HomeMy WebLinkAbout2009/09/15 Item 16
CITY COUNCIL
AGENDA STATEMENT
~!r~ CITYOF
. 1> ~ (HULA VISTA
SEPTEMBER 15, 2009, Item~
ITEM TITLE:
PUBLIC HEARING: Consideration of a Development
Agreement between the City of Chula Vista and McMillin Otay
Ranch LLC for McMillin's portion of the Eastern Urban Center
within the Otay Ranch community.
SUBMITTED BY:
ORDINANCE: Ordinance of the City Council of the City of
Chula Vista adopting a Development Agreement between the
City of Chula Vista and McMillin Otay Ranch LLC for
McMillin's portion of the Eastern Urban Center
giic~Y~~,Y ~GERlDEVELOPMENT SERVICES
CITY MANAGE, .
4/5THS VOTE: YES D NO 0
REVIEWED BY:
SUMMARY
In conjunction with consideration of its application for a SPA Plan and Tentative Map the
Applicant is also proposing a Development Agreement for its portion of the Eastern Urban
Center (EUC) project. The proposed Development Agreement provides greater certainty in the
development of the project to the Applicant and provides additional benefits to the City that
would otherwise not be realized. These benefits to both parties and the terms of the agreement
are outlined below. The approval of the Development Agreement is integral to being able to
finance and develop the project as it is identified in the SPA Plan.
ENVIRONMENTAL REVIEW
The City's Environmental Review Coordinator (ERC) has reviewed the Project and determined
that the Project would result in a significant impact to the environment; therefore, a Second-Tier
Environmental Impact Report (EIR-07-01) has been prepared. Prior to action on the
Development Agreement, the City Council will consider certification of the Final Second Tier
Environmental Impact Report (EIR 07-01) for the Otay Ranch Eastern Urban Center SPA Plan,
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Tentative Map and related items. The ERC has further determined that adoption of the ordinance
adopting the Development Agreement would have no new effects that were not examined in EIR
07-01. While heard concurrently, the City Council's consideration and decision on the EIR must
precede any action on the other EUC applications.
CHULA VISTA GENERAL PLAN/GENERAL OTAY RANCH DEVELOPMENT PLAN
CONSISTENCY
The Development Agreement implements the General Plan and GDP by providing a
comprehensive program to implement the SPA Plan and Tentative Map. Those plans provide
urban design plans incorporating a mixture of land uses connected by a grid system of public
streets and pedestrian paths, urban parks and plazas, outdoor dining, public buildings, and
commercial activities designed to promote a safe pedestrian environment. The EUC site
utilization plan, including the density, non-residential square footage, height, and number of
residential units, is consistent with the General Plan and GDP. The Development Agreement
that is described herein ties the implementation of all of these features together. Accordingly,
staff has determined that the Development Agreement is consistent with the ChuJa Vista General
Plan and the Otay Ranch General Development Plan.
RECOMMENDATION: That the City Council,
Hold the public hearing and place the Ordinance on first reading.
BOARDS/COMMISSION RECOMMENDATION
The Planning Commission met on August 26, 2009 and voted 6-0-0-1 to recommend Council
approval of the Development Agreement for the Eastern Urban Center.
DISCUSSION
State and Citv Requirements for Development Agreements
California Government Code sections 65864 through 65868.5 authorize cities to enter into a
development agreement with any person having a legal or equitable interest in real property for
the development of the property. A development agreement is a contract negotiated between the
project proponent and the public agency that governs the land uses that may be allowed in a
particular project and vests, subject to certain conditions in the agreement, the rights of the
project applicant to develop the property under current land use regulations for a specified term.
Through City Resolution No. 11933 (adopted in 1985), the City Council has determined that
development of large projects within the City create unique and complex development
considerations and that, in addition to the minimum requirements for development agreements
contained in the Government Code, additional procedures and requirements for the consideration
of development agreements shall be contained within each individual agreement. The
Development Agreement presented here includes the minimum requirements for development
agreements contained in the Government Code, as well as additional procedures and
requirements designed to address the unique and complex development considerations presented
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by the Project.
The City put together a review/negotiating team consisting of the Deputy City Manager/Director
of Development Services, the Finance Director, a representative of the City Attorney's Office
and the Principal Planner assigned to the Otay Ranch. The applicant was represented by legal
counsel as well.
The following discussion focuses on the benefits of the Development Agreement to both the City
and the Applicant, and a description of the fundamental terms ofthe Agreement.
Benefits to the City
Beyond the basic benefits of developing a project of the magnitude of the EVC, that include the
development of necessary infrastructure, creating a synergy with a possible university, and
enhancement of the City's image as a leader in sustainable community building, the City will
receive the following benefits from entering into this Development Agreement:
. The creation of an urban employment center which will add new local jobs. Studies by both
the City and the Applicant estimate that the completed Project will generate nearly 10,000
jobs, many of which will be higher-quality office employment opportunities.
. Long-term increase in tax revenues, over and above the cost of providing municipal services,
which are anticipated from the project. Once completed, the Financial Impact Analysis
prepared by the City estimates that the EVC would provide net revenues of approximately $5
million annually from a diversified tax base.
. Interim funding for Fire Department operating deficits. While the long-term projections for
this project estimate positive net revenues for the City at buildout, once a fire station is
triggered, fire operating costs are substantial. The developer will provide interim funding for
the operation and maintenance costs of the EVC Fire Station until the sooner of the following
occur: (1) the total property tax revenues from the project cover the property's fair share
portion of the fire stations' operating costs (estimated at 25%); or (2) a fiscal analysis
determines that total revenues generated by the project exceed the City's operating costs for
two (2) successive fiscal years (Attachment 1, Exhibit E, Paragraph 9).
· Provision of interim funding for other city operating cost deficits. While the long term
projections for this project estimate positive net revenues for the City at buildout, the
applicant is proposing an interim funding mechanism to negate possible operational deficits
in the early years of the project. Two years after the first occupancy, a fiscal model will be
run by the City, and then annually at the end of each fiscal year. If the model identifies a
deficit, the Master Developer will pay the City the difference between the City's service
costs for the EUC and the total revenues generated by the project. These fiscal model runs
will continue until the study identifies a net surplus for two (2) successive fiscal years, or the
Master Developer has met its maximum obligation of $500,000 (Attachment 1, Section 4.5).
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Benefits to the Applicant
. Predictability in the development approval process by vesting the permitted uses, density,
intensity of use, and timing and phasing of development consistent with the EUC SPA Plan
for up to twenty (20) years.
. Use of the City's Development Impact Fee Deferral Policy for the life of the Development
Agreement (up to 20 years). Pursuant to the Development Impact Fee Deferral Policy, the
Master Developer may defer the payment of Development Impact Fees until the request for
final inspection upon satisfaction of specified conditions (Attachment 1, Section 2.7).
. Expanded use of Community Facilities Districts (CFD).
Terms of Agreement
The agreement contains the following major points:
. The term of the Agreement is twenty (20) years (Attachment 1, Section 7.2).
. While this agreement is in effect, the Master Developer and Merchant Builders shall have the
vested right to develop the property pursuant to the Sectional Planning Area (SPA) Plan,
Tentative Map, Parks Agreement and Development Agreement (Attachment 1, Section 2).
This agreement vests permitted uses, intensity, height and size of buildings and reservations
of dedications of land.
. As described above this agreement allows for the continuation of the City's Development
Impact Fee Deferral program, which allows for the payment of development impact fees
upon request for final inspection rather than at issuance of building permits (Attachment 1,
Section 2.7).
. The agreement may be amended from time to time by the mutual written consent of the City
and Master Developer and the Owner of any affected portion of the property (Attachment 1,
Section 2.12).
. Master Developer will encourage the establishment of uses, including medical, professional,
financial and green-tech employers that are beneficial, or are synergistic with, a proposed
university in the Otay Ranch (Attachment I, Section 4.4)
. The City shall accept and process with reasonable promptness all completed applications for
subsequent approvals (Attachment 1, Section 5.1).
. Master Developer may, at its option, submit a written request on the City's standard
application form to City requesting that the City establish a Community Facilities District to
finance the acquisition and construction of public facilities in accordance with the Financing
Plan and the Goals and Policies (Attachment 1, Section 5.3).
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. Master Developer shall be reimbursed for certain facilities (Attachment 1, Section 5.9).
. Development Agreement remains linked to the property if Master Developer sells or transfers
ownership (Attachment 1, Section 10.2).
. Owners are required to demonstrate good faith compliance with the terms of the agreement
no later than each twelve-month anniversary of the effective date of the agreement.
. Costs for the fire station will be split evenly between the Master Developer and the City
when development of the fire station is triggered as detailed in the Public Facilities and
Financing Plan. Should the City not be able to identify the source of its share, fire service
requirements shall be satisfied by the applicant through an increase in staffing and
equipment, and improvements associated with that increased staff at existing Fire Station 7 in
Village Two (Attachment 1, Exhibit "E").
DECISION-MAKER CONFLICTS:
Staffhas reviewed the property holdings of the City Council members and has found no property
holdings within 500 feet of the boundaries of the property, which is subject to this action.
CONCLUSION:
The proposed agreement is consistent with Government Code and adopted city policies. The
agreement offers benefits to both the City and the Applicant. Staff recommends the City Council
adopt an ordinance approving the Eastern Urban Center Development Agreement.
CURRENT YEAR FISCAL IMPACT:
The City will be reimbursed by the developer for all costs incurred in the processing of the
Development Agreement, resulting in no impact in the current fiscal year.
ONGOING FISCAL IMPACT:
The ongoing fiscal impact to the City will vary depending on the actual revenues generated by
the project and the actual cost of providing services to the project. The revenues generated by
the project will be impacted by the project phasing schedule, product absorption, and general
economic conditions. Cost incurred by the City will be impacted by staffing and service levels
.provided by the City.
FISCAL/ECONOMIC Ai'lAL YSIS
The City retained Economics Research Associates (ERA) to conduct a fiscal analysis of the
proposed development and quantify any anticipated impacts to the City's General Fund. These
impacts are projected by comparing estimated revenues to be generated by the project with the
anticipated cost of providing City services to the project. The projected City operation and
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maintenance costs included in the analysis are based upon a proportional cost of citywide service
costs. Projected budgetary impacts to the City resulting from providing services to the EUC
project are discussed in the 'Budgetary Impacts' section to follow.
The fiscal analysis is based upon an assumed development program and projected market
absorption schedule. The development program outlines approximately 2 million square feet of
office, 980,000 square feet of retail, two 250-room hotels, and approximately 3,000 medium to
high density residential units. The absorption schedule is expected to extend for a 22 year period
and has been based upon the EUC traffic plan. This fiscal analysis is the basis for all fisc~l
assumptions in the Development Agreement. The Development Agreement allows for the
developer to modify the development phasing schedule to respond to market conditions. It
should be noted than any such adjustments are likely to impact the short term fiscal impacts to
the City.
Operating Deficit Funds
The Development Agreement calls for the developer to reimburse the City for operating deficits
(negative General Fund impacts) resulting from the project. Such a deficit may be the result of
changes to the development phasing schedule or various economic and market conditions. The
amount to be provided by the developer to the City to offset the negative impacts resulting from
the project is limited in the Development Agreement to a total of$500,000.
Per the Development Agreement, the payment of operating deficit funds by the developer to the
City will be based upon an annual review of the project's fiscal impact to the City. The first
analysis of the project's impact will take place two years after first occupancy within the
property. At that time, the analysis will look back and consider all impacts to the City occurring
from year one of the project. The annual reviews will continue until either (I) the $500,000
maximum obligation is met or (2) the fiscal study identifies a net positive impact to the City for
two successive fiscal years. The developer will reimburse the City for all costs incurred in the
preparation of the analyses.
To follow is a brief summary of fiscal analyses prepared by ERA, based upon two project
phasing scenarios. The scenarios analyzed reflect:
1. Construction of the first hotel in year one of the project; and
2. Construction ofthe first hotel in year five ofthe project.
The developer has indicated that the most likely project phasing scenario is somewhere between
these two scenarios (construction of the first hotel between year one and year five of the project).
However, should the construction of the first hotel be deferred beyond five years, the project will
generate a negative fiscal impact to the City beginning in year five and continuing until
construction ofthe first hotel.
Scenario 1
The estimated net fiscal impact to the City resulting from the EVe project is calculated by
comparing the projected revenues to be generated by the project with the proportional cost of
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providing public services to the project. The projected budgetary impact is discussed in greater
detail in the following 'Budgetary Impacts' section.
The first analysis assumes the construction of the first 2S0-room hotel in year one of the project.
In this scenario, the project is anticipated to generate a positive impact to the City in the first year
of approximately $289,SOO. The positive net impact to the City will increase each year
thereafter, rising to an annual positive impact of $4.9 million in year 22 of the project. The
ongoing annual net impact after full absorption of the project is anticipated to hover near the $4.9
million estimated in year 22. The projected net fiscal impact to the City in this scenario is
detailed below.
ERA Fiscal Model Overview - Hotel Development Yr 1
(in Thousands OOOs)
~41;'~~~T;\~~~Wmtf~~~~~~~'V~"Th;,~'~
Revenues 637.2 1,500.7 1,896.5 2,066.8 2,276.3 2,490.9 3,717.9 7,533.9 9,525.3 10,734.1
Expenses 347.7 737.6 972.4 1,210.3 1,450.3 1,692.4 2,365.9 4,710.5 5,351.4 5,778.7
Net FiscalImpact 289.5 763.1 924.1 856.5 826.0 798.5 1,352.0 2,823.4 4,173.9 4,955.4
Scenario 2
The second analysis prepared by the consultant assumes the deferral of the first hotel to the fifth
year of the project. This scenario is estimated to result in a cumulative negative fiscal impact to
the City of approximately $SOO,OOO, incurred from year one through year four. This shortfall
would trigger the payment of the operating deficit funds described above. This scenario is
considered the most likely to occur. The projected net fiscal impact to the City, assuming
construction ofthe hotel in year five and the application of the operating deficit funds, is detailed
below.
ERA Fiscal Model Overview - Hotel Development Yr 5
(in Thousands OOOs)
Wft~&:!"",*~I!1ilB~jS:f!!l'Jilll~~\'Jll,3'~~~~~~!'~i~~_,\'a~
Revenues 142.2 659.1 906.4 1,076.7 1,781.2 2,490.9 3,717.9 7,533.9 9,525.3 10,734.1
Expenses 347.7 737.6 972.4 1,210.3 1,450.3 1,692.4 2,365.9 4,710.5 5,351.4 5,778.7
Operating Deficit (205.5) (78.5) (66.0) (133.6)
Deficit Funding* 205.5 78.5 66.0 133.6
Net Fiscal Impact 330.9 798.5 1,352.0 2,823.4 4,173.9 4,955.4
*Developer to reimburse City for operating deficits up to $500,000.
BUDGETARY IMPACTS
The fiscal impact model prepared by ERA considers the proportional cost of providing public
services to the project. For both the provision of fire and library services, the actual cost to the
City of providing services will exceed the project's proportional cost. In these instances, the
actual cost to the City will be the marginal cost of operating a new facility. To follow is a
discussion of the projected budgetary impacts of providing services to the project.
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Fire Facilitv
The anticipated annual operating and maintenance cost of the EUC Fire Station is approximately
$4.1 million (based on current salaries and benefits, adjusted for contractually obligated cost of
living increases). The Development Agreement commits the developer to provide interim
funding for the operation and maintenance costs of the EUe Fire Station. This commitment is
separate from, and in addition to, the operating deficit funds previously discussed. The interim
fire station funding will continue until the revenues generated by the project are sufficient to
offset the cost of providing fire services to the project.
The annual amount of interim fire station funding will be based upon the actual revenues
generated by the project and the project's fair share of fire station costs, not to exceed 25% of the
station's total operating and maintenance costs. The City will be obligated to provide the
remaining 75% of operating and maintenance costs for the fire station. Applying the 25% cap to
the projected $4.1 million annual operating and maintenance cost for the station, the maximum
amount of interim fire station funding to be provided by McMillin annually is approximately $1
million. This estimate does not account for future changes in personnel costs or staffing models.
The actual interim fire station funding provided will be based upon the capped expenditures less
actual revenues generated by the project. The total interim fire station funding commitment by
McMillin is capped at $1.75 million.
As described above, the project's fair share of the operating and maintenance costs of the EUC
fire station is capped at 25%, leaving the City responsible for the remaining 75%. Based upon
the estimated $4.1 million annual operating and maintenance budget, this equates to an annual
General Fund obligation of approximately $3.1 million for the fire station. At buildout, this
obligation will be funded by other developments served by the station. Until those developments
come online and begin generating revenues to the City, the operation of the facility will result in
a negative General Fund impact.
If the expansion of services at Fire Station 7 occurs, the same interim fire station funding
obligation would be in effect.
Library Facilitv
All costs associated with the maintenance and operations of the library of the facility will be an
additional budgetary impact to the City. Actual General Fund impacts will vary depending on
the level of services provided at the facility.
Because the library facility will be located in a larger building to be constructed by the
developer, there is the potential of facility construction occurring in advance of the planned
operation of the facility. If this occurs, the library facility may remain empty until the City can
absorb the additional costs of operating and maintaining the facility.
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Park and Recreation Facilities
All costs associated with the maintenance and operations of the park and recreation facilities in
the proj ect will be an additional budgetary expense to the City.
The urban parks planned for the project area are anticipated to incur greater than average
maintenance costs per acre. As a result, the City and McMillin will split equally (50/50) the
annual cost of maintaining all public parks in the project area. This cost sharing is intended to
offset the additional maintenance costs resulting from the increased amenitization of the
facilities.
McMillin will be responsible for maintenance of private parks within their portion of the project
area.
CAPITAL PROJECTS
The project will include a fire station, a library, and park & recreation facilities.
Fire Facilitv
Per the Development Agreement, funding for the construction and equipping of the fire station
will be evenly split between the City and the developer. If the City is unable to provide its
portion of the project funding, the project's fire service requirements may be met by either (1)
the interim expansion of services at Fire Station 7 or (2) the full funding of EUC Fire Station
construction costs by the developer.
The EUC Fire Station is a Public Facilities Development Impact Fee (PFDIF) facility. The fee
program would provide construction funding for the project, not the General Fund. Based upon
current cash flow projections for the PFDIF, sufficient funds to provide up front construction
funding are not anticipated. This will result in either the developer providing full construction
funding or the interim expansion of services at Fire Station 7. The expansion of services at Fire
Station 7 requires the addition of one fire engine, including staffing and equipment. No
construction costs would be incurred.
To the extent that the developer expends funds to construct the EUC Fire Station or expand
services at Fire Station 7, they may be eligible for PFDIF credit against the project's overall
obligation, or reimbursement from the PFDIF program. The PFDIF program does not currently
include costs associated with expansion of services at Fire Station 7. In order to avoid additional
costs to the PFDIF program, any equipment to be provided to expand services at Fire Station 7
must be the same equipment that would have otherwise been acquired for the EUC Fire Station.
When the EUC Fire Station is constructed, this equipment would then be transferred to the new
facility. If the equipment is not transferred to the EUC, and the City authorizes either PFDIF
credit or cash reimbursement, the PFDIF program must be revised to include this additional cost.
This would increase the PFDIF fee.
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The Development Agreement states that the developer will be eligible for PFDIF credit for fire
station land acquisition. These costs are not currently included in the fee, and the program will
have to be revised to include this additional cost before credit can be awarded to the developer.
This would increase the PFDIF fee.
Library Facility
The library is also a PFDIF facility. Per the Development Agreement, the facility will be part of
a larger building, to be constructed by the developer. The developer will be eligible for either
credit against their PFDIF obligation or reimbursement from the PFDIF program. The specific
funding mechanism for the construction of the facility will be determined in the future, based
upon availability ofPFDIF funds and other program obligations.
Park and Recreation Facilities
The developer will provide 12.88 acres of urban parks and 2.75 acres of urban recreational
facilities, including improvements. In addition, the developer will provide in-lieu Parkland
Acquisition and Development (pAD) fees equivalent to 7.73 acres. Of the in-lieu fees to be
provided by the developer, the equivalent of 5.88 acres will be applied to the construction of the
urban parks and urban recreational facilities. The remaining 1.85 acre equivalency will be paid
in cash to the City.
PFDIF Proiect Prioritization and Phasing
All permits issued in the EUC will be subject to the City's PFDIF program. There are two
PFDIF facilities located within the Eue project area, a fire station and a library. To the extent
that the developer constructs and/or equips these facilities in accordance with the PFDIF
program, they will be eligible for either a credit against their PFDIF fee obligation or a cash
reimbursement from the PFDIF fund. In addition, the developer is eligible to defer the payment
of PFDIF fees to final inspection instead of paying at building permit, as would be required by
the PFDIF ordinance.
The application ofPFDIF credits to building permits, or the deferral ofPFDIF fees due, reduces
the number of fee paying permits, thereby reducing program revenues. As a result of this
reduction in revenues, the application of PFDIF credits and fee deferrals directly impacts the
PFDIF program's ability to meet existing debt obligations and phasing of other planned
construction proj ects.
The PFDIF program currently has an external debt obligation of approximately $5 million
annually. In addition to the external debt obligation, the PFDIF program must also repay the
Transportation Development Impact Fee (TDIF) program for interfund loans authorized in fiscal
years 2008-09 and 2009-10. The repayment of these loans over a 10 year period will add
approximately $1.4 million to the annual debt obligation of the PFDIF. In order to meet these
existing obligations, approximately 700 fee paying residential units must be issued annually.
Any reduction in fee paying permits impacts the PFDIF program's ability to meet its debt
obligation. If the PFDIF is unable to meet its external debt obligations, the General Fund is then
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required to meet the obligations. If the PFDIF is unable to meet its internal debt obligations, it
may be necessary for the General Fund to absorb this debt and repay the TDIF.
The next priority of the PFDIF program after the repayment of debt is the construction of new
facilities. The current PFDIF program includes five future facilities. The construction of these
facilities has been prioritized as follows:
1. Rancho del Rey Library
2. EUC Fire Station
3. EUC Library
4. / 5. Otay Ranch Village 4 Recreation Facility and Aquatic Facility
As with the debt obligation, any reduction in the number of fee paying permits may impact the
PFDIF program's ability to construct new facilities. In order to ensure sufficient funds are
available to construct the Rancho del Rey Library it will be necessary to closely monitor the
construction of PFDIF credit eligible facilities, including the EUC fire station and library. If
sufficient funds are not available to meet existing program commitments and priorities, it may be
necessary to postpone the construction ofthese facilities.
It will be necessary to balance the need to provide fire services to the project with the cash flow
of the PFDIF program. If the PFDIF is unable to absorb the application of fee credits resulting
from the construction of the EUC fire station, but the need to expand fire services has been
triggered by the project, the expansion of services at Fire Station 7 may be the best solution. The
only capital outlay associated with this scenario would be for the acquisition of a fire engine.
The actual construction of the new fire station would then be deferred until the PFDIF program is
able to absorb the construction without impacting the program's ability to meet debt obligations
or to construct the Rancho del Rey Library.
SPECIAL FINANCING DISTRICT
The City has historically allowed the formation of special financing districts, such as Community
Facilities Districts (CFDs), to finance the acquisition or construction of public improvements to
serve development projects. The formation of these districts allows developers to finance the
construction of public facilities using tax exempt bonds. The City has adopted a "Statement of
Goals and Policies Regarding the Establishment of Community Facilities Districts" ("Goals and
Policies"). The Development Agreement includes a number of exceptions to the adopted Goals
and Policies which have not previously been allowed by the City, including a 2% annual
escalator on the special tax and use of surplus special taxes to reimburse the McMillin for that
portion of the cost of construction of the authorized public facilities that exceeds the available
bond proceeds. In the Development Agreement, the City gives conditional approval of the use of
these financing tools to maximize the bonding capacity for the district. The maximum total tax
rate applicable in the district (at the time of the initial sale of a residential dwelling to a
homeowner) will continue to be held to the 2% maximum, as established in the Goals and
Policies.
The Development Agreement also includes a modified mechanism for reimbursement of
administrative costs to the City. Historically, the City has required priority administrative
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funding of $75,000 annually for each bond issue. These monies are used to pay various
consultants and reimburse City staff time involved in the administration of the district and the
bonds. In recent years, these funds have also been used to mitigate delinquencies in districts
without hitting reserves. The developer anticipates formation of three improvement areas, with
the possibility of two bond issuances per improvement area. In recognition of the anticipated
cost of administering these multiple bond sales and improvement areas, the City has agreed to a
new mechanism for the funding of administrative expenses. Per the Development Agreement,
the first bond sale in each improvement area will be subject to the $75,000 priority
administrative funding. At the time of the second bond sale per improvement area, the developer
will deposit $150,000 with the City, to be held and utilized as an administrative operating
expense reserve. As funds from the reserve are used by the City, they will be replenished via the
annual levy.
ATTACHMENTS
1. Proposed Development Agreement
2. Planning Commission Development Agreement Resolution PCM-06-08(B)
Prepared by: Scott D. Donaghe, Principal Planner, Planning Division
Tiffany Allen, Fiscal Land Management Analyst, Finance
J:\Planning\Otayranch\Eastem Urban Center SPA\2005 SPA-peM 99-07\Public Hearings-Workshops\City Council Hearing Package 2009\EUC
CC DA StaffReport.doc
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RESOLUTION NO. PCM-06-08(B)
RESOLUTION OF THE PLANNING COMMISSION OF THE CITY
OF CHULA VISTA RECOMMENDING THAT THE CITY COUNCIL
ADOPT AN ORDINANCE APPROVING DEVELOPMENT
AGREEMENT BETWEEN THE CITY OF CHULA VISTA AND
MCMILLIN OTAYRANCHLLC FOR MCMILLIN'S PORTION OF
THE EASTERN URBAN CENTER
WHEREAS, the property which is the subject matter of this resolution is identified as
Exhibit "A" attached to the Draft City Council Resolution, and is conunonly known as the Otay
Ranch Eastern Urban Center ("Property"); and,
WHEREAS, the City's Environmental Review Coordinator has reviewed the Project and
determined that the Proj ect would result in a significant impact to the environment, therefore, a
Second- Tier Environmental Impact Report (EIR 07-01) has been prepared; and,
WHEREAS, the Planning Conunission set the time and place for a hearing on said Otay
Ranch Eastern Urban Center Development Agreement and notice of said hearing, together with its
purpose, was given by its publication in a newspaper of general circulation in the city and its mailing
to property owners within 500 feet ofthe exterior boundaries ofthe Proj ect site at leastten days prior
to the hearing; and,
WHEREAS, the hearing was held at the time and place as advertised, namely 6:00 p.m.,
August 26, 2009, in the City Council Chamber, 276 Fourth Avenue, before the Planning
Commission, and said hearing was thereafter closed;
NOW, THEREFORE, BE IT RESOLVED THAT, from the facts presented to the
Planning Commission, the Commission has determined that the approval of a Development
Agreement for McMillin's portion of the Otay Ranch Eastern Urban Center is consistent with
California Government Code sections 65864 through 65868.5 as well as adopted City policies.
BE IT FURTHER RESOLVED THAT THE PLA:N.\'IoiNG COMMISSION reconunends
that the City Council adopt an ordinance approving the Development Agreement for McMillin's
portion of the Eastern Urban Center in substantially the form as in the attached Draft City Council
Ordinance, and that a copy of this resolution be transmitted to the owners of the property and the
City Council.
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Resolution PCM-06-08(B)
Page 2
PASSED AND APPROVED BY THE PLANNING COMMISSION OF CHULA
VISTA, CALIFORNIA, this 26th day of August 2009 by the following vote, to-wit:
AYES:
Spethman, Moctezuma, Vi nson, Tri pp, Fe 1 ber, Thompsonli
NOES:
ABSENT:
Clayton
ABSTENTIONS:
tJ&
Diana Vargas, Secretary t
Plarming Conunission
cott W. Vinson, Chair
Plarming Commission
ATTEST:
\
, . ., AlCP
Manager/Development Services Director
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16-14
ORDINANCE NO.
ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA APPROVING A DEVELOPMENT AGREEMENT
BETWEEN THE CITY OF CHULA VISTA AND MCMILLIN
OTAY RANCH LLC FOR MCMILLIN'S PORTION OF THE
EASTER.1"i URBAN CENTER
WHEREAS, the property which is the subject matter of this ordinance is identified in the
Development Agreement (on file in the Office of the City Clerk) and commonly known as Otay
Ranch Eastern Urban Center ("Property"); and
WHEREAS, the Project relied in part on the original Otay Ranch General Development Plan
Program Environmental Impact Report 90-01, and the Otay Ranch Eastern Urban Center SPA Plan
Final Second-Tier Environmental Impact Report ("EIR 07-01") (SCH#2007041 074), the candidate
CEQA Findings and Mitigation Monitoring and Reporting Program; and
WHEREAS, the Planning Commission set the time and place for a hearing on said
Development Agreement and notice of said hearing, together with its purpose, was given by its
publication in a newspaper of general circulation in the city and its mailing to property owners within
500 feet of the exterior boundaries of the Project site at least ten days prior to the hearing; and
WHEREAS, the hearing was held at the time and place as advertised, namely 6:00 p.m.
August 26,2009, in the Council Chambers, 276 Fourth Avenue, and the Planning Commission voted
6-0-0-1 to approve Planning Commission Resolution PCM-06-08(B) recommending to the City
Council approval of the Development Agreement between the City of Chula Vista and McMillin
Otay Ranch LLC for McMillin's portion of the Eastern Urban Center (the "Development
Agreement"); and
WHEREAS, on September 15,2009, a duly noticed public hearing was scheduled before the
City Council of the City of Chula Vista to consider adopting the ordinance to approve the
Development Agreement between the City of Chula Vista and McMillin Otay Ranch LLC for
McMillin's portion of the Eastern Urban Center.
NOW, THEREFORE, THE CITY COUNCIL of the City ofChula Vista does hereby order
and ordain as follows:
1. PLANNING COMMISSION RECORD
The proceedings and all evidence introduced before the Planning Commission at their public
hearing held on August 26, 2009 and the minutes and resolutions resulting therefrom, are
hereby incorporated into the record of this proceeding. These documents, along with any
documents submitted to the decision makers, shall comprise the entire record of the
proceedings for any California Environmental Quality Act (CEQA) claims.
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II. COMPLIANCE WITH CEQA
The City Council hereby finds that the adoption of the ordinance approving the Development
Agreement for the Project, as described and analyzed in the Second-Tier Final EIR 07-01,
would have no new effects that were not examined in said Final EIR (Guideline 15168
(c)(2)).
Ill. CONSISTENCY WITH GENERAL PLAN AL'ID OTAY RANCH GENERAL
DEVELOPMENT PLAN (GDP)
The City Council finds that the proposed Development Agreement is consistent with the
City's General Plan and Otay Ranch General Development Plan. The Development
Agreement implements the General Plan and GDP by providing a comprehensive program to
implement the SPA Plan and Tentative Map. Those plans provide urban design plans
incorporating a mixture of land uses connected by a grid system of public streets and
pedestrian paths, urban parks and plazas, outdoor dining, public buildings, and commercial
activities designed to promote a safe pedestrian environment. The EUC site utilization plan,
including the density, non-residential square footage, height, and number of residential units,
is consistent with the General Plan and GDP.
IV. ACTION
The City Council hereby adopts an Ordinance approving the Development Agreement
between the City of Chula Vista and McMillin Otay Ranch LLC for McMillin's portion of
the Eastern Urban Center (on file in the Office of the City Clerk) finding it consistent with
the California Government Code, with adopted City policies, and with the City's General
Plan and Otay Ranch General Development Plan.
V. EFFECTIVE DATE
This Ordinance shall take effect and be in full force on the thirtieth day from and after its
adoption.
Presented by
Approved as to form by
Gary Halbert, AICP, PE
Deputy City Manager
Development Services Director
16-16
THE ATTACHED AGREEMENT HAS BEEN REVIEWED
AND APPROVED AS TO FORM BY THE CITY
ATTORNEY'S OFFICE AND WILL BE
FORMALL Y SIGNED UPON APPROVAL BY
THE CITY COUNCIL
r, '
l~D ?dS /l' n. t /'
,,/', ~
(/;/ Bar: C. Miesfeld
I CIty Attorney
Dated: 9/( /J / tJ 1
DEVELOPMENT AGREEMENT BY AND
BETWEEN THE CITY OF OlliLA VISTA
AND
MCMILLIN OT A Y RANCH LLC
16-17
Recording Requested By:
and
When Recorded Mail To:
City Clerk
City of Chula Vista
276 Fourth Avenue
Chula Vista, California 91910
EXEMPT FROM RECORDER'S FEES
Pursuant to GOVERo'WENT CODE ~6103
(ABOVE SPACE FOR RECORDER'S USE ONLY)
DEVELOPMENT AGREEMENT
BY AND BETWEEN
THE CITY OF CHULA VISTA
AND
McMILLIN OTAY RANCH LLC
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16-18.
DEVELOPNlliNTAGREENlliNT
This Development Agreement ("Agreement") is made and entered into by and between
the CITY OF CHULA VISTA, a chartered California municipal corporation ("City") and
McMILLIN OTAY RANCH LLC, a Delaware limited liability company ("Master Developer")
and is dated for reference purposes only as of , 2009. The City and Master Developer
are sometimes referred to jointly in this Agreement as the "Parties" and individually as a "Party".
The Parties enter into this Agreement in light of the following recited facts (each a "Recital").
Capitalized terms in the Recitals are defined in Section I of the Agreement.
RECITALS
A. General Purposes. This Agreement is intended to accomplish all of the following:
I Recognize that the successful long-term build-out of the Eastern Urban Center
(the "EUC") is an important goal of the Parties, and allow the implementation of
the Project in accordance with the Existing Entitlements and Existing Land Use
Regulations.
2 Provide for the most efficient use of public and private resources.
3 Provide assurance that, upon approval of the Project, the Master Developer,
Merchant Builders and Owners may proceed with Development in accordance
with the Existing Entitlements and Existing Land Use Regulations.
4 Establish mechanisms that will help provide for the financing and construction of
facilities necessary for the public, including existing residents and residents of
future developments.
5 Provide a mechanism to allow deviations from ordinances or regulations in order
to promote appropriate urban standards and allow flexibility to support long-term
implementation of the Project.
6 Assure that the Project does not cause any conflict with City's growth
management goals and objectives by, for example, ensuring the provision of
adequate public facilities at the time of Development, proper timing and
sequencing of Development, effective capital improvement programming, and
appropriate Development incentives.
7 Streamline, coordinate, and provide greater regulatory certainty III the
Development approval process.
8 Further the Development vision of the EVC. Upon completion, City and Master
Developer expect that the portion of the EUe encompassed by the Project will be
a mixed-use, pedestrian-oriented urban center that will serve as the residential,
economic, and social focal point for the Eastern Planning Area. It is anticipated
that the Project will include a series of interconnected areas that will expand
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City's employment base, provide CiVIC and cultural venues and facilities,
introduce new shopping, hospitality and entertainment venues, and establish a
variety of urban housing types, including both higher-end and affordable housing,
all implemented in a sustainable community framework. City and Master
Developer expect the EVC to be a place where residents and visitors alike can
come together to live, work and play in a high-quality urban environment. When
finished, the EVC should generate significant new revenues to City through
property, sales, and other taxes, should enhance existing and planned facilities
including the planned university and regional technology park, and should
enhance City's image as a national leader in sustainable community building.
9 Foster cooperation between City and Master Developer in the Development of the
Project, and provide consistent support for the role of the EVC in the overall Otay
Ranch General Development Plan in order to realize the City's long-term vision
for the EVC and the overall success of the Otay Ranch General Development
Plan. Further, the Parties recognize that the EVC proposes a balance of
residential, non-residential and civic uses, and that, while all uses are intended to
be developed, the timing of the Development of the various components of the
Project is dependent upon market demand.
]0 Recognize the unique benefits of the EVC and its mix of residential and
commercial uses. The residential uses will support the commercial uses, and the
commercial uses will serve not only the adjacent homes but also other nearby
communities. Residential Development within the Project is anticipated to
include special financing districts that will provide enhanced fimding for
maintenance of public improvements and public properties that might otherwise
be paid for by City's general fund; for example, as more fully described in the
Parks Agreement, some portion of enhanced park maintenance is anticipated to be
funded through a Community Facilities District.
B. Authorization. City is authorized to enter into this Agreement pursuant to Chula Vista
City Council Resolution No. ] ]933, California GOVERNMENT CODE 965864 et seq.,
the City Charter, and City's self-rule powers, all of which authorize City to enter into
binding development agreements with persons having equitable or legal interests in real
property, for the purposes of assuring, among other things: (i) certainty as to permitted
land uses in the development of such property; and (ii) the construction of adequate
public facilities to serve such development of the property.
C. Interest in Propertv. Master Developer represents that it has equitable or legal interests in
the Property. Specifically, Master Developer represents that it is the fee owner of the
Property. Master Developer further represents that it has the legal authority to bind the
Property by recordation of this Agreement.
D. Mutual Benefits. In addition to the general purposes listed above, the Parties anticipate
that the following mutual benefits should arise from this Agreement:
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I High quality Development and implementation of the vision of the Property as
expressed in the Project, the EUC and the SPA Plan.
2 Certainty in the type of Development to be undertaken on the Property.
3 Assistance in providing public infrastructure necessary to serve the Project.
4 Assurance that adequate public facilities will be provided before or concurrently
with need.
5 Creation of an urban employment center which will establish a strong, well-
located employment sub-market and add new local jobs. Studies by both City and
Master Developer estimate that the completed Project will generate nearly ten
thousand jobs, approximately two-thirds of which will be higher-quality office
employment opportunities.
6 Long-term increase in tax revenues, over and above the cost of providing
municipal services, which are anticipated to result from the Project. Once
completed, and based upon fiscal studies for the Project, the EUC is expected to
provide significant new long-term revenues from a diversified tax base.
7 Enhancement of City's image and reputation as a leader in sustainable community
building. The EUC demonstrates a strong commitment to sustainability including
an emphasis on mixed use, an extensive street grid system which promotes
walkability and a centrally located bus rapid transit system corridor. The Project
also features a high level of detailing in the public realm, along with civic
amenities including a library, fire station, and a site reserved for an elementary
school.
8 Provision of infrastructure benefiting the general public over and above what the
Project would otherwise require, including a fire station, library, off-site sewer
improvements to Poggi Canyon and Salt Creek which will serve other
developments, and, through additional payments, overall infrastructure for the
Eastern Planning Area.
9 Facilitation of the implementation of the EUC in accordance with City's general
plan and Otay Ranch General Development Plan, through the creation of a high
quality urban center for the Eastern Planning Area which will create synergy for
the accomplishment of other City goals, including City's proposed university,
regional technology and research park.
10 Limitations on, but not a surrender of, City's exercise of certain governmental and
proprietary powers, as specified in this Agreement. This Agreement provides
predictability to Master Developer in the Development approval process by
providing vested rights under the Existing Entitlements and Existing Land Use
Regulations.
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The Parties agree that the anticipated "mutual benefits" of the Project as described above
are not covenants and do not themselves constitute specific consideration for this
Agreement. The Parties further agree that the failure to achieve any or all of such
"mutual benefits" shall not separately give rise to a cause of action for breach of this
Agreement or serve as a basis for either Party to seek any remedies under this Agreement.
Any such cause of action or pursuit of remedies under this Agreement must be based
upon the breach of a material provision of the Agreement, not the failure to obtain any or
all of these anticipated "mutual benefits".
With regard to the covenants, promises and other material requirements of this
Agreement, however, the Parties agree that those covenants, promises and other material
requirements constitute adequate consideration that is fair, just, mutual, equitable and
reasonable. Neither Party would consent to this Agreement without this consideration.
In particular, Master Developer would not enter into this Agreement, nor agree to provide
and furnish funds for the public and private Development and infrastructure described in
this Agreement, if not for the promise of City that the Property can be developed pursuant
to the Existing Entitlements and Existing Land Use Regulations. Similarly, City would
not enter into this Agreement if not for the promise of Master Developer to provide the
public facilities, public infrastructure and other public benefits provided for in this
Agreement.
E. Planning Commission Hearing. On August 26, 2009, City's Planning Commission held a
duly noticed public hearing on this Agreement and at the conclusion of the hearing
recommended approval of this Agreement.
F. City Council Hearing. On , 20_, the City Council held a duly
noticed public hearing on this Agreement, at the conclusion of which the Council
introduced and conducted the first reading of the ordinance approving the Agreement,
and subsequently, on , adopted Ordinance No. approving the
Agreement. As part of its initial hearing, the City Council considered and approved the
environmental documentation for this Agreement as being in compliance with the
California Environmental Quality Act, and found that this Agreement and the Project are
consistent with the Land Use Regulations.
AGREEMENT
NOW, THEREFORE, in light of the Recitals, which are incorporated into this
Agreement through Section 16.12 of this Agreement, and for good and valuable considerations,
the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the following
meamngs:
1.1 ADA-Accessible shall mean complying with the Americans With Disabilities Act,
the Americans With Disabilities Act Accessibility Guidelines, CALIFORNIA
CIVIL CODE 951, Title 24 of the CALIFORNIA CODE OF REGULATIONS,
and other applicable laws that require equal access to persons with disabilities.
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1.2 Agreement shall mean this Development Agreement.
1.3 Association shall mean a homeowners or business-owners association within or
encompassing the Proj ect or portions of the Proj ect.
1.4 Building Codes shall mean standard, uniform codes governing construction, as
adopted in California and/or City. Examples of Building Codes include the
California Building Code, the National Electrical Code, the Uniform Plumbing
Code, the Uniform Mechanical Code, the Uniform Housing Code, and the
Uniform Code for the Abatement of Dangerous Buildings. "Building Codes" do
not include what are commonly referred to as manuals for such matters as design,
subdivision, and hydrology.
1.5 CEOA shall mean the California Environmental Quality Act (CALIFORNIA
PUBLIC RESOURCES CODE S21000 et seq.), its implementing regulations
(CALIFORNIA CODE OF REGULATIONS TITLE 14, CHAPTER 3) and
governing case law interpreting CEQA.
1.6 City shall mean the City of Chula Vista.
1.7 City Council shall mean City's duly-elected and/or appointed City Council.
1.8 Claims shall mean and include claims, costs, damages, demands, expenses,
liabilities, liens and losses.
1.9 Community Facilities District shall mean a District formed pursuant to the Mello-
Roos Act.
1.10 Construction Standards shall mean and include only the Standard Specifications
for Public Works Construction, prepared by Public Works Standards, Inc., and the
Standard Drawings, prepared by the City of San Diego. "Construction Standards"
do not include what are commonly referred to as manuals for such matters as
design, subdivision and hydrology.
1.11 Dedication shall mean the grant of real property or an interest therein to City or
another public agency for a public purpose, without the payment of separate
monetary compensation by the City or other public agency for the dedication.
1.12 Development shall have the same definition as in CALIFORNIA
GOVERNMENT CODE S65927, as that statute exists on the date the Enabling
Ordinance is adopted.
1.13 Development Impact Fee shall mean fees imposed on Development to provide
capital facilities to mitigate the Development's impacts. Development Impact
Fees include City's fees for traffic, parks, public facilities, sewers, traffic signals,
and pedestrian bridges, the payment of which is required before the City may
issue Permits for all or portions of the Project.
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1.14 Development Moratorium shall mean any governmental decision, policy, law or
regulation, whether adopted by a legislative body or by initiative, that prohibits
and/or delays the already-begun application, review, commencement, completion,
or occupancy of any Development or issuance of any Permit.
1.15 Development Processing Fee means a fee imposed to pay City's administrative
costs of reviewing a proposed Development.
1.16 District shall mean and include assessment districts, Community Facilities
Districts, and any similar governmental mechanism to collect special assessments
or general or special taxes.
1.17 Eastern Planning Area shall mean that portion of City so identified in City's
General Plan.
1.18 Eastern Urban Center ("EUC") shall mean the portion of the City so identified in
the Otay Ranch General Development Plan.
1.19 Effective Date shall mean the first date on which all of the following are true: (a)
the Master Developer has signed the Agreement and returned the signed
Agreement to the City; (b) the City Council has adopted the Enabling Ordinance;
( c) the authorized representative of the City has signed the Agreement; and (d) the
Enabling Ordinance is effective and recorded with the County Recorder.
1.20 Enabling Ordinance shall mean City Ordinance No. _ by which this
Agreement was approved.
1.21 Encumber and Encumbrance shall mean and refer to mortgages, deeds of trust,
and any other device by which an Owner uses all or any portion of its interest in
the Property to secure a loan.
1.22 End User shall mean an Owner of one or more individual subdivided lots or
condominiums of the Project, obtaining such lot or condominium for the purpose
of occupying or using it for its own purposes and not for use in the business of
Development. "End Users" include, among others, home owners, tenants,
commercial building owners, apartment building owners, and Associations.
1".23 Entitlements shall mean all discretionary approvals by City allowing or regulating
Development and/or use of the Property. Entitlements include but are not limited
to the SPA Plan, the Property's tentative subdivision map, the EUC Public
Facilities Financing Plan, which is a part of the SPA Plan, the Parks Agreement,
and the final environmental impact report certified for the Project. A list of the
Existing Entitlements is set forth in Exhibit "B" of this Agreement.
1.24 Exactions shall mean and include obligations to pay money, construct facilities, or
provide land as a condition of Development, such as Development Impact Fees,
Dedications, Reservations and improvements.
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1.25 Existing Entitlements and Existing Land Use Regulations shall mean all
Entitlements or Land Use Regulations in effect as of the date the Enabling
Ordinance is adopted, including those approved or amended at the same City
Council meeting as the Enabling Ordinance is introduced.
1.26 Fees shall mean and include Development Impact Fees and Development
Processing Fees.
1.27 Financier shall mean any mortgagee, beneficiary, or trustee as to an
Encumbrance.
1.28 Financing Plan shall mean the Financing Plan attached to this Agreement as
Exhibit "C."
1.29 Force Maieure shall mean problems beyond the control of the affected Party that
delay or prevent a Party's performance of its obligations under this Agreement.
Examples of Force Majeure include, but are not limited to, floods, earthquakes,
and other Acts of God; fires; wars; civil commotion, riots, and similar hostilities;
strikes, picketing, and other labor difficulties; shortages of materials or supplies;
inability of any government agency or utility, including but not limited to City, to
provide adequate levels of water, sewer capacity, electricity or gas service; laws
of other agencies (including but not limited to voter initiative or referenda,
Development Moratoria, and judicial decisions); and Litigation brought by a third
party challenging the validity of this Agreement or of an Entitlement.
1.30 Goals and Policies shall mean the local goals and policies of City, adopted
pursuant to CALIFORNIA GOVERNMENT CODE 953312.7, pertaining to the
formation of a Community Facilities District under the Mello-Roos Act, as those
Goals and Policies exist on the date the Enabling Ordinance is adopted.
1.31 Growth Management Ordinance shall mean Chapter 19.09 of City's Municipal
Code, as it exists on the date the Enabling Ordinance is adopted.
1.32 Land Use Regulations shall mean all ordinances, resolutions, codes, rules,
regulations, plans (such as the Otay Ranch General Development Plan and
accompanying documents, and the Chula Vista General Plan), and official
policies of City governing Development and/or use of land, including, but not
limited to, the permitted use, density or intensity of use, subdivision requirements,
timing and/or phasing of Development, the height and/or size of buildings,
Reservations, Dedications, and design and standards for improvements. "Land
Use Regulations" do not include: (a) any City ordinance, resolution, code, rule,
regulation or official policy governing taxes or assessments of general application
upon all residents of City; (b) any City ordinance, resolution, code, rule,
regulation or official policy governing the conduct or taxation of businesses,
professions or occupations not in conflict with this Agreement or the Existing
Entitlements; (c) the control and abatement of nuisances (other than nuisances
existing only as conflicts with new Land Use Regulations made inapplicable by
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this Agreement); (d) the granting of encroachment permits and the conveyance of
rights and interests providing for the use of or entry upon public property, other
than the provisions of this Agreement addressing Dedications and Reservations;
or (e) the exercise of the power of eminent domain.
1.33 Litigation shall mean and include all forms of judicial actions and proceedings,
including but not limited to complaints (for damages, declaratory relief, or
otherwise), arbitrations, judicial references, petitions (for traditional mandate,
administrative mandate, or otherwise), and appeals, no matter how denominated.
1.34 Master Developer shall initially mean McMillin Otay Ranch LLC, a Delaware
limited liability company, but shall include its successors in interest as to the
Property identified pursuant to Section 10 of this Agreement.
1.35 Material Change (in the Proiect) shall mean any change in uses or total intensity
of the Project that would either (a) reduce build-out land use intensities in the
Project, as shown in the Otay Ranch General Development Plan, by more than
five percent (5%), or (b) render unmitigable any existing, or create any
unmitigable new, significant anticipated environmental impacts of the Project
beyond those identified in the final environmental impact report certified for this
Agreement. Approval of, or changes to, Entitlements or Land Use Regulations
governing other properties outside of the Property's boundaries shall neither
constitute nor create a "Material Change" in the Project.
1.36 Mello-Roos Act shall mean the Mello-Roos Community Facilities Act of 1982
(CALIFORNIA GOVERNMENT CODE &53311 et seq.), as amended.
1.37 Merchant Builder shall mean a buyer, assignee or transferee of one or more
subdivided lot or condominium site of the Project, acquiring such 10t(s) or site(s)
for the purpose of Development of improvements pursuant to the Existing
Entitlements and Existing Land Use Regulations or Subsequent Approvals for
End Users.
1.38 Otav Ranch General Development Plan shall mean the Otay Ranch General
Development Plan first adopted by the City in 1993 and most recently amended
by the City Council on December 12, 2005 through Resolution No. 2005-424.
1.39 Owner shall mean any person owning fee title to all or any part of the Property.
Initially, the only Owner is the Master Developer, but Owner may later also
include any number of Merchant Builders and End Users.
1.40 Parks Agreement shall mean, once approved, the "Agreement Regarding
Construction of Parks in a Portion of Otay Ranch Eastern Urban Center" between
City and Master Developer.
1.41 Party and Parties shall mean, individually, City or Master Developer, as the
context may require, and, collectively, City and Master Developer.
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1.42 Pedestrian Corridor shall mean the area within the right-of-way of a street
between the back of the curb and the pri vate property line.
1.43 Permits shall mean ministerial permits allowing Development and/or occupancy
of portions of the Property.
1.44 Proiect shall mean the Development of the Property at the maxImum total
intensity (subject to allowable transfers) in the SPA Plan.
1.45 Property shall mean the real property legally described in Exhibit "A" to this
Agreement and incorporated herein through Section 16.12 of this Agreement.
1.46 Reservation shall mean the setting aside of land for future public use, without any
legal right, title or interest being conveyed other than the promise to convey an
interest upon payment of fair market value for such land.
1.47 Reserved Authority shall have the meaning set forth III Section 3 of this
Agreement.
1.48 SPA Plan shall mean the Sectional Planning Area Plan for the EUC approved by
City on ,20_, .
1.49 Subsequent Approvals shall mean and include all Entitlements and Permits not
yet existing that are necessary for Development of the Project.
2. Development of the Property. While this Agreement is in effect, Master Developer and
Merchant Builders shall have the vested right to cause the Development of the Property
pursuant to the Existing Entitlements and Existing Land Use Regulations.
2.1 Uses. Permitted uses of the Property vested hereby shall be those in the SPA
Plan.
2.2 Intensity. Permitted intensity of use vested hereby shall be as shown in the SPA
Plan and contemplated in the Otay Ranch General Development Plan. Intensities
of use may be transferred within the Property, consistent with this Agreement and
the SPA Plan.
2.3 Size. The height and size of buildings vested hereby shall be as allowed in the
SPA Plan and contemplated in the Otay Ranch General Development Plan.
2.4 Reservations. Dedications. Improvements and Facilities. Reservations and
Dedications of land, and the provision of public improvements and facilities,
required by City for the Project, shall be those, and only those, shown in the SPA
Plan, the Project's Public Facilities Financing Plan, and tentative subdivision map
approved concurrently herewith for the Project, or as expressly set forth in this
Agreement, whether to be dedicated to or improved for City or another agency or
public utility. Fair market value of Reservations shall be determined as of their
acceptance. Master Developer and City may by mutual agreement make minor
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adjustments to public improvements and facilities, such as the size of a library,
without requiring amendment of this Agreement, so long as the improvements and
facilities are among those required by Existing Entitlements. Thus, examples of
minor adjustments would include minor additional Dedications to facilitate
construction of contemplated public streets or facilities, including transit facilities,
included in the Existing Entitlements but would not include new Dedications or
alignments for public streets or facilities that were not included in the Existing
Entitlements. Owners shall ensure that all End Users of the Project are given
notice with the close of escrow that transit facilities are planned within the
Project.
2.5 Vested Rights. Owners shall have a vested right to develop the Project in
accordance with the Existing Entitlements and Existing Land Use Regulations.
This vested right includes:
2.5.1 Subject to Section 2.13.4, the Existing Entitlements and Existing Land
Use Regulations shall govern Development of the Property.
2.5.2 This Agreement shall not prevent City from exercising its Reserved
Authority as provided in Section 3 of this Agreement, or, in addition, from
applying new City Land Use Regulations which do not conflict (as
described in Section 2.6 of this Agreement) with the Existing Entitlements
and Existing Land Use Regulations.
2.5.3 In the event of a conflict between a provision of the Existing Entitlements
and a provision of this Agreement, the provision that is more specific shall
prevail.
2.5.4 The City finds that this Agreement is consistent with its Land Use
Regulations, and therefore finds that the completed Development and
Permits consistent with the Project and this Agreement shall not constitute
a violation of any existing Land Use Regulation or standards therein, nor
shall a violation caused by other Development in City constitute grounds
to prevent the issuance of Permits for this Project. City finds that
compliance with the obligations, including the posting of adequate
security as customarily required by City for the construction of the
improvement or facility, as stated in the Parks Agreement, SPA Plan and
this Agreement, to provide library, fire and park facilities shall satisfy
City's Growth Management Ordinance. As long as the Project remains in
compliance, no Moratorium under the Grc;wth Management Ordinance for
library, fire or park facilities shall apply to the Project. If a Moratorium is
imposed on the Project because of City's failure to construct facilities
needed to comply with the Growth Management Ordinance, then Master
Developer may terminate this Agreement pursuant to Section 7.3.1.
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2.5.5 Nothing in this Agreement shall be interpreted so as to impair or reduce
any vested rights Owners have by virtue of any other Permit, law or
agreement.
2.5.6 The Parties acknowledge the right and ability of Owners to seek sewer
connections on a first-come, first-served basis during the building permit
process, and to obtain those sewer connections only if the City Engineer
determines that City has adequate treatment capacity. Should City
provide, or have provided, guaranteed sewer capacity from City's existing
capacity rights to another project, then capacity shall be guaranteed for the
entire Project, under similar conditions offered to that other project, so as
to allow this Project's buildout consistent with the Existing Entitlements.
2.5.7 The right to cause the Development of the Property pursuant to
Subsequent Approvals that are consistent with this Agreement and the
Existing Entitlements and Existing Land Use Regulations shall become
vested upon their approval by City, acceptance by Master Developer and,
if applicable, the Owner of the affected portion of the Property.
2.5.8 City shall not apply any increased parks requirements above those
identified in the Parks Agreement (whether for increased fees, increased
acreage, or both) to the Property or Project without Master Developer's
written consent.
2.5.9 Subject to its Reserved Authority and other provisions of this Agreement,
the City may apply to the Project and Property only, and may deny or
conditionally approve Subsequent Approvals only on the basis of, those
subsequently enacted Land Use Regulations which are not in conflict with
the Existing Entitlements, Existing Land Use Regulations, and this
Agreement. Subject to the City's Reserved Authority and other provisions
of this Agreement, such subsequent discretionary actions shall not prevent
Development of the Property for the uses and to the density or intensity of
Development set forth in this Agreement. Subject to its Reserved
Authority and other provisions of this Agreement, City shall apply no
Land Use Regulation, adopted after the Effective Date, applicable to the
Project or Property which conflicts with the Existing Entitlements or
Existing Land Use Regulations.
2.6 Conflicting Actions. A Land Use Regulation (as opposed to the exercise of the
City's Reserved Authority under Section 3 of this Agreement) adopted or
occurring subsequent to the Effective Date shall be considered to be in conflict
with this Agreement if it:
2.6. I Restricts the vested rights described in this Agreement or in any way
limits or reduces the timing, intensity, use, density, or sequencing of the
Development; otherwise requires any reduction or increase in the number,
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size, height or square footage of lots, structures, buildings or other
improvements, except as a transfer allowed by the SPA Plan.
2.6.2 Increases the amount or changes the location of the infrastructure required
for the Project so as to interfere with Development anticipated by the
Existing Entitlements;
2.6.3 Requires additional Exactions other than that provided for In the
Agreement or Existing Entitlements.
2.6.4 Changes design or Development standards or the policies or requirements
of the General Plan or Otay Ranch General Development Plan applicable
to the Property or Proj ect;
2.6.5 Does not conflict with Sections 2.6.1, 2.6.2, 2.6.3, or 2.6.4, but is not
uniformly applied throughout City to all multi-family residential, mixed-
used or urban-intensity Development within City;
2.6.6 Imposes a new Permit requirement or procedure, or a more stringent
growth management threshold, that is not already part of the Existing
Entitlements, except pursuant to Sections 3.2, 3.3, 3.4, 3.5, and 3.6; and/or
2.6.7 Materially increases the cost of Development as those costs of
Development exist at the time the Land Use Regulation is adopted. As
used in this Section 2.6.7, the phrase "materially increases" means
increases by twenty percent (20%) the cost of the structure or facility that
is the subject of the Land Use Regulation at the time the Land Use
Regulation is adopted, as reasonably determined by the City Manager or
his designee based upon information provided by Owner and other
available information. In the event the Land Use Regulation causes a
material increase in the cost ofthe structure or facility that is the subject of
the Land Use Regulation, the City and Owner shall meet and confer and
work in good faith to determine whether the Land Use Regulation may be
applied in a manner that does not result in a material increase. If the
Parties cannot agree upon such an application of the Land Use Regulation,
the Land Use Regulation shall be deemed to be in conflict with the
Existing Entitlements or Existing Land Use Regulations.
2.7 Development Impact Fees. The amount of any Development Impact Fee payable
to City shall be determined based upon the City's Development Impact Fee
schedule in place at the time of the issuance of any building permit for which a
Development Impact Fee is required. However, by this Agreement the City vests
the right of Owner to defer the payment of such Development Impact Fee until the
issuance of certificates of occupancy or request for final inspection, as applicable,
pursuant to the City's Development Impact Fee deferral policy as it exists at the
time of adoption of the Enabling Ordinance, without the necessity of additional
City Council review. Final payment of any Development Impact Fee shall
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include interest on the amount due, at the rate specified in the City's Development
Impact Fee deferral policy or the legal rate of interest, whichever is lower. City
shall have a lien on any portion of the Property for which a building permit has
been issued until all Development Impact Fees which are due but not yet payable
for that portion of the Property have been paid. In the event Owner were to
become entitled to a refund of any or some part of Development Impact Fees,
Development Impact Fees that have already been paid on account of building
permits that have been issued need not be refunded, but a credit shall be applied to
Development Impact Fees to the extent they were prepaid before issuance of
building permits for the Project.
2.8 Processing Fees. Owners shall pay City's Development Processing Fees for all
Subsequent Approvals pursuant to the fee schedules in effect at the time of
application for such Subsequent Approvals.
2.9 Water Supply. All tentative subdivision maps prepared for the Project shall
comply with the provisions of CALIFORNIA GOVERNMENT CODE 966473.7
and CALIFORNIA WATER CODE 910610 et seq., as applicable.
2.10 Enforcement. Pursuant to CALIFORNIA GOVERNMENT CODE 965865.4,
except to the extent it has been amended, canceled, modified or suspended, this
Agreement shall be enforceable by any Party notwithstanding any change in any
Land Use Regulation which purports to alter or amend the Existing Entitlements
or Existing Land Use Regulations.
2.11 Building Codes and Construction Standards.
2.11.1 All construction on the Property, including private and public
improvements, shall adhere to the Building Codes as those Building Codes
exist when building permits are applied for, provided that such Building
Codes are uniformly applied within City to all new Development projects
of similar type as the Proj ect.
2.11.2 All construction of public improvements for the Project shall also adhere
to the Construction Standards in their forms when construction drawings
for those improvements are submitted to City; provided that such
Construction Standards are uniformly applied within the Eastern Planning
Area.
2.11.3 Due to the unique nature of the Project, the Parties acknowledge that
exceptions and deviations to some Construction Standards may be
required. City will reasonably consider all requests for exceptions to and
deviations from the Construction Standards necessary for implementation
of the Project or to implement the Existing Entitlements. The Parties
acknowledge that it is reasonable for the City to deny a request for
exceptions to and deviations from the Construction Standards when
necessary to protect the public health, safety or welfare.
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2.12 Timing of Development. The California Supreme Court held in Pardee
Construction Companv v. City of Camarillo (1984) 27 Ca1.3d 465, that the failure
of the parties to a stipulated judgment, which was intended to vest certain
development rights, to provide for the timing of the development at issue, meant
that a later-adopted initiative restricting the timing of development prevailed over
the stipulated judgment. To avoid this result, City and Master Developer agree
that the timing and phasing of Development shall be within Owner's discretion
but as constrained by this Agreement and the Existing Entitlements. City shall
not limit the rate or timing of Development or occupancy of the Property, except
as authorized by this Agreement and the Existing Entitlements. Nothing in this
section shall be construed to limit City's right to ensure that Owners timely
provide all infrastructure required by this Agreement, the Existing Entitlements
and the Existing Land Use Regulations (including but not limited to the Growth
Management Ordinance and Public Facilities Financing Plan).
2.13 Changes. This Agreement shall not be amended except as expressly provided
herein.
2.13.1 This Agreement may be amended at any time, in whole or in part, by the
mutual written consent of City and Master Developer and the Owner of
the affected portion of the Property (subject to Section 2.13.2). Notice of
intention to amend any portion of this Agreement shall be given pursuant
to law and this Agreement. Any amendment to this Agreement shall
require adoption of an ordinance pursuant to the laws governing
development agreements.
2.13.2 Subject to Section 2.13.1, this Agreement may be amended by the Owner
of the affected portion of the Property without the consent of the Owner(s)
of other portions so long as the amendment does not change the use,
density, transferability, or intensity of use, nor increase the Dedication or
improvement obligations, of the portion of the Property belonging to the
non-consenting Owner(s), nor result in there not being a private party
responsible for providing required improvements for City.
2.13.3 Owners may, at any time and for any reason but only with the consent of
Master Developer, request Material Changes in the Project without risk to
any rights they have or that have vested pursuant to this Agreement.
However, all Material Changes shall be treated as amendments to this
Agreement. Changes that are not Material Changes shall not require an
amendment to this Agreement if the Master Developer, the Owner of the
affected portion of the Property, and the City Manager all agree that the
modification is minor and consistent with this Agreement.
2.13.4 Any Owner (if consent is given in writing by Master Developer) may
request other changes in the Existing Entitlements, Existing Land Use
Regulations, and Subsequent Approvals without risk to any rights they
have or that have vested pursuant to this Agreement. Owners may, if
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consent is given in writing by Master Developer but without the need for
the consent of any other Owner, accept changes to any Existing
Entitlement or Existing Land Use Regulations without risk to any rights
they have or that have vested pursuant to this Agreement; in that event, the
accepting Owner shall notify City of the change and the extent to which it
is being accepted, and that change shall not constitute an amendment to
this Agreement so long as the change does not apply to any non-
consenting Owner's portion of the Property. Such changes will, however,
be subject to City's normal review processes.
2.13.5 Neither transfers of units or uses within the Property pursuant to the SPA
Plan and in conformance with this Agreement, nor changes in the phasing
of Development (if done by the decision of Master Developer and/or an
Owner) shall constitute a Material Change, so long as those transfers do
not exceed the intensity of Development analyzed in the Project's
environmental impact report.
2.13.6 If City changes the classification of Hunte Parkway between Eastlake
Boulevard and State Route 125 to a six-lane prime arterial, City shall
consider reconfiguring the streets within the Property to match the
"Alternative EUC Circulation Conditions" design provided in the Fehr &
Peers EUC traffic study addendum dated May 15, 2008. The Parties
hereby agree that this reconfiguration shall neither constitute a Material
Change to this Agreement nor require an amendment hereto, and would
constitute a minor adjustment pursuant to Section 2.4, but shall be subject
to CEQA. This reconfiguration shall not be allowed to impair any of
Master Developer's rights under this Agreement, including but not limited
to vested rights to Develop the Property in the amount and schedule
contemplated by this Agreement.
2.14 Clarifications. This Agreement requires a close degree of coordination among
City, Master Developer and Owners. Refinements of planned Development of the
Property may demonstrate that clarifications are appropriate with respect to the
details of performance. City, Master Developer and Owners may effectuate such
clarifications through the mutual consent of City, Master Developer and the
Owner of the affected portion of the Property. No such clarification shall
constitute an amendment to this Agreement. The City Attorney shall be
authorized to make the determination whether a requested clarification constitutes
an amendment to this Agreement. Upon City Attorney approval, the City
Manager, at his or her discretion, may execute any clarification without City
Council action. However, City shall send a copy to Master Developer.
2.15 Growth Management Thresholds. If City amends its Growth Management
Ordinance, the amended Growth Management Ordinance shall apply to the
Project upon Master Developer's written acceptance by a clarification pursuant to
Section 2.14, which acceptance shall not constitute an amendment to this
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Agreement. This provision shall not affect any mitigation measures required of
Master Developer under the environmental document certified for the Project.
2.16 Issuance of Final Permits. No Permit shall be withheld if there has been
compliance with the requirements of this Agreement, the Existing Entitlements
and the Existing Land Use Regulations, including the Growth Management
Ordinance. If necessary, City shall use reasonable efforts to process any
additional Entitlements and Land Use Regulations that are necessary to
accomplish this goal.
2.17 Nature of Change in Law. After the Effective Date and subject to the City's
Reserved Authority in Section 3 of this Agreement, Section 2 of this Agreement
shall apply regardless of whether a change in the Existing Entitlements or
Existing Land Use Regulations is the result of City Councilor voter action. The
Parties again intend hereby to avoid the result in Pardee Construction Co. v. City
of Camarillo, 37 Ca1.3d 465 (1984).
3. Reserved Authority. Notwithstanding any other provision of this Agreement, the City
has the following Reserved Authority with respect to the Project:
3.1 Review of Subsequent Approvals. City shall review Subsequent Approvals
pursuant to the Existing Entitlements and Existing Land Use Regulations, any
future Land Use Regulations not in conflict with the Existing Entitlements and
Existing Land Use Regulations and its Reserved Authority as expressed in this
Section 3 of this Agreement.
3.2 Threat to Health or Safety. City may modify, suspend or terminate all or any part
of this Agreement if the City reasonably determines that compliance would create
a condition dangerous to the health or safety of the public.
3.3 Change in State or Federal Law. In the event that state or federal laws,
promulgated after the date the Enabling Ordinance is adopted, prevent or preclude
compliance with this Agreement, such provision shall be modified, suspended or
terminated so as to comply with such state or federal law.
3.4 Immediate Threat. If the City, acting through the City Manager or designee,
reasonably finds that a threat to health or safety poses an emergency, or that a
change in state or federal law requires immediate action, City may unilaterally
suspend the Existing Entitlements and Existing Land Use Regulations and this
Agreement. Such suspension shall remain in place until such time as the
procedures called for in Section 3.5 of this Agreement are completed and shall be
of the minimum scope and effect necessary to accommodate the emergency or
change in higher law.
3.5 Procedure for Exercise of Reserved Authoritv. Except as provided in Section 3.4,
City may exercise its Reserved Authority when it does all of the following:
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3.5.1 Gives notice to each affected Owner and to Master Developer. The notice
shall describe the facts giving rise to the need to modify, suspend or
terminate the Agreement, the City's proposed action, and state a proposed
date, time and place for a meeting to discuss the action. The Parties may
change the date, time and/or place of the meeting by mutual agreement.
The Parties shall take good faith efforts to have this meeting within thirty
(30) days after notice was given.
3.5.2 Meets and confers in good faith with each affected Owner and Master
Developer at the meeting described in the above notice. The purpose of
the meeting shall be to negotiate a remedy in good faith. The meeting
shall conclude within thirty (30) days of its commencement, or such later
time as the Parties agree in writing. If the Parties agree on a remedy
which City staff has the authority to implement, and which the City
Attorney has approved, the Parties need not pursue the Council hearing
described in Sections 3.5.3 and 3.5.4.
3.5.3 Holds a noticed, public hearing. The City Manager shall, within thirty
(30) days of the conclusion of the meet-and-confer efforts, make a
recommendation to the City Council concerning a proposed action. The
City Council shall hold a public hearing on the matter as soon as such a
hearing can be scheduled.
3.5.4 The City Council shall then determine appropriate action under Section 3
and such decision shall not be subject to administrative appeal. However,
Master Developer and/or any affected Owner may challenge such decision
in court.
3.6 Scope of Action. Any action (including but not limited to suspension,
modification, and/or termination) resulting from Sections 3.2, 3.3, and/or 3.4 shall
be subject to all of the following requirements:
3.6.1 The action chosen shall be of the minimum scope, effect, and duration
necessary to accommodate the health and safety issue or changed state or
federal law, and shall apply only to the Property and Project. For
example, City shall not apply to the Project any changes to its engineering
standards, hydrology manual or stormwater regulations which conflict
with the Existing Entitlements except as necessary to comply with an
order of a higher agency, such as the Regional Water Quality Control
Board.
3.6.2 If City chooses to suspend or modify the Agreement, Master Developer
may terminate this Agreement pursuant to Section 7.3.1.
3.7 CEOA. The Parties understand that discretionary Subsequent Approvals will be
subject to CEQA, and that the City must comply with the requirements of CEQA
when considering such Subsequent Approvals. The Parties intend, however, that
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the environmental impact report for the Proj ect, which is among the Existing
Entitlements, be relied upon by the City, to the extent allowed by law, when
analyzing the Subsequent Approvals. If the application ofCEQA to a Subsequent
Approval would (a) require as mitigation a reduction in the density or intensity of
use from that allowed by this Agreement, (b) require as mitigation a change of use
from those allowed by this Agreement, (c) result in the identification of
significant, unmitigable impacts, and/or (d) identify an environmentally preferred
alternative that would reduce density or intensity of use or change a use from
those allowed by this Agreement, then Master Developer may terminate this
Agreement pursuant to Section 7.3.1.
3.8 Off-Site Property. In any instance where Owner is required to construct any
public improvement on land not owned by Owner, Owner shall, at its sole cost
and expense, provide or cause to be provided, the real property interests necessary
for the construction of such public improvements. In the event Owner is unable,
after exercising reasonable efforts, including and not limited to, the rights under
Sections 1001 and 1002 of the CALIFORNIA CIVIL CODE, to acquire the real
property interests necessary for the construction of such public improvements,
and if so requested by Owner, and upon Owner's provision of adequate security
for costs City may reasonably incur, City shall negotiate for the purchase of the
necessary real property interests to allow Owner to construct the public
improvements as required by this Agreement and, if necessary, in accordance
with the procedures established by law, shall in its sole discretion, consider the
use of its power of eminent domain to acquire such required real property
interests. Owner shall pay all costs associated with such acquisition or any
condemnation proceedings, including both costs of the real property and litigation
expenses. If City is unable to acquire the required property by negotiations or
condemnation within the time-frame provided for in CALIFORNIA
GOVERNMENT CODE 966462.5, City shall continue to issue Subsequent
Approvals for the Project despite the fact that the improvement has not been
completed. City shall not postpone or refuse Subsequent Approvals because
Owner has failed to acquire off-site property required for the construction of
public improvements on land not owned by Owner. Notwithstanding the
foregoing, City's obligation to continue to issue Subsequent Approvals as
provided for in this Section in contingent upon: (a) Owner's submitting the
improvement plans required for the applicable improvement to City; (b)
consistent with CALIFORNIA GOVERNMENT CODE 966462.5, Owner's
entering into an agreement with City to reimburse City for costs incurrent by City
in acquiring the real property; and (c) compliance by Owner with any and all
applicable laws and Project conditions (other than the off-site condition in
question). This Section 3.8 is not intended by the Parties to impose upon Owner
an enforceable duty to acquire land or construct any public improvements on land
not owned by Owner, except to the extent the Owner elects to proceed with the
Development of the Project, and then only in accordance with valid conditions
imposed by the City upon the Development of the Project under the Subdivision
Map Act or other legal authority.
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4. Owners' Obligations.
4.1 Compliance With Law. Owners shall comply with the Existing Entitlements and
Existing Land Use Regulations. Owner shall also comply with all Subsequent
Approvals, Land Use Regulations that are not in conflict with this Agreement,
with the Existing Entitlements and with the Existing Land Use Regulations and
the City's Reserved Authority.
4.2 Administrative and Processing Costs of City. Owners shall pay City's
administrative and processing costs reasonably incurred in pursuit of any
condemnation required for the Project, processing and review of Subsequent
Approvals, the consideration and establishment of Districts pursuant to Section
5.3, relations with other governmental agencies pursuant to Sections 5.7 and 5.10,
a proportionate share of modifications to a Development Impact Fee program
pursuant to Section 5.9, and annual reviews pursuant to Section I 1.1.
4.3 Public Facilities and Services. Master Developer shall provide the following
facilities pursuant to the Existing Entitlements and Existing Land Use
Regulations, on the schedule described in the SPA Plan:
4.3. I Land and/or space within a building for public library facilities, and
Development Impact Fees for a library, as described in Exhibit "D."
4.3.2 Reservation of a site for, construction of, interim funding of and
Development Impact Fees for a City fIre station, as described in Exhibit
"E."
4.3.3 Dedication of land for and construction of City urban parks pursuant to the
Parks Agreement.
4.3.4 Park Development Impact Fees, as provided for by the Parks Agreement.
4.3.5 Right-of-way for the bus rapid transit line through the Property.
4.3.6 Land for the transit stop and improvement of transit lanes and guideways
through the Property as shown in the SPA Plan (but with a right to seek
reimbursement from other agencies and grant funds).
4.3.7 Off-site capital sewer improvements to the Poggi Canyon and Salt Creek
sewer basins and facilities, as defined in the Existing Entitlements.
4.4 Cluster Incentive Program. Master Developer will encourage the establishment of
uses, including medical, professional, financial and green-tech employers, within
the Property that will benefit or are synergistic with a proposed university in Otay
Ranch. To accomplish this, Master Developer agrees to actively participate with
local and regional agencies, including City, the South County Economic
Development Council, and others to attract university-related employers to EUC.
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City will reasonably consider any requests that the City actively support Master
Developer's efforts to secure those targeted employers for EVe.
4.5 Operating Deficit. Master Developer shall, on the terms ofthis Section 4.5, cover
City's deficit if it is determined in the initial years that the Project, exclusive of
interim funding and costs for fire services, will result in a net fiscal deficit to City.
Master Developer agrees to pay to City an amount equal to the difference between
City's service costs and the total revenues generated by the Project (including
assessments, ta,es, levies, developer payments, and other revenue sources as
addressed in City's fiscal model). The net deficit or surplus generated by the
Project will be determined by a fiscal study prepared by City and will exclude
consideration of interim funding and costs for fire services, which shall be
governed by Exhibit "E" of this Agreement. City and Developer shall meet prior
to the initiation of each study to review assumptions to be used in the study (e.g.,
property valuations, resident population, maintenance obligations, etc.). To allow
time for initial land uses to become established, the first fiscal analysis shall be
conducted following the end of the fiscal year which is two (2) years following
the first occupancy within the Property, and annually thereafter at the end of each
fiscal year. The fiscal study shall be prepared by City and may, at either party's
request, be reviewed by a third party independent fiscal consultant acceptable to
both parties. Master Developer shall bear the costs of preparing the annual fiscal
studies as well as any third party review initiated at Master Developer's request.
Any payments made under this provision shall be made on an annual basis, no
later than thirty (30) days following completion of the annual fiscal study. Master
Developer's total obligation under this Section 4.5 shall not exceed five hundred
thousand dollars ($500,000.00). The obligation of this Section 4.5 shall terminate
and be of no further force and effect as soon as either (a) the fiscal study identifies
a net surplus for two (2) successive fiscal years, or (b) the total obligation limit is
reached.
5. City Oblil!ations.
5.1 Processing. City shall accept and process with reasonable promptness all
completed applications for Subsequent Approvals.
5.2 Acceptance of and Bonding for Roads and Related Facilities. It is anticipated
that, due to the unique design of the Project, Master Developer may leave
construction of sidewalks to Merchant Builders separately from (and after)
construction of the adjacent roads. To accommodate this:
5.2.1 Bonding for public street improvements shall only be required for those
facilities located from back-of-curb to back-of-curb along with a
temporary ADA-Accessible asphalt-concrete sidewalk. Improvement
plans may show ultimate improvements within the Pedestrian Corridor as
future improvements, but work within the Pedestrian Corridor shall be
bonded for and constructed as part of the Development of the adjacent
parcel. Acceptance of curb-to-curb improvements and the release of the
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associated bonds shall not be delayed due to incomplete Pedestrian
Corridor improvements provided that an ADA-Accessible path, temporary
or permanent, has been constructed.
5.2.2 The release of any bond shall not be delayed by work not expressly
covered by the bond estimate or shown on the associated approved plans.
Furthermore, the state of work on subsequently-approved plans shall not
affect the release or acceptance of any work that has been completed
consistently with a previously-approved plan.
5.2.3 City may reduce both faithful performance and labor and materials bonds
by seventy-five percent (75%) upon substantial completion of the work
bonded for, as determined by the City's field inspector.
5.2.4 City shall accept security, in a legally authorized form customarily
accepted by City and in accordance with customary City procedures,
which is posted by successors to Master Developer (including here
Merchant Builders and other Owners) in place of security posted by
Master Developer. Upon the acceptance of the successor's security, City
shall release security posted by Master Developer for the subj ect
improvements, even if doing so results in more than one set of security for
improvements on a single set of plans.
5.3 Funding Mechanisms. Master Developer may, at its option, submit a written
request to City on City's standard application form requesting that City establish a
Community Facilities District to finance the acquisition and construction of public
facilities in accordance with the Financing Plan and the Goals and Policies. City
agrees that upon receipt of such request and application and the deposit with City
of sufficient funds to pay City's costs to undertake the proceedings to establish
such a Community Facilities District, City shall use reasonable efforts to: (a)
initiate and diligently pursue proceedings to establish such a Community
Facilities District; and (b) if the establishment of such Community Facilities
District is approved by the City Council and the levy of special taxes and the
issuance of bonds for or by such a District are approved by the qualified electors
of such District, to thereafter levy and collect special taxes and issue bonds of
such District in accordance with the Financing Plan and the Goals and Policies. If
City fails to complete the District proceedings and record the notice of special tax
lien within two hundred ten (210) days following Master Developer's submittal of
a complete application, other than due to delays caused by Master Developer's
failure to provide necessary information or inaction by Master Developer or by
other circumstances outside the control of City, or if City establishes the District
in a manner, structure or subject to conditions that are expressly inconsistent with
the Financing Plan and the Goals and Policies, then (a) City and Master
Developer shall meet and confer and reasonably consider the creation of another
financing mechanism to finance the Eligible Public Facilities (as defined in the
Financing Plan), including, but not limited to, reasonable efforts to consider
assisting Master Developer and another agency to establish a District to finance
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the Eligible Public Facilities in a manner consistent with the Financing Plan,
and/or (b) Master Developer may (if in Master Developer's sole discretion the
efforts of '(a)' are unsuccessful or inadequate) terminate this Agreement pursuant
to Section 7.3.1. Master Developer and City may mutually agree to extend the
210 day period for the completion of the District establishment proceedings,
which agreement shall not be unreasonably refused.
5.4 Parking Enforcement on Private Propertv. If Master Developer forms an entity
(which may be an Association) to manage parking within the Property, that
Association or other entity may provide enforcement of parking regulations
within private rights-of-way and on private property, and the City may consider
allowing the use of funds generated by parking revenues and charges for its
activities.
5.5 Future Use of Pro;ect Revenues. City acknowledges that while nothing in this
Agreement contemplates revenue sharing with respect to transient occupancy
taxes, retail sales taxes or other revenues, Master Developer, future Owners or
End Users may ask the City to consider revenue sharing to promote Development
consistent with the Existing Entitlements.
5.6 Coordination With Other Pro;ects. The Parties acknowledge that the success and
viability of the Project, including its benefits for City, depend greatly on its
coordination with other land uses and developments in the Eastern Planning Area,
and that subsequent land use actions by City may materially affect the market
viability of the Project. The Parties further acknowledge that they cannot restrict
City's police powers to determine other land uses in the area. However, the
Parties agree that, if City does consider any entitlements for other properties
within the Eastern Planning Area, the implementation of which either Party
concludes may materially affect the market viability of the Project or result in
additional water demand which would adversely impact the ability to implement
the Project, or would result in the Project violating the Existing Land Use
Regulations, they shall meet and confer in good faith about, and City shall
concurrently and in good faith consider and timely process, Master Developer's
requested changes to the EUC, SPA Plan and the City's planning documents,
based on a market analysis, prepared by Master Developer at its sole expense, that
would allow the Project to continue to attract necessary market investment. In the
event that City proceeds with entitlements for other properties within the Eastern
Planning Area to which Master Developer objects without also proceeding with
changes to the EUC, SPA Plan and the City's planning documents as requested by
Master Developer, Master Developer may terminate this Agreement pursuant to
Section 7.3.1.
5.7 Assistance From Other Governments. Upon Master Developer's request and at
Master Developer's sole expense, City shall reasonably consider whether to make
applications, or reasonably assist and cooperate with Developer in submitting
applications, for the following assistance, consistent with the Existing
Entitlements and Subsequent Approvals, for all or any part of the Project:
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5.7.1 Available tax or other benefits from the state or federal governments,
including but not limited to free trade/enterprise zone designations, state
or federal credit enhancements, tax credits or other fmancial support in
connection with bonds issued by a District.
5.7.2 Available grants, loans, bonds, and subsidies from the local, state or
federal governments or agencies for, for example, transit-oriented
developments, affordable housing, smart growth, sustainable development,
economic and employment development, and other government programs
that seek to encourage the type of Development identified in the Existing
Entitlements.
5.7.3 Reimbursement from federal, state or local, non-City, sources for any
facilities provided as part of the Project, including, but not limited to,
reimbursement for the transit elements.
5.8 Library. City shaIl cooperate with Master Developer in planning the library
within the Property, which City acknowledges and agrees may be part of a mixed-
use structure as shown in the SPA Plan. City shall use reasonable efforts to cause
the library design and operation to contribute to the achievement of the goals of
the SPA Plan.
5.9 Reimbursements for Certain Facilities. City shall in good faith consider including
into an existing Development Impact Fee program, establishing a new fee
program for, or establishing other reimbursement mechanisms for the costs of
those facilities described in Sections 5.9.1, 5.9.2, and 5.9.3 below to provide
Master Developer with a source of reimbursement for the cost of such facilities.
This funding mechanism shaIl be considered independently of, and in addition to,
establishment of a Community Facilities District; provided, however, to the extent
the entire cost of any such facility is paid to Master Developer as part of the
acquisition price of such facility financed through the District, the reimbursement
shall be paid into the fund or account of the District designated for the acquisition
or construction of public facilities and be available for such purposes. In the
event there are no public facilities remaining to be fmanced by the District, the
reimbursement shall be used by the District to redeem outstanding bonds of the
District or to pay debt service on such bonds. If City fails to establish any of
these reimbursement mechanisms for 5.9.1 or 5.9.2, then Master Developer may
terminate this Agreement pursuant to Section 7.3.1.
5.9.1 The facilities listed in Section 4.3.7.
5.9.2 "Street A," as shown on the approved tentative map for the Project.
5.9.3 The Project's cultural venue, in acknowledgement of EUC's role as the
cultural focus of the Eastern Planning Area, if City adopts a master plan
for cultural and/or artistic facilities and programs.
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5.10 Transit Dedications. City shall not require any Dedication for transit, or require
any Owner to construct or fund the construction of transit facilities, for use for
anything other than local transit service (i.e., not for bus rapid transit), until and
unless the Owner of any real property in question has entered into an agreement
for construction coordination and reimbursement with the other agency.
5.11 Recordation of Agreement and Amendments. The City Clerk shall file this
Agreement for recordation with the County Recorder of the County of San Diego
within ten (10) days after the Effective Date.
5.12 Limited Reimbursement for Specific Facilities Upon Early Termination of
Agreement. This Agreement, the Existing Entitlements and the Public Facilities
Financing Plan require Master Developer to construct or cause the construction of
certain public facilities and improvements at certain times. The phasing of the
construction of these public facilities and improvements is intended to correspond
to the need for the facilities and improvements created by the Development of the
Project. Therefore, Master Developer shall have no right to reimbursement (not
otherwise provided in this Agreement) for any public facilities and improvements
constructed pursuant to this Agreement, the Existing Entitlements and the Public
Facilities Financing Plan upon the early termination of this Agreement. In
addition, Master Developer may, for business reaSOI15, elect to construct a
required public improvement or facility in advance of the time required by this
Agreement, the Existing Entitlements and the Public Facilities Financing Plan. In
such case, Master Developer shall not be entitled to reimbursement (not otherwise
provided for in the Agreement) upon early termination of this Agreement.
However, if, and only if, City unilaterally requires Master Developer to construct
a public improvement or facility in advance of the time that improvement or
facility is required by this Agreement, the Existing Entitlements and the Public
Facilities Financing Plan, and, subsequently, this Agreement is terminated in
advance ofthe time that improvement or facility was to be constructed pursuant to
this Agreement, the Existing Entitlements and the Public Facilities Financing
Plan, then Master Developer shall be entitled to a limited right of reimbursement
for that portion of the cost of the facility or improvement that was not required to
serve Development completed as of the date of termination. City shall only be
responsible to reimburse Master Developer for that portion of the cost of the
facility or improvement that was not required to serve Development completed as
of the date of termination, and only when Master Developer is not entitled to
reimbursement for that facility and improvement from another source, including,
but not limited to, a Community Facilities District. This reimbursement from City
shall be subject to availability of funds, but shall in no event be completed later
than five (5) years from termination of the Agreement.
6. Third Party Litigation; Defense and Indemnitv.
6.1 General Plan Litigation. City has determined that this Agreement and the
Entitlements for the Project are consistent with its General Plan and other
applicable land use plans, and that those plans meet all requirements of law.
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Master Developer has reviewed the General Plan and all other applicable land use
plans and concurs with City's determination. City shall have no liability under
this Agreement for any failure of City to perform under this Agreement or the
inability of Owner to Develop the Property resulting from a judicial determination
that the General Plan, applicable land use plans, or portions thereof on which an
Existing Entitlement or Subsequent Approval relies, are, on the date each is
approved, invalid or inadequate or not in compliance with law.
6.2 Third Party Litigation Concerning the Agreement and the Entitlements. The
Owner issued any Subsequent Approval or Permit shall defend, at its expense,
including attorneys' fees, indemnify and hold harmless City, its agents, officers
and employees from any claim, action or proceeding against City, its agents,
officers or employees to attack, set aside, void or annul the approval of this
Agreement, the Existing Entitlements or the approval of any Subsequent
Approval or Permit granted to that Owner pursuant to this Agreement. City shall
promptly notify such Owner of any such claim, action or proceeding, and City
shall cooperate in the defense.
6.3 Indemnity. In addition to the provisions of Section 6.2 above, each Owner shall
indemnify, defend and hold City, its officers, agents, employees, subcontractors
and independent contractors free and harmless from any liability whatsoever,
based or asserted upon any act or omission of that Owner, its officers, agents,
employees, subcontractors and independent contractors, for property damage,
bodily injury, or death (that Owner's employees included) or any other element of
damage of any kind or nature, relating to or in any way connected with or arising
from the activities contemplated by this Agreement, including, but not limited to,
the study, design, engineering, construction, completion, failure and conveyance
of private or public improvements for the Project, save and except for liability or
claims arising through the active negligence or willful misconduct of City. That
Owner shall defend, at its expense, including attorneys' fees, City, its officers,
agents, employees, subcontractors and independent contractors in any legal or
equitable' action based upon such alleged acts or omissions, save and except
liability or claims arising through the active negligence of willful misconduct of
City.
6.4 Environmental Assurances. Owner shall indemnify, defend and hold City, its
officers, agents, employees, subcontractors and independent contractors free and
harmless from any liability, based or asserted, upon any act or omission of Owner,
its officers, agents, employees, subcontractors, predecessors in interest,
successors, assigns and independent contractors for any violation of any federal,
state or local law, ordinance or regulation relating to industrial hygiene or to
environmental conditions on, under or about the Property, including, but not
limited to, soil and groundwater conditions, save and except liability or claims
arising through the active negligence or willful misconduct of City. Owner shall
defend, at its expense, including attorneys' fees, City, its officers, agents,
employees, subcontractors and independent contractors in any action based or
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asserted upon any such alleged act or omission, save and except liability or claims
arising through the active negligence or willful misconduct of City.
6.5 Reservation of Rights. With respect to Sections 6.2, 6.3, and 6.4, City reserves
the right to either (1) approve the attorney(s) which Owner selects, hires or
otherwise engages to defend City hereunder, which approval shall not be
unreasonably withheld, or (2) relieve the Owner of its indemnity and defense
obligations and conduct its own defense, provided, however, that Owner shall
reimburse City forthwith for any and all reasonable expenses incurred for such
defense, including attorneys' fees, upon billing and accounting therefor, with the
understanding that Owner's attorneys shall be lead counsel and City's attorneys
shall, to the maximum extent feasible, cooperate with Owner's attorneys.
6.6 Survival. The provisions of Section 6 of this Agreement, for Claims ansmg
before termination of this Agreement, shall survive the termination of this
Agreement.
7. Term.
7.1 Commencement. This Agreement shall become effective on the Effective Date.
7.2 Duration. Unless terminated earlier pursuant to another provision hereof, this
Agreement shall be in full force and effect until, but shall automatically terminate
upon, the earlier of (a) the passage of twenty (20) years after the Effective Date,
or (b) completion of full build-out of the Property as contemplated in the Otay
Ranch General Development Plan that is among the Existing Entitlements,
including City's issuance of all required Permits and acceptance of all
Dedications and improvements required to complete Development and allow
occupancy.
7.3 Earlv Termination. Besides automatic termination pursuant to Section 7.2, this
entire Agreement shall be deemed terminated upon the occurrence of one of the
following events:
7.3.1 If termination occurs pursuant to any specific provision of this Agreement;
or
7.3.2 An uncured material breach by one Party occurs, and the non-breaching
Party elects in writing to pursue early termination of this Agreement rather
than specific performance of this Agreement; or
7.3.3 Entry after all appeals have been exhausted of a final judgment in
Litigation holding this Agreement, or its application to any part of the
Proj ect, invalid.
7.4 Earlv Termination as to Individual Parcels. In addition to termination pursuant to
Sections 7.2 and 7.3, this Agreement shall partially terminate as follows:
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7.4.1 As to any parcel zoned for multi-family residential use, this Agreement
shall terminate upon the occurrence of both (a) the completion or posting
of security (at the discretion of the City Engineer, exercised pursuant to
the Existing Municipal Code) for all conditions on Development of the
parcel imposed consistent with this Agreement, and (b) issuance of a
building permit and certificate of occupancy for the maximum number of
units allowed by the Project on that parcel, or such lesser number of units
as Master Developer, Owner and City have all agreed to in writing.
7.4.2 As to any parcel zoned for commercial, industrial or mixed residential-
commercial uses, this Agreement shall terminate upon the occurrence of
both (a) the completion or posting of security (at the discretion of the City
Engineer, exercised pursuant to the Existing Municipal Code) for all
conditions on Development of the parcel imposed consistent with this
Agreement, and (b) issuance of a building permit and certificate of
occupancy for the maximum amount of square footage of building area
allowed by the Proj ect on that parcel, or such lesser building area as
Master Developer, Owner and City have all agreed to in writing.
7.5 Effect of Termination. Termination of this Agreement pursuant to this Section 7
shall not affect any right or duty arising from Entitlements or Subsequent
Approvals issued by City prior to tennination, nor shall it destroy any vested right
arising from the completion of construction in good faith reliance on an
Entitlement or Subsequent Approval.
7.6 Extensions. The term of this Agreement and the time for performance by either
Party of any of its obligations hereunder shall be extended by the period of time
that Force Majeure exists. Such delay shall not be deemed to be a default. In
addition, the term of this Agreement shall be extended day-for-day by delays
arising from the pendency of Litigation challenging this Agreement or the
Development contemplated hereby. The Party claiming that Force Majeure exists
shall give notice thereof to the other Party within sixty (60) days of gaining actual
knowledge thereof.
8. Subdivision Maps. Pursuant to CALIFORi'\!IA GOVERNMENT CODE S66452.6(a),
no tentative map covering all or any portion of the Property shall expire before, and all
such maps are hereby extended to, the termination of this Agreement.
9. Financinl!:.
9.1 Right to Encumber. Any Owner may, in its sole discretion, obtain or allow one or
more Encumbrances as it believes will assist Development of its part of the
Project. Unless otherwise required by law, neither entering into nor a breach of
this Agreement shall defeat, render invalid, diminish or impair the lien of any
Encumbrance made in good faith. and for value. Nothing herein authorizes an
Owner to Encumber any interest in the Property other than its own. All
Encumbrances shall be subordinated to this Agreement.
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9.2 Notice. Owners and/or any Financiers shall have the right to give notice to City
of the existence of an Encumbrance.
10. Binding Effect.
10.1 EntirelY of Propertv. All of the Property shall be and shall remain subj ect to this
Agreement until terminated as to all or a portion of the Property pursuant to
Section 7, above.
10.2 Propertv and Agreement Remain Linked. Master Developer and Owners shall
have the right to sell, transfer or assign all or any portion of the Property and their
rights under the Agreement.
10.2.1 Any person acquiring any interest in the Property shall do so subject to
this Agreement. Conversely, no sale, transfer or assignment of any right,
interest or obligation under this Agreement shall be made unless made
together with a corresponding sale, transfer or assignment as to the
Property.
10.2.2 As to City, Master Developer shall remain liable for all obligations of
Sections 4.3 and 6.4 of this Agreement, all obligations of Existing
Entitlements, and for the obligations to construct improvements required
by subdivision maps on the Property. Master Developer may assign its
rights and interests and transfer or delegate some or all of the aforesaid
obligations, including improvement security, but only to another Master
Developer it so identifies to City who agrees in writing to fulfill Master
Developer's role with regard thereto. City retains the right to consent or
not consent to such change, but City's consent shall not be unreasonably
withheld and shall be limited to confirming the financial resources of the
successor necessary to fulfill its role under this Agreement. Neither
Merchant Builders nor End Users shall be deemed a Master Developer
unless so identified pursuant to this Section 10.2.
10.2.3 Nothing in this Agreement shall prevent Master Developer.from imposing
additional or different restrictions or obligations, that do not conflict with
this Agreement, on the Property and/or on subsequent Owners pursuant to
other legal mechanisms, such as purchase and sale agreements, deeds, or
declarations of covenants, conditions and restrictions, all of which shall be
subordinated to this Agreement; for example, the Parties anticipate that
Merchant Builders may become responsible, to Master Developer, for the
construction of public improvements. In that event, Master Developer (or
its successor pursuant to Section 10.2.2) would have a right of (or similar
to) indemnification as to those third parties, but would itself remain
obligated as to City.
10.2.4 Notwithstanding the foregoing, in the event substitute security has been
provided pursuant to Section 5.2.4, in the event of a default on a facility
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that has been bonded for, City shall exhaust that accepted, substituted
security before making any demand of Master Developer for those
improvements.
10.3 Binding on Financiers. This Agreement shall bind all Financiers and every
Owner whose title is acquired through a Financier as by, for example, foreclosure.
10.4 Eastern Urban Center. Master Developer does not initially own all of the land
intended to become part of the EVC. This Agreement only applies to the Property
owned by Master Developer as of the Effective Date. If Master Developer
acquires other real property within the EUC, as shown in the Otay Ranch General
Development Plan, binding that additional property to this Agreement shall
require amending this Agreement.
II. Compliance Review.
11.1 Annual Reviews. Pursuant to CALIFORNIA GOVERNMENT CODE 965865.1,
Owners shall be required to demonstrate good faith compliance with the terms of
this Agreement annually no later than each twelve-month anniversary of the
Effective Date. If, as a result of such review, City finds and determines that there
has not been good faith compliance with terms or conditions of this Agreement,
City shall notify Master Developer of the alleged default and take such actions as
are permitted by CALIFORNIA GOVERNMENT CODE 965865.1 or this
Agreement.
11.2 Failure bv Citv. The failure of City to conduct any annual review shall not
constitute a breach of this Agreement, affect an Owner's obligations hereunder, or
render this Agreement invalid or void.
11.3 Special Reviews. City may review Owners' compliance with this Agreement at
times other than the annual reviews described in Section 11.1 if City believes an
Owner is not complying in good faith with this Agreement.
11.4 Scope of Review. This Agreement and the documents incorporated herein
contain literally thousands of requirements, some as detailed as construction and
landscaping designs. Evidence of compliance with each requirement would waste
the Parties' resources. Accordingly, unless the City believes a default has
occurred, Owners shall be deemed to have satisfied their obligation to
demonstrate good faith compliance by showing substantial compliance with the
major provisions of this Agreement.
12. Default, Cure and Remedies.
12.1 Default bv Owner. An Owner shall be in default of this Agreement ifit does any
or any combination of the following:
12.1.1 Willfully violates any order, ruling or decision of any administrative or
judicial body having jurisdiction over the Property or the Project. Owner
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may contest any such order, ruling or decision by appropriate proceedings
conducted in good faith, in which event no default of this Agreement shall
be deemed to have occurred unless and until there is a final, non-
appealable judicial decision that Owner willfully violated such obligation.
12.1.2 Fail to cure a material breach of this Agreement within the time set forth
in a written notice of default from City.
12.2 Default bv City. City shall be in default of this Agreement only ifit fails to cure a
material breach of this Agreement within the time set forth in a written notice of
default from an Owner to City.
12.3 Notice of Default. A Party alleging a default by the other Party shall serve notice
thereof. Each such notice shall state with specificity all of the following:
12.3.1 It is given pursuant to Section 12 ofthis Agreement.
12.3.2 The nature of the alleged default.
12.3.3 The manner in which the alleged default may be satisfactorily cured.
12.3.4 A period of time in which the default may be cured. The notice of default
shall allow at least sixty (60) days to cure the default. If the default is of
such a nature as not to be susceptible of cure within said time using the
allegedly defaulting Party's diligent efforts, then the allegedly defaulting
Party shall only be deemed to have failed to cure the default if it fails
diligently to commence such cure within said time or if it fails diligently
to prosecute such cure to its conclusion.
12.3.5 If an Owner believes City is in default, it shall give notice of the alleged
default to Master Developer at least thirty (30) days before giving notice
to City.
12.4 Hearing on Default. If City alleges an Owner has committed a default, the City
Council may, but is not required to, hold a noticed, public hearing before
proceeding with any remedy or with Litigation.
12.5 Remedies for Default. The Parties acknowledge and agree that the City would not
have entered into this Agreement if it were to be liable in damages to an Owner
under this Agreement, or with respect to this Agreement or the application
thereof. The Parties further acknowledge and agree that the nature of the Project
and the terms of this Agreement render ordinary remedies at law inadequate for a
breach of this Agreement and that it would not be feasible or possible to restore
the Property to its natural condition once implementation of the Agreement has
begun. Therefore, the Parties agree that the remedies for breach of this
Agreement shall be limited to one or more of the following:
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12.5.1 In general, each of the Parties may pursue any remedy at law or equity
available for any breach of any provision of this Agreement (including,
but not limited to, obtaining letters of credit, performance bonds, and/or
withholding certain approvals), except that the City shall not be liable in
monetary damages in any form, including, without limitation, attorneys'
fees and litigation costs, to Owner, any mortgagee or lender, or to any
successor in interests of Owner or mortgagee or lender, or to any other
person, and Master Developer covenants on behalf of all successors in
interest in the Property or any portion thereof, not to sue the City for
monetary damages.
12.5.2 The Parties acknowledge that monetary damages and remedies at law will,
however, generally be inadequate, and that specific performance and other
non-monetary remedies are particularly appropriate remedies for the
enforcement of this Agreement and should be available to the Parties
because (a) money damages are unavailable against the City as provided
in Section 12.5.1; and (b) given the size, nature and scope of the Project, it
is not possible to determine the sum of money that would adequately
compensate Owner for Development of the Project. Therefore, the Parties
acknowledge and agree that specific performance is the preferred remedy
for any default under this Agreement.
12.5.3 Notwithstanding the foregoing, the Parties reserve all rights and remedies
for Claims not arising from this Agreement.
12.6 Right of Master Developer and Financier to Cure. Any Financier for whom
notice has been given pursuant to Section 9.2 shall have the same right to cure a
default as the Owner in debt to that Financier. Master Developer shall also have
the right but not the duty to cure a default of any Owner. The deadline for Master
Developer and the Financier to cure a default shall commence with the giving of a
notice of that Owner's default to that Financier and to Master Developer.
12.7 Multiple Owners. City shall send a copy of any notice of default to Master
Developer and all affected Owners. However, no default by an Owner shall
constitute a default by any other Owner, but it shall constitute a default by that
Owner's successor in interest.
13. Hearing Procedures. For any City Council hearing held pursuant to this Agreement:
13.1 Public Notice. Notice to the public shall be given as required by law.
13.2 Notice to Owners. Notice of a public hearing required by this Agreement shall be
given as provided in CALIFORNIA GOYERi'lMENT CODE ~65090 and 65091.
In addition to any notice that must be given to Owners as members of the public,
City shall give all affected Owners (but not End Users) written notice of the
hearing based on an identification of Owners provided by Master Developer. The
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notice shall include the subject of the hearing and a description of City's intended
action, if any.
13.3 Alternative to Hearing. At any time and with regard to any dispute or alleged
default, the Parties may, if all affected Parties agree, use mediation or arbitration
rather than or before the Council hearing procedure described in this Agreement.
14. Estoppel Certificate.
14.1 Right to Request. Upon request of the other Party, a Party shall deliver, within
thirty (30) days of the request, a certificate stating whether or not, to the
knowledge of the certifying Party:
14.1.1 This Agreement is in full force and effect;
14.1.2 This Agreement is a binding obligation of the Parties;
14.1.3 This Agreement has been amended, and, if it has been amended, an agree
to provide a copy, upon request, of such amendment; and
14.1.4 The requesting Party is in default of this Agreement.
14.2 Significance. Any such certificate may be and is intended to be relied upon by
any person, including but not limited to the other Party, potential purchasers of all
or any part of the Property, Financiers, and potential Financiers.
15. Appeal of Administrative Decision. Owners may appeal directly to the City Council
any decision by the City Manager concerning the interpretation and/or administration of
this Agreement. The Owner shall file any such appeal with the City Clerk within ten (10)
days after receiving notice of the staff decision. The City Council shall render a decision
at a public hearing held pursuant to Section 13 of this Agreement.
16. Miscellaneous.
16.1 Time of Essence. Time is of the essence of each provision hereof in which time is
an element.
16.2 Further Documents. The Parties shall sign, deliver and if appropriate record any
additional documents necessary to effectuate the purposes of this Agreement.
Upon expiration or termination of this Agreement as to all or any part of the
Property, the Parties shall sign and record any document reasonably necessary to
cancel this Agreement from the public records as to the Property (or portion
thereof) in question.
16.3 Notices. All notices and other communications given pursuant to this Agreement
shall be in writing and shall be deemed received when personally delivered, upon
the first business day after prepaid deposit with a recognized overnight delivery
service with instructions to deliver the next business day, or upon the fifth
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_.','E..'.,_ ~. _~~"~... _"".~,~_-"
calendar day after deposit in the United States mail, first-class, registered or
certified, postage prepaid, return receipt requested at the following addresses:
If to City:
City of Chula Vista
276 Fourth Avenue
Chula Vista, Califomia 91910
Attn: City Manager
With a copy to:
City Attorney
276 Fourth Avenue
Chula Vista, California 91910
If to Master Developer:
McMillin Otay Ranch LLC
c/o McMillin Companies LLC
Attn: Mr. Todd Galarneau
P.O. Box 85104
San Diego, California 92186-5104
With a copv to:
Hecht Solberg Robinson Goldberg & Bagley LLP
600 West Broadway, 8th Floor
San Diego, California 92101
Attn: Richard A. Schulman
Any Party may, from time to time, by written notice to the other, designate a
different address which shall be substituted for the one specified above.
16.4 Entire Agreement. This Agreement contains the entire agreement between the
Parties regarding the subject matter hereof, and all prior agreements or
understandings, oral or written, are hereby merged herein.
16.5 Waiver. No waiver of any provision of this Agreement shall constitute a waiver
of any other provision, whether or not similar, nor shall any such waiver
constitute a continuing or subsequent waiver of the same provision. No waiver
shall be binding, unless it is executed in writing by a duly authorized
representative of the Party against whom enforcement of the waiver is sought.
16.6 Relationship of the Parties. Nothing contained herein, nor any action taken or
document created pursuant hereto, shall be construed as creating the relationship
of partners, joint venturers, or any other association of any kind or nature between
or among any Parties.
16.7 No Third Partv Beneficiaries. This Agreement is made and entered into for the
sole benefit of the Parties and their successors in interest. No other person (such
as an individual or group of taxpayer or citizens) shall have any right of action
based upon any provision of this Agreement.
16.8 Captions. Captions and headings in this Agreement are for convenience only, and
are not guides for interpretation.
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1 6-51
16.9 Joint Preparation. This Agreement has been prepared and negotiated jointly and
equally by the Parties, each of whom was represented by counsel. This
Agreement shall not be construed against any Party on the ground that it prepared
the Agreement.
16.10 Governing Law and Venue. This Agreement is entered into and will be
performed in the County of San Diego, California, shall be governed by the laws
of the State of California and shall be enforceable in the Superior Court for the
County of San Diego, California.
16.11 Severability. If a Court invalidates part of this Agreement, the remainder shall
remain in force and effect unless the invalidation materially impairs a Party's
consideration, in which event this entire Agreement shall terminate.
16.12 Recitals and Exhibits. All Recitals and Exhibits to this Agreement are
incorporated into this Agreement by this reference. The following Exhibits are
attached to this Agreement and incorporated herein:
Exhibit A:
Legal Description of the Property (pursuant to 91.45)
Exhibit B:
List of Existing Entitlements (pursuant to 91.23)
Exhibit C:
Financing Plan (pursuant to 91.28)
Exhibit D:
Description of Library Facilities (pursuant to 94.3.1)
Exhibit E:
Outline of Fire Station Arrangement (pursuant to 94.3.2)
IN WITNESS WHEREOF, Master Developer and City have executed this Agreement on the
date first above written.
[Signature Page Follows]
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City:
CITY OF CHULA VISTA, a chartered
California municipal corporation
By
Its
ATTEST:
By
APPROVED AS TO FORM:
CITY ATTORJ"lEY
By
Master Developer:
McMILLIN OT A Y RANCH LLC,
a Delaware limited liability company
BY: McMILLIN COMPANIES, LLC, a
Delaware limited liability company
Its: Manager
By a,
Its vP
APPROVED AS TO FORM:
HECHT SOLBERG ROBINSON
GOLDBERG & BAGLEY LLP
/' -7---
By
Richard A. Schulman, Attorneys for
Master Developer MCMILLIN
OT A Y RANCH LLC
-36-
16-53
EXHIBIT A
Legal Description of McMillin Property
With Map of All ofEUC
REAL PROPERTY IN THE CITY OF CHULA VISTA, STATE OF CALIFORNIA, DESCRIBED AS
FOLLOWS:
PARCEL 3 OF PARCEL MAP NO. 18481, IN THE CITY OF CHULA VISTA, COUNTY OF SAN
DIEGO, STATE OF CALIFOIUITA, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAc'!
DIEGO COUNTY, lYIA Y 31, 2000, AS INSTRUMENT NO. 2000-283684 OF OFFICIAL RECORDS.
EXCEPTING THEREFROM THE LAND DESCRIBED IN THAT CERTAIN IRREVOCABLE OFFER
OF DEDICATION OF FEE INTEREST RECORDED lVlAY 22,2003, AS INSTRUMENT NO. 2003-
0604602, AND ACCEPTED BY THAT CERTAIN ACCEPTANCE OF IRREVOCABLE OFFER OF
DEDICATION OF FEE INTEREST RECORDED lVlA Y 22,2003, AS INSTRUMENT NO. 2003-
0604603, AND CONVEYED TO THE STATE OF CALIFORNIA BY GRANT DEED RECORDED
MAY 22, 2003, AS INSTRUMENT NO. 2003-0604607, ALL OF OFFICIAL RECORDS OF SAN
DIEGO COUNTY, CALIFOR.l'!IA.
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16-54
EXHIBIT "B"
LIST OF "EXISTING ENTITLEMENTS"
1. Eastern Urban Center Final Second Tier EIR (EIR-07-01)
2. Eastern Urban Center Sectional Planning Area (SPA) Plan (PCM-06-08(A))
3. Eastern Urban Center Tentative Map (pCS-09-03)
4. Development Agreement between the City of Chula Vista and McMillin Otay Ranch
LLC (pCM-06-08(B))
5. Eastern Urban Center Parks Agreement (pCM-06-08(C))
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EXHIBIT "c"
FINANCING PLAN
This Financing Plan sets forth the basic terms and conditions pursuant to which City and
Master Developer will cooperate to establish a Community Facilities District or Community
Facilities Districts (each, a "District") pursuant to the Mello-Roos Act to fInance the acquisition
or construction of certain public improvements in connection with the Project. Capitalized terms
not otherwise defIned in this Financing Plan shall be defIned as provided in the Development
Agreement. This Financing Plan is different from, and is meant to implement part of, City's
Public Facilities Financing Plan for EUC adopted pursuant to Municipal Code S 19.09.050.
I. Objectives. The principal objectives of this Financing Plan are to:
a. Provide City and Master Developer reasonable certainty that any District
will be established in accordance with the Goals and Policies, except as
any specifIc goal or policy may be explicitly supplemented, amended or
waived as set forth herein.
b. Provide for the issuance of bonds by or for the District or Districts or any
Improvement Areas (defined below) therein in one or more series in order
to minimize carrying costs and improve overall bondholder security.
c. Implement and document certain determinations by City pursuant to the
Goals and Policies.
To the extent this Financing Plan is inconsistent with other parts of the Development Agreement
to which this Financing Plan is an exhibit, the provisions of this Financing Plan shall govern.
2. Formation. City shall initiate proceedings to establish a District, upon Master
Developer's written request and submittal of City's standard application form and receipt of an
advance from the Developer in an amount determined by City to pay for City's estimated costs to
be incurred in undertaking the proceedings to establish the District ("Formation Proceeding
Costs"). City agrees that all such advanced City costs incurred in connection with the formation
of such District shall be eligible for reimbursement out of the first available District bond
proceeds and/or special taxes. The exact terms and conditions for the advance of funds by
Master Developer and the reimbursement of such advances as mutually agreed upon shall be
memorialized in a separate agreement between City and Master Developer. City agrees to use its
best efforts to complete the proceedings to form such District and record the notice of special tax
lien within two hundred ten (210) days after City's receipt of Master Developer's complete
application and deposit. In the event such District is not or cannot be formed by the City or
bonds cannot be issued for such District to finance the facilities as provided for in this Financing
Plan due to unforeseen changes in state or federal law or other reasons, City shall reasonably
cooperate with Master Developer in using the Statewide Community Infrastructure Program
("SCIP") or other community facilities district fInancing program available through the
California Statewide Communities Development Authority to finance, acquire, and/or construct
the public improvements described herein, and if that effort is not successful, the remedies of
Section 5.3 of the main text of the Agreement shall apply.
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3. Boundary. The District boundary shall encompass the Project and may contain
multiple improvement areas (each, an "Improvement Area") based on phasing of the Project. It
is currently contemplated that the District will contain at least three (3) Improvement Areas and
that both residential and non-residential land uses will be subject to the levy of special taxes by
the District.
4. Eligible Public Facilities and Discrete Components. Subject to the condition set
forth in the following paragraph, City will authorize the District to finance the following types of
public improvements ("Eligible Public Facilities") which by the approval of the Development
Agreement City has determined are consistent with the Goals and Policies or constitute an
approved exception to the Goals and Policies for the Project:
a. Boundary Arterials (TDIF Facilities)
b. Street A
c. Grid Streets (curb to curb) without Bus Rapid Transit facilities
d. Grid Streets (curb to curb) with Bus Rapid Transit facilities
e. Bus Rapid Transit Facilities
f. Sidewalks and Landscaping within right-of-way
g. Pedestrian Bridge facilities
h. Traffic Signals
1. Storm Drain Facilities
J. Sewer Facilities
k. Library Facilities (including land, airspace and/or condominium interests)
1. Fire Station Facilities and equipment (including land if the site for the fire
station is not otherwise required to be dedicated by Owner to the City or
such site is to be located on land not owned by Owner)
m. Public Parks
n. Land to be used as an Environmental Preserve which is not otherwise
required to be dedicated by Owner as a condition of approval of the
Existing Entitlements, including associated improvements
o. Art and/or Cultural Venue
p. Any public facility to be constructed by City or an Owner for which an
Owner is required to make a cash contribution pursuant to the Proj ect' s
conditions of approval or this Agreement ("Contributions") or which is
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included in City's Public Facilities Development Impact Fee program and
which public facility is to be owned by the City.
The facilities described in clauses k, I and p above shall be authorized to be financed by the
District only if and to the extent that the financing of such facilities by the District will not
adversely affect the City's ability to pay debt service on existing outstanding indebtedness
secured by or payable from the proceeds of Development Impact Fees imposed by the City to
finance such facilities. City agrees that its grant of Development Impact Fee credits as a result of
Master Developer's construction of any such facility pursuant to the Development Agreement or
other written agreement between City and Master Developer shall not prevent the financing of
such facility through the District.
The Eligible Public Facilities shall be financed with the proceeds of special taxes and/or bonds of
the District ("District Proceeds") regardless of the Improvement Area(s) from which such
District Proceeds are derived. Costs of the Eligible Public Facilities to be constructed by Owner
that are eligible to be financed with District Proceeds are as follows:
(i) The actual hard costs for the construction or the value of an Eligible
Public Facility, including labor, materials and equipment costs;
(ii) The costs of grading related to an Eligible Public Facility;
(iii) The costs incurred in designing, engineering and preparing the plans and
specifications for an Eligible Public Facility;
(iv) The costs of environmental evaluation and mitigation of or relating to the
Eligible Public Facility;
(v) Fees paid to governmental agencies for, and costs incurred in connection
with, obtaining permits, licenses or other governmental approvals for an Eligible Public Facility;
(vi) Costs of construction administration and supervision up to five percent
(5.0%) of the total cost of the Eligible Public Facility as an exception to the Goals and Policies
which would otherwise impose a limitation of one and three-quarters percent (1.75%) of total
cost;
(vii) Professional costs associated with each Eligible Public Facility, such as
engineering, legal, accounting, inspection, construction staking, materials and testing and similar
professional services;
(viii) Costs of payment, performance and/or maintenance bonds and insurance
costs directly related to the construction of an Eligible Public Facility; and
,"
As an exception to the Goals and Policies, City and Master Developer agree that "Discrete
Components" of each Eligible Public Facility may be approved for payment from District
Proceeds in an amount equal to actual cost of the Discrete Component less a 25% retention, and
that City shall not accept an Eligible Public Facility of which a Discrete Component is a part, or
pay any prior retention relating to such Discrete Component, until the entire Eligible Public
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..._ .~- ..-.....,.11-....._..___"""",..',"""..-.."_'7I'/$-"'"""..._~,:.;;:
Facility has been completed. Each Discrete Component is a component of an Eligible Public
Facility that City has agreed can be separately identified and/or inspected. City acknowledges
that a Discrete Component that consists of construction or installation work does not have to be
accepted by City as a condition precedent to the payment of acquisition thereof, but City shall
not be obligated to make such payment until such Discrete Component has been "substantially
completed," which shall mean that it is substantially complete for its intended use in accordance
with its plans and specifications, notwithstanding any fmal "punch list" items still required to be
completed. Master Developer shall be entitled to make a separate payment request to City for
the costs of final "punch list" items and other eligible costs not previously reimbursed upon
completion of such work.
The provisions of the Public Contracts Code shall not apply to the bidding, contracting
and construction of the Eligible Public Facilities and the contracts for construction of the Eligible
Public Facilities need not require the payment of prevailing wages. Rather, the Eligible Public
Facilities shall be bid, contracted for and constructed in accordance with a funding and
acquisition agreement ("Acquisition Agreement") to be entered into between City and Master
Developer at the time of formation of the District. The Acquisition Agreement shall provide
additional detail, consistent with the provisions of this Development Agreement, with respect to
the District and the acquisition and construction of the Eligible Public Facilities with District
Proceeds.
City acknowledges Master Developer's current expectation that Master Developer will
construct street improvements curb-to-curb and Merchant Builders will be responsible for
constructing the sidewalks and other improvements within the public right-of-way between the
street and private property. In such instances, the proper party to receive reimbursement for the
improvement and the method ofreimbursement shall be set forth in the Acquisition Agreement
and related documents, with appropriate protection to the City to avoid a claim that the wrong
party received reimbursement.
5. Financing Parameters. City agrees to levy special taxes of the District and issue
District bonds in one or more series to finance the acquisition and construction of the Eligible
Public Facilities using the parameters set forth below:
a. A precondition to the issuance of bonds shall be that the value of the real
property subject to special taxes required to repay the bonds shall be at
least four (4) times the amount of the bonds and any other
govermnentally-imposed land-secured debt (excluding any proceeds of the
bonds to be deposited in an escrow fund) ("Minimum Value to Debt
Ratio"); provided, however, that City, its bond counsel, its financial
advisor and the underwriter of the bonds (collectively, the "City's
Financing Team") do not view such ratio as posing an unusual credit risk.
In circumstances where the principal amount of a series of bonds proposed
to be issued causes such series of bonds to fail to meet the Minimum
Value to Debt Ratio, the proposed principal amount of such bonds may
nevertheless be issued provided that a portion of such bonds in an amount
reasonably expected by the City to eligible to be released from such
escrow and expended within three (3) years from the date of issuance of
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such bonds is escrowed (the "Escrow Bonds") so that the non-escrowed
principal amount of such bonds shall meet the Minimum Value-to Debt
Ratio and provided further that, in the view of the City's Financing Team,
the use of such escrow structure will be financially feasible, will not create
an unusual credit risk to the holders of such bond and will reduce issuance,
administrative and interest costs, provide certainty as to the availability of
the proceeds of the bonds to fund the Eligible Public Facilities, and
facilitate efficiency in such funding and the construction of the Eligible
Public Facilities. Proceeds of such Escrow Bonds shall be eligible to be
released from such escrow only if and to the extent that the value of the
taxable property subject to the levy of special taxes securing such bonds
compared to the principal amount of the non-escrowed bonds following
such release shall meet the Minimum Value-to Debt Ratio.
b. Each series of bonds shall have a term of thirty (30) years; provided,
however, the term of any individual series of bonds may be less than thirty
(30) years if the District's authority to levy the special taxes securing the
payment of such bonds or the underwriting conditions in the market for
land secured bonds at the time of he issuance of such bonds require the
issuance of such bonds with a shorter term.
c. Each series of bonds may include up to eighteen (18) months of
capitalized interest or such other lesser amount as may be requested by
Master Developer and, as an exception to the Goals and Policies, such
amount may exceed the amount necessary to place the special tax
installments on the assessment roll.
d. Each series of District bonds to be issued for an Improvement Area shall
be sized based upon the estimated annual special tax revenues from such
Improvement Area at build-out being equal to one hundred ten percent
(110%) of (i) annual debt service, plus (ii) priority annual administrative
expenses. Priority annual administrative expenses to be funded from
special taxes shall not exceed 575,000 for each Improvement Area (the
"Priority Annual Administrative Expense Requirement").
The City may fund from bond proceeds for each series of bonds issued for
an Improvement Area an amount representing all administrative expenses
reasonably expected to be incurred by the City during the first twelve (12)
months following the date of issuance of such bonds (the "Administrative
Expense Proceeds"). Inasmuch as the City and the Master Developer
anticipate that there may be more than one series of bonds issued for each
Improvement Area, the City may elect to establish and maintain a single
administrative expense fund for each Improvement Area (the
"Improvement Area Administrative Expense Fund") separate and apart
from the funds and accounts established and held by the fiscal agent for
each series of bonds issued for such Improvement Area. The City shall
deposit all Administrative Expense Proceeds and all special tax revenues
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funding the Priority Administrative Expense Requirement for each
Improvement Area in the applicable Improvement Area Administrative
Expense Fund.
Additionally, the Master Developer shall, as a precondition to the closing
of the issuance of the second series of bonds for each Improvement Area
(the "Second Series Closing"), advance and deposit $ I 50,000 ("Master
Developer Deposit") with the City to be held by the City and utilized as an
administrative expense operating reserve (the "Administrative Expense
Reserve Requirement"). The City shaIl retain the Master Developer
Deposit for each Improvement Area in an account (each, an
"Administrative Expense Reserve Account") within the applicable
Improvement Area Administrative Expense Fund which the City may
maintain until the maturity of all bonds issued for the Improvement Area.
The City shaIl include in the special tax levy for each Improvement Area
for the first five (5) fiscal years foIlowing date of the Second Series
Closing for each Improvement Area the amount of $30,000 (in addition to
the Priority Administrative Expense Requirement amount) which shaIl,
upon receipt, be deposited into the applicable Administrative Expense
Reserve Account and the City shaIl thereafter transfer to the Master
Developer an equal amount in reimbursement of the Master Developer
Deposit.
The moneys on deposit in the Administrative Expense Reserve Account
for an Improvement Area shaIl be utilized by the City from time to time to
pay for administrative expenses incurred by the City for such
Improvement Area in excess of other amounts on deposit in the
Improvement Area Administrative Expense Fund. If and to the extent that
the City must during any fiscal year utilize funds on deposit the
Administrative Expense Reserve Account for an Improvement Area as
described in the preceding sentence so as to cause the balance in such
account to be reduced below the Administrative Expense Reserve
Requirement at the end of such fiscal year, the City may include an
amount in the special tax levy within such Improvement Area for the
following fiscal year to replenish the Administrative Expense Reserve
Account to the Administrative Expense Reserve Requirement.
e. The total effective tax rate within each Improvement Area applicable to
any residential parcel on which a residential dwelling has or is to be
constructed, taking into account all ad valorem property taxes, voter-
approved ad valorem property taxes in excess of one percent (1 %) of
assessed value, the annual special taxes of existing community facilities
districts and community facilities districts under consideration and
reasonably expected to be established (excluding special taxes for
maintenance), the annual assessments (including any administrative
surcharge) of existing assessment districts and assessment districts under
consideration and reasonably expected to be established (excluding
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assessments for maintenance and services), and the special taxes of the
District, shall not exceed two percent (2.00%) of the projected initial sales
price of the residential dwelling unit and such parcel, as projected at the
time of District formation.
f. Special taxes shall be levied on Developed Property within an
Improvement Area at the maximum assigned special tax rate prior to the
issuance of bonds to finance the Eligible Public Facilities. "Developed
Property" means a parcel for which a building permit has been issued.
"Undeveloped Property" shall mean all other taxable property. Special
Taxes may be levied on Undeveloped Property within an Improvement
Area only after the issuance of bonds and only to the extent the annual
debt service on the bonds, administrative expenses, the reasonably
anticipated delinquent special taxes based on (a) the average delinquency
rate for special taxes levied in the previous fiscal year in all community
facilities districts within that portion of the City commonly known as Otay
Ranch for the first fiscal year in which special taxes are levied and (b) the
delinquency rate for special taxes levied in the previous fiscal year within
the Improvement Area for all subsequent fiscal years in which the special
taxes are levied, and the reserve fund replenishment amount is not able to
be paid in full from Developed Property special taxes levied and collected
within the applicable Improvement Area.
g. All affordable housing units and rental units may, at Master Developer's
option, be exempted from special taxes ofthe District.
h. Full or partial prepayment of the special taxes shall be permitted.
1. As permitted by the Goals and Policies, at Master Developer's election at
the time of submittal of its written request and City's standard application
form pursuant to Section 2 above, the City shall allow the special taxes
applicable to non-residential, taxable property within an Improvement
Area to escalate by two percent (2%) per year and debt service on the
bonds to escalate at the same average rate as the special tax escalation.
J. At Master Developer's election at the time of submittal of its written
request and City's standard application form pursuant to Section 2 above,
the City shall, as an exception to the Goals and Policies, allow the special
t<L'{es to escalate by two percent (2%) per year and debt service on the
bonds to escalate at the same average rate as the special tax escalation if
and to the extent necessary to fill any Financial Gap (defined in paragraph
I. below) established pursuant to the provisions of paragraph I. below.
k. The City shall, as an exception to the Goals and Policies, allow the levy
and collection of special taxes so as to generate "Surplus Special Taxes" if
and to the extent necessary to fill any Financial Gap established pursuant
to the provisions of paragraph I. below. "Surplus Special Taxes" shall
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mean (i) District special taxes levied on Developed Property within an
Improvement Area prior to the issuance of bonds for such Improvement
Area and collected by the District, net of the amount required to pay
District administrative expenses, and (ii) District special taxes levied on
Developed Property within such Improvement Area at the maximum
special tax rate after the issuance of bonds for such Improvement Area and
collected each fiscal year in excess of the amount required (w) to pay
principal and interest on the District bonds issued for such Improvement
Area, (x) to pay all administrative expenses of the District related to such
Improvement Area and such bonds, (y) pay for reasonably anticipated
delinquent special taxes within such Improvement Area based on (1) for
the first fiscal year in which special taxes are levied in the Improvement
Area, the average delinquency rate for special taxes levied in the previous
fiscal year in all community facilities districts within that portion of the
City commonly known as Otay Ranch and (2) in all subsequent fiscal
years, the delinquency rate for special taxes levied in the previous fiscal
year within the applicable Improvement Area and (z) to replenish the
reserve fund for such District bonds to the applicable reserve requirement.
Special taxes on Developed Properties shall be levied by the District in
each Improvement Area in each fiscal year at the maximum assigned
special tax rate until the earlier of (i) Master Developer's submittal of its
final payment request for the Eligible Public Facilities and payment in full
for all amounts approved by the City for the Eligible Public Facilities, (ii)
the payment in full of all bonds of the Improvement Area, or (iii) until the
Master Developer has received the amount as shown in the Financial
Analysis (defined in paragraph 1. below) to be funded from Surplus
Special Taxes to pay for Eligible Public Facilities if and to the extent
necessary to eliminate the Financial Gap. Surplus Special Taxes collected
by the District shall be deemed District Proceeds and disbursed to
reimburse, by any mechanism reasonably acceptable to Master Developer
and City, Master Developer amounts approved pursuant to payment
requests submitted for the Eligible Public Facilities.
1. The City's conditional approval of the utilization of the fmancing
parameters set forth in paragraphs j. (the "Residential Escalator
Parameter") and k. (the "Surplus Special Tax Parameter") above is based
upon the special and unique benefits of the Project specified in Recital D.
to the Development Agreement and the Master Developer's
representations that the use of such financing parameters will be necessary
to ensure the financial viability of the Project. The City and Master
Developer agree that a financial analysis in the format set forth in
Attachment "1" hereto (the "Financial Analysis") shall be applied to the
Project following the submission by the Master Developer of the written
request that the City initiate proceedings to form a District and City's
standard application form pursuant to Section 2 above and prior to the
submission to the City Council for its consideration of the resolution of
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intention to establish such a District required pursuant to Government
Code Section 53320. If the Financial Analysis demonstrates the necessity
for the utilization of such financing parameters to reduce or eliminate the
fmancial gap, if any, of the Project calculated pursuant to the Financial
Analysis (the "Financial Gap"), the City agrees to approve the application
of such financing parameters to the District as necessary to eliminate the
Financial Gap. If the Financial Analysis demonstrates that the utilization
of the financing parameters in their entirety is not necessary to eliminate
the Financial Gap, the City may limit the use of such fmancing parameters
to the extent necessary to eliminate the Financial Gap. For example, if the
Financial Analysis demonstrates that only the application of the
Residential Escalator Parameter is necessary to eliminate the Financial
Gap, the City may elect to permit the application of only the Residential
Escalator Parameter to the District. As a further example, if the Financial
Analysis demonstrates that application of the Residential Escalator
Parameter at some percentage less than 2% per year, the application of the
Escalator Parameter for a limited period of years or the use of the Surplus
Special Tax Parameter to generate a specific limited amount of Surplus
Special Taxes, or some combination thereof, will be sufficient to eliminate
the Financial Gap, the City may elect to so limit the application of such
financial parameters.
m. The timing of the issuance and sale of each series of the bonds, the terms
and conditions upon which such bonds shall be issued and sold, the
method of sale of such bonds and the pricing thereof shall be reasonably
determined by the City and shall conform to the Goals and Policies, this
Financing Plan and the Acquisition Agreement. The sale of each series of
the bonds shall be subject to receipt by the City of a competitively bid or
negotiated bond purchase agreement which is acceptable to the City.
n. The rate and method of apportionment of special taxes for each
Improvement Area shall include provisions to allow for administrative
reductions in the maximum special taxes, prior to the issuance of bonds of
the Improvement Area, with the consent of the owner(s) of 100% of the
taxable property within the Improvement Area. In addition, as required by
the Goals and Policies, the Acquisition Agreement shall include provisions
requiring the partial prepayment of special taxes or assessments if
necessary in order to reduce the total effective tax rate applicable to a
residential dwelling to 2% of the actual sales price of such residential
dwelling. The rate and method of apportionment shall include
substantially the following language: "Prior to the issuance of Bonds, the
Assigned Special Tax, Backup Special Tax, and Maximum Annual
Special Tax (collectively the "Special Tax Rates") on Taxable Property
may be reduced in accordance with, and subject to the conditions set forth
in this paragraph. Upon the City's receipt of a written request including
written consent of 100% of the owners of Taxable Property within the
Improvement Area and the CFD Administrator, the Special Tax Rates on
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Taxable Property may be reduced to a level which will provide not less
than the sum of estimated Administrative Expense Requirement and one
hundred ten percent (110%) of the estimated debt service with respect to
the amount of bonds requested to be issued in such written request. If it is
reasonably determined by the CFD Administrator that the total effective
tax rate on residential property, as determined in accordance with the
Development Agreement, exceeds the maximum level allowed in the
Development Agreement, the Special Tax Rates may be reduced to the
amount necessary to satisfY the maximum allowable effective tax rate
requirement on residential property with the written consent of 100% of
the owners of Taxable Property within the Improvement Area, which
consent shall not be unreasonably withheld, and the CFD Administrator.
A certificate in substantially the form attached hereto as Exhibit "A" shall
be used for purposes of evidencing the required written consent and
effectuating the reduction to the Special Tax Rates. The reductions
permitted pursuant to this paragraph shall be reflected in an amended
Notice of Special Tax Lien which the City shall cause to be recorded."
6. Modifications. In order to address economic circumstances, Project revisions,
bond underwriting criteria or other factors consistent with the Project's development plan and
City and Master Developer's objectives with respect to the Project and the Eligible Public
Facilities: (i) the provisions of this Financing Plan may be modified at an administrative level
with the consent of both the City Manager and Master Developer, and (ii) City shall cooperate
with Master Developer to amend District boundaries, including boundaries of Improvement
Areas thereof, special tax rates, and other relevant aspects of the District structure. City agrees
and acknowledges that in connection with any such amendment it shall not impose or otherwise
require any additional infrastructure, development fee or other requirements or conditions with
respect to the Project or District; provided, however, the City may require the Master Developer
to advance funds to pay all reasonable costs incurred or to be incurred by the City in considering
any such amendment.
7. Compliance with Federal Tax Laws and U.S. Securities and Exchange
Commission (SEC) Requirements. In connection with the issuance of each series of bonds ofthe
District, City and Master Developer shall abide by all federal tax laws and regulations, as well as
all applicable SEC laws and regulations regarding both original and continuing disclosure.
Failure of Master Developer to comply with SEC disclosure requirements may preclude the
issuance of any additional bonds. The Master Developer shall include a provision in the sale of
any portion of the Property to a merchant builder that will require the merchant builder to
comply with all such laws and regulation.
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ATTACHMENT "I" TO EXHIBIT "c"
TO DEVELOPMENT AGREEMENT
FINANCIAL ANALYSIS
~
en
I
en
en
Year 1 Year 2 Year 3 Year 4 Year 5 YearO Year 7 YearS Year 9 Year 10 Total
$ $ $ $ $ $ $
TOTAL PROJECTED REVENUE $ - $ $ - - $
TOTAL PROJECTED IMPROVEMENT COSTS
AND PROJECT EXPENSES - - -
PROJECT CASH FLOW BEFORE eFe
REIMBURSEMENTS,
FINANCING - - - -
FORECASTED eFO REIMBURSEMENTS - - - - -
(not including escalator or surplus taxesj
PROJECT CASH FLOW BEFORE FINANCING - - -
FINANCING - - - - -
$ $ $ $ $ $ $
PROJECT CASH FLOW $ - $ - $ - $ - -
$ $ $ $ $ $ $
CUMULATIVE PROJECT CASH FLOW $ - $ $ - $ -
EQUITY AND PROJECT RETURNS
$
TOTAL FORECASTED EQUITY REQUIRED
FORECASTEDINVESTOR1RR
MINIMUM REQUIRED INVESTOR IRR
$
FINANCIAL GAP
SALIENT PROJECT ASSUMPTIONS
EXHIBIT "D"
DESCRIPTION OF LIBRARY FACILITIES
1. City shall complete the update of the library master plan to determine revised library size,
timing, funding sources for the EUC library. City agrees to consider both ownership and
leasehold interests for EUC library.
2. Within one year of completion of the updated library master plan, Master Developer will
enter into a Library Delivery Agreement which specifies the following:
a. Provide a legal parcel and/or condominium airspace or other interest,
subject to the approval of the City Manager, suitable for City public library purposes in
accordance with the adopted library master plan. Said parcel/airspace shall be located
west of Street "A" and north of the Civic Plaza. An alternative location may be approved
jointly by the City Manager and Master Developer.
b. Provide for adequate parking facilities and pedestrian access to
accommodate library visitors and employees. Library parking shall conform to the EUC
parking management plan and be included in a parking district formed within EUC.
c. Provide a timetable for delivery of library which is consistent with the
timing identified in the updated library master plan. Both parties agree to consider
alternative formats for the library or alternative timetables for implementation should
Master Developer be unable to obtain financing, on economically reasonable and
customary terms, to construct the library in its anticipated format, or should City not be
able to identify sufficient funding, per the timing identified in the updated master plan.
d. If the building intended to contain the library is constructed before City's
library construction time frame, Master Developer shall offer City the right to use and/or
occupy space within the building on the following terms:
i. City shall have sixty (60) days after Master Developer gives notice
that the space is available in which to accept Master Developer's offer.
ii. City shall pay Master Developer market-rate rent for Class A
office space for the space City uses and/or occupies.
111. Unless Master Developer in its sole discretion agrees to an
increase, the amount of area rented shall be the amount allocated to the library in
the adopted master plan.
iv. Unless Master Developer in its sole discretion agrees to an
increase, City may use the rented space only for library purposes.
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EXHIBIT "E"
GENERAL OUTLINE FOR FIRE STATION PROPOSAL
I. Station Location and Reservation of Site. Station Location and Reservation of Site. The
station location is per the TM and the SPA Plan. Master Developer will reserve station
site, at the size shown on the TM, to City at first final "A" map which covers the planned
location. Any future relocation of the station site would require the approval of both the
Master Developer and the City. City agrees not to include an alternative site in the
updated Fire Master Plan without Master Developer approval. No relocation would
result in the Master Developer being obligated to provide a larger site or advance
improvements that would not otherwise be required for development existing at the time.
2. Station Design and Constmction Documents. Station Design and Constmction
Documents. The station will be constmcted via a design-build process, which may
include a pre-bid design process to refine / develop site planning and architectural
parameters and designs. Both parties shall cooperate in identifying bid parameters In
consultation with the City, Master Developer will bid, contract for, and manage the
design of the Fire Station. The bid package shall be circulated prior to the design review
approval of the first project which triggers the need for the station in accordance with the
PFFP for the Project. A list of pre-qualified bidders shall be developed, and all bidding
shall be accomplished in accordance with City policies. Both parties agree to cooperate
to ensure that the design of the station (approval of constmction documents) will be
completed within 8 months of final bid approval by the City Council.
3. Constmction. Upon final approval of the constmction documents, constmction of the
station shall commence and be diligently pursued to completion. Both parties agree to
cooperate to ensure completion of the station constmction within 12 months of
commencement of constmction. Delays in completing constmction of the station as a
result of the existence of Force Majeure or because of a City decision not to proceed shall
not result in the City withholding building permits for Development in the EUC which is
tied to completion or delivery of the station. Notwithstanding the foregoing, the City
may order that the constmction of the fire station be delayed for such period as the City
may specify if the commencement of constmction immediately following the final
approval would result in (a) a delay in the constmction of the Rancho Del Rey library or
(b) the necessity for the City to use funds other than PFDIF funds to pay that portion of
the scheduled debt service on the outstanding indebtedness of the City as of the Effective
Date (as defined in subsection 1.13 of the Agreement) incurred to finance the
constmction of PFDIF facilities that was at the time such indebtedness was incurred
intended by the City to be paid from PFDIF funds.
4. Funding. Costs for the fire station (including soft and hard costs) will be split evenly
between Master Developer and the City. Master Developer will not be responsible for
any costs added to the station project after award of the bid unless costs are agreed to by
both parties and are reimbursable through a fee program or other mechanism. Any costs
for equipment or constmction that is required by the City which is not consistent with the
fire component of the PFDIF program, or other reimbursement mechanism, will be the
responsibility of the City.
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City shall identify the source of its half of the station costs prior to City approval of the
fire station construction documents. Master Developer will manage the construction
process until acceptance of the facility by the City.
Should the City not be able tD identify sufficient funds to cover its half of the obligation,
the fire service requirements may be satisfied through an increase in the staffing and
equipment as needed at existing Fire Station 7. Master Developer would be responsible
for any costs associated with this scenario, including equipment acquisition, that are
covered by a fee program, even if such fee program originally contemplated such
improvements or equipment to be located in a different physical location. Any costs
arising directly because of this alternative not covered by a fee program will be the
responsibility ofthe City.
Any delays to the timing of the construction of the new fire station, or implementation of
changes to Station 7, resulting from the inability of the City to identify and secure its
portion of the station funding, the election by the City to delay funding, or from a City
decision not to proceed, will not be cause for stopping Development in the Project or
imposition of additional building measures beyond those required to comply with
applicable Building Codes. City agrees to cooperate with Master Developer to identify
any costs resulting from any delay in City funding and to identify ways those costs can be
offset or reimbursed to Master Developer.
5. Credits. Master Developer will establish credits for its portion of the fire station costs
according to the City's existing policies on credit establishment and reimbursement.
Credits for the value of the land will be established upon acceptance of the land
dedication by the City. If the Station 7 overstaffing alternative is selected, Master
Developer shall receive credits for any payments for equipment for or other capital
improvements to Station 7 for which the Master Developer is entitled to receive such
credits made at the time of the such payments. Any credits established may be used by
Master Developer, or a successor identified by Master Developer, against obligations of
all different components of the PFDIF program.
6. Contract. The construction contract shall be a three party agreement between the winning
bidder, Master Developer, and the City. Payments on the contract will be made to the
winning bidder by Master Developer in accordance with the billing procedures in the
construction contract. City shall reimburse Master Developer for these payments, up to
the total amount of its obligation, from the funds identified by the City at the start of
construction (see item 4 above) within 30 days of Master Developer submitting a copy of
the invoice and proof of payment.
7. Construction Management. Master Developer will be responsible for managing the
construction of the fire station. City shall consider Master Developer as a qualified
builder should Master Developer elect to construct the station as the low bidder.
8. Completion. Completion of the station is defined as the date of acceptance of the facility
by the City, independent of any warranty period.
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9. Interim Operation and Maintenance Funding. Master Developer will provide interim
funding for its fair share portion of the operation and maintenance costs of the EDC Fire
Station until the sooner of (1) such time as the total Ad Valorem property tax revenues
from the Project cover the Master Developer EDC's fair share portion of the station
operating costs or (2) until a fiscal analysis (in accordance with section 4.5 of the
Development Agreement) determines that total revenues generated by the Project
(including assessments, taxes, and other revenue sources as addressed in the City's fiscal
model) exceed the City's service costs (not including any fire costs) by an amount greater
than or equal to Master Developer's fair share responsibility of the station operating
costs.
The Project will be responsible for paying interim operating and maintenance costs at
percentages and levels, consistent with the Fire Master Plan adopted at the time the need
for the station is triggered, for all new equipment, staffing and facilities necessary to
service the Project. The Project's fair share responsibility has been determined to be: (i)
25% of the operating and maintenance costs for an engine company and (ii) 25% of the
operating and maintenance costs of a ladder truck company. Should the Fire Master Plan
adopted at the time the need for the station is triggered call for less fire stations in the
Eastern Planning Area than currently planned, Master Developer and the City shall meet
and confer on how to recalculate the Project's fair share responsibility of the operating
and maintenance costs.
Master Developer will pay the lesser of (I) the delta costs between the Project's total
property taxes and those percentages of the annual fire operating costs in any given year
or (2) the delta cost between the total net revenues generated by the overall Project (as
described in Section 4.5) and those percentages of the annual operating costs in any given
year. The total cumulative amount of this obligation will not exceed 51,750,000.00. Any
monies paid by Master Developer pursuant to this provision shall be considered as
project revenues in any annual fiscal studies conducted for the Project pursuant to section
4.5 of this agreement if any fire service costs are considered.
10. Alternatives. Except for the City's right pursuant to paragraph 3. to order the delay in the
construction of the fire station, nothing in this section shall limit the ability of the station
timing to be advanced by the applicant or of City to consider alternative means and
methods of providing service to the Project.
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