HomeMy WebLinkAbout30 Childcare FacilitySTAFF REPORT
CITY OF PALM DESERT
DEVELOPMENT SERVICES DEPARTMENT
DATE: December 16, 2021
PREPARED BY: Eric Ceja, Deputy Director of Development Services
REQUEST: Consideration of request by the Bermuda Dunes Learning Center in
Palm Desert for $900,000 from the City's Child Care Facilities Impact
Mitigation Fee Fund to fund necessary improvements to expand and
operate a childcare facility at 47549 Highway 74.
Recommendation
1. By Minute Motion, approve the Operating Covenant substantially as to form,
with the Bermuda Dunes Learning Center in Palm Desert for $900,000 for
necessary improvements to an existing facility for the operation and
expansion of a childcare facility at 47549 Highway 74; and
2. Authorize the City Attorney to finalize the Operating Covenant; and
3. Authorize the City Manager to sign the Operating Covenant.
Strategic Plan
• Economic Development — Priority 1: "Expand job and business creation
opportunities."
• Economic Development — Priority 4: "Expand and raise awareness of business -
friendly services in order to retain and attract businesses."
• Land Use, Housing & Open Space — Priority 5: "Utilize progressive land use policies
and standards to support ongoing and future needs."
Background Analysis
In 2005, the City Council established a Child Care Facilities Impact Mitigation Fee
(CCFIMF) with the intent of collecting and distributing funds in support of creating new child
facilities or new spaces to existing childcare facilities. The fee is collected at building permit
issuance and is applied to "non-residential" developments. As of today, the City has
collected approximately $2.3 million in CCFIMF and has distributed approximately $840k in
support of new childcare facilities, including the provision of vacant land for new facilities,
new spaces at Hope Lutheran Church, and improvements to other facilities to increase
capacity.
December 16, 2021 — Staff Report
Bermuda Dunes Learning Center
Page 2 of 4
Discussion
Bermuda Dunes Learning Center —Palm Desert (BDLC-PD) has purchased a site at 47549
Highway 74, south of St. Margaret's Episcopal Church, with the intended purpose of
expanding and operating a childcare facility. Several improvements to the building and site
are necessary to operate the facility, and BDLC-PD has submitted a funding request to the
City of Palm Desert for the use of the City's CCFIMF. As proposed, BDLC-PD would make
improvements to accommodate 150 spaces for toddlers, preschoolers, and elementary -age
children. Staff included a list of the improvements (attached to the end of the Operating
Covenant Agreement) and they are listed below.
• ADA improvements
• Bathroom additions
• HVAC replacement and repair
• Other landscape and energy efficient improvements to the buildings
As a condition of the requested funding BDLC-PD agrees to enter into an "Operating
Covenant Agreement" (OCA) with the City of Palm Desert (Attachment 1). This OCA
requires BDLC-PD to:
• Make the improvements identified in Attachment 1 up to $900,000.
• Operate with 150 childcare spaces for a period of 20 years.
• Report back to the City of Palm Desert of the monies spent on the improvements,
within 180 days of the executed agreement.
• Submit quarterly reports to the City to ensure 150 spaces are maintained throughout
the term.
In addition, to ensure that the conditions contained in the OCA remain in effect for the 20-
year term the OCA provides that:
• BDLC-PD could face penalties for non-compliance of the OCA including repayment
of a pro-rata portion of the payment back to the City;
• That the OCA be recorded against the property; and
• That the OCA is non -transferable without consent from the City.
If approved, the City Council will authorize the City Manager to approve an agreement with
BDLC-PD, which will require the facility to provide documentation of the improvements
performed and pull the necessary building permits.
Recommendation
BDLC is a reputable operator with an existing childcare facility in Bermuda Dunes, and staff
recommends approval of their funding request at $900,000. If approved, the request would
allow BDLC-PD to make necessary improvements to accommodate 150 new childcare
spaces within the City.
W:\Staff Reports - Shared 2\Staff Reports 12-16-2021\4 - Norma - 12-16-2021\30 BDLC - Childcare Mitigation\CC Staff Report (BDLC - Childcare).doc
December 16, 2021 — Staff Report
Bermuda Dunes Learning Center
Page 3 of 4
Fiscal Analysis
This request is a one-time cost of $900,000 to the City's Childcare Mitigation Fund (228) in
exchange for 150 spaces of new childcare spaces covered by a 20-year operational
covenant. The request is consistent with the Monies available in Fund 228 and there is no
impact to the City's General Fund.
W:\Staff Reports - Shared 2\Staff Reports 12-16-2021\4 - Norma - 12-16-2021\30 BDLC - Childcare Mitigation\CC Staff Report (BDLC - Childcare).doc
December 16, 2021 — Staff Report
Bermuda Dunes Learning Center
Page 4 of 4
LEGAL REVIEW
DEPT. REVIEW
RWH Ma.ri-i,k, Alvarez
Robert W. Hargreaves Martin Alvarez, Director of
City Attorney Development Services
FINANCIAL REVIEW
Avd-veil 002&
Janet Moore
Director of Finance
City Manager L. Todd Hileman: L. TOG(Oi H-1,.evu,Rvt,
Attachments:
1. DRAFT Operating Covenant Agreement
CITY COUNCIL AATION
APPROVED DENIED
RECEIVED OTHER
MEETINGDATE % • ILc) '2 a
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ABSENT: Nlt)ne
ABSTAIN: N4Ve,
VERIFIED BY: NiF1 ( SfS _
Original on File with City Clerk's Office
ASSISTANT CITY
MANAGER
Andy firestine
Andy Firestine
Assistant City Manager
W.Staff Reports - Shared 2\Staff Reports 12-16-2021\4 - Norma - 12-16-2021\30 BDLC - Childcare Mitigation\CC Staff Report (BDLC - Childcare) doc
RECORDING REQUESTED BY:
WHEN RECORDED
MAIL TO:
The City of Palm Desert
73-510 Fred Waring Drive
Palm Desert, CA 92260
Attn: Finance Director
APN SPACE ABOVE FOR RECORDER'S USE ONLY
OPERATING COVENANT AGREEMENT
by and among the
CITY OF PALM DESERT,
a California municipal corporation,
and
BERMUDA DUNES LEARNING CENTER,
Inc.
[Dated January 1, 2022 for reference purposes only]
OPERATING COVENANT AGREEMENT
THIS OPERATING COVENANT AGREEMENT (this "Agreement") is dated as of
2022, for reference purposes only (the "Reference Date"), and is entered into by and
among the CITY OF PALM DESERT, a California municipal corporation (the "City") and
BERMUDA DUNES LEARNING CENTER, Inc ("Bermuda Dunes"). The City and Bermuda
Dunes enter into this Agreement with reference to the following recited facts (each a "Recital"):
RECITALS
A. The City and Bermuda Dunes desire to create a mutual relationship through which
Bermuda Dunes purchases a property ("Property" — further defined in Recital E) to be operated
by Bermuda Dunes for public child care service purposes, makes certain Improvements to said
Property upon receipt of funds from the City pursuant to this Agreement, and operate the
Property for child care purposes for at least 20 years; and
B. The City and Bermuda Dunes agree that an Operating Covenant, secured against
the Property, is the best way to ensure that child care services are provided to members of the
community in a manner consistent with the Development Impact Fees that will be used to fund
the Improvements of the Property; and
C. The City's acquisition of the real property interests under this Agreement will
benefit the City by providing increased access to child care services for members of the
community; and
D. Bermuda Dunes entering into this Agreement and providing for the recordation of
this Agreement against the Property, providing constructive notice of the City's interest in the
Property through acquisition of the covenants established by this Agreement, is of material
benefit to Bermuda Dunes by providing for use of the Property to operate a child care facility;
and
E. The Clark Trust will purchase the Property, more fully described as APN 628-
140-011, TRA 018-001, prior to accepting City funds or making any Improvements to the
Facility.
NOW, THEREFORE, IN CONSIDERATION OF THE COVENANTS AND OTHER
PROMISES SET FORTH IN THIS AGREEMENT, THE CITY AND BERMUDA DUNES
AGREE AS FOLLOWS:
1. Definitions. All initially capitalized terms used in this Agreement shall have the
meanings set forth in Exhibit A, attached hereto and incorporated herein by reference, or, if not
set forth in Exhibit A, where such terms first appear in this Agreement, unless the context of
usage requires another meaning.
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2. Effective Date.
A. Definition. This Agreement shall not become binding on any Party, unless and
until the first date on which all of the following occur, if at all (the "Effective Date"):
(a) Signature and Delivery of Agreement by Bermuda Dunes. This
Agreement and the Bermuda Dunes Official Action, each signed by the authorized
representative(s) of Bermuda Dunes, are both delivered to the City;
and
(b) Approval of Agreement by City. This Agreement is approved by the City;
(c) Signature and Delivery of Agreement by City. This Agreement is signed
by the authorized representative(s) of the City and delivered to Bermuda Dunes.
B. Failure of Conditions. Mall of the conditions precedent to the Effective Date set
forth in Section A are not satisfied within sixty (60) days of both Parties executing this
Agreement, then no part of this Agreement shall become binding on or enforceable against any
Party and any prior signatures or approvals of this Agreement by any Party shall be void and of
no further force or effect.
3. Term. The "Term" of this Agreement shall commence on the Effective Date and
continue until the twentieth (20th) anniversary of the date on which Bermuda Dunes receives a
final Certificate of Occupancy (or similar approval) for the Facility from the City or other
agency, unless earlier terminated pursuant to the terms of this Agreement.
4. Authorization to Record Agreement. Bermuda Dunes acknowledge, agree, and authorize
City to record a copy of this Agreement in the official records of the Recorder of the County
following the Effective Date as an encumbrance of an interest in the Property.
5. Facility Operation Covenants.
A. Operation of Facility. Bermuda Dunes covenants and agrees that it shall, within
sixty (60) days of the Effective Date, commence improvement of the Property, and within six (6)
months (180 days), begin operating the Facility in accordance with the provisions of this
Agreement and any and all conditions of any and all Approvals. City hereby consents to
Bermuda Dunes pursuing any and all Approvals reasonably necessary for operation of the
Facility as a child care facility. Bermuda Dunes covenants to the City to purchase all required or
desirable equipment and furnishings for the Facility and hire all required or desirable personnel
for operation of the Facility, all in accordance with applicable Laws. If Bermuda Dunes has not
obtained all Approvals for the Facility on or before [January 1, 2023 ], then City may terminate
this Agreement, in City's sole and absolute discretion, by delivering Notice of termination of this
Agreement to Bermuda Dunes.
B. Submission of Required Application(s). Bermuda Dunes shall exercise
reasonable efforts to prepare and submit all required Applications, documents, fees, charges or
other items (including, without limitation, deposits, funds or sureties in the ordinary course)
required for the operation of the Facility as a child care facility, pursuant to all applicable Laws
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and Approvals, to each necessary Government for review and approval within the time period(s)
required to obtain all Approvals on or before January 1, 20231. Further, Bermuda Dunes shall
exercise reasonable efforts to obtain all Approvals on or before June 30, 2022]. The City's
zoning, building, and land use regulations shall be applicable to the operation of the Facility
pursuant to this Agreement.
C. Reservations. The approval of this Agreement by the City shall not be binding
on the City Council, Design Review Committee, or any other commission, committee, board, or
body of the City regarding any Approvals concerning use of the Facility as required by such
bodies. No action by the City with reference to this Agreement or any related documents shall be
deemed to constitute issuance or waiver of any required City Approval regarding the Facility.
Bermuda Dunes acknowledges and agrees that it obtains no right, permit, or entitlement to
operate the Facility on the Property by virtue of this Agreement and this Agreement is not a
statutory development agreement pursuant to Government Code Sections 65864, et seq.
D. Payment of the Facility Costs and Fees. Bermuda Dunes and the City agree
that the City shall not provide any financial assistance to Bermuda Dunes in connection with the
purchase of items or Improvements necessary for the operation of the Facility, other than the
payment specifically contemplated by this Agreement for Improvements to the Property, or
payment of any wages or benefits for employees employed by Bermuda Dunes at the Facility.
Bermuda Dunes shall pay any and all fees pertaining to the review and approval of the Facility
by each Government and utility service providers, including the costs of preparation of all
required construction, planning, and other documents reasonably required by each Government
or utility service provider pertinent to the construction, installation or operation of the Facility
including, but not limited to, specifications, drawings, plans, maps, permit applications, land use
Applications, zoning Applications, environmental review, and disclosure documents and design
review documents.
E. Operation Covenant. Bermuda Dunes covenants to the City to operate the
Facility on the Property continuously as a child care service provider (other than temporary
shutdowns for holidays, weekends, emergencies, weather, and other commercially reasonable
circumstances) for a duration of no fewer than twenty (20) years. Nothing in this Agreement
shall restrict Bermuda Dunes from adjusting its regular hours of operation for commercially
reasonable purposes (for example, without limitation, shifting to a 9 a.m to 4 p.m. schedule of
operations instead of 9 a.m. to 5 p.m., if economic circumstances make such a schedule
commercially reasonable). Bermuda Dunes shall, for the entire Term, at Bermuda Dunes's sole
cost and expense, exercise commercially reasonable efforts to obtain or cause to be obtained ail
franchises, permits, contractual arrangements, licenses, or registrations necessary for Bermuda
Dune's continuous operation of the Facility as a child care service provider on the Property.
Bermuda Dunes shall operate the Facility from the Property, throughout the Term, in accordance
with reasonable and customary business practices in Southern California.
F. No Discrimination or Segregation. Bermuda Dunes covenants by and for itself,
and its heirs, executors, administrators, and assigns, and all Persons claiming under or through it,
that this Agreement is made and accepted upon and subject to the following conditions:
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(a) Standards. That there shall be no discrimination against or segregation of
any Person or group of Persons, on account of any basis listed in subdivision (a) or (d) of Section
12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1,
subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of
the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or
enjoyment of the Property nor shall Bermuda Dunes or any Person claiming under or through it
establish or permit any such practice or practices of discrimination or segregation with reference
to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants,
or vendees in the Property.
(b) Interpretation. Notwithstanding Section 5.6(a), with respect to familial
status, Section 5.6(a) shall not be construed to apply to housing for older persons, as defined in
Section 12955.9 of the Government Code. With respect to familial status, nothing in Section
5.6(a) shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil
Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of
the Civil Code and subdivisions (n), (o), and (p) of Section 12955 of the Government Code shall
apply to Section 5.6(a).
6. City Payment for Cost of Improvements. In consideration for Bermuda Dunes
performing all of its covenants and other obligations under this Agreement, City agrees to make
a one-time Covenant Payment of Nine Hundred Thousand Dollars ($900,000.00) to Bermuda
Dunes within thirty (30) days after timely receiving written evidence, in the form of an executed
and recorded purchase and sale agreement or grant deed, that Bermuda Dunes has completed its
purchase of the Property for purposes of providing the child care services at the Facility.
7. City's Funding of Improvement Expenses. City and Bermuda Dunes hereby acknowledge
that the City's contribution of $900,000.00 toward the cost of Improvements for the Property is
for the duly authorized public purpose of providing increased child care availability in Palm
Desert, and that the source of the funds shall be funding sources legally available for such
purposes.
8. Covenant to Provide Child Care. By executing this Agreement, Bermuda Dunes agrees
that as consideration for the City's Covenant Payment, Bermuda Dunes agrees that it will, for a
period of no less than twenty (20) years, make available no fewer than one hundred and fifty
(150) spaces at the Facility for child care purposes.
9. Ouarterlv Covenant Reports.
A. Quarterly Reports. On or before each Quarterly Report Date, Bermuda Dunes
shall deliver the applicable Quarterly Report to the City for the immediately preceding Operating.
Quarter. Within twenty (20) days after receipt of a Quarterly Report, City shall determine
whether Bermuda Dunes remains in compliance with its covenant to provide no fewer than one
hundred and fifty (150) spaces at the Facility for child care purposes.
B. Notice of Dispute. If the City determines that Bermuda Dunes is not in
compliance with this Agreement as a result of its review of a Quarterly Report, the City shall
send Bermuda Dunes a Notice of Dispute that specifies the nature of the noncompliance. Upon
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C. Dispute Resolution.
(a) Negotiation Period. If the City provides a timely Notice of Dispute in
accordance with the requirements of Section 9.2, the Parties shall immediately commence good -
faith negotiations to resolve the dispute(s) stated in the Notice of Dispute. The Parties shall
continue such negotiations until the earlier of: (1) the end of the Negotiation Period, which shall
be no more than thirty (30) days; or (2) each such dispute is resolved by a written agreement
between the Parties. Notwithstanding any other part of this Section 9.3, the Parties may agree in
writing to extend the duration of the Negotiation Period for any period of time.
(b) Arbitration of Disputes. Any dispute arising under this Agreement,
including, without limitation, all disputes relating in any manner to the performance or
enforcement of this Agreement shall be resolved by binding arbitration in the County of Riverside,
California, pursuant to the rules of Judicial Arbitration and Mediation Services ("JAMS"), as
amended or as augmented in this Agreement (the "Rules"). Arbitration shall be initiated as
provided by the Rules, although the written notice to the other party initiating arbitration shall also
include a description of the claim(s) asserted and the facts upon which the claim(s) are based.
Arbitration shall be final and binding upon the parties and shall be the exclusive remedy for all
claims subject hereto, including any award of attorney's fees and costs. Either party may bring an
action in court to compel arbitration under this Agreement and to enforce an arbitration award. All
disputes shall be decided by a single arbitrator. The arbitrator shall be selected by mutual
agreement of the parties within thirty (30) days of the effective date of the notice initiating the
arbitration. If the parties cannot agree on an arbitrator, then the complaining party shall notify
JAMS and request selection of an arbitrator in accordance with the Rules. The arbitrator shall
have only such authority to award equitable relief, damages, costs, and fees as a court would have
for the particular claim(s) asserted. In no event shall the arbitrator award punitive damages of any
kind. The parties acknowledge that one of the purposes of utilizing arbitration is to avoid lengthy
and expensive discovery and allow for prompt resolution of the dispute. The arbitrator shall have
the power to limit or deny a request for documents or a deposition if the arbitrator determines that
the request exceeds those matters which are directly relevant to the claims in controversy. The
document demand and response shall conform to Code of Civil Procedure Section 1282.6. The
deposition notice shall conform to Code of Civil Procedure Section 1283. The parties may make
a motion for protective order or motion to compel before the arbitrator with regard to the discovery,
as provided in Code of Civil Procedure. Notwithstanding the election by the parties to arbitrate
their disputes, nothing contained herein shall prevent a party from filing an action in a court of
competent jurisdiction to seek any form of equitable remedy or relief.
(c) ARBITRATION CONSENT. WE HAVE READ AND UNDERSTAND
THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE
MATTERS INCLUDED IN THE `ARBITRATION OF DISPUTES' PROVISION TO
NEUTRAL ARBITRATION.
INITIALS OF AUTHORIZED CITY INITIALS OF AUTHORIZED BERMUDA
REPRESENTATIVE(S) DUNES REPRESENTATIVE(S)
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D. Adequate Consideration.
(a) Covenant Payment as Consideration. City and Bermuda Dunes agree that
the Covenant Payments that may become due and payable to Bermuda Dunes under this
Agreement represents fair consideration to Bermuda Dunes for entering into and performing its
covenants and other obligations under this Agreement for operation of the Facility.
(b) No Other Compensation. Both the City and Bermuda Dunes acknowledge
and agree that Bermuda Dunes will receive no compensation under this Agreement other than the
Covenant Payment. Bermuda Dunes shall not be entitled to any other reimbursement or other
compensation from the City for any costs incurred by Bermuda Dunes in performing or preparing
to perform its covenants or other obligations under this Agreement.
10. Defaults. Subject to any extensions of time provided for in this Agreement for Unavoidable
Delay, the occurrence of any of the following events shall constitute a "Default":
A. Monetary Default. The failure by any Party to perform any obligation of such
Party under this Agreement for the payment of money, if such failure is not cured within fifteen
(15) days after the non -performing Party's receipt of Notice from the injured Party that such
obligation was not performed, as and when due; provided, however, that no monetary default shall
occur regarding any payment, unless and until the process set forth in Section 9.3 has been
completely followed and, then, Notice of Default given in accordance with this Section 10.1 and
Section 21.
B. Non -Monetary Default. The failure by any Party to perform any of its obligations
set forth in this Agreement, other than obligations subject to Section 10.1, if such failure is not
cured within thirty (30) days after the non -performing Party's receipt of written Notice from the
injured Party that such obligation was not performed, as and when due or, if such failure is of a
nature that cannot reasonably be cured within thirty (30) days, the failure by such Party to
commence such cure within a reasonable period of time after receipt of such Notice and to,
thereafter, diligently prosecute such cure to completion.
11. Bermuda Dunes's Remedies. Notwithstanding any other provision of this Agreement to
the contrary, City and Bermuda Dunes agree that Bermuda Dunes's exclusive rights and remedies
regarding a Default by the City under this Agreement shall be: (a) recovery of the amount of any
Covenant Payment at the time of the Default; (b) termination of this Agreement; or (c) enforcement
of City's indemnity obligations under Section 13.1. It is the intention of Bermuda Dunes to be
bound by the limitation on rights, damages, and remedies set forth in this Section 11, and Bermuda
Dunes hereby waives any and all other rights, damages and remedies against the City for monetary
damages or other legal or equitable relief related to any Default of this Agreement by the City,
except as specifically provided in this Section 11. Bermuda Dunes and the City each acknowledge
and agree that the City would not have entered into this Agreement, if it were to be liable to
Bermuda Dunes for any monetary damages, monetary recovery, or any remedy other than
collection of the Covenant Payment due at the time of the Default or termination of this Agreement.
Notwithstanding any other provision of this Agreement to the contrary, City and Bermuda Dunes
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agree that, under no circumstances, shall City be liable to Bermuda Dunes for any consequential
or punitive damages, lost profits, or any similar damage types or amounts.
INITIALS OF AUTHORIZED
REPRESENTATIVE(S) OF BERMUDA DUNES
12. City Remedies. Notwithstanding any other provision of this Agreement to the contrary,
City and Bermuda Dunes agree that the City's exclusive rights and remedies regarding a Default
by Bermuda Dunes under this Agreement shall be: (a) termination of this Agreement and recovery
of a pro-rata portion of the Covenant Payment based on the nature of the default (i.e., if the Default
by Bermuda Dunes results from a continued failure to provide fifty of the required one hundred
and fifty spaces for child care, City would be entitled to recover the percentage of the amount of
the Covenant Payment from Bermuda Dunes that correlates to that deficiency); or (b) enforcement
of Bermuda Dunes's indemnity obligations under Section 13.2. It is the intention of the City to be
bound by the limitation on rights, damages, and remedies set forth in this Section 12, and the City
hereby waives any and all other rights, damages, and remedies against Bermuda Dunes for
monetary damages or other legal or equitable relief related to any Default of this Agreement by
Bermuda Dunes, except as specifically provided in this Section 12. The City and Bermuda Dunes
each acknowledge and agree that Bermuda Dunes would not have entered into this Agreement, if
it were to be liable to the City for any monetary damages, monetary recovery, or any remedy other
than collection of any pro -rated portion of the Covenant Payment due at the time of the Default or
termination of this Agreement.
INITIALS OF AUTHORIZED
REPRESENTATIVE(S) OF CITY
13. Indemnification
A. City Indemnity Obligations. The City shall Indemnify the Bermuda Dunes
Parties against any Claim to the extent such Claim arises from any wrongful intentional act or
negligence of the City Parties, but only to the extent that the City may be held liable under
applicable law for such wrongful intentional act or negligence and exclusive of any violation of
law (including the State Constitution) relating to the City's approval, entry into, or performance
of this Agreement. Nothing in this Agreement is intended nor shall be interpreted to waive any
limitation on the City's liability, any exemption from liability in favor of the City, any claim
presentment requirement for bringing an action regarding any liability of the City, or any
limitations period applicable to liability of the City, as set forth in Government Code Sections 800,
et seq., Sections 900, et seq., or in any other law or require the City to Indemnify any Person
beyond such limitations on the City's liability.
B. Bermuda Dunes Indemnity Obligations. Bermuda Dunes shall Indemnify the
City Parties against any and all Claims to the extent such Claims arise from any wrongful
intentional act or negligence of the Bermuda Dunes Parties and any and all Prevailing Wage
Actions relating to this Agreement, the Facility, or the Property. Further, Bermuda Dunes shall
Indemnify the City pursuant to Section 18.
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C. Independent of Insurance. The indemnification obligations of the Parties under
this Agreement shall not be construed or interpreted as in any way being restricted, limited, or
modified by any insurance coverage carried by such Party.
D. Survival of Indemnification and Defense Obligations. The indemnity and
defense obligations of the Parties under this Agreement shall survive the expiration or earlier
termination of this Agreement, until any and all actual or prospective claims regarding any matter
subject to an indemnity obligation under this Agreement are fully, finally, absolutely, and
completely barred by applicable statutes of limitations.
E. Indemnification Procedures. Wherever this Agreement requires any Indemnitor
to Indemnify any Indemnitee:
(a) Prompt Notice. The Indemnitee shall promptly Notify the Indemnitor of
any Claim.
(b) Selection of Counsel. The Indemnitor shall select counsel reasonably
acceptable to the Indemnitee. Counsel to Indemnitor's insurance carrier that is providing coverage
for a Claim shall be deemed reasonably satisfactory, except in the event of a potential or actual
conflict of interest for such counsel regarding such representation or such counsel proves to be
incompetent regarding such representation. Even though the Indemnitor shall defend the Claim,
Indemnitee may, at its option and its own expense, engage separate counsel to advise it regarding
the Claim and its defense. The Indemnitee's separate counsel may attend all proceedings and
meetings. The Indemnitor's counsel shall actively consult with the Indemnitee's separate counsel.
(c) Cooperation. The Indemnitee shall reasonably cooperate with the
Indemnitor's defense of the Indemnitee.
(d) Settlement. The Indemnitor may only settle a Claim with the Indemnitee's
consent, not to be unreasonably withheld.
14. No Challenge: Unenforceability. If the application or the enforceability of all or any
portion of this Agreement is challenged by Bermuda Dunes or any successor or assign of Bermuda
Dunes or is held to be unenforceable by a court of competent jurisdiction as against Bermuda
Dunes or its successors or assigns, then this Agreement shall immediately terminate, without
further Notice to or action by any Party and any Covenant Payment previously made to Bermuda
Dunes shall be immediately refunded to the City in full by Bermuda Dunes. The provisions of this
Section 14 shall survive expiration or termination of this Agreement.
15. City Contract Administration. The City Manager shall administer this Agreement on
behalf of the City. The City Manager may designate any member or members of the City's staff
to carry out such responsibilities. Except as otherwise expressly provided in this Agreement, the
City Manager has the authority to approve or consent to those matters in this Agreement requiring
the City's approval or consent and to enter into modifications of or amendments to this Agreement
on behalf of the City, where such modifications or amendments do not increase the monetary
obligations of City under this Agreement by more than One Hundred Thousand Dollars
($100,000.00), subject to the City Manager's retained and reserved sole and absolute discretion to
seek City governing board approval of any such matter.
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16. Governing Law. The laws of the State shall govern the interpretation and enforcement of
this Agreement, without application of conflicts or choice of laws principles.
17. Restrictions on Transfer. Bermuda Dunes shall not cause or allow any Transfer of this
Agreement, without the prior written consent of the City, which may be given, withheld, or
conditioned in the City's sole and absolute discretion. The City has entered into this Agreement
specifically with reference to the identity of Bermuda Dunes, as of the Effective Date, and to obtain
Bermuda Dunes's personal performance of Bermuda Dunes's obligations under this Agreement.
As a result, Bermuda Dunes acknowledges and agrees that the restrictions on Transfer of this
Agreement set forth in this Section 17 are reasonable.
18. Legal Challenges. Bermuda Dunes acknowledges that the City is a "public entity" and/or
a "public agency" as defined under applicable State law. Therefore, the City must satisfy the
requirements of certain State laws relating to the actions of public entities, including CEQA. Also,
as a public entity, the City's action in approving or performing this Agreement may be subject to
proceedings to challenge or invalidate this Agreement or mandamus. Bermuda Dunes assumes
the risk of delays and damages that may result to Bermuda Dunes from any Third Person legal
actions related to the City's approval of this Agreement or pursuit of the activities contemplated
by this Agreement, even in the event that an error, omission, or abuse of discretion by the City is
determined to have occurred. If a Third Person files a legal action regarding the City's approval
of this Agreement or the pursuit of the activities contemplated by this Agreement, Bermuda Dunes
shall Indemnify the City against such Third Person legal action. Nothing contained in this Section
18 shall be deemed or construed to be an express or implied admission that the City may be liable
to Bermuda Dunes or any other Person for damages or other relief alleged regarding any alleged
or established failure of the City to comply with any Law.
19. No Effect on Legislative Authority. Nothing in this Agreement shall limit or restrict the
governmental authority of the City to take any actions with respect to Bermuda Dunes, the Facility,
the Property, or otherwise, without notice to or consent from Bermuda Dunes, except as otherwise
expressly required by applicable law.
20. Non -liability of City Officials and Employees. No elected official, officer, contractor,
consultant, attorney, employee, or agent of the City shall be personally liable to Bermuda Dunes,
or any voluntary or involuntary successor or assign of Bermuda Dunes, or any lender or other
Person holding an interest in Bermuda Dunes, the Property, or otherwise, in the event of any
Default or breach of this Agreement by the City, or for any amount that may be or become due to
Bermuda Dunes or its successors or assigns under this Agreement, or on any obligations arising
under this Agreement.
21. Notices, Demands, and Communications Between the Parties.
A. Delivery. All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (i) if delivered by hand
and receipted for by the party to whom said notice or other communication shall have been
directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third (3rd)
business day after the date on which it is so mailed, to the following addresses:
9
21. Notices. Demands. and Communications Between the Parties.
A. Delivery. All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (i) if delivered by
hand and receipted for by the party to whom said notice or other communication shall have been
directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third (3rd)
business day after the date on which it is so mailed, to the following addresses:
To City:
With a copy to:
To Bermuda Dunes:
With a copy to:
City of Palm Desert
73-510 Fred Waring Drive
Palm Desert, CA 92260
Attention: City Manager
Best Best & Krieger LLP
74-760 Highway 111, Suite 100
Indian Wells, CA 92210
Attention: Robert Hargreaves, Esq.
Bermuda Dunes Learning Center
42115 Yucca Ln
Bermuda Dunes, CA 92203
Attention: Executive Director/Gayle Clark
Desert Law Group
74916 Highway 111,
Indian Wells, CA 92210
Attention: Kimberly Lee
22. Jurisdiction and Venue. The Parties each acknowledge and agree that this Agreement is
entered into and is to be fully performed in the City and that all legal actions arising from this
Agreement shall be filed in the Superior Court of the State in and for the County or the United
States District Court with jurisdiction in the County.
23. Incorporation of Recitals. The Recitals of fact set forth preceding this Agreement are
true and correct and are incorporated into this Agreement, in their entirety, by this reference.
24. Principles of Interpretation. No inference in favor of or against any Party shall be drawn
from the fact that such Party has drafted any part of this Agreement. The Parties have all
participated substantially in the negotiation, drafting, and revision of this Agreement, with advice
from counsel and other advisers of their own selection. A term defined in the singular in this
Agreement may be used in the plural, and vice versa, all in accordance with ordinary principles
of English grammar, which also govern all other language in this Agreement. The words
"include" and "including" shall be construed to be followed by the words: "without Iimitation."
Each collective noun shall be interpreted as if followed by the words "(or any part of it)," except
where the context clearly requires otherwise. Every reference to any document, including this
10
negotiations, letters of intent, memoranda of understanding or agreements between the Parties with
respect to all or any part of the subject matter of this Agreement.
26. No Waiver. Failure to insist on any one occasion upon strict compliance with any of the
terms, covenants or conditions of this Agreement shall not be deemed a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of any rights or powers under this
Agreement at any one time or more times be deemed a waiver or relinquishment of such right or
power at any other time or times.
27. Time is of the Essence. Time is of the essence in the performance of the Parties' obligations
under this Agreement.
28. Unavoidable Delay; Extension of Time of Performance. Subject to any specific provisions
of this Agreement stating that they are not subject to Unavoidable Delay, performance by a Party
under this Agreement shall not be deemed, or considered to be in Default, where any such Default
is due to an Unavoidable Delay. Any Party claiming Unavoidable Delay shall Notify the other
Party: (a) within ten (10) days after such Party knows of any such Unavoidable Delay; and (b)
within five (5) days after such Unavoidable Delay ceases to exist. To be effective, any Notice of
an Unavoidable Delay must describe the Unavoidable Delay in reasonable detail. The extension
of time for an Unavoidable Delay shall commence on the date of receipt of Notice of the
occurrence of the Unavoidable Delay by the Party not requesting an extension of time to perform
due to such Unavoidable Delay and shall continue until the end of the condition causing the
Unavoidable Delay. The Party seeking to be excused from performance shall exercise its best
efforts to cure the condition causing the Unavoidable Delay, within a reasonable time. Each Party
expressly agrees that adverse changes in economic conditions, of a Party specifically or the
economy generally, or changes in market conditions or demand or changes in the economic
assumptions of a Party that may have provided a basis for entering into this Agreement shall not
operate to excuse or delay the performance of each and every one of each Party's obligations and
covenants arising under this Agreement. The Parties expressly assume the risk of such adverse
economic or market changes, whether or not foreseeable, as of the Effective Date.
29. No Third Party Beneficiaries. The performance of the Parties' respective obligations under
this Agreement are not intended to benefit any Person other than the City or Bermuda Dunes,
except as may be expressly provided otherwise in this Agreement. No Person not a signatory to
this Agreement shall have any rights or causes of action against any Party to this Agreement as a
result of that Party's performance or non-performance under this Agreement, except as otherwise
expressly provided in this Agreement.
30. No Other Renresentations or Warranties. Except as expressly set forth in this Agreement,
no Party makes any representation or warranty material to this Agreement to any other Party.
31. Tax Consequences. Bermuda Dunes acknowledges that it may experience tax
consequences as a result of its receipt of the Covenant Payment and agrees that it shall bear any
and all responsibility, liability, costs, and expenses connected in any way with any such tax
consequence.
11
32. Relationship of Parties. The Parties each understand and agree that they are independent
contracting entities and do not intend by this Agreement to create any partnership, joint venture,
or similar business arrangement, relationship, or association between or among them.
33. Survival of Agreement. All of the provisions of this Agreement shall be applicable to any
dispute between the Parties arising from this Agreement, whether prior to or following expiration
or termination of this Agreement, until such dispute is finally and completely resolved between
the Parties, either by written settlement, entry of a non -appealable judgment, or expiration of all
applicable limitations periods and all terms and conditions of this Agreement relating to dispute
resolution and limitations on damages or remedies shall survive any expiration or termination of
this Agreement.
[Signatures on following page]
12
SIGNATURE PAGE
TO
OPERATING COVENANT AGREEMENT
The City and Bermuda Dunes sign this Operating Covenant Agreement by and through
the signatures of their respective authorized representative(s) set forth below, as of the Reference
Date:
CITY:
City of Palm Desert C6A-1(
By: By:�
Name: Name: . 0 (tea 1 le, C, ! a v K
Its: Its
BERMUDA DUNES:
Bermuda Dunes, Inc
ATTEST:
By:
Name:
City Clerk Its:
APPROVED AS TO LEGAL FORM:
BEST BEST & KRIEGER LLP
By:
City General Counsel
dCiVvrA
13
EXHIBIT A
TO
OPERATING COVENANT AGREEMENT
Definitions
A. Affiliate. Any other Person Controlling or Controlled by or under common Control
with a specified Person. "Affiliated" shall have the correlative meaning.
B. Application. Any agreement, application, certificate, document, or submission (or
amendment of any of the foregoing), as applicable: (a) necessary or appropriate for purchase or
operation of the Facility (defined herein), including any application for any building permit,
Certificate of Occupancy, utility service or hookup, easement, covenant, condition, restriction,
subdivision, or such other instrument as City or Bermuda Dunes may reasonably request in
connection with the Facility; or (b) to enable Bermuda Dunes to seek any Approval or to develop,
use, or operate the Facility in a certain manner
C. Approval. Any license, permit, approval, consent, certificate, ruling, variance,
authorization, conditional use permit, or amendment to any of the foregoing, as shall be necessary
or appropriate under any Law to develop or operate the Facility.
D. Bermuda Dunes. Defined in the initial paragraph of this Agreement.
E. Bermuda Dunes Parties. Collectively, Bermuda Dunes and its directors, officers,
employees, and agents.
F. Bermuda Dunes Party. Individually, Bermuda Dunes or its directors, officers,
employees or agents.
G. CEQA. The California Environmental Quality Act, codified at Public Resources
Code Sections 21000, et seq.
H. Certificate of Occupancy. A "Certificate of Occupancy" as defined in the
California Building Code, 2019 Edition, published by the International Code Council, as may be
amended from time to time, and as may be amended by the City.
L City. The City of Palm Desert, California, a municipal corporation.
J. City Parties. Collectively, the City, its elected officials, officers, employees,
representatives, agents and volunteers.
K. City Party. Individually, the City, its elected officials, officers, employees,
representatives, agents or volunteers.
L. Claim. Any claim, loss, cost, damage, expense, liability, lien, action, cause of
action (whether in tort, contract, under statute, at law, in equity or otherwise), charge, award,
assessment, fine or penalty of any kind (including consultant and expert fees and expenses and
investigation costs of whatever kind or nature and, if an Indemnitor improperly fails to provide a
EXHIBIT "A"
Definitions
defense for an Indemnitee, then Legal Costs of counsel retained by the Indemnitee), and any
judgment.
M. Control. Possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person and contractually bind such Person, whether
by ownership of Equity Interests, by contract, or otherwise.
N. County. The County of Riverside, California.
O. Covenant Payment. A one-time payment of nine hundred thousand dollars
($900,000.00) to be made by the City to Bermuda Dunes pursuant to the terms of this Agreement.
P. Default. Defined in Section 10.
Q. Default Interest. Interest at an annual rate equal to the lesser of: (a) eight percent
(8%) per annum; or (b) the Usury Limit.
R. Effective Date. Defined in Section 2.1.
S. Equity Interest. All or any part of any direct or indirect equity or ownership
interest(s) (whether stock, partnership interest, beneficial interest in a trust, membership interest
in a limited liability company, or other interest of an ownership or equity nature) in any entity, at
any tier of ownership, that directly or indirectly owns or holds any ownership or equity interest in
a Person.
T. Facility. That certain child care center located within the Property and operated in
accordance with the terms of this Agreement and all other applicable Approvals.
U. Federal. The government of the United States of America.
V. Government. Each and every governmental agency, authority, bureau,
department, quasi -governmental body, or other entity or instrumentality having or claiming
jurisdiction over the Property (or any activity this Agreement allows), including the government
of the United States of America, the State and County governments and their subdivisions and
municipalities, including the City, and all other applicable governmental agencies, authorities, and
subdivisions thereof, any planning commission, board of standards and appeals, department of
buildings, city council, zoning board of appeals, design review board or committee or similar body
having or claiming jurisdiction over the Property or any activities on or at the Property.
W. Improvements. Any valuable addition made to the Property intended to enhance
the Property for use as a child care facility, or otherwise adapt or modify portions of the Property
to improve the suitability for its intended use as a child care facility. The Improvements are
identified on Exhibit "B" attached to this Agreement.
X. Indemnify Where this Agreement states that any Indemnitor shall "indemnify"
any Indemnitee from, against, or for a particular matter, that the Indemnitor shall indemnify the
Indemnitee and defend and hold the Indemnitee harmless from and against any and all loss, cost,
Claims, liability, penalties, judgments, damages, and other injury, detriment, or expense (including
EXHIBIT "A"
Definitions
Legal Costs, interest and penalties) that the Indemnitee suffers or incurs: (a) from, as a result of,
or on account of the particular matter; or (b) in enforcing the Indemnitor's indemnity.
Y. Indemnitee. Any Person entitled to be Indemnified under this Agreement and its
agents, directors, employees, shareholders, officers and elected officials.
Z. Indemnitor. A Party that agrees to Indemnify any other Person.
AA. JAMS. The Judicial Arbitration and Mediation Service, Inc., its successor or any
similar organization agreed upon in writing between City and Bermuda Dunes.
BB. Laws. Every law, ordinance, requirement, order, proclamation, directive, rule, and
regulation of any Government applicable to the Property or the Ontario Facility Expansion, in any
way, including any development, use, maintenance, taxation, operation, or occupancy of, or
environmental conditions affecting the Property or the Ontario Facility Expansion, or relating to
any taxes, or otherwise relating to this Agreement or any Party's rights, obligations or remedies
under this Agreement, or any Transfer of any of the foregoing, whether in force on the Effective
Date or passed, enacted, modified, amended or imposed at some later time, subject in all cases,
however, to any applicable waiver, variance, or exemption.
CC. Legal Costs. All reasonable costs and expenses such Person incurs in any legal
proceeding (or other matter for which such Person is entitled to be reimbursed for its Legal Costs),
including reasonable attorneys' fees, court costs and expenses and consultant and expert witness
fees and expenses.
DD. Negotiation Period. A period of thirty (30) days immediately following the
delivery of a Notice of Dispute by Bermuda Dunes to City.
EE. Notice. Any approval, consent, demand, designation, election, notice, or request
relating to this Agreement, including any Notice of Default or termination of this Agreement or
any Notice of Dispute. Notices shall be delivered, and shall become effective, only in accordance
with Section 21.
FF. Notice of Dispute. A Notice from either Party under Section 9.2 setting forth in
reasonable detail all of the bases for any dispute regarding a Quarterly Report delivered by the
other Party.
GG. Notify. Give a Notice.
HH. Operating Quarter. Each calendar quarter occurring during the Term,
commencing on each July 1, October 1, January 1 and April 1 and ending, respectively, on each
September 30, December 31, March 31 and June 30 during the Term.
II. Parties. Collectively, City and Bermuda Dunes.
JJ. Party. Individually, City or Bermuda Dunes, as applicable.
EXHIBIT "A"
Definitions
KK. Person. Any association, corporation, governmental entity or agency, individual,
joint venture, joint-stock company, limited liability company, partnership, trust, unincorporated
organization or other entity of any kind.
LL. Prevailing Wage Action. Any of the following: (a) any determination by the State
Department of Industrial Relations that prevailing wage rates should have been paid, but were not;
(b) any determination by the State Department of Industrial Relations that higher prevailing wage
rates than those paid should have been paid; (c) any administrative or legal action or proceeding
arising from any failure to comply with any of California Labor Code Sections 1720 through 1781,
as amended from time to time, regarding prevailing wages, including maintaining certified payroll
records pursuant to California Labor Code Section 1776; or (d) any administrative or legal action
or proceeding to recover wage amounts at law or in equity, including pursuant to California Labor
Code Section 1781.
MM. Quarterly Report. A certified copy of the report submitted by Bermuda Dunes to
the City setting forth Bermuda Dunes's compliance with the provisions of this Agreement,
especially the obligation to make available no fewer than one hundred and fifty (150) spaces for
child care purposes at all times during the Term of this Agreement.
NN. Quarterly Report Date. The date that is thirty (30) days following the last day of
the immediately preceding Operating Quarter.
00. Southern California. The geographic areas of the County of Riverside, California,
and the County of Los Angeles, California.
PP. State. The State of California.
QQ. Term. Defined in Section 3.
RR. Third Person. Any Person that is not a Party.
SS. Transfer. Regarding any right or property, any of the following, whether by
operation of law or otherwise, whether voluntary or involuntary, and whether direct or indirect:
(a) any assignment, conveyance, grant, hypothecation, mortgage, pledge, sale, or other transfer,
whether direct or indirect, of all or any part of such right or property, or of any legal, beneficial,
or equitable interest or estate in such right or property or any part of it (including the grant of any
lien or other encumbrance); (b) any conversion, exchange, issuance, modification, reallocation,
sale, or other transfer of any direct or indirect Equity Interest(s) in the owner of such right or
property by the holders of such Equity Interest(s); (c) any transaction described in subsection "(b)"
of this Section 1.48 affecting any Equity Interest(s) or any other interest in such right, obligation
or property or in any such owner through any manner or means whatsoever; or (d) any transaction
that is in substance equivalent to any of the foregoing. A transaction affecting Equity Interests, as
referred to in subsections "(b)" through "(d)" of this Section 1.48, shall be deemed a Transfer by
a Person even though that Person is not technically the transferor. A "Transfer" shall not, however,
include any of the foregoing relating to any Equity Interest: (i) that constitutes a mere change in
form of ownership with no material change in beneficial ownership and constitutes a tax-free
transaction under Federal income tax law and the State real estate transfer tax; (ii) to member(s)
of the immediate family(ies) of the transferor(s) or trusts for their benefit; (iii) to any Person that,
EXHIBIT "A"
Definitions
as of the Effective Date, holds an Equity Interest in the Person whose Equity Interest is being
transferred; or (iv) any transaction in Equity Interests in the Person that occurs over a nationally
recognized stock exchange.
TT. Unavoidable Delay. A delay in either Party performing any of its obligations
under this Agreement, except payment of money, arising from or on account of any cause
whatsoever beyond the Party's reasonable control, despite such Party's reasonable diligent efforts,
including labor troubles or other union activities, casualty, war, acts of terrorism or riots.
Unavoidable Delay shall not include delay caused by a Party's financial condition, illiquidity, or
insolvency.
UU. Usury Limit. The highest rate of interest, if any, that Law allows under the
circumstances.
EXHIBIT "A"
Definitions
EXHIBIT B
TO
OPERATING COVENANT AGREEMENT
List of Improvements to the Property to be Funded by City
[Attached behind this cover page]
EXHIBIT `B"
List of Improvements
SCHEDULE B
IMPROVEMENTS AND ESTIMATED COSTS
• ADA Ramp - located south side of playground $135,000.00
• Additional bathrooms in classrooms $400,000.00
• Ball Wall for children to play $ 4,000.00
• Fencing for protection along wash/west side of property
and preschool playground north side $200,000.00
• Landscaping / Irrigation set-up $ 12,400.00
• Misting System for Courtyard $ 17,000.00
• Counter top, Refrigerators and Ovens for Kitchen $ 30,000.00
• Playground Equipment $ 85,000.00
•
• Professional Services: Landscape/Architect/Fire Safety $ 25,000.00
• Entrance gate for safety/security $ 18,000.00
• Repair existing irrigation system on both playgrounds $ 15,000.00
• Roof $ 144,000.00
• Telephone system throughout center $ 18,000.00
• Shade Structures $ 35,000.00
• Soft Surface for a safe zone under playground equipment $ 15,000.00
• Solar Panels $ 155,000.00
• Video Monitor system $ 20,000.00
• HVAC Unit $ 25,000.00
• Double Pane Windows $ 160,000.00
• Front Entry, Area Lobby $ 90,000.00
• Contractor's Fee $ 100.000.00
$1,703,400