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Home My WebLink AboutNB 1 IRV CO FAIR SHARE 07-15-91NEW BUSINESS N0. 1 7-15-91 JULY 15 1991 Inter -Com W�", I r / ATE: , TO: WILLIAM A. HUSTON, CITY MANAGER FROM: CHRISTINE A. SHINGLETON, ASSISTANT CITY MANAGER RON NAULT, FINANCE DIRECTOR SUBJECT: IRVINE COMPANY FAIR SHARE OBLIGATIONS FOR FUNDING OF CIVIC RECOMMENDATION It is recommended that the City Council consider The Irvine Company's request for a payment schedule in meeting its fair share proportion obligations on the Civic Center Expansion pursuant to Exhibit A of Resolution No. 88-12, by minute motion. BACKGROUND As the Council is aware, the City of Tustin and Irvine Company entered into the East Tustin Development Agreement on December 3, 1986. Pursuant to provisions of the Development Agreement, The Irvine Company was obligated to contribute a fair share proportion of construction costs to expand the City's Civic Center facilities in an amount not to exceed forty percent (40%) of construction costs or $2,000,000 adjusted for changes in construction costs. The Development Agreement also provided that The Irvine Company obligations may be financed by a program of fees. Pursuant to Section 1.11 B of the Development Agreement (page 27) , the City and The Irvine Company agreed to utilize developer fees as a method to finance such construction (see Resolution No. 88-12). Based upon provisions contained in Exhibit A of Resolution 88-12 as agreed to by The Irvine Company, the following procedure was applicable: "If the total amount of fees held by the City at the time the construction contract for the expansion of the Civic Center is awarded are not sufficient to pay Developer's contribution, then Developer shall advance to City such additional funds up to the $2,000,000 as adjusted for increases or decreases in the costs of construction from November, 1986 to the date of the construction contract award as may be needed subject to reimbursement from any such building permit fees subsequently collected. As fees are collected in excess of Developer's advance, City shall reimburse Developer's advance within 30 days of receipt of excess fees." City*Council Report Irvine Company Fair Share Obligations July 15, 1991 Page 2 At this time pursuant to the above provisions of Resolution No. 88- 12, The Irvine Company would be required to advance to the City $1,439,222 toward the Civic Center Expansion project based upon the Development Agreement's total required $2,370,781 contribution adjusted for increases in the costs of construction through the first contract award date and the $931,558.12 in Civic Center builder fees already collected. Upon providing The Irvine Company with a 60 day notice of its above obligation, The Irvine Company requested that the City create a Community Facility District to assist The Company in meeting its obligations to contribute to the costs associated with the Civic Center project. After discussing the issue with the Tustin City Attorney, the City's bond counsel and financial consultants, it was felt that creation of a District was not legally viable nor was it desired based on multiple additional municipal financing needs the City is expected to have in the near future. As an alternative, The Irvine Company requested that in satisfaction of their Civic Center obligation under the Development Agreement, they be permitted to make payments over time toward their obligation plus an interest payment in addition to the demand which would have been equal to the interest the City would have otherwise earned if the entire Company advance required by Resolution No. 88-12 would have been received by June 8, 1991 as requested by the City. In conjunction with the above request, the City's Finance Director has reviewed the cash flow needs of the Redevelopment Agency as identified in the adopted Town Center Financing Plan. As the Council is aware, the first three years of the Financial Plan beginning 1991/92 are -critical periods of construction with the Civic Center expansion being the largest and most aggressive during this period. In,order to meet our needs and considering the needs of The Irvine Company, the Finance Department has indicated that not less than a three year payment schedule be considered with a single annual payment of $558,466 due August 1, 1992, 1993 and 1994. The payment represents an annual payment schedule for reimbursement of the $1,439,222 Irvine Company balance of its Civic Center obligations plus compounded interest at 8%. Any collections made under the adopted fee program by future builders in East Tustin will be credited against the annual payment and any fee program collections after the completion of the direct pay schedule would be reimbursed to the Company in compliance with Resolution City Council Report Irvine Company Fair Share Obligations July 15, 1991 Page 3 No. 88-12. Staff would like direction from the City Council by minute motion as to whether a payment schedule would be permitted to comply with administrative procedures contained in Exhibit A (Page 2, Item #3) for The Irvine Company's Civic Center obligation only. Staff would not anticipate at this time the need to support a payment schedule for Irvine Company fair share contributions required by the Development Agreement for Irvine Boulevard widening nor for the East Tustin Fire Station facility and equipment. Christine A. Shi eton Assistant City Manager CAS:RN:kbc\ccfundin.cas JkWaJ... R&N.Nault Director of Finance Resolution No. 88-12 Exhibit A 3!7/88 THE DEPARTMENT OF COMMUNITY DEVELOPMENT EAST TUSTIN SPECIFIC PLAN ADMINISTRATIVE PROCEDURES AND REQUIRED BUILDING PERMIT FEES FOR FINANCING EXPANSION OF CIVIC CENTER Purpose Section 1.118 of the East Tustin Development Agreement between the City of Tustin and the Irvine Company ("Developer") authorizes the establishment of a financing mechanism to finance the Developer's fair share contribution to the costs of the expansion of the City's existing Civic Center facility to serve the East Tustin Area which developer's contribution is the lesser of 40% of the total construction costs of the expansion or not to exceed $2,000,000 adjusted for inflation. The purpose of this • administrative procedure• is to specifically define the methodology for implementation of the financing method and to ensure that -needed Civic Center facilities to serve development in East Tustin will be provided. ►1 i cabs 1 i ty The requirement to pay fees shall apply to any private development project in the East Tustin Specific Plan Area for which building permits are applied for. Payment of Fees The total amount of fees required for any project pursuant to this administrative . procedure shall be paid up front prior to issuance of any building permits for the first phase or any phase of any project in East Tustin. Administrative Procedures for Determination of Fees The following procedures have been established for implementing a fee system to finance Deve1oper's contribution to the expansion of the Civic Center: 1. In order to assist in a fair and practical means of distributing Developer's contribution across the East Tusti ri Specific Plan area, gross acreages of the Specific Plan area have been determined by development phase or sector based on available information as of December 30, 1987. Preliminary costs for the Civic Center expansion were then generally distributed to each phase or sector of the East Tustin Specific Plan Area as shown in Table 1. Administrative Procedures "molding Permit Fees for Financing ;pansion of Civic Center rage Two 2. At a point where actual development parcels are identified and gross acreage of each development parcel is determined by adoption of a sector level Tentative Tract Map for specific phases of development, actual fees for each development project will be assigned and calculated for each project site and appropriate fees must be paid prior to issuance of a building permit based on the following methodology. Project fees shall be determined by dividing total costs for a phase or sector as shown on Table I by the actual number of net acres to be developed in a phase or sector (see Table 2 and 3 examples). This calculation will provide a fee estimate per acre which will then need to be multiplied by the number of acres in a specific builder level project. Once a preliminary project fee is established utilizing this methodology, the actual fees shall be adjusted upward to reflect percentage increases in the Construction Cost Index from November 1987 to November of any year. This multiplier rate shall be adjusted on an annual basis. 3. If the total amount of fees held by the City at the time the construction contract for the expansion of the Civic Center is awarded are not sufficient to pay Developer's contribution, then Developer shall advance to City such additional funds up to the $2,000,000 as adjusted for increases or decreases in the costs of construction from November, 1986.to the date of the construction contract award as,may be needed -subject to reimbursment from any such building permit fees subsequently collected. As fees are collected in excess of Developer's advance, City shall reimburse Developer's advance within 30 days of receipt of excess fees. -7 rV Office of the City Manager July 3, 1991 C. Bradley Olson, Foothill Community 550 Newport Center P.O. Box 1 Newport Beach, Ca President Builders Drive 92658-8904 UCEIVED .1 U l 10 1991 itl Comm..ttttity Builders 'r�.s deckf % Office City Of Tustin 15222 Del Amo Avenue Tustin, CA 92680 (714) 544-8890 FAX (714) 832-0825 Re: Letter Agreement for Funding of Civic Center Expansion Dear Brad: We appreciate your letter and proposal of June 28, 1991. While we agree with many of the points, we are offering a counter to your proposed schedule. Based on the cash flow needs of the Redevelopment Agency as identified in its adopted financing plan, the first three fiscal years beginning 91/92 are the critical periods of construction, with the Civic Center expansion being the largest and most aggressive during this period. In order to meet our needs and, considering the needs of the company, we are proposing a three year payment schedule with a single annual payment of $558,466 due August 1, 1992, 1993 and 1994. Any collections made under the fee program will be credited against the annual payment and any fee program collections after the complet.ion of the direct pay schedule is completed will of course, be reimbursed to the company in compliance with Resolution 88-12. Brad, I feel that our proposal is to the benefit of both the City and the company and I hope that you will find it satisfactory. If you agree to the City's proposal, please acknowledge by signing and returning the enclosed copy of this letter. It is our desire to finalize this matter in conjunction with the Notice of Bond Sale scheduled for the Agency's meeting of July 15, 1991. In order to meet this deadline, we will need to hear from you no later than Wednesday, July 10, 1991. C. Bradley Olson July . 3 , 1991 Page 2 Thank you for your assistance in this matter. Sincerely, William A. Huston City Manager Dated: WAH:1s Enclosure a:cbradleyA tr Acknowledged and agreed by: C. Bradley Olson, President Foothill Coamaunity Builders