HomeMy WebLinkAboutItem No. 12 Periodic ReviewText File
City of Lake Elsinore 130 South Main Street
Lake Elsinore, CA 92530
www.lake-elsinore.org
File Number: ID# 17-710
Agenda Date: 7/10/2018 Status: Consent AgendaVersion: 1
File Type: ReportIn Control: City Council / Successor Agency
Agenda Number: 12)
Page 1 City of Lake Elsinore Printed on 7/5/2018
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REPORT TO CITY COUNCIL
To:Honorable Mayor and Members of the City Council
From:Grant Yates, City Manager
Prepared by: Barbara Leibold, City Attorney
Date:July 10, 2018
Subject:Periodic Review -First Amended and Restated Development Agreement
(Summerly)
Recommendation
That the City Council find McMillin Summerly LLC in good faith compliance with the terms of
the First Amended and Restated Development Agreement.
Background
On August 24, 2004 City entered into the First Amended and Restated Development Agreement
(“Summerly DA”) with Laing-CP Lake Elsinore (“Original Developer”), which recorded on
December 17, 2004 in the Official Records of Riverside County, California as Instrument
Number 1001282, with respect to Original Developer’s development of a residential planned
community, parks, a golf course and related infrastructure (“Summerly Project”) on certain
property within the East Lake Specific Plan (“ELSP”) referred to in the Summerly DA as the
Developer Property.
On or about June 2010, Developer acquired the Developer Property from Bank of America, N.A.
as successor in interest to Original Developer with respect to the Developer Property, and is the
assigneeof all of Original Developer’s right, title and interest in and to the Summerly DA.
The Summerly DA and the Chapter 19.12 of the Lake Elsinore Municipal Code require periodic
review of development agreements to determine good faith compliance with the terms of the
agreement. The Developer and the City commenced the periodic review of the Summerly DA in
2016 and the Developer submitted a Report of Good Faith Compliance (Exhibit “A”). However,
in the course of this administrative review, certain limited disputes arose between the City and
Developer relating to the implementation and interpretation of the Summerly DA. As a result of
those disputes, the periodic review was postponedand the City and the Developer entered into
settlement negotiations.
Periodic Review -First Amended and Restated Development Agreement (Summerly)
July 10,2018
Page 2 of 2
Discussion
The City and the Developer entered into a Settlement Agreement and release dated April 24,
2018 which resolved the disputes under the Summerly DA. Pursuant to the Settlement
Agreement and Release, the City and the Developer have also entered into a SecondOperating
Memorandum Of Understanding dated June4, 2018 and a First Amendment To Amended and
Restated Park Implementation Agreement dated June 4, 2018.On June 7, 2018, the Developer
remitted $1.5 million to the City in accordance with the Settlement Agreement and Release.
In addition to the resolution of disputes documented in the Settlement Agreement and
implementing documents, the Summerly Project continues to develop. Since submittal of the
Developer’s 2016 Good Faith Compliance Report,the Developer has completed Phase D
evidenced by recordation of the Release of Project Development Covenants on March 13, 2018,
and has commenced Phases E and F. The Developer has obtained issuance of more than
1,000 building permits for residential dwelling units within the Summerly Project and that the
First Extension Term was automatically extended for five years to February 24, 2027 (“Second
Extension Term”) as provided in Section 8 of the Summerly DA.
Under the terms of the Summerly DA, the Developer is required to comply with all applicable
city, state and federal laws, regulations and permits. The City acknowledges that the Developer
is working with the ACOE and CDFW to update and revise the applicable 404 Permit and 1602
Agreement.
Fiscal Impact
None.
Exhibits
Exhibit A—Developer’s Good Faith Compliance Report
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3799852.9
Mr. Grant Yates, City Manager
130 South Main St.
Lake Elsinore, CA 92530
RE:First Amendedand RestatedDevelopment Agreement Annual Review--Summerly
Dear Mr. Yates,
Please find attached McMillin Summerly, LLC ‘s (“Developer”) report of its good faith
compliance with the First Amended and Restated Development Agreement (“DA”) between
Laing-CP Lake Elsinore LLC (“Original Developer”) and the City of Lake Elsinore (“City”), in
connection with the City’s periodic review of the DA, pursuant to Section 16 thereof.
Per Section 16of the DA, “[s]uch periodic review shall be conducted administratively by the City
Manager and any appropriate department heads designated by the City Manager to perform
such periodic review. The City Manager shall report the results of such periodic review to the
City Council within thirty (30) days after the conclusion thereof. No public hearing shall be held
by the City Manager, Planning Commission or City Council withregard to such periodic review.”
Despite this language, Developer requests that the administrative review of its good faith
compliance be submitted to the City Council for ratification.
The enclosed report details Developer’s good faith compliance with the DA through April 28,
2016.
Sincerely,
Brian Milich
GOOD FAITH COMPLIANCE REPORT
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I. Introduction
On August 24, 2004 the City of Lake Elsinore (“City”) entered into the First Amended and Restated
Development Agreement (“DA”) with Laing-CP Lake Elsinore (“Original Developer”), with respect to
Original Developer’s development of certain property within the East Lake Specific Plan(“ELSP”),
referred to as the Developer Property.The DA was adopted by OrdinanceNo. 1127 on August 24, 2004.
Pursuant to the DA, the Initial Term of the DA would expire on or around August24, 2014. The DA
provides for two automatic five (5) year extensions to the term of the DA, provided that certain conditions
are first met.
On or about June 2010, McMillin Summerly, LLC (Developer”) acquired the Developer Property from
Bank of America, N.A. as successor in interest to Original Developer, including all of Original
Developer’s right, title and interest in and to the DAand the Original Developer’s right title and interest
in and to the Disposition and Development Agreement dated December 26, 2002 among the
Redevelopment Agency of the City of Lake Elsinore (Agency”), Civic Partners-Elsinore LLC (“Master
Developer”) and Original Developer (“2002 DDA”).
On or about November 23, 2010 -Recognizing that the historic economic crisis beginning in 2007 and
resultant illiquidity brought “development of the Developer Property to a standstill” and recognizing that
such was an “eventbeyond the control” of the parties, theCity and Developer entered into “First
Operating Agreement of Understanding” (“OMOU”), memorializing that such eventtolledthe expiration
of the Initial Term of the DA by 30 months–from August 24, 2014 until February 24, 2017.
On or about March 8, 2011 Developer,Master Developer and the Agency entered into an Amended and
Restated Disposition and Development Agreement(“2011 DDA”), among other things to (a) clarify
certain rights and obligations of the parties under the 2002 DDA, (b) document the implementation of the
2002 DDA and resolve ambiguities identified in the 2002 DDA, and (c) clarify the intent of the 2002
DDA.
On or about August 13, 2013, the City Councilby OrdinanceNo 2013-1316duly approved SPA 10 as an
amendment to the East Lake Specific Plan (“ELSP”), allowing among other things for the addition of 24
dwelling units to Parcel 27 (the former recreation center site).
On or about April 25, 2016, the City Council by Resolution No2016-30 dulyapproved SPA 6-Erratum as
an amendment to the ELSP allowing among other things for the addition of up to 182 dwelling units on
Parcel 18 (formerly the school site).
Among other thing the DA vests certain rights in Developer with respect to the development of the
Developer Propertyin accordance with the Development Plan, and defines the respective obligations of
City and Developer.
Developer has complied in good faith with all conditions, covenants, and requirements of the DA; is
ahead of schedule with respect to the development of the Developer Property asset forth in the 2011
DDA; has properly obtained all requisite permissions, permits, and approvals; has paid all required fees
and charges; and in doing so has complied with all applicable laws, ordinances, and regulationsrelating to
the development of the Developer Propertyincluded within the Development Plan and associated
amenities, including, without limitation, on-site and off-site improvements contemplated by the
Development Plan.
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Pursuant to Section 16 of the DA, a periodic review of Developer’s good faith compliance with the DA
shall be undertaken by the City. “During each periodic review, Developer is required to demonstrate its
good faith compliance with the terms of [the DA], and shall furnish such reasonable evidence of good
faith compliance as the City, in its exercise of its reasonable discretion, may require.”
In connection therewith, as well as to obtain City’s confirmation of the first automatic extension of the
DA’s term1, Developer hereby submits this report (“Report”) detailing its compliance, in good faith, with
all conditions, requirements, and provisions of the DA. 2
II. Summary ofProject Status
Developer has complied in good faith with all conditions of the DA required to be performed as of the
date of this Review,including without limitation its compliance with:
All applicable governmental regulations, pursuant to Section 7.1 of the DA;
The automatic extension of the Initial Term of the DA, pursuant to Section 8 of the DA;
All timing and phasing requirementsof the 2002 DDAas amended and restated in the 2011
DDA pursuant to Section 12.2 of the DA, including without limitation:
o the timely commencement and completion of all phases and backbone infrastructure thus
far required;
o All conditions and requirements of East Lake Specific Plan Amendment 6 (“SPA 6”),
required thus far ;
o All conditions and requirements of SPA 6-Erratum, required thus far;and
o All conditions and requirements of SPA 10, required thus far;
The Construction of Facilities and Provision of Public Services, thus far required, pursuant to
Section 12.6.1 of the DA;
Obtaining and implementing changes to the Project in accordance with Sections 9 and 12.4 of the
DA;
Obtaining all required approvals and permits thusfar required;
The payment of all applicable Existing Impact Fees thus far required;
All other conditions, covenants, and/or requirements of the DA, thus far required.
III. Developer’s Good Faith Compliance with Section 12.2 of the DA
Section 12.2 of the DA provides, in pertinent part, that:
1 By its terms, the DA provides for two automatic 5 year extensions to the term of the DA provided that (1) for each
extension, Developer has first obtained 500 building permits prior the end of the term, and (2) Developer is not in
breach of the DA. As established in further detail below, these conditions have been met.
2 Except as otherwise set forth herein, all capitalized terms shall be ascribed the meaning given to them in the First
Amended and Restated Development Agreement.
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“Developer shall develop the Developer Property subject to the timing and phasing
requirements established by the DDA and the Specific Plan as Amended by SPA 6 and the
Existing Development Approvals. […] Developer shall have the right to develop the
Developer Property in such order, at such rate, and at such times during the Term of [the
DA] as Developer deems appropriate within the reasonable exercise of its independent
business judgment. Notwithstanding the foregoing or the terms and conditions of the DDA,
Developer shall commence grading and construction of the Golf Course in Phase 1 of the
Project and shall complete construction therefor as a condition precedent to the issuance of
a certificate of occupancy for any other structure in the Project. For purposes of this Section
12.2, “completion of the Golf Course” shall mean issuance by City of a certificate of
occupancy or other written acknowledgment of the satisfactory completion thereof consistent
with City’s customary practice….”
Developer has compliedin full with Section 12.2.
A.Developer’s Golf Course Compliance
Developer timely graded, constructed, and otherwise completed the Golf Course as required by Section
12.2, and was thereafter issued a certificate of occupancy by City.
B.Developer’s Compliancewith theTiming and Phasing Requirements of theDDA
Section 12.2 of the DA provides that Developer shall comply with the timing and phasing requirements of
the DDA. Developer has complied in good faith with all conditions of the DDA required to be performed
as of the date of this Report including without limitation:3
The timely and sequential Commencement and Completion of all Phases of the Project on the
Developer property thus far required, as detailed in DDA Section 501.2 and Attachment 11, and
pursuant to all applicable Phase Commencement, Completion and/or Extension Protocols:
o Attachment 11 to the DDA sets forth the Schedule of Phase Development for the
Developer Property. It shows each of the 8 phases (Phase 1, and Phases A-G). Phase A
(or a substitute Phase) was required to commence within 18 months after completion of
Phase 1 and all other successive Phases are required to commence within 18 months after
commencement of the next previous Phase.
o As set forth below, Developer has completed all phases required to be thus far completed
(Phase 1, A, and B), in each case meeting or exceeding the timetableto do so. Further,
Developer has completed Phase C almost 6 months in advance of therequiredcompletion
date.
3 All capitalized terms used in this section shall take on the meaning ascribed to them in the DDA.
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DDA
Phase
Commencement Completion Release of Covenants
Recorded
1 Required -March 8, 2011
Actual –March 8, 2011
Required –March 8, 2012
Actual -December 22, 2011
January 24, 2013
B Required –June 22, 2013
Actual -June 17, 2013
Required –December 17, 2014
Actual -May 19, 2014
September 15, 2014
A Required –December 17, 2014
Actual -December 15, 2014
Required –June 15, 2016
Actual -June 5, 2015
September 17, 2015
C Required –June 15, 2016
Actual -December 15, 2014
Required –June 15, 2016
Actual –December 30, 2015
July 13, 2016
The timely completion of the Phase Scope of Work for all Phases required thus far, pursuant to
DDA Section 501.2, and as further described in Attachment 17A to the DDA, including without
limitation:
o The timely completion of Rough Grading within the boundaries of all Phases thus far
required in accordance with all applicable grading plans;
o The timely completion of all Erosion Control Improvements thus far required;
o The timely completion of all Backbone Infrastructure Scope of Work thusfar required,
including without limitation the applicable work set forth in Attachment 1 to the DDA
with respect to Diamond Drive, Hidden Trail and Summerly Place Roads, Village
Parkway and Meadow;
o The timely completion of all Infrastructure improvements required as a condition to the
approval of SPA 6 (see infra at Section III C), any Tentative Tract Maps, ACOE Section
404 Permit or Other Entitlement Permits;
o The timely completion of all modification to Backbone Infrastructure Scope of Work thus
far required.
Compliance with all Summerly Conditions of Approval thus far required as set forth on
Attachment 20 to the DDA
Obtaining all required approvals, permits, and permissions in connection with the work and
development performed to date;
All other conditions, covenants, and/or requirements of the DDA, thus far required
Developer’s compliance with the DDA conditions and obligations set forth above is evidenced, with
respect to Phases thusfar completed, by Agency’s execution of Releases of Project Development
Covenants for Phases 1, A,B, C and D (pursuant to DDA Section 501.2(c) –“Phase Completion
Protocol).
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C.Developer’s Compliance with SPA 6
Developer has complied with all conditions of SPA 6 required to be performed as of the date of this
Report, including without limitation:
The building of all residential units in compliance with all conditions and requirements ofSPA 6,
including without limitation the design, architectural, landscaping and development regulations of
SPA 6;
The construction and completion of all streets and roads thus far required as detailed in and
required by SPA 6;
The satisfaction and/or performance of all conditions, thus far required, provided in the
“Conditions of Approval” for SPA 6, including without limitation:
o The implementation of appropriate mitigation measures as contained in the Mitigation
Monitoring Programs (Condition #10);
o Developer’s participation in the Development Impact Fee Program; and the construction of
all water mainsand fire hydrants in accordance with Riv. County Ordinance 460 and/or 787.1
(Condition #15);
o Compliance of all lots with the applicable standards set forth in SPA 6, as well as Municipal
and Zoning Codes (Condition #18);
o Initiation and completion of the formation of a Homeowner’s Association, approved by the
City, and recorded (Condition #22);
o The payment of all requisite fees to Lake Elsinore Unified School District (Condition #42);
o The payment of all applicable fees required thus far, including park fees(Condition #43);
o Connection of each lot within any subdivision to a public sewer (Condition #44);
o Compliance with City Ordinance 1105 (per Conditions #56 and #57);
All other conditions, covenants, and/or requirements of SPA 6, thus far required.
D.Developer’s Compliance with SPA 6-Erratum
Existing Development Approvals, as defined by the DA, includes SPA 6-Erratum.
Developer has complied with all conditions of SPA 6-Erratum required to be performed as of the date of
this Report, including without limitation:
Landscaping, as required, consistent with the guidelines and regulations set forth by the Elsinore
Valley Municipal Water District (“EVMWD”);
The building of all residential units required thus far on Parcel 18of Tentative Tract Map 31920
as detailed in and required by SPA 6-Erratum;
All other conditions, covenants, and/or requirements of SPA 6-Erratum, thus far required.
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E.Developer’s Compliance with SPA 10
Existing Development Approvals, as defined by the DA, includes SPA 10.
Developer has complied with all conditions of SPA 10 required to be performed as of the date of this
Report, including without limitation:
The building of all residential units required thus far on Parcel 27of Tentative Tract Map 31920
as detailed in and required by SPA 10;
All other conditions, covenants, and/or requirements of SPA 10, thus far required.
III. Developer’s Good Faith Compliance in Constructing Public Facilities (DA §12.6.1)
Section 12.6.1 of the DA provides, in pertinent part, that:
“As provided by the Specific Plan, the Project provides for an integrated roadway system,
public facilities including water and sewer facilities, parks, a potential elementary school
and storm drains. The construction and installation of such facilities and infrastructure
improvements by the Developer and the phasing thereof shall be subject to City review and
approval at the time that tentative tract maps are submitted for applicable areas of the
Project. Construction and installation of infrastructure and other public improvements shall
be phased with the development of the Project pursuant to the phasing plan contained in the
Specific Plan as amended by SPA 6 and the DDA. In addition to constructing and installing
the infrastructure improvements necessary to the Project, Developer shall also participate in
and pay Existing Impact Fees”
Developer has complied with all conditions of Section 12.6.1 thus far required, including the construction
and installation of infrastructure and other public improvements pursuant to the phasing plan set forth in
the DDA, and has paid all required Existing Impact Fees (see infra at Section VI).
IV. Developer’s Compliance Regarding Changes in the Project (DA §§9 and §12.4)
As amendments to the ELSP, the changes implemented by SPA 6-Erratum and SPA 10 are considered
part of the “Project”covered by theDA. Specifically, the DA defines “Project” to mean:
“…the proposed development of the Developer Property included within the Development Plan
and associated amenities, including without limitation, on-site and off-site improvements
contemplated by the Development Plan”
And the DA defines “Development Plan” to mean:
“…the Existing Land Use Regulations and the Existing Development Approvals.
Specifically, but without limitation, such Development Plan includes the East Lake Specific
Planas amended by SPA 6 covering the Developer Property, and all subsequent
amendments thereto…..”
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Because the term “Project”as defined by the DAincludes “all subsequent amendments”to ELSP, SPA 10
and SPA 6-Erratum,constitute part of theProject and Development Plan under the DA.
Further, there have been no changeswhich would constitute or require a substantive amendmentto the
DAasset forth in Section 12.4. In respect of the Project, therehas been no alteration of thepermitted
uses, no increase in the density or intensity or the number of lots, no increase in the maximum height and
size of permitted buildings, no deletion of a requirement for the reservation or dedication of land for
public purposes,except for minor boundary adjustments approved by the City Manager, and no
amendment or change requiring a subsequent environmental impact report pursuant to Public Resources
Code Section 21166.
V. Developer’s Compliance In Obtaining All Required Approvals
Developer has obtained all required approvals, permits, and permissions required under the DA, DDA,
Tentative Tract Map 31920, SPA 6, SPA 6-Erratum, and SPA 10, required as of the date of this report,
including without limitation: all required Implementing Approvals4, and Subsequent Development
Approvals5.
VI. Payment of All Required Assessments and Fees(DA §12.9)
Section 12.9,of the DA provides, in pertinent part, that:
“Other than the Existing Impact Fees and except as provided in Section 13.1, the City shall
not, without the prior written consent of the Developer, impose any assessment or fee
applicable to the development of the Project on the Developer Property or any portion
thereof.”
As defined by the DA “Existing Impact Fees” means:
“…any fee,charge,dedication or other requirement which is levied, imposed or assessed on
development occurring on the Developer Property as of the Agreement Date.”
Developerhas paid all Existing Impact Fees and those under Section 13.1 which are required to be paid as
of the date of this Reportandis in good faith compliance with the DA. Specifically, Developer has paid:
4 "Implementing Approvals means those procedures, reviews, permits and approvals necessary to implement the
Existing Development Approvals and this First Amended Agreement, including, but not limited to, grading plan
check, grading permits, building plan check, building permits, encroachment permits, sign review, sign permits,
landscape plan review, engineering plan check, and encroachment permits."
5 "Subsequent Development Approvals means any land-use development permit and/or approval obtained after the
Effective Date that substantially modifies the Project as provided for under the Existing Development Approvals, or
that seeks to, or will have the legal effect of, substantially amending any one or more of the Existing Development
Approvals, or this First Amended Agreement."
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1.All required DAG Fees, including the Initial DAG Fee. Developer currently has earned DAG
credits which exceed any required DAG Fees;6
2.All required Affordable Housing “In Lieu Fees” (Section 12.10);
3.All required TUMF Fees;
4.All required EVMWD Fees.
5.All required library fees
6.All required traffic infrastructure fees
7.All required Quimby fees
8.All required drainage fees
9.All other required permit fees, approval fees, filing fees, and related chargeslevied, imposed or
assessed on development occurring on the Developer Property as of the Date of the DA.
10.Developer is exempt from paying MSHCP feeswith respect to all of the 1955 units of the Project
–which units are vested under the DA. The MSHCP fee was not “levied, imposed or assessed on
development occurring on the Developer Property as of the Agreement Date”. Accordingly it is
not an “Existing Impact Fee.”
VI. Developer’s Compliance with the Law and Other Requirements (DA §7.1, 12.13)
Pursuant to Sections 7.1, and 12.13, of the DA, and the DA generally, in connection with its development
of the Developer Property Developer compliedin good faithwith all applicable Governmental
Requirements, Development Agreement Law, Existing Land Use Regulations, City and Municipal Codes,
as well as required conditions of approval and mitigation measures.
VI. Extension of theTerm of theDA (§5)
As described in the Introduction section of this Report, through the OMOU, the City memorialized that
the Initial term of the DA was tolled by 30 months (from August 24, 2014 until February 24, 2017) in
recognition of the impact of the unprecedented economic crisison the development of the Developer
Property. The OMOU did not constitute a substantive amendment to the DA or its term, under
Government Code Section 65868, or under the provisions of the DA itself.
Pursuant to Section 8of the DA and the Section 1 of the OMOU(attached hereto as Exhibit “F”), the
InitialTerm of the DA is to be automatically extended from February 24, 2017 to February 24, 2022, “if
prior to the expiration of the Initial Term(a) Developer has obtained 500 building permits for residential
6 Developer has completedthefollowingOpen Space Improvements described in Section 12.8.2 of the DA:the Golf
Course, as well asimprovements to the San Jacinto Riverand Bioswale, entitling Developer to the DAG fee credits
of $7,550,000 detailed in Section 12.8.2. Upon completion of the improvements to the Open Space Buffer and
Wetlands, Developer shall be entitled to the remaining balance of DAG fee credits in the amount of $805,000. None
of Developer’s DAG fee credits are duplicative of items financed through CFD’s or Extraordinary Infrastructure tax
increment payments.
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dwelling units within the Project which permits shall not have expired or pursuant to which Developer
shall have commenced or completed the permitted residential dwelling unitsand (2) Developer is not in
breach of the [DA]”.
As set forth above, Developer is in compliance with the DA, and not in breach. Further, Developer
obtained the requisite 500building permits prior to the expiration of the Initial Term of the DA.
Accordingly, the term of the DA has been automatically extended in accordance with its terms to
February 14, 2022.