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21-1019_RIVERSTREET SJC, LLC_Agenda Report_E7City of San Juan Capistrano Agenda Report TO: Honorable Mayor and Members of the City Council FROM: Benjamin Siegel, City Manager SUBMITTED BY: Charles View, Assistant City Manager DATE: October 19, 2021 SUBJECT: Reimbursement Agreement between the City and River Street SJC LLC for Design and Construction of Sewer Improvements Along Los Rios Street for The River Street Project RECOMMENDATION: Approve and authorize the City Manager to execute a reimbursement agreement between the City, or its successors or assigns, and River Street SJC LLC, providing for reimbursement from the Sewer Fund to River Street SJC LLC for a portion of its costs of designing and constructing sewer improvements along Los Rios Street, as a required mitigation measure of the Environmental Impact Report for the River Street Project. EXECUTIVE SUMMARY: The River Street Project environmental impact report (EIR) requires the developer to upsize the sewer line in Los Rios Street to Del Obispo Street from 8-inch diameter to 12- inch diameter to accommodate sewer flows from the Project and from upstream of the Project. The EIR mitigation measure for the upsizing also states that “the project applicant and the City shall enter into a development reimbursement agreement for said improvements such that the applicant will be reimbursed for costs incurred in exceedance of its fair share contribution.” A reimbursement agreement that would meet that EIR requirement is included as Attachment 1 and is recommended for approval. The agreement provides for a reimbursement amount of $210,385 that would be credited against the Project’s Sewer Impact Fees of that same amount. The City’s share of the total cost of design and construction is estimated to be $480,769 as shown in Exhibit “A” to the proposed reimbursement agreement. River Street LLP has agreed to absorb the estimated $270,384 not covered by their Sewer Impact Fee obligation. 10/19/2021 E7 PREPARED BY: Steve May, Project Manager City Council Agenda Report October 19, 2021 Page 2 of 3 With the planned annexation of the City’s sewer system and transfer of the Sewer Fund to Santa Margarita Water District (SMWD) in the near future, the proposed agreement would allow for reimbursement to occur before the annexation is completed. In accordance with the Annexation Agreement between the City and Santa Margarita Water District, the proposed agreement has been provided to Santa Margarita Water District for review. DISCUSSION/ANALYSIS: The existing sewer line along the easterly side of Los Rios Street, which runs down to Del Obispo Street, is an 8-inch diameter line that is already deficient in size. Due to the existing deficiency, it is necessary for the Los Rios line to be upsized to accommodate Project sewer flows together with existing flows from upstream. The proposed reimbursement agreement provides for reimbursing the developer the cost of the pipe upsizing, with the maximum reimbursement capped at the Project’s Sewer Impact Fee amount of $210,385. Exhibit “A” to the agreement shows the planned new sewer layout and identifies which portions are developer responsibility and which portions are City responsibility. Exhibit “B” to the agreement is a table of all design and construction costs for both the developer’s share and the City’s share. The proposed agreement is different than the typical reimbursement agreement in that the reimbursement by way of offsetting Sewer Impact Fees will be completed before the actual construction of the upsized sewer line. This is proposed so that the cost of the reimbursement and subsequent loss of Sewer Fund revenues will be identified before the utility annexation to SMWD occurs. This arrangement will result in the developer paying a total of $449,472 of the project’s costs that will not be reimbursed but will allow the developer to proceed with relative certainty as to their total financial obligation for the project before the utilities annexation. This will also avoid the need for complicated financial reporting between the developer and SMWD post-annexation. The costs shown in Exhibit “A” to the Agreement are based on actual design costs and the lowest of three competitive construction bids that included prevailing wages. With the total of the design costs and estimated construction costs being more than double the reimbursement amount, staff is confident that the reimbursement amount will not be more than the developer’s actual costs. FISCAL IMPACT: The proposed reimbursement agreement will reduce Sewer Impact Fee revenues for the Sewer Fund by the reimbursement amount of $210,385. As described above, the credit is less than the City’s actual fair share cost of the project. ENVIRONMENTAL IMPACT: The recommended action of approving a reimbursement agreement is not subject to CEQA pursuant to Section 15060(c)(3) of CEQA Guidelines because the action is not a City Council Agenda Report October 19, 2021 Page 3 of 3 project as defined in Section 15378 of the CEQA Guidelines, and the action would have no potential for resulting in physical change to the environment, directly or indirectly. The reimbursement agreement involves the construction of a sewer line for the River Street project. The City Council certified a final environmental impact report for the River Street project, including the subject sewer line, by adoption of Resolution Number 19-10- 15-01 on October 15, 2019. PRIOR CITY COUNCIL REVIEW: There have been no prior City Council reviews of this item. COMMISSION/COMMITTEE/BOARD REVIEW AND RECOMMENDATIONS: This item does not require commission, committee, or board review. NOTIFICATIONS: Daniel C. Ferons, General Manager, Santa Margarita Water District Dan Almquist, River Street SJC LLC Douglas D. Dumhart, 3-D Advisors LLC (for River Street SJC LLC) ATTACHMENT: Attachment 1: Proposed Reimbursement Agreement 1 SEWER IMPROVEMENT REIMBURSEMENT AGREEMENT On the effective date, as defined below, this agreement ("Agreement") is made and entered into between the City of San Juan Capistrano, a California municipal corporation ("City”), and River Street SJC, LLC ("Developer"). The City and Developer may be referred to individually in this Agreement as a “Party” and together as the “Parties.” RECITALS WHEREAS, the City entered into a Development Agreement No. 18-002 with Developer on December 6, 2019 (“Development Agreement”) record as instrument No. 2020000328826 on July 10, 2020, in the office of the County Recorder of the County of Orange, California for the development of an office/commercial development at 31825 Los Rios Street, San Juan Capistrano, California (the "Project"); and, WHEREAS, a Draft Environmental Impact Report (EIR) was prepared for the Project in January 2019 (State Clearinghouse No. 2018011019) (the “Draft EIR”) and a Final EIR for the Project was certified by the City in October 15, 2019; and, WHEREAS, Section 5.14.1.7, Mitigation Measures, of the Draft EIR provides for and requires the Developer to construct sewer improvements as follows: “Prior to issuance of building permits, the project applicant shall upsize pipe segment D15704 between manhole D10135 on Los Rios Street and manhole D11155 on Del Obispo, from 8-inch to 12-inch diameter pipe.” WHEREAS, Section 5.14.1.7 of the Draft EIR requires that prior to upsizing the line, the project applicant and the City shall enter into a development reimbursement agreement for said improvements such that the applicant will be reimbursed for Developer’s costs incurred to construct the sewer improvements; and, Attachment 1, Page 1 of 8 2 WHEREAS, the sewer improvement work described above and referred to as UD20-0009, along with any other necessary accessories that must be constructed and/or purchased and installed, including but not limited to, flow meters, shall be referred to collectively in this Agreement as the “Sewer Improvement”; and WHEREAS, Developer will be obtaining construction bids for the Sewer Improvement that will provide the basis for the reimbursement amount to be provided by the City in the form of credits to the Developer against future Project-required sewer connection fees; and, WHEREAS, the Parties desire to enter into this Agreement before the sewer system for the Project is turned over to the Santa Margarita Water District; and, WHEREAS, in order for the City to avoid the burden of auditing construction costs, it is in the City’s best interests to enter into this Agreement. AGREEMENT In consideration of the foregoing recitals and the obligations undertaken by the Parties as established in Exhibit A and hereinafter set forth, the Parties agree as follows: 1. Obligations of the Developer 1.1 The Scope of this Agreement is the City's obligation to reimburse the Developer for the cost of constructing the Sewer Improvement, subject to the terms and limitations set forth in this Agreement. Nothing in this Agreement is intended to alter or waive any obligations or duties of the Developer to comply with existing City ordinances, policies, procedures, plans and specifications related to the construction of the Sewer Improvement, including any requirements to obtain approval of construction plans or obtain necessary building, street-work, encroachment or other permits or to Attachment 1, Page 2 of 8 3 comply with any requirements or conditions placed on the issuance of those permits (e.g. insurance, improvement security, etc.). 1.2 As the City is reimbursing the Developer the Eligible Construction Costs (as defined in Section 1.4 below) to construct the Sewer Improvement, the Sewer Improvement is a "Public Work" as defined by California Labor Code, section 1720(a). Developer agrees (a) to pay, and shall cause its contractors and subcontractors to pay, prevailing wages for the construction of the Sewer Improvement and (b) comply with the other applicable provisions of Labor Code, section 1720 et seq. and implementing regulations of the Department of Industrial Relations, necessary to determine that prevailing wages have been paid as required by law. During the construction of the Sewer Improvement, Developer shall, or shall cause its contractor, to post at the Project area the applicable prevailing rates of per diem wages. Developer shall indemnify, hold harmless and defend (with legal counsel reasonably acceptable to the City) the City against any claim for damages, compensation, fines, penalties or other amounts arising out of the failure or alleged failure of any person or entity (including Developer, its contractors and subcontractors) to pay prevailing wages as required by law or to comply with the other applicable provisions of Labor Code sections 1720 et seq. and/or the implementing regulations of the Department of Industrial Relations in connection with construction of the Sewer Improvement. 1.3 Developer shall obtain bids from various subcontractors and turn over the bid package to the City for review. 1.4 "Eligible Costs" or "Eligible Construction Costs" means the amounts for design, engineering, administration, and construction of the Sewer Improvement as submitted by the Developer and approved by the City. The Eligible Costs shall include “soft costs” for the engineering design, plan check, permitting, inspection, cultural monitoring, traffic control and project administration of the Sewer Improvement. Construction bid amounts may include a Contingency of up to ten percent (10%) of the construction costs for the Sewer Improvement. The Eligible Costs shall also include a Project Administration expense in the amount of up to ten percent (10%) of the all the Eligible Costs for the Sewer Improvement. The Eligible Costs, are defined in Exhibit B Attachment 1, Page 3 of 8 4 attached hereto and incorporated herein by reference and shall not be subject to any further review or approvals after this Agreement has been approved. 2. City's Obligations 2.1 The City shall reimburse 100% of the Eligible Costs of the Sewer Improvement as submitted by the Developer and approved by the City. 2.2 City shall issue the reimbursement in the form of credits to the Developer against future Project-required sewer connection fees. 2.3 The Developer shall only be responsible for future Project-required sewer connection fees as were in effect on the Effective Date of this Agreement. 2.4 Notwithstanding anything to the contrary stated herein, in no event shall the City reimburse Developer, through credits or otherwise, more than the cost of the Sewer Improvement or the Developer’s Project-required sewer connection fees, whichever is less. 3. Miscellaneous Terms 3.1 Binding upon Successors. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their predecessors, successors, assigns, past, present, or future affiliated and related entities, officers, members, agents, employees, and representatives (collectively “successors”), including but not limited to successors to the City’s wastewater utility operation). 3.2 Integration. This Agreement constitutes the complete and final agreement of the parties with respect to the subject matters referred to in the Agreement. 3.3 Modification. Any modifications of the Agreement must be in writing and signed by all parties. No oral modifications shall be effective to vary or alter the terms of this Agreement. Attachment 1, Page 4 of 8 5 3.4 Severability. If any provision or any part of any provision of the Agreement shall, for any reason, be held invalid, unenforceable, or contrary to public policy or law, the remainder of the Agreement shall not be affected thereby, and shall continue to be valid and enforceable. 3.5 Counterparts. This Agreement may be executed in counterparts, including true and accurate copies of the original, all of which, when taken together, shall be deemed on original agreement. Any executed copy shall not be binding upon any Party until all Parties have duly executed a copy of this Agreement. 3.6 Attorneys’ Fees. If either Party commences any proceeding or legal action to enforce or interpret any term, covenant or condition of this Agreement, the prevailing party in such proceeding or action shall be entitled to recover from the non- prevailing party its reasonable attorneys’ fees and legal expenses. 3.7 Waiver of Terms. The waiver by either Party of a breach by the other of any provision of this Agreement shall not constitute a continuing waiver or a waiver of any subsequent breach of either the same or a different provision of this Agreement. No provisions of this Agreement may be waived unless in writing and signed by all parties to this Agreement. Waiver of any one provision herein shall not be deemed to be a waiver of any other provision herein. 3.8 Effective Date. This Agreement shall be deemed effective as of the date when the last party to the Agreement signs the Agreement. [Signatures on Following Page] Attachment 1, Page 5 of 8 The parties have executed this Agreement at San Juan Capistrano, California, on the day and year first above written. CITY OF SAN JUAN CAPISTRANO , A Municipal Corporation By: __________ _ Benjamin Siegel, City Manager ATTEST: MARIA MORRIS C ity Clerk By: __________ _ Date : --------- APPROVED AS TO FORM: JEFFREYS. BALLINGER City Attorney By :_9_~ __ 3_~_-__ Date: September 20, 2021 Attachments: Exh ibit A -Sewer Improvement Obligations Exhibit B -Eligible Costs DEVELOPER River Street SJC, LLC By: a~ Dan Almquist, Manager APPROVED AS TO FORM: DEVELOPER ATTORNEY 6 Attachment 1, Page 6 of 8 A-1 EXHIBIT A SEWER IMPROVEMENT OBLIGATIONS Line Segment A-B Line Segment B-C Line Segment C-D Line Segment D-E Total Los Rios Sewer Line = 236’ Line Segments A-B + B-C = 71’ or 30% Line Segments C-D + D-E = 165’ or 70% Developer obligation: Line Segments A-B and B-C Sewer Manholes #4 and 5 City Obligation: Line Segments C-D and D-E Sewer Manholes #2 and 3 Attachment 1, Page 7 of 8 B-1 EXHIBIT B ELIGIBLE COSTS UD20-0009 Los Rios Sewer Improvement - 12" Upsizing City City Item Description Unit Qty. Unit $ Amount Share Amount Design, Plan Check, and Permitting Engineering Design L.S. 1 $ 7,200 70% $ 5,040 City Plan Check Fees Exh. I $ 16,116 70% $ 11,281 City Inspection Fees Exh. I $ 17,165 70% $ 12,016 Shoring Plans L.S. 1 $ 2,000 70% $ 1,400 OCTA/Metrolink Permitting L.S. 1 $ 6,500 70% $ 4,550 Traffic Control Plans L.S. 1 $ 4,400 70% $ 3,080 City Encroachment Permit Fee L.S. 1 $ 794 70% $ 556 As-built Plans L.S. 1 $ 2,500 70% $ 1,750 Total $ 56,675 70% $ 39,672 Construction Costs Sewer Manhole Ea. 4 $ 12,500 $ 50,000 25% $ 12,500 8" PVC Sewer Main L.F. 83 $ 291 $ 24,120 0% $ - Trench, Backfill & Resurface S.F. 1380 $ 118 $ 162,840 70% $ 113,988 12" Sewer Main L.F. 165 $ 259 $ 2,700 100% $ 42,700 Connect to Existing Manhole Ea. 1 $ 6,500 $ 6,500 100% $ 6,500 Repair and Replace Existing Driveway L.S. 1 $ 12,915 $ 12,915 0% $ - Remove Existing Sewer L.S. 1 $ 3,000 $ 3,000 100% $ 3,000 Shoring/Excavation L.S. 1 $ 62,415 $ 62,415 100% $ 62,415 Boring L.S. 1 $ 75,306 $ 75,306 100% $ 75,306 Traffic Control L.S. 42 $ 357 $ 15,000 70% $ 10,500 Sub Total $ 454,796 $ 326,909 Contingency 10% $ 45,480 70% $ 32,691 Total $ 500,276 $ 359,600 Additional Construction Costs RxR Flagmen L.S. /Day 15 $ 1,750 $ 26,250 100% $ 26,250 RxR Signal Cable mark-out L.S. 1 $ 500 $ 500 100% $ 500 SCRRA Inspections L.S./Day 1 $ 1,500 $ 1,500 100% $ 1,500 RWP Safety Training Class L.S. 2 $ 1,500 $ 3,000 100% $ 3,000 SCRRA Performance Bond $180K L.S. 1 $ 3,600 $ 3,600 100% $ 3,600 City Performance Bond $193K L.S. 1 $ 3,870 $ 3,870 0% $ - Cultural Monitoring Hrly 56 $ 75 $ 4,200 70% $ 2,940 Total $ 42,920 $ 37,790 Project Administration L.S. 1 10% $ 59,987 $ 43,706 Grand Totals $ 659,857 $ 480,769 Attachment 1, Page 8 of 8