Loading...
HomeMy WebLinkAbout21 FLOOD CONTROL 03-20-06 AGENDA REPORT MEETING DATE: MARCH 20, 2006 TO: WILLIAM A. HUSTON, CITY MANAGER FROM: CHRISTINE A. SHINGLETON, ASSISTANT CITY MANAGER SUBJECT: ANTICIPATED ECONOMIC DEVELOPMENT CONVEYANCE AMENDMENTS AND ENVIRONMENTAL INSURANCE FOR FLOOD CONTROL CHANNELS AT TUSTIN LEGACY SUMMARY: City Council authorization is requested to permit City staff to execute upcoming Economic Development Conveyance Agreement Amendments with the Department of the Navy and to secure environmental insurance coverage for certain property addressed in one of the proposed Economic Development Amendments prior to acceptance by the City of the subject property. RECOMMENDATION: It is recommended that the City Council take the following action: 1. Authorize the City Manager or Assistant City Manager to execute Amendment No.1 and Amendment No.2 to the Economic Development Conveyance Agreement with the Department of the Navy, subject to the City's special legal counsel approval of all provisions in each Amendment including proposed Navy quitclaim deeds. Also, authorize the City Manager, of his designee to carry out all actions necessary to implement the Amendments including execution of all related documents including quit claim deeds approved by the City's special legal counsel. 2. Authorize the Assistant City Manager, or his designee to bind environmental and pollution legal liability insurance coverage, including coverage for loss, remediation expense, legal defense expenses and natural resource damage for property at Tustin Legacy to be transferred to the City pursuant to Amendment No.2 to the Economic Development Conveyance Agreement with the Navy, subject to special legal counsel approval of all policy endorsements, and authorize a payment amount for such policy in an amount not to exceed $302,000 including premium, broker fee, and all required taxes out of the Tustin Legacy Enterprise Fund. FISCAL IMPACT: Page 2 There is no anticipated direct fiscal costs associated with the anticipated Conveyance Amendments. On Amendment No.2, it is anticipated that the City, on behalf of itself and any successors and assigns, as a covenant running with the land will have a minor annual reporting requirement to the Navy as it affects portions of the subject property encompassed in the Operable Unit (OU)-3 Record of Decision/Remedial Action Plan (ROD/RAP) and Land Use Control and Implementation and Certification Plan for OU-3 dated May 2003. However, provisions of the quitclaim deed as recommended by the City's special legal counsel will ensure that the City will not be assuming any responsibility for the protection and maintenance of the environmental remedy nor the performance of the environmental remedy for the subject OU-3 parcels to be transferred to the City. Costs for an environmental insurance policy to cover flood control channel right-of-way areas are as follows: premium of $269,250; taxes of $8,562,15, and; broker fee of $23,300. Costs are an eligible expense from the Tustin Legacy Enterprise Fund and will be expensed against land sale proceeds in the account. In addition, the City is completing negotiation with Tustin Legacy Community Partners (TLCP), LLC. on a Disposition and Development Agreement (DDA) for the Master Developer footprint at Tustin Legacy. Subject to future action on the DDA, TLCP has agreed to pay the City an amount of $175,000 as a reimbursement for its expenditures for purchase of the proposed policy and for naming TLCP (together with members of this developer in their capacities as members of the limited liability company) as additional insured under the policy. BACKGROUND: In May 2002, the Navy approved an Economic Development Conveyance (EDC) of certain property at the former MCAS Tustin and agreed to convey 1153 acres to the City pursuant to that certain Agreement between the United States of America and Tustin for Conveyance of a Portion of the former Marine Corps Air Station Tustin (the "Conveyance Agreement"). Two amendments to the Conveyance Agreement are currently being reviewed by the City's special base closure counsel. First, a non- substantive Amendment No.1 is being proposed to implement a change in the Navy's organizational structure to identify modified Navy points of contact on all EDC implementation activities and City responsibilities to the Navy under the Conveyance Agreement. Secondly, the Navy proposes an Amendment No.2 to convey certain flood control channel rights-of-way areas and property, located largely under the current Jamboree Road right-of-way area (from Edinger Avenue south to Moffett Avenue), within Tustin's jurisdictional limits. Both Amendments are currently being finalized by the City's special legal counsel and the City Council is being asked to provide authorization for acceptance of the Amendments by the special legal counsel given tight time frames that will be required for approval. The MCAS Tustin Specific Plan/Reuse Plan originally proposed conveyance of existing flood control channels with Tustin owned by the Federal Government to the County of Page 3 Orange and Orange County Flood Control District (collectively the "County") based on a public benefit application submitted by the County, and as recommended to the City of Tustin, acting as the Local Redevelopment Authority (LRA), by the Tustin Base Closure Commission. The County has subsequently informed the Navy that they no longer wish to receive conveyances of the channel rights-of-way and would prefer to defer conveyance until any necessary flood control channel improvements are completed. Further, there are portions of existing right-of-way area along the west side of Peters Canyon Channel in OU-3 that the County did not wish to assume environmental liability for pre-existing remediation action plans that have been put in place in these areas by the Navy. Without conveyance of the rights-of-way areas to the City, subsequent design and construction of any necessary flood control improvements could be significantly delayed. The Navy is not amenable to holding any property subject to a base closure action that is no longer needed by the Federal Government and for which a Finding of Suitability to Transfer (FOST) has been issued. As agreed, the Navy has separated the conveyance of portions of properties proposed for conveyance under Amendment No.2, including portions of necessary rights-of-way needed for redevelopment purposes and located within OU-3 into separate deeds to distinguish the parcels that will be transferred without land use restrictions. If authorized by the City Council, the City would receive title to 6 parcels which include the existing Peters Canyon Channel, Barranca Channel and Santa Ana/Sante Fe Channel right-of-way areas and portions of the Jamboree Road right-of-way ( already a portion of existing LlFOC areas controlled by the City) totalling approximately 28 acres. The Navy has issued three separate FOST's that include the affected properties (September 2001, April 2002, and September 2004). The Federal Government is generally responsible for remediation of contamination at former military bases and for providing limited indemnification against subsequent discovered environmental contamination. The risk challenge has been to protect a proposed recipient of property (such as the City of Tustin) by ensuring: first, that known exposures are contained and limited; and second, that the risk of unknown or future exposure is transferred to an insurance carrier, thus allowing redevelopment activities to proceed in a timely manner. Carriers also provide protection from cost overruns in the event additional unknown contamination is discovered after military approves a FOST on property and issues a ROD/RAP for a site, or there is greater concentration of known contamination than originally identified in the FOST or ROD/RAP, or a change of regulatory conditions associated with the FOST and/or ROD/RAP after inception of an insurance program. Since the potential for environmental liability exists with any transfer of land, environmental insurance should be in place before the transaction affecting the flood control channels is completed (the City's existing environmental liability policy alreadt covers Carve Out Area 10, also identified as Parcels II-H-11 and II-H-12). The City has previously appointed Mr. Rich Hyland with Complete Insurance as the City's exclusive broker for all environmental insurance related issues related to Tustin Legacy. Mr. Hyland was instrumental in placing the current $75 million dollar environmental and pollution liability policy, currently in place on property conveyed to the City under the Page 4 original Conveyance Agreement. Due to new insurance treaties which expired December 31, 2001, the City's existing policy cannot be amended to add properties proposed for conveyance to the City under Amendment No.2 and to take advantage of previously favorable underwriting. However, in response to previous underwriting on the property by XL Environmental Insurance, XL Environmental has responded to a proposal solicitation based on the City's underwriting criteria. The following is a summary of the major features of the proposed environmental and pollution liability policy coverage: 1. XL Environmental the umbrella carrier for the underwriting, will have the policy issued by its surplus line carrier Indian Harbor Insurance Company, a company with an A+ Best Rating and the City's current environmental insurance carrier on other property at Tustin Legacy. 2. $25 Million dollar limit of liability (including each and total of all losses, remediation expenses, or legal defense expenses). Exclusions to the policy would include known conditions that were not disclosed to the carrier in writing prior to inception of the policy; nuclear hazards; intentional acts related to non-compliance with governmental requirements; any hostile acts such as war, and terrorism; underground storage tanks, and mold, rot and other related fungus. The policy would also include a natural resource damage endorsement. Natural resource damage means physical injury to or destruction of and losses to the value of land, fish, wildlife, biota, air, water, groundwater, and other such resources such as those located with channel areas which are considered jurisdicational wetlands of the U.S. 3. Deductible/self insured amount of $250,000 4. In addition to a 10 year policy term, an extended 5 year reporting period for claims. 5. Besides the City of Tustin, the Tustin Community Redevelopment Agency, the Tustin Public Financing Authority and Tustin Legacy Community Partners, LLC would be additional named insured on the policy. Staff will be available on March 20 to provide an brief overview and to answer any questions that the City Council might have. '--. --..-.---. /~ ~ ~ ~ ~ ~~ ~ @ ~ au ; ~ ~ i Hi ! ' ~, g ¡¡¡dill I -I.j ~' .. !- 0 ,I Z . W ('J W « -.J I í ~ I , , @ , ~ I ! Z I- en" :::H 1-15, LL ,"' O~¡ ",! ~r u" ", II' llIH03~