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AGREEMENT FOR DEFERRAL
OF
DEVELOPMENT IMPACT AND SEWER CAPACITY FEES
[BAYFRONT RESORT AND CONVENTION CENTER]
This AGREEMENT FOR DEFERRAL OF DEVELOPMENT IMPACT AND SEWER CAPACITY FEES [Bayfront Resort and Convention Center] (the “Agreement”), is made and entered into as of , 2022, by and between the City of Chula Vista, a chartered municipal corporation (the “City”), and RIDA Chula Vista, LLC , a Delaware limited liability company (the “Developer,” and collectively with the City, the “Parties”), with reference to the below Recitals.
RECITALS
A. The City, the Developer, and the San Diego Unified Port District ( the “Port District”) entered into a Disposition and Development Agreement for the Resort Hotel Convention Center Project (Chula Vista Bayfront Master Plan Parcel H -3) (the “Project”), effective May 7, 2018.
B. The Project is comprised of (1) a resort hotel, consisting of no less than 1,570 rooms and no more than 1,600 rooms and related resort -level amenities (collectively, the “Developer’s Private Improvements”), (2) an attached approximately 275,000 square foot convention center (“Convention Center”) to be constructed and operated by Developer on behalf of the City of Chula Vista Bayfront Facilities Financing Authority, formed by the City and the Port for such pur pose, and (3) a portion of the substantial public improvements required for development of the Developer’s Private Improvements and Convention Center (the “Developer’s Phase IA Infrastructure Improvements”), as more particularly described that certain Project Implementation Agreement between the City, the Port, Developer , the Financing District (as defined therein) and the JEPA (as defined therein) (the “PIA”).
2 C. As authorized by California Government Code section 66000, et seq ., the City imposes various development impact fees in connection with the approval of a development project for the purpose of defraying all or a portion of the cost of public facilities related to the development project.
D. Certain development impact fees applicable to this Project are set forth in the Chula Vista Municipal Code (“CVMC”) as follows: (1) CVMC Chapter 3.54 provides for the transportation infrastructure related Bayfront Development Impact Fee (the “BFDIF”); (2) CVMC Chapter 3.50 provides for certain other public faciliti es development impact fees (“PFDIF”); (3) CVMC Chapter 13.14.090 provides for certain sewer capacity fees (“Sewer Capacity Fees”); and (4) City Council Policy 478-01 provides for certain traffic signal fees (“Signal Fees”).
E. In accordance with City polices, rates and calculations, City and Developer have agreed that Developer’s total BFDIF, PFDIF , Sewer Capacity Fees and Signal Fees is $____________________(collectively, the “Project Development Fees Obligation”) . The Parties have further agreed that this amount shall be fixed at the date for issuance of the first building permit for the Project and that the applicable rates for the fees shall not subject to increase ; provided, however that, if the first building permit for the Project is not issued prior to the City’s next development impact fee rate review and adjustment (currently scheduled to occur on or about, but no sooner than, October 1, 2022) such amount shall be subject to change based upon the City’s updated development impact and/or capacity fees and any such changes shall be automatically incorporated into the terms of this Agreement, including with respect to the final total amount of the Project Development Fees Obligation.
F. The CVMC allows for Developer to receive credits towards the BFDIF component of its Project Development Fees Obligation through the construction of BFDIF qualified public improvements up to, but not in excess of, the BFDIF fees imposed.
G. Through its construction of various components of Developer’s Phase IA Infrastructure Improvements, Developer is expected to generate approximately $ _________ in credits towards the BFDIF component of Developer’s Project Development Fees Obligation, with the final amount of credits to be determined upon Developer’s completion of such improvements which shall equal an amount (as determined pursuant to the PIA) approved by the City which is equal to costs incurred for such improvements that are determined to be qualified for credits in accordance with the City’s BFDIF policies (the “Phase IA Construction Credit”). When the Phase IA Con struction Credit is offset against the BFDIF component of the Developer’s Project Development Fees Obligation , th e remaining development fee obligation due and owing is currently expected to be approximately $ _____________(the “Net Development Fee Obligation”).
H. Pursuant to the authority set forth in various sections of the CVMC and City policies, including, without limitation Section 3.50.160, and the City’s inherent authority as charter 3 city, the City is permitted , to defer the Net Development Fee Obligation upon request from a developer, the making of certain findings and upon certain terms.
I. Developer has requested that the City defer the Net Development Fee Obligation in order to address funding sequencing issues and to make the Project financially feasible.
J. The City has determined that the Project qualifies for the requested fee deferral under CVMC Section 3.50.160.C, an d other applicable standards in consideration of (1) Developer’s demonstrated need for the deferral to address funding sequencing and overall Project feasibility challenges; and (2) the substantial public benefits of the Project in furthering the desired objectives and goals of the City to facilitate development of the Chula Vista Bayfront Master Plan area, job creation, and related economic development benefits to the public, both at a local and regional level.
K. The City has also determined that the terms of this Agreement are consistent with the requirements of CVMC Section 3.50.160.C in that the Net Development Fee Obl igation (1) will bear interest at a fair market rate, such that the City will receive an amount that is equal to, or greater than, the total amount of fees owed prior to the deferral ; and (2) the amount deferred is adequately secured by a written agreement.
AGREEMENT
NOW THEREFORE, in consideration of the above Recitals and for good and valuable consideration the receipt and sufficiency of which the Parties hereby acknowledge, Developer and the City agree as follows:
1. Acknowledgments. The Parties hereby certify that the above Recitals are true and correct and are incorporated herein by this reference.
2. Terms of Payment.
2.1 In General. Developer will pay the Project Development Fees Obligation through a combination of the Phase IA Construction Credit and cash payments of the Net Development Fee Obligation to be deferred on the terms set forth in this Agreement.
2.2 Calculation of Construction Cost Credit Amount. The Phase IA Construction Credit amounts shall be determined and earned in accordance with the terms of the CVMC and implementing City policies as costs are incurred by Developer for portions of Developer’s Phase IA Infrastructure Improvements and determined to be eligible for credit under the City’s implementing policies. Actual costs incurred by Developer for Developer’s Phase IA Infrastructure Improvements shall be determined by the City pursuant to the terms of the PIA.
4 2.3 Calculation of Deferred Obligation Amount. Developer’s obligation to pay the Net Development Fee Obligation shall be evidenced by a promissory note (“ Deferred Fees Note” or “Note”) executed by Developer in favor of the City, in the form attached hereto as Exhibit “A.” The final Net Development Fee Obligation and the corresponding initial principal amount of the Deferred Fees Note will be the amount of the Net Development Fee Obligation determined by City as of the Effective Date (defined below) by dedu cting from the amount of the Project Development Fees Obligation the sum of the Phase IA Construction Credit costs incurred by Developer and approved by City, plus City’s reasonable estimate of such additional costs incurred, or to be incurred, by Developer that are pending City approval. The final principal amount of the Deferred Project Fees Note will be determined using City’s final calculation of Developer’s Phase IA Construction Credit qualified costs pursuant to the terms of the PIA.
2.4 Prepayment Prior to the Effective Date . The Net D evelopment Fee Obligation may be paid in whole or part in cash or other immediately available funds (such payment a “Prepayment”), at the sole option of the Developer, on or before such time as such amounts would otherwise be due and payable (i.e. upon or before the Effective Date). Any principal amount of the Deferred Fees Note will be adjusted to reflect any partial Prepayment.
2.5. Execution and Delivery of Note . Unless the Net Development Fee Obligation is paid in full on or before the Effective Date pursuant to Section 2 .4 above, the Developer shall execute and deliver the Deferred Fees Note in the principal amount determined pursuant to Sections 2.3 and 2.4 (taking into account any partial Prepayments prior to or on the Effective Date) above to the City no later than the Effective Date. If Developer fails to timely deliver the Deferred Fees Note as provided herein, the Net Development Fee Obligation shall be immediately due and payable.
2.6. Definition of Effective Date. The date of the issuance of the first Certificate of Occupancy for the Project shall be the “Effective Date.” To the extent not already paid in full pursuant to Section 2.4 above, payment of any remaining Net Development Fee Obligation shall be deferred from the date(s) such amount would otherwise be due and payable (hereafter, the “Deferred Obligation”) until the date that is sixty (60) months after the Effective Date (the “Deferred Obligation Due Date”).
2.7. Interest Accrual. Interest shall begin to accrue on the Deferred Obligation as of the Effective Date. The Deferred Obligation shall bear interest at the rate of three percent (3.00%) per annum, compounded annually, and subject to Section 2.9, shall be paid as follows: (i) 20% of the principal amount of the Deferred Obligation ( excluding all interest accrued thereon until such date) shall be paid no later than the second anniversary of the Effect ive Date; (ii) 10% of the principal amount of the Deferred Obligation ( excluding all interest accrued thereon until such date) shall be paid no later than the third anniversary of the Effective Date; (iii) 10% of the 5 principal amount of the Deferred Obligation (excluding all interest accrued thereon until such date) shall be paid no later than the fourth anniversary of the Effective Date; and (iv) the remaining amount of the unpaid Deferred Obligation, including all interest thereon shall be paid in full no later than the Deferred Obligation Due Date.
2.8. Acceleration of Debt Upon Certain Transfers . The outstanding balance of the Deferred Fees Note shall become immediately due and payable if Developer transfers its leasehold interests in the Project and Developer shall be obligated on or prior to consummation of any such transfer, to pay all amounts due and owing under the Deferred Obligation Note (including interest accruing through the date of such payment) . After such payment, Developer shall have no further obligations or liabilities under this Agreement and the Note and the Guarantor shall have no further obligations under the Payment Guaranty. Developer shall notify the City in writing thirty (30) calendar days prior to transferring its leasehold interests the Project and/or Property to any transferee.
2.9. Prepayment After the Effective Date . Developer may prepay the outstanding balance of or any portion of the principal amount of the Deferred Fees Note and/or any inter est accrued thereon as of the date of such prepayment at any time without penalty.
Concurrently with any such prepayment, Developer shall provide written direction to the City with respect to how such prepayment should be applied and whether it is intende d as prepayment of principal, interest, or both and how such prepayment should be allocated to amounts due and owing under the Deferred Fee Note as of the date of prepayment. Upon any such prepayment, amounts owing under the Deferred Fee Note (including with respect to compounding interest thereon) will be adjusted to reflect such prepayment as indicated in such written direction received from the Developer.
3. Security. The Deferred Fees Note shall be secured by a payment guaranty in the form attached hereto as Exhibit “ B” (the “Payment Guaranty”) by _________________________ (the “Guarantor”). Developer will cause the Guarantor to deliver the Payment Guaranty to the City no later than the Effective Date. If Developer fails to timely deliver the Payment Guaranty as provided herein, the Net Development Fee Obligation shall be immediately due and payable.
4. Development of the Project . This Agreement does not obligate Developer to commit to or agree to undertake any development of the Project. Developer and Guarantor shall have no obligations or liabilities under this Agreement, the Deferred Pro ject Fees Note or the Payment Guaranty, and each shall be deemed rescinded and reconveyed as appropriate, if Developer provides notice to the City of i ts abandonment of the Project at any time prior to issuance of a Certificate of Occupancy.
5. Remedies. In order to enforce Developer’s obligations under the terms of this Agreement or the Note and the Guarantor’s obligations under the Payment Guaranty, the City shall 6 be entitled to pursue any and all remedies provided at law or in equity, including, without limitation, any and all remedies provided under the Note and the Payment Guaranty. Without limiting the generality of the foregoing, in the event of a material default by Developer of its obligations hereunder or of the Guarantor of its obligations under the Payment Guaranty, the City shall provide written notice thereof to Developer and, if such default has not been cured within five (5) business days after Developer’s receipt of such notice, the City shall have the right to accelerate the debt ow ed under the Note, as applicable, and pursue collection of the Deferred Obligation directly from Developer and/or the Guarantor. All such remedies shall be cu mulative and non-exclusive.
6. Indemnification. To the maximum extent allowed by law, Developer shall defend, indemnify, protect and hold harmless the City, its elected and appointed officers, agents, volunteers, and employees (collectively the “Indemnified Parties”), from and against any and all claims, demands, causes of action, costs, expenses, (including reasonable attorney’s fees and actual costs), liability, loss, damage or injury, in law or equity, to property or persons, including wrongful death, in any manner arising out of or incident to any alleged acts, omissions, negligence, or willful misconduct of Developer, its officials, officers, employees, agents, contractors, and subcontractors arising out of or in connection with this Agreement. This indemnity provision does not include any claims, damages, liability, costs and expenses arising from the sole negligence or willful misconduct of the Indemnified Parties.
7. Agreement Runs with the Land . The burden of the covenants contained in this Agreement is for the benefit of the Property and the City, its successors and assigns and any successor in interest and thereby run with the land . City is deemed the beneficiary of such covenants for and in its own right and for the purposes of protecting the interest of the community.
8. Miscellaneous Provisions.
8.1. Authority. Each of the signatories to this Agreement warrants and represents that he or she is competent and authorized to enter this Agreement on behalf of the Party for whom he or she purports to sign.
8.2. Notices. Any and all notices or other communications made pursuant to this Agreement shall be given in writing and delivered by personal service or Federal Express and email, which shall be addressed as follows:
If to City: City of Chula Vista
276 Fourth Avenue
Chula Vista, CA 91910
Attn: City Manager’s Office
7 With a copy to: City of Chula Vista
276 Fourth Avenue
Chula Vista, CA 91910
Attn: City Attorney’s Office
If to Developer:
RIDA Chula Vista, LLC
1777 Walker Street, Suite 501
Houston, Texas 77010
Attention: Ira Mitzner
With a copy to: RIDA Chula Vista, LLC
1777 Walker Street, Suite 501
Houston, Texas 77010
Attention: Luke Charlton
and
Latham & Watkins
12670 High Bluff Drive
San Diego, CA 92130
Attention: Steven Levine
Notices shall be deemed delivered upon receipt of email or receipt by personal service or as of the second (2nd) business day after deposit with Federal Express.
8.3. Captions. Captions in this Agreement are inserted for convenience of reference and do not define, describe, or limit the scope or intent of this Agreement or any of its terms.
8.4. Allocation of Legal Expenses . Each Party shall bear its own costs and expenses incurred to comply with, or in the drafting, negotiation or approval process of, this Agreement.
8.5. Entire Agreement. This Agreement, together with the Deferred Obligation Note and the Payment Guaranty, contains the entire agreement between the Parties regarding the subject matter hereof. Any prior oral or written representations, agreements, understandings, and/or statements shall be of no force and effect and are intended to be replaced in total by this Agreement. Each Party further warrants and represents that it has not relied upon any oral 8 statements or promises made by any representatives of any other Party to this Agreement in executing this Agreement.
8.6. Preparation of Agreement. No inference, assumption or presumption shall be drawn from the fact that a Party or its attorney prepared and/or drafted this Agreement. It shall be conclusively presumed that both Parties participated equally in the preparation and/or drafting of this Agreement.
8.7. Governing Law. This Agreement shall be subject to and governed by the laws of the State of California, without regard to conflict of law rules.
8.8. Severability. In the event that any provision of this Agreement is declared by any court of competent j urisdiction to be void or otherwise invalid, all of the other terms, conditions and provisions of this Agreement shall remain in full force and effect to the same extent as if that part declared void or invalid had never been incorporated in the Agreement and in such form, the remainder of the Agreement shall continue to be binding upon the Parties.
8.9. Counterparts. This Agreement may be signed and executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one Agreement. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or email shall be effective as delivery of an originally executed counterpart of this Agreement. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include electronic signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper -based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act and the California Uniform Electronic Transactions Act.
8.10. Time of the Essence. Time is of the essence in the performances of the Parties’ obligations contained herein.
8.11. Waiver. A failure of a Party to enforce strictly a provision of this Agreement shall in no event be considered a waiver of any Party of such provision. No waiver by a Party of any breach or default by the other Party shall operate as a waiver of any succeeding breach or other default or breach by such other Party.
8.12. Further Acts. In addition to the acts recited in this Agreement, the Parties agree to perform, or cause to be performed on the date of this Agreement, or thereafter, any and 9 all such further acts as may be reasonably necessary to consummate the transactions contemplated hereby. Each of the Parties agrees that it will execute and deliver all such documents and instruments as may be necessary and appropriate to effectuate the terms of this Agreement.
8.13 Collateral Assignment and Lender Protections . Capitalized terms used in this Section 8.13 that are not defined in this Agreement shall have the meanings set forth in the PIA. Developer may assign all or a part of its entire rights, interests and obligations hereunder, or create a security interest over its rights and interests hereunder, to the Permitted Lenders to whom Developer has assigned or collaterally assigned, or granted a lien or leasehold deed of trust in, the Sublease and the Ground Lease for the purpose of securing financing for the Convention Center, Parking Improvements, and the Resort Hotel. The City hereby consents to the granting by the Developer to such Permitted Lende rs of security interests in this Agreement. The City acknowledges that a Permitted Lender may require that the City execute a consent to collateral assignment of this Agreement. As part of such collateral assignment, the City shall agree, in a manner materially and substantially consistent with the rights afforded to Permitted Lenders under Article IX of the Sublease and Article X of the Ground Lease, (a) to provide such Permitted Lenders notice of and opportunity to cure the Developer’s defaults hereunde r, (b) to allow such Permitted Lenders or SPE Lender Affiliates or any successful bidder that is not a Permitted Lender or SPE Lender (each, a “Foreclosure Purchaser”) to assign and reassign all of the Developer’s rights hereunder, (c) to provide for the City and the Foreclosure Purchaser to enter into a new agreement on the terms and conditions set forth in this Agreement in connection with a New Lease pursuant to Section 10.3.2 of the Ground Lease or a New Sublease pursuant to Section 9.3(b) of the Sublease; and (d) to provide for other customary lender protection provisions that are not in violation of applicable laws or regulations subject to City’s prior reasonable approval. The City, upon reasonable request of the Developer, shall execute such consents to or acknowledgements of such assignments by the Developer and other customary documents as Developer or its Permitted Lenders reasonably require in connection with this Agreement and the financing of the Convention Center, Parking Improvements, and the Resort Hotel provided they are materially and substantially consistent with the provisions of Article X of the Ground Lease and Article IX of the Sublease and do not conflict with, modify, or amend any of the terms of this Agreement, the Sublease, or the Ground Lease in final forms subject to City’s prior reasonable approval. Without limiting the forgoing provisions of this Section 8.13, a foreclosure (or assignment in lieu thereof) of Developer’s interest in this Agreement by the Permitted Lender must be accompanied by a foreclosure (or assignment in lieu thereof) of tenant’s interest in the Ground Lease or sub- subtenant’s interest in the Sublease. Following a foreclosure of Developer’s interest in the Site, Developer’s interest in this Agreement may only be assigned to a permitted assignee that has acquired Developer’s interest in the Sublease and who expressly assumes the Developer’s obligations under the Sublease and this Agreement in an assumption agreement reasona ble acceptable to the City.
10 [SIGNATURE PAGE TO FOLLOW]
11 IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the date first written above.
RIDA CHULA VISTA, LLC
a Delaware Limited Liability Company
By: ______________________________
Name:
Title:
CITY OF CHULA VISTA
a chartered municipal corporation
By: ______________________________
Name: ______________________________
Title: ______________________________
ATTEST:
By: ______________________________
Name: ______________________________
Title: City Clerk
APPROVED AS TO FORM:
By: ______________________________
Name: ______________________________
Title: City Attorney