Loading...
HomeMy WebLinkAboutItem 1a - Resolution No. 7103 Morlan Place Underground Utility District and Agreement with Santa Anita LLC DATE: December 15, 2015 TO: Honorable Mayor and City Council FROM: Jason Kruckeberg, Assistant City Manager/Development Services Director Philip A. Wray, Deputy Director of Development Services/City Engineer SUBJECT: RESOLUTION NO. 7103 ESTABLISHING MORLAN PLACE UNDERGROUND UTILITY DISTRICT; AND AN AGREEMENT WITH SANTA ANITA LLC (RUSNAK MERCEDES-BENZ DEALERSHIP) FOR COST SHARING OF THE UNDERGROUNDING OF OVERHEAD UTILITIES ON MORLAN PLACE Recommended Action: Adopt Resolution No. 7103 and Approve the Cost Sharing Agreement SUMMARY The Rusnak Mercedes-Benz Dealership expansion is currently under construction on the lot bounded by Santa Anita Avenue, Santa Clara Street, and Morlan Place. Recently, the City was approached by representatives of the Rusnak Dealership with their interest in pursuing the undergrounding of the overhead utility lines adjacent to their property on the north side of Morlan Place, from Santa Anita Avenue to Huntington Drive. On November 3, 2015, the City Council held a study session to consider pursuing the undergrounding of the overhead utilities on Morlan Place. Per the City Council’s direction, an Agreement with Rusnak has been prepared for the cost sharing of the project, with a funding share of 75% from the City and 25% from Rusnak. Based on the preliminary estimate of $1 million, the City’s share will be $750,000 and is proposed from the General Fund. The Agreement allows for an increase in the total cost of up to 20% in the event of an updated estimate. The Agreement includes a promissory note for the reimbursement of the City’s share from future local sales tax revenues from the Rusnak Dealership. If, at the end of 10 years of operation, the City’s share has not been fully reimbursed, Rusnak will be responsible for paying any outstanding balance. The project qualifies under Southern California Edison Company’s (SCE) Rule 20B program; SCE has indicated they will begin work on the project if authorized by the City. In order to proceed with a Rule 20B project, the City must form an Underground Utility District for Morlan Place. It is recommended that the City Council adopt Resolution Resolution 7103 Rusnak Undergrounding December 15, 2015 Page 2 of 4 7103 establishing the Morlan Place Underground Utility District, and approve the Agreement with Santa Anita LLC (Rusnak Mercedes-Benz Dealership) for cost sharing of the undergrounding. BACKGROUND In 1968, the Public Utilities Commission established a program, entitled Rule 20, to convert overhead utility lines to underground facilities in an effort to reduce overhead cables and equipment and increase public safety and aesthetics. The Rule 20 program has two significant subsections: Subsection A applies to Utility Company funded projects, and Subsection B applies to projects funded by others. The Rule 20A program requires the utility companies to annually set aside funding in an equitable manner for city projects. The Rule 20 program also requires cities to form specific Underground Utility Districts for each project. In 1968, the City of Arcadia adopted Ordinance No.1375 pertaining to the formation of Underground Utility Districts, and since then has benefited from 15 Rule 20A undergrounding utility district projects on City streets. To date, the City has not administered a Rule 20B project. In 2003, the City administered a Rule 20A undergrounding project on Santa Anita Avenue from Colorado Boulevard to Huntington Drive, and on Santa Clara Street from Santa Anita Avenue to Huntington Drive. The overhead utilities on Morlan Place were excluded from that project because of funding constraints and future potential plans for the street that called for separately undergrounding these poles. The City’s most recent Rule 20A undergrounding project on Duarte Road, from El Monte Avenue to the west City limits, was completed in 2008, but the funding was mortgaged well into the future to cover the project costs. Therefore, there will be no Rule 20A funds available to the City for the next six to ten years. Earlier this year, the City was approached by representatives of the Rusnak Mercedes- Benz Dealership with their interest in pursuing the undergrounding of the overhead utility lines on Morlan Place from Santa Anita Avenue to Huntington Drive. The overhead lines are on the north side of Morlan Place and the new Mercedes-Benz Dealership is currently under construction directly adjacent to the lines. The undergrounding of these lines had been the focus of several City efforts over the years, including the planned vacation of Morlan Place at one point, and earlier plans to redevelop this area. These projects never went forward. More recently, Rusnak had been considering funding the relocation of the overhead lines to the south side of the street, and they offered to put their relocation funding toward undergrounding the utilities, if the City would fund the balance. According to SCE, the preliminary estimate for the project is approximately $1 million. This item was presented to the City Council at the November 3, 2015, City Council Study Session and the City Council proposed a funding share with Rusnak of 75%/25% Resolution 7103 Rusnak Undergrounding December 15, 2015 Page 3 of 4 respectively, with the City’s 75% share subject to reimbursement by future Rusnak sales tax revenues. The City Council directed staff to pursue a funding agreement with Rusnak. DISCUSSION For Rule 20B projects, SCE will credit the project for:  An amount equal to the cost of an equivalent overhead electric system, (approximately 20% of the total undergrounding cost), and  The removal cost of the current facilities According to SCE, the preliminary estimate for the project is approximately $1 million, including the credits. The project will include undergrounding the service lines to the adjacent buildings and conversions of the meters from overhead to underground. These costs are included in the project, and there would be no costs to the adjacent property owners, except for the Rusnak contribution. In order to proceed with a Rule 20B project, the City must form an Underground Utility District in compliance with Ordinance No. 1375, to specifically identify the limits of the project. The Ordinance requires a public hearing to ascertain whether the public necessity, health, safety, or welfare requires the removal of the above ground utilities. All adjacent property owners have been notified of the public hearing. Once the underground utility district is formed, SCE will proceed with the design of the project. Per City Council direction, an Agreement with Rusnak has been prepared for the cost sharing of the project. The proposed funding share is for 75% from the City and 25% from Rusnak. Based on the preliminary estimate of $1 million, the City’s share will be $750,000, and is proposed from the General Fund. The Agreement allows for an increase in the total cost of the project of up to 20%, or $200,000, in the event of an updated estimate. The Agreement includes a Promissory Note for the reimbursement of the City’s share from future local sales tax revenues from the Rusnak Dealership in excess of the $800,000 annual commitment agreed to in the Covenants, Conditions, and Restrictions agreed to by Rusnak at the time of their property purchase. Rusnak has estimated the cost of relocating the overhead utilities to the south side of the street at approximately $250,000, and will pledge up to this amount for the undergrounding. In addition, the agreement states that if, at the end of a 10-year operating period, the City’s costs are not fully reimbursed, Rusnak will immediately pay any outstanding balance. FISCAL IMPACT The preliminary cost estimate for the undergrounding of the overhead utilities on Morlan Place is $1 million. The City and Rusnak have agreed to share the cost on a 75%/25% Resolution 7103 Rusnak Undergrounding December 15, 2015 Page 4 of 4 basis, respectively. The actual costs will be determined when the design is complete and construction bids have been received. An appropriation of $750,000 from the General Fund Reserve is requested to cover the City’s share and will be reimbursed from future local sales tax revenues from the Rusnak Dealership in excess of the $800,000 annual commitment as specified in the Agreement. If the City’s costs are not fully reimbursed within 10 years, Rusnak has agreed to pay any remaining balance. An increase in the total cost of up to 20% is also requested to cover updated estimates. This contingency would also be repaid through future sales tax proceeds. If the project exceeds this contingency, it will be returned to the City Council for further consideration. RECOMMENDATION It is recommended that the City Council adopt Resolution 7103 establishing the Morlan Place underground Utility District, and approve the Agreement with Santa Anita LLC (Rusnak Mercedes-Benz Dealership) for cost sharing of the undergrounding of the overhead utilities on Morlan Place, and approve an appropriation of $750,000 (75% of the $1 Million estimate) with an increase of up to $200,000(20% of total cost) for updated estimates. Attachments: Resolution No. 7103 Draft Agreement and Promissory Note AGREEMENT THIS AGREEMENT is executed as of this _____ day of December, 2015, by and “City” between the CITY OF ARCADIA, a public entity () and RUSNAK/ARCADIA, a “Company” California corporation (). City and Company are individually referred to as a “Party”“Parties.” and collectively as the This Agreement is made with reference to the following facts: RECITALS A.As set forth in a “Declaration of Covenants, Conditions and Restrictions” dated as of June 10, 2013 and recorded December 6, 2013 as Instrument No. 20131729128, Official “CC&Rs” Records of Los Angeles County, California (), Company(through an affiliated entity) is proceeding with construction to improve and expand the Mercedes Benz new and used car dealership known as “Rusnak Arcadia” and located at 55 West Huntington Drive, Arcadia, “Expanded Dealership” California (). In connection therewith, Companybelieves that the appearance of the Expanded Dealership will be enhanced by placing underground those utilities currently located on eight (8) utility poles located adjacent to the Expanded Dealership. B.City agrees that the undergrounding of these utilities will enhance the appearance of the Expanded Dealership and desires to cooperate with Companywith respect thereto. The Partiesdesire by this Agreement to describe the manner in which they will cooperate to cause “Project” these utilities to be placed underground (). The Partiestherefore agree as follows: 1.Project Cost and Allocation.City and Companyestimate the total cost of the Projectwill be approximately ONE MILLION DOLLARS ($1,000,000.00). Based upon such cost estimate,Company will be allocated twenty-five percent (25%) of such total costs,not to exceed Two Hundred FiftyThousand Dollars ($250,000.00), and City will be allocated seventy- five percent (75%) of such total costs, not to exceed Seven Hundred Fifty Thousand Dollars ($750,000.00) (the City’s allocation being subject to reimbursement by Company as described herein). 2.Construction by Edison; Cost Overages. City will take appropriate action to “Edison” allow the Project to be designed and managed by Southern California Edison () as a Rule 20 project. City and Company acknowledge that the cost of the Project may be subject to the requirement that prevailing wages be paid. Neither Party shall be obligated by this Agreement to pay amounts in excess of those maximum amounts described in Section 1 above unless both Partiesso agree in a written amendment to this Agreement. City and Company will cause Edison todesign and bid the Project(and will be liable to Edison for any costs associated with the design and bidding process). If the successful bid for the Project (including any design or other costs charged by Edison) exceeds One Million Dollars ($1,000,000.00), this Agreement shall be deemed terminated unless the Parties agree in writing to modify the maximum amounts that will be paid as set forth in Section 1 above. Notwithstanding the foregoing, City agrees that it may elect,without the need for further authorization from the City Council of the City, to agree to a contingency increase of up to twenty percent (20%) in the total cost of the Project if 24347.00801\21523905.5 the Edison bidding process results in a cost in excess of One Million Dollars ($1,000,000.00). In that case,City could agree to pay up to an additional Two Hundred Thousand Dollars ($200,000.00)for a total City payment of not to exceed Nine Hundred Fifty Thousand Dollars ($950,000.00);provided, however, that in the event of such an increased payment by City beyond Seven Hundred Fifty Thousand Dollars ($750,000.00), Company’s repayment obligation as described in the Note will be increased to reflect the increased amount actually paid byCity. 3.The Parties will pay the cost of the Project in accordance with the allocation described in Section 1 above, such costs to be paid to Edison in accordance with Edison’s normal billing practices for such construction.City and Company will attempt to include in their contract with Edison a provision requiring consultation with the Partiesprior to the authorization of any change order(s)that might increase the cost of the Project beyond the maximum amounts agreed to by the Parties as set forth herein. In the event of change orders that increase the total cost of the Project beyond the maximum amounts allocated between the Partiesas set forth in Section 1 above, each Partywill remain liable for payment of its agreed upon percentage of any such overage. 4.Promissory Note.Companyagrees that the funds advanced by the City as described herein will be reimbursed to the City in accordance with the provisions of the “Note” Promissory Note ()from Companyto the City in the same form as that attached hereto as Exhibit “A” .The Note will be payable from Local Sales Tax Revenues from the Dealership/Expanded Dealership(as those terms are defined in the CC&Rs).Company will execute and deliver the Note to City within ten (10) days after the total cost of the Project is known and the amount advanced by the City, calculated as set forth herein, has been determined. The obligations for payment as set forth in the CC&Rs and in the Note are independent,and an obligation to pay by the “Owner”under the CC&Rs or by the Company under this Agreement (including the Note) shall not absolve the other from its payment obligations under the other document. 5.Entire Agreement; Binding Effect. This Agreement represents the entire understanding and agreement between the City and Companyregarding the undergrounding of utilities as described herein and supersedes any prior agreements and understandings between the Partiesrelated to such matters. This Agreement shall be binding upon and inure to the benefit of theParties, their successors and assigns. 6.Amendment. This Agreement may be modified only in a writing signed by both Parties. 7.Governing Law; Venue. This Agreement shall be construed, interpreted and applied in accordance with the laws of the State of California. Any litigation or arbitration regarding this Agreement will be brought in Los Angeles County Superior Court or conducted in Los Angeles County. 8.Attorneys’ Fees. In the event of any action or proceeding to enforce or construe any of the provisionsof this Agreement, the prevailing party in such action or proceeding shall be entitled to reasonable attorneys’ fees and costs. 2 24347.00801\21523905.5 9.Counterparts. This Agreement may be executed in counterparts and when so executed by the Parties, shall be binding upon them and each such counterpart will be an original document. IN WITNESS WHEREOF, the Partieshereto have executed this Agreement as of the date set forth above. CITY: CITY OF ARCADIA,a public entity By: Name: Its: ATTEST:APPROVED AS TO LEGAL FORM: BEST BEST & KRIEGER LLP CityClerkCity Attorney COMPANY: RUSNAK/ARCADIA, a California corporation By: Name: Its: By: Name: Its: 3 24347.00801\21523905.5 EXHIBIT A PROMISSORY NOTE [Attached] Exhibit A 24347.00801\21523905.5 PROMISSORY NOTE $________________Arcadia, California December__, 2015 FOR VALUE RECEIVED, the undersigned, RUSNAK/ARCADIA, a California “Maker” corporation () hereby promisesto pay tothe CITY OF ARCADIA, a public entity “Holder” (), or order, at 240 West Huntington Drive, Arcadia, California 91066, the principal sum of ____________________________Dollars ($___________)[fill in an amount equal to 75% of construction costsor as otherwise calculated pursuant to the Agreement].This Note shall be non-interest bearing. The entire unpaid principal balance of this Note will be fully due “Maturity Date” and payable ten (10) years following the date hereof(the ). 1.All payments hereunder shall be paid in lawful money of the United States of America to Holder at 240 West Huntington Drive, Arcadia, California 91066 or such other place as Holder may designate from time to time. 2.All payments on account of the indebtedness evidenced by this Note shall be applied to the unpaid principal balance. 3.Intentionally deleted. 4.All amounts payable pursuant to this Note shall be paid from annual Local Sales Tax Revenues from the Dealership/Expanded Dealershipin excess of Eight Hundred Thousand Dollars ($800,000.00) for each “Full Tax Year” during the term of this Note. All defined terms used herein with respect to Local Sales Tax Revenues shall be as defined in Section 6 of the Declaration of Covenants, Conditions and Restrictions recorded December 6, 2013 as Instrument “CC&Rs” No. 20131729128, Official Records of Los Angeles County, California(). If the funds from Local Sales Tax Revenues are not sufficient to fully satisfy the unpaid principal balance and remaining interest prior to the Maturity Date, any such unpaid amounts will be fully due and payable as of the Maturity Date. 5.Maker agrees to indemnify Holder and to hold Holder and Holder’s successors and assigns harmless from and against any and all claims, demands, costs, liabilities and obligations of any kind or nature arising out of any default hereunder, including without limitation all costs of collection, including reasonable attorneys’fees and all costs of suit, in the event the unpaid principal sum of this Note and/or any interest thereon is not paid when due. 6.The indebtedness evidenced by this Note may be prepaid in whole or in part without penalty at any time prior to the Maturity Date. 7.Following the maturity of the indebtedness evidenced hereby, whether by acceleration or otherwise, any amount remaining unpaid to Holder shall thereafter bear interest at the rate of tenpercent (10%) per annum. 1 24347.00801\21523905.5 8.The obligations of Maker pursuant to this Note and of “Owner” pursuant to the CC&Rs are independent and any payments by “Owner” pursuant to the CC&Rs shall not relieve Maker of any payments for which it may be or become liable pursuant to this Note. 9.The obligationsregarding “Ownership, Use and Operation of Property” described in Sections 2.1, 2.2 and 2.4 of the CC&Rs are incorporated herein by reference and shall apply to and be binding upon Maker with respect to its ownership, use and operation of the Dealership/Expanded Dealershipthroughout the term of this Note. 10.Maker acknowledges and agrees that Maker shall not have any rights whatsoever to set-off against amounts due hereunder or otherwise due Holder any amount or obligation due Maker or claimed to be due Maker from Holder. 11.The unenforceability or invalidity of any provision or provisions of this Note as to any persons or circumstances shall not render that provision or those provisions unenforceable or invalid as to any other persons or circumstances, and all provisions hereof, in all other respects, shall remain valid and enforceable. 12.This Note shall bind Maker and its successors and assigns and the benefits hereof shall inure to Holder and Holder’s successors and assigns. 13.Payments hereunder are due and payable in lawful money of the United States. The validity, interpretation and performance of this Note shall be governed by and construed in accordance with the laws of the State of California. 14.Time is of the essence of this Note. MAKER: RUSNAK/ARCADIA, a California corporation By: Name: Its: 2 24347.00801\21523905.5