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
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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
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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.
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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:
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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.
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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:
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