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December 17, 2024
ITEM TITLE
Reimbursement Agreement and Appropriation: Approve a Reimbursement Agreement with Millenia, 2022, LLC for the Cost of Construction of Hunte Parkway Trunk Sewer Extension Report Number: 24-0302
Location: Otay Ranch Eastern Urban Center, known as “Millenia.” East of SR-125, bounded by Birch Road on the north, Eastlake Parkway on the east and Hunte Parkway on the south.
Department: Development Services
G.C. § 84308: Yes
Environmental Notice : The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act (“CEQA”) State Guidelines . T herefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required
Recommended Action
Adopt a resolution approving a Reimbursement Agreement with Millenia 2022, LLC for construction of a sewer facility known as Hunte Parkway Trunk Sewer Extension and amend the fiscal year 2024-25 budget appropriating funds for that purpose.
(4/5 Vote Required)
SUMMARY
Millenia 2022, LLC (“Developer”) has constructed the Hunte Parkway Trunk Sewer Extension as a requirement of developing the Millenia project. The Developer is entitled to received reimbursement for costs of construction that exceed the project’s Salt Creek Development Impact Fee (“Salt Creek DIF”) obligation, pursuant to Ordinance No. 2617, as amended. The Developer has received Salt Creek DIF credits and now seeks cash reimbursement for the remainder of the costs. The total reimbursable cost to be paid to Developer under this Reimbursement Agreement is $2,022,896.02.
ENVIRONMENTAL REVIEW
The Director of Development Services has reviewed the proposed activity for compliance with CEQA and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because the proposed activity does not result in a physical change in the environment . Therefore, pursuant
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to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. Thus, no environmental review is required.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable.
DISCUSSION
The Otay Ranch Eastern Urban Center Sectional Planning Area was approved by City Council in September 2009. The Developer gave the master -planned community the marketing name “Millenia” and started construction in 2013. The project includes approximately 3.5 million square feet of non-residential uses and 2,983 multi-family housing units. Construction of the project has progressed steadily over the past 11 years, including public infrastructure such as a fire station, six parks, an off-site sewer facility, major roadways, traffic signals, dedication of right-of-way, a transit stop for a Bus Rapid Transit (“BRT”) line, and a pedestrian bridge connecting Millenia with Otay Ranch Village 11. The Millenia planning area is nearing completion and the Developer seeks reimbursement for eligible costs of constructing certain public improvements. The subject of this reimbursement is a required off-site sewer facility.
Wastewater generated by the Millenia project is conveyed to both the Poggi Canyon Trunk Sewer to the north and the Salt Creek Interceptor to the south. The City created separate development impact fee (“DIF”) programs to fund facilities within the Poggi and Salt Creek sewer basins. The DIF programs identify additional sewer facilities that are necessary to accommodate the increased sewer flows generated by new development. To pay for the construction of these facilities, the projects within the Poggi and Salt Creek Sewer basins pay a DIF based on equivalent dwelling units (“EDUs”) generated by each use. The fees are due at the time of building permit issuance and may be deferred until final inspection. The sewer facilities may be constructed by the City from the DIF funds collected or, as in the case of Millenia, constructed by the Developer who may receive DIF credits or reimbursement, or a combination thereof.
One of the sewer facilities in the Salt Creek Sewer DIF that was necessary to serve Millenia is the Hunte Parkway Trunk Sewer Extension (the “Sewer Extension”). The City identified that Millenia would exceed the capacity of the existing sewer lateral in the Salt Creek Sewer Basin at some point during the buildout of Millenia and was required to construct the new Sewer Extension. The City required the Developer, through the project conditions of approval and environmental mitigation measures, to monitor sewage flows on a regular basis and submit the results to the City.
The design for the Sewer Extension was approved by the City in 2014, however construction didn’t start until late 2020 after the sewer flow monitoring determined that the volume of flow s in the existing pipe were approaching capacity. A contractor was hire d to construct the new lateral and the initial field verification concluded that the approved design would not provide sufficient soil coverage for the sewer extension as it passed under Salt Creek. In early 2021, a redesign of the sewer extension commenced. The redesign resulted in the need to construct a dual-pipe siphon. Construction on the revised project began in mid-2023 and was completed in late 2023.
City staff has audited the construction costs and determined the total eligible cost of the Sewer Extension is $3,464,979.08. The Developer has already received a portion of th ose costs in Salt Creek DIF credits in the
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amount of $1,442,083.06. The Developer is entitled to a cash reimbursement from the Salt Creek Sewer DIF Fund (Fund #430767) in the remaining amount of $2,022,896.02.
Salt Creek DIF
Hunte Parkway Trunk Sewer Extension Reimbursement
Eligible Expenses $ 3,464,979.08
Less Salt Creek DIF Credits previously applied: $(1,442,083.06) Total Reimbursement: $2,022,896.02
DECISION-MAKER CONFLICT
Staff has reviewed the property holdings of the City Council members and has found no property holdings within 1,000 feet of the boundaries of the property which is the subject of this action. Consequently, this item does not present a disqualifying real property-related financial conflict of interest under California Code of Regulations Title 2, section 18702.2(a)(7) or (8), for purposes of the Political Reform Act (Cal. Gov’t Code §87100, et seq.). Staff is not independently aware, and has not be en informed by any City Council member, of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter.
CURRENT-YEAR FISCAL IMPACT
There is no current year fiscal impact to the General Fund as a result of this action.
The action increases appropriations by $2,022,896.02 in the Salt Creek DIF (Fund # 430767) from the available fund balance for reimbursement to the developer.
ONGOING FISCAL IMPACT
There is no ongoing fiscal impact as a result of this action.
ATTACHMENTS:
1. Reimbursement Agreement
Staff Contact: Kimberly K. Elliott, Facilities Financing Manager Laura C. Black, AICP, Development Services Director