HomeMy WebLinkAbout0011_2_Settlement Agreement - Exhibit A Agreement#168386 v5 4000.2 12/19/2016
SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT (“Agreement”) is made and effective this 10th day
of January, 2017 (“Effective Date”), by and among the CITY OF LAKE ELSINORE, a
municipal corporation organized and existing under the laws and Constitution of the State of
California (“City”), COMMUNITY FACILITIES DISTRICT NO. 2003-2 OF THE CITY (“CFD
No. 2003-2”), a community facilities district created in accordance with Section 53311 et. seq. of
the Government Code of the State of California (the “Mello-Roos Act”), COMMUNITY
FACILITIES DISTRICT NO. 2016-2 OF THE CITY (“CFD No. 2016-2”), a community
facilities district created in accordance with the Mello-Roos Act, and PARDEE HOMES, a
California corporation (“Pardee”) (collectively, the “Parties,” and individually, a “Party”).
RECITALS
A.Pardee is the master developer of a master-planned community in the City
commonly referred to as “Canyon Hills.” Canyon Hills is located within Improvement Areas A,
B, C and D of CFD No. 2003-2. A portion of Canyon Hills referred to as “Phase 8,” which is
included in Improvement Area B, is also included in CFD No. 2016-2.
B.The Canyon Hills property is subject to a Development Agreement between the
City and Pardee’s predecessor-in-interest, Pardee-Grossman/Cottonwood Canyon, recorded with
the Riverside County Recorder on July 19, 1990 as Document No. 265632, as amended by a
First Amendment to Development Agreement between the City, Pardee and Richmond American
Homes of Maryland, Inc. recorded with the Riverside County Recorder on February 19, 2010 as
Document No. 2010-0078164 (together, the “Development Agreement”).
C.The City and Pardee entered into a Funding, Construction and Acquisition
Agreement dated as of February 1, 2004 with respect to CFD No. 2003-2 (the “Funding
Agreement”) and also entered into a Joint Community Facilities Agreement with Elsinore Valley
Municipal Water District (“EVMWD”) dated as of January 13, 2004 (the “JCFA”) with respect
to the financing of “EVMWD Charges” and “Acquisition Facilities” (as defined in the JCFA)
through CFD No. 2003-2.
D.In 2016, the City, at Pardee’s request, completed proceedings to annex certain
property into CFD No. 2003-2 that is adjacent to Canyon Hills, which property now is included
in Improvement Area E of CFD No. 2003-2.
E.On December 13, 2016, the City, at Pardee’s request, completed proceedings to
establish CFD No. 2016-2 encompassing Phase 8 of Canyon Hills.
F.The City has issued bonds of CFD No. 2003-2 (“CFD No. 2003-2 Bonds”) for
Improvement Areas A, B, C and D. There is additional authorized indebtedness available for the
issuance of up to $7,975,000 in principal amount of additional CFD No. 2003-2 Bonds for
Improvement Area B and $3,000,000 in CFD No. 2003-2 Bonds for Improvement Area E.
G.CFD No. 2016-2 is expected to have capacity for the issuance of up to
$19,000,000 in bonds (the “CFD No. 2016-2 Bonds”), the proceeds of which will be available to
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(i) repay the outstanding indebtedness of CFD No. 2003-2 Bonds and satisfy the CFD No.
2003-2 special tax obligation with respect to all property within Phase 8, and (ii) fund authorized
facilities of CFD No. 2016-2.
H.The Western Riverside Council of Governments (“WRCOG”) has commenced
enforcement proceedings and investigations (the “Action”) against the City in connection with a
dispute over the City’s collection of Transportation Uniform Mitigation Fees (“TUMF”) related
to development occurring within Canyon Hills. The Action has resulted in the City having to
consent to that certain Memorandum of Agreement (“MOA”) in which City and WRCOG have
engaged in a voluntary non-binding arbitration (the “Arbitration”). Pardee is neither a party to
the MOA nor the Arbitration and is not bound by nor involved in either. The MOA, among other
things, provides that at the conclusion of the non-binding arbitration, either the City or WRCOG
may elect to file an action in Superior Court seeking a declaration, among other things, as to
whether the development occurring within Canyon Hills is exempt from TUMF (the “Future
Litigation”). Because Pardee continues to own property within Canyon Hills, Pardee is an
interested party in such Future Litigation.
I.WRCOG asserts that the City owes past due TUMF relating to building permits
issued by the City in connection with Canyon Hills. The City and Pardee dispute WRCOG’s
position and maintain that no such TUMF are due in connection with past or future building
permits for Canyon Hills. In order to resolve various uncertainties related to the outcome of the
Action, Arbitration and Future Litigation, the City and Pardee entered into a Cooperation
Agreement as of October 1, 2015 (the “Cooperation Agreement”) which set forth the allocation
of TUMF responsibility among the City and Pardee, depending on the outcome of the Action,
Arbitration or Future Litigation and pursuant to which Pardee has been tendering payment of
TUMF within Canyon Hills under protest. The City and Pardee also entered into a Joint Defense
Agreement as of July 15, 2015 (the “Joint Defense Agreement”) relating to the Future Litigation.
J.In order to assist the City with its settlement with WRCOG of the Action,
Arbitration and Future Litigation and in settlement of Pardee’s claims against the City relating to
TUMF, including, without limitation, the TUMF Recovery Litigation (as defined in the
Cooperation Agreement) (the “Pardee Claims”) and any claims the City may have against Pardee
relating to the payment of TUMF for Canyon Hills, the Action, Arbitration and Future Litigation
(the “City Claims”), the City and Pardee now desire to enter into this Agreement.
K.Without any admissions of any type or nature concerning the Pardee Claims and
City Claims, the Parties hereby desire to resolve the dispute and to settle and compromise the
Pardee Claims and City Claims upon the terms and conditions hereinafter set forth solely in
order to avoid the risk, expense and uncertainty of litigation.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and conditions contained herein
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows
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1.Recitals Incorporated. The Recitals set forth above are incorporated by this
reference as though fully set forth herein.
2.Satisfaction of TUMF Obligation.
a.Satisfaction of TUMF Prior to Effective Date. Notwithstanding anything in
the Cooperation Agreement to the contrary, City shall assume all obligations for TUMF that are
claimed owing by WRCOG with respect to any development within Canyon Hills prior to the
Effective Date. Within thirty (30) days following City’s and Pardee’s execution of the “TUMF
Credit Agreement” described in Section 2.c. below, City shall return to Pardee all TUMF paid
under protest by Pardee prior to the Effective Date.
b.Satisfaction of TUMF on and following Effective Date. Pardee shall be
responsible for the payment of TUMF within Canyon Hills on and following the Effective Date
and shall fully satisfy the entire remaining TUMF obligation for Canyon Hills through the initial
funding and construction of all or a portion of the ”TUMF Improvements,” as defined in, and
pursuant to Section 3 below. Consequently, all TUMF paid under protest for Canyon Hills prior
to the Effective Date shall be returned to Pardee as provided in Section 2.a. above and no TUMF
shall be required to be paid following the Effective Date.
c.TUMF Credit Agreement. In consideration of Pardee’s obligation to provide
the initial funding for, and manage the construction of the TUMF Improvements pursuant to this
Agreement, within thirty (30) days following the Effective Date, the City and Pardee shall enter
into a TUMF Credit Agreement with respect to the TUMF Improvements in the form set forth in
WRCOG’s TUMF Administrative Plan subject to those changes necessary to conform to the
terms of this Agreement.
3.Funding and Construction of TUMF Improvements.
a.Scope of TUMF Improvements. The TUMF Improvements shall consist of
the following:
(i) improvements to Camino del Norte consisting generally of 4 lanes of
street, curb, gutter, right of way acquisition and other per SCES Engineering design plans, as
more specifically described in Exhibit A to this Agreement (the “Camino del Norte
Improvements”);
(ii) widening of Railroad Canyon Road to three lanes each direction from the
I-15 Interchange to the City limits at Canyon Lake, including all costs of design and engineering,
curb and gutter as to be mutually agreed to by the parties and as more specifically described in
Exhibit B to this Agreement (the “Railroad Canyon Road Improvements”); and
(iii) extension of Camino del Norte from Old Franklin Bridge where it begins
as Canyon Estates Drive and realigns as an extension of Camino Del Norte towards Summerhill
Drive to where it blends in by the temporary storage business per SCES Engineering design
plans, as more specifically described in Exhibit C to this Agreement (the “Camino del Norte
Extension”).
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If by reason of permitting, design or engineering issues the construction of the foregoing TUMF
Improvements becomes impractical or prohibitive, or if the costs will exceed the Funding Cap
(defined below), the Parties agree to cooperate in good faith to identify and agree upon substitute
TUMF-eligible improvements provided the total costs to be incurred by Pardee for the TUMF
Improvements and substitute improvements will not exceed the Funding Cap.
b.Construction of TUMF Improvements. Subject to (i) the City’s acquisition
and receipt of all necessary rights-of-way, easements, licenses, permits and approvals required
for the construction of the applicable TUMF Improvement, (ii) the City’s approval of the plans
and specifications for the applicable TUMF Improvement, (iii) the City’s and Pardee’s execution
of the TUMF Credit Agreement, and (iv) the City’s and Pardee’s execution of the Funding
Agreement Amendment (defined below), Pardee shall solicit bids for the construction of the
TUMF Improvement and award the construction contract(s) for the TUMF Improvement in
accordance with the same bidding and contracting requirements that would apply to the City if it
were to award such contract(s). The City and Pardee will endeavor to commence construction of
each TUMF Improvement in accordance with the following performance schedule:
TUMF Improvement Commence Construction
Camino del Norte Improvements By the end of 2017
Railroad Canyon Road Improvements Within 180 days following execution of TUMF
Credit Agreement
Camino del Norte Extension By the end of 2017
Each TUMF Improvement will be constructed in accordance with a construction schedule to be
included in the applicable construction contract(s).
c.Reimbursement of Actual Costs of TUMF Improvements. Pardee agrees to
provide the initial funding for all “Actual Costs” (as defined in the Funding Agreement) of the
TUMF Improvements, not to exceed $6,751,391 (the “Funding Cap”). In connection with the
construction of the TUMF Improvements, Pardee shall not charge the City for construction
management or general contractor feesfor constructing or managing the construction and/or
design and engineering of the TUMF Improvements. Under no circumstances, and
notwithstanding anything in this Agreement or the TUMF Credit Agreement to the contrary,
shall Pardee be required to incur Actual Costs for the TUMF Improvements in excess of the
Funding Cap. If Pardee determines at any time based upon Actual Costs incurred to date and
estimated Actual Costs to be incurred that the total Actual Costs of the TUMF Improvements
will exceed the Funding Cap, Pardee shall provide written notice to City describing such
estimated Actual Costs. Upon City’s receipt of such written notice, the City and Pardee shall
schedule a meeting to discuss the information and mutually determine whether there are
reductions in the scope of work for the TUMF Improvements that may be made, or substitute
TUMF-eligible improvements that can be identified in order to remain within the Funding Cap.
All Actual Costs incurred by Pardee for the TUMF Improvements shall be reimbursed by the
City according to the following process:
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(i)Pardee may submit monthly invoices to the City for reimbursement of
Actual Costs incurred by Pardee relating to a TUMF Improvement that are not construction
costs. Such invoices shall include copies of the bills or invoices received by Pardee from third
parties evidencing the Actual Costs. Such invoices from Pardee shall be paid by the City within
thirty (30) days of receipt.
(ii)Pardee may submit periodic invoices to the City for reimbursement of
Actual Costs incurred by Pardee pursuant to the construction contract(s) for a TUMF
Improvement in accordance with the applicable construction contract, including all change
orders. Such invoices from Pardee shall be paid to Pardee by the City within thirty (30) days of
receipt.
(iii)All change orders under any construction contract for a TUMF
Improvement shall be approved by the City Manager.
4.Special Taxes and Bonds of CFD Nos. 2003-2 and 2016-2.
a.Within thirty (30) days following the Effective Date, the City and Pardee shall
enter into an amendment to the Funding Agreement (the “Funding Agreement Amendment”) to
add CFD No. 2016-2 and Improvement Area E of CFD No. 2003-2 to the Funding Agreement so
as to permit the funding of the eligible facilities and fees with the special taxes of CFD No.
2016-2 and Improvement Area E collected prior to the issuance of Bonds and the proceeds of the
CFD No. 2016-2 Bonds and CFD No. 2003-2 Bonds issued for Improvement Area E. With the
approval of EVMWD, the City and Pardee also agree to amend the JCFA to include CFD No.
2016-2 and Improvement Area E. After the issuance of bonds for CFD No. 2016-2 or
Improvement Area E, as applicable, the City shall be entitled to retain the proceeds of any
special taxes not required to pay debt service on bonds from CFD No. 2016-2 or Improvement
Area E, as applicable.
b.The City shall proceed with the issuance of a principal amount of $7,975,000 in
CFD No. 2003-2 Bonds for Improvement Area B as soon as reasonably possible following the
Effective Date. Such CFD No. 2003-2 Bonds shall be issued with a premium in order to
maximize the available amount of net proceeds. Of the proceeds of such CFD No. 2003-2 Bonds
remaining after funding the reserve fund, costs of issuance and capitalized interest, if any, the
first $6,800,000 shall be available to fund Fees and Public Facilities in accordance with the
Funding Agreement, as amended, and all amounts in excess of the first $6,800,000 shall be
available to the City for eligible facilities.
c.As soon as reasonably possible following the buildout of all residential property
within CFD No. 2016-2, the City shall proceed with the issuance of the CFD No. 2016-2 Bonds
in an estimated par amount of $19,000,000. Of the proceeds of the CFD No. 2016-2 Bonds
remaining after funding the reserve fund, costs of issuance and the amount necessary to pay,
repay or defease the obligation to pay, or any indebtedness secured by the CFD No. 2003-2,
Improvement Area B special tax for all property within CFD No. 2016-2, the first $4,000,000
shall be available to fund Fees and Public Facilities in accordance with the Funding Agreement,
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as amended, and all amounts in excess of the first $4,000,000 shall be available to the City for
eligible facilities.
5.Release of All Pardee Claims by Pardee. Except for the warranties provided in
this Agreement as well as covenants and obligations created by this Agreement, Pardee, on behalf
of itself and its officers, successors, affiliates, agents, attorneys and assigns, forever releases and
discharges the City, and their respective officers, successors, affiliates, agents, attorneys and
assigns from any and all claims, demands, disputes, damages, liabilities, actions, causes of action,
and other rights to relief, both legal and equitable, of every kind and nature, whether known or
unknown, past or present, which Pardee has, had or may have against any one or more of the City,
arising out of or related in any way to the Pardee Claims. The foregoing release is expressly
conditioned upon the occurrence of each of the following events (the “Pardee Release
Conditions”):
a.The formation of CFD No. 2016-2 and the City’s and Pardee’s execution of the
Funding Agreement Amendment and the amendment to the JCFA described in
Section 4.a. above; and
b.The execution of a TUMF Credit Agreement as described in Section 2.c. above.
In the event that any of the foregoing Pardee Release Conditions fail to occur, the release
contained in this section shall be deemed void ab initio.
6.Release of All City Claims by City. Except for the warranties provided in this
Agreement as well as covenants and obligations created by this Agreement, City, on behalf of
itself, CFD No. 2003-2 and CFD No. 2016-2, its officers, successors, affiliates, agents, attorneys
and assigns, forever releases and discharges Pardee and its officers, successors, affiliates, agents,
attorneys and assigns from any and all claims, demands, disputes, damages, liabilities, actions,
courses of action, and other rights of relief, both legal and equitable, of every kind and nature,
whether known or unknown, past or present, which City has had, or may have, against the City,
arising out of or related to the City Claims. The foregoing release is expressly conditioned upon
the occurrence of each of the following events (the “City Release Conditions”):
a.The earlier of (i) the completion and dedication of the TUMF Improvements or
(ii) Pardee’s submittal of invoices to the City in a total amount equal to the
Funding Cap; and
b.The execution of a TUMF Credit Agreement as described in Section 2.c. above
7.Waiver of Civil Code Section 1542. Pardee and City, each on behalf of itself and
its officers, successors, affiliates, agents, attorneys and assigns, expressly waives all rights they
may have, or claim to have, under the provisions of Civil Code Section 1542 which provides in
relevant part:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN
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BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR.”
8.Default. Failure by either party to perform any material action or covenant
required by this Agreement within the time periods provided herein following notice and failure
to cure as described hereafter, constitutes a “Default” under this Agreement. A party claiming a
Default shall give written notice of Default to the other party specifying the Default complained
of. Except as otherwise expressly provided in this Agreement, the claimant shall not institute
any proceeding against any other party, and the other party shall not be in Default, if such party
within thirty (30) days from receipt of such notice cures such default, or if the nature of such
Default is such that it cannot reasonably be cured within such thirty (30) day period, then the
claimant shall not institute any proceeding against any other party, and the other party shall not
be in Default, if such party shall, with due diligence, commence to cure, correct or remedy such
failure or delay and shall complete such cure, correction or remedy with diligence, as soon as
reasonably possible.
9.Dispute Resolution and Mediation. The Parties agree that differences of opinion
regarding the obligations of the Parties under this Agreement shall be discussed as soon as
practically possible following awareness of a conflict. Before commencing any legal action, the
Parties shall attempt early resolution of conflicts through mediation administered through the
rules and procedures of the American Arbitration Association. The Parties agree that
documented willingness to participate in mediation is a condition precedent of any later legal
action.
10.Notices. Any document or notice required or permitted under this Agreement shall
be in writing and shall be deemed duly delivered if delivered or addressed as set forth below:
(a) Upon personal delivery; or (b) as of the third day after depositing such document or notice in
the United States mail, certified mail, return receipt requested, postage prepared; or (c) as of the
first business day after depositing such notice with a nationally recognized overnight courier
services expenses prepaid. All documents and notices shall be addressed as follows:
To the City:
City of Lake Elsinore, CFD No. 2003-2
and CFD No. 2016-2
130 South Main Street
Lake Elsinore, CA 92530
Attention: City Manager, City Clerk
With a Copy to:
Leibold, McClendon & Mann
9841 Irvine Center Drive, Suite 230
Irvine, CA 92618
Attention: Barbara Leibold
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To Pardee:
Pardee Homes
1250 Corona Pointe Court, Suite 600
Corona, CA 92879
Attention: Mike Taylor, Jeff Chambers
With a Copy to:
O’Neil LLP
19900 MacArthur Blvd., Suite 1050
Irvine, CA 92612
Attention: John P. Yeager, Esq.
11.No Assignment of Rights. Pardee represents and warrants that it is the true holder
of all rights and remedies released by this Agreement, and that it has not assigned nor transferred
any of those rights or remedies to any other individual or entity.
12.Exclusive Remedy. By executing this Agreement, the parties agree that, except as
otherwise stated herein, the rights and remedies provided in this Agreement shall be the sole and
exclusive rights and remedies surviving as between them relating to the Claims.
13.Authority to Execute. By signature below, each signatory signifies that he or she
is an authorized signatory of the Party on behalf of whom he or she executes this Agreement.
14.Duplicate Originals. This Agreement may be signed in counterparts and the
executed counterparts thereof shall together form the executed Agreement. A copy of a fully
executed counterpart of this Agreement, including an electronic or facsimile transmission of a
fully executed counterpart, may serve as an original, fully executed counterpart.
15.Governing Law. This Agreement is entered into in the State of California and is
governed by the laws of the State of California.
16.No Admission of Liability. The Parties agree that neither the execution of this
Agreement nor the terms of the Agreement shall be construed as an admission of liability by any
Party or an admission of any claim against a Party.
17.No Representation by Parties. This Agreement contains the sole and entire
agreement and understanding of the Parties with respect to the entire subject matter of the
Agreement, and any and all prior discussions, negotiations, commitments, or understandings
related to this Agreement, if any, are merged in this Agreement. No representations, oral or
otherwise, express or implied, other than those contained in this Agreement, have been or shall
be deemed to have been made by any Party. No other agreement shall be deemed to exist or to
bind the Parties with respect to the subject matter of this Agreement.
18.Amendments/Modifications. No provision of this Agreement may be amended or
modified except by a writing executed by each Party.
19.Successors. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and to their respective heirs, executors, administrators, successors and
permitted assigns.
20.No Third Party Beneficiaries. There shall be no third party beneficiaries of this
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Agreement.
21.Headings. The headings of the paragraphs of this Agreement are inserted solely for
convenience of reference and are not a part of and are not intended to govern, limit or aid in the
construction of any terms or provision hereof.
22.No Waiver.Failure or delay on the part of the Parties to enforce any right,
power, or privilege under this Agreement shall not be deemed to constitute a waiver of such
right, power, or privilege, or of any other right, power, or privilege.
23.Provisions Equally Construed. This Agreement was drafted by the mutual
enterprise of the Parties and shall not be construed in favor of or against any party, but shall be
construed equally as to both parties.
24.Consultation with Counsel. The undersigned hereto declare and represent that
each has had the opportunity to consult with legal counsel of their own choosing concerning the
advisability of entering into this Agreement; that they have read and understood the contents of
this Agreement; and that they execute the same of their own free will. Each party's attorney has
reviewed this Agreement and has approved this Agreement as to form and substance.
25.Force Majeure. Whenever performance is required of a Party hereunder, that
Party shall use all due diligence and take all necessary measures in good faith to perform, but if
completion of performance is delayed by reasons of floods, earthquakes, inclement weather or
other acts of God, war, civil commotion, riots, strikes, acts of terrorism, picketing, other labor
disputes, damage to work in progress by casualty, government shutdowns, moratoria or other
restrictive laws or regulations, or the acts, omissions or breach of agreement by the other Party to
this Agreement or its agents, contractors or subcontractors, or by other cause beyond the
reasonable control of the Party (financial inability excepted), then the specified time for
performance shall be extended by the amount of the delay actually so caused.
26.Termination of Cooperation Agreement and Joint Defense Agreement. Upon
the Effective Date, both the Cooperation Agreement and Joint Defense Agreement shall be
deemed terminated by the Parties; provided, however, any amounts due and payable by Pardee to
the City pursuant to Section 2.B of the Joint Defense Agreement as of the Effective Date shall
remain due and payable.
[Signature Page Follows]
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CITY OF LAKE ELSINORE
By:
City Manager
COMMUNITY FACILITIES DISTRICT
NO. 2003-2 OF THE CITY OF LAKE
ELSINORE
By:
City Manager
COMMUNITY FACILITIES DISTRICT
NO. 2016-2 OF THE CITY OF LAKE
ELSINORE
By:
City Manager
ATTEST:
By:
City Clerk
PARDEE HOMES, a California corporation
By: Mike Taylor
Division President
APPROVED AS TO FORM:
O’NEIL LLP
By: John P. Yeager, Esq.
Attorneys for Pardee
APPROVED AS TO FORM:
By:
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EXHIBIT A
Detailed Scope of Camino del Norte Improvements
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EXHIBIT B
Detailed Scope of Railroad Canyon Road Improvements
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EXHIBIT C
Detailed Scope of Camino del Norte Extension