Title
CONSIDERATION OF APPROVING A FEE DEFERRAL AGREEMENT WITH STONE CREEK CASITAS, LLC
RESOLUTION NO. 2015-098 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING A DEVELOPMENT IMPACT FEE DEFERRAL AGREEMENT WITH STONE CREEK CASITAS, LLC FOR APPROXIMATELY $1.7 MILLION OF FEES IN CONNECTION WITH A 97 UNIT APARTMENT PROJECT ON MAIN STREET NEAR WALNUT DRIVE
Body
RECOMMENDED ACTION
Recommended Action
Council adopt the resolution.
Body
SUMMARY
On April 14, 2015 the City Council approved an ordinance that amended the Municipal Code adding chapter 3.56. This chapter allows the City Council to approve development impact fee deferral agreements for eligible projects in Western Chula Vista. The proposed fee deferral agreement with Stone Creek LLC is an eligible project as defined by the Municipal Code and will reduce the enhanced equity requirement being imposed by the lending industry, allowing the project to obtain construction financing.
ENVIRONMENTAL REVIEW
The Development Services Director has reviewed the proposed activity, approval of a fee deferral agreement for the Stone Creek Casitas, for compliance with the California Environmental Quality Act (CEQA) and has determined that the Stone Creek Casitas project is adequately covered by the previously approved Mitigated Negative Declaration (IS 13-006) and that the Fee Deferral Agreement is not "Project", as defined under Section 15378(b)(4) of the State CEQA Guidelines; therefore, pursuant to Section 15060 (c)(3) of the State CEQA Guidelines the current activity is not subject to CEQA.
BOARD/COMMISSION RECOMMENDATION
Not Applicable
DISCUSSION
Staff recommends entering into an agreement with Stone Creek LLC for the development of a 97 unit apartment complex along Main Street. The proposed project meets the requirements of Municipal Code 3.56 in that it will provide a public benefit by providing new highly amenitized market rate rental housing in the southwest area of Chula Vista. The project proposes to build enhanced features such as BBQ areas, a children's area with play equipment and a recreational building with a pool. There will also be walking trails and enhanced passive open spaces between the buildings and along the existing channel. The project will have high quality Spanish style architecture with tiled roofs, cultured stone, decorative shutters, covered patios and arched openings. Staff also received and reviewed the project pro-forma to determine overall project feasibility. Upon review of the project's pro-forma, staff concurred that the project is not feasible based on the required lease payments to support the loan. The project does not have any available comparables that collect the required lease payments that can be used to support the issuance of a construction or take-out loan. Because of the quality and cost of construction and the lack of available comparables the project requires an additional ten percent equity to secure its financing. The proposed fee deferral agreement will provide the additional equity by reducing the upfront construction costs associated with the collection of development impact fees. Without the proposed fee deferral agreement the proposed project would not be financially viable based on today's comparables and the requirements of the lending industry.
The agreement proposes to defer the payment of development impact fees in accordance with the following terms:
· City agrees to finance the Public Facilities Development Impact Fee, Parkland Acquisition and Development Fee, and portions of the Transportation Development Impact fee over thirty (30) years from the date of the agreement. The current estimate of the deferred fee is approximately $1,728,637 which represents about ten percent (10%) of the total cost of construction. It should be noted that a portion of the Transportation Development Impact Fee cannot be deferred and must be collected at certificate of occupancy as required by the TransNet Extension Ordinance, SANDAG Board Policy No. 31 and previous City Council Resolutions, including 2014-066.
· The deferred fees will accrue interest at two percent (2%) per annum. Interest shall begin to accrue upon issuance of a building permit.
· No payments will be due during the first ten (10) years of the agreement.
· Payments toward the deferred impact fees will be due on July 1st following the tenth (10th) anniversary of the agreement and continue until the fees have been paid in full by 30th year of the agreement.
· Payments shall consist of principal and interest, fully amortized over thirty (30) years.
· The Developer agrees to record a trust deed to secure repayment of the impact fee deferral; however the trust deed is expected to be subordinated to the lender providing project financing. The City reserves the right to reasonably approve the lender and the terms of the subordination.
· Developer agrees that the impact fee deferral will be paid in full upon any transfer of the project to a new buyer unless the City reasonably approves the new buyer and the buyer expressly assumes the repayment obligation; The agreement will be effective only when the City's fee deferral program becomes fully effective on May 21, 2015.
The overall terms of the proposed agreement are consistent with the requirement of section 3.56 of the Municipal Code.
DECISION-MAKER CONFLICT
Staff has reviewed the property holdings of the City Council and has found no property holdings within 500 feet of the boundaries of the property which is the subject of this action. Staff has reviewed this matter and has determined that Councilmember Miesen may have a prohibited financial interest in this matter because of his financial interest in Republic Waste (as a source of income). As a result, his recusal is recommended. Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City's Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. The deferral agreement furthers strategic goal 2.1.2 because this action provide policies that encourage investment in western Chula Vista.
CURRENT YEAR FISCAL IMPACT
There is no current year fiscal impact as a result of this action.
ONGOING FISCAL IMPACT
Approval of the Stone Creek Agreement defers impact fee revenues of approximately $1,728,637 that would have otherwise been collected by the Western Transportation Development Impact Fee fund, Western Parkland Acquisition and Development Impact Fee fund, and the Public Facilities Development Impact Fee fund, as summarized in the table below.
|
Units |
TDIF |
PFDIF |
PAD |
Total Deferred |
Fee per Unit |
|
$ 871 |
$ 9,343 |
$ 7,607 |
$ 17,821 |
Project Total |
97 |
$ 84,487 |
$ 906,271 |
$ 737,879 |
$ 1,728,637 |
In order to mitigate future construction cost increases and lost investment earnings, the deferred impact fees will accrue interest charges at a rate of 2% per year, beginning with the issuance of the certificate of occupancy for the project.
ATTACHMENTS
A. Agreement with Stone Creek LLC
Staff Contact: Eric Crockett, Economic Development Department
Kelly Broughton, Development Services Department