STAFF REPORT
Meeting Date:
June 23, 2026
CONSENT
18 SUBJECT: APPROVE AN AGREEMENT WITH DUNE DRIFTER LLC FOR CALTRANS
ENCROACHMENT PERMIT PROCESSING
RECOMMENDATION: It is recommended that the City Council:
1. Approve and authorize the City Manager to execute an Agreement with Dune Drifter LLC for Caltrans Encroachment Permit Processing; and
2. Find that the proposed actions are exempt under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines section 15061(b)(3) and 15308. Or in the alternative that the proposed action is not a “project” under CEQA pursuant to CEQA Guidelines section 15378.
SUMMARY OF THE MATTER
This report recommends that the City Council approve a Developer Indemnity, Reimbursement, and Agency Agreement with Dune Drifter LLC to facilitate processing of a required Caltrans Encroachment Permit associated with the Pacific Edge Hotel renovation project.
Because portions of the project affect Caltrans right-of-way along Coast Highway, Caltrans requires the City to serve as the permit applicant. The proposed agreement authorizes Dune Drifter LLC to act as the City's limited agent for the preparation and administration of the permit application while assigning responsibility for all project-related costs, permitting, construction, insurance, and regulatory compliance to Dune Drifter LLC.
The agreement includes reimbursement, insurance, and indemnification provisions to protect the City and does not obligate the City to fund, construct, own, operate, or maintain the project improvements. Approval of the agreement will facilitate permit processing while ensuring project-related responsibilities and risks remain with Dune Drifter LLC.
DISCUSSION
APPROVE AN AGREEMENT WITH DUNE DRIFTER LLC FOR CALTRANS
ENCROACHMENT PERMIT PROCESSING
June 23, 2026
The proposed Developer Indemnity, Reimbursement, and Agency Agreement between the City of Laguna Beach and Dune Drifter LLC establishes the terms under which the City will serve as the applicant and permittee for a required Caltrans Encroachment Permit associated with the renovation of the Pacific Edge Hotel. The project includes construction activities within Caltrans’ Coast Highway right-of-way, including parking structure footings, shoring, excavation, traffic control, and related improvements.
Caltrans will not contract with a private entity. Therefore, the proposed agreement establishes the City as the applicant for the encroachment permit and related agreements with Caltrans and authorizes Dune Drifter LLC to act as the City's agent for preparation and administration of the Caltrans permit application. The agreement does not allow Dune Drifter LLC to bind the City to financial, maintenance, property, or other obligations without the City's prior written approval. Any future responsibilities required by the Caltrans encroachment permit will require a separate agreement between Dune Drifter LLC and the City to transfer said responsibilities to Dune Drifter or their successors. The City Engineer or his designee will work closely with Dune Drifter LLC and Caltrans to ensure permits and agreements are processed in a timely manner.
The proposed agreement assigns full responsibility for the design, construction, permitting, operation, and compliance of the project to Dune Drifter LLC and requires them to be responsible for all costs and to maintain required insurance coverage.
Approval of the agreement expedites the Caltrans permit process, which mutually benefits the City and Dune Drifter LLC; however, all project-related risks, costs, and responsibilities will remain with Dune Drifter LLC. The agreement does not obligate the City to fund, construct, own, operate, or maintain the project improvements and provides mechanisms for reimbursement, insurance, security, and enforcement should Dune Drifter LLC fail to meet its obligations. City staff believes this arrangement will best protect the City from a liability, financial and operational standpoint, while complying with Caltrans’ requirements and allowing the applicant the opportunity to prioritize and complete the required work.
FINANCIAL ANALYSIS
The proposed agreement does not require the expenditure of City funds. Dune Drifter LLC is responsible for all costs associated with preparation, permitting, construction, inspection, and administration of the project and is required to reimburse the City for costs incurred in connection with its role as applicant for the Caltrans Encroachment Permit. Accordingly, the recommended action has no anticipated net fiscal impact on the City's operating or capital budgets.
ALIGNMENT WITH CITY COUNCIL GOALS AND PRIORITIES
The proposed agreement supports the City Council's goals of maintaining effective intergovernmental coordination, protecting public infrastructure, and facilitating appropriate private investment while ensuring that project-related risks and costs remain the responsibility of the project applicant.
ENVIRONMENTAL ANALYSIS
The proposed actions are exempt under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines section 15061(b)(3) under the “common sense” exemption. An agreement allowing Dune Drifter LLC to be the City’s authorized agent for all things related to the Caltrans encroachment permit for a project that has already undergone environmental review is an action that can be seen with certainty that
APPROVE AN AGREEMENT WITH DUNE DRIFTER LLC FOR CALTRANS
ENCROACHMENT PERMIT PROCESSING
June 23, 2026
there is no possibility that the activity in question may have a significant effect on the environment. In the alternative that the proposed action is not a “project” under CEQA pursuant to CEQA Guidelines section 15378 (b)(5) as an organizations or administrative activity of the government that will not result in direct or indirect physical changes in the environment.
ATTACHMENTS
1. Dune Drifter LLC Agreement for Caltrans Encroachment Permit (Pgs. 3-12) Submitted By: Mark McAvoy Approved: .David A Kiff
Mark McAvoy, Director of Public
Works & Utilities
Dave Kiff, City Manager
APPROVE AN AGREEMENT WITH DUNE DRIFTER LLC FOR CALTRANS
ENCROACHMENT PERMIT PROCESSING
June 23, 2026
Report Prepared By: Coordinated With:
Thomas Perez, City Engineer Patrick Donegan, Assistant City Attorney