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HomeMy WebLinkAboutDispostion and Development Agreement (DDA) - Palm Desert Development CompanyPALM DESERT REDEVELOPMENT AGENCY STAFF REPORT REQUEST: APPROVE AMENDMENT NO. 2 TO THE DISPOSITION AND DEVELOPMENT AGREEMENT BY AND BETWEEN THE REDEVELOPMENT AGENCY AND THE PALM DESERT DEVELOPMENT COMPANY AMENDING THE TERMS FOR THE PAYMENT IN LIEU OF PROPERTY TAXES (PILOT) AND AMENDING THE TERMS OF THE ENERGY SAVINGS PAYMENT AND ALLOWABLE ENERGY FEATURES SUBMITTED BY: JANET M. MOORE, HOUSING AUTHORITY ADMINISTRATOR DATE: MAY 26, 2005 CONTENTS: SECOND AMENDMENT TO DISPOSITION AND DEVELOPMENT AGREEMENT Recommendation: By Minute Motion, that the Palm Desert Agency Board: 1) Approve Amendment No. 2 to the Disposition and Development Agreement by and between the Palm Desert Redevelopment Agency and the Palm Desert Development Company amending the terms for the payment in lieu of property taxes (PILOT) and amending the terms of the Energy Savings Payment and allowable energy saving features. 2) Authorize Chairman to execute the Amendment to the DDA and any other documents necessary to facilitate such amendment. EXECUTIVE SUMMARY: Approval of this request will amend the amount of the PILOT payment for the first year (2003) to a prorated amount based on the date the property was 100% occupied. This amendment also adds flexibility to the Agency and Palm Desert Development to expand the types of energy saving features that could be added to the property and adjusts the terms for the "Energy Savings Payment". Denial of this request will make the developer pay the "PILOT' for a period when the property was not receiving revenue, and limit any additional energy saving features to Fuel Cells. O RDA Pat" Leon Wpdocs IMM staff report Amendment No 2 DDA PDOC wpd STAFF REPORT AMENDMENT NO. 2 - PALM DESERT DEVELOPMENT COMPANY PAGE 2 MAY 26, 2005 DISCUSSION: On June 14, 2001, the Agency board approved a Disposition and Development Agreement between the Palm Desert Redevelopment Agency and the Palm Desert Development Company wherein the Agency agreed to make a low interest loan in the amount of $7,659,437 to assist with the construction of 162 unit tax credit apartment project now known as Hovley Gardens. Section 4.9.5 of the Agreement details the Payment In Lieu Of Taxes (PILOT). Both the Developer and staff expected the property to be available for occupancy sooner than it was, however, unexpeced delays pushed the overall project completion to September 2003 and it was not until December 2003 that the property was 100% occupied. Revenues from rental income are used to pay the PILOT. Because the Developer received minimal revenue for 2003, he has requested that the first annual PILOT payment be prorated from the month in which he achieved 100% occupancy, December 2003, to the end of the year. Staff feels the request is justified for the reasons noted and has calculated the PILOT for 2003 to be $6,666. The PILOT for the calendar year 2004 was due April 1, 2005 and is amended to be the first full PILOT payment in the amount of $80,000. Subsequent PILOT payments will include a 2% increase. Additionally, the Agreement calls for an "Energy Savings Payment" to be made to the Agency from the benefits of Energy Savings Features paid for by the Agency. Exhibit "T was added to the Agreement late in the negotiations and did not perhaps clearly address the issues related to Energy Savings Features. A portion of the Agency's loan was specified to be used to upgrade the buildings energy efficiency by doing such things as: increased insulation; thicker drywall; Low-E glass windows as well as provide locations for fuel cell equipment to be installed later at the expense of the Agency. Fuel cell technology still appears to be years away from widespread distribution. The fuel cells, once installed, would run the refrigerators. Staff sees energy efficiency as an important element of all projects and desires to have the flexibility to be able to include other types of fuel saving or energy saving features in the project provided they are mutually agreed upon by the Developer and the Agency. Because it is not known what type of energy saving features would be available in the future to provide maximum benefit to this project, the Agency amended Exhibit "J" to include the details of the current features as well as the method by which the Energy Savings Payment will be calculated in the future, should additional equipment be installed. G RDA Path Lwn Wpdocs AIM staff report Amendment No 2 DDA PDDC �* STAFF REPORT AMENDMENT NO. 2 - PALM DESERT DEVELOPMENT COMPANY PAGE 3 MAY 26, 2005 The Agency still reserves the right to do an analysis of energy savings from the current energy saving features that were installed during construction at some point in the future should we feel it is necessary to do so. Submitted by: 4"Q/ WA-� An Moore Housing Authority Administrator JMM:pl Approval: iment t/- KAV fz r V- Paul S. Gibson, Director of Finance 1161o�r4� f' Carlos L. Ortege,,,gxecutive Director 6 RDA Patry Leon Wpdoca JM.V staff report Amendment No 2 - DDA PDDC �*pd Department Head: `-'wave Yrigoye6 Director of Red opment/Housing RECORDING REQUESTED BY: WHEN RECORDED RETURN TO: Palm Desert Redevelopment Agency 73-510 Fred Waring Drive Palm Desert, California 92260 Attention: Janet Moore [Space Above For Recorder's Use Only] The undersigned declare that this Memorandum of Amendment of Disposition and Development Agreement is exempt from Documentary Transfer Tax pursuant to California Revenue and Taxation Code Section 11922. SECOND AMENDMENT TO DISPOSITION AND DEVELOPMENT AGREEMENT THIS SECOND AMENDMENT TO DISPOSITION AND DEVELOPMENT AGREEMENT ("Amendment") dated as of , 2005 ("Effective Date"), is entered into by and between the PALM DESERT REDEVELOPMENT AGENCY, a public body, corporate and politic ("Agency") and PALM DESERT DEVELOPMENT COMPANY, a California corporation ("Developer''). RECITALS A. The Agency and Developer have previously entered into that certain Disposition and Development Agreement, dated as of June 14, 2001, as amended by that certain Amendment to Disposition and Development Agreement dated as of May 13, 2004 (as so amended, the "DDA"), which affects that certain property located in the City of Palm Desert, County of Riverside, State of California, more particularly described on Exhibit "A" attached hereto. B. The Agency and Developer wish to amend and modify the DDA as hereinafter set forth in this Amendment. AGREEMENT NOW, THEREFORE, in consideration of the terms of this Amendment and for other valuable consideration, the receipt of which is hereby acknowledged, Agency and Developer agree as follows: 1046\04\231725.1 1. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the DDA. 2. Exhibit J to the DDA is hereby amended and restated in its entirety with Exhibit J, attached hereto. All references to the DDA, and any amendments thereto, to Exhibit J shall refer to the amended and restated version attached hereto. 3. Notwithstanding anything to the contrary contained in the DDA, the Agency Note, the Agency Deed of Trust, or the Agency Regulatory Agreement and Option (collectively, the "Agency Documents"): (a) The Developer shall make a PILOT payment to the City of Palm Desert in the amount of (i) $ 6,666 (for the month of December, 2003) within 30 days of the Effective Date, (ii) $80,000 (for the calendar year 2004) on April 1, 2005, and thereafter the Developer shall make the PILOT payments to the Agency in the amounts and at the times set forth in Section 4.9.5 of the DDA. (b) The Energy Savings Payments shall not be due or owing, or otherwise accrue to the Agency, and the amount of the Positive Net Cash Flow shall be determined without reference to any Energy Savings Payment, until such time as any of the following shall occur: (1) Prior to such time as the Agency shall have paid, or caused to have been paid, the Agency Energy Contribution as described in subsections (2) or (3) below, the Agency provides written notice to the Developer requesting that the Developer promptly prepare and submit to the Agency a report ("Energy Savings Report") of the energy savings for the 12 month period immediately preceding the date of such notice and calculated as provided in Exhibit J. Upon receipt and review of the Energy Savings Report, the Agency in the exercise of its sole and absolute discretion may require that the Baseline Energy Savings Payment, as such term is defined in Exhibit J, be paid to the Agency with the Annual Payment. The amount of the Baseline Energy Savings Payments shall be applied by the Agency first to the payment of accrued interest, and the remainder, if any, to the principal on the Agency Loan. The Agency may not request that the Developer prepare an Energy Savings Report under this subsection (1) more often than once every 3 years. (2) The Agency shall have paid, or cause to have been paid, the Agency Energy Contribution. In such event, promptly following the payment of the Agency Energy Contribution, the Developer shall prepare and submit to the Agency an Energy Savings Report describing the energy savings for the 12 month period immediately preceding the payment of the Agency Energy Contribution and calculated as provided in Exhibit J (the "Baseline Savings"). Thereafter, Energy Savings Payments shall be paid to the Agency with the Annual Payment, and (i) the amount of the Baseline Energy Savings Payment equal to the Baseline Savings shall be applied by the Agency first to the payment of accrued interest, and the remainder, if any, to the principal on the Agency Loan, and (ii) the amount of the Additional Energy Savings Payment, as such 2 1046\04\231725.1 term is defined in Exhibit J, in excess of the Baseline Savings shall be applied for such purposes and in such manner as the Agency shall determine in its sole and absolute discretion. (3) The Agency shall have paid, or caused to be paid, the Agency Energy Contribution and the proceeds thereof shall have been used to pay for the installation of energy savings equipment other than the fuel cells described in Exhibit J, as may be mutually agreed upon by the parties ("Alternative Equipment"). In such event, on the first anniversary of the date of completion of the installation of the Alternative Equipment, the Developer shall promptly prepare and submit to the Agency an Energy Savings Report calculated as provided in Exhibit J with such modifications to the method of calculation as are reasonably necessary to reflect the energy savings derived from the installation of the Alternative Equipment. Thereafter, all Additional Energy Savings Payments shall be paid to the Agency with the Annual Payment and may be applied by the Agency for such purposes and in such manner as the Agency shall determine in its sole and absolute discretion. Notwithstanding anything to the contrary contained in this subsection (b), if the Energy Savings Payments shall have commenced pursuant to subsection (1) above, and the Agency subsequently pays, or causes to be paid, the Agency Energy Contribution as provided in either subsection (2) or (3) above, then the amount of the Additional Energy Savings Payment and the manner in which the proceeds thereof are applied by the Agency shall be controlled by the provisions of subsections (2) or (3) above, as applicable. 4. Each reference in the Agency Documents to the DDA shall be deemed to be a reference to the DDA as modified by this Amendment. 5. Except as specifically modified hereby, the Agency Documents shall each remain unaffected and unchanged by reason of this Amendment. 6. The Agency Documents are hereby ratified and affirmed by Developer and shall remain in full force and effect as modified hereby. 7. This Amendment shall bind and benefit the heirs, successors, and assigns of Developer and Agency, respectively. 8. Nothing contained in this Amendment shall be construed as giving any person or entity, other than the parties hereto, any right, remedy or claim under, or with respect to, the Agency Documents. 9. Developer acknowledges and agrees that if and to the extent that Agency has not heretofore required Developer to strictly comply with the covenants, agreements and obligations contained in the Agency Documents, such action or inaction shall not constitute a waiver of, or otherwise affect or prejudice Agency's present or future rights, remedies, benefits or powers under the Agency Documents in any manner, including the right to require performance of such covenants, agreements 3 1046\04\231725.1 and obligations strictly in accordance with the terms and provisions of the Agency Documents. 10. This Amendment constitutes the final expression and the entire and exclusive agreement of the parties hereto with respect to the subject matter hereof, and supersedes in all respects any and all other negotiations between the parties hereto, whether oral or written. 11. If there is any conflict between the terms and conditions of this Amendment and the terms and conditions of the Agency Documents, the terms and conditions of this Amendment shall prevail. 12. This Amendment shall be governed by and construed in accordance with the laws of the State of California. 13. If any court of competent jurisdiction determines any provision of this Amendment to be invalid, illegal or unenforceable, that provision shall be deemed severed from the rest, which shall remain in full force and effect as though the invalid, illegal or unenforceable provision had never been a part hereof. 14. No provision of this Amendment may be changed, discharged, supplemented, terminated or waived except in a writing executed by the parties hereto. 15. In executing this Amendment, neither party has relied on any inducements, promises or representations made by the other party or its attorney, other than those set forth herein. 16. This Amendment may be executed in two or more counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. [signatures begin on next page] 4 1046\04\231725.1 WITNESS the signatures of the parties as of the date first set forth above. PALM DESERT REDEVELOPMENT AGENCY, a public body, corporate and politic Buford A. Crites, Chairman ATTEST: Rachelle D. Klassen, Secretary APPROVED AS TO FORM: AGENCY GENERAL COUNSEL, Richards, Watson and Gershon, a professional corporation PALM DESERT DEVELOPMENT COMPANY, a California corporation 5 Danavon L. Horn, President 1046\04\231725.1 STATE OF CALIFORNIA COUNTY OF On , 2005, before me, , a Notary Public in and for the State of California, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument, the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. Notary Public in and for the State of California (SEAL) STATE OF CALIFORNIA COUNTY OF On , 2005, before me, , a Notary Public in and for the State of California, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument, the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. Notary Public in and for the State of California (SEAL) 0 1046\04\231725.1 STATE OF CALIFORNIA COUNTY OF On , 2005, before me, , a Notary Public in and for the State of California, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument, the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. Notary Public in and for the State of California (SEAL) 7 1046\04\231725.1 EXHIBIT "A" LEGAL DESCRIPTION OF PROPERTY IN THE CITY OF PALM DESERT, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA; THAT PORTION OF THE WEST ONE-HALF OF THE NORTHWEST ONE -QUARTER OF THE NORTHEAST ONE -QUARTER AND THE EAST ONE-HALF OF THE NORTHWEST ONE -QUARTER OF THE NORTHEAST ONE -QUARTER OF SECTION 16, TOWNSHIP 5 SOUTH, RANGE 6 EAST, S.B.M., SHOWN AS PARCEL "A" AND PARCEL "B" OF PARCEL MAP WAIVER RECORDED JANUARY 23, 1996 AS INSTRUMENT NO. 25522, O.R., DESCRIBED AS FOLLOWS: COMMENCING AT THE NORTHWEST CORNER OF SAID WEST ONE-HALF OF THE NORTHWEST ONE -QUARTER OF THE NORTHEAST ONE -QUARTER; THENCE NORTH 890 47' 20" EAST ALONG THE NORTHERLY LINE OF SAID WEST AND EAST ONE-HALF OF THE NORTHWEST ONE -QUARTER OF THE NORTHEAST ONE -QUARTER A DISTANCE OF 1078.13 FEET TO A POINT, SAID POINT BEING 250.00 FEET WESTERLY OF THE NORTHEAST CORNER OF SAID EAST ONE-HALF OF THE NORTHWEST ONE -QUARTER OF THE NORTHEAST ONE -QUARTER, AS MEASURED ALONG SAID NORTHERLY LINE; THENCE SOUTH 000 02' 43" WEST, PARALLEL WITH THE EASTERLY LINE OF SAID EAST ONE-HALF OF THE NORTHWEST ONE -QUARTER OF THE NORTHEAST ONE -QUARTER A DISTANCE OF 48.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 000 02' 43" WEST A DISTANCE OF 575.00 FEET; THENCE NORTH 890 47' 20" EAST A DISTANCE OF 250.00 FEET TO A POINT ON SAID EASTERLY LINE OF THE EAST ONE-HALF OF THE NORTHWEST ONE - QUARTER OF THE NORTHEAST ONE -QUARTER; THENCE SOUTH 000 02' 43" WEST ALONG SAID EASTERLY LINE A DISTANCE OF 355.33 FEET; THENCE SOUTH 890 48' 51" WEST A DISTANCE OF 822.08 FEET; THENCE NORTH 000 01' 57" EAST A DISTANCE OF 409.75 FEET TO THE BEGINNING OF A NONTANGENT CURVE, CONCAVE NORTHWESTERLY, HAVING A RADIUS OF 229.00 FEET, A RADIAL LINE PASSING THROUGH SAID POINT BEARS SOUTH 130 47' 57" EAST; THENCE NORTHEASTERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 700 08' 16", AN ARC DISTANCE OF 280.33 FEET TO THE A-1 1046\04\231725.1 BEGINNING OF A COMPOUND CURVE, CONCAVE WESTERLY, HAVING A RADIUS OF 985.00 FEET, A RADIAL LINE PASSING THROUGH SAID POINT BEARS SOUTH 83' 56' 13" EAST; THENCE NORTHERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 070 25' 56", AN ARC DISTANCE OF 127.77 FEET TO THE BEGINNING OF A COMPOUND CURVE, CONCAVE WESTERLY, HAVING A RADIUS OF 200.00 FEET, A RADIAL LINE PASSING THROUGH SAID POINT BEARS NORTH 880 37' 51" EAST; THENCE NORTHERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 050 40' 23", AN ARC DISTANCE OF 19.80 FEET TO THE BEGINNING OF A REVERSE CURVE, CONCAVE EASTERLY, HAVING A RADIUS OF 200.00 FEET, A RADIAL LINE PASSING THROUGH SAID POINT BEARS SOUTH 820 57' 28" WEST; THENCE NORTHERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 060 49' 52", AN ARC DISTANCE OF 23.85 FEET; THENCE TANGENT TO LAST MENTIONED CURVE, NORTH 000 12' 40" WEST A DISTANCE OF 151.56 FEET TO A POINT LYING 48.00 FEET SOUTHERLY OF SAID NORTHERLY LINE OF THE EAST ONE-HALF OF THE NORTHWEST ONE - QUARTER OF THE NORTHEAST ONE -QUARTER; THENCE NORTH 890 47' 20" EAST, PARALLEL WITH SAID NORTHERLY LINE, A DISTANCE OF 397.78 FEET TO THE TRUE POINT OF BEGINNING. SUBJECT TO EXISTING EASEMENTS AND RIGHTS OF WAY OF RECORD. COMPRISING 12.39 ACRES, MORE OR LESS. A-2 1046\04\231725.1 EXHIBIT "S The City of Palm Desert and Palm Desert Redevelopment Agency have identified increased energy efficiency to reduce reliance on electricity and promote sustainable development as an important objective of Hovley Gardens. This will be accomplished through passive planning (i.e., building siting), upgraded energy -efficient building materials, the use of fuel cells, an emerging energy technology or any other mutually acceptable form of energy efficient building upgrades. The City, Agency and Developer recognize that achieving efficiency beyond CTCAC Title 24 requirements results in an additional development costs. Further, fuel cell technology is a significant investment and is currently not ready for broad distribution. Given these factors, the cost for installing this technology is outside of the project's development budget and will be paid through Agency funds at such time as the Agency determines that it is economically feasible. Upgraded Building Materials In developing the project, the City identified building materials that would be upgraded to achieve maximum energy efficiency. In addition, to create cost efficiencies with respect to installation of future fuel cells, the project will be installed with the infrastructure required (as identified by the City) to implement fuel cell production for each building. This includes additional electrical wiring and plumbing, expanded foundation, and construction of an equipment room attached to each building to house the future fuel cells. Exhibit J-3 attached hereto is a break-out of the upgraded features and their associated, incremental increase in cost over standard construction that would meet the City's development standards and CTCAC Title 24 requirements. Fuel Cells The development will be constructed to accommodate fuel cell equipment. The Agency and/or City will assume the full cost of installing fuel cells at each building at such time as the Agency determines that it is economically feasible. As discussed above, the development is pre -wired, including water and electrical runs between the individual residential units and fuel cell equipment room. The fuel cells will provide a dedicated electrical supply for the refrigerators in each unit. Fuel Cells currently use gas for production energy. This utility cost, net maintenance, will be passed on to tenants on a pro rata share as they benefit from the fuel cell production in the form of reduced electrical bills. It is anticipated that the cost will not be significant and represent a minor adjustment to their utility allowance. In recognition of the Agency's commitment to energy efficiency and their investment in the project, the Developer will make an annual payment to the Agency for the benefit of the Palm Desert Housing Authority. The payment will be calculated based on Exhibit J-2 attached hereto. The calculation does not alter the gross rent that will be charged to tenants. In the first year, tenant utility allowances will be calculated by a certified engineer, and in subsequent years actual utility bills will be used to develop the allowance based on documented usage and rates. First year gas usage for the fuel cell will be based on estimates and subsequent years based on actual bills. 1046\04\231727.2 Exhibit J-2 The formula for calculating the Agency payment is illustrated in the following example. Total Utility Savings Unit Riverside Type County Housing Authority Allowance Less: Actual Utilities 2-BR $76 $40 3-BR $93 $55 4-BR $118 $67 Sample Calculation Per Unit Type Total Utility Savings over Housing Allowance Rates $36 $38 $51 Allocation of Utility Savings Estimated Energy Savings attributable to CTCAC Construction Standards (115% of Title 24) Estimated Energy Savings due to City of Palm Desert Construction Standards "CTCAC Energy "Baseline Energy Savings" Savings Payment' $29 $7 $30 $8 $41 $10 Estimated Energy Savings due to City of Palm Desert Fuel Cells or Alternative Equipment "Additional Energy Savings Payment" $0* $0* $0* Notes: (1) The actual determination of the "CTCAC Energy Savings" is to be determined on a best efforts basis, by a qualified energy consultant, mutually agreeable to the Agency and the Developer. Baseline Energy Savings Payment and Additional Energy Savings Payment are to be offset by cost of consultant. (2) The "Base Line Energy Savings Payment" is the Savings attributable to the City of Palm Desert's increased construction standards over those required by the California Tax Credit Allocation Committee ("CTCAC") without regard to the savings attributable to Fuel Cells and/or Alternative Equipment. These payments are to be applied to Agency Loan. (3) The 'Additional Energy Savings Payment" is the amount of savings attributable to the installation of the Fuel Cells and/or the Alternative Equipment. 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