(iii) Consultant shall process PPO Provider reimbursements on behalf of City in accordance with industry standards from receipt of the corresponding bill review audit analysis from Consultant.
(iv) C onsultant will be responsible for monitoring, “flagging” and returning to City duplicate copies of a Bill (“Duplicates”).
(v) Any conflicts or complaints from medical providers (“Complaints”) concerning Bill Review Services completed by Consultant initially will be handled directly by Consultant. Consultant will provide an initial response to a Complaint and will send a written response to the complainant that summarizes the nature of the Complaint and the steps Consultant has taken to resolve it. City may be asked to interject itself into a Complaint between Consultant and a medical provider to resolve the Complaint in a m anner acceptable to Ci ty and as needed by Consultant. Notwithstanding the foregoing, City shall retain full responsibility for payment of all benefits and any other expenses or services required to be paid or provided under applicable policies or state and federal workers’ compensation laws. (vi) C onsultant agrees to supply City in the Consultant’s standard format a transmission reflecting the results of the Bill Review Services provided hereunder. (c) Savings for the Fee schedule or usual and customary service shall be:
(i) for states having a Standard Fee Schedule: (A) the medical provider’s original bill amount; less (B) the billed amount resulting from the allowance based on specified conversion factor(s) multiplied by referenced value(s).
(ii) for states not having a state mandated Fee Schedule: (A) the medical provider’s original bill amount; less (B) the bill amount resulting from UCR.
(d) Scanning Services
(i) Consultant will provide Scanning Services and, when appropriate, Optical Character Recognition (“OCR”) Services. Consultant will timely and within industry standards, scan all bills and attached medical notes delivered to Consultant necessary for providing Bill Review services. Subject to applicable law and obtaining any required authorizations, Consultant also shall provide Scanning Services for additional claim-related documentation. (ii) All material scanned by Consultant hereunder shall be accessible to City through CareMC.
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Clinical and Technical Assessment Services
Terms and Conditions
1. DESCRIPTION OF SERVICES
(a) C linical and Technical Assessment Services. Consultant provides this service to evaluate state specific complex rules and verify coding by providers when appropriate and supported by documentation. This can include clinical review to validate coding is correct for all applicable provider bills, a mbulatory surgical center bills, and all hospital bills (inpatient and outpatient) including:
(i) r eview and analysis of codes, charges, and billing structure for incorrect coding, incorrect billing, bundling, and up-coding of procedures which affect Standard Fee Schedule values; (ii) review of bills, records, and documentation by a nurse and/or by a coder; (iii) separation of charges not related to the compensable injury; (iv) review and apply complex state specific rules;
(v) application of utilization review determinations and clinical edits; (vi) diagnostic related group validation (i.e., verification that the diagnostic related group billed is appropriate for the services rendered); and
(vii) cost shifting of revenue and CPT codes.
2. DELIVERY OF SERVICES
(a) Consultant will timely and within industry standards, complete R eview Services and return the reviewed Bills to City, with any adjustments to identified overcharges. (b) Savings for the review services shall be:
(i) for states having a state mandated Standard Fee Schedule: (A) the bill amount in the Fee Schedule; less (B) the bill amount resulting from the nurse review services. (ii) for states not having a state mandated Standard Fee Schedule: (A) the medical provider’s original bill amount; less (B) the bill amount resulting from the nurse review services. (iii) for states having a state mandated Standard Fee schedule (A) the medical provider’s original bill amount; less (B) the bill amount resulting from technical review services. (iv) for states not having a state mandated Standard Fee Schedule: (A) the medical provider’s original bill amount; less (B) the bill amount resulting from the technical review services. (c) C onsultant Responsibilities
(i) Consultant shall pay bills reviewed by Consultant in a timely manner in accordance with all state guidelines, and City agrees to waive any secondary vendor bill review and/or other retrospective reviews regarding all bills for which Consultant has secured a reduction from the original billed charges.
(ii) If a medical provider submits an appeal, the bill will be reviewed again and, if any adjustment is necessary, Consultant will provide that information on the Explanation of Review (EOR).
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CERiS
(Hospital Bill Itemization Review Services; Negotiation Services; Implant Cost Review Service) Terms and Conditions
1. DESCRIPTION OF SERVICES
(a) H ospital Line Itemization Review Services. CERiS , a wholly owned subsidiary of CorVel Corporation, performs Services on Hospital Bills (inpatient and outpatient) consist ing of procurement of actual bill itemization including (i) a line -by-line validation and comparison of the itemization description charges actually billed by a particular hospital to what CMS billing guidelines allow to be separately billed for in order to disallow inappropriate charges, and then will compare the valid itemization descriptions to the average itemization description charges utilized by other hospitals within a pre -designated geographic area, and (ii) a review of charges that fall outside of any pre- contracted discounts or fee schedules, and generates payment recommendations in accordance with the City’s “Payors Allowable” language. This service does not itself include negotiation services nor Implant Cost Services.
(b) Negotiation Services. (
CERiS) will provide negotiation services with respect to all Hospital Bills (inpatient and outpatient). Consultant will contact the provider for agreement of the negotiated rate. A signed agreement regarding such rates will be maintained by Consultant . Consultant will use its commercially reasonable efforts to enter into an agreement with providers regarding negotiated rates in accordance with a mutually agreed upon schedule.
(c) Implant Cost Review Service. (
CERiS) includes Implant Cost Review services with respect to the applicability of the City ’s “Payors Allowable” plan or policy language that specifically addresses implant payments. Consultant will identify and provide the manufacturers implant cost through its proprietary repository of national implant invoice data. Consultant then determines the recommended payment in accordance with the City ’s “Payors Allowable”. In the event there is insufficient implant invoice data for the requested implant, Consultant will notify the City and Consultant shall not b e responsible for any costs, fees, damages or penalties for any such inability of Consultant to produce a cost savings per City’s request.
2. DE LIVERY OF SERVICES
(a) When applicable Consultant will timely within industry standards, complete CERiS Services and return the reviewed Hospital Bills to City , together with a written summary of any adjustments to identified overcharges.
(b) Savings for the CERiS Services shall be:
(i) for states having a state mandated Fee Schedule: (A) the bill am ount in the Fee Schedule; less (B) the bill amount resulting from CERiS Services.
(ii) for states not having a state mandated Fee Schedule: (A) the medical provider’s original bill amount; less (B) the bill amount resulting from the CERiS Services. (c) City
Responsibilities
(i) City shall pay bills reviewed by Consultant in a timely manner in accordance with all state guidelines, and agrees to waive any bill audit and/or other retrospective reviews regarding all bills for which Consultant has secured a reduction from the original billed charges. (ii) City will identify all bills that are not eligible for CERiS Services due to: (A) compensability; (B) a pre -negotiated rate with City or other previously established discount; (C) services that are “review only” due to litigation or other non-payment issues; and (D) duplicate bills. (d) If a medical provider questions the adjustment and/or balance bills the patient, and the claim payor notifies Consultant of such communication, Consultant will provide documentation of its findings. If 26 445
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the hospital provides corrective or qualifying information sufficient to alter our original adjustments, Consultant will revise its report, advise the claim payor of the new, corrected adjustment. Only in the event of a successful appeal of the reduction of the bill by the medical provider shall City be entitled to receive a credit for the portion of the fee previously charged for the amount of the adjustment successfully appealed.
Preferred Provider Network Access Services (PPO)
Terms and Conditions
I. DESCRIPTION OF SERVICES
(a) C onsultant ’s preferred provider organization is a network of hospitals, physicians and other providers (“Participating Providers ”) that offer services at pre-negotiated Provider rates (“PPO Network ”).
Consultant also provides state certified preferred provider organization networks in states that maintain such networks.
II. DE LIVERY OF SERVICES
(a) Consultant will provide City with access to its PPO Network provided it is the exclusive preferred provider organization utilized by City . Consultant may at any time and in its sole discretion add and/or terminate any provider to or from the PPO Network. (b) Consultant will provide City with a web-based directory of its PPO Network providers. (c) City agrees that, during the Term of this Agreement City will not contract directly or indirectly with Participating Providers made known to City under this Agreement. (d) City will make reasonable effort to channel all Covered Persons to the Participating Providers as are allowed under the laws of that service area or state.
CAREIQ Services
Terms and Conditions
I. DESCRIPTION OF SERVICES
CareIQ is Consultant Nationwide Ancillary Benefit Management Program. CareIQ’s network is comprised of direct provider contracts, affiliate networks and national vendor agreements. CareIQ is responsible to pay rendering providers timely for covered and approved services performed.
The CareIQ Ancillary Benefit Management Program includes; referral management and coordination, billing and invoicing, credentialed provider network management, and/or clinical oversight of treatment.
Services Included; Durable Medical Equipment, Home Healthcare, Transportation, Interpretation, Imaging and Diagnostics, Independent Medical Examinations, Age of Injury Determinations, Physical Therapy, Occupational Therapy, and other Rehabilitation and Ancillary Healthcare services.
II. P AYMENT FOR CA REIQ SERVICES
Consultant shall invoice and bill the CareIQ Services directly to the specific claims file.
Consultant reserves the right to increase and amend the rates set forth herein by notifying City of such amendment in writing, and City shall, if such amendment is unacceptable, have thirty (30) days from the date said notice is received to reject such amendment by delivery of written notice of rejection to Consultant. If Consultant does not receive such notice of termination within such thirty (30) day period, the amendment to the rates shall be deemed accepted by City and this Agreement shall continue in full force and effect, as so amended. 27 446
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Pharmacy Benefit Program
Terms and Conditions
I. DESCRIPTION OF SERVICES.
(a) Consultant shall be the exclusive provider of a Pharmacy Program inclusive of a PBM and a Provider Network representing participating pharmacy providers that are obligated upon and after identification of a participant within Consultant’s PBM to:
i. Accept a contracted rate, and
ii. Apply mandated processes and Consultant ’s Formulary and Concurrent Drug Utilization Review program at point-of-service before dispensing prescribed medications.
II. DEFINITIONS.
(a) “AWP” shall mean the Average Wholesale Price for a Brand or Generic Drug Product. Consultant bases City pricing off of the reported AWP value from Medi-Span and the date of service.
(b) “AWP Discount” shall mean the PBM discounts Consultant applies, per City ’s negotiated rates, to covered brand and generic drug products, Compound Drugs and specialty medications.
(c) "Brand Drug" shall mean a c overed drug defined as a brand name drug in PBM proprietary Generic Code Conversion ("GCC") logic.
(d) “Compound Drugs” shall be systematically identified when processing through the PBM via the Formulary. Drug compounding is often regarded as the process of combining, mixing, or altering ingredients to create a medication tailored to the needs of an indiv idual patient. Compounding includes the combining of two or more drugs. Compounded drugs are not FDA-approved. (e) “Concurrent Drug Utilization Review” (“DUR”) shall mean the algorithm systematically applied at a participating pharmacy before dispensing that c onsiders the Presenting Drug’s safety and efficacy in context with other drugs that have been dispensed. In addition, the algorithm includes applicable protocols and guidelines based on the Presenting Drug and specific claim history, such as the time period from the last fill of the same Drug.
(f) “First Fill” shall mean a prescription filled by a Participating Pharmacy for a limited supply of Covered Drugs for a claim that is not, at the time, eligible. First Fill transactions follow Consultant ’s First Fill Formulary. The First Fill Formulary is for the immediate treatment of injuries, including common exposure drugs/vaccines. The pharmacy is instructed to fill any formulary prescription written by the treating physician, whether or not the claim is accepted a s a workers' compensation claim. Most claims are ultimately accepted.
(g) “Formulary” shall mean Consultant ’s Workers’ Compensation Standard or state specific drug/drug class and brand/generic specific triggers systematically applied at a Participating Pharmacy before dispensing a Presenting Drug that prompts the pharmacy through its adjudication system to either:
dispense the Presenting Drug, convert from brand to generic, and attain approval to dispense.
(h) "Generic Drug" shall mean a Covered Drug, whether identified by its chemical, proprietary, or non- proprietary name, that (i) is accepted by the FDA as therapeutically equivalent and interchangeable with drugs having an identical amount of the same active ingredient; and (ii) defined as a generic drug in 28 447
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PBM proprietary GCC logic. In the adjudication process, Consultant applies City’s negotiated Generic Drug discount rate to the AWP value of covered generic drugs.
(i) “GCC” refers to PBM proprietary Generic Code Conversion logic. GCC logic converts Medi-Span codes to the brand and generic codes used for claims adjudication.
(j) “Good Samaritan (Emergency) Fill” shall mean a limited supply of Covered Drugs that are outside of the Formulary and typically dispensed outside of normal business hours (overnight, weekends or holidays) by a Participating Pharmacy without City’s or Consultant’s approval in order to meet, in the pharmacist’s professional judgment, an immediate or urgent need . City is responsible for payment of drug charges processed through good samaritan fills; Consultant assumes no liability.
(k) “Mail Order Program” or “Home Deliver Program” shall mean the managed program from which Covered Drugs are dispensed and billed through Consultant’s PBM. A pharmacy’s status as a mail order pharmacy does not indicat e participation in the Consultant PBM Mail Order Program. Mail Order participation is limited to designated pharmacies operating within the strict parameters of Consultant’s Mail Order Program.
(l) “Multi Source Brand” shall mean a Covered Drug specified as a brand name drug available from more than one manufacturer as determined by Consultant primarily using a combination of data fields provided to Consultant by Medi-Span (or another nationally available reporting source that may be selected by Consultant ). Multi Source Brand Drugs are eligible for conversions to Generic Drugs at the Participating Pharmacy.
(m) “Multi Source Generic” shall mean a Covered Drug specified as a multi source generic drug as determined by Consultant primarily using a combination of data fields provided to Consultant by Medi-Span (or another nationally available reporting source that may by selected by Consultant). Generic Drugs in their six month exclusivity period or limited supply drugs may be excluded from Multi Source Generic Drugs.
(n) “PBM” shall mean Pharmacy Benefits Manager. Consultant performs as the PBM on behalf of its Citys.
(o) “Presenting Drug” shall mean the drug ordered by the prescriber and presented on a signed prescription to a Participating Pharmacy and processed through Consultant’s PBM.
(p) “Rate application exceptions,” per Billing and Payments of Pharmacy Program (below) sections (d) and (e), apply when either State Fee Schedule AWP v alues or City ’s negotiated pharmacy benefit management AWP discount rates are lower than Consultant ’s Acquisition Price. Consultant ’s Acquisition Price reflects Consultant’s cost of the Covered Drug plus a processing and management fee.
(q) “Single Source Brand” shall mean a Covered Drug specified as a brand name drug available from only one manufacturer as determined by Consultant primarily using a combination of data fields provided to Consultant by Medi-Span (or another nationally available reporting source that may by selected by Consultant). Single Source Brand Drugs are not eligible for conversions to Generic Drugs.
(r) “Single Source Generic” shall mean a Covered Drug as determined by Consultant that may not have been purchased by pharmacies at standard Multi Source Generic Drug rates because of limited manufacturers, limited supply or exclusivity rights. In the adjudication process , City’s Brand Drug AWP Discount value may be applied to Single Source Generic Drugs.
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(s) “Specialty Medications” shall mean certain pharmaceuticals, biotech or biol ogical drugs, that are Covered Drugs used in the management of chronic or genetic disease, including but not limited to, injectable, infused, or oral medications, or products that otherwise require special handling. In the adjudication process, City’s Claims Professional’s approval is required, and City ’s Brand Drug AWP Discount value and dispensing fee may be applied irrespective of the Presenting Drug’s GCC status.
III. DELIVERY OF SERVICES.
(a) Consultant shall provide its Pharmacy Program’s PBM and Network for the benefit of City.
(b) Eligibility, First Fill, Pharmacy Identification (ID) Cards, and Mail Order/Home Delivery.
Pharmacy ID cards contain the necessary data elements to enable a Participating Pharmacy provider to electronically process through and transmit claim data to Consultant ’s PBM. The electronic transmission that occurs at the point of sale is required for application of Formulary, Concurrent Drug Utilization Review and contractual pricing.
i. City agrees to promptly provide Consultant all information needed to produce and distribute Pharmacy ID cards to e ligible claimants. Subject to applicable law, City will instruct eligible claimants to use the Pharmacy ID cards at participating network providers in order to facilitate the Pharmacy Program.
ii. Distribution of Pharmacy ID cards does not guarantee that Pharmacy ID cards will be appropriately utilized by e ligible claimants or Participating Pharmacies; therefore, City understands that claims assigned by Pharmacies to third party billers or paper bills submitted by the Pharmacies are not adjudicated through the prospective PBM. iii. Consultant, agrees to produce and distribute Pharmacy ID cards to Eligible Claimants upon receipt of all necessary Eligible Claimant information from City.
Consultant will also send an introduction letter to the Eligible Claimant along with the Pharmacy ID card.
a. Consultant will provide access for Eligible Claimants to the PBM Mail Order Program.
Consultant will work with City to establish the parameters of the Mail Order Program and the process which will be utilized to encourage Eligible Claimant use of the Mail Order Program.
(c) Consultant’s PBM will present a proprietary or state mandated Formulary to City . Upon presentation of identification to a Participating Pharmacy, the Formulary w ill trigger the Participating Pharmacy’s adjudication system to either:
i. Automatically dispense certain medications, or Obtain Prior Authorization (PA) approval from claims professional to dispense,
(d) Consultant’s PBM will implement a Concurrent Drug Uti lization Review (“DUR”) program on behalf of City, Concurrent DUR includes a review of the drug history at the time the prescription is presented. Absent City ’s directions, DUR shall be performed in accordance with Consultant ’s PBM’s standard service model.
IV. BILLING AND PAYMENTS OF PHARMACY PROGRAM.
(a) Financial obligations of parties.
(i) City shall be financially responsible for all drug charges incurred by claimants for dispensed medications processed under Consultant ’s PBM. Consultant assumes no liability for drug charges with the exceptions noted below in subsection iii. 30 449
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(ii) If the Consultant claims professional determines, upon receipt of Consultant’s PBM invoice, that specific formulary and non- formulary drugs should not have been dispensed, the Consultant claims professional should inform the PBM as soon as possible.
1. The pharmacy benefit management will request a reversal from the Participating Pharmacy. If granted, Consultant will reverse the drug charges, however, if the Pharmacy does not grant the pharmacy benefit management ’s request, City is responsible for payment of the drug charges; Consultant assumes no liability for drug charges with the exceptions noted below in subsection iii.
(iii) Upon receipt of an invoice, Consultant claims professional may timely dispute charges for drugs that were dispensed in error, triggering Consultant’s PBM to reverse the drug charges, by notifying Consultant for any of the following reasons:
1. Consultant’s PBM and/or the Participating Pharmacy’s viola tion of Formulary or Utilization Review Parameters set forth in City’s DUR program, or in the Claimant Level Formulary; or
2. Duplicate or inadvertent entries or other clerical mistakes on a PBM invoice.
(b) Invoicing and Payment.
On a per Covered Drug basis Consultant will apply daily for all drug charges and fees related to the PBM directly to the claim file.
Consultant shall invoice and bill directly all prescription fees to the specific claims file.
Consultant uses Medi-Span as our AWP data source. Consultant ’s Medi-Span database is updated daily and AWP values are applied on the date of dispense.
In all states with the exception of California, City will be billed the lessor of the state fee schedule AWP or the Consultant’s negotiated rate.
(c) Both parties understand that pricing indices historically used (including under this Agreement) for determining the financial components of pharmacy billing rates are outside the control of Consultant and City. The parties also understand there are extra- market industry, legal, governmental and regulatory activities which may lead to changes relating to, or elimination of, these pricing indices that could alter the financial positions and expectations of both parties as intended under this Agreement.
Both parties agree that, upon entering into this Agreement and thereafter, their mutual intent has been and is to maintain pricing neutrality as intended and not to benefit one party to the detriment of the other. Accordingly, to preserve this mutual intent, if pricing neutrality does change and Consultant undertakes any or all of the following:
(i) Changes the AWP source, or other source if AWP is not applicable, across its book of business (e.g., from Medi-Span to First Databank); or (ii) Maintains AWP, or other source if AWP is not applicable, as the pricing index with an appropriate adjustment in the event the AWP, or other, methodology and/or its calculation is changed, whether by the existing or alternative sources; or (iii) Transitions the pricing index from AWP, or other so urce if AWP i s not applicable, to another index or benchmark (e.g., to Wholesale Acquisition Cost);
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City’s negotiated PBM pricing will be modified as reasonably and equitably necessary to maintain the pricing intent under this Agreement.
V. CALIFORNIA MODIFICATION
On April 15, 2016, the State of California Department of Industrial Relations applied the new Federal Upper Limit (FUL) index to the California Pharmacy Workers’ Compensation Fee Schedule. The new FUL index has resulted in a need for Consultant to modify our current pricing structure based on the fee schedule changes and our contract language.
The FUL’s impact and the modification is limited to generic drugs; brand drug pricing will not change. As per our contract, the modification will maintain “pricing neutrality” between both parties.
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Peer Review/Medical Records Review Program
Terms and Conditions
I. DESCRIPTION OF SERVICES.
(a) Consultant shall provide access, and deliver the services described hereunder in connection with such access, to a panel of medical professionals who have been credentialed by Consultant as “Credentialed Providers” and who will perform Peer Review (“Peer Reviews”) and Medical Record Reviews (“MRRs”).
(b) Peer Review/Medical Record R eview is defined as the process of reviewing and commenting on the work, decisions and/or recommendations by one’s equal (peer) to ensure that it meets specific criteria such as federal and state regulations, and nationally accepted standards of care in re ndering medical services.
II. DELIVERY OF SERVICES.
(a) Consultant shall work only with Credentialed Providers under this Agreement. “Credentialed Providers” are medical professionals with respect to whom Consultant has performed its standard credentialing process. Consultant shall also verify that the medical professionals who are Credentialed Providers meet all applicable statutory and/or legal requirements regarding who can conduct a Peer Review or MRR. (b) City shall have the right to nominate medical professionals as candidates for addition to the panel of Credentialed Providers provided by Consultant for access by City (“Credentialed Panel”), subject to such medical professionals being credentialed by Consultant as Credentialed Providers. (c) City shall have the right, with written notice to Consultant, to request that Consultant cease using a specific medical professional from the Credentialed Panel for City ’s claimants. Upon receipt of such notice from City, Consultant shall promptly cease using the specified medical professional as requested by City in such notice.
(d) City may submit a request for a Peer Review or a MRR via phone, fax, or electronically via Consultant’s CareMC website, if applicable.
(e) Consultant shall ensure that the MRR is assigned to a provider within 2 business days of receipt of request or in accordance with applicable State law.
(f) Consultant will copy required medical records for the Peer Review or MRR as provided by the City ’s file handler or legal office. Consultant will obtain additional medical records as requested. (g) Consultant shall deliver to City completed Peer Review and MRR reports within 7 business days of assignment to the Credentialed Provider. Prior to such delivery to Cit y, Consultant shall complete its quality review of such report.
(h) Consultant shall provide City quarterly activity reports within twenty (20) business days following the applicable quarter.
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Medicare Set-Aside Services
Terms and Conditions
I. DESCRIPTION OF SERVICES
a. Medicare Set -Asides: Consultant provides an extensive review of medical records and medical bills, producing a comprehensive report and cost projection outlining future Medicare eligible costs in anticipation of settling out fu ture medical care on a City ’s employee or insured individual. Costs are determined through Consultant ’s proprietary Bill Review system as well as utilization of the online Red Book™ access for medication costs. Red Book™ is the accepted authority by Centers for Medicare Services (“CMS”) for pricing on all medications. b. Life Care Plans/Future Cost Projections:
Life Care Plans/Future Cost Projections are a plan for
optimal utilization of health care dollars that document objective view of the future health needs, services and related costs. It provides for comprehensive reports summarizing medical treatment and care and outlining lifetime needs for a City’s employee or injured individual when they are catastrophically injured. Life Care Plans/Future Cost Projections are also used both for litigious settlements as well as projecting reserves setting.
c. Medicare Conditional Payment Resolution: Consultant’s service includes securing Medicare
Conditional Payment letters and disputing the Medicare Conditional Payments unrelated to the claim. Consultant communicates directly with the Medicare contractors, the CRC (Commercial Repayment Center) or BCRC (Benefits Coordination & Recovery Center) to resolve the Medicare Conditional Payment debt.
II. DELIVERY OF SERVICES OF MEDICARE SET ASIDES
a. City shall provide the Consultant Medicare Set-Aside Hub office with a copy of the first report of injury, most recent two years of medical records and medical bills including indemnity payout, all operative reports, IMEs/AMEs as well as orders rendered by the workers’ compensation judicial system. Appropriate releases for completion of request for service will be forwarded either to the City or, at the City’s request, directly to counsel representing the injured worker to obtain the injured worker’s signature.
b. City may submit a request for a Medicare Set-Aside via email, phone, fax, or electronically via Consultant’s CareMC website, if applicable.
c. A certified Medicare Consultant (“Consultant”) will review the medical records and bill summary, prepare a detailed summary of the records and a projection for future medical expense which are Medicare eligible. If requested, the Consultant will also provide a projection of those costs which are not Medicare eligible in order to provide the City with their total medical exposure.
d. The Consultant will return the completed Medicare Set-Aside report to the City within fifteen (15) business days of receiving all relevant medical records and related information. If a rated age is warranted, the Consultant will acquire same. If the Medicare status of injured party is unknown or unclear, a request for Medicare status will be submitted to the Social Security Administration. Once the Medicare status is known, the Coordination of Benefits Contractor will be notified and conditional payments requested. 34 453
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e. Upon City’s request, Consultant Medicare Set-Aside Hub office will submit through the web- portal all required documents to enable CMS to review and approve the proposal. Items submitted include the Medicare Set-Aside report, the tentative settlement amount, along with other required documentation, to the Centers for Medicare & Medicaid Services (CMS).
Upon receipt, Consultant Medicare Set-Aside Hub office will forward the CMS Determination letter to the City. Final executed settlement documents (reflecting CMS recommended Medicare Set-Aside amount) will be provided to Consultant Medicare Set- Aside Hub by the City/counsel and then forwarded by Consultant to CMS through the web- portal.
f. Upon request from City, Consultant shall provide City quarterly activity report within twenty (20) business days following the applicable quarter.
III. DELIVERY OF SERVICES OF LIFE CARE PLANS/FUTURE COST PROJECTIONS
a. City shall provide all available medical records and billing to Consultant Medicare Set-Aside Hub office as well as any other pertinent records for initial review. b. For a Life Care Plan, a visit to the residence of the City’s employee or injured individual with interview of claimant and family will be conducted after permission is acquired by the City.
The interview will include evaluation of the home setting, extensive information gathering, and pictures of the various equipment and housing structures. c. Letters will be sent to all treating physicians to obtain their opinions on future medical treatments including medications and therapies for the claimant. The physician’s opinions will be included as recommendations within the Life Care Plan summaries. d. Future cost projections are utilized to immediately set reserves for future medical needs regarding catastrophic or major injuries. Home visits are not conducted for a future cost projection.
e. City may submit a request for a life care plan or future cost projection via email, phone, fax, or electronically via Consultant’s CareMC website, if applicable.
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Medicare Agent Services
Liability Claims
Terms and Conditions
I. DESCRIPTION OF SERVICES
In order t o assist City, as a Responsible Reporting Entity (“RRE”), in complying with the mandatory quarterly electronic reporting requirements issued by the Centers for Medicare/Medicaid Services (“CMS”) under the Medicare/Medicaid and S -CHIP Extension Act of 2007, Section 111 (the “Act”) regarding certain injured parties who are Medicare Beneficiaries, Consultant provides Medicare Agent services as described below subject to the provisions of the final regulations to be issued by CMS.
II. DESCRIPTION OF MEDICARE AGENT SERVICES
(a) Upon designation as City’s Medicare Agent, Consultant shall provide City assistance with City’s registration as a RRE.
(b) Consultant and City will establish a manual interface to facilitate the exchange of specific claims data required to be reported to CMS und er the Act; thereafter, as City ’s designated Medicare Agent, Consultant will initiate a test file interface with CMS within the statutory timeframes required by CMS under the Act.
(c) Upon successful completion of the test file interface, Consultant will commence an ongoing monthly query process on behalf of City where Consultant will transmit through the CMS Query Tool certain basic claims data elements (claimant name, social security number, date of birth and gender) on the liability claims the Cit y provides to Consultant via the manual interface, for CMS to determine if such claim data elements match a valid CMS record indicating Medicare eligibility. Consultant will report the results of such query on CareMC and in a Monthly Eligibility Query report for City to review. In the event the Medicare Reporting Queue determines any such liability claim is invalid due to an error or missing information, then City shall be responsible for reviewing, researching and correcting such claims data from the Mon thly Eligibility Query report supplied by Consultant to the City, for resubmission by Consultant through the CMS Query Tool on the next monthly query process transmission; provided, however, if City so requests, Consultant will provide such research regard ing Medicare eligibility at an additional hourly rate and such research shall include claimant’s name, social security number, date of birth, gender and any other required data field.
(d) Once it is determined through the Medicare Reporting Queue that a liab ility claimant is Medicare eligible, the City will provide Consultant through the manual interface all data elements necessary to commence the transmission of mandatory quarterly electronic claims reporting of those liability claimants to the CMS Benefits Coordination & Recovery Center (BCRC) on City ’s behalf within the specific 7- day reporting period assigned to City by CMS. A copy of the initial report shall also be posted by Consultant on CareMC for City to review. The BCRC will confirm either acceptance of the Medicare eligible claims thus reported or return any files for which data is missing or incorrect. Consultant shall post on CareMC and provide Quarterly Claim Submission reports to the City with any error reports from the BCRC showing such files containing missing or incorrect data for City to research and correct by the manual interface to Consultant . Once corrected, Consultant will enter the data and resubmit such files to the BCRC during the next quarterly reporting file.
(e) Consultant, as City’s designated Medicare Agent, will continue to electronically transmit to the BCRC on a quarterly basis all new and updated liability claims provided by the City to Consultant through the manual interface, identified through the Medicare Reporting Queue and the City provided Consultant the necessary data to report the City’s Medicare eligible claims. (f) Consultant, as City ’s designated Medicare Agent, will also electronically transmit to the BCRC any monetary settlement data received by the City to Consultant through the manual 36 455
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interface on City’s Medicare eligible claims.
(g) Consultant shall provide City quarterly activity reports within twenty (20) business days following the applicable quarter.
III. LIMITATION OF LIABILITY REGARDING MEDICARE AGENT SERVICES In order to assist C ity, as a RRE, in complying with the mandatory quarterly electronic reporting requirements issued by the CMS under the Medicare/Medicaid and S -CHIP Extension Act of 2007, Section 111 (the “Act”) regarding certain injured parties who are Medicare Beneficiaries, Consultant agrees to provide Medicare Agent services as described in the Case Management Services Description of Services attached hereto subject to the provisions of the final regulations to be issued by CMS, including information relating to such claimant, and the establishment and maintenance of an electronic data interface with CMS’s computer system to the extent required by law and within the time period required by CMS so as to avoid the incurrence of penalties and fines (“RRE Reporting Obligations”).
(a) In order for City to meet its RRE Reporting Obligations, City shall promptly review the results of the Medicare Reporting Queue, research any errors or missing data and resubmit such corrected or missing data promptly to Consultant within the applicable timeframes so that Consultant can timely report such corrected or missing data to CMS.
(b) In the event that information supplied by City to Consultant is incorrect, incomplete or untimely delivered and prevents Consultant from completing a timely transmission to CMS, or leads to errors in transmissions to CMS, City shall be solely responsible for promptly resubmitting corrected data to Consultant, and Consultant will not be liable for any damages, fines, penalties or other amounts to the extent arising from such incorrect, incomplete or untimely delivered information. Consultant shall notify City via a posting on CareMC and the Quarterly Claim Submission report if Consultant receives notice from CMS that a transmission submitted by Consultant on behalf of City as an RRE contains incorrect, incomplete or untimely delivered information. The City shall correct errors necessary to complete successful transmission to CMS.
(c) City shall release Consultant from any and all penalties or other fines imposed by CMS and its related governmental agencies, in the event information supplied by City to Consultant is incorrect, incomplete or untimely delivered and prevents Consultant from submitting a report to CMS or leads to errors in submissions to CMS.
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Clearinghouse Payer Agent Services Program
Terms and Conditions
1. DESCRIPTION OF SERVICES
(a) Clearinghouse Payer Agent Services: Consultant shall act as City’s agent under this Agreement. Consultant’s clearinghouse receives bills from health care providers in electronic form, verifies the data integrity of the information on the bills, and routes directly to Consultant’s Bill Review system for completion of Consultant’s Bill Review service.
Explanation of Benefit (EOB) information will be transmitted to providers from Consultant in the ANSI 835 format. Consultant will send 835 data to health care providers via its clearinghouse upon Consultant’s completion and approval of all Explanation of Benefits (EOB’s) via Consultant’s Bill Review service in compliance with the local governing state laws and regulations.
(b) Compliance with applicable law: Consultant shall ensure that Clearinghouse Services are provided in compliance with the applicable laws, statutes, rules and regulations of the state service shall be provided in. City agrees to timely provide to Consultant information and assistance requested by Consultant and reasonably required to ensure such compliance.
2. SETUP AND DELIVERY OF SERVICES
(a) Routing Directly to Bill Review: A test sample of City’s bills will be pulled from the clearinghouse test system and imported to the bill review test system. Bill review results will be output to City through the existing format. Routing bills through Consultant’s Test bill review system may require three to four weeks. Consultant will make reasonable efforts to begin testing within five business days of the request for services.
3. PRICING STRUCTURE
The cost of Clearinghouse Payer Agent Services is as follows:
• For City for which Consultant provides bill review services – No additional charge
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A
dvocacy 24/7 Nurse Triage Services
Terms and Conditions
C
onsultant shall provide to City the following Services related to Nursing Coordination of Care Services:
• A
nswer calls received 24 hours a day/7 days per week on Consultant maintained City triage telephone line.
• Instruct the caller / injured employee on first aid and or initial injury treatment. • Facilitate assessment at a designated outpatient clinic or emergency room as needed. • Follow up with the injured employee within 24 hours of initial report to evaluate current condition. • Document all calls and communicate to appropriate parties.
A
n incident shall encompass
• The nurse receipt of the initial call,
• The gathering of necessary information and distribution of said information to the appropriate parties, and • O
ne clinical follow-up to the injured employee in the first 24 hours following the initial call.
Med
ication Review Services
Terms and Conditions
I. DESCRIPTION OF SERVICES.
(a) Consultant acknowledges there is a subset of patients in the system that do not improve despite extensive diagnostic testing and numerous treatments. Consultant knows these relatively fewer cases drive a disproportionate amount of costs. Interestingly, these “creeping catastrophic” claims often present as a simple strain or sprain injury or diffuse spinal pain. There is ample data to suggest that bio-psychosocial factors can amplify, sustain or mitigate a patient’s perception of disability in these cases. Consultant shall use clinical modeling to identify those patients at risk for delayed recovery and apply an interdisciplinary bio-psychosocial approach to their care. (b) Consultant offers a variety of interventions that are recommended depending on the severity and chronicity of the claim. They can be utilized separately or integrated in a more comprehensive management plan again depending on claim severity and patient characteristics.
II. DELIVERY OF SERVICES.
Medication Review :
• C onsultant ’s contracted physician will evaluate the medical necessity of each currently used or prescribed medication.
• C onsultant ’s contracted physician will recommend elimination of duplicative medications.
• C onsultant ’s contracted physician will determine and recommend medications that may replace and be equally or more effective than one or a group of currently 39 458
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used/prescribed medications.
• Consultant’s contracted physician will recommend medications that are pharmacologically similar to currently used or prescribed medications when available at a lower cost (same or similar class, less cost, generic when available). • Consultant’s contracted physician will attempt Peer to Peer contact by calling the PTP.
• Consultant’s contracted physician will provide the City a written agreement from the prescribing physician (if agreement is reached) for alternate treatment plan. • On cases where agreement is not met between Consultant and the primary treating physcian a written report will be generated and sent to the City that includes a written summary of all activity that will include recommendations, rationales and potential savings identification made by Consultant’s contracted physician. • Allowances will be made for the attending primary treating physician to bill for their time spent on the teleconference at the applicable fee schedule.
Wellness Program:
Cases can be initially referred to a network of cognitive behavioral therapists who function to help the patient/claimant improve their pain coping skills, change their perception of disability and decrease fear- avoidance behaviors that are often a significant barrier for return to work.
TeleHealth Services
Terms and Conditions
Consultant shall provide TeleHealth visits to City’s injured employees who opt for such service for as level of care determinations are made through our 24/7 nurse triage hotline. A TeleHealth visit is a single synchronous virtual consultation through Consultant’s third party vendor platform between a qualified professional and a claimant (“TeleHealth”).
Consultant’s 24/7 triage nurses are trained to provide an initial assessment and will provide immediate referral to medical care when needed. Nurses may refer to TeleHealth as appropriate (i.e., musculo- skeletal injuries).
• TeleHealth virtual visits are always an “option” for the injured employee. • If opted by the injured employee, Consultant connects the injured employee to a physician immediately via a computer, tablet or phone.
• If the injured employee decides that he/she does not want a TeleHealth visit, Consultant will immediately offer to schedule the injured employee with a traditional, in-person PPO medical provider located at a convenient, clinic-based location.
A TeleHealth “visit” is defined as “A Consultation Unit” is a single synchronous consultation through the Platform between a Qualified Professional and a patient.”
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Workers’ Compensation Lien Resolution Services
Terms and Conditions
1. DESCRIPTION OF SERVICES
a) L ien Resolution Services. Consultant shall provide Lien Resolution Services for City through its CareMC Application to control and provide resolution and closur es to lien file cases. Consultant shall utilize industry standard processes including having Consultant attend Workers Compensation Appeals Board (“WCAB”) conferences & trials, and negotiate as required or applicable. b) W orkers Compensation Appeals Boards Serviced:
AHM – Anaheim SBR – San Bernardino
OXN - Oxnard SDO – San Diego
POM – Pomona VNO – Van Nuys
RIV- Riverside SAC – Sacramento
ANA - Santa Ana OAK – Oakland
LBO – Long Beach SFO – San Francisco
LAO – Los Angeles STK – Stockton
MDR – Marina Del Rey
c) Workers Compensation Appeals Boards Serviced on a case-by-case basis:
SBA – Santa Barbara RED – Redding
SLO – San Luis Obispo FRE – Fresno
SJO – San Jose BAK – Bakersfield
2. DELIVERY OF SERVICES
a) C laim Referral. Lien resolution services are on a referral basis per claim and subject to prior City approval.
b) Reporting. Consultant shall provide monthly reports at no charge to City. c) Case-in-chief walk-through service.
(i) Consultant shall provide Walk-throughs for pro-per cases, and as needed for litigated claims. (ii) City’s claims adjuster professional shall provide referrals for each lien resolution settlement agreement.
(iii) Consultant shall prepare all required documentation and file packets, obtain the adjudicating number and the order approving from the judges at the WCAB. (iv) Results are reported by Consultant to City weekly at the end of the same week they are assigned. d) S ervice and Review of Initial Discovery.
Consultant shall review, gather and serve all documents relevant to the case and the outstanding liens that will be necessary to satisfy the requirements of discovery and due process, including, but not limited to: Settlement documents, medical reports, Request for Authorizations (“RFA’s”) Utilization Review (“UR”)determinations, objection letters, and bill review. e) D eclaration of Readiness Filings.
Consultant shall utilize an electronic filing of a declaration of readiness to proceed to request a hearing date with the WCAB in order to facilitate or expedite Lien Resolution and/or Litigation (if necessary). f) A ttendance at the WCAB for Lien Conference and/or Lien Trials Consultant shall have its own experienced hearing representatives appear at the WCAB on behalf of the City with the goal of resolving any outstanding liens, or moving towards litigation (if necessary). 41 460
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g) Litigation Review and Support
Consultant shall review and analyze the lien claimant evidence provided in support of Consultant’s pos
ition when a matter is set for a lien trial.
h) C onsultant’ s Obligations
(i) Consultant shall provide Lien Resolution Services as described herein to City upon receipt of specific referral from City. In the absence of instructions from City to the contrary, which Consultant must approve, Lien Resolution Services shall be performed as described herein. (ii) Consultant shall complete its Lien Resolution Services within sixty (60) days of referrals without litigation, provided there are no delays from litigation. (
iii) Any c onflicts or complaints from providers and/or their lien claimant vendors (“ Complaints”) concerning Lien Resolution Services completed by Consultant initially will be handled directly by Consultant. Consultant will provide an initial response to a Complaint within one (1) business day following the date on which Consultant received the Complaint. Consultant will send a written response to the complainant within five (5) business days that summarizes the nature of the Complaint and the steps Consultant has taken to resolve it. A copy of this response will be sent to the attention of the designated City account representative. Different or more specific parameters of Consultant 's authority to respond to and resolve Complaints hereunder may be agreed to mutually by the parties. Further, City shall have the right, but not the obligation, at a ny
tim
e, to interject itself into a Complaint between Consultant and a provider and to resolve the Complaint in a manner acc eptable to City at its sole discretion. Notwithstanding the foregoing, City shall retain full responsibility for payment of all benefits and any other expenses or services required to be paid or provided under applicable policies or state and federal work ers’ c
ompensation laws.
(
iv) Consultant ag rees to supply City, at no additional cost, a transmission or report in the format i n w
hich it is then customarily stored by Consultant reflecting the results of Lien Resolution Services provided monthly. Such data shall be provided as to further allow for the application of Lien Resolution Service fees to the individual claim file and the payment of said fees.
3. PRICING PROCESSES
(a) P
ricing is based on a percent of savings after fee schedule application. There is a per lien cap that ensures the client pays no more than this maximum amount per lien. Some items, such as a walk- through service and an adequacy hearing are billed at a flat rate. (b) Me
thod of Pricing: Percentage of savings per lien after fee schedule is applied, versus total billed amount. Savings is defined as the difference between total claimed lien amount after fee schedule r
eduction and final lien settlement amount, or amount ordered paid by WCAB. (
i) F
or liens not subject to Official Medical Fee Schedules (“OMFS”) nor Usual and Customary, pricing will be calculated at percentage of savings from overall difference between total amount billed and final lien settlement amount.
(c) A
uthority to resolve liens without determination of OMFS granted by employer to expedite file cl
osure will be invoiced at a reduced percentage of savings from the billed amount. (d) Litigation pricing is applied to liens that are the subject of a pre-trial conference statement.
This includes, but is not limited to: service of trial exhibits, review of lien claimant trial exhibits, pre-trial and post-trial briefings as well as points & authorities, petitions for reconsideration, and petitions for costs and/or sanctions for frivolous litigation.
Claim Referral:
Lien resolution services are on a referral basis per claim, and subject to client approval. 42 461
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43 462
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CLAIMS ADMINISTRATION STANDARDS EXHIBIT
The following Standards (“Standards”) have been adopted by the Public Risk Innovation, Solutions, and Management (PRISM) Joint Powers Authority in accordance with Article 18(b) of its Joint Powers Agreement. It is the intent of these Standards to ensure compliance with all applicable Labor Code and California Code of Regulations Sections. In the event that there exists a conflict between the Standards, the Labor Code or the Code of Regulations, the most stringent requirement shall apply. These Standards are hereby incorporated into this Agreement between City and Consultant. To the extent that the Scope of Services Exhibit conflicts with these Standards, the Scope of Services Exhibit shall take precedence.
I. CLAIM HANDLING - ADMINISTRATIVE
A. Case Load
1. Each claims examiner assigned to the Member should handle a targeted caseload of 150 but not to exceed 165 claims. In situations where caseloads include future medical and medical only claims, these claims shall be counted as 2:1 in the caseload limit.
2. Supervisory personnel should not handle a caseload, although they may handle specific issues or a small number of conflict claims.
B. Case Review and Documentation
1. Documentation shall reflect any significant developments in the file and include a plan of action. Plan of action statements shall be updated at the time of examiner diary review.
2. The examiner shall review indemnity and medical-only files at intervals not to exceed 45 calendar days. Future medical files shall be reviewed at intervals not to exceed 90 calendar days.
3. The supervisor shall review all new claims within 60 calendar days of initial set up and subsequently monitor activity on indemnity files at intervals not to exceed 120 calendar days.
Future medical files shall be reviewed by the supervisor at intervals not to exceed 180 calendar days.
4. File contents shall comply with Code of Regulations Sections 10101, 10101.1 and 15400, and be kept in a neat and orderly fashion. If claims are maintained in a paperless system, documents shall be clearly identified (e.g., medical report, WCAB Orders, legal, etc.).
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5. Medical Only Claims
a. If a medical-only claim is still open at 90 calendar days, it shall be transferred to an indemnity examiner.
b. If, at any time, it is anticipated there will be indemnity benefits paid, the claim shall be transferred to an
indemnity claim type.
c. If the medical-only claim remains open at 180 days, the claim shall be converted to an indemnity claim type,
unless there is documentation showing that medical
treatment will be ending and the claimant will be
discharged from care within the next 30 days, or the
claimant is only seeking treatment for a blood- borne
pathogen exposure protocol.
C. Communication
1. Telephone Inquiries
Return calls shall be made within 1 working day of the original telephone inquiry. All documentation shall reflect these efforts.
2. Incoming Correspondence
All correspondence received shall be clearly stamped with the date of receipt.
3. Return Correspondence
All correspondence requiring a written response shall have such response completed and transmitted within 5 working days of receipt.
4. Ongoing Claimant Contact
On cases involving unrepresented injured workers who are off work, telephone contact shall be made at a minimum of once every 30 days and within 3 working days after discharge from the hospital or outpatient facility following a surgical procedure.
This is in addition to nurse case management involvement on claims where nurse case managers are assigned.
D. F iscal Handling
1. Fiscal handling for indemnity benefits on active cases shall be balanced with appropriate file documentation on a semi-annual 45 464
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basis and prior to sending a benefit termination notice to verify that statutory benefits are paid appropriately. Balancing is defined as, “an accounting of the periods and amounts due in comparison with what was actually paid”.
2. In cases of multiple losses with the same person, payments shall be made on the appropriate claim file.
E. Medicare Reporting
Mandatory reporting to the Center for Medicaid Services (CMS) shall be completed directly or through a reporting agent in compliance with Section
111 of the Medicare Medicaid and SCHIP Extension Act of 2007 (“MMSEA”). Medicare eligibility shall be documented in the claim file at time of settlement evaluation.
II. CLAIM CREATION
A. Three-Point Contact
Three-point contact shall be conducted on all claims with the non-represented injured worker, employer representative and treating physician within 3 working days of receipt of the claim by the third party administrator or self -administered entity. If a nurse case manager is assigned to the claim, initial physician contact may be conducted by either the claims examiner or the nurse case manager.
This initial contact should be substantive and clearly documented in the claim file. In the event a party is non-responsive, there shall be evidence of at least three documented attempts to reach the individual.
B. Compensability
1. The initial compensability determination (accept claim, deny claim or delay acceptance pending the results of additional investigation) and the reasons for such a determination shall be made and documented in the file within 14 calendar days of the filing of the claim with the employer. In the event the claim is not received by the third party administrator or self - administered entity within 14 calendar days of the filing of the claim with the employer, the third party administrator or self- administered entity shall make the initial compensability determination within 7 calendar days of receipt of the claim.
2. Delay of benefit letters shall be mailed in compliance with the Division of Workers’ Compensation (DWC) guidelines. In the 46 465
Agreement No. A-8455
event the employer does not provide notice of lost time to the third party administrator or self -administered entity timely to comply with DWC guidelines, the third party administrator or self-administered entity shall mail the benefit letters within 7 calendar days of notification.
3. The final compensability determination shall be made by the claims examiner or supervisor within 90 calendar days of employer receipt of the claim form.
C. AOE/COE Investigation
If a decision is made to delay benefits on a claim, an AOE/COE investigation shall be initiated within 3 working days of the decision to delay. This may include, but is not limited to, assigning out for witness/injured worker statements, initiating the QME/AME process, requesting medical records, etc.
D. Reserves
1. Using the information available at claim file set up, an initial reserve shall be established for the most probable case value.
2. The initial reserve shall be electronically posted to the claim within 14 calendar days of receipt of the claim.
E. Indexing
All claims shall be reported to the Index Bureau at time of initial set up and re-indexed on an as needed basis thereafter. Blood borne pathogen exposure claims are an exception to this requirement.
The EIA maintains membership with the Index Bureau that members can access.
III. CLAIM HANDLING – TECHNICAL
A. Payments
1. Initial Temporary and Permanent Disability Indemnity Payment
a. The initial indemnity payment shall be issued to the injured worker within 14 calendar days of knowledge of
the injury and disability. In the event the third party administrator or self - administered entity is not notified of the injury and disability within 14 calendar days of the employer’s knowledge, the third party administrator 47 466
Agreement No. A-8455
or self-administered entity shall make payment within 7 calendar days of notification. Initial permanent disability payments shall be issued within 14 calendar days after
the date of last payment of temporary disability.
Effective 1/1/2013, permanent disability payments shall be issued upon approval of an Award pursuant to Labor
Code Section 4650(b)(2). Prior to a PD Aw ard,
advances may be due if the employer has not offered
the employee a position paying at least 85% of their
wages and compensation at time of injury or the
employee is not employed in a position paying at least
100% of their wages and compensation at time of injury.
This shall not apply with salary continuation.
b. The properly completed DWC Benefit Notice shall be
mailed to the employee within 14 calendar days of the
first day of disability. In the event the third party
administrator or self - administered entity is not notified of the first day of disability until after 14 calendar days, the DWC Benefit Notice shall be mailed within 7
calendar days of notification.
c. Self-imposed penalty shall be paid on late payments in accordance with Section III. A.7 of this document.
d. Overpayments shall be identified and reimbursed timely where appropriate. The third party administrator or self- administered entity shall request reimbursement of
overpaid funds from the party that received the funds. If necessary, a credit shall be sought as part of any
resolution of the claim.
2. Subsequent Temporary and Permanent Disability Payments
a. Eligibility for indemnity payments subsequent to the first payment shall be verified, except for established long - term disability.
b. Ongoing indemnity payments shall be paid in accordance with Labor Code Section 4650(c).
c. Subsequent DWC benefit notices shall be issued in
accordance with CCR 9812.
d. Self-imposed penalty shall be paid on late payments in accordance with Section III. A.7 of this document.
3. Final Temporary and Permanent Disability Payments
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a. All final indemnity payments shall be issued timely.
b. The appropriate DWC benefit notices shall be issued in accordance with CCR 9812.
c. Self-imposed penalty shall be paid on late payments in accordance with Section III. A.7. of this document.
4. Award Payments
a. The claim file shall reflect demonstrated efforts to initiate/batch payments on undisputed Awards,
Commutations, or Compromise and Release
agreements within 10 working days following receipt of
the appropriate document, unless the Award indicates
payment is due sooner.
b. For all claims in the primary workers’ compensation
program (PWC) and/or excess reportable claims, copies
of all Awards shall be provided to the Authority at time of payment.
5. Medical Payments
a. Medical treatment billings (physician, pharmacy,
hospital, physiotherapist, etc.) shall be reviewed for
correctness, approved for payment and paid within 60
days of receipt.
b. The medical provider shall be notified in writing within 30 days of receipt of an itemized bill if a medical bill is contested, denied or incomplete.
c. A bill review process should be utilized whenever
possible. There should be participation in a PPO and/or MPN whenever possible.
6. Injured Worker Reimbursement Expense
a. Reimbursements to injured workers shall be issued
within 15 working days of the receipt of the claim for reimbursement.
b. Advance travel expense payments shall be issued to the injured worker 10 working days prior to the anticipated date of travel.
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7. Penalties
a. Penalties shall be coded so as to be identified as a penalty payment.
b. If the Member utilizes a third party administrator, the Member shall be advised of the assessment of any
penalty for delayed payment and the reason thereof, and the administrator’s plans for payment of such penalty, on a monthly basis.
c. If the Member utilizes a third party administrator, the Member, in their contract with the administrator, shall specify who is responsible for specific penalties.
B. Medical Treatment
1. Each Member shall have in place a Utilization Review process as set forth in Labor Code Section 4610.
2. Disputes regarding utilization review determinations shall be resolved using the Independent Medical Review process set forth in Labor Code Section 4610.5.
3. Nurse case managers shall be utilized where appropriate.
Rationale for assignment and continued necessity shall be documented in the claim notes at each regular diary review.
4. If enrolled in a Medical Provider Network, the network shall be utilized whenever appropriate.
C. Apportionment
1. Investigation into the existence of apportionment shall be documented.
2. If potential apportionment is identified, all efforts to reduce exposure shall be pursued.
D. Disability Management
1. The third party administrator or self -administered entity shall work proactively to obtain work restrictions and/or a release to full duty on all cases. The TPA or self-administered entity shall notify a designated Member representative immediately upon receipt of temporary work restrictions or a release to full duty, 50 469
Agreement No. A-8455
and work closely with the Member to establish a return to work as soon as possible.
2. The third party administrator or self-administered entity shall notify a designated Member representative immediately upon receipt of an employee’s permanent work restrictions so that the Member can determine the availability of alternative, modified or regular work.
3. If there is no response within 20 calendar days, the third party administrator or self-administered entity shall follow up with the designated Member representative.
4. Members shall have in place a process for complying with laws preventing disability discrimination, including Government Code Section 12926.1, which requires an interactive process with the injured worker when addressing a return to work particularly with permanent work restrictions.
5. Third party administrators or self -administered claims professional shall cooperate with members to the fullest extent, in providing medical and other information the member deems necessary for the member to meet its obligations under federal and state disability laws.
E. Supplemental Job Displacement Benefits
1. Supplemental Job Displacement Benefits – Dates of injury on or after 1/1/04 and before 1/1/13: Benefits pursuant to Labor Code Section 4658.5 shall be timely provided. Dates of injury on or after 1/1/13: Benefits pursuant to Labor Code 4658.7 shall be timely provided.
2. The third party administrator or self -administered entity shall secure the prompt conclusion of SJDB.
F. Reserving
1. Reserves shall be reviewed at regular diary and at time of any significant event, e.g., surgery, P&S/MMI, return to work, etc., and adjusted accordingly. This review shall be documented in the file regardless of whether a reserve change was made.
Where the SIP model does not apply, claims shall be reserved for the most probable value.
2. Indemnity reserves shall reflect actual temporary disability indemnity exposure with 4850 differential listed separately.
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3. Permanent disability indemnity exposure shall include life pension reserve if appropriate.
4. Future medical claims shall be reserved in compliance with CCR 15300 (b)(4) allowing adjustment for reductions in the approved medical fee schedule, undisputed utilization review, medically documented non-recurring treatment costs and
medically documented reductions in life expectancy.
5. Allocated expense reserves shall include medical cost containment, legal, investigation, copy service and other related fees.
6. A reserve worksheet shall be utilized and/or detailed rationale substantiating reserve levels shall be documented within the claim file.
G. Resolution of Claim
1. Within 10 working days of receiving medical information indicating that a claim can be finalized, the claims examiner shall begin appropriate action to finalize the claim.
2. Follow up finalization efforts shall continue and be documented at regular diary reviews until resolution is complete.
3. Settlement value shall be documented appropriately utilizing all relevant information.
4. Where settlement includes resolution of future medical for a Medicare beneficiary or an expected Medicare beneficiary, the settlement shall document the strategy to protect Medicare’s secondary payer status.
5. Pursuant to CCR15400.2, claim files with awards for future benefits shall be reviewed for administrative closure two years after the last provision of benefits.
H. Settlement Authority
1. No agreement shall be authorized involving liability, or potential liability, of the Authority without the advance written consent of the Authority. The member shall be notified of any settlement request submitted to the EIA.
2. The third party administrator shall obtain the Member’s authorization on all settlements or stipulations in excess of the 52 471
Agreement No. A-8455
settlement authority provided in any provision of the individual contract between the Member and the claims administrator.
3. Proof of settlement authorization(s) shall be maintained in the claim file.
IV. LITIGATED CASES
The third party administrator or self -administered entity shall establish written guidelines for the handling of litigated cases. The guidelines should, at a minimum, include the points below, which may be adopted and incorporated by reference as "the guidelines".
1. The third party administrator or self-administered entity shall promptly initiate investigation of issues identified as material to potential litigation. The Member shall be alerted to the need for in-house investigation, or the need for a contract investigator who is acceptable to the Member. The Member shall be kept informed on the scope and results of investigations.
2. The third party administrator or self-administered entity shall, in consultation with the Member, assign defense counsel from a list approved by the Member. Initial referral and ongoing litigation management shall be timely and appropriate. The third party administrator or self -administered entity shall maintain control of the ongoing claim activities.
3. Settlement proposals directed to the Member shall be forwarded by the third party administrator, self-administered entity or defense counsel in a concise and clear written form with a reasoned recommendation. Settlement proposals shall be presented to the Member as directed so as to insure receipt in sufficient time to process the proposal.
4. Knowledgeable Member personnel shall be involved in the preparation for medical examinations and trial, when
appropriate or deemed necessary by the Member so that all material evidence and witnesses are utilized to obtain a favorable result for the defense.
5. T
he third party administrator or self-administered entity shall comply with any reporting requirement of the Member.
V. SUBROGATION
1. In all cases where a third party (other than a Member employee or agent) is responsible for the injury to the employee, attempts to obtain information regarding the identity of the 53 472
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responsible party shall be made within 14 calendar days of recognition of subrogation potential.
2. Once identified, the third party shall be contacted within 14 calendar days with notification of the Member's right to subrogation and the recovery of certain claim expenses.
3. If the third party is a governmental entity, a claim shall be filed with the governing board (or State Board of Control as to State entities) within 6 months of the injury or notice of the injury. If the third party is a non- governmental entity, a complaint shall be filed in civil court within 2 years in order to preserve the statute of limitations.
4. Periodic contact shall be made with the responsible party and/or insurer to provide notification of the amount of the estimated recovery to which the Member shall be entitled.
5. If the injured worker brings a civil action against the party responsible for the injury, the claims administrator shall consult with the Member about the value of the subrogation claim and other considerations. Upon Member authorization, subrogation counsel shall be assigned to file a Lien or a Complaint in Intervention in the civil action.
6. Whenever practical, the claims administrator shall aggressively pursue recovery in any subrogation claim. They should attempt to maximize the recovery for benefits paid, and assert a credit against the injured worker’s net recovery for future benefit payments.
7. Member (and EIA if applicable) approval is required to waive pursuit of subrogation or agree to a settlement of a third party recovery. This approval shall be documented in the claim file.
In cases of self - administered entities, a process shall be documented noting the authority levels within the member organization to waive pursuit of subrogation or agree to a settlement of a third party recovery.
V
I. EXCESS COVERAGE
A. Claims meeting the definition of reportable excess workers’ compensation claims as defined by the Memorandum of Coverage Conditions Section shall be reported to the Authority within 5 working days of the day on which it is known the criterion is met. Utilize the Excess Workers’ Compensation First Report Form available through the EIA website.
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B. Subsequent reports shall be transmitted to the Authority on a quarterly basis on all indemnity claims and on a semi -annual basis on all future medical claims or sooner if claim activity warrants, or at such other intervals as requested by the Authority, in accordance with Underwriting and Claims Administration Standards. Utilize the Excess Workers’ Compensation Status Report Form available through the EIA website, or a comparable form to be approved by the Authority.
C. Reimbursement requests shall be submitted in accordance with the Authority’s reporting and reimbursement procedures on a quarterly or semi- annual basis depending on claims payment activity. Utilize the Excess Workers’ Compensation Claim Reporting and Reimbursement Procedures available through the EIA website.
D. A closing report with a copy of any settlement documents not previously sent shall be sent to the Authority.
Following is the history of amendments to this document:
Amended: March 4, 1988
Amended: October 7, 1988
Amended: October 6, 1995
Amended: October 1, 1999
Amended: June 6, 2003
Amended: March 2, 2007
Amended: July 1, 2009
Amended: July 1, 2011
Amended: March 2, 2012
Amended: October 4, 2013
Amended: July 1, 2019
55 474
Agreement No. A-8455
RATES AND COSTS EXHIBIT
Workers' Compensation Claims Administration
Description Pricing
Life of Contract Flat Annual Fee1
Includes 90 IND claims and 150 MO claims per year (annual averages are reviewed at the end of each contract year to assess staffing. We do not anticipate a claim swing; these thresholds are simply put in place as a “guardrail”) $255,175.00
Plus all open claims (approx. 328 IND and 14 MO)
Per claim Fee after maximum number of claims:
Medical-Only $175.00
Indemnity $1,300.00
Employer's Liability $1,300.00
Program Management
Description Pricing
Data Conversion - Per Data Source Included
Implementation Fee - One Time Fee $5,000.00
CareMC Access - Per Annum ²
First 5 Full Access Users Included
Each User over 5 - Per User, Per Year $1,000.00
¹ Includes Assistance with Self-Insured Data for State Reports, State Statistical Reporting & All State Filing Requirements
² Includes Executive Dashboard, Claim Details, Claims Summary Screen & Claims Reporting Account Management and Technical Support
Description Pricing
Account Management Staff Included
(Optional Service, not to be engaged without the City’s consent) Electronic Data Transmission
Monthly File $250.00
Weekly File $600.00
Daily File $2,000.00
Training – Onsite and Online Included
Technical Support Included
State EDI Files Included
Monthly Reporting Included
Ad hoc Report Programming - Per Hour $200.00
Communication Materials/Posters Pass through printing cost Annual Banking Fees
Additional Account(s) - Per Account
One account included
$1,000.00
Carrier TPA Oversight Fees ¹ Bill from Carrier to Client ¹ Fees charged by the carrier (Oversight fees, Tail Claim transfer / takeover fees, etc.) are the responsibil ity of the client and will be billed directly to the client by the carrier or by Consultant should Consultant be invoiced for such fees.
56 475
Agreement No. A-8455
Intake and Immediate Intervention Services
Description Pricing
Claim Intake (includes one FNOL distribution) - Per Intake Included Incident Only Reporting - Per Incident Included
Advocacy 24/7 - Per Call $95.00
Telehealth Services Fee Schedule or U&C value by CPT code
57 476
Agreement No. A-8455
Allocated Expense Fees Legal Services
Description Pricing
Subrogation 25% of Recoveries
Legal Bill Auditing ¹ 2.5% of gross legal charges
reviewed
Indexing and OFAC Compliance - Per Index $15.00
¹ Fees will never exceed the savings generated
Bill Review Services
Description Pricing
Bill Review: Includes Standard Fee Schedule and UCR - Per Bill ¹˒² $8.50 + Network Solutions Includes: ² 24% of Savings
Clinical Review, Implant Analysis, Line Item Bill Review, Negotiations, PPO Network Access,
Substantive Denials, Technical Evaluation
Minimum Transaction Fee ² $8.50
State EDI, Scanning/OCR, Initial 1099 Provider Notification Letter Included ¹ Includes bill intake, document imaging, file upload, state EDI’s, and initial 1099 provider notification letters. ² Minimum transaction fee (MTF) per bill transaction. Applied per transaction if all other applicable fees do not meet the minimum transaction fee. Applies to all transactions, including but not limited to, Specialty Bills, Duplicate Bills and bills sent for Re-consideration or Re-evaluation. There is a maximum bill review transaction fee of $15,000.00.
Patient Management
Description Pricing
Telephonic Case Management, Field Case Management
and Return to Work Coordinator - Per Hour
Alaska, California, Hawaii and New York $135.00
All Other States ¹˒² $124.00
Vocational Rehabilitation - Per Hour ² $175.00
Specialty Services (Catastrophic, Life Care Plan, Medicare Conditional Payments, Medicare Set Asides, Bilingual) - Per Hour $206.00 Nurse Utilization Review - Per Review $150.00
Physician Utilization Review - Per Review $275.00
UR Authorization Only (Adjuster Review) - CA - Per Review $40.00 Care Advocate - Per Claim $50.00
PeerWell App Access - Per Claim (One-Time Fee) $500.00
¹ Fee applies to all States with the exception of premium states (CA, HI, AK, and NY). ¹Statutory rates supersede if applicable.
Prevailing IRS Mileage Rate applies.
Each invoice for Case Management Services shall have an additional professional service fee of $39.00 billed to City.
58 477
Agreement No. A-8455
Pharmacy Solutions
Description Pricing
Retail Pharmacies
Brand AWP -17% + $3.00 dispensing fee
Generic AWP -45% + $3.00 dispensing fee
Mail Order
Brand AWP -18% + $2.00 dispensing fee
Generic AWP -55% + $2.00 dispensing fee
Clinical Modeling
Integration of Pharmacy Data Included
Dynamic Calculation/Display in CareMC Included
Pharmacy Interventions
Certified Pharmacy Technician Included
Rx Nurse Included
Nurse Management Case Management hourly rate
Pharmacy Review - Per Review $375.00
Cognitive Behavioral Therapy - Per Hour $250.00
Medication Review - Per Hour $250.00
Ancillary Benefit Management Services
Description Pricing
Medical Imaging Services Varies by State and Diagnostic Independent Medical Exam See 2022 IME/Peer Fee Schedule Physical and Occupational Therapy Varies by State
Durable Medical Equipment Varies by State and Equipment IME Peer Review - Per Hour See 2022 IME/Peer Fee Schedule Transportation Varies by State and Service
Translation Varies by State and Service Level
Medicare Agent Reporting
Description Pricing
Set up and engagement Included
Monthly Maintenance Included
Quarterly Reporting Included
California Lien Program
Description Pricing
Set up fee/minimum fee - Per Lien ¹ $50.00
Percent of savings off Fee Schedule 20% of savings
Lien Cap $3,000.00
Lien Conference $500.00
Lien Trial
Half Day $500.00
Full Day $750.00
DOR Filing Included
Service and Review of Initial Discovery Included
Litigation Review and Support - Per Hour $125.00
¹ Deducted from total fee if over $100.00
59 478
Agreement No. A-8455
State Certified Managed Care Networks
Description Pricing
Implementation, Filing, Setup (one-time fee) ¹
Standard Network - CA MPN $2,500.00 per network
Standard Network - CA MPN & CA Kaiser $3,500.00 per network Custom Network - CA MPN $5,000.00 per network
Administration² CA MPN: +$2.50/bill
Optional Services (Appointment Scheduling, Training, Panel Creation, etc.) Varies by State
¹ Implementation & administration for all other MCOs (AR MCO, CT MCO, FL MCA, GA MCO, MN MCO, NE MCO, NH MCO, NJ MCO, OK CMP & WV MHCP) are included in bill review fees. Each applicable state represents a separate network.
² Additional bill fee is applied to all Bill Review transactions relating to the applicable state regardless of the bill’s network utilization.
The above pricing per claim is based on handling of all claims that occur and are reported during the agreement period. If life of contract pricing is selected, claims will be handled until closed or until the end of the agreement period, whichever comes first. If life of claim pricing is selected, claims will be handled until closed. Pricing is valid fo r first year of the contract. At the end of the first year and each year thereafter, all fees outlined on the claims and managed care pricing sheet shall increase the greater of CPI or 3.5%.
Any service not identified in this proposal will be provided at a later time. (2) Fees for Additional Professional Services: If City requires any additional professional services from Consultant relating to the Services or the CareMC Application, including but not limited to integration of the CareMC Application with EDI or other City systems, City shall submit a written request to Consultant for such services. Consultant shall, in good faith, consider providing such services at its then-current professional services fee rate and standard terms and conditions. (3) Billing and Payments for Case Management. C onsultant will invoice City monthly for all fees related to Case Management Services directly to the specific claims file. Billing for Case Management is based on actual time per activity. Activity is based on ten (10) minute, a sixth (.17) of an hour, units.
Time billed that exceeds the base billing unit multiple, i.e., 10 minutes, 20 minutes, etc., will be converted to the next billing unit.
60 479
Agreement No. A-8455
I
NSURANCE EXHIBIT
INS-A
61 480
Exhibit INS-A
I
NSURANCE REQUIREMENTS FOR CONSULTANTS
(WITH ERRORS AND OMISSIONS REQUIREMENT)
1. C
onsultant shall obtain and maintain during the performance of any services under this Agreement the following insurance against claims for injuries to persons or damages to property which may arise from or in connection with the performance of services hereunder by Consultant, its agents, representatives, employees or subconsultants. a. C
ommercial General Liability Insurance, including Contrac tual Liability, in an amount not less than $1,000,000 combine d s
ingle limit for bodily injury and property damage for each claimant for general liability with coverage equivalent to Insura nce Services Office Commercial General Liability Coverage (Occurrenc e Form CG 0001). If a general aggregate limit is used, that limit shall apply separately to the project or shall be twice the occurrence amount; b. B
usiness automobile liability insurance in an amount not less than $1,000,000 combined single limit for bodil y injury and property damage for each claimant for automobile liability with coverage equivalent to Insurance Services Office automobile l iability coverage (Occurrence Form CA0001) covering Code No. 1, “any auto;” c. P
rofessional liability/errors and omissio ns insurance appropriate to Consultant’s profession to a minimum coverage of $1,000,000, with neither Consultant nor listed subconsultants having less than $500,000 individually. The professional liabi lity/errors and omissions insurance must be project specific with at least a one year extended reporting period, or longer upon request. d. W
orkers’ compensation insurance in compliance with the laws of the State of California, and employer’s liability insuran ce i
n an amount not less than $1,000,000 per claiman t. Additionally, the workers’ compensation policy shall include a waiver of all rights of subrogation which the insurer may have against the City.
2. C
onsultant shall, prior to performance of any services, file with the Risk Manager certificates of insurance with original endorsements effecting coverage required by this Exhibit INS -A. The certificates and endorsements for each insurance policy are to be signed by a person authorized by that insurer to bind coverage on its behalf. The certificates and endorsements are to be on the attached forms or on other forms approved by the Risk Manager. All certificates and endorsements are to be received and approved by t he Risk Manager before commencement of services. City reserves the right to require complete certified copies of all required insurance policies at any time. The certificates of insurance and endorsements shall be sent via email (or fax if necessary) to the Risk Manager, addressed as follows (do not send hard copies):
C
ity of Oxnard
Insurance Compliance
Ref erence No.
P .O. Box 100085 – OX
Duluth, GA 30096
V
ia Email: [email protected]
V ia Fax: 678-259-1007
3. C
onsultant agrees that all insurance coverages shall be provided by a California admitted insurance carrier with an A.M. Best rating of A:VII or better and shall be endorsed to state that coverage may not be suspended, voided, canceled, or reduced in coverage or limits without 30 days’ prior written notice to the Risk Manager. The Risk Manager shall not approve or accept any endorsement if the endorsement contains “best effort” modifiers or if the insurer is relieved from the responsibility to give such notice.
4. Consultant agrees that the commercial general liability and business automobile liability insurance policies shall be endorsed to n
ame City, its City Council, officers, employees, agents and volunteers as additional insureds as respects: liability arising out of activities performed by or on behalf of Consultant; products and completed operations of Consultant; premises owned, occupied or used by Consultant; or automobiles owned, leased, hired or borrowed by Consultant. The coverage shall contain no special limitations on the scope of protection afforded to City, its C ity Council, officers, employees, agents and volunteers. The General Liability Special Endorsement Form and Automobile Liability Special Endorsement Form attached to this Exhibit INS- A or substitute forms containing the same information and acceptable to the Risk Manager shall be used to provide the endorsements (ISO form CG 2010 11/85 or if not available, CG 2010 with an edition date prior to 01/04 and CG 2037).
5. T
he coverages provided to City shall be primary and not contributing to or in excess of any e xisting City insurance or self - insurance coverages ( this must be endorsed) . Additionally, the workers’ compensation policy shall include a waiver of all rights of subrogation which the insurer may have against the City. Any failure to comply with reporti ng provisions of the policies shall not affect coverage provided to City, its City Council, officers, employees and volunteers. The insurance shall apply separately to eac h insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability.
6. T
he insurer shall declare any deductibles or self-insured retentions to and be approved by the Risk Manager. At the option of the Risk Manager, either the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects City, its City Council, officers, employees and volunteers, or the Consultant shall procure a bond guaranteeing payment of losses and related investi gations, claim administration and defense expenses.
7. A
ll insurance standards ap plicable to Consultant shall also be applicable to Consultant's subconsultants. Consultant agrees to maintain appropriate agreements with subconsultants and to provide proper evidence of coverage upon receipt of a written requ est from the Risk Manager.
5/
22 62
481
Exhibit INS-A
INSTRUCTION FOR SUBMITTING INSURANCE CERTIFICATES AND ENDORSEMENT FORMS
Certificates of Insurance
The sample accord form on the following page is provided to facilitate your preparation and submission of certificates of insurance.
You may use this or any industry form that shows coverage as broad as that shown on the attached sample. Please note the certificate holder address must be as shown on the attached sample accord form with the contract number and in surance exhibit identification information completed. Improperly addressed certificates may delay the contract start-up date because the City’s practice is to return unidentifiable insurance certificates to the insured for clarification as to the contract number.
Cancellation provisions must be endorsed to the policy . Modifying the certificate does not change coverage or obligate the carrier to provide notice of cancellation.
Endorsement Forms
Original endorsements are required for commercial general l iability and business automobile liability insurance policies and must be attached to the applicable certificate of insurance. City preference is that the Consultant/insurer use the endorsement f orms which are attached. Substitute forms will be accepted, however, as long as they include provisions comparable to the sample accord form.
INS-A.doc
63 482
Exhibit INS-A
ACORD CERTIFICATE OF INSURANCE ISSUE DATE (MM/DD/YY)
PRODUCER
THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
CODE SUB-CODE
COMPANIES AFFORDING INSURANCE COVERAGE
INSURED
COMPANY
LETTER A SPECIFY COMPANY NAMES IN THIS SPACE
COMPANY
LETTER B
COVERAGES
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY
PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO
WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
CO
LTR
TYPE OF INSURANCE
POLICY
NUMBER
POLICY
EFFECTIVE
DATE
(MM/DD/YY)
POLICY
EXPIRATION
DATE
(MM/DD/YY)
LIMITS
A
GENERAL LIABILITY
[x] COMMERCIAL GENERAL
LIABILITY [ ] CLAIMS
MADE [x] OCCUR.
[x] OWNER'S &
CONTRACTOR'S PROT.
GENERAL AGGREGATE $1,000,000
PRODUCTS COMP/OP AGG . $1,000,000
PERSONAL & ADV. INJURY $1,000,000
EACH OCCURRENCE $1,000,000
FIRE DAMAGE (Any one fire) $
MED. EXPENSE (Any one person) $
A
AUTOMOBILE LIABILITY
[x] ANY AUTO
ALL OWNED AUTOS
SCHEDULED AUTOS
HIRED AUTOS
NON-OWNED AUTOS
GARAGE LIABILITY
COMBINED SINGLE $1,000,000
LIMIT
BODILY INJURY $
(Per person)
BODILY INJURY $
(Per accident)
PROPERTY DAMAGE $
A
EXCESS LIABILITY
UMBRELLA FORM
OTHER THAN UMBRELLA
FORM
EACH OCCURRENCE $
AGGREGATE $
A
WORKERS'
COMPENSATION
AND
EMPLOYERS' LIABILITY
STATUTORY LIMITS
EACH ACCIDENT $1,000,000
DISEASE-POLICY LIMIT $1,000,000
DISEASE-EACH EMPLOYEE $1,000,000
A
OTHER
Errors and omissions insurance or malpractice insurance available for the insured's profession
Minimum coverage $1,000,000
Each consultant/ $500,000
& listed sub-consultant
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/RESTRICTIONS/SPECIAL ITEMS
CERTIFICATE HOLDER
CITY OF OXNARD
Attn: Insurance Compliance
Reference No._______
P.O. Box 100085 – OX
Duluth, GA 30096
Via Email: [email protected]
Via Fax: 678-259-1007
CANCELLATION
SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELED BEFORE THE E
XPIRATION DATE THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO MAIL 30
DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT
FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND UPON THE COMPANY, ITS AGENTS OR REPRESENTATIVES.
AUTHORIZED REPRESENTATIVE
Rev. 5/22 INS-A.doc
64 483
Exhibit INS-A
GENERAL LIABILITY SPECIAL ENDORSEMENT
FOR THE CITY OF OXNARD (the “City”)
SUBMIT IN DUPLICATE
ENDORSEMENT NO.
ISSUE DATE (MM/DD/YY)
PRODUCER POLICY INFORMATION:
Insurance Company:
Policy No.:
Policy Period: (from) (to)
LOSS ADJUSTMENT EXPENSE Included in Limits
In Addition to Limits
Telephone: Deductible Self-Insured Retention (check which) of $ with an Aggregate of $ applies to
coverage. Per Occurrence Per Claim (which) NAMED INSURED
APPLICABILITY. This insurance pertains to the operations, products and/or tenancy of the named insured under all written agreements and permits in force with the City unless checked here in which case only the following specific agreements and permits with the City are covered
CITY AGREEMENTS/PERMITS
TYPE OF INSURANCE
GENERAL LIABILITY
COMMERCIAL GENERAL LIABILITY
COMPREHENSIVE GENERAL LIABILITY
OWNERS & CONTRACTORS PROTECTIVE
Claims Made
Retroactive Date
Occurrence
OTHER PROVISIONS
COVERAGES
LIABILITY LIMITS IN THOUSANDS $
EACH OCCURRENCE AGGREGATE
GENERAL
PRODUCTS/COMPLETED OPERATIONS
PERSONAL & ADVERTISING INJURY
FIRE DAMAGE
CLAIMS: Underwriter’s representative for claims pursuant to this insurance.
Name:
Address:
Telephone: ( )
In consideration of the premium charged and notwithstanding any inconsistent statement in the policy to which this endorsemen t is attached or any endorsement now or hereafter attached thereto, insurance company agrees as follows:
1. INSURED. The City, its officers, agents, employees and volunteers are included as insureds with regard to liability and defense of suits arising fro m the operations, products and activities performed by or on behalf of the named insured.
2. CONTRIBUTION NOT REQUIRED. As respects: (a) work performed by the named insured for or on behalf of the City; or (b) products sold by the named insured to the City; or (c) premises leased by the named insured from the City, the insurance afforded by this policy shall be primary insurance as resp ects the City, its officers, agents, employees or volunteers; or stand in an unbroken chain of coverage excess of the named insured’s scheduled underlying primary coverage. In either event, any other i nsurance maintained by the City, its officers, agents, employees or volunteers shall be in excess of this insurance and shall not contribute with it.
3. SEVERABILITY OF INTEREST. This insurance applies separately to each insured against whom claim is made or suit is brought except with respect to the co mpany’s limits of liability.
The inclusion of any person or organization as an insured shall not affect any right which such person or organization would have as a claimant if not so included.
4. CANCELLATION NOTICE. With respect to the interests of the City, this insurance shall not be canceled, or materially reduced in coverage or limits except after thirty (30) days prior written notice by receipted delivery has been given to the City.
5. PROVISIONS REGARDING THE INSURED’S DUTIES. Any failure to comply with reporti ng provisions of the policy or breaches or violations of warranties shall not affect coverage provided to the City, its officers, agents, employees or volunteers.
6. SCOPE OF COVERAGE. This policy, if primary, affords coverage at least as broad as:
a. Insurance Services Office Commercial General Liability Coverage, “occurrence” form CG0001; or b. If excess, affords coverage which is at least as broad as the primary insurance form CG0001.
Except as stated above nothing herein shall be held to waive, alter or extend any of the limits, conditions, agreements or exclusions of the policy to which this endorsement is attached.
ENDORSEMENT HOLDER
CITY OF OXNARD
Attn: Insurance Compliance
Reference No._______
P.O. Box 100085 – OX
Duluth, GA 30096
Via Email: [email protected]
Via Fax: 678-259-1007
AUTHORIZED REPRESENTATIVE
Broker/Agent Underwriter
I (print/type name), warrant that I have authority to bind the above-mentioned insurance company and by my signature hereon do so bind this company to this endorsement.
Signature
(original signature required)
Telephone: ( ) Date Signed:
Rev. 5/22 INS-A.doc
65 484
Exhibit INS-A
AUTOMOBILE LIABILITY SPECIAL ENDORSEMENT
FOR THE CITY OF OXNARD (the “City”)
SUBMIT IN DUPLICATE
ENDORSEMENT NO.
ISSUE DATE (MM/DD/YY)
PRODUCER POLICY INFORMATION:
Insurance Company:
Policy No.:
Policy Period: (from) (to)
LOSS ADJUSTMENT EXPENSE Included in Limits
In Addition to Limits
Telephone: Deductible Self-Insured Retention (check which) of $ with an Aggregate of $ applies to
coverage. Per Occurrence Per Claim (which) NAMED INSURED APPLICABILITY. This insurance pertains to the operations, products and/or tenancy of the named insured under all written agreements and permits in force with the City unless checked here in which case only the following specific agreements and permits with the City are covered:
CITY AGREEMENTS/PERMITS
TYPE OF INSURANCE OTHER PROVISIONS
COMMERCIAL AUTO POLICY
BUSINESS AUTO POLICY
OTHER
LIMIT OF LIABILITY
CLAIMS: Underwriter’s representative for claims pursuant to this insurance.
Name:
Address:
Telephone: ( )
$ per accident, for bodily injury and property damage.
In consideration of the premium charged and notwithstanding any inconsistent statement in the policy to which this endorsemen t is attached or any endorsement now or hereafter attached thereto, insurance company agrees as follows:
1. INSURED. The City, its officers, agents, volunteers and employees are included as insureds with regard to liability and defense of sui ts arising from the operations, products and activities performed by or on behalf of the named insured.
2. CONTRIBUTION NOT REQUIRED. As respects: (a) work performed by the named insured for or on behalf of the City; or (b) products sold by the named insured to the City; or (c) premises leased by the named insured from the City, the insurance afforded by this policy shall be primary insurance as respects the City, its officers, agents, employees or volu nteers; or stand in an unbroken chain of coverage excess of the named insured’s scheduled underlying primary coverage. In either e vent, any other insurance maintained by the City, its officers, agents, employees or volunteers shall be in excess of this insurance and shall not contribute with it.
3. SEVERABILITY OF INTEREST. This insurance applies separately to each insured against whom claim is made or suit is brought except with respect to the company’s limits of liability.
The inclusion of any person or organization as an insured shall not affect any right which such person or organization would have as a claimant if not so included.
4. CANCELLATION NOTICE. With respect to the interests of the City, this insurance shall not be canceled, or materially reduced in coverage or limits except after thirty (30) days prior written notice by receipted delivery has been given to the City.
5. PROVISIONS REGARDING THE INSURED’S DUTIES. Any failure to comply with reporting provisions of the policy or breaches or violations of warranties shall not affect covera ge provided to the City, its officers, agents, employees or volunteers.
6. SCOPE OF COVERAGE. This policy, if primary, affords coverage at least as broad as:
a. Insurance Services Office Automobile Liability Coverage, “occurrence” form CA0001, code ("any auto"); or b. If excess, affords coverage which is at least as broad as the primary insurance form referenced in the preceding section (1).
Except as stated above nothing herein shall be held to waive, alter or extend any of the limits, conditions, agreements or ex clusions of the policy to which this endorsement is attached.
ENDORSEMENT HOLDER
CITY OF OXNARD
Attn: Insurance Compliance
Reference No._______
P.O. Box 100085 – OX
Duluth, GA 30096
Via Email: [email protected]
Via Fax: 678-259-1007
AUTHORIZED REPRESENTATIVE
Broker/Agent Underwriter
I (print/type name), warrant that I have authority to bind the above-mentioned insurance company and by my signature hereon do so bind this company to this endorsement.
Signature
(original signature required)
Telephone: ( ) Date Signed
Rev. 5/22 INS-A.doc
66 485
Agreement No. A-8455
CONSULTANT ENTERPRISE COMP, INC.
CAREMC LICENSE AGREEMENT
This CareMC License Agreement (this “License Agreement ”) is entered into as of July 1, 2022 (the “Effective Date”) by and between CorVel Enterprise Comp, Inc., a wholly -owned subsidiary of CorVel Corporation (“Consultant”), 1920 Main Street, Suite 900, Irvine, CA 92614 (“Consultant”) and City of Oxnard (“City”).
RECITALS
WHEREAS, Consultant has developed a proprietary software solution (the “CareMC Application”) which is accessible via the Consultant web site located at URL www.caremc.com (the “CareMC Site”), through which Consultant provides its customers with the option of utilizing certain Third Party Claims Administration Services and bundled Managed Care Services, including certain Bill Review Services, online (such automated and online components of Consultant’s Managed Care Services, “Online Services”); and WHEREAS, Consultant has developed a proprietary smartphone application (“My Care Services” smartphone app) for City and City’s claimants accessible via claimant’s own independent smartphone including but not limited to Apple’s iOS 7.0+ or Android 4.0+ or other smartphone device with such access capabilities; and
WHEREAS, C onsultant provides its customers with the option of accessing certain Third Party Claims Administration Services and bundled Managed Care Services by means of Consultant’s proprietary software solution (the “CareMC Application”) via the Consultant web site located at the URL “www.caremc.com” (the “CareMC Site”); and WHEREAS, Consultant and City have entered into a Professional Services Agreement (A-8455); and WHEREAS, City desires to be provided with access to and use of the CareMC Application by means of an Internet browser under the terms and conditions set forth in this License Agreement.
NOW, THEREFORE, in consideration of the premises set forth above, the promises made herein, and other good and valuable consideration the receipt which is hereby acknowledged, the parties agree as follows:
1. ACCESS TO THE CAREMC APPLICATION
A. T erms of Use . The parties acknowledge and agree that the terms and conditions under which par ticular Third Party Claims Administration Services and bundled Managed Care Services are provided by Consultant and the terms and conditions under which City may access and use the CareMC Application in order to utilize the online and automated components of such Third Party Claims Administration Services and bundled Managed Care Service (the “Online Services”) shall be governed by the terms and conditions of this License Agreement.
B. My Care App. City agrees and acknowledges the terms and conditions that City ’s claimants shall agree upon by utilizing Consultant’s My Care App as described hereunder as Attachment A to this License Agreement.
C. Registration Information. Prior to accessing the CareMC Application, City shall provide Consultant with certain regist ration information requested therein (“ Registration Information ”). City represents and warrants that (i) the Registration Information City provides is true, accurate, current and complete, and (ii) the Registration Information will be updated as necessary to keep such data true, accurate, current and complete.
D. Passwords and Levels of Access. As soon as practicable after the execution of this License Agreement, Consultant s hall provide a master password to City that allows City initial access to the Online Services (the “Master Password ”). City shall then designate a group of Authorized Users. The group of Authorized Users (“ Restricted Users”) shall have access to all data available on the CareMC Site including data that constitutes or contains “personally identifiable information” (“PII Data”) as such term is defined in any applicable state or federal statutes or regulations. Each Restricted User shall initially access the Online Services by means of the Master Password, then shall be required to choose his/her own unique password (each, a “Restricted Password”) for all future access.
E. Security of Passwords . City acknowledges and agrees that it shall be solely responsible for (i) selecting Authorized Users, (ii) assigning the various levels of authority an d access each Authorized User may have to the CareMC Application, Online Services and City Data, including by determining which Authorized Users shall be Non-Restricted Users, (iii) ensuring that only Authorized Users have access to the Master Password, only Restricted Users have access to the Restricted Passwords and only Non -Restricted Users have access to Non -Restricted Passwords, (iv) implementing a system to control, track and account for all Restricted Passwords and Non- Restricted Passwords, (v) stric tly maintaining the confidentiality and integrity of the Master Password, Restricted Passwords and Non - Restricted Passwords and levels of authority among Authorized Users, and (iv) ensuring that Authorized Users shall at all tim es comply with the terms and conditions of this License Agreement. City further agrees that it shall notify Consultant immediately in writing if the security or integrity of a password has been compromised.
F. City D ata. Responsibility for ensuring that the content and data input into the CareMC Application by City or Authorized Users (“City Data”) is accurate, reflects City ’s requirements and is entered correctly lies solely with City . All data generated by and through City’s use of the CareMC Application and Online Services shall resi de on Consultant ’s server. Consultant reserves the right to temporarily suspend access to any City Data that it determines, in its sole discretion, violates the terms and conditions of this License Agreement or any applicable laws.
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G. Changes to the CareMC Application. Consultant reserves the right, at any time in its sole discretion and without liability to City , to delete or change features of the CareMC Application, CareMC Site or Online Services provided such changes do not materially alter the functionality, efficiency or performance of the CareMC Application.
2. LICENSE AND RESTRICTIONS
A. L imited License . Subject to the terms and conditions of this License Agreement, Consultant grants to City during the License Term (as defined in Section 8A below) a limited, non-exclusive, non -transferable, non-sublicensable license to access and use, and allow Authorized Users to access and use, the CareMC Application via the CareMC Site solely for City ’s own internal business use and operations. City shall access and use the CareMC Application in accordance with the user’s guides and online instruction provided to City by Consultant (“Documentation”) and all applicable laws, statutes, rules and regulations.
B. Restrictions. City shall not, and shall not allow Authorized Users or any third party to (i) rent, lease, re -license or otherwise provide access to the CareMC Application or Online Services to any third party, (ii) alter, modify or create derivative works of the CareMC Application, ( iii) use any reverse compilation, decompilation or disassembly techniques or similar methods to determine any design structure, concepts and construction method of the CareMC Application or replicate the functionality of the CareMC Application for any purpose, or (iv) copy the CareMC Application or any content, materials, information and other data provided by Consultant on the CareMC Site or used in providing the Online Services (“ Consultant Content”) and/or Documentation without Consultant ’s prior written consent.
C. Third Parties . C ity shall not allow any third party to have access to the CareMC Application or Online Services without prior written consent of Consultant and ensuring that (i) such third party enters into a legally enforceable written agreement with Consultant, or (ii) Consultant and City shall enter into a Letter Agreement whereby City assumes all responsibility and liability for access by such third party.
D. Own ership. Consultant owns and shall retain all right, title and interest in and to the CareMC Application, Documentation, CareMC Site, Online Services, Consultant Content and any intellectual property rights inherent therein or arising therefrom. In addition to Consultant’s rights in the individual elements of the Consul tant Content, Consultant owns a copyright in the selection, coordination, arrangement and enhancement of the Consultant Content. Neither City nor any Authorized User shall obtain any ownership rights, express or implied, or any other rights other than those expressly set forth herein in the CareMC Application, Documentation or Consultant Content.
A. E. Compliance Monitoring and Audits . Consultant may monitor and perform remote audits of City ’s use of the CareMC Application and CareMC Site for the purpose of verifying that City and Authorized Users are using the CareMC Application in compliance with the terms of this CareMC License Agreement. Consultant reserves the right, to temporarily suspend City ’s or any Authorized User’s access to the CareMC Application in the event City or such Authorized User engages in, or Consultant in good faith suspects is engaged in, any unauthorized conduct. Upon such suspension, Consultant shall immediately inform City of such suspension and though the support of City resolve any issue which has arisen within a commercially reasonable timeframe.
3 . INFRASTRUCTURE, MAINTENANCE AND SUPPORT
A. Consultant Infrastructure Obligations. Subject to City ’s compliance with the terms and conditions of this License Agreement, Consultant shall be responsible for providing and maintaining the hardware, software and other equipment required to host the CareMC Application for City (“CareMC Infrastructure”). The CareMC Infrastructu re is subject to modification by Consultant from time to time for purposes such as adding new functionality, maximizing operating efficiency and upgrading hardware, provided such modifica tions shall not in the aggregate degrade the performance of the Online Services utilized by City . City understands and acknowledges that such modifications may require changes to City ’s Internet access and/or telecommunications infrastructure to maintain City ’s desired level of performance. Consultant shall give City reasonable prior written notice of any such modifications.
B. C ity Infrastructure Obligations . Except for the CareMC Infrastructure, which will be provided by Consultant , City shall be responsible for obtaining and maintaining all hardware, software, equipment , Internet access and/or telecommunications services and other items or services furnished by third party venders or providers (“ Third Party Providers”) required to enable City to access and use the CareMC Application and CareMC Site as contemplated hereunder.
C. Support . Con sultant will provide general support regarding questions on the CareMC Application and CareMC Site via email and by telephone from Monday through Friday between the hours of 5:00 a.m. and 6:00 p.m. Pacific Standard Time, excluding holidays.
D. Scheduled Maintenance. C onsultant will use reasonable efforts to (i) perform any scheduled downtime outside of City ’s normal business hours, (ii) notify City of all scheduled downtimes at least seventy -two (72) hours in advance, and (iii) perform software updates to the CareMC Application with minimal disruption to City’s use of the Online Services.
E. S ystem Monitoring . Consultant will use reasonable efforts to continuously monitor its web servers and database servers to ensure that they are functioning properly.
F. Security.
Consultant will implement and use reasonable efforts to maintain secure systems through the use of firewalls, virtual private networks (VPN), and other security technologies. Consultant will use reasonable efforts to as pursuant to applicable laws report to City any confirmed breach of Consultant’s systems affecting City Data within seventy-two (72) hours .
G. Disaster Recovery and Backup . C onsultant will use reasonable efforts to perform nightly backups of essential data on its web servers and database servers. Consultant has implemented third party backup and restoration technology to enable high speed recovery of data. Consultant utilizes redundant load balanced industry standard servers for 24x7, 365 day access, except for regularly scheduled system maintenance and upgrade processes. SQL Server databases are hosted on clustered servers offering fall -over capability, redundant 68 487
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communication links, and load balanced application servers. Backup tapes are restored into a test environment not less than qua rterly to confirm validity of backups. The CareMC Site has redundant inbound Internet and Intranet connectivity.
H. Professiona l Managed Care Services . If City requires any additional professional services relating to the CareMC Application or Online Services from Consultant including but not limited to integration with City ’s electronic data interfaces (EDIs) or other City systems, City shall submit a written request to Consultant for such services. Consultant shall, in good faith, consider providing such services at its then-current professional services fee rate and standard terms and conditions.
4. REPRESENTATIONS AND WARRANT IES
A. City R epresentations . City represents that (i) it has the legal authority to provide the City Data to Consultant hereunder, and (ii) it is fully aware and knowledgeable of and shall comply with its duties and responsibilities with respect to the privacy and confidentiality of medical records and protected health information under applicable federal and state laws, including but not limited to those imposed by applicable state and federal privacy and security laws. Upon written notice to City , Consultant may modify or temporarily suspend City’s access to and use of the CareMC Application, Online Services and/or CareMC Site as necessary to comply with any law or regulation.
B. Consultant War ranties. Consultant warrants that (i) it shall use c ommercially reasonable professional practices and good workmanship in providing the CareMC Application, and (ii) City support will be performed consistent with generally accepted industry standards. These warranties extend only to City.
C. Exclusive Remedy. For any breach of the foregoing warranties, Consultant ’s entire liability and City ’s exclusive remedy will be the correction of the problems or errors that cause the breach of warranty, if feasible, or termination of the Agreement.
5. DISCLAIMERS AND LIMITATIONS OF LIAB ILITY
A. D isclaimers . TO THE EXTENT ALLOWED BY APPLICABLE LAW, EXCEPT FOR THE LIMITED WARRANTIES DESCRIBED IN SECTION 4B ABOVE, CONSULTANT MAKES NO OTHER WARRANTIES, EXPRESS, IMPLIED OR
STATUTORY, AND EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, GOOD TITLE, SATISFACTORY QUALITY AND NONINFRINGEMENT. CITY SPECIFICALLY ACKNOWLEDGES AND AGREES AS FOLLOWS:
(i) Internet Usage. Ci ty acknowledges that the Internet is essentially an unregulated, insecure and unreliable environment, and that the ability of City to access and use the CareMC Application is dependent on the Internet and hardware, software and services provided by various Third Party Providers. CONSULTANT SHALL NOT BE RESPONSIBLE FOR CITY ’S INABILITY TO ACCESS OR USE THE CAREMC APPLICATION TO THE EXTENT SOLELY
CAUSED BY FAILURES OR INTERRUPTIONS OF ANY HARDWARE, SOFTWARE OR SERVICES PROVIDED BY CITY OR THIRD PARTY PROVIDERS.
(ii) CareMC Application. CIT Y ACKNOWLEDGES AND AGREES THAT CONSULTANT DOES NOT WARRANT
THAT THE CAREMC APPLICATION OR ONLINE SERVICES ARE ERROR FREE, THAT CITY WILL BE
ABLE TO ACCESS OR USE THE CAREMC APPLICATION OR ONLINE SERVICES WITHOUT PROBLEMS
OR INTERRUPTIONS, OR THAT THE CAREMC SITE AND CAREMC APPLICATION A RE NOT SUSCEPTIBLE TO INTRUSION, ATTACK OR COMPUTER VIRUS INFECTION.
B. Exclusion of Damages.
(i) Exclusion of Damages. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL,
INDIRECT, INCIDENTAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT
LIMITED TO LOST PROFITS OR LOST REVENUES) UNDER THIS AGREEMENT, WHETHER OR NOT FORESEEABLE
AND REGARDLESS OF WHETHER CLAIMS UNDER THIS AGREEMENT ARE BROUGHT UNDER TORT, CONTRACT OR ANY OTHER LEGAL OR EQUITABLE THEORY.
(iii) Acknowledgment. T
he parties acknowledge that the limitations and disclaimers set forth in this Agreement were an essential element in setting consideration under this Agreement.
6. INDEMNIFICATI ON
A. M utual Indemnification. Subject to s ection 6D below, each party shall defend any third party claim against the other party arising from the death of or physical injury to any person or damage to the indemnified party’s property to the extent proxim ately caused by the negligence of the indemn ifying party or its agents or employees, and indemnify and hold harmless the other party and its respective officers, directors and employees from and against damages, liabilities and reasonable costs and expenses, includi ng reasonable legal fees (“Losses”) incurred in connection therewith.
B. Indemnification by Consultant. Subject to Section 6D below, Consultant shall defend any third party suit or action against City to the extent such suit or action is based on a claim that City’s permitted use of the CareMC Application under this Agreement constitutes an infringement of a United States patent, trademark, trade name, trade secret, copyright or other United States intellectual property right, and Consultant will pay those Losses finally awarded against City in any monetary settlement or final, non -appealable judgment of such suit or action which are specifically attributable to such claim. This indemnity does not apply to any claims based on City ’s use of the CareMC Application (i) in violation of this A greement or the Documentation (as defined in the CareMC License Agreement), (ii) in combination with any other software, hardware, network or system where the alleged infringement relates to such combination, or (iii) 69 488
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based on Consultant ’s compliance with City ’s instructions, designs or specifications where the alleged infringement relates to such compliance. If any portion of the CareMC Application becomes, or in Consultant ’s opinion is likely to become, the subject of a claim of infringement, then Consul tant may, at its option and expense, procure for City the right to continue using the CareMC Application or replace or modify the affected portion of the CareMC Application so that it becomes non-infringing. If neither alternative is reasonably available, Consultant may terminate this Agreement. THE FOREGOING STATES CONSULTANT ’S ENTIRE LIABILITY AND CITY’S SOLE REMEDY FOR INFRINGEMENT CLAIMS.
C. C ity Indemnification. Subject to Section 6D below, City shall defend, indemnify and hold harmless Consultant from Losses arising out of or relating to (i) City’s misuse of, modification to, rejection of or failure to implement on a timely basis any of Consultant ’s recommendations made hereunder, (ii) acts or omissions by Consultant that were undertaken at the express direction of City , (iii) City’s use of the CareMC Application in violation of the terms of the CareMC License Agreement, (iv) data or content included in or omitted from City Data (as defined in the CareMC License Agreement), (v) subject to Section 6A above, any claim by an employee of City or City’s insureds brought against Consultant due to the recommendations made by Consultant hereunder and not caused by a breach by Consultant of its obligations hereunder in providing such recommendations, and (vi) any claim described in Section 6B(i)-(iii) above.
D. Conditions. The parties’ indemnification obligations under this Section 6 are contingent upon: (i) the indemnified party giving prompt written notice to the indemnifying party of any claim under this Section (provided, however, that failure to give such not ification shall not affect the indemnification provided hereunder except to the extent, and only to the extent, that the indemnifying party shall have been actually prejudiced as a result of such failure), (ii) the indemnifying party having the right, but not the obligation, to assume sole control of the defense or settlement of the claim, and (iii) at the indemnifying party’s request and expense, the indemnified party cooperating in the investigation and defense of such claim(s). If the indemnifying party assumes the defense of any claim hereunder, the indemnified party shall be entitled to participate in (but not control) such defense and to retain its own counsel, at its own expense. The indemnifying party shall not settle or consent to an adverse judgment in any such claim that adversely affects the rights or interests of the indemnified party or imposes additional obligations on the indemnified party, without the prior express written consent of the indemnified party.
7. INS
URANCE
A. C onsultant Insurance. Consultant , at its sole expense, agrees to maintain, at all times during the term of the Agreement, the required professional liability, errors and omissions, workers' compensation, general, and auto liability insurance coverages as set forth on the Certificate of Insurance provided with the executed Service Agreement with an effective date of [insert date].
B. City I nsurance. City , at its sole expense, agrees to keep in force comprehensive general liability insurance and professional liability insurance with coverage limits in accordance with acceptable industry standards for the term of this Agreement. Up on request by Consultant, City shall furnish Consultant with a certificate of such insurance. City shall provide Consultant with prior written notice of any cancellation, non -renewal or material change to any such insurance coverages pursuant to its insurance policies. It is agreed t hat City shall be deemed in compliance with this Section 7B by being self -insured under terms and conditions and with sufficient reserves as is customary within the industry for companies of comparable size and operations.
8. L ICENSE TERM AND TER MINATION
A. T erm . The Term of the License Agreement shall run coterminous with the Master Agreement unless terminated pursuant to Section 8B or 8C hereunder this License Agreement.
B. Termination for Convenience . Either party shall have the right to termin ate this License Agreement for any reason or for no reason, upon ninety (90) days written notice to the other party.
C. Termination for Cause. This License Agreement may be terminated by either party for cause as follows: (i) upon thirty (30) days written notice if the other party breaches or defaults under any material provision of this Agreement and does not cures such breach prior to the end of such thirty (30) day period, (ii) effective immediately and without notice if the other party ceases to do business, or otherwise terminates its business operations, except as a result of an assignment, as permitted under the terms and condition s of this License Agreement, or (iii) effective immediately and without notice if the other party becomes in solvent or seeks protection under any bankruptcy, receivership, trust deed, creditors arrangement, composition or comparable proceeding, or if any such proceeding is instituted against the other (and not dismissed within ninety (90) days).
D. Effect.
Except to the extent expressly provided to the contrary herein, any right of action for breach of the License Agreement prior to termination, and the following provisions shall survive the termination of this License Agreement: Sections 1G, 2D, 4, 5 and 6.
Additionally, upon termination or expiration of the License Agreement (i) Consultant shall provide City with any proprietary data belonging to City, in the current format in which it is stored at Consultant at the termination of the License Agreement, ( ii) all licenses granted under this License Agreement shall terminate immediately, (iii) all rights to use the CareMC Application and Online S ervices shall cease immediately, and (iv) each party shall promptly return all information, documents, manuals and other materials belonging to the other party related to this License Agreement, whether in printed or electronic form, except as otherwise provided in this License Agreement, including without limitation all confidential information of the other party then currently in its possession.
9. CO NFIDENTIALITY
A. Definition of Confidential Information . “Confidential Information” shall mean any non -public data, information and other materials regarding the products, services or business of a party (and/or, if either party is bound to protect the confidentiality of any third 70 489
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party’s information, of a third party) provided to either party by the other party where such information is marked or otherw ise communicated as being “proprietary” or “confidential” or th e like, or where such information should, by its nature, be reasonably considered to be confidential and/or proprietary. Without limiting the foregoing, the parties agree that (i) the CareMC Appl ication, Documentation, Consultant Content (as defined in the in the CareMC License Agreement) and all software, source code, source documentation, inventions, know -how, and ideas, updates and any documentation and information relating thereto constitutes Confidential Information of Consultant , (ii) the City Data (as defined in the CareMC License Agreement) constitute Confidential Information of City , and (iii) this Agreement, the Exhibits and Schedules attached hereto, and the terms and conditions set forth herein and therein are Confidential Information of both parties.
B. Disclosure and Use of Confidential Information. The Confidential Information disclosed by either party (“ Disclosing Party”) to the other (“ Receiving Party”) constitutes the confidential and proprietary information of the Disclosing Party and the Receiving Party agrees to treat such Confidential Information in the same manner as it treats its own similar proprietary information, but in no case will the degree of care be less than reasonable care. The Receiving Party shall use the Confident ial Information of the Disclosing Party only in performing under this Agreement and shall retain the Confidential Information in confidence and not disclose it to any thi rd party (except as authorized under this Agreement) without the Disclosing Party’s ex press written consent. The Receiving Party shall disclose the Disclosing Party’s Confidential Information only to those employees and contractors of the Receiving Party who have a need to know such information for the purposes of this Agreement, and such employees and contractors must be bound by this Agreement or have entered into agreements with the Receiving Party containing confidentiality provisions covering the Confidential Information with terms and conditions at least as restrictive as those set forth herein.
C. Exceptions . N otwithstanding the foregoing, the parties’ confidentiality obligations hereunder shall not apply to information which: (i) is already known to the Receiving Party prior to disclosure by the Disclosing Party, (ii) becomes publicly available without fault of the Receiving Party, (iii) is rightfully obtained by the Receiving Party from a third party without restriction as to disclosure, (iv) is approved for release by written authorization of the Disclosing Party, (v) is developed independently by the Receiving Party without use of or access to the Disclosing Party’s Confidential Information, or (v) is required to be disclosed by law, rule, regulation, court of competent jurisdiction or governmental order, provided, howeve r, that the Receiving Party shall advise the Disclosing Party of the Confidential Information required to be disclosed promptly upon learning thereof in order to afford the Disclosing Party a re asonable opportunity to contest, limit or assist the Receiving Party in crafting the disclosure, and then such disclosure shall be made only to the extent necessary to satisfy such requirements.
D. Use o
f Data . Nothing shall prohibit Consultant from using aggregate, non-identifying, statistical data generated through its customers’, including City , use of the CareMC Application and Online Services for analytical purposes, provided that Consultant shall not use or disclose any such data or information in a manner that would reveal the identity of, or other confidential information concerning, City. Such aggregate, non -identifying statistical data could include, without limitation, statistics regarding usage of the CareMC Application and Online Se rvices, the number of case referrals generated through the CareMC Application and Online Services and the efficiencies gained by Consultant customers through their use of the CareMC Application and Online Services.
10. G
ENERAL PROVISIONS
A. C hoice o f Law. This Agreement shall be governed by and construed under the laws of the State of California and the United States without regard to conflicts of laws provisions thereof. The parties expressly agree that the United Nations Conventio n on Contracts f or the International Sale of Goods is specifically excluded from application to this Agreement. The parties submit to the jurisdiction of the United States federal courts for the State of California and agree, that said courts have the sole and exclusive jurisdiction over any cause of action arising under or in connection with this Agreement.
B. Co mpliance with Laws. Both parties shall comply with all federal, state, and local laws, regulations, ordinances, guidelines, permits and requirements applicable to providing services pursuant to this Agreement, and will be solely responsible for obtaining current information on such requirements.
C. Contacts for Notices. All written notice required or permitted hereunder shall be in writing and shall be sufficient if personally delivered or sent by facsimile or internationally recognized delivery service to the address or fax number set forth below, unless such address or fax number is changed by notice, to the other party, as permitted hereunder. Any notices shall be deemed given on the date received, as indicated (i) by receipt of electronic answer back in the case of facsimile, or (ii) the records of the delivery service, if by courier.
I
f to Consultant:
CorVel Corporation
1920 Main Street, Suite 900
Irvine, California 92614
Attn: Legal Department
Phone: (949) 851-1473
Fax: (866) 434-2469
Email: [email protected]
If to City:
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City of Oxnard Human Resources
300 West Third Street, 1st Floor
Oxnard, CA 93030
Attn: Risk Manager
D. A ssignment. Neither this Agreement nor any rights, licenses or obligations hereunder, may be assigned by either party without the prior written consent of the non-assigning party. Notwithstanding the foregoing, Consultant may assign this Agreement to any acquiror of all or of substantially all of Consultant ’s equity securities, assets or business related to the subject matter of this Agreement. Any attempted assignment in violation of this Agreement shall be void and without effect.
E. Severability. S hould any term of this Agreement be declared void or unenforceable by any arbitral tribunal or court of competent jurisdiction, such declaration shall have no effect on the remaining terms hereof, which shall continue in full force and effect.
F. Waiver. T he failure of either party to enforce any rights granted hereunder or to take action against the other party in the event of any breach hereunder shall not be deemed a waiver by that party as to subsequent enforcement of rights or subsequent actions in the event of future breaches.
G. Relationship of the Parties. The relationship of Consultant and Licensee established by this Agreement is that of independent contractors, and nothing contained in this Agreement shall be construed (i) to give either party the power to direct or control the day -to- day activities of the other, or (ii) to constitute the parties as partners, franchisee- franchiser, joint venturers, co -owners or otherwise as participants in a joint or common undertaking, or otherwise give rise to fiduciary obligations between the parties.
H. Force Majeure. Except for the obligation to mak e p ayments, nonperformance by either party shall be excused to the extent that performance is rendered impossible by war, acts of terrorism, strikes, fire, flood, governmental acts or orders or restrictio ns, failure of suppliers, or any other reason where failure to perform is beyond the control of the non-performing party.
I. Entire Agreement. This Agreement constitutes the entire, final, complete and exclusive agreement between the parties and supersedes all previous agreements or representations, oral or w ritten, relating to the subject matter of this Agreement. This Agreement may not be modified or amended except in writing signed by a duly authorized representative of each party. Both parties acknowledge having read the terms and conditions set forth in this Agreement and all attachments hereto, understand all terms and conditions, and agree to be bound thereby.
J. Counterparts. T
his Agreement may be executed in two counterparts, each of which shall be an original and together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties by their duly authorized representatives have executed this Agreement as of the Effective Date set forth above.
CORVEL ENTERPRISE COMP, INC. CITY OF OXNARD
By: By:
Name: Name:
Title: Title:
Date: Date:
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AT
TACHMENT A
My Care Smartphone Claims App Attachment
End User License Agreement
Such access shall provide City’s claimants an opportunity to review the current status of their individual claim. For access by City claimant, such City claimant will be required to have a smartphone including but not limited to an Apple iOS 7.0+ smartphone or Android 4.0+ smartphone or other smartphone device with such access capabilities. City acknowledges the terms of Attachment A hereunder which shall be a part of the My Care App and which the End User (“Claimant”) shall be responsible for. The My Care App is at no costs to City for these Services.
Terms are non-negotiable as these are part of the Smart Phone App PLEASE READ THIS LICENSE AGREEMENT BEFORE USING THE APP. USE OF THE APP INDICATES END USER’S ACCEPTANCE OF THIS END USER LICENSE AGREEMENT. IF END USER DOES NOT AGREE WITH THE TERMS, END USER SHOULD NOT USE THE APP.
1. License Grant; License Restrictions. Either of Consultant Enterprise Comp, Inc. or Consultant Healthcare Corporation, as applicable, (“Consultant”) provides the mobile software application program and user manual(s) or help files contained therein, and any modifications, updates, revisions, or enhancements thereto received by End User from Consultant (collectively, the "App"), and licenses its use solely pursuant to the terms stated below:
a. End User is granted a nontransferable license to use the App under the terms stated in this Agreement for personal use. End User may not use the App for commercial purposes. Title and ownership of the App and of the copyright in the App remains with Consultant; b. The App may be used by End User on a single mobile device, which End User owns or uses and for which the App is designed to operate;
c. End User may not make copies, translations, or modifications of or to the App. End User may not alter, obscure, or remove the copyright notice on any copy of the App; d. End User may not assign, sell, distribute, lease, rent, sublicense, or transfer the App or this license or disclose the App to any other person. End User may not reverse-engineer, disassemble, or decompile the App or otherwise attempt to discover the source code or structural framework of the App; and
e. Consultant may terminate this Agreement and the license granted hereunder at any time. This Agreement and the license granted hereunder automatically terminates if End User fails to comply with any provision of this Agreement. End User agrees upon termination to: (i) cease using the App and providing or accessing any data or information by or through the App, and (ii) destroy the App, together with all copies, modifications, and merged portions in any form, including any copy on End User’s mobile device or on any computer.
2. Limited Warranty. The App is provided "AS IS" and with all faults. NO WARRANTIES ARE EXPRESSED AND NONE SHALL BE IMPLIED. CONSULTANT SPECIFICALLY EXCLUDES
ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT. CONSULTANT DOES NOT WARRANT THAT USE OF THE APP WILL BE UNINTERRUPTED OR ERROR-FREE.
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3. M
aintenance & Support. The App is maintained by Consultant or its subcontractors. From time to time, Consultant may provide modifications, updates, revisions, or enhancements, all of which are offered pursuant to the terms and conditions of this Agreement. Consultant does not provide support to End Users. All support requests should be directed at End User’s employer or other person responsible to manage End User’s claims and not at Consultant.
4. Consent to use Data. All data or information submitted by End User through the App shall be used by Consultant in accordance with Consultant’s Privacy Policy posted at:
http://www.Consultant.com/privacy-policy/
5. Limitations of Liability (End User). IN NO EVENT WILL CONSULTANT'S LIABILITY FOR
ACTUAL DIRECT DAMAGES ARISING OUT OF THIS AGREEMENT OR THE USE OR PERFORMANCE OF THE APP EXCEED $100. IN NO EVENT WILL CONSULTANT BE
LIABLE FOR ANY LOST PROFITS, SALES, BUSINESS, DATA, COSTS OF PROCUREMENT
OF SUBSTITUTE GOODS OR SERVICES OR ANY INDIRECT, SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES RESULTING FROM THE USE OF THE APP OR OTHERWISE
ARISING FROM THIS AGREEMENT, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. The parties agree that the above limits represent a reasonable allocation of risk.
6. Governing Law; Exclusive Jurisdiction. This Agreement is governed by the laws of California.
End User agrees that the federal or state courts sitting in State of California, shall be the exclusive courts of jurisdiction and venue for any litigation, special proceeding or other proceeding as between the parties that may be brought, or arise out of, or in connection with, or by reason of this Agreement.
The United Nations Convention on Contracts for the International Sale of Goods is expressly disclaimed.
7. Indemnification (End User). End User shall defend, indemnify and hold harmless Consultant from and against damages, liabilities and reasonable costs and expenses, including reasonable legal fees arising out of or relating to: (i) End User’s use of the App in violation of the terms of this Agreement, (ii) data or content included in or omitted from content and data input into the App by End User or any other third party using End User’s mobile device, and (iii) any claim by an employee of End User or End User’s insureds brought against Consultant due to the recommendations made by Consultant through the App.
8. Disclaimer. Consultant shall not be responsible or liable for any third party claims arising from the negligent acts, errors, omissions, willful misconduct or fraud caused by End User in connection with its use of the App or otherwise attributable this Agreement.
9. Assignment. End User may not assign any of End User’s rights or delegate any of End User’s obligations under this Agreement without the prior written consent of Consultant. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties, their respective successors and permitted assigns.
10. Notice. All notices required to be sent hereunder shall be in writing and shall be deemed to have been given when mailed by first class mail to the address listed below.
11. Severability. If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions of this Agreement will remain in full force. 74 493
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12. Wai
ver. The waiver by either party of a breach of any provision of this Agreement or the failure by either party to exercise any right hereunder shall not operate or be construed as a waiver of any subsequent breach of that right or as a waiver of any other right.
13. Export Administration. End User agrees to comply fully with all relevant export laws and regulations of the United States ("Export Laws") to assure that neither the App nor any direct product thereof is (1) exported, directly or indirectly, in violation of Export Laws; or (2) are used for any purposes prohibited by the Export Laws, including, without limitation, nuclear, chemical, or biological weapons proliferation.
14. Entire Agreement. This Agreement shall constitute the complete agreement between the parties and supersede all prior or contemporaneous agreements or representations, written or oral, concerning the subject matter of this Agreement. This Agreement may not be modified or amended except in writing signed by a duly authorized representative of each party; no other act, document, usage or custom shall be deemed to amend or modify this Agreement.
15. Survival. The provisions of Sections 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14 shall survive the termination of this Agreement.
Copyrights
Copyright © 2014 Consultant. All rights reserved.
This documentation and the corresponding App are the property of Consultant and are licensed to the user under the terms of this End User License Agreement. Unauthorized use or copying of the App, documentation, or any other associated materials is a violation of state and federal laws. These materials must be returned to Consultant if so demanded. 75 494
5-YEAR AGREEMENT WITH CORVEL ENTERPRISE COMP., INC. FOR THIRD PARTY WORKERS’ COMPENSATION CLAIMS ADMINISTRATION SERVICESPresented to the City CouncilMike More, Human Resources ManagerMay 17, 2022 495
That the City Council approve and authorize the Mayor toexecute Agreement No. A-8455 with CorVel EnterpriseComp., Inc. in an amount not to exceed $1,515,000 for a 5-year term for workers’ compensation claims administrationand adjustment services.RECOMMENDATION 2 496
• The City currently contracts with Acclamation InsuranceManagement Services, Inc. (AIMS) for workers’compensation claims administration services•Original Agreement: 5-Year term from July 1, 2012 – June 30, 2017•First Amendment: 5-year term from July 1, 2017 – June 30, 2022• Staff conducted an RFP in January 2021 for workers’compensation claims administration services•Distributed RFP directly to 12 firms known to perform this work•Posted onpublicpurchase.com•Advertised on the City’s website•10 proposals received•Human Resources Department staff reviewed proposals andinterviewed top 3 ranked firms
BACKGROUND
3 497
• CorVel Enterprise Comp., Inc. selected as the most qualified firm to beawarded the agreement•Overall responsiveness to the RFP•Most advantageous staffing model•Demonstrated public agency experience•Experience and ability of its staff•Competitive pricing structure• Total cost of the agreement is not to exceed $1,515,000 over 5 years(includes CPI factor estimated at 5% and an allowance for additional costspursuant to the Rates and Cost Exhibit of the Agreement):FY 22-23: $ 280,175*FY 23-24: 287,934 FY 24-25: 301,330FY 25-26: 315,395FY 26-27: 330,166Total $1,515,000* Includes start-up costs of $5,000
RESULTS
4 498
That the City Council approve and authorize the Mayor toexecute Agreement No. A-8455 with CorVel EnterpriseComp., Inc. in an amount not to exceed $1,515,000 for a 5-year term for workers’ compensation claims administrationand adjustment services.Financial Impact• None in the current fiscal year.• This agreement will begin July 1, 2022 and is included aspart of the FY 2022-23 Budget.
RECOMMENDATION
5 499
QUESTIONS
500
CITY COUNCIL AGENDA REPORT
REPORTS
AGENDA ITEM NO. L.2
DATE: May 17, 2022
TO: City Council
FROM: Michael Wolfe, Public Works Director, (805) 385-8055, [email protected]
SUBJECT: Public Works Department Update. (0/10/10)
RECOMMENDATION
That the City Council receive and file an update report from the Public Works Department with respect to an overview of department operations, programs, activities, challenges, opportunities and staffing.
Please click the following link to view the required Measure M pre-recorded presentation video: https://youtu.be/VxgZE8gMFZo
BACKGROUND
This agenda item involves a verbal report to the City Council from the Public Works Director. This report is pre-recorded so that it is compliant with Measure M.
In his report, updates are provided to the City Council that include the following topics:
1. Department overview:
a. Administration
b. Asset Management & Maintenance
c. Engineering & Transportation
d. Environmental & Operations
e. Water Services
2. Department programs
3. Department activities
4. Department challenges/opportunities
5. Recruiting and staffing
STRATEGIC PRIORITIES
This agenda item is a routine operational item or does not relate to the five strategic priorities adopted by City Council on March 16, 2021.
FINANCIAL IMPACT
There is no financial impact in receiving this report.
COMMITTEE OUTCOME
501
This item did not originate in Committee.
Prepared by: Michael Wolfe, Public Works Director, Brian Yanez, Assistant Public Works Director, Steve Howlett, Assistant Public Works Director, Tatiana Arnaout, City Engineer
ATTACHMENTS
1. Presentation
502
Oxnard City Council Meeting
May 17, 2022
REPORT TO CITY COUNCIL:
PUBLIC WORKS DEPARTMENT UPDATE
Michael L. Wolfe, PE
Public Works Director
503
RECOMMENDATION
2 That the City Council receive and file a verbal
update report from the Public Works Department.
504
PRIORITIES
3 City Council
● Restore proper street paving cycle
● Repair Alleys
● Restore Proper maintenance of parks, parkways
and medians, tree trimming cycle, and clean up the
gateways to the City
● Ensure adequate future water supply
● Build an Aquatics Center in South Oxnard
● Repair seawalls
505
DEPARTMENT OVERVIEW
4 506
DEPARTMENT OVERVIEW
5 507
Parks Division: Parks, Open Spaces, Street Landscapes,
Urban Forest, GAP
6 508
Parks Division: Parks, Open Spaces, Street Landscapes,
Urban Forest, GAP
7 509
Parks Division - Parks
8 510
Parks Division - Parks
9 511
Parks Division - Parks
10 512
Parks Division-Graffiti Action Program
11 513
Parks Division - Parks
12 514
Special Districts
13 515
Special Districts
14 516
Special Districts
15 517
Facilities Maintenance
16 518
Roofs
Facilities Maintenance
17 519
HVAC
Facilities Maintenance
18 520
Facilities Maintenance
19 521
Engineering
20 522
Engineering
21 523
Engineering
22 524
Engineering
23 10
Projects
(over $70M)
30 Projects
In Design Phase 19
Projects
$45M
Approx.
In Bid Phase
Completed
15 Projects
Over
$80M
In Construction
Phase
525
Transportation & Mobility
24 526
Environmental Resources
25 527
Environmental Resources
26 528
Environmental Resources
27 529
Environmental Resources
28 530
Environmental Resources
29 Neighborhood Bulky Item Drop-Off Events
Event Date Region Total
Participants
E-Waste
(tons)
Municipal Solid
Waste (tons)
Green Waste
(tons)
Total
Tonnage
Saturday, March 5, 2022 1 307 3.91 33.46 1.73 39.1
Saturday, March 12, 2022 2 367 4.31 37.24 0.38 41.93
Saturday, March 19, 2022 3 371 5.71 62.84 0.96 69.51
Saturday, March 26, 2022 4 387 4.11 48.85 2.14 55.1
Grand Total 1,432 18.04 182.39 5.21 205.64
531
Environmental Resources
30 Event Date Total
Participants
E-Waste
(units)
Municipal
Solid Waste
(tons)
Green
Waste
(tons)
Total
Tonnage
Saturday, December 4,
2021
929 293 438.68 18.63 457.31
Saturday, April 9, 2022 697 276 372.67 14.47 387.14
Grand Total 1,626 569 811.35 33.1 844.45
Del Norte Drop-Off Events
532
Fleet Maintenance
31 In-house vehicle upfit
Fleet vehicles and equipment are
valued at over $46.5 M
533
Fleet Maintenance
32 Environmental Resources Side Loader
Preventive Maintenance Service Police Motor Unit Repair Fire Truck Leaf Spring Replacement
534
Street Maintenance
33 535
Street Maintenance
34 34
536
Street Maintenance
35 35
537
Street Maintenance
36 36
538
Water
37 539
Water
38 540
Recycled Water
39 541
Wastewater
40 542
Wastewater
41 543
Stormwater
42 544
STAFFING CHALLENGES
43 PW DIRECTOR
515 T otal Authorized Positions
Asset
Management
& Maint
Engineering &
Transportation
Environmental
and Operations Water ServicesAdministration
Issues:
● Vacancies
● Hiring process
● Injured/mod duty
● COVID absences
43 545
Parks Division: Parks, Open Spaces, Street Landscapes,
Urban Forest, GAP
44 With Measure E
● Contract services:
○ Park mowing - weekly
○ Tree pruning - over 7,000
○ Arterial street landscape maint. -
monthly
○ Trash removal - 3X/week
○ Daily restroom custodial services
○ Gopher control - monthly
○ On-call irrigation services
Pre Measure E
● Contract services:
○ Parks mowing - attempt monthly
○ Tree pruning - budget for 1,562
○ Arterial street landscape maint. -
attempt annually
○ Trash removal - weekly
○ Restroom cleaning - as available
○ Gopher control - no set schedule
○ No on-call irrigation services
546
Engineering
45$8.9 M Measure E Funding - 38.6 lane miles
547
Accomplishments with Measure E
46 Pothole Crew:
● Repaired 2,583 potholes
from July 2021 to March
2022
○ In streets - 1,686
○ In alleyways - 897
● More than doubled the
amount before Measure E
in just 9 months (FY
20/21 1,022 locations)
548
Public Works Week
May 15-21, 2022
549
CITY COUNCIL AGENDA REPORT
REPORTS
AGENDA ITEM NO. L.3
DATE: May 17, 2022
TO: City Council
FROM: Michael Wolfe, Public Works Director, (805) 385-8055, [email protected]
SUBJECT: Declaration of a Local Emergency Due to Drought Conditions and a Lack of Adequate Water Supply, Authorizing the City Manager to Take Appropriate Actions, and Adoption of a Resolution Amending Water Conservation Restrictions. (0/10/5)
RECOMMENDATION
That the City Council:
1. Adopt a resolution proclaiming the existence of a local emergency due to water shortage emergency conditions; and
2. Adopt a resolution rescinding Resolution No. 14,741 and adopting new mandatory water conservation measures.
Additional information will be provided live by Calleguas Municipal Water District.
Please click the following link to view the required Measure M pre-recorded presentation video: https://youtu.be/ZCqeSRLFCww
BACKGROUND
California is experiencing a drought emergency following the three driest years on record, as the Sierra Nevada snowpack and State reservoir water levels face historic lows.
On March 28, 2022, Governor Newsom issued Executive Order N-7-22 which directs a number of actions in response to the historic drought conditions we are currently facing. Among these actions are steps to increase water conservation, emergency regulations requiring all water providers to implement a minimum Stage 2 of their Water Shortage Contingency Plans, and groundwater recharge programs. The Executive Order also directs the Water Board to consider adopting emergency regulations to prohibit watering “non-functional turf”, or turf that serves only ornamental purposes, in the commercial, industrial, and institutional sectors during the ongoing drought emergency, thereby conserving precious supplies.
Approximately 40% of the City of Oxnard’s (Oxnard) water supply is imported from northern California via the State Water Project (SWP). This supply is distributed to Oxnard via Calleguas Municipal Water District (CMWD), which receives SWP water from the Metropolitan Water District of Southern California (MWD).
The California Department of Water Resources (DWR) had initially set the 2022 SWP allocation at 15%, however after a historically dry start to the year with no significant storms in the forecast a cutback was required. On March 18, 2022 DWR announced that SWP allocations would be slashed from 15% to 5%. 2022 will mark the second consecutive year of a 5% allocation.
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Following the 5% SWP allocation update, MWD indicated that SWP dependent regions of its service area, including CMWD, have insufficient supplies to meet current water demands. In response, CMWD declared a Stage 3 Water Shortage on April 6, 2022 and called on all water users within its service area to immediately reduce water use by up to 30%.
On April 12, 2022, MWD presented an informational item to their Water Planning and Stewardship Committee with a proposed Water Shortage Emergency Condition and Emergency Water Conservation Program to preserve supplies in the SWP Dependent Area.
The first phase of this program includes:
a. Limiting landscape watering to one day per week in the SWP Dependent Area; b. Requiring those member agencies whose service areas encompass all or a portion of the SWP Dependent Area to adopt and implement effective enforcement mechanisms to ensure compliance with this limit; and c. Imposing volumetric penalties of up to $2,000 per acre-foot (AF) for non-compliance.
If needed, the second phase of this program would involve a “human health and safety” (HH&S) needs only scenario, which would include no outdoor watering. Second phase details are still in development.
On April 26, 2022 MWD presented to their board a proposed Resolution and an update to their original Emergency Water Conservation Plan. The framework outlined in the April 12, 2022 Board Information Letter was modified to incorporate another alternative for agencies to achieve compliance based on monthly volumetric limits of SWP water available to MWD. The plan now includes two paths for affected Member Agencies to reduce use of MWD’s supplies delivered from the SWP system and to avoid penalties for non compliance.
The key items of the Resolution authorizes the following actions to reduce demands and preserve supplies in the SWP Dependent Area:
1. Declare that a Water Shortage Emergency Condition exists in the SWP Dependent Area.
2. Adopt a framework for an Emergency Water Conservation Program to reduce non-essential water use and preserve available supply for the greatest public benefit in the SWP Dependent Area. The framework includes two paths for affected Member Agencies to reduce the use of Metropolitan’s SWP supplies and achieve compliance with the program. a. The first path allows a Member Agency to restrict outdoor irrigation to one day per week (or its equivalent) beginning June 1, 2022. However, the General Manager is authorized to modify this restriction to ban all non- essential outdoor irrigation or enforce volumetric limits should conditions warrant as the year develops. Member Agencies that document enforcement of these restrictions will be deemed compliant with the Emergency Water Conservation Program. Noncompliant Member Agencies will face volumetric penalties of $2,000 per acre-foot on any water supplied by Metropolitan from the SWP system that exceeds certain monthly allocation limits. b. The second path allows a Member Agency to comply with monthly allocation limits directly. The specific limit for each agency is based on an allocated share of the HH&S water provided by DWR and certain additional SWP supplies delivered through the SWP system. Member Agencies that meet these limits will be deemed compliant with the Emergency Water Conservation Program; non-compliant Member Agencies will face the same volumetric penalties as under the first path.
Importantly, under this framework, penalties will only be applied to Metropolitan supplies delivered from the SWP system. As such, if an affected Member Agency fully shifts its demands to other local supplies or Metropolitan’s Colorado River connections, it will not face penalties in a given month.
The General Manager would be authorized to finalize terms of the Emergency Water Conservation Program consistent with this framework and the Board’s authorization, and in conformance with DWR’s requirements to access SWP water for HH&S purposes. The General Manager would be required to finalize these terms within 30 days of Board adoption.
On April 27, 2022 CMWD presented to their Board a Resolution following that of MWD, which:
Declares a Water Shortage Emergency Condition exists in the CMWD Service Area. Adopts an Emergency Water Conservation Program based on, and consistent with that of MWD, including the two path compliance framework.
551
Imposes a penalty of $2,000 per acre-foot on all potable water provided by Calleguas sourced from Metropolitan’s water supplies for purveyors that do not comply, with the enforcement period beginning June 1, 2022.
Authorizes the General Manager to amend and augment the terms of the Emergency Water Conservation Plan to make it conform to and/or reconcile with any Emergency Water Conservation Plan and/or similar program adopted by Metropolitan.
For the coming months, CMWD plans to heighten the focus on conserving limited water supplies through mandatory measures in anticipation of this drought continuing into a possible fourth year or beyond.
On April 19, 2022 and May 3, 2022, the Oxnard Public Works Director provided a verbal drought condition update to the City Council. Council was informed that staff will be returning on May 17, 2022 to provide additional information and recommendations.
DISCUSSION
Through MWD and CMWD’s recent actions, there are two ways to comply with current restrictions and avoid or reduce possible penalties as noted in the Background section of this staff report. The first way is to restrict outdoor watering to one day per week and the other is to stay under defined limits for gallons of water per capita per day (GPCD). The second path allows compliance to be achieved by meeting an agency-specific volumetric delivery limit every month. The volumetric limit for each agency will be based on 55 GPCD offset by available local supplies plus any additional water MWD is able to provide from the SWP system, allocated to each agency based on proportionate population. Agencies using supplies below these volumetric limits would not pay penalties.
Based upon the current information available through MWD and CMWD, Oxnard’s current average of GPCD would not be below the threshold to avoid penalties. The maximum penalty discussed by MWD and CMWD has been $2,000 per acre-foot (AF). On average, the City purchases approximately 1,290 AF per month during the peak summer months from CMWD, which would result in exceeding the volumetric threshold by roughly 690 AF per month. This would result in penalties of roughly $1,380,000 per month. To stay in line with the mandatory conservation measures and actions of MWD and CMWD and to limit any possible penalties assessed, staff is recommending that the City follow the first compliance path of limiting outdoor watering to one day per week effective no later than June 1, 2022.
Currently, under Resolution No. 14,741, Oxnard is in a Stage 2 water shortage level with the following restrictions with respect to potable water:
Watering of lawns, ornamental turf, trees, shrubs, vegetation, landscape and other outside irrigation is prohibited except between 4 p.m. and 9 a.m. or 6 p.m. and 9 a.m. during daylight savings time, no more than twice a week.
Watering Schedule
Odd numbered addresses (Ending in 1, 3, 5, 7, 9): Sundays and Thursdays ONLY Even numbered addresses (Ending in 0, 2, 4, 6, 8): Saturdays and Wednesdays ONLY No watering between 9 a.m. and 4 p.m. (non-daylight savings time) No watering between 9 a.m. and 6 p.m. (daylight savings time) Exceptions to allow for irrigation outside of the designated periods include (1) watering of newly installed, drought-tolerant landscapes for up to a year after planting and (2) hand watering of potted plants or stressed vegetation with use of a container (e.g., bucket or watering can) or a hose fitted with a shut-off nozzle). Irrigation of park and school ground areas with potable water will only be permitted during the twice weekly designated irrigation periods noted above and only if necessary. Sport activity fields may irrigate more frequently, but only as necessary, to maintain playing surface quality. The application of potable water to landscapes during and within 48 hours after measurable rainfall is prohibited.
The irrigation of newly constructed homes and building exteriors with potable water is prohibited unless drip or microspray systems are used.
The use of potable water in a fountain or other decorative water feature is prohibited, except where the water is part of a recirculating system.
552
The City must provide prompt notice to customers when information indicates a leak may exist within the end-user's control.
Irrigation of ornamental turf on public medians with potable water is prohibited.
Staff is recommending that the City Council rescind Resolution No.14,741, adopting a new resolution with the following restrictions with respect to potable water (changes from Resolution No. 14,74 are indicated in bold):
Watering of lawns, ornamental turf, trees, shrubs, vegetation, landscape and other outside irrigation is prohibited except between 4 p.m. and 9 a.m. or 6 p.m. and 9 a.m. during daylight savings time, no more than once a week.
Watering Schedule
Odd numbered addresses (Ending in 1, 3, 5, 7, 9): Sundays ONLY Even numbered addresses (Ending in 0, 2, 4, 6, 8): Saturdays ONLY No watering between 9 a.m. and 4 p.m. (non-daylight savings time) No watering between 9 a.m. and 6 p.m. (daylight savings time) Exceptions to allow for irrigation outside of the designated periods include (1.) the hand watering of trees or other perennials with use of a container (e.g. bucket or watering can) or a hose fitted with a shut-off nozzle and (2.) the use of drip irrigation or other high-efficiency irrigation systems to apply water at a weekly volume consistent with the one-day watering restriction imposed on less efficient irrigation systems.
Irrigation of park and school ground areas with potable water will only be permitted during the once weekly designated irrigation periods noted above.
Sport activity fields may irrigate more frequently, but only as necessary, to maintain playing surface quality. All vegetation within Wildland-Urban Interface and Defensible Space will be maintained as required under Public Resource Code 4291
The application of potable water to landscapes during and within 48 hours after measurable rainfall is prohibited.
The irrigation of newly constructed homes and building exteriors with potable water is prohibited unless drip or microspray systems are used.
The use of potable water in a fountain or other decorative water feature is prohibited, except where the water is part of a recirculating system.
The City must provide prompt notice to customers when information indicates a leak may exist within the end-user's control.
Irrigation of ornamental turf on medians with potable water is prohibited.
Restricting the allowable watering days to Saturdays and Sundays only, greatly aids in the management of enforcement.
It will be more efficient for City staff to notice violations while out in the field during the regular work week (Mon-Fri), as there should be no irrigation occurring at that time.
The City is developing enhanced conservation and drought messaging leveraging a variety of different communication outlets including; digital media (Facebook, Instagram, Twitter and Nextdoor), print media (flyers, utility bill inserts, newspaper ads), and radio ads.
In addition, emphasis on utilizing high visibility platforms throughout the City; including billboards, yard signs, digital street signs, banners, and Environmental Resource’s recycling truck signs will take place to reach a larger target audience. Messaging will highlight the extreme drought condition, mandatory conservation measures such as the one day per week watering schedule, and provide resources for saving water, such as rebates and incentive programs.
Staff will continue providing information and resources at in person public events such as the Multicultural Festival, Tamale Festival, Farmers Markets, Insect Festival, and other popular community-based events.
Messaging will be created in English, Spanish, and Mixteco. Collaboration with the Mexican Consulate and the Mixteco Indigena Community Organizing Project (MICOP) will be used to bring appropriate outreach to Oxnard’s Spanish speaking and Mixteco populations.
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Further, the Water Division is establishing a Water Conservation and Education hotline which will be in place by early June. This hotline will serve as an easily accessible resource for Oxnard residents to stay up-to-date on current water waste restrictions, readily report water waste and receive information on rebates and incentive programs. The hotline will be staffed during regular City business hours with a voicemail prompt for after hours and on weekends.
In the last drought update to Council on January 4, 2022, staff recommended utilizing employees designated as Water Conservation Ambassadors to actively patrol predetermined portions of the City, looking for water waste violations, should a 0% SWP allocation be finalized. Although a 0% allocation was not finalized, staff will be implementing an internal outreach campaign training all City staff to report water waste violations and will be utilizing Water Division meter reader staff as Water Ambassadors to report water waste violations during regular meter reading routes. The Water Division is drafting a Request for Proposal to utilize an agency to patrol for water waste violations for after hours and on weekends.
The Oxnard Water Division will continue to take the following actions when water waste is reported or observed:
1st
Violation
Courtesy
Notice/
Educational
Letter
7 day Post
Letter
Follow-up
Phone Call
For a first violation, the city may give written notice of the fact of such violation to the customer by personal service, by delivery through regular United States mail addressed to the customer's residence, or any other means reasonably designed to notify the customer of the violation. The notice contains a description of violation, lists all prohibited water waste, and provides resources such as rebate information.
Follow up to see if the customer has received the educational letter. Discuss if the issue has been addressed and offer additional information/resources. 2nd
Violation
Letter -
Warning of
Penalty
Letter may contain a description of the facts of the violation, a statement of the possible penalties for violation and a statement informing the customer of his/her right to request an adjustment or an appeal.
3rd
Violation
Penalty A surcharge may be imposed on the customer in an amount equal to 25 percent of the most recent utility bill (exclusive of the sewer and refuse portion of the bill), or $25, whichever is greater, payable as part of the utility bill for the location at which the violation occurred.
4th
Violation
Penalty A surcharge may be imposed on the customer in an amount equal to 50 percent of the most recent utility bill (exclusive of the sewer and refuse portion of the bill), or, $50, whichever is greater, payable as part of the utility bill for the location at which the violation occurred.
Additional
Violations
Fine/Admin
Cites
Impose such other penalty or fine as deemed appropriate by the City Manager, until such time that the City Manager determines that further violations are not likely to occur.
The surcharges stated above are pursuant to the City of Oxnard Municipal Code Section 22-137 (Failure to Comply). The “Additional Violations” section noted above is part of the City’s administrative citation process and may be used in the event of non-compliance with mandatory conservation measures or violations of the City’s Municipal Code with assistance of the City’s Code Enforcement team.
Residents, Home Owners Associations (HOA), commercial establishments, municipal customers, and schools are all required to follow the City’s mandatory water conservation measures.
As of the date this staff report was prepared, staff is currently working on the newly mandated Annual Water Supply and Demand Assessment (Annual Assessment). Beginning in 2022, each April for the following water year (October 1 to September 30) an Annual Assessment is completed to determine if there is a need to implement the Water Shortage Contingency Plan (WSCP) and to what extent.
554
Findings of the Annual Assessment will be presented to Council and the Community Development Department upon completion with a recommended Water Shortage Stage and conservation actions. The assessment is anticipated to be completed by June. The future actions could include but are not limited to:
No Outdoor Watering
No Use of Outdoor Decorative Fountains
No New Swimming Pool Construction
Required Pool Covers to Reduce Water Loss
No New Construction Permits
California's drought condition and recommendations from the DWR are frequently changing, as well as the actions taken by MWD and CMWD. As such, the City must react and take quick action to ensure compliance as new information continues to come forth. In addition, quick reaction to this ever-changing drought situation also helps avoid penalties that may be assessed by regional water agencies and the State. Because of the fluid nature of the drought status and the imposed mandates and penalties, staff is making the recommendation that the City Council authorize the City Manager, during the declared drought emergency, to adopt and approve the necessary drought stage, actions, restrictions and enforcement in line with those of the City’s Urban Water Management Plan and Water Shortage Contingency Plan.
It should be noted that the City’s golf course is not subject to these restrictions because the golf course uses their own groundwater wells to irrigate. CMWD has determined that the use of source water other than Potable State Water is exempt from the resolution. If the Council desires to provide alternative direction with regards to possible watering restrictions for the golf course, staff can be directed to return with alternatives.
As a way to partner with regional water agencies to address this unprecedented drought situation, staff from Oxnard will participate in a newly developed Drought Response Task Force, spearheaded by CMWD. The purpose of the Drought Response Task Force is to foster a unified and organized drought response by providing local jurisdictions with a platform for coordination and collaboration, timely drought related updates, access to resources, and opportunities for idea sharing.
Proclamation of local emergency
If the Council proclaims a local emergency on May 17, 2022, pursuant to Oxnard City Code section 6-4, the Director of Emergency Services will return to the Council at least every 30 days to review whether or not the local emergency must continue.
If necessary, during the local emergency, pursuant to Oxnard City Code section 6-3(C)(1), the Director of Emergency Services may adopt drought stages and conservation requirements consistent with the City’s Urban Water Management Plan and Water Shortage Contingency Plan including transitioning from a Stage II Shortage level to a Stage III Shortage Level; and/or an emergency water conservation plan and/or similar program adopted by Calleguas Municipal Water District (CMWD) and/or the Metropolitan Water District of Southern California.
STRATEGIC PRIORITIES
This agenda item supports the Infrastructure and Natural Resources strategy. The purpose of the Infrastructure and Natural Resources strategy is to preserve and improve our roads, utilities, parks, trees, water supply and natural resources through effective planning, prioritization, and an equitable and efficient use of available funding.
FINANCIAL IMPACT
There is no direct financial impact in approving the recommendations.
COMMITTEE OUTCOME
This item did not originate in Committee.
Prepared by: Omar Castro, Water Division Manager
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ATTACHMENTS
1. Water Shortage_ Local Emergency Proclamation.Reso
2. Water Conservation Resolution
3. City of Oxnard Resolution No. 14,741
4. Governor’s Executive Order N-7-22
5. Calleguas RES_2042_042722
6. Metropolitan Water District of Southern California’s Informational Item to Water Planning and Stewardship Committee
7. MWD Resolution - Emergency water shortage
8. Update to the Public Works and Transportation Committee Drought Condition Report of October 26, 2021
9. Presentation
556
CITY OF OXNARD
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
OXNARD PROCLAIMING THE EXISTENCE OF A LOCAL
EMERGENCY DUE TO WATER SHORTAGE EMERGENCY
CONDITIONS
WHEREAS, Government Code section 8630 and Chapter 6 of the Oxnard City Code empower the City Manager of the City of Oxnard (“City”), acting in the capacity of the Director of Emergency Services, to request the City Council to proclaim the existence of a local emergency when drought conditions threaten the safety of persons or property within the City; and
WHEREAS, severe drought conditions are constraining available water supplies throughout the State; and
WHEREAS, on October 19, 2021, Governor Gavin Newsom declared a state of emergency to exist in all California counties due to worsening drought conditions; and WHEREAS, this proclamation follows other increasingly expansive drought declarations and executive orders that have been issued since April 2021; and WHEREAS, at that time, Governor Newsom called on Californians to re-double their efforts to reduce water use by 15 percent and for local and regional water agencies to implement their Water Shortage Contingency Plans (“WSCPs”) “at a level appropriate to local conditions that takes into account the possibility of a third consecutive dry year;” and
WHEREAS, on March 28, 2022, Governor Newsom issued Executive Order N-7- 22 which directs a number of actions in response to the historic drought conditions the State, and by extension the City, is currently facing; and WHEREAS, among these actions are steps to increase water conservation, emergency regulations requiring all water providers to implement a minimum Stage 2 of their WSCPs, and groundwater recharge programs; and
WHEREAS, approximately 40% of the City’s water supply is imported from northern California via the State Water Project (“SWP”); and WHEREAS, this supply is distributed to the City via Calleguas Municipal Water District (“CMWD”), which receives SWP water from the Metropolitan Water District of Southern California (“MWD”); and
WHEREAS, the California Department of Water Resources (“DWR”) had initially set the 2022 SWP allocation at 15%, however after a historically dry start to the year with no significant storms in the forecast a cutback was required; and WHEREAS, on March 18, 2022 DWR announced that SWP allocations would be slashed from 15% to 5%; and
WHEREAS, following the 5% SWP allocation update, MWD indicated that SWP dependent regions of its service area, including CMWD, have insufficient supplies to 557
meet current water demands; and
WHEREAS, in response, CMWD declared a Stage 3 Water Shortage on April 6, 2022 and called on all water users within its service area to immediately reduce water use by up to 30%; and
WHEREAS, on April 12, 2022, MWD presented an informational item to their Water Planning and Stewardship Committee with a proposed Water Shortage Emergency Condition and Emergency Water Conservation Program (the “Program”) to preserve supplies in the SWP Dependent Area; and
WHEREAS, the first phase of the Program includes: limiting landscape watering to one day per week in the SWP Dependent Area; requiring those member agencies whose service areas encompass all or a portion of the SWP Dependent Area to adopt and implement effective enforcement mechanisms to ensure compliance with this limit; and imposing volumetric penalties of up to $2,000 per acre-foot (AF) for non- compliance; and
WHEREAS, if needed, the second phase of the Program would involve a “health and safety” needs only scenario, which would include no outdoor watering. Second phase details are still in development; and
WHEREAS, on April 26, 2022, MWD adopted a resolution and updated their original Emergency Water Conservation Plan, and declaring that a water shortage emergency condition exists in the SWP Dependent Area; and WHEREAS, on April 27, 2022, CWMD adopted a resolution declaring a water shortage emergency conditions exists in the CMWD Service Area.
WHEREAS, the City Council does hereby find that the aforesaid conditions of extreme peril warrant and necessitate the proclamation of the existence of a Local Emergency.
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NOW, THEREFORE, IT IS HEREBY PROCLAIMED that a Local Emergency now exists throughout the City and that during the existence of this Local Emergency the powers, functions, and duties of the emergency organization of the City shall be those prescribed by state law, and by the ordinances, resolutions and other adopted policies of the City.
Dated: _______________________ By:____________________________________ John C. Zaragoza
Mayor
ATTEST: APPROVED AS TO FORM:
_________________________ ____________________________
Rose Chaparro, City Clerk Stephen M. Fischer, City Attorney 559
RESOLUTION NO. ___
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
OXNARD RESCINDING RESOLUTION 14,741 AND
ADOPTING NEW MANDATORY WATER
CONSERVATION MEASURES
WHEREAS, severe drought conditions are constraining available water supplies throughout California; and
WHEREAS, on October 19, 2021, Governor Gavin Newsom declared a state of emergency to exist in all California counties due to worsening drought conditions; and WHEREAS, at that time, Governor Newsom called on Californians to re-double their efforts to reduce water use by 15 percent and for local and regional water agencies to implement their Water Shortage Contingency Plans (“WSCPs”) “at a level appropriate to local conditions that takes into account the possibility of a third consecutive dry year;” and WHEREAS, on March 28, 2022, Governor Newsom issued Executive Order N-7-22 which directs a number of actions in response to the historic drought conditions the State, and by extension the City, is currently facing; and
WHEREAS, among these actions are steps to increase water conservation, emergency regulations requiring all water providers to implement a minimum Stage 2 of their WSCPs, and groundwater recharge programs; and
WHEREAS, approximately 40% of the City’s water supply is imported from northern California via the State Water Project (“SWP”); and
WHEREAS, this supply is distributed to the City via Calleguas Municipal Water District (“CMWD”), which receives SWP water from the Metropolitan Water District of Southern California (“MWD”); and
WHEREAS, the California Department of Water Resources (“DWR”) had initially set the 2022 SWP allocation at 15%, however after a historically dry start to the year with no significant storms in the forecast a cutback was required; and
WHEREAS, on March 18, 2022 DWR announced that SWP allocations would be slashed from 15% to 5%; and
WHEREAS, following the 5% SWP allocation update, MWD indicated that SWP dependent regions of its service area, including CMWD, have insufficient supplies to meet current water demands; and
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Resolution No. ______
WHEREAS, in response, CMWD declared a Stage 3 Water Shortage on April 6, 2022 and called on all water users within its service area to immediately reduce water use by up to 30%; and
WHEREAS, on April 12, 2022, MWD presented an informational item to their Water Planning and Stewardship Committee with a proposed Water Shortage Emergency Condition and Emergency Water Conservation Program (the “Program”) to preserve supplies in the SWP Dependent Area; and
WHEREAS, the first phase of the Program includes: limiting landscape watering to one day per week in the SWP Dependent Area; requiring those member agencies whose service areas encompass all or a portion of the SWP Dependent Area to adopt and implement effective enforcement mechanisms to ensure compliance with this limit; and imposing volumetric penalties of up to $2,000 per acre-foot (AF) for non-compliance; and WHEREAS, on April 26, 2022, MWD adopted a resolution and updated their original Emergency Water Conservation Plan, and declaring that a water shortage emergency condition exists in the SWP Dependent Area; and
WHEREAS, on April 27, 2022, CWMD adopted a resolution declaring a water shortage emergency conditions exists in the CMWD Service Area; and WHEREAS, on May 17, 2022, the City Council proclaimed the existence of a local emergency due to water shortage emergency conditions.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF OXNARD DOES HEREBY FIND, DETERMINE, RESOLVE, AND ORDER AS FOLLOWS:
Section 1.The foregoing recitals are true and correct.
Section 2.Resolution 14,741 is hereby rescinded.
Section 3.Stage 2 water shortage conditions exist within the city.
Section 4. a. Watering of lawns, ornamental turf, trees, shrubs, vegetation, landscape and other outside irrigation is prohibited except between 4 p.m. and 9 a.m. or 6 p.m. and 9 a.m. during daylight savings time, no more than once per week.
b. The following watering schedule is established:
i. Odd numbered addresses (Ending in 1, 3, 5, 7, 9): Sundays ONLY
ii. Even numbered addresses (Ending in 0, 2, 4, 6, 8): Saturdays ONLY
iii. No watering between 9 a.m. and 4 p.m. (non-daylight savings time)
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iv. No watering between 9 a.m. and 6 p.m. (daylight savings time). c. Exceptions to allow for irrigation outside of the designated periods shall include (1) the hand watering of trees or other perennials with use of a container (e.g. bucket or watering can) or a hose fitted with a shut-off nozzle and (2) the use of drip irrigation or other high-efficiency irrigation systems to apply water at a weekly volume consistent with the one-day watering restriction imposed on less efficient irrigation systems. d. Irrigation of park and school ground areas with potable water are only permitted during the once weekly designated irrigation periods noted in this Section.
e. Sport activity fields may irrigate more frequently, but only as necessary, to maintain playing surface quality.
f. All vegetation within Wildland-Urban Interface and Defensible Space will be maintained as required under Public Resources Code 4291. g. The application of potable water to landscapes during and within 48 hours after measurable rainfall is prohibited.
h. The irrigation of newly constructed homes and building exteriors with potable water is prohibited unless drip or microspray systems are used. i. The use of potable water in a fountain or other decorative water feature is prohibited, except where the water is part of a recirculating system. j. The City must provide prompt notice to customers when information indicates a leak may exist within the end-user's control. k. Irrigation of ornamental turf on medians with potable water is prohibited.
Section 5.Pursuant to Oxnard City Code (“OCC”) section 22-151(C), the mandatory water conservation requirements established in Section 4 of this Resolution (“water conservation requirements”) shall remain in effect unless otherwise amended or rescinded by further action of the City Council. Notwithstanding the requirements of OCC section 22-151(C), the Director of Emergency Services is authorized to modify the water conservation requirements, pursuant to OCC section 6-3(C)(1) during a proclaimed local emergency.
Section 6.This Resolution shall take effect immediately upon its adoption. 562
Resolution No. ______
PASSED, APPROVED and ADOPTED this ____ day of __________, 20___, by the following vote:
AYES:
NOES:
ABSTAIN:
ABSENT:
_______________________________
John C. Zaragoza, Mayor
ATTEST:
_________________________________
Rose Chaparro, City Clerk
APPROVED AS TO FORM:
_________________________________
Stephen M. Fischer, City Attorney
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EXECUTIVE DEPARTMENT
STATE OF CALIFORNIA
EXECUTIVE ORDER N-7-22
WHEREAS on April 12, 202l, May l 0, 2021, July 8, 202l, and October 19, 2021, I proclaimed states of emergency that continue today and exist across a ll the counties of California, due to extreme and expanding drought conditions; and
WHEREAS climate change continues to intensify the impacts of droughts on our communities, environment, and economy, and California is in a third consecutive year of dry conditions, resulting in continuing drought in all parts of the State; and
WHEREAS the 21st century to date has been characterized by record warmth and predominantly dry conditions, and the 2021 meteorological summer in California and the rest of the western United States was the hottest on record; and
WHEREAS since my October 19, 2021 Proclamation, early rains in October and December 2021 gave way to the driest January and February in recorded history for the watersheds that provide much of California's water supply; and WHEREAS the ongoing drought will have significant, immediate impacts on communities with vulnerable water supplies, farms that rely on irrigation to grow food and fiber, and fish and wildlife that rely on stream flows and cool water; and
WHEREAS the two largest reservoirs of the Central Valley Project, which supplies water to farms and communities in the Central Valley and the Santa Clara Valley and provides critical cold-water habitat for salmon and other anadromous fish, have water storage levels that are approximately l .1 million acre-feet below last year's low levels on this date; and WHEREAS the record-breaking dry period in January and February and the absence of significant rains in March have required the Department of Water Resources to reduce anticipated deliveries from the State Water Project to 5 percent of requested supplies; and
WHEREAS delivery of water by bottle or truck is necessary to protect human safety and public health in those places where water supplies are disrupted; and
WHEREAS groundwater use accounts for 41 percent of the State's total water supply on an average annual basis but as much as 58 percent in a critically dry year, and approximately 85 percent of public water systems rely on groundwater as their primary supply; and
WHEREAS coordination between loca l entities that approve permits for new groundwater wells and local groundwater sustainability agencies is important to achieving sustainable levels of groundwater in critically overdrafted basins; and
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WHEREAS the duration of the drought, especially following a multiyear drought that abated only five years ago, underscores the need for California to redouble near-, medium-, and long-term efforts to adapt its water management and delivery systems to a chang ing climate, shifting precipitation patterns, and water scarcity; and
WHEREAS the most consequential, immediate action Californians can take to extend available supplies is to voluntarily reduce their water use by 15 percent from their 2020 levels by implementing the commonsense measures identified in operative paragraph 1 of Executive Order N-10-21 (July 8, 2021 ); and
WHEREAS to protect public health and safety, it is critica l the State take certain immediate actions without undue delay to prepare for and mitigate the effects of the drought conditions, and under Government Code section 8571, I find that strict compliance with various statutes and regulations specified in this Proclamation would prevent, hinder, or delay the mitigation of the effects of the drought conditions.
NOW, THEREFORE, I, GAVIN NEWSOM, Governor of the State of California, in accordance with the authority vested in me by the State Constitution and statutes, including the California Emergency Services Act, and in particular, Government Code sections 8567, 8571, and 8627, do hereby issue the following Order to become effective immediately:
IT IS HEREBY ORDERED THAT:
1. The orders and provisions contained in my April 21, 2021, May 10, 2021, July 8, 2021, and October 19, 2021 Proclamations remain in full force and effect, except as modified by those Proclamations and herein.
State agencies shall continue to implement all directions from those Proclamations and accelerate implementation where feasible.
2. To help the State achieve its conservation goals and ensure sufficient water for essential indoor and outdoor use, I call on all Californians to strive to limit summertime water use and to use water more efficiently indoors and out. The statewide Save Our Water conservation campaign at SaveOurWater.com provides simple ways for Californians to reduce water use in their everyday lives. Furthermore, I encourage Californians to understand and track the amount of water they use and measure their progress toward their conservation goals.
3. By May 25, .2022, the State Water Resources Control Board (Water Board) shall consider adopting emergency regulations that include all of the following:
a. A requirement that each urban water supplier, as defined in section 10617 of the Water Code, shall submit to the Department of Water Resources a preliminary annual water supply and demand assessment consistent with section 10632.1 of the Water Code no later than June 1, 2022, and submit a fina l annual water 568
supply and demand assessment to the Department of Water Resources no later than the deadline set by section 10632.1 of the Water Code;
b. A requirement that each urban water supplier that has submitted a water shortage contingency plan to the
Department of Water Resources implement, at a minimum, the shortage response actions adopted under section 10632 of the Water Code for a shortage level of up to twenty percent (Level 2), by a date to be set by the Water Board; and
c. A requirement that each urban water supplier that has not submitted a water shortage contingency plan to the
Department of Water Resources implement, at a minimum,
shortage response actions established by the Water Board, which shall take into consideration model actions that the Department of Water Resources shall develop for urban water supplier water shortage contingency planning for Level 2, by a date to be set by the Water Board.
To further conserve water and improve drought resiliency if the drought lasts beyond this year, I encourage urban water suppliers to conserve more than required by the emergency regulations described in this paragraph and to voluntarily activate more stringent local requirements based on a shortage level of up to thirty percent (Level 3).
4. To promote water conservation, the Department of Water Resources shall consult with leaders in the commercial, industrial, and institutional sectors to develop strategies for improving water conservation, including direct technical assistance, financial assistance, and other approaches. By May 25, 2022, the Water Board shall consider adopting emergency regulations defining "non-functional turf" (that is, a definition of turf that is ornamental and not otherwise used for human recreation purposes such as school fields, sports fields, and parks) and banning irrigation of non-functional turf in the commercial, industrial, and institutional sectors except as it may be required to ensure the health of trees and other perennial non-turf plantings.
5. In order to maximize the efficient use of water and to preserve water supplies critical to human health and safety and the environment, Public Resources Code, Division 13 (commencing with section 21000) and regulations adopted pursuant to that Division are hereby suspended, with respect to the directives in paragraphs 3 and 4 of this Order and any other projects and activities for the purpose of water conservation to the extent necessary to address the impacts of the drought, and any permits necessary to carry out such projects or activities. Entities that desire to conduct activities under this suspension, other than the directives in paragraphs 3 and 4 of this Order, shall first request that the Secretary of the Natural Resources Agency make a determination that the proposed activities are eligible to be conducted under this suspension. The Secretary shall use sound discretion in applying this Executive Order to ensure that the suspension serves the purpose of accelerating conservation projects that are necessary to address impacts of the drought, while at the same time 569
protecting public health and the environment. The entities implementing these directives or conducting activities under this suspension shall maintain on their websites a list of all activities or approvals for which these provisions are suspended.
6. To support voluntary approaches to improve fish habitat that would require change petitions under Water Code section 1707 and either Water Code sections 1425 through 1432 or Water Code sections 1725 through 1732, and where the primary purpose is to improve conditions for fish, the Water Board shall expeditiously consider petitions that add a fish and wildlife beneficial use or point of diversion and place of storage to improve conditions for anadromous fish. California Code of Regulations, title 23, section 1064, subdivisions ( a) ( 1) (A) (i)-(ii) are suspended with respect to any petition that is subject to this paragraph.
7. To facilitate the hauling of water for domestic use by loca l communities and domestic water users threatened with the loss of water supply or degraded water quality resulting from drought, any ordinance, regulation, prohibition, policy, or requirement of any kind adopted by a public agency that prohibits the hauling of water out of the water's basin of origin or a public agency's jurisdiction is hereby suspended. The suspension authorized pursuant to this paragraph shall be limited to the hauling of water by truck or bottle to be used for human consumption, cooking, or sanitation in communities or residences threatened with the loss of affordable safe drinking water.
Nothing in this paragraph limits any public health or safety requirement to ensure the safety of hauled water.
8. The Water Board shall expand inspections to determine whether illegal diversions or wasteful or unreasonable use of water are occurring and bring enforcement actions against illegal diverters and those engaging in the wasteful and unreasonable use of water. When access is not granted by a property owner, the Water Board may obtain an inspection warrant pursuant to the procedures set forth in Title 13 (commencing with section 1822.50) of Part 3 of the Code of Civil Procedure for the purposes of conducting an inspection pursuant to this directive.
9. To protect health, safety, and the environment during this drought emergency, a county, city, or other public agency shall not:
a. Approve a permit for a new groundwater well or for alteration of an existing well in a basin subject to the Sustainable
Groundwater Management Act and classified as medium- or high-priority without first obtaining written verification from a Groundwater Sustainability Agency managing the basin or area of the basin where the well is proposed to be located that groundwater extraction by the proposed well would not be inconsistent with any sustainable groundwater management program established in any applicable Groundwater
Sustainability Plan adopted by that Groundwater Sustainability 570
Agency and would not decrease the likelihood of achieving a sustainability goal for the basin covered by such a plan; or b. Issue a permit for a new groundwater well or for alteration of an existing well without first determining that extraction of groundwater from the proposed well is (1) not likely to interfere with the production and functioning of existing nearby wells, and (2) not likely to cause subsidence that would adversely impact or damage nearby infrastructure.
This paragraph shall not apply to permits for wells that will provide less than two acre-feet per year of groundwater for individual domestic users, or that will exclusively provide groundwater to public water supply systems as defined in section 116275 of the Health and Safety Code.
10. To address household or small community drinking water shortages dependent upon groundwater wells that have failed due to drought conditions, the Department of Water Resources shall work with other state agencies to investigate expedited regulatory pathways to modify, repair, or reconstruct failed household or small community or public supply wells, while recognizing the need to ensure the sustainability of such wells as provided for in paragraph 9.
11. State agencies shall collaborate with tribes and federal, regiona l, and local agencies on actions related to promoting groundwater recharge and increasing storage.
12. To help advance groundwater recharge projects, and to demonstrate the feasibility of projects that can use available high water flows to recharge local groundwater while minimizing flood risks, the Water Board and Regional Water Quality Control Boards shall prioritize water right permits, water quality certifications, waste discharge requirements, and conditional waivers of waste discharge requirements to accelerate approvals for projects that enhance the ability of a local or state agency to capture high precipitation events for local storage or recharge, consistent with water right priorities and protections for fish and wildlife. For the purposes of carrying out this paragraph, Division 13 (commencing with section 21000) of the Public Resources Code and regulations adopted pursuant to that Division, and Chapter 3 ( commencing with section 85225) of Part 3 of Division 35 of the Water Code and regulations adopted pursuant thereto are hereby suspended to the extent necessary to address the impacts of the drought. This suspension applies to (a) any actions taken by state agencies, (b) any actions taken by local agencies where the state agency with primary responsibility for the implementation of the directives concurs that local action is required, and (c) permits necessary to carry out actions under (a) or (b). The entities implementing these directives shall maintain on their websites a list of all activities or approvals for which these provisions are suspended.
13. With respect to recharge projects under either Flood-Managed Aquifer Recharge or the Department of Water Resources Sustainable 571
Groundwater Management Grant Program occurring on open and working lands to replenish and store water in groundwater basins that will help mitigate groundwater conditions impacted by drought, for any (a) actions taken by state agencies, (b) actions taken by a loca l agency where the Department of Water Resources concurs that local action is required, and (c) permits necessary to carry out actions under (a) or (b), Public Resources Code, Division 13 (commencing with section 21000) and regulations adopted pursuant to that Division are hereby suspended to the extent necessary to address the impacts of the drought. The entities implementing these directives shall maintain on their websites a list of all activities or approvals for which these provisions are suspended.
14. To increase resilience of.state water supplies during prolonged drought conditions, the Department of Water Resources shall prepare for the potential creation and implementation of a multi-year transfer program pilot project for the purpose of acquiring water from willing partners and storing and conveying water to areas of need.
15. By April 15, 2022, state agencies shall submit to the Department of Finance for my consideration proposals to mitigate the worsening effects of severe drought, including emergency assistance to communities and households and others facing water shortages as a result of the drought, facilitation of groundwater recharge and wastewater recycling, improvements in water use efficiency, protection of fish and wildlife, mitigation of drought-related economic or water-supply disruption, and other potential investments to support short- and long-term drought response.
IT IS FURTHER ORDERED that as soon as hereafter possible, this Order be filed in the Office of the Secretary of State and that widespread publicity and notice be given of this Order.
This Order is not intended to, and does not, create any rights or benefits, substantive or procedural, enforceable at law or in equity, against the State of California, its agencies, departments, entities, officers, employees, or any other person.
IN WITNESS WHEREOF I have hereunto set
my hand and caused the Great Seal of the
State of California to be affixed this 28th
day of March 2022.
I I
,:, .l · I'
t (.1 I
l~~-~--
GAVIN NEWSOM
Governor of California
ATTEST:
SHIRLEY N. WEBER, PH.D.
Secretary of State
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Board of Directors
Water Planning and Stewardship
4/12/2022 Board Meeting
9-2
Subject
Information on a proposed Water Shortage Emergency Condition and Emergency Water Conservation Program to Preserve Metropolitan’s Supplies in the State Water Project-Dependent Areas Executive Summary
As a result of record drought in California and extremely limited State Water Project (SWP) allocations, staff projects there will be insufficient supplies this year to meet the anticipated demands in areas staff has identified as the current SWP-dependent portions of Metropolitan’s service area (“SWP Dependent Area”). Therefore, staff is proposing that the Board take the following actions to reduce demands and preserve supplies in this area:
1. Express support for the Governor’s Executive Order N-7-22 on March 28, 2022, calling for all urban water suppliers to implement actions to reduce water use by 20-30 percent, depending on local conditions.
2. Declare that a Water Shortage Emergency Condition exists in the SWP Dependent Area.
3. Adopt the framework for a two-phase Emergency Water Conservation Program to reduce non-essential uses of water and preserve available water supplies for the greatest public benefit in the SWP Dependent Area. The first phase of this program would:
a. Limit landscape watering to one day per week in the SWP Dependent Area; b. Require those member agencies whose service areas encompass all or a portion of the SWP Dependent Area to adopt and implement effective enforcement mechanisms to ensure compliance with this limit; and
c. Impose volumetric penalties of up to $2,000 per acre-foot for non-compliance.
The one-day-per-week watering limitation would be effective immediately; any penalties for non- compliance would be assessed beginning June 1, 2022. If needed, the second phase of this program would involve a complete ban on landscape watering to further preserve available supplies in the SWP Dependent Area, with similar penalties for non-compliance.
4. Authorize the General Manager to finalize the terms for the Emergency Water Conservation Program consistent with the Board’s authorization and in conformance with the California Department of Water Resources’ (DWR) requirements to access SWP water for human health and safety purposes.
5. Require the General Manager to regularly report to the Board on the effectiveness of the first phase of the Emergency Water Conservation Program and authorize the General Manager to implement the second phase of the program if deemed necessary.
6. Require the General Manager to return to the Board with proposed modifications to the Emergency Water Conservation Program should he determine that implementation of the first and second phases of the program are not adequately preserving available supplies in the SWP Dependent Area. These modifications may include using a population-based approach to set limits or targets on per capita water use.
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Staff projects that water savings attained from these actions, if implemented by member agencies and other retail agencies, would preserve supply for essential human health and safety needs through the fall. However, if drought conditions persist or the water savings from these actions fall short, staff is prepared to recommend a complete ban on outdoor watering in the SWP Dependent Area.
A public hearing and Special Board Meeting is scheduled for April 26, 2022, for the Board to consider these actions, which would be taken pursuant to Water Code section 350 et seq., Water Code section 375 et seq., and other applicable authorities, and in accordance with Metropolitan’s Urban Water Management Plan and Water Shortage Contingency Plan, the Governor’s Executive Orders related to the drought, and recent directives from DWR concerning the use of SWP supplies.
Details
The Need to Access Human Health and Safety Supplies from the SWP For decades, Metropolitan has worked to improve its conveyance and distribution system to ensure flexibility in delivering SWP and Colorado River water throughout much of its service area. However, due to the depth and duration of the current drought, staff projects that Metropolitan will not be able to meet normal demands in the SWP Dependent Area utilizing existing resources. Despite best efforts to maximize available resources and operational flexibility this year, Metropolitan must seek additional human health and safety water allocated from DWR.
Beginning in water year 2020 (October 1, 2019, to September 30, 2020), watersheds supplying the SWP received well below-average precipitation. DWR classified water years 2020 and 2021 as dry and critically dry, respectively. Despite substantial precipitation in October and December 2021, precipitation in Northern California from January through March 2022 fell to the driest levels on record. In addition to reduced precipitation, California’s climate is warming, and the historical relationships between temperature, precipitation, and runoff are changing. In 2021, the DWR’s snowmelt runoff forecast over-estimated actual runoff by 68 percent. In 2022, despite DWR estimating runoff to a highly conservative 99th percentile, runoff forecasts for the Sacramento River dropped by 27 percent, further exacerbating supply planning.
The deteriorating hydrologic conditions led DWR to reduce the SWP Table A Allocation for 2022 from 15 to five percent of contract amounts on March 18, 2022. This follows a five percent SWP Table A Allocation in 2021. Coming in the third year of drought, this extremely low Table A allocation is insufficient to meet minimum human health and safety needs in the SWP Dependent Area. Accordingly, DWR will exercise a never-before- invoked provision of the water supply contract (Article 18a) that allows SWP water to be allocated on some other basis than Table A to meet minimum demands for domestic supply, fire protection, or sanitation. To that end, in October 2021 Metropolitan submitted a letter to DWR requesting delivery of certain human health and safety supplies to the SWP Dependent Area.
It should be noted that the boundaries of the SWP Dependent Area are not fixed and other Metropolitan supplies (such as previously stored SWP supplies from groundwater banking, carryover, flexible storage in Castaic Lake or Perris Lake, or north-of-Delta transfers) are also delivered through those service connections. The boundaries of the SWP Dependent Area have been reduced in recent years with the new ability to supply the Mills Water Treatment Plant from Diamond Valley Lake (May 2021) and through new water management programs such as the Operational Shift Cost Offset Program (May 2021) and the Reverse Cyclic Storage Program (February 2022).
Although the exact conditions to access human health and safety supplies are not finalized, DWR expects contractors receiving such supplies to mandate substantial reductions in water use consistent with these emergency drought circumstances. Further, DWR will require any water taken in 2022 for human health and safety purposes to be returned within five years, thus creating a water supply debt that effectively trims future Table A allocations and slows any storage recovery once the drought eases. Guidelines established by DWR are based on prior curtailment regulations adopted by the California State Water Resources Control Board (SWRCB) and could be further modified.
The Need for Demand Management in the SWP Dependent Area Of most importance, the normal water demands of Member Agencies currently lying within the SWP Dependent Area cannot be met in 2022 without a real risk of depleting supplies needed for human health 580
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and safety. Metropolitan must seek the water offered by DWR for human health and safety purposes and must conform to conditions that DWR places on its use.
In November 2021, the Board declared that specified emergency conditions exist within portions of the service area rather than across the entire regional system. The Board’s action on that date also stated that, “should drought conditions persist or worsen in the coming months, Metropolitan’s Board of Directors will consider declaring a water shortage emergency condition and imposing appropriate regulations, restrictions and penalties pursuant to California Water section 350 et seq., so as to conserve Metropolitan’s water supplies for the greatest public benefit with particular regard to domestic use, sanitation, and fire protection.” Unfortunately, current hydrologic conditions require this type of action.
In 2014, the Board adopted a revised Water Supply Allocation Plan (WSAP) to be used when a regional shortage exists. The WSAP establishes baseline usage, regional shortage levels, and a surcharge for a member agency’s aggregate water use above a predetermined allotment. The WSAP was designed and intended only for use during region-wide water shortages. The WSAP included provisions, based on Senate Bill X7-7 in 2009, to set a floor of minimum per capita usage of 100 gallons per person per day (gpcd) for total water use and 55 gpcd for indoor residential water use. Staff determined that the WSAP, with its regional focus, could not effectively or efficiently alleviate the circumstances of this current emergency.
Rather than modifying or reconstructing the WSAP for this rapidly developing emergency condition, a more expedient manner to preserve existing water supplies in the SWP Dependent Area is to reduce or eliminate non- essential uses in the directly affected areas. These non-essential uses (e.g., water for outdoor landscapes, filling swimming pools or fountains, or washing cars) could be curtailed through either price or non-price mechanisms.
A Framework for the Emergency Water Conservation Program Based on these principles, and through collaboration with the affected member agencies, staff recommends the Board authorize an Emergency Water Conservation Program that initially focuses on non-price mechanisms to reduce outdoor watering. The proposed Emergency Water Conservation Program includes three main elements to achieve the goal of lowering normal demand and preserving water for human health and safety purposes:
(1) Each member agency that currently receives SWP supplies 1 at the connections within the SWP Dependent
Area must implement and enforce a restriction on outdoor watering of no more than one day per week (and outdoor watering may later be completely banned).
(2) If a member agency either does not submit an acceptable plan to limit outdoor watering or if it inadequately enforces the plan, a penalty of up to $2,000 per acre-foot shall be assessed on all supplies delivered to that non-compliant agency at the designated connections. Importantly, for wholesale member agencies, the penalty would apply only to that portion of water delivered to one or more of their non-compliant retail agencies. The penalty would not be applied to the full delivery to the wholesale member agency if only a portion of its retailers were non-compliant. (3) An agency can entirely avoid these outdoor watering restrictions and penalties if it takes sufficient action to entirely eliminate its use of SWP supplies at the designated connections.
Outdoor watering ordinances. Staff is coordinating with the affected member agencies to define elements of one-day-per-week watering. Metropolitan would not specify, for example, either the day of the week or any even/odd house numbering rotation. Metropolitan will, however, require that member agencies limit watering times to 8 minutes per station (for most irrigation systems) to prevent substitution of water use from newly banned days to permitted days. Hand watering of trees would be exempt from the one-day-per-week restriction.
Each retail water provider receiving supply at the designated connections must submit municipal codes or ordinances adopted by their respective governing bodies which clearly restrict outdoor watering to no more than one day per week. Staff will report progress and performance with these restrictions monthly to the Board. The
1 SWP supplies are Metropolitan’s supply inclusive of SWP Table A, carryover storage, flexible storage, north-of-Delta transfers, and previously stored Table A supplies pumped or exchanged through water management programs along the California Aqueduct.
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call for one-day-per week watering would take place immediately upon the Board’s authorization of the Emergency Water Conservation Plan (planned for April 26, 2022). In order to avoid a volumetric penalty for water used beginning in June 2022, the retailer must adopt and begin enforcement of the restrictions by May 31, 2022.
Enforcement plans. Equally important to the outdoor watering restrictions on paper is the agency’s willingness and ability to enforce meaningful penalties for non-compliance. Staff is also coordinating with the member agencies in this area to develop a list of acceptable enforcement provisions, because enforcement mechanisms may vary widely. For example, one agency might use code enforcement officers to cite and educate customers.
Another agency might use advanced metering infrastructure to flag suspected outdoor water use on banned days electronically. Yet another agency might use tiered pricing penalties to assure compliance. The relevant enforcement principle is that the agency establishes a plan with real consequences to the consumer for inaction with either a one-day-per-week restriction or a ban on all outdoor water use. Further, an enforcement plan must be auditable with a clear and transparent way to verify enforcement. Similar to the outdoor watering ordinances, enforcement plans must be adopted by the retail agency’s governing body by May 31, 2022, to avoid the volumetric penalty beginning Jun. 1, 2022. If the retail agency is not the Metropolitan member agency, then the Metropolitan member agency must coordinate regulations to be enacted by the retail agency in the affected area.
Volumetric penalties. If a retail agency takes supply at the designated connection but does not adopt either an acceptable outdoor watering ordinance or enforcement plan, the volume of water purchased by the member agency at that connection for itself, or on behalf of the retail agency, shall be assessed a $2,000 per acre-foot penalty. This penalty will be charged to the member agency separate from all other applicable rates and charges for water service, as it is not a charge for service. For wholesale member agencies, the penalty would apply only to that portion of water delivered to one or more of their non-compliant retail agencies. The penalty would not be applied to the full delivery to the wholesale Member Agency if only a portion of its retailers were non-compliant.
The fine of $2,000 per acre-foot was selected to send a strong economic signal to reduce water use by complying with an outdoor watering ordinance and enforcement plan. Any penalties collected would be proportionately returned to member agencies (once compliant) to help defray enforcement or other costs incurred in conjunction with the proposed Emergency Water Conservation Program.
The outdoor watering ordinances, enforcement plans, and volumetric penalties listed above comprise the framework of the Emergency Water Conservation Plan. At the Special Board Meeting planned for April 26, 2022, the Board will consider whether to authorize the General Manager to finalize the plan’s terms.
Once final, the member agencies and retail agencies that are not member agencies would adopt ordinances and enforcement plans to avoid penalties to the Member agencies.
Assistance Provided to Member Agencies
Metropolitan will assist the member agencies in improving compliance with the watering restrictions and amplifying the serious message to consumers within the SWP dependent areas. Assistance will take these forms:
(1) Member Agency Administered Program (MAAP). Metropolitan will make available the full allotment of the MAAP funds to the affected Member agencies. Metropolitan will allow affected member agencies to access remain
ing funds in the MAAP for enforcement activities for the current biennium. For the upcoming biennium, approximately $4.2 million is proposed in the budget for the affected agencies.
These funds would be made immediately available beginning July 1, 2021. In addition, any penalties paid for non-compliance with the Emergency Water Conservation Plan would likewise be made available to agencies for enforcement. A member agency wishing to access these funds must still submit a proposal for approval by Metropolitan.
(2) Assistance with public messaging for drought awareness and water conservation. In Mar. 2022, the Board authorized staff to enter into a three-year contract with a media placement firm. From March – June 2022, up to $3.5 million is available to develop and purchase advertising. Likewise, up to $7.4 million is available in the proposed FY 2022-24 biennium budget. Metropolitan staff will coordinate closely with the public affairs staff of the affected member agencies to send an amplified and unified message to consumers about the one-day-per-week watering restrictions. Metropolitan will stand with the 582
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member agencies in communicating these emergency conditions. Staff expects many opportunities to amplify the message also through the earned media of press conferences and news media stories.
Planned Monitoring and Reporting
Staff will report to the Water Planning and Stewardship Committee each month on progress achieved by the Emergency Water Conservation Program. Further, staff will partner with the member agencies to collect and report changes in per-capita water use. Staff will monitor progress and report back to the Board using these types of tools:
Lists of agencies with compliant outdoor watering restrictions and enforcement plans. Change in Metropolitan water deliveries to the SWP Dependent Area. Total local supply production within the SWP Dependent Area. Water conservation and productions reports based on monthly data submitted to the SWRCB on residential per capita water use.
Disaggregated data from more than 5,000 flow-monitoring devices installed on single-family homes in Metropolitan’s service area (including approximately 1,500 within the SWP Dependent Area) showing changes in outdoor water use behavior.
Remote-sensing imagery showing change in “greenness” of outdoor landscapes (this is a developing research method).
Through this monthly monitoring and through regular communications with the member agencies, the General Manager would inform the member agencies and the Board in advance of the intent to implement the second phase of the Emergency Water Conservation Plan and ban all outdoor watering.
Continuing Actions to Improve the Plan if the Drought Persists or Compliance Falters The primary goals of the two-phase Emergency Water Conservation Plan are to (1) preserve Metropolitan’s scarce supplies in 2022; (2) minimize the amount of SWP human health and safety water that Metropolitan must access (and pay back); and (3) prepare for a potentially dry 2023. Preserving water supply now allows the potential for a new water year to develop, and the plan could be modified as conditions improve. Alternatively, despite the best efforts of agencies in the SWP Dependent Area to reduce or eliminate non-essential water use, continuing drought conditions may force further action.
Staff is actively exploring with the member agencies alternative approaches to reduce demands if the outdoor watering restrictions within the proposed Emergency Water Conservation Plan prove ineffective, disproportionate, or unworkable. Staff will develop a population-based method designed to share the remaining supply across the agencies using limits on per-capita water use rather than solely on outdoor watering restrictions.
The population-based method, or a hybrid approach combining outdoor watering restrictions with a backstop of a population-based limit, may prove to be a more viable tool to reduce water use. If an alternative approach is needed, the General Manager would seek Board approval before implementation.
Other Activities Supporting the SWP Dependent Area
Staff regularly reported to the Board and sought authority and funding to address system and supply shortages affecting the SWP Dependent Area. The Emergency Water Conservation Program is intended only as a short- term, stop-gap policy until lasting relief can be provided. Sample operational, physical, and supply actions to improve the supply
constraints include:
Adjusted distribution system operations to minimize SWP use and draw heavily on the Colorado River and stored supplies (January 2021).
Increased pumping on the Colorado River Aqueduct to the total capacity of eight pumps (intermittent operation since April 2021).
Initiated the Operational Shift Cost Offset Program (May 2021) and Reverse Cyclic Program (February 2022), which removed financial barriers to switching from or deferring SWP deliveries. Switched the source water feed to the Mills Water Treatment Plant from SWP to Diamond Valley Lake storage (May 2021).
Rebuilt and started up the Greg Avenue facility to pump ~100 acre-feet per day of Colorado River and stored supplies into the western portion of the distribution system (June 2021). 583
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Expanded conservation programs (December 2021).
Authorized agreements with other water agencies to improve management of SWP supplies (San Bernardino Valley MWD, San Diego County Water Authority, December 2021). Amended the capital investment plan to start planning and implementing infrastructure projects for the western portion of the distribution system (February 2022).
These actions are accelerating with the development of infrastructure and water supply portfolios through the Extreme Drought Assessment, which includes as its design condition three SWP allocations of five percent.
Policy
Metropolitan Water District Administrative Code Section 6410. Powers and Duties Metropolitan Water District Administrative Code Section 6412. Delegation of Executive and Administrative Powers
Metropolitan Water District Administrative Code Section 11104: Delegation of Responsibilities By Minute Item 20984, dated Nov. 1, 1960, the Board adopted Resolution 5838 and approved the execution of the SWP contract with DWR.
By Minute Item 49979, dated Dec. 9, 2014, the Board approved adjustments to the Water Supply Allocation Plan By Minute Item 50824, dated May 9, 2017, the Board adopted a resolution that declared a “Condition 1 –Water Supply Watch.”
By Minute Item 52378, dated May 10, 2021, the Board adopted the 2020 Urban Water Management Plan and the Water Shortage Contingency Plan
By Minute Item 52481, dated Aug. 17, 2021, the Board adopted a resolution that declared a “Condition 2 –Water Supply Alert.”
By Minute Item 52581, dated Nov. 9, 2021, the Board adopted a resolution which declared specified emergency conditions within the Metropolitan service area.
Fiscal Impact
Upon adopting the Emergency Water Conservation Plan, revenues from water transactions will likely decrease as member agencies reduce water demands. At the Mar. 22, 2022, budget workshop, staff presented a scenario with 100 thousand acre-feet fewer transactions for two years. This scenario—realistic in the magnitude of the needed demand management activity—would reduce revenues by approximately $100 million each year.
Ref# wrm12684345
4/7/2022
Brad Coffey
Manager, Water Resource Management
Date
4/8/2022
Adel Hagekhalil
General Manager
Date
584
Board of Directors
Board of Directors
4/26/2022 Board Meeting
7-1
Subject
Conduct a public hearing and adopt a resolution to (1) declare a Water Shortage Emergency Condition; (2) adopt the framework of an Emergency Water Conservation Program and authorize the General Manager to finalize the Program consistent with the framework; and (3) express support for the Governor’s Executive Order N-7-22; the General Manager has determined the proposed actions are exempt or otherwise not subject to CEQA Executive Summary
As a result of record drought and limited State Water Project (SWP) allocations, insufficient supply exists this year to meet normal Member Agency demand in the SWP Dependent Area. The SWP Dependent Area represents the current portion of Metropolitan’s service area that can only receive the district’s supplies from the SWP system. If Metropolitan mandates robust conservation measures in the SWP Dependent Area, the California Department of Water Resources (DWR) will provide additional supplies to meet human health and safety (HH&S) needs. Metropolitan staff has coordinated closely with the affected Member Agencies as the drought worsened, meeting with them more than 17 times since August 2021. Metropolitan has received extensive feedback on alternative approaches to increase supply or constrain demand.
As a result, staff proposes that the Board adopt the Resolution in Attachment 1, which authorizes the following actions to reduce demands and preserve supplies in the SWP Dependent Area:
1. Declare that a Water Shortage Emergency Condition exists in the SWP Dependent Area.
2. Adopt a framework for an Emergency Water Conservation Program to reduce non-essential water use and preserve available supply for the greatest public benefit in the SWP Dependent Area. The framework includes two paths for affected Member Agencies to reduce the use of Metropolitan’s SWP supplies and achieve compliance with the program.
a. The first path allows a Member Agency to restrict outdoor irrigation to one day per week (or its equivalent) beginning June 1, 2022. However, the General Manager is authorized to modify this restriction to ban all non-essential outdoor irrigation or enforce volumetric limits should conditions warrant as the year develops. Member Agencies that document enforcement of these restrictions will be deemed compliant with the Emergency Water Conservation Program. Non- compliant Member Agencies will face volumetric penalties of $2,000 per acre-foot on any water supplied by Metropolitan from the SWP system that exceeds certain monthly allocation limits. b. The second path allows a Member Agency to comply with monthly allocation limits directly. As described more fully below, the specific limit for each agency is based on an allocated share of the HH&S water provided by DWR and certain additional SWP supplies delivered through the SWP system. Member Agencies that meet these limits will be deemed compliant with the Emergency Water Conservation Program; non-compliant Member Agencies will face the same volumetric penalties as under the first path.
Importantly, under this framework, penalties will only be applied to Metropolitan supplies delivered from the SWP system. As such, if an affected Member Agency fully shifts its demands to other local supplies or Metropolitan’s Colorado River connections, it will not face penalties in a given month. 3 585
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The General Manager would be authorized to finalize terms of the Emergency Water Conservation Program consistent with this framework and the Board’s authorization, and in conformance with DWR’s requirements to access SWP water for HH&S purposes. The General Manager would be required to finalize these terms within 30 days of Board adoption.
As a final element of the framework, the General Manager would be required to report regularly to the Board on the Emergency Water Conservation Program’s effectiveness and to notify the Board and Member Agencies of any need to implement more stringent conservation requirements.
3. Express support for the Governor’s Executive Order N-7-22 on March 28, 2022, set forth in Attachment 2, calling for all urban water suppliers to implement actions to reduce water use by 20-30 percent, depending on local conditions.
Staff will actively monitor and report on water usage by each Member Agency within the SWP Dependent Area.
Regardless of the method of compliance chosen by each affected Member Agency, staff will report to the Board on water usage metrics in both volumes delivered and per capita for each agency.
The Board will consider these actions at a public hearing and Special Board Meeting on April 26, 2022. These actions would be taken pursuant to Water Code section 350 et seq., Water Code section 375 et seq., and other applicable authorities, and in accordance with Metropolitan’s Urban Water Management Plan (UWMP) and Water Shortage Contingency Plan (WSCP), the Governor’s Executive Orders related to the drought, and recent directives from DWR concerning the use of SWP supplies.
Details
Need to Access Human Health and Safety Supply from the SWP For decades, Metropolitan has worked to improve its conveyance and distribution system to ensure flexibility in delivering SWP and Colorado River water throughout much of its service area. However, due to the depth and duration of the current drought, Metropolitan cannot meet normal demands in the SWP Dependent Area with existing resources. Despite best efforts to maximize available resources and operational flexibility this year, and to provide the greatest public benefit, Metropolitan must seek additional HH&S water allocated from DWR.
Beginning in water year 2020 (October 2019 through September 2020), watersheds supplying the SWP received well-below-average precipitation. Despite substantial precipitation in October and December 2021, precipitation in Northern California from January through March 2022 fell to the driest levels on record. In addition, California’s warming climate is shifting the historical relationships between temperature, precipitation, and runoff. In 2021, DWR’s snowmelt runoff forecast overestimated actual runoff by 68 percent. In 2022, the runoff forecast has already dropped by 42 percent.
Deteriorating hydrologic conditions led DWR to reduce the SWP Table A allocation for 2022 from 15 to five percent of contract amounts on March 18, 2022. This follows a five percent SWP Table A allocation in 2021.
Coming in the third year of drought, this extremely low Table A allocation cannot meet minimum HH&S needs in the SWP Dependent Area. Accordingly, DWR will exercise a never-before-invoked provision of the SWP contract (Article 18a) that allows SWP water to be allocated on some other basis than Table A to meet minimum demands for domestic supply, fire protection, or sanitation. To that end, in October 2021, Metropolitan submitted a letter to DWR requesting delivery of certain HH&S supplies to the SWP Dependent Area. DWR accepted, in modified form, Metropolitan’s request for these deliveries on April 15, 2022.
DWR expects SWP contractors receiving these HH&S supplies to mandate substantial reductions in water use consistent with these emergency drought circumstances. Further, DWR requires any water taken in 2022 for HH&S purposes to be returned within five years, thus creating a water supply debt that effectively trims future Table A allocations and slows any storage recovery once the drought eases. DWR based these guidelines on curtailment regulations previously adopted by the California State Water Resources Control Board (SWRCB).
These guidelines could be further modified.
It should be noted that the boundaries of the SWP Dependent Area have not been fixed and other Metropolitan supplies (such as previously stored SWP supplies from groundwater banking, carryover, flexible storage in Castaic Lake or Perris Lake, or north-of-Delta transfers) are also delivered through this system. Metropolitan’s 4 586
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drought-mitigation actions have shrunk the SWP Dependent Area in recent years with a new ability to supply the Mills Water Treatment Plant from Diamond Valley Lake (May 2021) and through new water management programs such as the Operational Shift Cost Offset Program (May 2021) and the Reverse Cyclic Storage Program (February 2022).
Need for Demand Management in the SWP Dependent Area
In 2014, the Board adopted an updated Water Supply Allocation Plan (WSAP) for use when regional shortages exist. The WSAP established baseline usage for each Member Agency, regional shortage levels, and a surcharge for a Member Agency’s aggregate water use above a predetermined allotment. The WSAP included provisions, based on the Water Conservation Act of 2009 (Senate Bill X7-7), setting a minimum water use threshold of 100 gallons per capita per day (gpcd) for total water use.
However, the WSAP was designed and intended only for use during regionwide water shortages and requires a more extended period to implement. Staff has determined that the current WSAP cannot effectively or efficiently alleviate the circumstances of the current emergency in the SWP Dependent Area. Rather than reconstructing the WSAP for this rapidly developing emergency condition, a more expedient manner to preserve existing water supplies in the SWP Dependent Area is to reduce or eliminate non-essential uses in the directly affected areas.
These non-essential uses of potable water (e.g., water for outdoor landscapes, filling swimming pools or fountains, or washing cars) could be curtailed through either price or non-price mechanisms.
To that end, on November 9, 2021, Metropolitan’s Board adopted a resolution recognizing the statewide drought emergency, declaring specified emergency conditions to exist within portions of its service area, and calling on Member Agencies to take various actions to preserve Metropolitan’s supply from the SWP. Among other things, Member Agencies were urged to make all reasonably practicable changes in their operations and to implement mandatory conservation and efficiency measures to reduce the use of SWP supplies. That resolution further stated, “should drought conditions persist or worsen in the coming months, Metropolitan’s Board of Directors will consider declaring a water shortage emergency condition and imposing appropriate regulations, restrictions, and penalties pursuant to California Water Code section 350 et seq., so as to conserve Metropolitan’s water supplies for the greatest public benefit with particular regard to domestic use, sanitation, and fire protection.” Unfortunately, current hydrologic conditions require this emergency action.
Framework for the Emergency Water Conservation Program
The Emergency Water Conservation Program is intended to adaptively preserve supplies by reducing non-essential uses of water delivered through the SWP system1. Based on continued feedback from the Member Agencies, the framework outlined in the April 12, 2022, Board Information Letter 9-2 was modified to incorporate another more flexible alternative for agencies to achieve compliance based on monthly volumetric limits of SWP water available to Metropolitan.
The Emergency Water Conservation Program now includes two paths for affected Member Agencies to reduce use of Metropolitan’s supplies delivered from the SWP system. A penalty of $2,000 per acre-foot for all usage above certain limits would be enforced on Member Agencies for non-compliance. Penalties would be enforced monthly beginning in June.
Compliance with Outdoor Use Limits
Under the first compliance path, a Member Agency must adopt restrictions (via an ordinance or other appropriate means) that limit outdoor watering to one day per week (or its equivalent). Metropolitan will not specify the day of the week or any method of even/odd house numbering rotation to moderate distribution system impacts.
Metropolitan will, however, require that Member Agencies limit watering times to prevent substitution of water use from newly banned days to permitted days. In addition, the Member Agency must adopt a mechanism for
1 Metropolitan accesses the SWP system to deliver Table A, carryover storage, flexible storage, north-of-Delta transfers, and previously stored Table A supplies pumped or exchanged through water management programs along the California Aqueduct.
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banning all outdoor watering in the event the General Manager later determines that such a ban is necessary to preserve SWP supplies.
Of course, it is not sufficient simply to have these restrictions on paper. Member Agencies must be willing and able to impose meaningful penalties for non-compliance. As such, a Member Agency choosing this compliance path also must submit to Metropolitan an enforcement plan with real consequences to the consumer or end user for failing to abide by the one-day-per-week restriction or ban on outdoor water use. This enforcement plan must be auditable, with a clear and transparent way to verify enforcement if expected water use reductions fall short.
Both the watering restrictions and the plans for enforcing them at the retail level must be in place no later than June 1, 2022. If the affected Member Agency is not a retail water supplier, then it must coordinate with the appropriate retail agency(ies) within its service area to ensure that those agencies also adopt the requisite restrictions and enforcement plans prior to the deadline. Non-compliant Member Agencies will face volumetric penalties on water supplied by Metropolitan from the SWP system above certain limits. The volumetric limits are further described as part of the second compliance path below.
There are some important exceptions to these outdoor watering restrictions. The primary exception is to allow hand-watering of trees or other perennials to support their health and ability to recover once the outdoor watering restrictions are lifted. A second exception is to allow drip or other high-efficiency irrigation systems to apply water at a weekly volume consistent with the one-day watering restriction imposed on less efficient irrigation systems. Metropolitan will continue to coordinate with the affected Member Agencies on an appropriate formulation of these types of exemptions if a complete ban on outdoor watering is imposed.
If all water providers within a wholesale Member Agency choose the watering restrictions path, then no volumetric penalties would be assessed. If water providers within a wholesale Member Agency select different compliance paths, then the Member Agency would initially be assessed penalties calculated using the volumetric limits. Metropolitan would then work in good faith with the Member Agency to determine the appropriate volume of water to be assessed for any of the wholesale Member Agency’s water providers.
On behalf of the Member Agencies, Metropolitan submitted a request in October 2021 for supplemental HH&S deliveries for water necessary to prevent or suppress wildfires, particularly at the wildland-urban interface. The Department of Water Resources initially excluded these volumes from the HH&S allocation. However, DWR is now developing a mechanism for variances that may supplement the allocated water. Metropolitan will work with the Member Agencies and relevant fire authorities to submit a request for supplemental deliveries for these important public safety uses, if needed.
Because of uncertainty in the drought’s persistence and the speed and scale of demand response, the General Manager is authorized to ban all non-essential outdoor irrigation as early as September 1, should conditions warrant. The General Manager is further authorized to impose volumetric limits on all Member Agencies that originally chose this first path if regional demand response continues to lag. Imposition of volumetric limits would not occur prior to December 1.
Compliance with Volumetric Allocation Limits
The second path allows an affected Member Agency to achieve compliance by meeting an agency-specific volumetric delivery limit from Metropolitan every month. The volumetric limit for each agency will be based on their equivalent share of HH&S water available from DWR (roughl y based on 55 gallons per person per day
offset by available local supplies) plus any additional water Metropolitan is able to provide from the SWP system, allocated to each agency based on proportionate population. Member Agencies using Metropolitan’s supplies within these volumetric limits would not pay penalties. Any Member Agency that exceeds its volumetric limit would pay a $2,000 per acre-foot penalty on any water provided by MWD from the SWP system in excess of the limit for that month. Volumetric penalties would accrue and be billed monthly.
Staff has provided the Member Agencies with an initial estimate of their monthly volumetric limit. The General Manager will finalize this limit, along with all other elements of the Emergency Water Conservation Plan, within 30 days of Board adoption.
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Penalty Structure
The same penalty structure applies to both compliance paths. If an affected Member Agency chooses the outdoor use limit path and submits acceptable documentation before June 1, no penalties would be assessed. If the agency does not submit acceptable documentation, then volumetric penalties of $2,000 per acre-foot of use above certain volumetric limits will accrue beginning June 1.
Penalties will be assessed and billed monthly. If an agency misses the June 1 deadline for compliance, penalties will be charged for that entire month. Once in compliance, penalties stop accruing at the beginning of the following month. Penalties will be charged to the Member Agency independent from all rates and charges for water service, as it is not a charge for service.
These penalty structures are designed to send a strong economic signal to incentivize action. Any penalties collected will be returned to the affected Member Agencies through the Member Agency Administered Program (MAAP) to help defray enforcement or other costs incurred in conjunction with the proposed Emergency Water Conservation Program.
Importantly, this Emergency Water Conservation Program only applies penalties on Metropolitan supplies delivered from the SWP system. As such, any Member Agency that fully shift demands to other local supplies or to Metropolitan’s Colorado River connections will not face penalties in a given month. Under no circumstances would a penalty be paid on any Colorado River water delivered to that agency.
The General Manager will establish procedures for reviewing or redetermining any penalties assessed on the Member Agency pursuant to the Emergency Water Conservation Program. The General Manager shall review any appeals submitted in a timely manner. The General Manager shall also establish reasonable procedures for the filing of appeals to the Board from his determination.
Monitoring and Reporting
Staff will report to the Water Planning and Stewardship Committee each month on progress achieved by the Emergency Water Conservation Program. This will include, at a minimum, monthly tracking of Metropolitan water deliveries and remaining available supplies to the SWP Dependent Area. Metropolitan will also inform the Board of the compliance status of the affected Member Agencies and of any penalties assessed.
Through monthly monitoring and regular communication, the General Manager will inform the Member Agencies and the Board in advance of any need to implement a ban on all outdoor watering (for implementation no earlier than September 1) or a need to implement volumetric limits for all affected agencies (for implementation no earlier than December 1).
Termination of the Emergency Water Conservation Program The Emergency Water Conservation Program shall continue through June 30, 2023, unless the Board of Directors lifts the action before that date.
Assistance Provided to Member Agencies
Metropolitan will assist the Member Agencies in their complying with the watering restrictions and amplifying the serious message to consumers within the SWP-dependent areas. Assistance will take these forms:
(1) Member Agency Administered Program. Metropolitan will make MAAP funds fully available to the affected Member Agencies for enforcement activities in the FY 2020/21 and 2021/22 budget. For the FY 2022/23 and 2023/24 biennial budget, approximately $4.2 million of funding is available for the affected agencies. These funds would be made immediately available beginning July 1, 2022. In addition, any penalties paid would likewise be made available to agencies for enforcement. A Member Agency wishing to access these funds must submit a proposal for approval by Metropolitan. Uses of MAAP funding could include drought-related actions, messaging, and code enforcement. Upon termination of the Emergency Water Conservation Program, MAAP funding and procedures would revert back to the previously established guidelines.
(2) Assistance with Public Messaging for Drought Awareness and Water Conservation. In March 2022, the Board authorized staff to enter into a three-year contract with a media placement firm. Through 7 589
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June 30, 2022, up to $4.5 million is available to develop and purchase advertising. Likewise, up to $7.4 million is available in the subsequent biennial budget. Metropolitan staff will coordinate closely with the public affairs staff of the affected Member Agencies to send an amplified and unified message to consumers about the one-day-per-week watering restrictions. Metropolitan will stand with the Member Agencies in communicating these emergency conditions. Staff expects many opportunities to amplify the message also through the earned media of press conferences and news media stories.
Support of the Governor’s Executive Order N-7-22
The Board is requested to support Governor Newsom’s Executive Order N-7-22 of March 28, 2022 (Attachment 2). This Executive Order incorporates orders and provisions contained in the Governor’s earlier proclamations of April 21, 2021, May 10, 2021, July 8, 2021, and October 19, 2021. Though Metropolitan will not mandate compliance on a Member Agency’s conformance with Executive Order N-7-22, the affected Member Agencies are strongly called upon to do the following:
Implement at least Level 2 of their Water Shortage Contingency Plans to achieve at least a 20 percent reduction in water use.
Adopt and enforce the State Water Resources Control Board’s (SWRCB) emergency regulations prohibiting wasteful water uses.
Adopt and enforce the SWRCB’s proposed prohibition (once adopted) of the use of potable water for irrigating non-functional turf at commercial, industrial, and institutional sites.
Other Activities Supporting the SWP Dependent Area
Staff regularly reported to the Board and sought authority and funding to address system and supply shortages affecting the SWP Dependent Area. The Emergency Water Conservation Program is intended only as a short- term, stop-gap measure until lasting relief can be provided. A selection of the main operational, physical, and supply actions taken to improve the supply constraints include:
Adjusted distribution system operations to minimize SWP use and draw heavily on the Colorado River and stored supplies (January 2021).
Increased pumping on the Colorado River Aqueduct to the total capacity of eight pumps (intermittent operation since April 2021).
Initiated the Operational Shift Cost Offset Program (May 2021) and Reverse Cyclic Program (February 2022), which removed financial barriers to switching from or deferring SWP deliveries. Switched the source water feed to the Mills Water Treatment Plant from SWP to Diamond Valley Lake storage (May 2021).
Rebuilt and started up the Greg Avenue facility to pump ~100 acre-feet per day of Colorado River and stored supplies into the western portion of the distribution system (June 2021). Expanded conservation programs (December 2021).
Authorized agreements with other water agencies to improve management of SWP supplies (San Bernardino Valley MWD, San Diego County Water Authority, December 2021). Amended the capital investment plan to start planning and implementing infrastructure projects for the western portion of the distribution system (February 2022). Authorized purchase of transfer supplies (April 2021 and April 2022) These actions are accelerating with the development of infrastructure and water supply portfolios through the Extreme Drought Assessment, which includes as its design condition three SWP allocations of five percent.
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Policy
Metropolitan Water District Administrative Code Section 6410: Powers and Duties Metropolitan Water District Administrative Code Section 6412: Delegation of Executive and Administrative Powers
Metropolitan Water District Administrative Code Section 11104: Delegation of Responsibilities Operating Policy A-06, Emergency Management and Business Continuity By Minute Item 50824, dated May 9, 2017, the Board adopted a resolution which declared a “Condition 1 –Water Supply Watch.”
By Minute Item 51166, dated April 10, 2018, the Board authorized changes to Member Agency Administered Program.
By Minute Item 52481, dated August 17, 2021, the Board adopted a resolution which declared a “Condition 2 – Water Supply Alert.”
By Minute Item 52581, dated November 9, 2021, the Board adopted a resolution which declared specified emergency conditions within the Metropolitan service area.
California Environmental Quality Act (CEQA)
CEQA determination for Option #1:
The proposed actions are being taken to address a water shortage emergency condition in portions of Metropolitan’s service area and are intended to conserve scarce water supplies in those areas to ensure that near- term human health and safety needs can be met. Accordingly, these actions are necessary to prevent or mitigate an immediate emergency and are not subject to CEQA pursuant to Public Resources Code Section 21080(b)(4) and Section 15269(c) of the State CEQA Guidelines. Furthermore, the proposed actions are being taken in accordance with Executive Order EO N-7-22 issued by the Governor on March 28, 2022, which directs that specific actions be taken in response to the extreme drought conditions in California. Among other things, all urban water suppliers must, at a minimum, implement the actions identified in their Water Shortage Contingency Plans (WSCPs) for a shortage level up to 20 percent. This order expressly suspends the requirements of CEQA and the State CEQA Guidelines with respect to this directive. Likewise, Water Code Section 10652 statutorily exempts implementation of actions listed in and taken pursuant to an agency’s WSCP. Finally, where it can be seen with certainty that there is no possibility that the proposed actions may have a significant impact on the environment, those actions are not subject to CEQA pursuant to Section 15061(b)(3) of the State CEQA Guidelines.
Board Options
Option #1
Adopt the Resolution shown in Attachment 1 and:
a. Declare that a Water Shortage Emergency Condition exists in the SWP Dependent Area b. Adopt the framework of an Emergency Water Conservation Program and authorize the General Manager to finalize the Program consistent with the framework. c. Express support for the Governor’s Executive Order N-7-22.
Fiscal Impact: Upon adopting the Emergency Water Conservation Program, revenues from water transactions will likely decrease as Member Agencies reduce water demands. At the March 22, 2022, budget workshop, staff presented a scenario with 100,000 acre-feet fewer transactions each year. This scenario— realistic in the magnitude of the needed demand management activity—could reduce revenues by approximately $100 million in fiscal year 2022/23.
Business Analysis: Implementing the Emergency Water Conservation Program would preserve available water supplies for the greatest public benefit and would avoid the potential use of emergency storage from DWR reservoirs
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Option #2
Modify the Resolution in Attachment 1 and the recommended actions to modify actions or penalties to conserve available water supplies for the greatest public benefit.
Fiscal Impact: Unknown fiscal impact of water shortage Business Analysis: Adjusting the proposed action may accelerate or slow demand management activities initiated by the Emergency Water Conservation Program. Depending on the modification, changes may also preclude Metropolitan from receiving needed human health and safety supplies from DWR Option #3
Do not adopt the Resolution in Attachment 1 nor take the recommended actions.
Fiscal Impact: Unknown fiscal impact of water shortage Business Analysis: Delaying the decision to implement an Emergency Water Conservation Program would reduce the opportunity to conserve scarce supplies available to the region in 2022. Delaying the implementation may also preclude Metropolitan from receiving needed human health and safety supplies from DWR
Staff Recommendation
Option # 1
4/22/2022
Brad Coffey
Manager, Water Resources Management
Date
4/22/2022
Adel Hagekhalil
General Manager
Date
Attachment 1 – Resolution of the Board of Directors of the Metropolitan Water District of Southern California Declaring a Water Shortage Emergency Condition and Implementing an Emergency Water Conservation Program in Portions of its Service Area
Attachment 2 – Executive Department State of California Executive Order N-7-22
Ref# wrm12687675
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RE
SOLUTION OF THE BOARD OF DIRECTORS
OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA
DECLARING A WATER SHORTAGE EMERGENCY CONDITION AND IMPLEMENTING AN
EMERGENCY WATER CONSERVATION PROGRAM IN PORTIONS OF ITS SERVICE AREA W
HEREAS, Severe Drought Conditions Are Constraining Available Water Supplies from Northern California.
Beginning in water year 2020 (October 1, 2019, to September 30, 2020), the watersheds supplying the California State Water Project (SWP) received below-average precipitation. The California Department of Water Resources (DWR) classified water years 2020 and 2021 as dry and critically dry, respectively. Persistent dry conditions will likely result in a critically dry designation for water year 2022.
The three-year sequence of water years 2020 - 2022 (October 1, 2019, through September 30, 2022) is projected to be the driest on record in California for statewide precipitation. Precipitation in Northern California during the three months from January through March 2022 was the driest on record for that region.
In addition to reduced precipitation since 2020, California’s climate is transitioning to a warmer setting in which historical relationships among temperature, precipitation, and runoff are changing. In 2021, the DWR’s snowmelt runoff forecast over-estimated the runoff that occurred by 68 percent. In 2022, DWR’s median runoff forecast for the Sacramento River dropped from 16.7 to 9.7 million acre-feet, a reduction of 42 percent.
WHEREAS, Governor Newsom Has Declared a State of Emergency to Exist in All California Counties Due to These Severe Drought Conditions.
On October 19, 2021, Governor Gavin Newsom declared a state of emergency to exist in all California counties due to worsening drought conditions. This proclamation follows other increasingly expansive drought declarations and executive orders that have been issued since April 2021.
At that time, Governor Newsom called on Californians to re-double their efforts to reduce water use by 15 percent and for local and regional water agencies to implement their Water Shortage Contingency Plans (WSCPs) “at a level appropriate to local conditions that takes into account the possibility of a third consecutive dry year.”
WHEREAS, Governor Newsom Has Issued an Executive Order Calling on Urban Water Suppliers to Activate Their Water Shortage Contingency Plans.
As part of their Urban Water Management Plans (UWMPs), local and regional water providers are required to prepare and adopt WSCPs. These plans identify voluntary and mandatory response actions that will be taken under various water shortage conditions. These actions include mandatory conservation activities to reduce water use by 10 to 50 percent, depending on the severity of the shortage.
Due to worsening drought conditions, including a record-breaking dry period in January and February, Governor Newsom issued Executive Order N-7-22 on March 28, 2022, specifically requiring all urban water suppliers to implement, at a minimum, the response actions identified in their WSCPs for a shortage level of 20 percent (Level 2).
This executive order further encouraged urban water suppliers to conserve more than the minimum required and to voluntarily activate more stringent local requirements based on a shortage level of up to 30 percent (Level 3).
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HEREAS, Metropolitan’s State Water Project Supplies Have Been and Are Being Curtailed.
On March 18, 2022, DWR reduced the SWP Table A allocation for 2022 from 15 to only five percent of contract amounts. Table A allocations for 2020 and 2021 were 20 and five percent, respectively. The last three years marks the lowest three-year combined deliveries of allocated water in the history of the SWP.
Three consecutive years of low Table A allocations have strained water supplies for portions of Metropolitan’s service area that currently are served primarily through the SWP. Referred to as the “SWP Dependent Area,” this area has limited or no access to Colorado River Supplies.
As a result, there will be insufficient SWP supplies this year to meet the minimum human health and safety (HH&S) needs in the SWP Dependent Area. HH&S needs are defined as “the amount of water necessary for prevention of adverse impacts to human health and safety, for which there is no feasible alternative supply.” In general, HH&S needs are limited to domestic supply, sanitation, public health and fire protection purposes, and cannot exceed 55 gallons per person per day.
To supplement the low Table A allocation, DWR has agreed to provide additional SWP supplies to SWP contractors if necessary to fulfill their unmet HH&S needs. However, DWR is requiring any SWP contractor receiving such supplies to impose mandatory restrictions on water use within its service area consistent with these emergency circumstances. DWR also is requiring any SWP water accessed for HH&S purposes be returned to the state within five years or as wetter conditions return.
WHEREAS, Metropolitan’s SWP Supplies Are Essential to Meet the Total Demands of Its Member Agencies.
Over the past 20 years, the SWP has provided about 30 percent of the region’s total water needs and a portion of the supply delivered to each of Metropolitan’s 26 Member Agencies.
Diamond Valley Lake, Metropolitan’s largest surface water reservoir and source of dry-year and emergency water supplies, has only been replenished with SWP supplies since the discovery of Quagga mussels in Colorado River water in Jan. 2007.
Under a five percent Table A allocation, Metropolitan cannot meet normal demands in the SWP Dependent Area, serve SWP supplies to other Member Agencies, or replenish storage in Diamond Valley Lake.
WHEREAS, Metropolitan, Its Member Agencies, and Others in the Region Have Taken Extraordinary Steps to Reduce Demands and Bolster Supplies.
In conjunction with its Member Agencies, counties, cities, and wholesale and retail water suppliers, Metropolitan decreased potable water demands within the service area by 40 percent, roughly 80 gallons per person per day, since 1990.
Metropolitan has invested $1.5 billion in conservation, local water recycling, and local groundwater recovery since 1990, resulting in a cumulative savings of nearly 7.6 million acre-feet.
Metropolitan h as invested more than $3 billion in increasing storage capacity with Diamond Valley Lake and conveyance capacity with the Inland Feeder to capture SWP supply when available for later use in dry years.
Local water suppliers and communities have also made multi-billion-dollar strategic and forward-looking investments in water conservation (within and outside the MWD service area), water recycling, stormwater capture and reuse, groundwater storage, and other strategies to improve drought resilience.
Water conserved throughout the service area, among other things, has helped preserve storage in Metropolitan’s diverse storage portfolio during these dry conditions.
Continued action by Southern California residents to conserve water and extend local groundwater and surface water supplies will provide greater resilience if the drought continues in future years. 12 594
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etropolitan established the Member Agency Administered Program (MAAP) to assist Member Agencies in implementing local conservation activities. A portion of the funded projects can be used when water savings are not readily quantifiable, such as drought messaging and local water-use related code enforcement programs.
WHEREAS, Metropolitan and Its Member Agencies Have Taken Specific Actions to Preserve SWP Supplies.
Metropolitan and its Member Agencies have invested billions of dollars to preserve and enhance the availability and utilization of local supplies and, in turn, to decrease the overall use of Metropolitan’s imported supplies.
Metropolitan has established water management programs to increase Member Agency flexibility to shift from or temporarily defer taking Metropolitan’s supply from the SWP.
In 2021 and 2022, Metropolitan made targeted investments in its delivery system to reduce Member Agency dependency on SWP supplies. These investments have significantly improved operational flexibility, allowing delivery of water from either of Metropolitan’s two imported supply sources to most of the service area.
Metropolitan’s Member Agencies have, where feasible, operated their systems to reduce dependency on Metropolitan’s supply delivered through service connections fed from the SWP system.
On August 17, 2021, Metropolitan’s Board adopted a resolution declaring a “Condition 2 – Water Supply Alert” to preserve Metropolitan’s supply for the region.
On November 9, 2021, Metropolitan’s Board adopted a resolution recognizing the statewide drought emergency, declaring specified emergency conditions to exist within portions of its service area, and calling on Member Agencies to take various actions to preserve Metropolitan’s supply from the SWP. Among other things, Member Agencies were urged to make all reasonably practicable changes in their operations and to implement mandatory conservation and efficiency measures to reduce the use of SWP supplies.
WHEREAS, Metropolitan Has Determined that It Must Take Additional Actions Immediately to Conserve the Remaining Available SWP Supplies.
In December 2014, Metropolitan’s Board adopted a revised Water Supply Allocation Plan (WSAP) pursuant to which it may determine that a regional shortage exists, establish a regional shortage level, and impose an Allocation Surcharge on Member Agencies for water use above a predetermined allotment. The WSAP was designed and intended only for use during periods of regionwide water shortages and requires a more extended period to implement. As such, the current WSAP cannot effectively or efficiently address the water shortages anticipated to occur this year in the SWP Dependent Area.
Likewise, while actions being taken pursuant to the November 9, 2021, Board resolution are helpful, they are not sufficient to address in a timely manner the urgent circumstances present in the SWP Dependent Area.
That resolution specifically noted that if drought conditions persisted or worsened, Metropolitan’s Board would consider declaring a Water Shortage Emergency Condition and imposing appropriate regulations, restrictions and penalties to conserve Metropolitan’s water supplies.
Unfortunately, drought conditions have persisted, and the water supply outlook has worsened, particularly with respect to SWP supplies. Accordingly, Metropolitan believes it is necessary, desirable, and in the best interests of Metropolitan and its Member Agencies to declare that a Water Shortage Emergency Condition exists in the SWP Dependent Area, to adopt the framework for an Emergency Water Conservation Program encompassing the SWP Dependent Area, and to take certain other actions as set forth below and described in Board Letter 7-1 dated April 26, 2022, so as to reduce water use and preserve remaining SWP supplies.
Adopting an Emergency Water Conservation Program is consistent with actions taken by our Member Agencies and other retail agencies and will assist Metropolitan and its Member Agencies in public outreach efforts to communicate the severity of the current drought and the need for conservation and collective action. 13 595
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etropolitan further believes that it is necessary, desirable, and in the best interest of Metropolitan to work closely with Member Agencies to identify near-term actions to address this drought emergency and to grant the General Manager certain additional powers and authorities to assist in carrying out such activities promptly.
WHEREAS, Metropolitan Is Authorized and Required to Take These Additional Actions.
Article X, Section 2 of the California Constitution requires all water resources in the state to be put to beneficial use and prohibits the waste or unreasonable use of such resources. What constitutes reasonable use is dependent on exigent circumstances, and may change during periods of drought.
Water Code Section 350 et seq. requires the distributor of a public water supply to declare that a water shortage emergency condition exists “whenever it finds and determines that the ordinary demands and requirements of water consumers cannot be satisfied without depleting the water supply needed for human consumption, sanitation, and fire protection.” Upon making such a declaration, the water supplier is authorized to adopt such regulations and restrictions as will, in its sound discretion, “conserve the water supply for the greatest public benefit with particular regard to domestic use, sanitation, and fire protection.” Water Code Section 375 et seq. authorizes retail and wholesale water providers to adopt water and enforce conservation programs, which may include specific water-use limitations. Water providers may impose civil and criminal penalties for violating the requirements of such programs and/or may enforce water-use limitations by imposing “a volumetric penalty in an amount established by the public entity.” Water Code Section 10620 et seq. requires every urban water supplier to prepare and adopt an UWMP, which must include a WSCP to be implemented during times of shortage. Governor Newsom has directed all urban water suppliers to implement, at a minimum, the response actions identified in their WSCPs for a shortage level of 20 percent (Level 2).
DWR is requiring any SWP contractor receiving HH&S supplies to impose mandatory restrictions on water use within its service area consistent with these emergency circumstances.
The Metropolitan District Act and Metropolitan’s Administrative Code authorize and support taking specific actions to address the current drought emergency. In particular, Administrative Code Section 4512 provides that deliveries of water “shall be subject to operational, supply or demand conditions, as determined by the General Manager.”
WHEREAS, Metropolitan Held a Noticed Public Hearing to Receive Input on These Additional Actions.
On April 26, 2022, a public hearing was held to receive input, comments, and/or protests on the proposed declaration of a Water Shortage Emergency Condition and adoption of the framework of an Emergency Water Conservation Program for the SWP Dependent Area, as well as the other actions set forth below and described in Board Letter 7-1 dated April 26, 2022. A copy of Board Letter 7-1 was posted on Metropolitan’s website (https://mwdh2o.legistar.com/Calendar.aspx) and was available for review prior to the hearing.
Notice of this hearing was published on April 14, 2022, in six different newspapers of general circulation encompassing all six counties within Metropolitan’s service area: Los Angeles Times (Los Angeles County), Orange County Register (Orange County), Inland Valley Daily Bulletin (San Bernardino County), Ventura County Star (Ventura County), Press Enterprise (Riverside County), and San Diego Union Tribune (San Diego County).
At this public hearing, Metropolitan’s Board received information, comments, testimony, and other evidence provided by Board members, Member Agency representatives, staff, and the public pertaining to these matters, and all persons present were given an opportunity to be heard.
N
OW, THEREFORE, BE IT RESOLVED that the Board of Directors of The Metropolitan Water District of Southern California hereby declares a Water Shortage Emergency Condition to exist in the SWP Dependent Area. Per this declaration, the Board calls on all Member Agencies to:
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(1
) Make all possible changes in their operations to reduce their use of Metropolitan’s SWP supplies. (2) Immediately mandate and implement such conservation requirements, water-use efficiency measures, and drought-related limitations consistent with their WSCPs and substantively conforming to the Emergency Water Conservation Program.
BE IT FURTHER RESOLVED that the General Manager is hereby authorized and directed to finalize and implement an Emergency Water Conservation Program in the SWP Dependent Area, subject to the following conditions:
(1) The Emergency Water Conservation Program shall conform to the framework outlined in Board Le
tter 7-1, dated April 26, 2022. (A copy of this Board Letter may be accessed through M
etropolitan’s website at https://mwdh2o.legistar.com/Calendar.aspx.) This framework includes volumetric penalties for non-compliance of up to $2,000 per acre-foot for use exceeding specified allocation limits.
(2) The Emergency Water Conservation Program shall include a provision for Member Agencies in the S
WP Dependent Area to use 100 percent of their MAAP allocations for any conservation-related activities and projects, even where the water savings from such activities and projects are not readily quantifiable. Uses of MAAP funding could include drought-related actions, messaging, and code enforcement. Upon termination of the Emergency Water Conservation Program, the MAAP allocations would revert back to the previously established formula for non-documented water-saving pr
ogram funding requests.
(3) The General Manager shall consult with all affected Member Agencies on the final terms of the E
mergency Water Conservation Program.
(4) The General Manager shall finalize the Emergency Water Conservation Program within 30 days of Board adoption of this resolution.
(5
) The Emergency Conservation Program shall continue through Jun. 30, 2023, unless otherwise terminated as described below.
BE IT FURTHER RESOLVED that the General Manager is hereby directed to continue the actions and activities specified in August 17, 2021, and November 9, 2022, Board resolutions, except as expanded or limited herein.
BE IT FURTHER RESOLVED that the Board hereby declares Metropolitan’s support for the Governor’s Executive Order N-7-22 and directs staff to work with the relevant state agencies to implement the Executive Order.
BE IT FURTHER RESOLVED that, should drought conditions persist in the coming months, or should demand management actions not sufficiently preserve available supplies, the General Manager may impose additional conditions or requirements as part of the Emergency Water Conservation Program described in Board Letter 7-1, which may include a prohibition on all outdoor uses of water or a requirement for affected Member Agencies to conform to specified volumetric limits.
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EREBY CERTIFY that the foregoing is a full, true, and correct copy of a resolution adopted by the Board of Directors of The Metropolitan Water District of Southern California at its meeting held on Apr. 26, 2022.
Secretary of the Board of Directors
of The Metropolitan Water District
of Southern California
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PUBLIC WORKS AND TRANSPORTATION COMMITTEE
AGENDA REPORT
REPORTS
AGENDA ITEM NO. D.5
DATE: December 14, 2021
TO: Public Works and Transportation Committee
FROM: Michael Wolfe, Public Works Director, (805) 385-8055, [email protected]
SUBJECT: Update to the Public Works and Transportation Committee Drought Condition Report of October 26, 2021. (0/10/5)
RECOMMENDATION
That the Public Works and Transportation Committee:
1. Recommend that the City Council approve the City stay in a Stage 2 water shortage condition pursuant to the City Council approved Resolution No. 14,741;
2. Provide feedback on the water conservation outreach, education, and enforcement plan; and
3. Provide feedback on a potential new resolution with the appropriate water shortage stage and conservation measures should a 0% allocation be finalized in Spring 2022.
Please click the following link to view the required Measure M pre-recorded presentation video: https://youtu.be/t6Sz_oR1Rgs
BACKGROUND
On October 26, 2021, staff provided a drought condition update and presentation to the Public Works and Transportation Committee (PWTC). At the meeting, staff was asked to address questions and concerns related to the City’s conservation compliance, enforcement, penalties and credits and to return with an updated staff report. Additionally, California’s drought condition and recommendations from the Department of Water Resources are frequently changing, as well as the actions taken by Metropolitan Water District and Calleguas Municipal Water District. As such, new information has since come forth and has been added to the updates below. Because of the fluid nature of this topic, staff may provide additional information at the PWTC meeting.
Additionally, staff anticipates bringing back another drought update to the PWTC and the City Council in Spring 2022 when more information is known about the snowpack levels and other data that may impact water supplies to the City.
Latest Drought Information Update
On October 19, 2021, Governor Gavin Newsom issued a proclamation expanding the drought emergency statewide. The governor’s proclamation now includes the eight counties that had previously not been included under the state of emergency: Imperial, Los Angeles, Orange, Riverside, San Diego, San Bernardino, San Francisco and Ventura. The proclamation requires all water suppliers to implement water shortage contingency plans that are responsive to their local conditions, preparing for the likelihood of a third consecutive dry year. 599
The proclamation also provides assistance and funding under the California Disaster Assistance Act. Governor Newsom is urging Californians to increase their efforts to attain the 15 percent voluntary water use reduction.
The Metropolitan Water District (Met) states that “despite extraordinary measures taken by Met, it’s member agencies, and others in Southern California, further and immediate action is needed to preserve and stretch limited State Water Project (SWP) supplies and urgent action is also necessary to slow the draw from Met’s SWP supplies stored in surface reservoirs and groundwater basins throughout the State.” On November 9, 2021, Met’s Board of Supervisors adopted a resolution declaring a regional drought emergency. The resolution calls upon member agencies to take all reasonable measures to reduce their dependence on SWP supplies for the duration of the emergency and to implement appropriate voluntary and mandatory drought actions from their Water Shortage Contingency Plans. Specifically, the resolution calls upon all member agencies to:
Review the adequacy of their past drought response measures. Make all reasonably practicable changes in their operations to reduce their use of SWP supplies. Immediately implement such conservation requirements, water-use efficiency measures, and drought- related limitations as are appropriate to reduce the use of SWP supplies, including those SWP supplies already in storage.
Each year, California’s Department of Water Resources (DWR) provides an allocation percentage using a Water Supply Allocation Plan formula. Allocations represent the amount of SWP water that DWR will deliver for the year and is reviewed monthly based on several factors, such as water in storage, environmental requirements, and rain and snow runoff projections. The allocated supply of water is sold to Met, which then wholesales it to Calleguas, which then sells it to the City of Oxnard. For 2022, Met anticipates an initial SWP allocation as low as 0% given the extremely dry conditions and low storage in major reservoirs. A 0% allocation means Calleguas will not receive additional SWP supplies, resulting in Calleguas utilizing their existing water supplies to meet their customer water demands. The allocation in SWP usually increases from the initial announcement, but this is highly dependent on precipitation and snowpack in the Sierras over the next winter months. If the final allocation for 2022 is anything above 0%, even 5% as they were in Calendar Year 2021, then Met should have more flexibility in meeting demands for its SWP dependent areas and therefore, Oxnard should not be heavily impacted.
Should a 0% allocation be finalized in April/May, a health and safety needs only scenario (the worst-case scenario), Met would lose its flexibility in meeting demands for state water project-dependent areas and would be limited by the State to serve potable water for “health and safety needs” only. This has the potential to mean “no outdoor water use” for a portion of the calendar year 2022.
Following in line with Met’s actions, Calleguas Municipal Water District (CMWD) adopted Resolution No. 2033 on November 17, 2021 calling on all purveyors (City of Oxnard) to reduce water consumption demand by 15% compared to 2020 levels. The resolution places responsibility on the purveyor to implement the appropriate water conservation measures to achieve the 15% reduction. CMWD’s potential measures for purveyors to enact to achieve reduction include:
Restrict irrigation hours to evening and early morning hours. Prohibit non-essential irrigation (ex., golf courses and parks) and limit water use for essential irrigation. Restrict or disallow irrigation entirely.
Disallow the use of water to fill ornamental lakes, ponds, pools, and fountains. Limit or disallow the washing of vehicles.
Disallow the spraying of outdoor paved surfaces and using potable water for street cleaning. 600
Restrict the use of water from fire hydrants for construction purposes. Implement a rate structure for charges and penalties for water use restriction violations.
Some of the proposed conservation measures, such as restriction on irrigation hours and no spraying of outdoor paved surfaces, are already implemented under Oxnard’s Stage 2 water shortage, Resolution No. 14,741 and Oxnard City Code on prohibited water waste, Sec. 22-136.
If insufficient SWP supplies fail to develop in early 2022, CMWD may invoke powers under California Water Code Section 350 to implement mandatory actions.
DISCUSSION
Follow-up to Committee and City Manager’s Questions:
The Oxnard Water Division takes the following actions when water waste is reported or observed:
Education and Enforcement Hierarchy
1st
Violation
Courtesy
Notice/
Educational
Letter
7 day Post
Letter
Follow-up
Phone Call
For a first violation, the city may give written notice of the fact of such violation to the customer by personal service, by delivery through regular United States mail addressed to the customer's residence, or any other means reasonably designed to notify the customer of the violation. The notice contains a description of violation, lists all prohibited water waste, and provides resources such as rebate information.
Follow up to see if the customer has received the educational letter. Discuss if the issue has been addressed and offer additional information/resources. 2nd
Violation
Letter -
Warning of
Penalty
Letter may contain a description of the facts of the violation, a statement of the possible penalties for violation and a statement informing the customer of his/her right to request an adjustment or an appeal.
3rd
Violation
Penalty A surcharge may be imposed on the customer in an amount equal to 25 percent of the most recent utility bill (exclusive of the sewer and refuse portion of the bill), or $25, whichever is greater, payable as part of the utility bill for the location at which the violation occurred.
4th
Violation
Penalty A surcharge may be imposed on the customer in an amount equal to 50 percent of the most recent utility bill (exclusive of the sewer and refuse portion of the bill), or, $50, whichever is greater, payable as part of the utility bill for the location at which the violation occurred.
Additional
Violations
Fine/Admin
Cites
Impose such other penalty or fine as deemed appropriate by the City Manager, until such time that the City Manager determines that further violations are not likely to occur.
The surcharges stated above are pursuant to the City of Oxnard Municipal Code Section 22-137 (Failure to Comply). However, over the past 12 months, the Water Division has received 118 reports of water waste and has yet to impose surcharges to gain compliance by the property owner. The “Additional Violations” section noted above is part of the City’s administrative citation process and may be used in the event of non- compliance with Stage 2 requirements or violations of the City’s Municipal Code with the assistance of the City’s Code Enforcement team.
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As a phased approach to outreach and enforcement, staff recommends the following:
Phase 1
The City will move forward with enhanced conservation messaging leveraging a variety of different communication outlets; including digital media (Facebook, Instagram, Twitter and Nextdoor), print media (flyers, utility bill inserts, newspaper ads ), and messaging through other platforms (radio ads , City billboards, and DMV ads). Messaging will emphasize the City’s Stage 2 water shortage restrictions, such as the twice a week outdoor watering schedule, and provide resources for saving water, such as rebates and incentive programs. All communications will be done in both English and Spanish.
The messaging will be coordinated with Metropolitan Water District (Met) to continue a unified regional message in the media and outreach campaigns in order to communicate the need for continued conservation to the general public, businesses, stakeholders, industries, and public officials. In Met’s November 9, 2021 Drought Resolution, their General Manager was directed to coordinate with the member agencies and bring to the Met Board an appropriate regional message to communicate the status of the statewide drought emergency and specified emergency conditions within the Metropolitan service area and the need for continued conservation to the general public, businesses, stakeholders, industries, and public officials. The City will utilize the regional messaging developed by Met and Calleguas Municipal Water District (CMWD) to keep messaging consistent.
Development Services shall verify at the time of landscape plan check submittal, that the landscape planting and irrigation plans comply with the current title 23 Model Water Efficient Landscape Ordinance (MWELO).
Consistent with City Council Resolution 14,741, irrigation of newly constructed home and building exteriors with potable water is prohibited unless drip or micro spray systems are used.
Continued reporting of water waste by all Oxnard staff by utilizing the 311 app or by email, [email protected], or by calling the Oxnard Public Works call center at (805) 385-8136. Under Phase 1 there are no active water ambassadors patrolling for water waste violations.
Residents, Home Owners Associations (HOA), commercial establishments, municipal customers, and schools are all required to follow the City’s mandatory water conservation measures listed under the Stage 2 Water Shortage. Additionally, “an HOA shall not issue a fine or assessment on a homeowner for reducing or eliminating the watering of vegetation or lawns during a state or locally-declared drought emergency,” (Civil Code section 4735(c)).
All reports of water waste are logged in a tracking spreadsheet maintained by water conservation staff within the Water Division. Historical data has shown that the informational and educational approach has been well received by the community and generally does not go further than a warning of penalty within the education and enforcement hierarchy plan.
Supporting Data
During the past 12 months, only 11 of 118 water waste reports required an additional follow-up. In the past 6 months, only 7 of 79 water waste reports required an additional follow-up. A follow-up is completed when a second complaint, either by the same person or someone different, is reported.
In Oxnard, the overall water demand has continued to decline from peak usage from 26,703 acre-feet of water in the beginning of the previous drought commencing in Fiscal Year 2013-14 to 21,847 acre-feet of water in Fiscal Year 2019-20. Based on water consumption during Fiscal Year 2014 to water consumption data during Fiscal Year 2019-20 there has been an average reduction in overall water use of 15 percent. Oxnard’s residents 602
and business have been doing their part to address the State’s drought and water supplies issues for over eight years. As such, staff recommends the above education and enforcement process and remaining at Stage 2.
Phase 2
Should a 0% State Water Project (SWP) allocation be finalized by the Department of Water Resources (DWR) in Spring 2022, staff recommends moving to Phase 2 of the outreach, education, and enforcement plan. It should be noted that a 0% allocation means only the baseline amount of water will be supplied from the SWP.
Staff would bring back for the Council’s consideration a new resolution with the appropriate water shortage stage and conservation measures that are in line with any of Met’s and CMWD’s mandated restrictions. The conservation messaging campaigns will be strengthened while following in line with CMWD and Met’s outreach and education plan.
Based upon current information from Met, a 0% SWP allocation would likely require water usage for public health and safety only and zero outdoor watering if in alignment with Met’s mandatory water use restrictions.
A proposed City Council resolution would reflect appropriate restrictions and requirements consistent with Met’s and/or CMWD’s requirements. These could include increased penalties, issuing administrative citations and penalties for first violations. Furthermore, a resolution could include additional restrictions as outlined in the Oxnard Municipal Code Section 22-154 (C)(2), which include:
Identifying maximum allowed water use
Not issuing new construction meters or short-term water use unless reclaimed or non-potable water is used, unless potable water use is necessary to protect the health, safety or welfare Require expeditious leak repair within 48 hours after discovery of such leak, break or malfunction, or receipt of notice from the city of such condition, whichever comes first Limits on swimming pools; new and refilling of existing Limits on agricultural use
Limit new water service
In addition to City staff continuing to report water waste violations while in the field, the Water Division will have employees designated as Water Conservation Ambassadors to actively patrol predetermined portions of the City, looking for violations of the water waste ordinance. A rotating schedule would be established to ensure that mornings, evenings, and weekends are patrolled evenly throughout the City.
Example water patrol schedule:
Week 1: Districts 1, 2, and 3
Week 2: Districts 4, 5, and 6
When violations are identified, ambassadors will log the violation type, location, time, take a photo of the issue and list any other useful observations. Violation logs will be turned into the Water Conservation Supervisor, who will coordinate with the Water Division Manager, then initiate the education and enforcement hierarchy process.
Mandatory Leak Repair
Per City Code Sec. 22-136. “all repairs shall be completed within 72 hours after discovery of such leak, break or malfunction, or receipt of notice from the city of such condition, whichever comes first.” 603
Under section 22-154 restrictions are listed that could be enacted by the Council should they declare a drought stage. One of the optional restrictions is, “all repairs shall be completed within 48 hours after discovery of such leak, break or malfunction, or receipt of notice from the city of such condition, whichever comes first.” With Resolution No. 14,741, City Council declared a continuance of the Stage 2 water shortage condition, but did not elect to use the 48-hour window requirement for repairs of leaks.
Staff also recommends that the City stay within the 72-hour leak repair window. This allows property owners the opportunity to obtain the assistance of a professional and/or additional funding necessary to address the repairs, if needed.
As an additional tool to help the Oxnard residents manage their water consumption and address water leaks, the City will begin the Council-approved advanced meter infrastructure (AMI) installation project in early 2022.
The project is scheduled to take place over a three-year period.
Through an interactive portal with tracking and alarming features (similar to tracking data and usage on a smartphone), customers will be able to track how and when they are using the most water and where to focus on water use efficiencies. Customers will have full access to their water usage data 24 hours a day, thereby eliminating the need to wait for a monthly bill to notice excess water use, which may indicate a leak.
Additionally, Oxnard staff will be able to view the same water use data allowing for better customer service and outreach opportunities.
Because the City has a vast amount of irrigation in parks, medians, and parkways, the City will be at the forefront of water stewardship. Unfortunately, years of deferred maintenance due to budget constraints has led to many irrigation system failures. Staff from Public Works continues to address the necessary repairs to avoid water waste Staff anticipates hiring contractors to assist with the repairs, should funding become available. A request for additional irrigation repair funding is anticipated for the PWTC and City Council to consider. In the meantime, in a partnership between Parks and the Water Division to address irrigation leaks and aging irrigation infrastructure, staff will be performing water irrigation efficiency surveys and providing recommendations for efficiency improvements and infrastructure replacements.
Additionally, there have been multiple inquiries for the use of water trucks to irrigate the parkway and median trees in areas where the irrigation system is waiting for repairs. Staff is working with West Coast Arborists on a pilot program that will utilize their water trucks for this purpose. A section of landscaping will be identified within the City and scheduled for watering twice per week. Staff will measure the water infiltration after each application and compare the results with trees being irrigated on bubbler and drip systems. The results of these measurements will determine if the use of water trucks is efficient for continued use in other areas throughout the City.
Financial Assistance for Leaks
Under Resolution No. 15,069, customers' bills that have been impacted due to a leak can request a one-time credit adjustment based on the sewer portion of their bill over the lifetime of their account.
Should the PWTC recommend staff develop a different allowance process for billing adjustments related to water leaks, staff will come back with a recommendation. However, staff does not recommend making any adjustments to the current process that could promote owners' unwillingness to permanently address water waste issues during this critical drought time.
STRATEGIC PRIORITIES
604
This agenda item supports the Infrastructure and Natural Resources strategy. The purpose of the Infrastructure and Natural Resources strategy is to preserve and improve our roads, utilities, parks, trees, water supply and natural resources through effective planning, prioritization, and an equitable and efficient use of available funding.
FINANCIAL IMPACT
There is no financial impact.
Prepared by: Omar Castro, Water Division Manager
ATTACHMENTS
1. October 26, 2021 PWTC Drought Condition Report
2. October 19, 2021 Governor's Proclamation Expanding Drought Emergency -SOE
3. November 9, 2021 - Met's Declares a Regional Drought Emergency
4. CMWD Resolution
5. Presentation
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Declaration of a Local Emergency Due to Drought Conditions, Authorizing the City Manager to Take Appropriate Actions, and Adoption of a Resolution Amending Water Conservation
Restrictions
Megan Schneider
Water Conservation and Outreach Supervisor
City Council
May 17, 2022
606
That the City Council:
1. Adopt a proclamation proclaiming the existence of a local emergency due to water shortage emergency conditions; and
2. Adopt a resolution rescinding Resolution No. 14,741 and adopting new mandatory water conservation measures.
O
RECOMMENDATION 2
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● California is experiencing a drought emergency following the three driest years on record
● March 18, 2022 - State Water Project (SWP) allocations reduced from 15% to 5% by the Department of Water Resources (DWR)
● March 28, 2022 - Governor Newsom issued Executive Order N-7-22 directing a number of actions in response to the historic drought conditions ● Metropolitan Water District (MWD) has indicated that SWP dependent regions of its service area have insufficient supplies to meet current water demands BACKGROUND 3
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METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA ACTIONS 4 ● April 27, 2022 - Declared a Water Shortage Emergency Condition and implemented a Emergency Water Conservation Program (EWCP) ● The EWCP framework includes two paths for Member Agencies to reduce the use of SWP supplies and achieve compliance with the program:
1. Restrict outdoor irrigation to one day per week and document enforcement
2. Meet a volumetric delivery limit per month
● Penalty of $2,000 per AF for purveyors that do not comply, with the enforcement period beginning June 1, 2022
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● On April 6, 2022 - Declares a Stage 3 Water Shortage Level ● Calling on all water users within its service area to immediately reduce water use by 30% ● On April 27, 2022 - Adopt Resolution in line with MWD:○ Declare a Water Shortage Emergency exists○ Adopt an EWCP based on and consistent with that of MWD○ Impose volumetric penalties of up to $2,000 per acre-foot for non-compliance○ Authorize the General Manager to amend the terms of the EWCP to make it conform with any similar program adopted by MWD CALLEGUAS MUNICIPAL WATER DISTRICT ACTIONS 5
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● Proclamation proclaiming the existence of a local emergency due to water shortage emergency conditions
● With the approval of the two resolutions, Council will be providing the City Manager the authority to adopt drought stages and conservation requirements consistent with the City’s Urban Water Management Plan and Water Shortage Contingency Plan including transitioning from a Stage II Shortage level to a Stage III Shortage Level; and/or an emergency water conservation plan and/or similar program adopted by Calleguas and/or the Metropolitan
OXNARD PROPOSED ACTIONS 6
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● Rescind Resolution No.14,741, adopting a new resolution to stay in line with the mandatory conservation measures and actions of MWD and CMWD.
The following changes and additions are:
○ No more than once a week watering
○ Odd numbered addresses (Ending in 1, 3, 5, 7, 9): Sundays ONLY ○ Even numbered addresses (Ending in 0, 2, 4, 6, 8): Saturdays ONLY ○ Exceptions to allow for irrigation outside of the designated periods include (1.) the hand watering of trees or other perennials with use of a container (e.g. bucket or watering can) or a hose fitted with a shut-off nozzle and (2.) the use of drip irrigation or other high-efficiency irrigation systems to apply water at a weekly volume consistent with the one-day watering restriction imposed on less efficient irrigation systems. ○ All vegetation within Wildland-Urban Interface and Defensible Space will be maintained as required under Public Resource Code 4291 ○ Irrigation of ornamental turf on medians with potable water is prohibited
OXNARD PROPOSED ACTIONS 7
612
OXNARD’S EDUCATION AND ENFORCEMENT HIERARCHY 8
1st
Violation
Courtesy Notice/
Educational
Letter
7 day Post Letter
Follow-up
Phone Call
For a first violation, the city may give written notice of the fact of such violation to the customer by personal service, by delivery through regular United States mail addressed to the customer's residence, or any other means reasonably designed to notify the customer of the violation. The notice contains a description of violation, lists all prohibited water waste, and provides resources such as rebate information.
Follow up to see if the customer has received the educational letter. Discuss if the issue has been addressed and offer additional information/resources.
2nd
Violation
Letter - Warning
of Penalty
Letter may contain a description of the facts of the violation, a statement of the possible penalties for violation and a statement informing the customer of his/her right to request an adjustment or an appeal.
3rd
Violation
Penalty A surcharge may be imposed on the customer in an amount equal to 25 percent of the most recent utility bill (exclusive of the sewer and refuse portion of the bill), or $25, whichever is greater, payable as part of the utility bill for the location at which the violation occurred. 4th
Violation
Penalty A surcharge may be imposed on the customer in an amount equal to 50 percent of the most recent utility bill (exclusive of the sewer and refuse portion of the bill), or, $50, whichever is greater, payable as part of the utility bill for the location at which the violation occurred.
Additional
Violations
Fine/Admin
Cites
Impose such other penalty or fine as deemed appropriate by the City Manager, until such time that the City Manager determines that further violations are not likely to occur. 613
● Enhanced messaging in English, Spanish and
Mixteco with emphasis on utilizing high
visibility platforms throughout the City:
○ Billboards, yard signs, digital street
signs, banners, and Environmental
Resources’ recycling truck signs
● Water Conservation and Education Hotline
● In-reach Campaign
● Meter staff to report water waste during
reading routes
● Request for Proposal for water waste
patrols during non-city business hours
OXNARD’S OUTREACH EFFORTS 9
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• Oxnard is currently under a Stage 2 water shortage
• Staff is currently working on the newly mandated Annual Water Supply and Demand Assessment • Each April for the following water year (October 1 to September 30) the assessment is carried out to determine if there is a need to implement the Water Shortage Contingency Plan (WSCP) and to what extent • Findings will be presented to Council and the Community Development Department
• Anticipated to be completed in June
WATER SHORTAGE LEVEL 10
615
• California's drought condition and recommendations from the DWR are frequently changing, as well as the actions taken by MWD and CMWD • Immediate action is needed to secure our water supply and prevent penalties • Preparedness to react to ever-changing regulations is crucial DISCUSSION 11
616
This agenda item supports the Infrastructure and Natural Resources strategy. The purpose of the Infrastructure and Natural Resources strategy is to preserve and improve our roads, utilities, parks, trees, water supply and natural resources through effective planning, prioritization, and an equitable and efficient use of available funding.
STRATEGIC PRIORITIES 12
617
There is no direct financial impact in receiving this report FINANCIAL IMPACT 13
618
QUESTIONS
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CITY COUNCIL AGENDA REPORT
REPORTS
AGENDA ITEM NO. L.4
DATE: May 17, 2022
TO: City Council
FROM: Emilio Ramirez, Housing Director, (805) 385-8094, [email protected]
SUBJECT: Central Terrace Apartments located at 217 – 235 East Sixth Street in Downtown Oxnard. (0/5/5)
RECOMMENDATION
That the City Council:
1. Adopt a resolution of the City Council of the City of Oxnard approving and authorizing the City Manager or designee to execute and take all needed actions in consultation with City Attorney relative to entering into an Assignment of City loan documents; loan rider and subordination agreement in connection with that certain loan provided by City to Many Mansions for the development of Central Terrace Apartments affordable housing project;
2. Authorize the City Manager or designee to execute an Assignment, Assumption and Modification Agreement and Loan Rider by and between the City of Oxnard, Many Mansions, a California nonprofit public benefit corporation, and Central Terrace LP, a California limited partnership;
3. Authorize the City Manager or designee to execute a Subordination Agreement by and among Banner Bank, a Washington corporation, the City of Oxnard, and Central Terrace LP, California limited partnership; and
4. Authorize the City Manager or designee to execute the First Amendment to the Affordable Housing and Sustainable Communities (AHSC) Implementation Agreement by and between the City of Oxnard and Many Mansions, a California nonprofit public benefit corporation.
Please click the following link to view the required Measure M pre-recorded presentation video: https://youtu.be/LlH4_SPLr40
BACKGROUND
Many Mansions is a non-profit public benefit corporation that works to provide affordable housing to households with very-low and low-incomes by constructing new or acquiring and rehabilitating existing housing units, in partnership with Cities and other local organizations. Since its founding, Many Mansions has acquired and managed over 600 units of affordable housing at twenty properties throughout Ventura County. Many Mansions is also a service provider offering adult, children, and family services.
On June 1, 2021, the Oxnard City Council authorized the Mayor to execute a loan agreement for the development of the Central Terrace Apartments, an affordable rental housing development that will be located in downtown Oxnard, and an Affordable Housing and Sustainable Communities Implementation (AHSC) Agreement for the City to receive pass- through payments from Many Mansions to complete off-site improvements as further described below. The Central Terrace received its final entitlement approval by the Planning Commission on May 20, 2021.
AHSC Implementation Agreement, Project Scope and Description 620
In June 2021 Many Mansions submitted an Affordable Housing and Sustainable Communities application to the California Department of Housing and Community Development to receive funding for the development of the Central Terrace Apartments, an eighty-seven-unit affordable housing mixed use development that will be located at 217-235 East Sixth Street in downtown Oxnard that will include four stories of residential units above a podium and ground floor space including approximately 2,375 square feet of common space, office space, restrooms, and a kitchenette.
The AHSC application also included a grant component that provides grant funding for housing related infrastructure, sustainable transportation infrastructure, transit related amenities or Program activities. City staff coordinated with Many Mansions, Ventura County Transportation Commission, and the California Van Pool Authority to identify bicycle, pedestrian, and transit projects that would qualify for the AHSC grant component. These activities include the City acting as the lead agency to design and construct the following two sustainable transportation infrastructure and transportation related amenities projects:
1. The Fourth Street Mobility Improvement Project will extend from C Street to the Oxnard Transit Center along Meta Street to 6th Street and will include design and construction of sidewalks, curb extensions, disability improvements, traffic signal modifications, bike detection, class II on-street bike lanes, bike racks, benches, B Street transit hub improvements, resurfacing, drainage improvements, signage, striping, and a new restroom. The Fourth Street Mobility Improvement Project is included in the City’s 2021-2026 Capital Improvement Program.
2. The Downtown Oxnard Transit Amenities project includes design and installation of bus shelters, benches, bike racks, lighting, and real-time arrival signs at various transit stops in Oxnard.
The combined cost of both projects was estimated to be $5,409,200 and would be carried out by the City’s Public Works Department and be subject to an implementation agreement between the City and Many Mansions, as required by the California Department of Housing and Community Development, for Many Mansions to qualify for the grant component.
On June 1, 2021, prior to Many Mansions submitting their AHSC application to the California Department Housing and Community Development, the Oxnard City Council authorized the Mayor to execute an Affordable Housing and Sustainable Communities Implementation Agreement (“AHSC Implementation Agreement”) by and between the City of Oxnard and Many Mansions in order to satisfy the State’ experience requirement for development of the sustainable transportation infrastructure and transit related amenities related improvements. The AHSC Implementation Agreement allows the City to receive pass-through payments from Many Mansions, the sole applicant of the Affordable Housing and Sustainable Communities application, for the purpose of constructing sustainable transportation infrastructure and transit- related amenities improvements as described above.
City Loan Agreement
On June 1, 2021 the Oxnard City Council also authorized the Mayor to execute an Affordable Housing In-Lieu Loan Agreement and Regulatory Agreement with Many Mansions, providing gap financing in the amount of $1,250,000 for the construction of the Central Terrace Apartments. Many Mansions subsequently also executed a Deed of Trust and Promissory note related to the $1,250,000 City loan.
On July 24, 2020 Annual Plan was approved by the Board of Commissioners to allocate thirty-five (35) Project Based Vouchers once the project is placed in service. As part of the project-based voucher proposal, supportive services will be provided on-site in accordance with the Oxnard Housing Authority’s Administrative Plan.
DISCUSSION
In December 2021 and February 2022, Many Mansions secured all remaining funding necessary for development of the Central Terrace Apartments including Low-Income Housing Tax Credit financing and Affordable Housing and Sustainable Communities funding. Total funding sources includes the following:
1. Permanent Loan
2. City of Oxnard In-Lieu Fee Funds in the amount of $1,250,000 621
3. County of Ventura Community Development Block Grant – Disaster Recovery
4. Affordable Housing and Sustainable Communities
5. Affordable Housing Program from the Federal Loan Home Bank
6. Tax Credit Equity
The total estimated cost for construction of the Central Terrace Apartments is $45,023,015. To execute the Low-Income Housing Tax Credit financing structure to construct the project, Many Mansions has formed Central Terrace LP, a California limited partnership, with Central Terrace LLC, a California Limited Liability Company as the Managing General Partner, Many Mansions, a California Nonprofit Corporation, as the sole and managing member, and Merritt Community Capital Corporation as the equity share Special Limited Partner. The project is scheduled to close on their construction financing on or before June 6, 2022 and begin construction in July/August 2022.
In order for Many Mansions to close on their construction financing under the new limited partnership, Many Mansions must execute an Assignment, Assumption, and Modification Agreement with the City in order to receive City consent on the following, as required by the City loan documents:
1) Assignment of its interests and obligations under the City Loan Documents to Central Terrace LP;
2) Transfer ownership of the property, located at 217-235 East Sixth Street in downtown Oxnard, from Many Mansions to Central Terrace LP;
3) The scope of work of the project;
4) Recordation of encumbrances on the project required in order for Many Mansions to receive financing for the project from other lenders as further summarized below; and
5) Modification of certain terms of the City Loan Documents as further summarized below.
Additionally, Many Mansions is also requesting to execute a Subordination Agreement with Banner Bank, a Washington corporation, the City of Oxnard, and Central Terrace LP, California limited partnership and a First Amendment to the AHSC Implementation Agreement between the City and Many Mansions as further summarized below.
Assignment, Assumption, and Modification Agreement
The Assignment, Assumption, and Modification Agreement by and between the City of Oxnard, Many Mansions, and Central Terrace LP will provide many Mansions with the required consent from the City to assign its interests and obligations under the City loan documents and transfer ownership of property where the project will be developed to Central Terrace LP. It also gives the City’s consent on the scope of work of the project, which includes a four stories of residential units above a podium and ground floor space (mixed-use) development with eighty-six one-bedroom units and one two-bedroom unrestricted manager’s unit, 2,375 square feet of common space, office space, restrooms, and a kitchenette. The project will include thirty-five units reserved for homeless households, with incomes at or below thirty percent of the area median income and provide on-site supportive services to tenants of the thirty-five units. These units will also receive project-based voucher assistance, through a separate agreement executed with the Oxnard Housing Authority as approved within the adopted Annual Plan and approved by the United States Department of Housing and Urban Development. The remaining fifty-two units will be reserved for households with incomes at fifty percent and sixty percent of the area median income.
The Assignment, Assumption, and Modification Agreement will also give Many Mansions consent to encumber the project with the following encumbrances:
1) Regulatory Agreement in connection with the issuance of tax-exempt bonds for the Project, which will be senior in priority to the City Loan Documents.
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2) Deed(s) of trust securing the construction converting to permanent loan of tax-exempt bond proceeds to the Project in the approximate original principal amount of $24,000,000, to be reduced to an amount not to exceed $6,600,000 upon the conversion form the construction phase to the permanent phase, and a construction only loan in the approximate original principal amount of $13,250,000, which will be senior in priority to the City Loan Documents.
3) Deed of trust securing a permanent AHSC loan from the in the approximate original principal amount of $15,298,727, which will be senior in priority to the City Loan Documents.
4) Regulatory Agreement in connection with the AHSC loan, which will be senior in priority to the City Loan Documents.
5) Deed of trust securing a loan from County of Ventura for the development of the Project in the approximate original principal amount of $875,000.
6) Regulatory agreement recorded on the Property in connection with the County Loan, which will be senior in priority to the City Loan Documents.
7) Deed of Trust securing a loan from Federal Home Loan Bank Affordable Housing Program funds in the approximate amount of $870,000.
Modifications to the City Loan Agreement include the following:
1) In Section 1.7, Section 2.5, and Section 2.10 of the City Loan Agreement, "MUFG Union Bank, N.A." will be replaced with "Banner Bank".
2) In Section 5.11 of the City Loan Agreement, will be amended to state as follows:
“Lender shall subordinate the obligations of this Loan Agreement, and the attached Regulatory Agreement and Deed of Trust to be recorded on the Property, to all documents (except as noted) associated with the following loans: (i) Banner Bank construction converting to permanent loan of tax-exempt bond proceeds to the Project in the approximate original principal amount of $24,000,000, to be reduced to the approximate principal amount of $7,000,000 upon the conversion from the construction phase to the permanent phase; (ii) Banner Bank construction only loan in the approximate principal amount of $13,250,000; (iii) regulatory agreements related to the County of Ventura construction and permanent loan of Community Development Block Grant Disaster Recovery funds in the approximate principal amount of $875,000; and (iv) California Department of Housing and Community Development permanent loan of Affordable Housing and Sustainable Communities funds in the approximate principal amount of $15,298,727. Borrower and Lender shall cooperate in the execution of such subordination agreements required to perfect such subordinations."
5) A new Section 9.19 is added to the City Loan Agreement as follows:
"9.19 ADMINISTRATION OF LOAN DOCUMENTS. Following the execution of this Loan Agreement by the City, the Loan Documents shall be administered on behalf of City by the City Manager or designee (“City Manager”). The City Manager is authorized to execute minor modifications to the Loan Documents and subordination agreements authorized in Section 5.11 of this Loan Agreement. All other waivers or amendments shall require the formal consent of the Oxnard City Council."
6) A new Exhibit G (Loan Rider) is attached to and incorporated into the City Loan Agreement, in the same form as included the Assignment, Assumption, and Modification Agreement marked as Exhibit B.
Modification to the City Promissory Note
7) Section 2.B.(1) of the City Note is amended to replace “MUFG Union Bank, N.A.” with “Banner Bank”.
Modification to City Regulatory Agreement.
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8) Section 2 is amended to replace “MUFG Union Bank, N.A.” with “Banner Bank”.
9) Section 14 is amended to include the Developer’s address.
Subordination Agreement
Many Mansions has secured tax exempt bond financing for the development of the Central Terrace Apartments. In order to proceed with closing on this financing, a Subordination Agreement by and among Banner Bank, a Washington corporation, the City of Oxnard, and Central Terrace LP, is required so that Banner Bank can purchase the tax-exempt bonds and so that the California Municipal Finance Authority may issue the bonds. Under this agreement the City would need to subordinate the obligations under the City Loan Agreement, Regulatory Agreement and Deed of Trust to be recorded on the Property.
Amending the AHSC Implementation Agreement between Many Mansions and the City
In agreement with Many Mansions, staff proposes the following amendments, which have been reviewed and approved by the City Attorney’s Office, to the AHSC Implementation Agreement by and between Many Mansions and the City of Oxnard.
1. Modifying part of Section 5 to include:
The AHSC Loan may be assigned and disbursed to the Partnership, in which an affiliate of the Developer is the managing general partner.
2. Recital C. is amended in its entirety to read as follows:
“The AHSC Application sought an award to the Developer in an aggregate amount not to exceed $30,000,000 in AHSC funds including a loan (the "AHSC Loan") not to exceed $20,000,000 for an Affordable Housing Development (AHD) and a grant (the "AHSC Grant") in an amount not to exceed $10,000,000 for Housing -Related Infrastructure (HRI), Sustainable Transportation Infrastructure (STI), Transit -Related Amenities (TRA) or Program (PGM) activities as defined the AHSC Program Guidelines adopted by SGC on February 24, 2021. The Developer was awarded a total of $8,497,962 of AHSC Grant funds, which will be disbursed to the Developer. The Developer will transfer up to $5,409,500 of the AHSC Grant funds to the City for the purpose of constructing certain STI Improvements and TRA Improvements, specifically the 4th Street Mobility Improvements and the Downtown Oxnard Transit Improvements, as set forth in more detail in Exhibits 2 and 3 (the "City Improvements"), attached hereto and incorporated herein by this reference.”
3. Section 1 of the Agreement is modified to read as follows:
The City shall complete the City Improvements portion of the Sustainable Transit Obligations in accordance with the terms of the AHSC Grant Documents, including without limitation the Disbursement Agreement between Developer and HCD regarding the AHSC Grant funds ("Disbursement Agreement") and the approved design and construction documents and pursuant to the Schedule of Performance attached hereto as Exhibit 1 and incorporated hereby."
4. Section 5 of the Agreement is modified to read as follows:
The City and the Developer acknowledge that HCD will disburse funds in accordance with the Disbursement Agreement.
5. Section 6 of the Agreement is modified to add additional noticed parties and amended in its entirety to read as follows:
All notices, including deliveries of documentation (i.e., plans and contracts) for review and approval herein, shall be sent by a party hereto or its counsel by either personal delivery, a reputable overnight courier which keeps receipts of delivery (such as UPS, Cal Overnight, or Federal Express), or through the facilities of the United States Post Office, postage prepaid, certified or registered mail, return receipt requested. Any such notice shall be effective upon delivery, if delivered by personal delivery or overnight courier, and seventy-two (72) hours after dispatch, if mailed in accordance with the above. Notice to the respective parties shall be sent to the following addresses unless written notice of a change 624
of address has been given pursuant hereto:
6. Amend Section 8 to read:
Termination. This Agreement shall terminate upon the earlier of: (i) completion of all obligations under the AHSC Documents as evidenced by a written notice from HCD reasonably acceptable to the Parties and the Financing Parties (as defined below); or (ii) mutual written agreement of the Parties and the Financing Parties. “Financing Parties” shall mean the limited partner(s) of the Partnership and Banner Bank, as the first priority lender to the Partnership with a security interest in the Housing Project (and any successor and assign of such security interest) (“Senior Lender”).
7. Add the following language as 10(i) of the Agreement:
The City will deliver written notice to Developer when the STI and TRA Improvement design and construction documents are completed and will deliver a copy of the STI and TRA Improvement design and construction documents to Developer. When the City advertises construction, the City will provide Developer with written notice of such action, and will deliver a copy of any and all construction contract(s) to be executed for the construction or installation of the STI and TRA Improvements to Developer at Developer’s expense. Upon execution of any and all construction contract(s) for the construction or installation of the STI and TRA Improvements, the City will deliver a copy of any and all such construction contract(s) to Developer.
The Parties hereto hereby agree that if (i) the City does not complete the City Improvements in accordance with the Performance Schedule, or (ii) the City indicates that it will not be able to complete the City Improvements in accordance with the Performance Schedule, then Developer (or (a) Senior Lender or (b) any successor to Senior Lender or its nominee following a foreclosure or deed in lieu of foreclosure (collectively, “Successor Parties”)) shall have the right, but not the obligation, to step in and take over the completion of the City Improvements by delivering written notice to the City (“Work Takeover Notice”). Upon delivery of the Work Takeover Notice, each of the City and Developer (or Successor Party if applicable) shall take all actions necessary and reasonably appropriate for Developer (or Successor Party if applicable) to effectuate completion of the City Improvements pursuant to HCD requirements, which actions shall include, without limitation, the assignment of any construction contracts and the granting of licenses from the City to Developer (or Successor Party if applicable).
8. Add the following language to section 11 of the Agreement:
The Parties hereby agree that Central Terrace LP, a California limited partnership, is the owner of the Housing Project (the “Partnership”) shall have the right to succeed to Developer’s rights hereunder. Under no circumstances shall such assumption by the Partnership be conditioned upon the assumption of the Partnership of any indemnification obligations contained herein, provided, however, that the Partnership will assume indemnification obligations that run to the benefit of the City with respect to any subsequent breach by the Partnership under this Agreement first occurring after such assumption. The Partnership’s exercise of the right of assumption set forth in this section shall be evidenced by delivery of notice (the “Partnership’s Assumption Notice”) to the City. The Partnership’s Assumption Notice shall not be delivered until Developer (or its affiliate) has been removed as the general partner of the Partnership.
The rights of the Partnership hereunder shall transfer with any transfer of the Housing Project, including following a foreclosure or deed in lieu thereof, without the consent of the City. The City acknowledges and consents to Senior Lender’s collateral assignment of Partnership’s rights under this Agreement as set forth in Senior Lender’s security interest in the Housing Project.
The Financing Parties are intended to be and shall be third-party beneficiaries of this Agreement and the Developer and the City shall not amend, modify or terminate this Agreement without the Financing Parties’ express prior written consent.
The Schedule of Performance was amended to remove a disclaimer regarding the schedule being subject to change.
STRATEGIC PRIORITIES
625
This agenda item supports the Quality of Life strategy. The purpose of the Quality of Life strategy is to build relationships and create opportunities within the community for safe and vibrant neighborhoods, which will showcase the promising future of Oxnard. This item supports the following goals and objectives:
Goal 3. Strengthen neighborhood development, and connect City, community and culture.
Objective 3a. Create a renewed focus on establishing a positive outlook and orientation of our City, neighborhoods and overall community.
FINANCIAL IMPACT
There is no immediate financial impact with the staff recommended actions. However, given that the AHSC Implementation Agreement requires pass-through payments to the City via a reimbursement basis, Public Works staff will return to Council to identify the funding source and recognize appropriate funds for the City to complete the Fourth Street Mobility Improvement Project and Downtown Oxnard Transit Amenities improvements on a reimbursable basis.
COMMITTEE OUTCOME
This item did not originate in the Committee, however, the entitlements for the development project was considered and approved by the Planning Commission on May 20, 2021 and the funding agreements were considered by and approved by the City Council on June 1, 2021.
Prepared by: Emilio Ramirez, Housing Director
ATTACHMENTS
1. Assignment, Assumption, and Modification Agreement
2. BANNER - CENTRAL TERRACE - Subordination Agreement (City of Oxnard) EB Edit 5.12.22 (1)
3. First Amendment to Implementation Agreement
4. Resolution
5. Loan Rider
6. Central Terrace June 1 2021 - Staff Report
7. PowerPoint Presentation (1)
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RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
City of Oxnard
Housing Department
435 South D Street
Oxnard, CA 93030
Attn: Housing Director
NO FEE FOR RECORDING PURSUANT
TO GOVERNMENT CODE SECTIONS 27383 &
27388.1
APN: 201-0-213-110 SPACE ABOVE FOR RECORDER'S USE ONLY A-8264
ASSIGNMENT, ASSUMPTION AND MODIFICATION AGREEMENT
CITY LOAN DOCUMENTS
(Central Terrace Apartments, Oxnard)
This Assignment, Assumption and Modification Agreement (the "Agreement") is entered into as of May 1, 2022 (the "Effective Date"), by and among the CITY OF OXNARD, a California municipal corporation (the "City"), Many Mansions, a California Nonprofit Corporation, a California nonprofit public benefit corporation ("Many Mansions"), and Central Terrace LP, a California limited partnership (the "Partnership"). The City, Many Mansions and the Partnership are sometimes referred to in this Agreement individually as a "Party" and collectively as the "Parties".
RECITALS
A. The City and Many Mansions entered into an Affordable Housing Loan Agreement, dated as of June 1, 2021 (the "City Loan Agreement"), to assist in the development of a 87-unit housing complex affordable to low income households (the "Project") on the real property located at 217-235 East Sixth Street in the City of Oxnard, County of Ventura, State of California, as more specifically described on the attached Exhibit A (the "Property").
B. Pursuant to the City Loan Agreement, the City will make a loan to Many Mansions in the amount of One Million Two Hundred Fifty Thousand Dollars ($1,250,000) (the "City Loan") to assist with the development of the Project. 627
2 1650\33\3258670.5
C. The City Loan is evidenced by that certain Promissory Note Affordable Housing Assistance (Secured by Deed of Trust), dated as of June 1, 2021, in the original principal amount of One Million Two Hundred Fifty Thousand Dollars ($1,250,000) (the “City Note”), secured by that certain Deed of Trust with Assignment of Rents dated as of June 1, 2021, and recorded on July 13, 2021, as Instrument No. 20210713-00133017-0 (the “City Deed of Trust”) in the Official Records of Ventura County (the "Official Records").
D. In connection with the City Loan, the City and Many Mansions entered into that certain Regulatory Agreement, dated June 1, 2021, and recorded in the Official Records on June 18, 2021, as Instrument No. 20210618-00119400-0 (the "City Regulatory Agreement"). The City Loan Agreement, City Note, the City Deed of Trust, and the City Regulatory Agreement are hereinafter collectively referred to as the “City Loan Documents."
E. Many Mansions has formed the Partnership for purposes of pursuing financing and ultimately developing and operating the Project.
F. Many Mansions now desires to assign its interests and obligations under the City Loan Documents to the Partnership and the Partnership desires to assume Many Mansions' interests and obligations under the City Loan Documents G. The assignment of Many Mansions' interests and obligations under the City Loan Documents to the Partnership is a transfer which requires the City's consent under Section 9.13 of the City Loan Agreement.
H. In connection with the development of the Property, Many Mansions now desires to transfer the Property to the Partnership and the Partnership desires to acquire the Property.
I. The transfer of the Property by Many Mansions to the Partnership requires the City's consent under Section 5.12 of the City Loan Agreement.
J. The Partnership is closing on the financing for the development of the Project and in connection therewith, the Parties desire to modify certain terms of the City Loan Documents.
K. The encumbrance of the Property in connection with the financing for the Project requires the City's consent under Section 5.10 of the City Loan Agreement.
L. Capitalized terms not defined in this Agreement shall have the meanings set forth in the City Loan Agreement.
NOW, THEREFORE, in consideration of the mutual benefits accruing to the Parties and other valuable consideration, the receipt and sufficiency of which consideration are acknowledged, the Parties agree as follows:
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1. Assignment by Many Mansions. As of the Effective Date, Many Mansions assigns to the Partnership all of Many Mansions' right, title, and interest in and obligations under the City Loan Documents, and Many Mansions is released from all obligations under the City Loan Documents that accrue on or after the Effective Date.
2. Acceptance of Assignment and Assumption by the Partnership. As of the Effective Date, the Partnership accepts the above assignment of Many Mansions' right, title and interest in and assumes all obligations under the City Loan Documents, and agrees to perform all of Many Mansions' obligations and covenants under the City Loan Documents as if the Partnership were the original signatory thereto and agrees that as of the Effective Date the Partnership shall be deemed a party to the City Loan Documents. All references in the City Loan Documents to the "Borrower" and the "Developer" shall be deemed to be references to the Partnership and its permitted successors and/or assigns. The City agrees that in no event shall Partnership be liable for any claims, default, breach or damage arising under the City Loan Documents prior to the effective date of this Agreement.
3. Representations.
(a) The Partnership represents and warrants that it is a duly formed, validly existing limited partnership in good standing under the laws of the State of California, and has the power and authority to execute this Agreement and perform Many Mansions' obligations under the City Loan Documents. (b) Many Mansions represents and warrants that it has not previously assigned, pledged, hypothecated or otherwise transferred any of its right, title, or interest in or obligations under the City Loan Documents. (c) Many Mansions represents and warrants that it is not in default in any respect under any terms of the City Loan Documents
(d) To the actual knowledge of the City, no event has occurred or does any condition exists which, with the giving of notice or the lapse of time or both, would constitute a default by Many Mansions under the City Loan Documents. (e) The City represents and warrants to the Partnership that the City is not in default under the City Loan Documents.
(f) To the actual knowledge of Many Mansions, no event has occurred or does any condition exists which, with the giving of notice or the lapse of time or both, would constitute a default by the City under the City Loan Documents.
4. City Consents.
(a) Pursuant to Section 4.1 of the City Loan Agreement, the City hereby approves the scope of work described in construction contract and plans and specifications received by the City as of the date that this Agreement is recorded 629
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(b) Pursuant to Section 5.10 of the City Loan Agreement, the City consents to the recordation of the following encumbrances on the Property:
i. Regulatory Agreement in connection with the issuance of tax-exempt bonds for the Project, which will be senior in priority to the City Loan Documents.
ii. Deed(s) of trust securing the construction converting to permanent loan of tax-exempt bond proceeds to the Project in the approximate original principal amount of $24,000,000, to be reduced to an amount not to exceed $6,600,000 upon the conversion form the construction phase to the permanent phase, and a construction only loan in the approximate original principal amount of $13,250,000, which will be senior in priority to the City Loan Documents. iii. Deed of trust securing a permanent loan from the California Department of Housing and Community Development ("HCD") for the Project in the approximate original principal amount of $15,298,727 (the "HCD Loan"), which will be senior in priority to the City Loan Documents.
iv. Regulatory Agreement in connection with the HCD Loan, which will be senior in priority to the City Loan Documents. v. Deed of trust securing a loan from County of Ventura for the Project in the approximate original principal amount of $875,000 (the "County Loan"). vi. Regulatory agreement recorded on the Property in
connection with the County Loan, which will be senior in priority to the City Loan Documents.
vii. Deed of Trust securing a loan from Federal Home Loan Bank Affordable Housing Program funds in the approximate amount of $870,000. (c) Pursuant to Section 5.12 of the City Loan Agreement, the City consents to the transfer of the Property from Many Mansions to the Partnership. (d) Pursuant to Section 9.13 of the City Loan Agreement, the City consents to the assignment of the City Loan Documents from Many Mansions to the Partnership and the assumption of the City Loan Documents by the Partnership.
5. Modification of the City Loan Agreement. The City Loan Agreement is hereby modified as follows:
(a) In Section 1.7 of the City Loan Agreement, replace "MUFG Union Bank, N.A." with "Banner Bank".
(b) In Section 2.5 of the City Loan Agreement, replace "MUFG Union Bank, N.A." with "Banner Bank".
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(c) In Section 2.10 of the City Loan Agreement, replace "MUFG Union Bank, N.A." with "Banner Bank".
(d) Section 5.11 of the City Loan Agreement, is amended to state as follows:
"Lender shall subordinate the obligations of this Loan Agreement, and the attached Regulatory Agreement and Deed of Trust to be recorded on the Property, to all documents (except as noted) associated with the following loans: (i) Banner Bank construction converting to permanent loan of tax-exempt bond proceeds to the Project in the approximate original principal amount of $24,000,000, to be reduced to the approximate principal amount of $7,000,000 upon the conversion from the construction phase to the permanent phase; (ii) Banner Bank construction only loan in the approximate principal amount of $13,250,000; (iii) regulatory agreements related to the County of Ventura construction and permanent loan of Community Development Block Grant Disaster Recovery (CDBG-DR) funds in the approximate principal amount of $875,000; and (iv) California Department of Housing and Community Development permanent loan of Affordable Housing and Sustainable Communities (AHSC) funds in the approximate principal amount of $15,298,727. Borrower and Lender shall cooperate in the execution of such subordination agreements required to perfect such subordinations."
(e) A new Section 9.19 is added to the City Loan Agreement as follows:
"9.19 ADMINISTRATION OF LOAN DOCUMENTS. Following the
execution of this Loan Agreement by the City, the Loan Documents shall be administered on behalf of City by the City Manager or designee (“City Manager”). The City Manager is authorized to execute minor modifications to the Loan Documents and subordination agreements authorized in Section 5.11 of this Loan Agreement. All other waivers or amendments shall require the formal consent of the Oxnard City Council." (f) A new Exhibit G is hereby attached to and incorporated into the City Loan Agreement, in the form attached hereto as Exhibit B.
6. Modification to the City Note. Section 2.B.(1) of the City Note is hereby amended to replace “MUFG Union Bank, N.A.” with “Banner Bank”.
7. Modification to City Regulatory Agreement. The City Regulatory Agreement is hereby modified as follows:
(a) Section 2 is hereby amended to replace “MUFG Union Bank, N.A.” with “Banner Bank”.
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(b) Section 14 is amended to include the following address for the Developer:
"Central Terrace LP
1259 E. Thousand Oaks Blvd.
Thousand Oaks, CA 91362
Attention: President"
8. Effective Date. This Agreement and the assignment, assumption, and modifications described in this Agreement shall be effective as of the Effective Date.
9. Successors and Assigns. This Agreement shall be binding on and inure to the benefit of the legal representatives, heirs, successors and assigns of the Parties.
10. Invalidity. Any provision of this Agreement which is determined by a court to be invalid or unenforceable shall be deemed severed here from, and the remaining provisions shall remain in full force and effect as if the invalid or unenforceable provision had not been a part of this Agreement.
11. Headings. The headings used in this Agreement are for convenience only and shall be disregarded in interpreting the substantive provisions of this Agreement.
12. California Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.
13. Counterparts. This Agreement may be signed by the different Parties in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same agreement.
[Signatures on Following Page]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.
MANY
MANSIONS:
MANY MANSIONS, A CALIFORNIA NONPROFIT
CORPORATION, a California nonprofit public benefit corporation By: ________________________________________
Rick Schroeder, President
PARTNERSHIP: CENTRAL TERRACE LP, a California limited partnership By: Central Terrace LLC, a California limited liability company, its general partner
By: Many Mansions, a California Nonprofit Corporation, a California nonprofit public benefit corporation, its sole member and manager
By: __________________________________
Rick Schroeder, President
CITY: THE CITY OF OXNARD,
a California municipal corporation
By: _____________________________________
Alexander Nguyen, City Manager
ATTEST:
_____________________________
Rose Chaparro, City Clerk
APPROVED AS TO FORM:
______________________________
Stephen Fischer, City Attorney
[Signatures Must Be Notarized]
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STATE OF CALIFORNIA )
)
COUNTY OF __________________ )
On ____________________, before me, ___________________________, Notary Public, personally appeared ______________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
__________________________________
Name: __________________________
Notary Public
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
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STATE OF CALIFORNIA )
)
COUNTY OF __________________ )
On ____________________, before me, ___________________________, Notary Public, personally appeared ______________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
__________________________________
Name: __________________________
Notary Public
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
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STATE OF CALIFORNIA )
)
COUNTY OF __________________ )
On ____________________, before me, ___________________________, Notary Public, personally appeared ______________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
__________________________________
Name: __________________________
Notary Public
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
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EXHIBIT A
PROPERTY DESCRIPTION
All that certain real property situated in the County of Ventura, State of California, described as follows:
LOTS 7, 8, 9, 10 AND 11 IN BLOCK A OF THE RICE TRACT, IN THE CITY OXNARD,
COUNTY OF VENTURA, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 1A PAGE 34 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY RECORDER OF SAID COUNTY.
Assessor’s Parcel Number: 201-0-213-110
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EXHIBIT B
EXHIBIT G TO AFFORDABLE HOUSING LOAN AGREEMENT
LOAN RIDER
(City Loan)
This Deed of Trust Rider (the “Rider”) is attached to and made a part of the Affordable Housing Loan Agreement made on June 1, 2021 (the “Loan Agreement”), as assigned pursuant to the Assignment, Assumption and Modification Agreement entered into as of ______, 2022, between Central Terrace LP, a California limited partnership (“Borrower”) and City of Oxnard , a municipal corporation (“Lender”), and is for the benefit of MCC Housing LLC, a California limited liability company, and its successors and assigns (the “Limited Partner”), the limited partner of Borrower under the First Amended and Restated Agreement of Limited Partnership of Borrower dated May 1, 2022 (the “Partnership Agreement”). The Loan Agreement evidence a loan in the original principal amount of $1,250,000 to Borrower (the “Loan”) and is secured by a Deed of Trust encumbering certain real property and improvements thereon consisting of a housing project for low-income households, located in the County in which the Deed of Trust will be recorded (the “Project”). Capitalized terms not defined herein shall have the meanings given to them in the Loan Agreement.
The parties hereto agree that the following covenants, terms, and conditions shall be part of and shall modify or supplement the Loan Documents:
1. Nonrecourse Obligation. The Loan is a nonrecourse obligation of Borrower.
Neither Borrower nor its general or limited partner, nor any other party shall have any personal liability for repayment of the Loan. The sole recourse of Lender under the Loan Documents for repayment of the Loan shall be the exercise of its rights against the Project and related security thereunder.
2. General Partner Change. The withdrawal, removal, and/or replacement of a general partner of the Borrower pursuant to the terms of the Partnership Agreement shall not constitute a default under any of the Loan Documents, and any such actions shall not accelerate the maturity of the Loan, provided that any required substitute general partner is reasonably acceptable to Lender and is selected with reasonable promptness.
3. Assignment of Limited Partner Interests. Notwithstanding anything to the contrary contained in the Loan Documents, all or a portion of the interests of Borrower’s Limited Partner shall be transferable to any affiliate of Merritt Community Capital Corporation (“Merritt”), without the consent of the Lender. The interest the Limited Partner shall be transferable to a non-affiliate of Merritt with the consent of the Lender, which consent shall not be unreasonably withheld.
4. Monetary Default. If a monetary event of default occurs under the terms of any of the Loan Documents, prior to exercising any remedies thereunder, Lender shall give the Limited Partner of the Borrower, as identified in Paragraph 7 below or as identified to Lender by written notice, simultaneous written notice of such default. Borrower shall have a period of seven (7) 638
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days after such notice is given within which to cure the default prior to exercise of remedies by Lender under the Loan Documents, or such longer period of time as may be specified in the Loan Documents.
5. Non-Monetary Default. If a non-monetary event of default occurs under the terms of any of the Loan Documents, prior to exercising any remedies thereunder, Lender shall give Borrower and the Limited Partner of the Borrower, as identified in Paragraph 6 below or as identified to Lender by written notice, simultaneous written notice of such default. If the default is reasonably capable of being cured within thirty (30) days, Borrower shall have such period to effect a cure prior to exercise of remedies by Lender under the Loan Documents, or such longer period of time as may be specified in the Loan Documents. If the default is such that it is not reasonably capable of being cured within thirty (30) days or such longer period if so specified, and if Borrower (a) initiates corrective action within said period, and (b) diligently, continually, and in good faith works to effect a cure as soon as possible, then Borrower shall have such additional time as is reasonably necessary to cure the default prior to exercise of any remedies by Lender. If Borrower fails to take corrective action or to cure the default within a reasonable time, Lender shall give Borrower and the Limited Partner of the Borrower, as identified in Paragraph 7 below or as identified to Lender by written notice, written notice thereof, whereupon Limited Partner may remove and replace the General Partner with a substitute general partner who shall effect a cure within a reasonable time thereafter in accordance with the foregoing provisions. In no event shall Lender be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default or the default is not cured within one hundred eighty (180) days after the first notice of default is given, or such longer period of time as may be specified in the Loan Documents.
6. Notices. Lender shall give Limited Partner written notice of any default under the Loan Documents, and the cure periods contained in Paragraphs 5 and 6 above shall commence on the effective date of any such notice, at the following address:
Limited Partner: MCC Housing LLC
c/o Merritt Community Capital Corporation
1970 Broadway, Suite 250
Oakland, CA 94612
Attention: President & CEO
Facsimile: (510) 444-7874
With a copy to: Carle, Mackie, Power & Ross LLP
100 B Street, Suite 400
Santa Rosa, California 95401
Attention: Henry Loh II
Facsimile: (707) 526-4707
Any cure periods available to the Limited Partner, either as specified in the Loan Documents or in this Rider, shall commence upon the date of any such notice to the Limited Partner.
7. Casualty, Condemnation, Etc. In the event of any fire or other casualty to the Project or eminent domain proceedings resulting in condemnation of the Project or any part 639
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thereof, Borrower shall have the right to rebuild the Project, and to use all available insurance or condemnation proceeds therefor, provided that (a) such proceeds are sufficient to keep the Loan in balance and rebuild the Project in a manner that provides adequate security to Lender for repayment of the Loan or if such proceeds are insufficient then Borrower shall have funded any deficiency, (b) Lender shall have the right to approve plans and specifications for any major rebuilding and the right to approve disbursements of insurance or condemnation proceeds for rebuilding under a construction escrow or similar arrangement, and (c) no material default then exists under the Loan Documents. If the casualty or condemnation affects only part of the Project and total rebuilding is infeasible, then proceeds may be used for partial rebuilding and partial repayment of the Loan in a manner that provides adequate security to Lender for repayment of the remaining balance of the Loan.
8. Lender Approvals, Etc. In any approval, consent, or other determination by Lender required under any of the Loan Documents, Lender shall act reasonably and in good faith.
9. Force Majeure. There shall be no default for construction delays beyond the reasonable control of Borrower, provided that such delays do not exceed one hundred eighty (180) days, or such longer period of time as may be specified in the Loan Documents.
10. Purchase Rights. The execution and delivery of the purchase option and right of first refusal agreement described in the Partnership Agreement shall not constitute a default under the Loan Documents or accelerate the maturity of the Loan thereunder. Any requisite consent of Lender to (a) the exercise of said purchase option and right of first refusal agreement by the project general partner or sponsor or its assignee, as applicable, identified therein, and to (b) the assumption without penalty of loan obligations by the project general partner or sponsor or its assignee, as applicable, and the release of Borrower from such obligations, shall not be unreasonably withheld. Subject to any such consent requirement, the exercise of rights under such agreement shall not constitute a default or accelerate maturity of the Loan.
11. Loan Assumption. If the purchase option and right of first refusal agreement described in the Partnership Agreement is not exercised and the Project is sold subject to low income housing use restrictions as contained in an existing regulatory agreement or other recorded covenant, any requisite consent of Lender to said sale, and to the assumption without penalty of loan obligations by the purchaser and the release of Borrower from such obligations, shall not be unreasonably withheld.
12. Take-Out Loan. Lender acknowledges that any loan to which Lender has subordinated any of the Loan Documents (the “Senior Indebtedness”) may not be fully amortizing and may have an outstanding balance at its maturity date. Lender hereby approves of and agrees to subordinate to any new loan (a “Take-Out Loan”) issued for the purpose of refinancing the Senior Indebtedness at its maturity date, provided the Take-Out Loan bears interest at a commercially reasonable rate for a term that will be no less than co-terminus with the loan secured by this Deed of Trust, and the amount of the Take-Out Loan does not exceed the outstanding principal amount, plus accrued interest, of the Senior Indebtedness.
13. Extended Use Agreement. Lender acknowledges that Borrower and the California Tax Credit Allocation Committee have or intend to enter into, or concurrently with the execution and delivery of the Loan Documents are entering into, an “Extended Use Agreement”, which constitutes the extended low-income housing commitment described in 640
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Section 42(h)(6)(B) of the Internal Revenue Code, as amended (the “Code”). Lender acknowledges and agrees that, in the event of a foreclosure of its interest under the Mortgage or delivery by the Borrower of a deed in lieu thereof (collectively, a “Foreclosure”), the following rule contained in Section 42(h)(6)(E)(ii) of the Code shall apply:
For a period of three (3) years from the date of Foreclosure, with respect to any unit that had been regulated by the Extended Use Agreement, (i) none of the eligible tenants occupying those units at the time of Foreclosure may be evicted or their tenancy terminated (other than for good cause, including but not limited to, the tenants’ ineligibility pursuant to Section 42 of the Code), (ii) nor may any rent be increased except as otherwise permitted under Section 42 of the Code.
14. Prohibition of Sale. Lender shall neither (a) sell, assign, transfer, or convey any such indebtedness (or any interest therein) to Fannie Mae or Federal Home Loan Mortgage Corporation (“Freddie Mac”) nor (b) include such indebtedness (or any interest therein) in a pool of loans to be sold, assigned, transferred, or conveyed to Fannie Mae or Freddie Mac, without the Borrower’s prior written consent and obtaining a waiver from Fannie Mae and Freddie Mac as applicable.
15. Inconsistency. In the event of any inconsistency or conflict between the covenants, terms, and conditions of any of the Loan Documents and this Rider, the covenants, terms and conditions of this Rider shall prevail.
16. Survival. Except to the extent expressly modified, supplemented, or amended in this Rider, the Loan Documents remain in full force and effect. 641
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4880-5591-3242v.3 0058243-000403
WHEN RECORDED MAIL TO:
Banner Bank
5930 Granite Lake Drive, Suite 170
Granite Bay, CA 95746
Attention: Sandy Bowen
Loan No. 14014073 and 14014075
Space above this line reserved for recorder’s use
SUBORDINATION AGREEMENT
(CITY OF OXNARD)
NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN CERTAIN INTERESTS IN
THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT.
THIS SUBORDINATION AGREEMENT (“Agreement”) is entered into this ___ day of ________________, 2022, by and among (i) BANNER BANK, a Washington corporation, as agent for the CALIFORNIA MUNICIPAL FINANCE AUTHORITY, a joint exercise of powers agency existing under the laws of the State of California (“Issuer”), pursuant to that certain Master Agency Agreement (“Master Agency Agreement”), dated as of ______________, 2022, by and between the Senior Mortgagee and Issuer (in such capacity, “Bond Lender”), and as swap counterparty under the Senior Loan Documents (“Swap Counterparty”; and together with Bond Lender and their successors and assigns and any subsequent holder of the Senior Mortgage, “Senior Mortgagee”), (ii) the CITY OF OXNARD, a municipal corporation organized and existing under the law of the State of California (“Subordinate Mortgagee”), and (iii) CENTRAL TERRACE LP, a California limited partnership (“Borrower”).
RECITALS
A. Borrower is the owner of certain land located in Ventura County, California, described in Exhibit A attached hereto (“Land”). The Land is or will be improved with a multifamily rental housing project (the “Improvements”). The Land and the Improvement now or hereafter located thereon shall be referred to herein, collectively, as the “Project”.
B. Pursuant to that certain Master Pledge and Assignment (“Master Pledge”) dated as of __________________, 2022, by and among Issuer, Bond Lender, and Banner Bank, a Washington corporation, in its capacity as the initial purchaser of the Bonds (in such capacity, “Holder”), Issuer has issued (i) its California Municipal Finance Authority Multifamily Housing Revenue Bonds (Central Terrace Apartments) 2022 Series A-1 in the amount of $23,288,038 (the “Tax-Exempt Bonds”), and (ii) its California Municipal Finance Authority Multifamily Housing Revenue Bonds (Central Terrace Apartments) 2022 Series A-2 (Taxable) in the amount of [$14,191,071] (the “Taxable Bonds”; and together with the Tax-Exempt Bonds, the “Bonds”). Holder has agreed to purchase the Bonds, and Issuer will use the proceeds from the 642
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sale of the Bonds to fund (i) a construction converting to permanent loan to Borrower in the amount of $23,288,038 (the “Senior Tax-Exempt Loan”), and (ii) a construction loan to Borrower in the amount of [$14,191,071] (the “Senior Taxable Loan”; and together with the Senior Tax-Exempt Loan, the “Senior Loan”). The Senior Loan is made pursuant to that certain Construction and Term Loan Agreement, dated as of even date herewith, by and between Senior Mortgagee and Borrower (the “Senior Loan Agreement”), evidenced by (i) that certain Promissory Note (Tax-Exempt) dated as of even herewith, made by Borrower in favor of Bond Lender (the “Senior Tax-Exempt Note”) in the face amount of $23,288,038, and (ii) that certain Promissory Note (Taxable) dated as of even herewith, made by Borrower in favor of Bond Lender (the “Senior Taxable Note”; and together with the Senior Tax-Exempt Note, the “Senior Note”) in the face amount of [$14,191,071], and secured by that certain Construction Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing (the “Senior Mortgage”), dated as of even date herewith, by Borrower for the benefit of Senior Mortgagee, encumbering the Land, the Improvements and the related personal property and other property described and defined in the Senior Mortgage as the “Property” (the “Mortgaged Property”), and recorded substantially concurrently herewith in the Official Records of Ventura County, California (the “Official Records”). As security for the repayment of the principal and interest owing on the Bonds, Bond Lender has assigned to Holder all of its right, title and interest in, to and under the Senior Loan Documents. All capitalized terms used herein and not otherwise defined in this Agreement, will have the meanings given to those terms in the Senior Loan Agreement.
C. Pursuant to that certain Affordable Housing Loan Agreement (Central Terrace Apartments) dated as of June 1, 2021, between Subordinate Mortgagee and Borrower's predecessor-in-interest (“Subordinate Loan Agreement”), Subordinate Mortgagee has made or is making a loan to Borrower in the original principal amount of $1,250,000 (“Subordinate Loan”). The Subordinate Loan is evidenced by that certain Promissory Note Affordable Housing Assistance (Secured by Deed of Trust) dated as of June 1, 2021, made by Borrower's predecessor-in-interest in favor of Subordinate Mortgagee in the face principal amount of $1,250,000 (the “Subordinate Note”), and secured by that certain Deed of Trust with Assignment of Rents dated as of June 1, 2021, made by Borrower's predecessor-in-interest for the benefit of Subordinate Mortgagee and recorded in the Official Records on July 13, 2021, as Instrument No. 20210713-0013317-0 (“Subordinate Mortgage”). In connection with the Subordinate Loan, Borrower's predecessor-in-interest and Subordinate Mortgagee have also executed that certain Regulatory Agreement (City of Oxnard) dated as of June 1, 2021, and recorded in the Official Records on June 18, 2021, as Instrument No. 20210618-00119400-0 (the “Regulatory Agreement”). The Borrower's predecessor-in-interest, the Borrower and the Subordinate Mortgagee have entered into that certain Assignment, Assumption and Modification Agreement, dated as of [May 1], 2022 ("Modification Agreement") pursuant to which the Borrower's predecessor in-interest's interests, rights, duties and liabilities under the Subordinate Loan Agreement, the Subordinate Note, the Subordinate Mortgage and the Regulatory Agreement (collectively, and as modified by the Modification Agreement, "Subordinate Loan Documents") have been assigned to the Borrower and pursuant to which certain provisions of the Subordinate Loan Documents have been modified
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D. The execution and delivery of this Agreement is a condition precedent to Holder purchasing the Bonds and the Issuer making the Loan, as applicable.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows:
1.Definitions. The following terms, when used in this Agreement (including, as appropriate, when used in the above recitals), will have the following meanings:
(a) “Bankruptcy Proceeding” means any bankruptcy, reorganization, insolvency, composition, restructuring, dissolution, liquidation, receivership, assignment for the benefit of creditors, or custodianship action or proceeding under any federal or state law with respect to Borrower, any guarantor of any of the Senior Indebtedness, any of their respective properties, or any of their respective partners, members, officers, directors, or shareholders. (b) “Borrower” means all persons or entities identified as “Borrower” in the first Recital of this Agreement, together with their successors and assigns, and any other person or entity who acquires title to the Mortgaged Property after the date of this Agreement; provided that the term “Borrower” will not include Senior Mortgagee if Senior Mortgagee acquire titles to the Mortgaged Property.
(c) “Casualty” means the occurrence of damage to or loss of all or any portion of the Mortgaged Property by fire or other casualty. (d) “Condemnation” means the Project or any part thereof is taken by condemnation or eminent domain or by grant of the Mortgaged Property in lieu thereof. (e) “Enforcement Action” means any of the following actions taken by or at the direction of Subordinate Mortgagee: the acceleration of all or any part of the Subordinate Indebtedness, the advertising of or commencement of any foreclosure or trustee’s sale proceedings, the exercise of any power of sale, the acceptance of a deed or assignment in lieu of foreclosure or sale, the collecting of Rents, the obtaining of or seeking of the appointment of a receiver, the seeking of default interest, the taking of possession or control of any of the Mortgaged Property, the commencement of any suit or other legal, administrative, or arbitration proceeding based upon the Subordinate Note or any other of the Subordinate Loan Documents, the exercising of any banker’s lien or rights of set-off or recoupment, or the exercise of any other remedial action against Borrower, any other party liable for any of the Subordinate Indebtedness or obligated under any of the Subordinate Loan Documents, or the Mortgaged Property. (f) “Enforcement Action Notice” means a written notice from Subordinate Mortgagee to Senior Mortgagee, given following one or more Subordinate Mortgage Default(s) and the expiration of any notice or cure periods provided for such Subordinate Mortgage Default(s) in the Subordinate Loan Documents, setting forth in reasonable detail the Subordinate Mortgage Default(s) and the Enforcement Actions proposed to be taken by Subordinate Mortgagee.
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(g) “Impositions” means (i) all general and specific real property taxes and assessments imposed on the Mortgaged Property; (ii) all other taxes and assessments and charges of every kind that are assessed upon the Mortgaged Property (or upon the owner and/or operator of the Mortgaged Property) and that create or may create a lien upon the Mortgaged Property (or upon any personal property or fixtures used in connection with the Mortgaged Property), including without limitation nongovernmental levies and assessments pursuant to applicable covenants, conditions or restrictions; and (iii) all license fees, taxes and assessments imposed on any mortgagee (other than such mortgagee’s income or franchise taxes) which are measured by or based upon (in whole or in part) the amount of the obligations secured by the Mortgaged Property.
(h) “Leases” means, collectively, all leases of the Mortgaged Property or any portion thereof, all licenses and agreements relating to the management, leasing or operation of the Mortgaged Property or any portion thereof, and all other agreements of any kind relating to the use or occupancy of the Mortgaged Property or any portion thereof. (i) “Loss Proceeds” means all monies received or to be received under any insurance policy, from any condemning authority, or from any other source, as a result or any Condemnation or Casualty.
(j) “Notice” is defined in Section 6(d).
(k) “Regulatory Agreement” has the meaning ascribed thereto in Recital C, above.
(l) “Rents” shall have the meaning set forth in the Senior Mortgage. (m) “Senior Indebtedness” means Senior Loan.
(n) “Senior Loan Agreement” has the meaning ascribed thereto in Recital B, above.
(o) “Senior Loan Documents” means, the Senior Loan Agreement, the Senior Note, the Senior Mortgage and all other “Loan Documents” described in the Senior Loan Agreement.
(p) “Senior Mortgage” has the meaning ascribed thereto in Recital B, above. (q) “Senior Mortgage Default” means any act, failure to act, event, condition, or occurrence which constitutes, or which with the giving of Notice or the passage of time, or both, would constitute, a “Default” or an “Event of Default” as defined in the Senior Loan Agreement.
(r) “Senior Mortgagee” has the meaning ascribed thereto in the preamble to this Agreement.
(s) “Senior Note” has the meaning ascribed thereto in Recital B, above, as may be amended from time to time.
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(t) “Subordinate Indebtedness” means all sums evidenced or secured or guaranteed by, or otherwise due and payable to Subordinate Mortgagee pursuant to, the Subordinate Loan Documents.
(u) “Subordinate Loan Documents” means the Subordinate Loan Agreement, the Subordinate Note, the Subordinate Mortgage, the Regulatory Agreement, any UCC-1 financing statement filed for the benefit of the Subordinate Mortgagee in connection with the Subordinate Loan, and all other documents at any time evidencing, securing, guaranteeing, or otherwise delivered in connection with the Subordinate Indebtedness, as the same have been modified by the Modification Agreement and as may be further amended. (v) “Subordinate Mortgage Default” means any act, failure to act, event, condition, or occurrence which allows (but for any contrary provision of this Agreement), or which with the giving of Notice or the passage of time, or both, would allow (but for any contrary provision of this Agreement), Subordinate Mortgagee to take an Enforcement Action. (w) “Subordinate Mortgagee” means the person or entity named as such in the first paragraph of this Agreement and any other person or entity who becomes the legal holder of the Subordinate Note after the date of this Agreement. (x) “Subordinate Note” has the meaning ascribed thereto in Recital C, above. (y) “Surplus Cash” means, with respect to any period, any revenues of Borrower remaining after paying, or setting aside funds for paying, all of the following:
(i) All sums due or currently required to be paid under the Senior Loan Documents, including any Imposition deposits.
(ii) All deposits to any replacement reserve, completion/repair reserve or other reserve or escrow required by the Senior Loan Documents that are due or currently payable.
(iii) All reasonable operating expenses of the Mortgaged Property, including real estate taxes, insurance premiums, utilities, building maintenance, painting and repairs, management fees, payroll, administrative expenses, legal expenses and audit expenses (excluding any developer fees payable with respect to the Mortgaged Property).
2.Subordination of Subordinate Indebtedness.
(a) The Subordinate Indebtedness is and will at all times continue to be subject and subordinate in right of payment to the prior payment in full of the Senior Indebtedness.
(b) Until the occurrence of a Senior Mortgage Default, Subordinate Mortgagee will be entitled to retain for its own account all payments made on account of the principal of and interest on the Subordinate Indebtedness in accordance with the requirements of the Subordinate Loan Documents; provided no such payment is made more than 10 days in 646
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advance of its due date and provided further that no such payment exceeds 75% of then available Surplus Cash. However, immediately upon Subordinate Mortgagee’s receipt of Notice or actual knowledge of a Senior Mortgage Default, Subordinate Mortgagee will not accept any payments on account of the Subordinate Indebtedness, and the provisions of Section 2(c) of this Agreement will apply. Subordinate Mortgagee acknowledges that a Subordinate Mortgage Default constitutes a Senior Mortgage Default. Accordingly, upon the occurrence of a Subordinate Mortgage Default, Subordinate Mortgagee will be deemed to have actual knowledge of a Senior Mortgage Default.
(c) If (i) Subordinate Mortgagee receives any payment, property, or asset of any kind or in any form on account of the Subordinate Indebtedness (including any proceeds from any Enforcement Action) after a Senior Mortgage Default of which Subordinate Mortgagee has actual knowledge (or is deemed to have actual knowledge as provided in 2(b) above) or has been given Notice, or (ii) Subordinate Mortgagee receives, voluntarily or involuntarily, by operation of law or otherwise, any payment, property, or asset in or in connection with any Bankruptcy Proceeding, such payment, property, or asset will be received and held in trust for Senior Mortgagee. Subordinate Mortgagee will promptly remit, in kind and properly endorsed as necessary, all such payments, properties, and assets to Senior Mortgagee. Senior Mortgagee will apply any payment, asset, or property so received from Subordinate Mortgagee to the Senior Indebtedness in such order, amount (with respect to any asset or property other than immediately available funds), and manner as Senior Mortgagee determines in its sole and absolute discretion. (d) Without limiting the complete subordination of the Subordinate Indebtedness to the payment in full of the Senior Indebtedness, in any Bankruptcy Proceeding, upon any payment or distribution (whether in cash, property, securities, or otherwise) to creditors (i) the Senior Indebtedness will first be paid in full in cash before Subordinate Mortgagee will be entitled to receive any payment or other distribution on account of or in respect of the Subordinate Indebtedness, and (ii) until all of the Senior Indebtedness is paid in full in cash, any payment or distribution to which Subordinate Mortgagee would be entitled but for this Agreement (whether in cash, property, or other assets) will be made to Senior Mortgagee. (e) The subordination of the Subordinate Indebtedness will continue if any payment under the Senior Loan Documents (whether by or on behalf of Borrower, as proceeds of security or enforcement of any right of set-off or otherwise) is for any reason repaid or returned to Borrower or its insolvent estate, or avoided, set aside or required to be paid to Borrower, a trustee, receiver or other similar party under any bankruptcy, insolvency, receivership or similar law. In such event, any or all of the Senior Indebtedness originally intended to be satisfied will be deemed to be reinstated and outstanding to the extent of any repayment, return, or other action, as if such payment on account of the Senior Indebtedness had not been made. (f) In addition to the limitations set forth above, Subordinate Mortgagee agrees that the Subordinate Indebtedness will be payable solely from not more than 75% of Surplus Cash while the Senior Indebtedness remains outstanding.
3.Subordination of Subordinate Loan Documents.
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(a) Each of the Subordinate Loan Documents is, and will at all times remain, subject and subordinate in all respects to the liens, terms, covenants, conditions, operations, and effects of each of the Senior Loan Documents. Subordinate Mortgagee intentionally and unconditionally subordinates the lien or charge of the Subordinate Loan Documents in favor of the lien or charge upon the Mortgaged Property of the Senior Mortgage and the other Senior Loan Documents, and understands that in reliance upon and in consideration of this subordination, specific loans and advances are being and will be made and, as part and parcel thereof, specific monetary and other obligations are being and will be entered into which would not be made or entered into but for said reliance upon this subordination. (b) The subordination of the Subordinate Loan Documents and of the Subordinate Indebtedness will apply and continue notwithstanding (i) the actual date and time of execution, delivery, recording, filing or perfection of each of the Senior Loan Documents and of each of the Subordinate Loan Documents, (ii) the availability of any collateral to Senior Mortgagee, including the availability of any collateral other than the Mortgaged Property, and (iii) the amendment and restatement of the Senior Note and the Senior Mortgage at Conversion. (c) By reason of, and without in any way limiting, the full subordination of the Subordinate Indebtedness and the Subordinate Loan Documents provided for in this Agreement, all rights and claims of Subordinate Mortgagee under the Subordinate Loan Documents in or to all or any portion of the Mortgaged Property are expressly subject and subordinate in all respects to the rights and claims of Senior Mortgagee under the Senior Loan Documents in or to the Mortgaged Property.
(d) If Subordinate Mortgagee, by indemnification, subrogation or otherwise, acquires any lien, estate, right or other interest in any of the Mortgaged Property, then that lien, estate, right or other interest will be fully subject and subordinate to the receipt by Senior Mortgagee of payment in full of the Senior Indebtedness, and to the Senior Loan Documents, to the same extent as the Subordinate Indebtedness and the Subordinate Loan Documents are subordinate pursuant to this Agreement.
4.Additional Representations and Covenants.
(a) Subordinate Mortgagee represents and warrants that each of the following is true:
(i) Subordinate Mortgagee is now the owner and holder of the Subordinate Loan Documents.
(ii) The Subordinate Loan Documents are now in full force and effect. (iii) The Subordinate Loan Documents have not been modified or amended.
(iv) No Subordinate Mortgage Default has occurred.
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(v) The current unpaid principal balance of the Subordinate Indebtedness is $____________________.
(vi) No scheduled monthly payments under the Subordinate Note have been or will be prepaid.
(vii) None of the rights of Subordinate Mortgagee under any of the Subordinate Loan Documents are subject to the rights of any third parties, by way of subrogation, indemnification or otherwise.
(b) Without the prior written consent of Senior Mortgagee in each instance, Subordinate Mortgagee will not do any of the following:
(i) Amend, modify, waive, extend, renew, or replace any provision of any of the Subordinate Loan Documents.
(ii) Pledge, assign, transfer, convey, or sell any interest in the Subordinate Indebtedness or any of the Subordinate Loan Documents. (iii) Accept any payment on account of the Subordinate Indebtedness other than a regularly scheduled payment of interest or principal and interest made not earlier than ten (10) days prior to its due date, or as expressly authorized in Section 4(i) below and not in excess of seventy-five percent (75%) of then available Surplus Cash. (iv) Take any action which has the effect of increasing the Subordinate Indebtedness.
(v) Appear in, defend or bring any action to protect Subordinate Mortgagee’s interest in the Mortgaged Property.
(vi) Take any action concerning environmental matters affecting the Mortgaged Property.
(c) Subordinate Mortgagee will deliver to Senior Mortgagee a copy of each Notice received or delivered by Subordinate Mortgagee pursuant to the Subordinate Loan Documents or in connection with the Subordinate Indebtedness, simultaneously with Subordinate Mortgagee’s delivery or receipt of such Notice. Senior Mortgagee will deliver to Subordinate Mortgagee in the manner required in Section 5(b) a copy of each Notice of a Senior Mortgage Default delivered to Borrower by Senior Mortgagee. Neither giving nor failing to give a Notice to Senior Mortgagee or Subordinate Mortgagee pursuant to this Section 4(c) will affect the validity of any Notice given by Senior Mortgagee or Subordinate Mortgagee to Borrower, as between Borrower and such of Senior Mortgagee or Subordinate Mortgagee as provided the Notice to Borrower.
(d) Without the prior written consent of Senior Mortgagee in each instance, Subordinate Mortgagee will not commence, or join with any other creditor in commencing, any Bankruptcy Proceeding. In the event of a Bankruptcy Proceeding, Subordinate Mortgagee will 649
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not vote affirmatively in favor of any plan of reorganization or liquidation unless Senior Mortgagee has also voted affirmatively in favor of such plan. In the event of any Bankruptcy Proceeding, Subordinate Mortgagee will not contest the continued accrual of interest on the Senior Indebtedness, in accordance with and at the rates specified in the Senior Loan Documents, both for periods before and for periods after the commencement of such Bankruptcy Proceedings.
(e) Whenever the Subordinate Loan Documents give Subordinate Mortgagee approval or consent rights with respect to any matter, and a right of approval or consent with regard to the same or substantially the same matter is also granted to Senior Mortgagee pursuant to the Senior Loan Documents or otherwise, Senior Mortgagee’s approval or consent or failure to approve or consent, as the case may be, will be binding on Subordinate Mortgagee. None of the other provisions of this Section 4 are intended to be in any way in limitation of the provisions of this Section 4(e).
(f) All requirements pertaining to insurance under the Subordinate Loan Documents (including requirements relating to amounts and types of coverages, deductibles and special endorsements) will be deemed satisfied if Borrower complies with the insurance requirements under the Senior Loan Documents and of Senior Mortgagee. All original policies of insurance required pursuant to the Senior Loan Documents will be held by Senior Mortgagee.
Nothing in this Section 4(f) will preclude Subordinate Mortgagee from requiring that it be named as a mortgagee and loss payee, as its interest may appear, under all policies of property damage insurance maintained by Borrower with respect to the Mortgaged Property, provided such action does not affect the priority of payment of Loss Proceeds, or that Subordinate Mortgagee be named as an additional insured under all policies of liability insurance maintained by Borrower with respect to the Mortgaged Property.
(g) In the event of a Condemnation or a Casualty, all of the following provisions will apply:
(i) The rights of Subordinate Mortgagee (under the Subordinate Loan Documents or otherwise) to participate in any proceeding or action relating to a Condemnation or a Casualty, or to participate or join in any settlement of, or to adjust, any claims resulting from a Condemnation or a Casualty, will be and remain subordinate in all respects to Senior Mortgagee’s rights under the Senior Loan Documents with respect thereto, and Subordinate Mortgagee will be bound by any settlement or adjustment of a claim resulting from a Condemnation or a Casualty made by Senior Mortgagee.
(ii) All Loss Proceeds will be applied either to payment of the costs and expenses of restoration or to payment on account of the Senior Indebtedness, as and in the manner determined by Senior Mortgagee in its sole discretion. (iii) If Senior Mortgagee applies or releases Loss Proceeds for the purposes of restoration of the Mortgaged Property, then Subordinate Mortgagee will release for such purpose all of its right, title and interest, if any, in and to such Loss Proceeds. If Senior Mortgagee holds Loss Proceeds, or monitors the disbursement thereof, Subordinate Mortgagee will not do so. Nothing contained in this Agreement will be deemed to require Senior Mortgagee 650
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to act for or on behalf of Subordinate Mortgagee in connection with any restoration or to hold or monitor any Loss Proceeds in trust for or otherwise on behalf of Subordinate Mortgagee, and all or any Loss Proceeds may be commingled with any funds of Senior Mortgagee. (iv) If Senior Mortgagee elects to apply Loss Proceeds to payment on account of the Senior Indebtedness, and if the application of such Loss Proceeds results in the payment in full of the entire Senior Indebtedness, any remaining Loss Proceeds held by Senior Mortgagee will be paid to Subordinate Mortgagee unless another party has asserted a claim to the remaining Loss Proceeds.
(h) Subordinate Mortgagee will enter into attornment and non-disturbance agreements with all tenants under commercial or retail Leases, if any, to whom Senior Mortgagee has granted attornment and non-disturbance, on the same terms and conditions given by Senior Mortgagee.
(i) Except as provided in this Section 4(i), and regardless of any contrary provision in the Subordinate Loan Documents, Subordinate Mortgagee will not collect payments for the purpose of escrowing for any cost or expense related to the Mortgaged Property or for any portion of the Subordinate Indebtedness. However, if Senior Mortgagee is not collecting escrow payments for one or more Impositions, Subordinate Mortgagee may collect escrow payments for such Impositions; provided that all payments so collected by Subordinate Mortgagee will be held in trust by Subordinate Mortgagee to be applied only to the payment of such Impositions.
(j) Within 10 days after request by Senior Mortgagee, Subordinate Mortgagee will furnish Senior Mortgagee with a statement, duly acknowledged and certified setting forth the then-current amount and terms of the Subordinate Indebtedness, confirming that there exists no default under the Subordinate Loan Documents (or describing any default that does exist), and certifying to such other information with respect to the Subordinate Indebtedness as Senior Mortgagee may request.
(k) Senior Mortgagee may amend, waive, postpone, extend, renew, replace, reduce or otherwise modify any provisions of the Senior Loan Documents without the necessity of obtaining the consent of or providing Notice to Subordinate Mortgagee, and without affecting any of the provisions of this Agreement.
5.Default Under Loan Documents.
(a) For a period of 90 days following delivery to Senior Mortgagee of an Enforcement Action Notice, Senior Mortgagee will have the right, but not the obligation, to cure any Subordinate Mortgage Default, provided that if such Subordinate Mortgage Default is a non- monetary default and is not capable of being cured within such 90-day period and Senior Mortgagee has commenced and is diligently pursuing such cure to completion, Senior Mortgagee will have such additional period of time as may be required to cure such Subordinate Mortgage Default or until such time, if ever, as Senior Mortgagee (i) discontinues its pursuit of any cure and/or (ii) delivers to Subordinate Mortgagee Senior Mortgagee’s written consent to the Enforcement Action described in the Enforcement Action Notice. Senior Mortgagee will not be 651
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subrogated to the rights of Subordinate Mortgagee under the Subordinate Loan Documents by reason of Senior Mortgagee having cured any Subordinate Mortgage Default. However, Subordinate Mortgagee acknowledges that all amounts advanced or expended by Senior Mortgagee in accordance with the Senior Loan Documents or to cure a Subordinate Mortgage Default will be added to and become a part of the Senior Indebtedness and will be secured by the lien of the Senior Mortgage.
(b) Senior Mortgagee shall not complete a foreclosure sale of the Mortgaged Property or record a deed-in-lieu of foreclosure with respect to the Mortgaged Property (each, a “Foreclosure Remedy”) unless Subordinate Mortgagee has first been given thirty (30) days written notice of the Senior Mortgage Default giving Senior Mortgagee the right to complete such Foreclosure Remedy, and unless Subordinate Mortgagee has failed, within such thirty (30) day period, to cure such Event(s) of Default; provided, however, that Senior Mortgagee shall be entitled during such thirty (30) day period to continue to pursue all of its rights and remedies under the Senior Loan Documents, including, but not limited to, acceleration of the Senior Loan, commencement and pursuit of a judicial or non-judicial foreclosure (but not completion of the foreclosure sale), appointment of a receiver, enforcement of any guaranty, and/or enforcement of any other Senior Loan Document. In the event Senior Mortgagee has accelerated the Senior Loan and Subordinate Mortgagee cures all Events of Default giving rise to such acceleration within the thirty (30) day cure period described above, such cure shall have the effect of de-accelerating the Senior Loan; provided, however, that such de-acceleration shall not waive or limit any of Senior Mortgagee’s rights to accelerate the Senior Loan or exercise any other remedies under the Senior Loan Documents as to any future or continuing Event(s) of Default. It is the express intent of the parties hereunder that Senior Mortgagee shall have the right to pursue all rights and remedies except completion of a Foreclosure Remedy without liability to Subordinate Mortgagee for failure to provide timely notice to Subordinate Mortgagee required hereunder, and that Senior Mortgagee’s liability hereunder shall be expressly limited to actual damages to Subordinate Mortgagee directly caused by Senior Mortgagee’s completion of a Foreclosure Remedy without Subordinate Mortgagee receiving the notice and opportunity to cure described above. Senior Mortgagee shall give Subordinate Mortgagee any required notice described above at the address set forth below in Section 6(g).
Subordinate Mortgagee will not be subrogated to the rights of Senior Mortgagee under the Senior Loan Documents by reason of Subordinate Mortgagee having cured any Senior Mortgage Default.
However, Senior Mortgagee acknowledges that all amounts paid by Subordinate Mortgagee to Senior Mortgagee to cure a Senior Mortgage Default will be deemed to have been advanced by Subordinate Mortgagee pursuant to, and will be secured by the lien of, the Subordinate Mortgage.
Notwithstanding anything in this Section 5(b) to the contrary, Subordinate Mortgagee’s right to cure any Senior Mortgage Default will terminate immediately upon the occurrence of any Bankruptcy Proceeding.
(c) In the event of a Subordinate Mortgage Default, Subordinate Mortgagee will not commence any Enforcement Action until 90 days after Subordinate Mortgagee has delivered to Senior Mortgagee an Enforcement Action Notice with respect to such Enforcement Action. Subordinate Mortgagee may not commence any other Enforcement Action, including any foreclosure action under the Subordinate Loan Documents, until the earlier of (i) the 652
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expiration of such 90-day period or such longer period as provided in Section 5(a), or (ii) the delivery by Senior Mortgagee to Subordinate Mortgagee of Senior Mortgagee’s written consent to such Enforcement Action by Subordinate Mortgagee. Subordinate Mortgagee acknowledges that Senior Mortgagee may grant or refuse consent to Subordinate Mortgagee’s Enforcement Action in Senior Mortgagee’s sole and absolute discretion. At the expiration of such 90-day period or such longer period as provided in Section 5(a) and, subject to Senior Mortgagee’s right to cure set forth in Section 5(a), Subordinate Mortgagee may commence any Enforcement Action. Any Enforcement Action on the part of Subordinate Mortgagee will be subject to the provisions of this Agreement. Subordinate Mortgagee acknowledges that the provisions of this Section 5(c) are fair and reasonable under the circumstances, that Subordinate Mortgagee has received a substantial benefit from Senior Mortgagee having granted its consent to the Subordinate Mortgage, and that Senior Mortgagee would not have granted such consent without the inclusion of these provisions in this Agreement.
(d) Senior Mortgagee may pursue all rights and remedies available to it under the Senior Loan Documents, at law, or in equity, regardless of any Enforcement Action Notice or Enforcement Action by Subordinate Mortgagee. No action or failure to act on the part of Senior Mortgagee in the event of a Subordinate Mortgage Default or commencement of an Enforcement Action will constitute a waiver on the part of Senior Mortgagee of any provision of the Senior Loan Documents or this Agreement.
(e) If the Enforcement Action taken by Subordinate Mortgagee is the appointment of a receiver for any of the Mortgaged Property, all of the Rents, issues, profits and proceeds collected by the receiver will be paid and applied by the receiver solely to and for the benefit of Senior Mortgagee until the Senior Indebtedness will have been paid in full. (f) Subordinate Mortgagee consents to and authorizes the release by Senior Mortgagee of all or any portion of the Mortgaged Property from the lien, operation, and effect of the Senior Loan Documents. Subordinate Mortgagee waives to the fullest extent permitted by law, all equitable or other rights it may have (i) in connection with the release of all or any portion of the Mortgaged Property, (ii) to require the separate sale of any portion of the Mortgaged Property, (iii) to require Senior Mortgagee to exhaust its remedies against all or any portion of the Mortgaged Property or any combination of portions of the Mortgaged Property or any other collateral for the Senior Indebtedness, or (iv) to require Senior Mortgagee to proceed against Borrower, any other party that may be liable for any of the Senior Indebtedness (including any general partner of Borrower if Borrower is a partnership), all or any portion of the Mortgaged Property or combination of portions of the Mortgaged Property or any other collateral, before proceeding against all or such portions or combination of portions of the Mortgaged Property as Senior Mortgagee determines. Subordinate Mortgagee waives to the fullest extent permitted by law any and all benefits under California Civil Code Sections 2845, 2849 and 2850. Subordinate Mortgagee consents to and authorizes, at the option of Senior Mortgagee, the sale, either separately or together, of all or any portion of the Mortgaged Property. Subordinate Mortgagee acknowledges that without Notice to Subordinate Mortgagee and without affecting any of the provisions of this Agreement, Senior Mortgagee may (i) extend the time for or waive any payment or performance under the Senior Loan Documents; (ii) modify or amend in any respect any provision of the Senior Loan Documents; and (iii) modify, 653
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exchange, surrender, release, and otherwise deal with any additional collateral for the Senior Indebtedness.
(g) If any party other than Borrower (including Senior Mortgagee) acquires title to any of the Mortgaged Property pursuant to a foreclosure of, or trustee’s sale or other exercise of any power of sale under, the Senior Mortgage conducted in accordance with applicable law, the lien, operation, and effect of the Subordinate Mortgage and other Subordinate Loan Documents automatically will terminate with respect to such Mortgaged Property.
6.Miscellaneous Provisions.
(a) This Agreement shall be the whole and only agreement with regard to the subordination of the lien or charge of the Subordinate Loan Documents to the lien or charge of the Senior Loan Documents and shall supersede and cancel, but only insofar as would affect the priority between said documents, any prior agreements as to such subordination, including, but not limited to, those provisions, if any, contained in the Subordinate Loan Documents which provide for the subordination of the lien or charge thereof to another deed or deeds of trust or to another mortgage or mortgages.
(b) In making disbursements pursuant to any of the Senior Loan Documents, Senior Mortgagee is under no obligation or duty to, nor has Senior Mortgagee represented that it will, see to the application of such proceeds by the person or persons to whom Senior Mortgagee disburses such proceeds, and any application or use of such proceeds for purposes other than those provided for in such Senior Loan Document(s) shall not defeat the subordination herein made in whole or in part.
(c) Subordinate Mortgagee has received, and been afforded a reasonable opportunity to review, the Senior Loan Documents. No decision by Subordinate Mortgagee to review, or not to review, the Senior Loan Documents, including but not limited to the disbursement provisions contained therein, shall modify, impair or otherwise limit or affect the enforceability of this Agreement.
(d) If there is any conflict or inconsistency between the terms of the Subordinate Loan Documents and the terms of this Agreement, then the terms of this Agreement will control.
(e) This Agreement will be binding upon and will inure to the benefit of the respective legal successors and permitted assigns of the parties to this Agreement. No other party will be entitled to any benefits under this Agreement, whether as a third-party beneficiary or otherwise.
(f) This Agreement does not constitute an approval by Senior Mortgagee of the terms of the Subordinate Loan Documents.
(g) Each notice, request, demand, consent, approval or other communication (collectively, “Notices”, and singly, a “Notice”) which is required or permitted to be given pursuant to this Agreement will be in writing and will be deemed to have been duly and 654
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sufficiently given if (i) personally delivered with proof of delivery (any Notice so delivered will be deemed to have been received at the time so delivered), or (ii) sent by a national overnight courier service (such as FedEx) designating earliest available delivery (any Notice so delivered will be deemed to have been received on the next Business Day following receipt by the courier), or (iii) sent by United States registered or certified mail, return receipt requested, postage prepaid, at a post office regularly maintained by the United States Postal Service (any Notice so sent will be deemed to have been received on the date of delivery as confirmed by the return receipt), addressed to the respective parties as follows:
(i) Notices intended for Senior Mortgagee will be addressed to:
Banner Bank
5930 Granite Lake Drive, Suite 170
Granite Bay, CA 95746
Attention: Sandy Bowen
Loan No. 14014073 and 14014075
(ii) Notices intended for Subordinate Mortgagee will be addressed to:
City of Oxnard
Housing Director
435 South D Street
Oxnard, California 93030
(iii) Notices intended for Borrower will be addressed to:
Central Terrace LP
c/o Many Mansions
1259 E. Thousand Oaks Boulevard
Thousand Oaks, CA 91362
Any party, by Notice given pursuant to this Section, may change the person or persons and/or address or addresses, or designate an additional person or persons or an additional address or addresses, for its Notices, but Notice of a change of address will only be effective upon receipt. Neither party will refuse or reject delivery of any Notice given in accordance with this Section. (h) Nothing in this Agreement or in any of the Senior Loan Documents or Subordinate Loan Documents will be deemed to constitute Senior Mortgagee as a joint venturer or partner of Subordinate Mortgagee.
(i) Upon Notice from Senior Mortgagee, Subordinate Mortgagee will execute and deliver such additional instruments and documents, and will take such actions, as are required by Senior Mortgagee in order to further evidence or implement the provisions and intent of this Agreement.
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(j) This Agreement will be governed by the laws of the State in which the Land is located.
(k) If any one or more of the provisions contained in this Agreement, or any application of any such provisions, is invalid, illegal, or unenforceable in any respect, the validity, legality, enforceability, and application of the remaining provisions contained in this Agreement will not in any way be affected or impaired.
(l) The term of this Agreement will commence on the date of this Agreement and will continue until the earliest to occur of the following events: (i) the payment of all of the Senior Indebtedness; provided that this Agreement will be reinstated in the event any payment on account of the Senior Indebtedness is avoided, set aside, rescinded or repaid by Senior Mortgagee as described in Section 2(e) of this Agreement, (ii) the payment of all of the Subordinate Indebtedness other than by reason of payments which Subordinate Mortgagee is obligated to remit to Senior Mortgagee pursuant to this Agreement, (iii) the acquisition by Senior Mortgagee or by a third party purchaser of title to the Mortgaged Property pursuant to a foreclosure of, deed in lieu of foreclosure, or trustee’s sale or other exercise of a power of sale or similar disposition under the Senior Mortgage; or (iv) with the prior written consent of Senior Mortgagee, without limiting the provisions of Section 5(d), the acquisition by Subordinate Mortgagee of title to the Mortgaged Property subject to the Senior Mortgage pursuant to a foreclosure, or a deed in lieu of foreclosure, of (or the exercise of a power of sale under) the Subordinate Mortgage. Notwithstanding the foregoing, the terms and conditions of Section 3 of this Agreement shall survive the occurrence of any of the foregoing events (and the term of this Agreement, as to Section 3, shall be perpetual).
(m) No failure or delay on the part of any party to this Agreement in exercising any right, power, or remedy under this Agreement will operate as a waiver of such right, power, or remedy, nor will any single or partial exercise of any such right, power or remedy preclude any other or further exercise of such right, power, or remedy or the exercise of any other right, power or remedy under this Agreement.
(n) Each party to this Agreement acknowledges that if any party fails to comply with its obligations under this Agreement, the other parties will have all rights available at law and in equity, including the right to obtain specific performance of the obligations of such defaulting party and injunctive relief.
(o) This Agreement shall inure to the benefit of any subsequent holder of the Senior Note.
(p) This Agreement may be amended, changed, modified, altered or terminated only by a written instrument or written instruments signed by the parties to this Agreement.
(q) This Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument.
656
16 4880-5591-3242v.2 0058243-000403
1650\33\3259367.4
4880-5591-3242v.3 0058243-000403
[Signature Pages Follow]
657
[Signature Page to Subordination Agreement (City of Oxnard) – Central Terrace Apartments] IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first above written.
SENIOR MORTGAGEE:
BANNER BANK, a Washington corporation,
as “Agent”, pursuant to that certain Master Agency
Agreement dated as of _________________
between Issuer and Agent
By: ______________________________,
Waheed Karim
Vice President
BANNER BANK, a Washington corporation
By: ______________________________,
Waheed Karim
Vice President
658
[Signature Page to Subordination Agreement (City of Oxnard) – Central Terrace Apartments] SUBORDINATE MORTGAGEE:
THE CITY OF OXNARD,
a municipal corporation
By: ______________________________________
Alexander Nguyen
City Manager
APPROVED AS TO FORM:
__________________________________
Stephen Fischer
City Attorney
659
[Signature Page to Subordination Agreement (City of Oxnard) – Central Terrace Apartments] BORROWER:
CENTRAL TERRACE LP,
a California limited partnership
By: Central Terrace LLC,
a California limited liability company,
its managing general partner
By: Many Mansions, a California Nonprofit
Corporation,
a California nonprofit public benefit
corporation,
its sole member and manager
By: ______________________________
Rick Schroeder
President
660
Exhibit A
4880-5591-3242v.2 0058243-000403
1650\33\3259367.4
4880-5591-3242v.3 0058243-000403
EXHIBIT A
LEGAL DESCRIPTION
All that certain real property situated in the County of Ventura, State of California, described as follows:
LOTS 7, 8, 9, 10 AND 11 IN BLOCK A OF THE RICE TRACT, IN THE CITY OXNARD,
COUNTY OF VENTURA, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 1A PAGE 34 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY RECORDER OF SAID COUNTY.
Assessor’s Parcel Number: 201-0-213-110
661
ACKNOWLEDGMENT
State of California )
) ss
County of _______________________)
On _______________________, 2022 before me, ____________________________________________, a Notary Public, personally appeared _____________________________________, who proved to me on the basis of satisfactory evidence to be the person (s) whose name (s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her their authorized capacity (ies), and that by his/her/their signature (s) on the instrument the person (s), or the entity upon behalf of which the person (s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature_____________________________
(Seal)
A notary public or other officer completing this
certificate verifies only the identity of the
individual who signed the document to which
this certificate is attached, and not the
truthfulness, accuracy, or validity of that
document.
662
ACKNOWLEDGMENT
State of California )
) ss
County of _______________________)
On _______________________, 2022 before me, ____________________________________________, a Notary Public, personally appeared _____________________________________, who proved to me on the basis of satisfactory evidence to be the person (s) whose name (s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her their authorized capacity (ies), and that by his/her/their signature (s) on the instrument the person (s), or the entity upon behalf of which the person (s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature_____________________________
(Seal)
A notary public or other officer completing this
certificate verifies only the identity of the
individual who signed the document to which
this certificate is attached, and not the
truthfulness, accuracy, or validity of that
document.
663
ACKNOWLEDGMENT
State of California )
) ss
County of _______________________)
On _______________________, 2022 before me, ____________________________________________, a Notary Public, personally appeared _____________________________________, who proved to me on the basis of satisfactory evidence to be the person (s) whose name (s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her their authorized capacity (ies), and that by his/her/their signature (s) on the instrument the person (s), or the entity upon behalf of which the person (s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature_____________________________
(Seal)
A notary public or other officer completing this
certificate verifies only the identity of the
individual who signed the document to which
this certificate is attached, and not the
truthfulness, accuracy, or validity of that
document.
664
1 Agreement No. A-8329
FIRST AMENDMENT TO AHSC IMPLEMENTATION AGREEMENT
This First Amendment (“First Amendm ent”) to the AHSC Implementation and mutual indemnity agreement (“Agreement”) is made and entered into in the County of Ventura, State of California, this _____ day of May, 2022 by and between the City of Oxnard, a municipal corporation (“City”), Many Mansions, A California Nonprofit Corporation, a California nonprofit public benefit corporation (“Developer”, and collectively with the City, the “Parties”, or individually, a “Party.”). This First Amendment amends the Agreement entered into on June 1, 2021, the Parties.
The Parties agree as follows:
1. Recital C. is hereby amended in its entirety to read as follows:
“The AHSC Application sought an award to the Developer in an aggregate amount not to exceed $30,000,000 in AHSC funds including a loan (the "AHSC Loan") not to exceed $20,000,000 for an Affordable Housing Development (AHD) and a grant (the "AHSC Grant") in an amount not to exceed $10,000,000 for Housing -Related Infrastructure (HRI), Sustainable Transportation Infrastructure (STI), Transit -Related Amenities (TRA) or Program (PGM) activities as defined the AHSC Program Guidelines adopted by SGC on February 24, 2021. The Developer was awarded a total of $8,497,962 of AHSC Grant funds, which will be disbursed to the Developer. The Developer will transfer up to $5,409,500 of the AHSC Grant funds to the City for the purpose of constructing certain STI Improvements and TRA Improvements, specifically the 4th Street Mobility Improvements and the Downtown Oxnard Transit Improvements, as set forth in more detail in Exhibits 2 and 3 (the "City Improvements"), attached hereto and incorporated herein by this reference.”
2. In Section 1, the first sentence is here by amended in its entirety to read as follows:
"The City shall complete the City Improvements portion of the Sustainable Transit Obligations in accordance with the terms of the AHSC Grant Documents, including without limitation the Disbursement Agreement between Developer and HCD regarding the AHSC Grant funds ("Disbursement Agreement") and the approved design and construction documents and pursuant to the Schedule of Performance attached hereto as Exhibit 1 and incorporated hereby."
3. In Section 5, the second sentence is he reby amended in its entirety to read as follows:
“The AHSC Loan may be assigned and disbursed to the Partnership, in which an affiliate of the Developer is the managing general partner.”
4. In Section 5, the following is he reby added as the last sentence:
665
2 "The City and the Developer acknowledge that HCD will disburse funds in accordance with the Disbursement Agreement."
5. Section 6 is hereby amended in it s entirety to read as follows:
“Notices. All notices, including deliveries of documentation (i.e., plans and contracts) for review and approval herein, shall be sent by a party hereto or its counsel by either personal delivery, a reputable overnight courier which keeps receipts of delivery (such as UPS, Cal Overnight, or Federal Express), or through the facilities of the United States Post Office, postage prepaid, certified or registered mail, return receipt requested. Any such notice shall be effective upon delivery, if delivered by personal delivery or overnight courier, and seventy-two (72) hours after dispatch, if mailed in accordance with the above. Notice to the respective parties shall be sent to the following addresses unless written notice of a change of address has been given pursuant hereto:
To Developer: Rick Schroeder, President Many Mansions
1259 E Thousand Oaks Blvd.
Thousand Oaks, CA 91360
With a copy to:
MCC Housing LLC
c/o Merritt Community Capital Corporation
1970 Broadway, Suite 250
Oakland, California 94612
Attention: President & CEO
With a copy to:
Carle, Mackie, Power & Ross LLP
100 B Street, Suite 400
Santa Rosa, CA 95401
Attention: Henry Loh II
With a copy to:
Banner Bank
5930 Granite Lake Drive
Suite 170
Granite Bay, California 95746
Attention: Andre Massey
Loan Nos. 14014073 and 14014075
With a copy to:
Davis Wright Tremaine LLP
865 S. Figueroa Street
Suite 2400
666
3 Los Angeles, California 90017
Attention: Tiffany K. Switzer, Esq.
To City: Tatiana Arnaout, City Engineer City of Oxnard
305 W Third Street
Oxnard, CA 93030
6. Section 8 is hereby amended in it s entirety to read as follows:
“Termination. This Agreement shall terminate upon the earlier of: (i) completion of all obligations under the AHSC Grant Documents as evidenced by a written notice from HCD reasonably acceptable to the Parties and the Financing Parties (as defined below); or (ii) mutual written agreement of the Parties and the Financing Parties. “Financing Parties” shall mean the limited partner(s) of the Partnership and Banner Bank, as the first priority lender to the Partnership with a security interest in the Housing Project (and any successor and assign of such security interest) (“Senior Lender”).”
7. Section 10 i. is hereby added to th e Agreement to read as follows:
“The City will deliver written notice to Developer when the STI and TRA Improvement design and construction documents are completed and will deliver a copy of the STI and TRA Improvement design and construction documents to Developer. When the City advertises construction, the City will provide Developer with written notice of such action, and will deliver a copy of any and all construction contract(s) to be executed for the construction or installation of the STI and TRA Improvements to Developer at Developer’s expense. Upon execution of any and all construction contract(s) for the construction or installation of the STI and TRA Improvements, the City will deliver a copy of any and all such construction contract(s) to Developer.”
8. The Parties hereto hereby agree that if (i) the City does not complete the City Improvements in accordance with the Performance Schedule, or (ii) the City indicates that it will not be able to complete the City Improvements in accordance with the Performance Schedule, then Developer (or (a) Senior Lender or (b) any successor to Senior Lender or its nominee following a foreclosure or deed in lieu of foreclosure (collectively, “Successor Parties”)) shall have the right, but not the obligation, to step in and take over the completion of the City Improvements by delivering written notice to the City (“Work Takeover Notice”). Upon delivery of the Work Takeover Notice, each of the City and Developer (or Successor Party if applicable) shall take all actions necessary and reasonably appropriate for Developer (or Successor Party if applicable) to effectuate completion of the City Improvements pursuant to HCD requirements, which actions shall include, without limitation, the assignment of any construction contracts and the granting of licenses from the City to Developer (or Successor Party if applicable).
9. Section 11 is hereby added to the Agreement to read as follows:
667
4 “The Parties hereby agree that Central Terrace LP, a California limited partnership, is the owner of the Housing Project (the “Partnership”) shall have the right to succeed to Developer’s rights hereunder. Under no circumstances shall such assumption by the Partnership be conditioned upon the assumption of the Partnership of any indemnification obligations contained herein, provided, however, that the Partnership will assume indemnification obligations that run to the benefit of the City with respect to any subsequent breach by the Partnership under this Agreement first occurring after such assumption. The Partnership’s exercise of the right of assumption set forth in this section shall be evidenced by delivery of notice (the “Partnership’s Assumption Notice”) to the City. The Partnership’s Assumption Notice shall not be delivered until Developer (or its affiliate) has been removed as the general partner of the Partnership.
The rights of the Partnership hereunder shall transfer with any transfer of the Housing Project, including following a foreclosure or deed in lieu thereof, without the consent of the City. The City acknowledges and consents to Senior Lender’s collateral assignment of Partnership’s rights under this Agreement as set forth in Senior Lender’s security interest in the Housing Project.
The Financing Parties are intended to be and shall be third-party beneficiaries of this Agreement and Developer and the City shall not amend, modify or terminate this Agreement without the Financing Parties’ express prior written consent.”
10. Exhibit 1 to the Agreement is replaced w ith the Exhibit 1 attached to this First Amendment.
As so amended, the Agreement remains in full force and effect.
668
5 Each of the undersigned hereby executes this First Amendment in the spaces provided below to evidence their respective agreement to the terms of this First Amendment.
CITY OF OXNARD DEVELOPER
MANY MANSIONS, A CALIFORNIA
NONPROFIT PUBLIC BENEFIT
CORPORATION
John C. Zaragoza, Mayor Date Rick Schroeder Date P r e s i d e n t
ATTEST:
Skyler Wolpert Date
S e c r e t a r y
Rose Chaparro, City Clerk Date
APPROVED AS TO FORM:
Stephen M. Fischer Date
City Attorney
669
Exhibit 1: Schedule of Performance
Note: It is acknowledged that some of the following milestones may have already been achieved.
For those milestones which have previously been met, the month and year completed has been provided. For those milestones not yet completed, a completion date (MM/YY) for each of the applicable items is provided below.
STI MILESTONES
STI Capital Project Milestone Schedule Date
Executed binding agreement between the Recipient and developer of the proposed development detailing the terms and conditions of the Project development.
06/21
Site Control of sites(s) by proposed developer.
Completed all necessary environmental clearances, including those required under CEQA and NEPA.
06/22
Submission of Final Construction Drawings and Specifications to the appropriate local permitting authority.
02/24
Commencement of Construction. 09/24
Construction completion and closeout. 01/25
Program funds fully disbursed. 06/25
TRA MILESTONES
TRA Capital Project Milestone Schedule Date
Executed binding agreement between the Recipient and developer of the proposed development detailing the terms and conditions of the Project development.
06/21
Site Control of sites(s) by proposed developer.
Completed all necessary environmental clearances, including those required under CEQA and NEPA.
06/22
Submission of Final Construction Drawings and Specifications to the appropriate local permitting authority.
02/24
Commencement of Construction. 09/24
Construction completion and closeout. 01/25
Program funds fully disbursed. 06/25
670
EXHIBIT 2
City STI Improvements
Project Name Description (include: the general
location and description of each STI
improvement and note if sidewalks
are new or replaced. Please include
other descriptive information such as
key gaps closed and connections
established.)
Address Amount of
AHSC Grant
STI #1 4th Street
Mobility
Improvements
(Roadway/Signal
Work)
Improvements to the 4th Street
corridor from C Street past the Oxnard
Transit Center along Meta Street to
6th Street; design and construct 1 mile
of Class II bike lanes along both sides
of the street, 2,873' of safe and
accessible sidewalk, curb extensions,
traffic signal modifications to
detect bicycles, resurfacing, and
improvements to drainage.
4th Street from C
Street to Oxnard
Boulevard to
Meta Street to
6th Street, in the
City of Oxnard.
$4,146,675
671
EXHIBIT 3
City TRA Improvements
Project Name Description (include: the general
location and description of each STI
improvement and note if sidewalks are
new or replaced. Please include other
descriptive information such as key
gaps closed and connections
established.)
Address Amount of
AHSC Grant
TRA
#1
4th Street
Mobility
Improvements
(Bus Stop 4th at
B Street)
Improvements to the 4th Street/B
Street transit hub; design and install
new concrete bus pad with saw‐tooth
design for better pedestrian/cyclist
visibility, ADA improvements,
sidewalks, benches, bike racks, curb,
gutter, striping, signage, and restroom
facilities.
4th Street/B
Street, in the City
of Oxnard.
$753,325
TRA
#2
Downtown
Oxnard
Transit
Amenities
Improvements
Improvements to 54 stops in the
downtown Oxnard area; design and
install bus shelters, benches, bike racks,
lighting, and real‐time arrival signs.
Downtown
Oxnard – 54
stops
$509,500
672
CITY COUNCIL OF THE CITY OF OXNARD
RESOLUTION NUMBER 2022- ______
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF OXNARD
APPROVING AND AUTHORIZING THE CITY MANAGER OR
DESIGNEE TO EXECUTE AND TAKE ALL NEEDED ACTIONS IN
CONSULTATION WITH CITY ATTORNEY RELATIVE TO ENTERING
INTO AN ASSIGNMENT OF CITY LOAN DOCUMENTS; LOAN RIDER
AND SUBORDINATION AGREEMENT IN CONNECTION WITH THAT
CERTAIN LOAN PROVIDED BY CITY TO MANY MANSIONS FOR
THE DEVELOPMENT OF CENTRAL PLAZA AFFORDABLE HOUSING
PROJECT
WHEREAS, the City Council hereby finds and declares that it is necessary, essential and a public purpose for the City to enter into a variety of agreements to facilitate the development of the Central Terrace Apartments consisting of eighty-seven units of multi-family affordable housing, including one manager’s unit, and approximately 2,375 square feet of common area space on the ground floor on a 0.42-acre parcel located in Oxnard, California (“Project”); and WHEREAS, the City Council previously approved and entered into an Affordable Housing Loan Agreement, Promissory Note, Deed of Trust and Regulatory Agreement (collectively “Loan Documents”) by and between the City and Many Mansions, a California nonprofit public benefit corporation (“Many Mansions”); and WHEREAS, in furtherance of the Project the City Council desires to approve and authorize the City Manager or designee to execute an Assignment, Assumption and Modification Agreement City Loan Documents (“Assignment”) by and between City, Many Mansions and Central Terrace LP, a California limited partnership (“Partnership”); and WHEREAS, in furtherance of the Project the City Council desires to approve and authorize the City Manager or designee to execute a Deed of Trust Rider (“Loan Rider”) that shall amend the Loan Documents; and
WHEREAS, in furtherance of the Project the City Council desires to approve and authorize the City Manager or designee to execute a Subordination Agreement (“Subordination Agreement”) by and among City, Partnership and Banner Bank, a Washington corporation (“Bank”); and
WHEREAS, the City Council has determined that the approval of this Resolution and the acts authorized therein are exempt from the California Environmental Quality Act (CEQA) pursuant to 14 Cal. Code of Regulations section 15280 and Public Resources Code sections 21159.21 and 21159.23; and
WHEREAS, the City Council hereby finds and declares that this Resolution is being adopted by the City pursuant to the powers granted to the City.
NOW, THEREFORE, the City Council of the City of Oxnard resolves as follows:
673
2 1. The City Council hereby finds and declares that the above recitals are true and correct.
2. The City Council further approves and authorizes the City Manager or designee to take all needed actions and execute all requisite documents on behalf of the City in consultation with the City Attorney relative to the (i) Assignment; (ii) Loan Rider; (iii) Subordination Agreement and (iv) any other agreements for the purpose of developing, maintaining and operating the Project.
3. That the City Clerk is directed to prepare and file a Notice of Exemption with the County Clerk.
4. This Resolution shall take effect from and after the date of its passage and adoption. (signatures appear on next page)
674
3 PASSED AND ADOPTED this day of , 2022, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
John C. Zaragoza, Mayor
ATTEST:
Rose Chaparro, City Clerk
APPROVED AS TO FORM:
Stephen Fischer, City Attorney
675
Deed of Trust Rider 1
Exhibit G
LOAN RIDER
(City Loan)
This Deed of Trust Rider (the “Rider”) is attached to and made a part of the Affordable Housing Loan Agreement made on June 1, 2021 (the “Loan Agreement”), as assigned pursuant to the Assignment, Assumption and Modification Agreement entered into as of ______, 2022, between Central Terrace LP, a California limited partnership (“Borrower”) and City of Oxnard , a municipal corporation (“Lender”), and is for the benefit of MCC Housing LLC, a California limited liability company, and its successors and assigns (the “Limited Partner”), the limited partner of Borrower under the First Amended and Restated Agreement of Limited Partnership of Borrower dated May 1, 2022 (the “Partnership Agreement”). The Loan Agreement evidence a loan in the original principal amount of $1,250,000 to Borrower (the “Loan”) and is secured by a Deed of Trust encumbering certain real property and improvements thereon consisting of a housing project for low-income households, located in the County in which the Deed of Trust will be recorded (the “Project”). Capitalized terms not defined herein shall have the meanings given to them in the Loan Agreement.
The parties hereto agree that the following covenants, terms, and conditions shall be part of and shall modify or supplement the Loan Documents:
1. Nonrecourse Obligation. The Loan is a nonrecourse obligation of Borrower.
Neither Borrower nor its general or limited partner, nor any other party shall have any personal liability for repayment of the Loan. The sole recourse of Lender under the Loan Documents for repayment of the Loan shall be the exercise of its rights against the Project and related security thereunder.
2. General Partner Change. The withdrawal, removal, and/or replacement of a general partner of the Borrower pursuant to the terms of the Partnership Agreement shall not constitute a default under any of the Loan Documents, and any such actions shall not accelerate the maturity of the Loan, provided that any required substitute general partner is reasonably acceptable to Lender and is selected with reasonable promptness.
3. Assignment of Limited Partner Interests. Notwithstanding anything to the contrary contained in the Loan Documents, all or a portion of the interests of Borrower’s Limited Partner shall be transferable to any affiliate of Merritt Community Capital Corporation (“Merritt”), without the consent of the Lender. The interest the Limited Partner shall be transferable to a non- affiliate of Merritt with the consent of the Lender, which consent shall not be unreasonably withheld.
4. Monetary Default. If a monetary event of default occurs under the terms of any of the Loan Documents, prior to exercising any remedies thereunder, Lender shall give the Limited Partner of the Borrower, as identified in Paragraph 7 below or as identified to Lender by written notice, simultaneous written notice of such default. Borrower shall have a period of seven (7) days after such notice is given within which to cure the default prior to exercise of remedies by Lender 676
Deed of Trust Rider 2
under the Loan Documents, or such longer period of time as may be specified in the Loan Documents.
5. Non-Monetary Default. If a non-monetary event of default occurs under the terms of any of the Loan Documents, prior to exercising any remedies thereunder, Lender shall give Borrower and the Limited Partner of the Borrower, as identified in Paragraph 6 below or as identified to Lender by written notice, simultaneous written notice of such default. If the default is reasonably capable of being cured within thirty (30) days, Borrower shall have such period to effect a cure prior to exercise of remedies by Lender under the Loan Documents, or such longer period of time as may be specified in the Loan Documents. If the default is such that it is not reasonably capable of being cured within thirty (30) days or such longer period if so specified, and if Borrower (a) initiates corrective action within said period, and (b) diligently, continually, and in good faith works to effect a cure as soon as possible, then Borrower shall have such additional time as is reasonably necessary to cure the default prior to exercise of any remedies by Lender. If Borrower fails to take corrective action or to cure the default within a reasonable time, Lender shall give Borrower and the Limited Partner of the Borrower, as identified in Paragraph 7 below or as identified to Lender by written notice, written notice thereof, whereupon Limited Partner may remove and replace the General Partner with a substitute general partner who shall effect a cure within a reasonable time thereafter in accordance with the foregoing provisions. In no event shall Lender be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default or the default is not cured within one hundred eighty (180) days after the first notice of default is given, or such longer period of time as may be specified in the Loan Documents.
6. Notices. Lender shall give Limited Partner written notice of any default under the Loan Documents, and the cure periods contained in Paragraphs 5 and 6 above shall commence on the effective date of any such notice, at the following address:
Limited Partner: MCC Housing LLC
c/o Merritt Community Capital Corporation
1970 Broadway, Suite 250
Oakland, CA 94612
Attention: President & CEO
Facsimile: (510) 444-7874
With a copy to: Carle, Mackie, Power & Ross LLP
100 B Street, Suite 400
Santa Rosa, California 95401
Attention: Henry Loh II
Facsimile: (707) 526-4707
Any cure periods available to the Limited Partner, either as specified in the Loan Documents or in this Rider, shall commence upon the date of any such notice to the Limited Partner.
7. Casualty, Condemnation, Etc. In the event of any fire or other casualty to the Project or eminent domain proceedings resulting in condemnation of the Project or any part thereof, Borrower shall have the right to rebuild the Project, and to use all available insurance or 677
Deed of Trust Rider 3
condemnation proceeds therefor, provided that (a) such proceeds are sufficient to keep the Loan in balance and rebuild the Project in a manner that provides adequate security to Lender for repayment of the Loan or if such proceeds are insufficient then Borrower shall have funded any deficiency, (b) Lender shall have the right to approve plans and specifications for any major rebuilding and the right to approve disbursements of insurance or condemnation proceeds for rebuilding under a construction escrow or similar arrangement, and (c) no material default then exists under the Loan Documents. If the casualty or condemnation affects only part of the Project and total rebuilding is infeasible, then proceeds may be used for partial rebuilding and partial repayment of the Loan in a manner that provides adequate security to Lender for repayment of the remaining balance of the Loan.
8. Lender Approvals, Etc. In any approval, consent, or other determination by Lender required under any of the Loan Documents, Lender shall act reasonably and in good faith.
9. Force Majeure. There shall be no default for construction delays beyond the reasonable control of Borrower, provided that such delays do not exceed one hundred eighty (180) days, or such longer period of time as may be specified in the Loan Documents.
10. Purchase Rights. The execution and delivery of the purchase option and right of first refusal agreement described in the Partnership Agreement shall not constitute a default under the Loan Documents or accelerate the maturity of the Loan thereunder. Any requisite consent of Lender to (a) the exercise of said purchase option and right of first refusal agreement by the project general partner or sponsor or its assignee, as applicable, identified therein, and to (b) the assumption without penalty of loan obligations by the project general partner or sponsor or its assignee, as applicable, and the release of Borrower from such obligations, shall not be unreasonably withheld. Subject to any such consent requirement, the exercise of rights under such agreement shall not constitute a default or accelerate maturity of the Loan.
11. Loan Assumption. If the purchase option and right of first refusal agreement described in the Partnership Agreement is not exercised and the Project is sold subject to low income housing use restrictions as contained in an existing regulatory agreement or other recorded covenant, any requisite consent of Lender to said sale, and to the assumption without penalty of loan obligations by the purchaser and the release of Borrower from such obligations, shall not be unreasonably withheld.
12. Take-Out Loan. Lender acknowledges that any loan to which Lender has subordinated any of the Loan Documents (the “Senior Indebtedness”) may not be fully amortizing and may have an outstanding balance at its maturity date. Lender hereby approves of and agrees to subordinate to any new loan (a “Take-Out Loan”) issued for the purpose of refinancing the Senior Indebtedness at its maturity date, provided the Take-Out Loan bears interest at a commercially reasonable rate for a term that will be no less than co-terminus with the loan secured by this Deed of Trust, and the amount of the Take-Out Loan does not exceed the outstanding principal amount, plus accrued interest, of the Senior Indebtedness.
13. Extended Use Agreement. Lender acknowledges that Borrower and the California Tax Credit Allocation Committee have or intend to enter into, or concurrently with the execution and delivery of the Loan Documents are entering into, an “Extended Use Agreement”, which 678
Deed of Trust Rider 4
constitutes the extended low-income housing commitment described in Section 42(h)(6)(B) of the Internal Revenue Code, as amended (the “Code”). Lender acknowledges and agrees that, in the event of a foreclosure of its interest under the Mortgage or delivery by the Borrower of a deed in lieu thereof (collectively, a “Foreclosure”), the following rule contained in Section 42(h)(6)(E)(ii) of the Code shall apply:
For a period of three (3) years from the date of Foreclosure, with respect to any unit that had been regulated by the Extended Use Agreement, (i) none of the eligible tenants occupying those units at the time of Foreclosure may be evicted or their tenancy terminated (other than for good cause, including but not limited to, the tenants’ ineligibility pursuant to Section 42 of the Code), (ii) nor may any rent be increased except as otherwise permitted under Section 42 of the Code.
14. Prohibition of Sale. Lender shall neither (a) sell, assign, transfer, or convey any such indebtedness (or any interest therein) to Fannie Mae or Federal Home Loan Mortgage Corporation (“Freddie Mac”) nor (b) include such indebtedness (or any interest therein) in a pool of loans to be sold, assigned, transferred, or conveyed to Fannie Mae or Freddie Mac, without the Borrower’s prior written consent and obtaining a waiver from Fannie Mae and Freddie Mac as applicable.
15. Inconsistency. In the event of any inconsistency or conflict between the covenants, terms, and conditions of any of the Loan Documents and this Rider, the covenants, terms and conditions of this Rider shall prevail.
16. Survival. Except to the extent expressly modified, supplemented, or amended in this Rider, the Loan Documents remain in full force and effect. 679
CITY COUNCIL AGENDA REPORT
REPORTS
AGENDA ITEM NO. N.2
DATE: June 1, 2021
TO: City Council
FROM: Emilio Ramirez, Housing Director, (805) 385-8094, [email protected]
SUBJECT: Central Terrace Apartments - In-Lieu Loan Agreement and Affordable Housing and Sustainable Communities Program (AHSC) Implementation Agreement. (0/10/5)
RECOMMENDATION
That the City Council:
1. Authorize the Mayor to execute an Affordable Housing In-Lieu Loan Agreement and Regulatory Agreement with Many Mansions, a non-profit affordable housing provider, providing gap financing in the amount of $1,250,000 for the construction of eighty-six (86) affordable rental units and one (1) unrestricted manager’s unit commonly known as the Central Terrace Apartments located at 217- 235 East 6th Street, Oxnard, CA 93030;
2. Approve a budget appropriation of $1,250,000 from the Oxnard Housing In-Lieu Fees Fund;
3. Authorize the City Manager or designee to make necessary corrections or modifications to the In-Lieu Loan Agreement, Regulatory Agreement, Deed of Trust, or Promissory Note in order in order to make them consistent with each other; and
4. Authorize the Mayor to execute an Implementation Agreement with Many Mansions to receive pass-through grant funding associated with Central Terrace Apartments’ Affordable Housing and Sustainable Communities Program application.
(This item did not originate in the Committee due to a pending Appeal, which has since been withdrawn, at the time this agenda item was scheduled to be published for the May 11, 2021 Community Services, Public Safety, Housing and Development Committee meeting.)
Please click the following link to view the required Measure M pre-recorded presentation video: https://youtu.be/22dmJZvDPSc
BACKGROUND
Many Mansions is a non-profit housing organization that works to provide affordable housing to households with very- low and low-incomes by constructing new or acquiring and rehabilitating existing housing units, in partnership with Cities and other local organizations. Since its founding over forty years ago, Many Mansions has acquired and managed over 600 units of affordable housing at twenty properties throughout Ventura County. Many Mansions is also a service provider offering adult, children, and family services.
Many Mansions purchased the approximately half-acre site located at 217- 235 East 6th Street, in downtown Oxnard, in Item N-2Item N-2Item N-2
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February 2020. The Central Terrace Apartments development will provide multi-family affordable rental housing units that will include
eighty-six (86) affordable one-bedroom units, plus one (1) two-bedroom unrestricted manager’s unit.
Thirty-five (35) One-Bedroom Units will be provided for households at or below thirty-percent of the area median income. These units will be permanent supportive housing units and will be made available to house homeless individuals and families. Twenty (20) Units will be provided at fifty-percent of the area median income, and thirty-one (31) units will be provided for households at or below sixty-percent of the area median income. The current California Department of Housing and Community Development state income limit for a household earning up to thirty percent of the area median income in a one-bedroom unit is up to $27,100; for a household earning up to fifty percent of the area median income in a one-bedroom unit up to $45,200; and for a household earning up to sixty percent of the area median income in a one-bedroom unit is up to $47,430. Additional affordability restrictions on the project are described in the Financing Plan, Development Schedule, and Loan Agreement section of the report.
The project will include four stories of residential units above a podium (concrete first floor) with an elevator, the ground floor will include approximately 2,375 of common space, office space, restrooms, and a kitchenette. Once construction of the development has been completed, Many Mansions will provide life enriching services free of charge on an ongoing basis, on site, for the residents including transportation coordination, case management services, and access to community and government resources.
Many Mansions received approval of a Major Downtown Design Development Review Permit at the Community Development Director Hearing held on April 21, 2021 and is scheduled to go to the Planning Commission on May 20, 2021 for consideration of a Density Bonus Permit in order to receive three development concessions.
In-Lieu Fees
In-Lieu fees are collected by the City from Developers who receive City Council approval to pay fees in-lieu of building the required minimum ten percent of affordable housing units in their projects, as required by the City’s Inclusionary
Housing Ordinance for rental or for-sale products in projects with ten or more units. These In-Lieu fees are used to create affordable housing opportunities in the City by providing loans to developers for the construction of new affordable housing within the City of Oxnard. Many Mansions submitted a funding application to the City to support a financial gap of $1,250,000, with the use of the City’s affordable housing in-lieu fee funds for the construction of the Central Terrace Apartments.
Affordable Housing and Sustainable Communities Program
Many Mansions’ financing plan for the Central Terrace Apartments also involves submission of an application to the Affordable Housing and Sustainable Communities Program, which is administered by the Strategic Growth Council, a
body under the California Department of Housing and Community Development. The Affordable Housing and Sustainable Communities Program funds land-use, housing, transportation, and land preservation projects to support infill and compact development that reduce greenhouse gas emissions. Funding for the Affordable Housing and Sustainable Communities Program is provided from the Greenhouse Gas Reduction Fund, an account established to receive Cap-and- Trade auction proceeds. The Affordable Housing and Sustainable Communities Program provides grants and/or loans, or any combination thereof, to achieve greenhouse gas emissions reductions through increasing accessibility of affordable housing, employment centers, and key destinations via low-carbon transportation resulting in fewer vehicle miles traveled through shortened or reduced trip length or mode shift from single occupancy vehicle use to transit, bicycling, or walking.
The Affordable Housing and Sustainable Communities program can fund up to $20 Million in loan funds for construction of affordable housing developments which can then be leveraged with other funding sources. The Affordable Housing and Sustainable Communities Program can also fund up to $10 million in grant funds under the same application for Housing Related Infrastructure, Sustainable Transportation Infrastructure, Transit-Related Amenities, or Program Activities.
As such, the City has also been asked by Many Mansions to assist in their Affordable Housing and Sustainable Communities Program application for their Central Terrace Apartments project so that the City may receive grant Item N-2
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funding to complete City planned sustainable transportation infrastructure and transit-related amenities related improvements in downtown in areas adjacent to and in close proximity to the project site.
The Sustainable Transportation Infrastructure, Transit-Related Amenities Notice of Funding availability was issued on February 26, 2021 and the deadline to submit the application is on June 8, 2021. This June 8th deadline is also part of the reason that staff could not take this item to the Committee once the Appeal was withdrawn on May 18, 2021.
DISCUSSION
The total cost for construction of the Central Terrace Apartments is $44,821,109. Once the 86-unit project is placed in
service, through a separate action, Many Mansions will request thirty-five project-based vouchers from the Oxnard Housing Authority. As part of the project-based voucher proposal, supportive services, as described in this report, will be provided on-site in accordance with the Oxnard Housing Authority’s Administrative Plan.
Financing Plan, Development Schedule, and Loan Agreement An assessment of Many Mansions’ proforma and company background was conducted by the City in which it was determined that the requested $1,250,000 funding
equates to less than three percent of the total estimated project costs.
Many Mansions is a successful builder and manager of affordable housing throughout Ventura County and has several thriving rental projects, along with the capacity through their staffing to undertake and complete this project.
Many Mansion’s proposed permanent funding sources for the project are as follows:
City of Oxnard In-Lieu Fee Loan (City Funding): $1,250,000 MUFG Union Bank, N.A (Private Funding): $6,835,000
Affordable Housing and Sustainable Communities Loan (State Funding) : $15,219,821 Federal Home Land Bank Of San Francisco (FHLBSF) AHP (Federal Funding): $870,000 General Partner Equity (Private Funding): $100
Deferred Developer (Private Funding): $1,554,300
Tax Credit Equity (Federal Funding): $19,091,888.
If Many Mansions is able to secure all of the private and public funding listed above in their first attempt, then Many Mansions would begin construction in June 2022 and complete construction in Spring 2024.
The City’s Affordable Housing In-Lieu Loan Agreement for a gap-financing loan of $1,250,000, will require the Central Terrace Apartments development to provide eight (8) one-bedroom permanent supportive housing units for homeless households with annual incomes at or below fifty-percent of the area median income. All eight units will carry a fifty- five-year affordability restriction which will match the term of the Affordable Housing In-Lieu Loan Agreement. The density bonus permit that the Central Terrace Apartments is requesting as part of their land use application with the City also carries a fifty-five-year restriction on an additional fourteen (14) units. Those 14 units must be made available for rent to households with annual incomes at or below fifty percent of the area median income. The current California Department of Housing and Community Development state income limit for a one-person household earning up to fifty percent of the area median income is $39,950 and goes up to $45,200 for a two-person household in Ventura County.
The restrictions will be enforced via a recorded regulatory agreement executed between Many Mansions and City for the In-Lieu units and a separate density bonus agreement for the density bonus units between the City and Many Mansions to Item N-2
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ensure that the units remain affordable and are provided to eligible income qualified tenants.
The eight (8) in-lieu units will require financial reporting and analysis annually to comply with In-Lieu loan requirements. Monitoring fees for the fifty-five-year term are included in the Developer’s budget so that the City is able
to recover the cost of the monitoring.
The loan agreement between the City and Many Mansions would be inclusive of a promissory note, deed of trust, and regulatory agreement. Other loan terms associated with the City’s Affordable Housing In-Lieu loan are summarized below:
1. Three percent simple interest; and
2. Repayment of the City Loan will be on a residual receipts basis to be paid after all operating expenses, reserves, debt service with mandatory payments, investor management fee, deferred developer fee, and partnership management fee, with fifty percent of the residual receipts split pro-rata among all soft lenders based on the original principal amount of each soft lender loan; and
3. Many Mansions is required to secure all project financing and close on their construction loan by May 2025, or sooner.
If Many Mansions does not meet this timeline, the agreement is automatically terminated. If Many Mansions is able to meet this timeline, then the term of the agreement is fifty-five years from the date Many Mansions closes on their permanent financing.
Affordable Housing and Sustainable Communities Program Participation City Staff has coordinated with Many Mansions and the Ventura County Transportation Commission to identify bicycle, pedestrian, and transit projects that can qualify for the Affordable Housing and Sustainable Communities grant component. Staff recommends that the City solicit grant funds for sustainable transportation infrastructure and transit- related amenities related improvements for the City’s Fourth Street Mobility Improvement Project, which is included in the City’s 2021-2026 Capital Improvement Program, and for design and installation of Downtown Oxnard Transit Amenities. The Fourth Street Mobility Improvement Project extends from C Street east to the Oxnard Transit Center (at 4th and Meta Streets), south along Meta Street to 6th Street. The project includes the design and construction of sidewalks, curb extensions, disability improvements, traffic signal modifications, bike detection, class II on-street bike lanes, bike racks, benches, B Street transit hub improvements, resurfacing, drainage improvements, signage, striping, and a new restroom. The Fourth Street Mobility Improvement Project is included in the City’s 2021-2026 Capital Improvement Program (CIP).
The City is working with the Gold Coast Transit District to develop the Downtown Oxnard Transit Amenities project to coordinate the design and installation of bus shelters, benches, bike racks, lighting, and real-time arrival signs at fifty-four transit stops in Downtown Oxnard. The project will be included in the City’s 2022-2027 CIP. The combined cost of both projects is estimated to be $5,409,200 and would be carried out by the City’s Public Works Division and be subject to an implementation agreement between the City and Many Mansions, which is further discussed in this report.
Many Mansions’ application for the Affordable Housing and Sustainable Communities Program will also request that a portion of the grant funds be used for Ventura County Transportation Commission vehicle acquisition. Ventura County Transportation Commission will be the lead agency for the Ventura County Transportation Commission vehicle acquisition, with a not to exceed estimate of $2.25 million. These Affordable Housing and Sustainable Communities grant funds would be subject to a separate implementation agreement between Ventura County Transportation Commission and Many Mansions.
The final cost estimate for each sustainable transportation infrastructure and transit-related amenities project will be included in the final grant application, which will become part of the final agreement.
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Implementation Agreement between Many Mansions and the City The City and Many Mansions are required to enter into an implementation agreement in order to comply with the Affordable Housing and Sustainable Communities
program’s experience requirement. Staff recommends that the City execute a separate agreement with Many Mansions for the completion of the sustainable transportation infrastructure or transit-related amenities components included in the Affordable Housing and Sustainable Communities application.
Many Mansions, as the sole applicant, would receive all of the grant funds. The proposed terms of the implementation agreement between the City and Many Mansions are summarized below:
1. If awarded Grant funds, up to $5,409,200 thereof shall be transferred to the City for the purpose of constructing sustainable transportation infrastructure and transit-related amenities improvements;
2. The City would be the lead agency to design and construct the Fourth Street Mobility Improvement Project and Downtown Oxnard Transit Amenities projects;
3. The City will submit to Many Mansions all cost invoices and draw requests for the transit funds that are associated with the proposed improvements;
4. The City will complete the proposed improvements no later than the deadline required under the Affordable Housing and Sustainable Communities grant documents;
5. Many Mansions must receive final approval from the City of their Affordable Housing and Sustainable Communities application prior to submission;
6. The agreement will terminate upon the earlier of: the completion of all obligations under the Affordable Housing and Sustainable Communities requirements; or (ii) mutual agreement of both the City and Many Mansions; or (iii) the occurrence of an Event of Default;
7. The agreement will automatically terminate if Many Mansions does not receive an award of the Affordable Housing and Sustainable Communities funds to construct the Central Terrace Apartments affordable housing development and grant funds for the City to construct sustainable transportation infrastructure and transit-related amenities improvements.
If grant funding is awarded in an amount less than requested, or if the final cost for design or construction increases at the time of bid and award, the City will be responsible for funding cost overages. However, if grant funding is awarded in an amount less than requested, the City will also have the discretion to reject the grant funds and its commitment to the sustainable transportation infrastructure and transit-related amenities improvement projects.
If the City accepts the grants funds, the City would begin construction of the sustainable transportation infrastructure and transit-related amenities improvements by Summer 2024 and would complete construction by January 2025. Final disbursement of all funds would occur by June 2025.
STRATEGIC PRIORITIES
This agenda item supports the Infrastructure and Natural Resources strategy.
The purpose of the Infrastructure and
Natural Resources strategy is to preserve and improve our roads, utilities, parks, trees, water supply and natural resources through effective planning, prioritization, and an equitable and efficient use of available funding.
This agenda item supports the Quality of Life strategy. The purpose of the Quality of Life strategy is to restore and increase quality services and programs that enrich Oxnard's diverse community, promotes safe neighborhoods, encourages community engagement, and supports our residents in their efforts to improve their quality of life.
FINANCIAL IMPACT
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Approval of the recommended actions will:
Authorize an appropriation of $1,250,000 of the City’s Affordable Housing In-Lieu funds to award a gap-financing loan
to Many Mansions for the development of the Central Terrace Apartments into the following account: 371-5135-804- 8364 (Housing Assist Loan). The current fund balance in the In-Lieu fund is: $ 3,149,296.
There is no immediate financial impact to the approval of the Affordable Housing and Sustainable Communities Program Implementation Agreement between the City and Many Mansions. However, the Affordable Housing and Sustainable Community Program grant funds are disbursed on a reimbursement basis. If Many Mansions is awarded Affordable Housing and Sustainable Communities grant funds, Public Works staff will return to Council to identify the initial funding source and recognize appropriate funds for the City to complete the Fourth Street Mobility Improvement Project and Downtown Oxnard Transit Amenities improvements on a reimbursable basis.
COMMITTEE OUTCOME
This item did not originate in the Committee. The item was originally scheduled for the May 11, 2021 Community Services, Public Safety, Housing and Development Committee meeting. However an appeal was filed on May 3, 2021 regarding the approval of the Major Downtown Design Review Permit issued at the Community Development Director’s
Hearing held on April 21, 2021. However, this appeal has subsequently been withdrawn by the appealing party and the Major Design Review Permit for the Central Terrace Apartments remains valid and in effect. The appeal also delayed the Planning Commission’s consideration of the density bonus application associated with the project. At the time this agenda was printed, the Planning Commission consideration of the permit had not yet occurred. It will be considered on May 20, 2021.
The Affordable Housing and Sustainable Communities program application submission deadline is June 8, 2021. An executed Implementation Agreement between the City and Many Mansions is required in order to comply with the Affordable Housing and Sustainable Communities program’s experience requirement. Due to the project appeal, which was withdrawn on May 18th, staff did not have sufficient time to take this item to a committee meeting and still meet the June 8th grant deadline.
Prepared by: Emilio Ramirez, Housing Director
ATTACHMENTS
1. Attachement 1 - Affordable Housing Loan Agreement
2. Implementation Agreement
3. MM In-Lieu Loan & AHSC Implementation Agreement REVISED 5.12.21 Draft PPT V4
4. Budget Appropriation
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Central Terrace Apartments
Emilio Ramirez, Director
Housing Department
City Council
May 17, 2022
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Background
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Project Location
CENTRAL TERRACE
APARTMENTS
PROJECT SITE
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Central Terrace Apartments
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1. Loan Amount of $1,250,000 Affordable Housing in Lieu Fund
2. 3% simple interest
3. Repayment of the City Loan will be on a residual receipts basis
4. 55 year term
5. Many Mansions received entitlement approvals including a Major Downtown Design Development Review Permit and a Density Bonus Permit in order to receive development concessions
6. Many Mansions received all funding approvals from all sources
7. Many Mansions must start construction by June 8th
5 Affordable Housing In-Lieu Loan
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AHSC Grant Funded Projects
6 4th Street Mobility Improvement Project Downtown Oxnard Transit Amenities From the Central Terrace development site
along Meta Street, connecting to and past the
Oxnard Transit Center, and then along 4th
Street, terminating at C Street.
Within a 1 mile radius of the Central Terrace
development site
• Design and construction of sidewalks
• Curb extensions & ADA Improvements
• Traffic signal modifications
• Class II on-street bike lanes, Bike
detection, Bike Racks
• Benches
• B Street transit hub improvements
• Resurfacing & Drainage Improvement
• Signage and striping
• New restroom
• Coordinated with Gold Coast Transit District
• Design and installation at 54 downtown
transit stops
• Bus shelters
• Benches
• Bike racks
• Lighting
• Real-time arrival signs
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Proposed City Improvements
7 Downtown Oxnard Transit
Amenities Project
1-Mile Radius
4th Street Mobility Improvement Project
Central
Terrace
Housing Sie
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Project Budget and Funding Sources
8 City of Oxnard In-Lieu Fee Funds
Banner Bank
Ventura County CDBG - DR
Affordable Housing and Sustainable Communities Loan
Federal Home Land Bank Of San Francisco Affordable Housing Program Low-Income Housing Tax Equity Credit
TOTAL FUNDING: $45,023,015
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1. Parties include the City of Oxnard, Many Mansions, and Central Terrace LP
2. City consents that Many Mansions assign its interests and obligations to Central Terrace LP
3. The Assignment, Assumption, and Modification Agreement will also give Many Mansions consent to encumber the project to procure additional project funding
4. Modifying the loan documents to replace MUFG Union Bank with Banner Bank
5. City consents on the scope of work of the project
6. Mixed-use development with eighty-six affordable one-bedroom units and ground floor space with 2,375 square feet of common space, office space, restrooms, and a kitchenette
7. Thirty-five units reserved for homeless households, with incomes below 30% of the area median income and provide on-site supportive services
8. Fifty-two unit will be reserved for households with incomes at 50% to 60% of the area median income.
Assignment, Assumption & Modification
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1. Adopt a resolution authorizing the City Manager execute and take all needed actions in consultation with City Attorney relative to enter into an Assignment of City loan documents; loan rider and subordination agreement in connection with a loan from the City to Many Mansions for the development of the Central Terrace Apartments;
2. Authorize the City Manager or designee to execute an Assignment, Assumption and Modification Agreement and Loan Rider;
3. Authorize the City Manager or designee to execute a Subordination Agreement by and among Banner Bank, the City of Oxnard, and Central Terrace LP; and
4. Authorize the City Manager or designee to execute the First Amendment to the Affordable Housing and Sustainable Communities Implementation Agreement by and between the City of Oxnard and Many Mansions.
Recommendation
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CITY COUNCIL AGENDA REPORT
REPORTS
AGENDA ITEM NO. L.5
DATE: May 17, 2022
TO: City Council
FROM: Emilio Ramirez, Housing Director, (805) 385-8094, [email protected]
SUBJECT: Homeless Solutions Center, 241 West Second Street. (0/5/5)
RECOMMENDATION
That the City Council:
1. Adopt a resolution of the City Council of the City of Oxnard approving and authorizing the Mayor to execute a Financial Cost Sharing Agreement by and between the City of Oxnard and the County of Ventura and further authorizing the City Manager or Designee to execute and take all needed actions relative to entering into a Permanent Local Housing Allocation loan agreement and a Measure O loan agreement with Mercy House Living Centers for the construction of the tenant improvements for the navigation center located within the proposed Homeless Solutions Center project;
2. Authorize the Mayor to execute a Financial Cost Sharing Agreement by and between the City of Oxnard and the County of Ventura for the financial sharing arrangement for the development and operation of the permanent year-round navigation center to be located on the ground floor of the Homeless Solutions Center;
3. Approve and authorize the City Manager or designee to execute the First Amendment to the Disposition and Development Agreement by and between the City of Oxnard and Housing Trust Fund Ventura County and CDP Developers, LLC;
4. Adopt a resolution of the City Council of the City of Oxnard declaring 241 W. Second Street to be exempt surplus land pursuant to Government Code Section 54221(f)(1)(a) and Authorizing the City staff to take related actions;
5. Accept, recognize, and deposit a lump sum contribution of $2,935,265 from the County of Ventura to pay for the County’s share of the cost to construct tenant improvements for development of the City’s new permanent year-round navigation center on the ground floor of the Homeless Solutions Center; and
6. Approve a budget appropriation of $160,000 from the Low-and-Moderate Income Housing Fund of the former redevelopment agency.
Please click the following link to view the required Measure M pre-recorded presentation video: https://youtu.be/TTTguD2WrUc
BACKGROUND
Executive Summary
The actions before the Council on May 17, 2022 are the steps necessary prior to the June 2022 groundbreaking of the Homeless Solutions Center - a five story mixed-use project that includes a homeless navigation center on the ground floor accommodating 110 beds and fifty-six permanent supportive housing (PSH) units, inclusive of one unrestricted 696
Manager’s unit, in the top four levels of the building, as well as office space for leasing and supportive services for PSH tenants.
The Homeless Solutions Center will be the City’s first Housing First project, built in accordance with the City’s Five- Year Homeless Plan, adopted in Fall 2018. The Housing First model is being adopted by communities across the County to address the homelessness crisis. This approach is characterized as providing immediate access to permanent housing without preconditions, thereby allowing an individual or family to use its permanent home as a platform for stability and success.
BACKGROUND
The National Guard Armory, 351 South K Street, has been used as both an overnight shelter and more recently as a twenty-four hour navigation center since 2002. The National Guard Armory is an over eighty-year-old structure and is not adequate to offer the standard of operation that a modern homeless navigation center should. Leading up to the approvals for the Homeless Solutions Center (HSC) at 241 W. Second Street (Second and B), many outreach efforts and public meetings were held.
Outreach
A local navigation site selection committee considered ten different sites but was not able to identify a viable location and was disbanded in approximately 2018. Starting in July of 2019 the search for a site resumed. In summary:
1. July 2019 - January 2020 - twenty-one different properties throughout the City were evaluated, including entering into a lease agreement for 1258 Saviers Road, which was later terminated.
2. January 2020 - Identified 214 W. Second Street as a potential HSC location.
3. January 2020 - October 2020 - Conducted seven community meetings for input on the HSC.
4. May 2020 - March 2021 - Conducted five public meetings or hearings before the Community Development Director, Planning Commission, Council Committee and City Council.
In total there were at least twelve public meetings which resulted in a fully entitled Homeless Solutions Center.
Existing Approvals & Project Milestones:
1. June 30, 2020 - The City Council authorized the Mayor to execute an Exclusive Negotiating Agreement by and between Community Development Partners and the City of Oxnard in consideration of developing a Homeless Solutions Center at 241 W. Second Street.
2. July 24, 2020 - Annual Plan was approved by the Board of Commissioners to allocate fifty-five (55) Project Based Vouchers with an estimated value of $24,881,280 over a twenty-year term to the Homeless Solutions Center. This item was also discussed as part of the March 30, 2021 City Council action. A separate agreement will be executed by the Oxnard Housing Authority in accordance with the Annual Plan upon approval and certification of a subsidy layering review of the project by the California Tax Credit Allocation Committee.
3. November 30, 2020 - Community Development Director approved a Major Downtown Design Development Review Permit and a Lot Line Adjustment at a public hearing.
4. December 17, 2020 - Planning Commission approved a Special Use Permit to allow for the operation of the homeless navigation center and resource center onsite and ministerial approval of a Density Bonus Permit to reduce the parking requirements for the site to a single space for the navigation center, although the project will be providing ten spaces on site.
5. March 30, 2021 - Council approved the following (the staff report from March 30, 2021 is attached):
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a. Disposition and Development Agreement between the City, Community Development Partners (CDP), and the Housing Trust Fund Ventura County (HTF), inclusive of a Donation Agreement and Agreement Containing Covenants.
i. This approval included the land donation at the appraised value of $840,000 and $1,500,000 in City Low-and Moderate-Income Housing Asset set-aside funds.
b. Loan Agreement Between the City and CDP, inclusive of a Promissory Note, Deed of Trust, Regulatory Agreement, and Notice of Affordability Restrictions.
c. Memorandum of Understanding between the City and County of Ventura that set up the framework and parameters for an equal cost sharing agreement between the entities for capital costs associated with the build out of the new navigation center and for on-going operating costs.
d. Budget Appropriation associated with the Loan Agreement with CDP and to pay for staff related costs.
6. December 2021 - CDP secured all remaining financing necessary for the development of the Homeless Solutions Center.
7. April 2022 - Pursuant to the terms of the DDA, the City Manager and the Housing Trust Fund Ventura County executed the Donation Agreement approved by the City Council during the March 30, 2021 City Council Meeting authorizing the conveyance of the subject property for the development of the Homeless Solutions Center.
8. June 6, 2022 - Expected date that CDP closes on their construction financing.
9. June 2022 - Expected construction begins on the Homeless Solutions Center.
10. December 2023 - Estimated building completion.
Project Funding & Financing Plan:
The March 30, 2021 staff report estimated a total development budget of $34 million which did not include all the costs associated with the tenant improvements necessary to build out the navigation center portion of the development, which are part of the responsibility of the City and the County of Ventura in accordance with the Memorandum of Understanding. As of the writing of this staff report, the total development cost of the Homeless Solutions Center is approximately $35,890,097, which does not include costs associated with deferred ground lease payments to the Housing Trust Fund Ventura County. The increase in the development cost from the estimate of $34 million in 2021 is primarily attributable to inflation.
As presented in the March 30, 2021 staff report, the City’s financial contribution for the construction of the Homeless Solutions Center includes the land donation at the appraised value of $840,000, and $1,500,000 in City Low-and Moderate-Income Housing Asset set-aside funds, which may only be used for the creation of affordable housing. The remaining project costs would be brought to the project by CDP in the form of private, state and federal sources. CDP is able to secure these funding sources because of the site’s proximity to transit and other social services. The anticipated funding sources include:
Potential Funding Sources Amount Source
Low Income Housing Tax Credit Equity $16,759,227 Federal Private Permanent Loan $8,415,775 Private
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No Place Like Home $7,198,578 State
City of Oxnard Affordable Housing Funds $1,500,000 City of Oxnard County of Ventura $1,005,042 County of Ventura
Deferred Development Fee $1,011,475 Private
Total: $35,890,097
DISCUSSION
While the development budget for the project does include costs associated with the construction of the building, it does not include all other costs necessary for the construction of tenant improvements for the homeless navigation center (the ground floor of the HSC). This report discusses funding for the navigation center’s tenant improvements and ongoing operation costs as well as a number of required approvals in order for the project to move forward.
Financial Cost Sharing Agreement with the County of Ventura for Construction and Operation As indicated in the March 30, 2021 staff report, staff would to return to Council for approval of a final and binding agreement (Financial Cost Sharing Agreement) with the County for the 50/50 cost sharing agreement of capital and operation costs at the new navigation center.
The March 30, 2021 staff report estimated capital costs associated with the build out of the new navigation center would be $4,059,128. The current estimated construction budget to complete tenant improvements necessary for the operation of the new permanent navigation center at the Homeless Solutions Center is $5,687,999, where the most significant cause of this cost increase is inflation but also reflects approximately $135,000 of unanticipated costs. The tenant improvement budget remains subject to change based on final construction drawings, a prevailing wage determination, and actual construction costs at the time construction begins on the navigation center improvements, which is estimated to begin in December 2023 or January 2024 and completed in the first or second quarter of 2024. The tenant improvement budget of $5,687,999 includes: the cost of the shell, design, insurance, and construction oversight fees, as well as a pro rata share of the improvement costs for a rooftop deck, which will be a shared space between navigation center guests and PSH tenants. Should the construction costs increase, City and County staff will return to the City Council and Board of Supervisors, respectively, to request additional funding to equally share in the increased cost.
Based on the current construction budget, the City’s share of the tenant improvements and administrative costs necessary to carry out those improvements is $1,902,742. This amount reflects a reduction of $1,032,524 in the City’s share of the tenant improvement costs because of the following funding and credits:
1. $941,258 for the the Permanent Supportive Housing development a. This is part of the City's $1.5 Million loan to CDP for the development of the Permanent Supportive Housing Units (PSH) and includes the building shell for the navigation center ($855,689) and related contingency ($85,569) totaling $941,258.
b. $91,266 for the City’s land donation to the Housing Trust Fund Ventura County (This is not the whole value of the land as the land is also providing for the permanent supportive housing units). 699
Based on current construction costs the City will utilize $1,463,948 of the allocated $1,546,716 Measure O funds as well $347,528 in California Department of Housing and Community Development Permanent Local Housing Allocation grant funds. Both these funding sources have already been approved for this use.
Mercy House will be responsible for construction of the tenant improvements, under the terms of two proposed loan agreements with the City, discussed later in this report for Council consideration. The navigation center is estimated to be completed and become operational by the first or second quarter of 2024.
The Financial Cost Sharing Agreement also applies to the operation of the navigation center. The FY 2024-2025 navigation center operations budget is $2,954,360 for FY 2024-2025. The City’s share of the navigation center operation costs in FY 24-25 is $1,477,180. The navigation center operation is estimated to begin in the first or second quarter of 2024.
A budget of $1,565,000 has been established by the City and Mercy House for a six-month contingent period, beginning January 1, 2024 through June 30, 2024, which will depend on the progress of construction. Like the capital costs, the City Council approved funding to pay for operation costs and includes Measure O ($400,000), Measure E ($1,500,000), and California Department of Housing and Community Development Permanent Local Housing Allocation grant funds, if needed.
The County Board of Supervisors is expected to approve the County’s share of the tenant improvement costs and on- going operation costs via the Financial Cost Sharing Agreement on May 10, 2022.
The proposed terms of the Financial Cost Sharing Agreement can be found in the attachments. In summary the term begins May 2022 and expires June 30, 2025 with the County providing quarterly payments to the City for the operation of the navigation center. As it relates to the tenant improvements the City and County will share equally in the improvements and the County will advance the City $2,935,265 for the tenant improvement costs.
Loan Agreements
City staff is proposing to issue two loans to Mercy House to construct the tenant improvements for the navigation center.
Given that the homeless solutions center development is covering $941,252 of the $5,687,999 construction costs on behalf of the City, the combined amount of the loans necessary for Mercy to complete the tenant improvements is $4,746,747. Upon receipt of the County’s share of the tenant improvement costs, City staff is proposing to use those funds as well as funds from Measure O, designated for this use, to provide Mercy House with a loan in the amount of
1. One loan for $4,399,213 with the use Measure O ($1,463,948) and County Funds ($2,935,265);
2. Second loan for $347,528, with the use of Permanent Local Housing Allocation funds, designated for this use, to pay for the balance of the improvement costs.
The proposed terms of the two loan agreements by and between the City and Mercy House for the construction of the tenant improvements are found in the attachments. In summary, both loans are 15 year terms with 0% interest, and forgivable at the end of loan term based on continued operation and compliance.
If approved by Council, the loan agreements and regulatory agreements would be executed by the City Manager or designee (in consultation with the City Attorney) and Mercy House concurrently with the close of construction financing for development of the Homeless Solutions Center. The promissory note and deed of trust would be executed by Mercy House concurrently with the loan agreement and regulatory agreement. The County will advance the City its share of the tenant improvement costs within 10 days of City’s recording of a deed of trust securing the two loan agreements.
Modification of Homeless Solutions Center Agreements and Required Approvals On March 30, 2021, the City Council authorized the Mayor to execute a Development and Disposition Agreement by and between Housing Trust Fund Ventura County, Community Development Partners Developers, LLC, and the City of Oxnard, and further authorized the City Manager or Designee to execute and take all needed actions in consultation with 700
the City Attorney relative to entering into a Donation Agreement by and between Housing Trust Fund Ventura County and the City of Oxnard, Agreement Containing Covenants, and a Loan Agreement with CDP Developers, LLC for the construction of the Homeless Solutions Center. This same Council action also authorized staff to complete and execute minor and non-material modifications to the approved Development and Disposition Agreement.
Staff consulted with the City Attorney’s Office and outside special counsel from Price, Postel & Parma LLP, and has negotiated and will execute the following amendments to the Development and Disposition Agreement. The City Attorney's Office and special counsel agree that these amendments are not material. The First Amendment to the Disposition and Development Agreement is attached.
1. Applying the rights and obligations of the Disposition and Development Agreement to future amendments.
2. Allow for future interests of mortgages including after foreclosures; and
3. Allowing material changes, with prior City of Oxnard approval, to the development and use.
Staff, in consultation with the City Attorney’s Office and special counsel, propose to execute the following supporting documents under the authority approved and delegated by the City Council.
1. A loan agreement in the amount of $1,500,000 imposing conditions for the use of funds in the development of the Homeless Solutions Center.
2. A promissory note as evidence of debt due to the City of Oxnard in the amount of $1,500,000.
3. A deed of trust as security to the debt evidenced by the promissory note in the amount of $1,500,000.
4. A covenant agreement requiring that the property be used for the Homeless Solutions Center for ninety-nine years.
5. A regulatory agreement requiring the provision of affordable housing.
6. A donation agreement with the Housing Trust Fund Ventura County with a requirement for the land to be provided to Community Development Partners for the development of the Homeless Solutions Center.
Additionally, while the City of Oxnard is not a party to an agreement ground leasing the property, we acknowledge that it has been prepared and assented to by the Housing Trust Fund Ventura County and CDP for the development of the HSC as required by the above-mentioned Donation Agreement.
Exempt Surplus Land
The City of Oxnard owns the subject property where the proposed Homeless Solutions Center will be developed. The City Council previously adopted Resolution No. 15,432 and declared that the Surplus Land Act was not applicable to the property because the property was found to be necessary for the agency’s use, as defined by Government Code Section 54221. However, the California Department of Housing and Community Development reviewed and objected to this declaration but agrees that the property is exempt surplus land. The State has advised that the City withdraw its prior declaration and instead find, determine and declare the subject property as exempt surplus land per Government Code Section 54221(f)(1)(A) per a title transfer authorized by Government Code Section 37364, which authorizes a city to sell, lease, exchange, quitclaim, convey, or otherwise dispose of real property to provide housing affordable to persons and families of low or moderate income if:
1. Not less than 80 percent of the area of the parcel will be used for the development of housing;
2. Not less than 40 percent of the total number of those housing units developed on the parcel shall be affordable to households whose incomes are equal to, or less than, 75 percent of the maximum income of lower income households, and at least half of which shall be affordable to very low-income households; and 701
3. Dwelling units produced for persons and families of low or moderate income under Government Code Section 37364 shall be restricted by regulatory agreement to remain continually affordable to those persons and families for the longest feasible time, but not less than 30 years, with such regulatory agreement recorded in the office of the county recorder in which the housing development is located.
The Homeless Solutions Center meets all these criteria. As such, staff recommends that the City Council declare the subject property as exempt surplus land per Government Code Section 54221(f)(1)(A) per a title transfer authorized by Government Code Section 37364.
STRATEGIC PRIORITIES
This agenda item supports the Quality of Life strategy. The purpose of the Quality of Life strategy is to restore and increase quality services and programs that enrich Oxnard's diverse community, promotes safe neighborhoods, encourages community engagement, and supports our residents in their efforts to improve their quality of life.
FINANCIAL IMPACT
The County of Ventura will pay the City a lump sum of $2,935,265 for their share of the tenant improvements for the navigation center. These funds will be deposited into the City’s Affordable Housing In-Lieu Fund retainage payable account. This amount received from the County of Ventura will provide a portion of the funding needed to fund the $4,399,213 loan by and between the City and Mercy House to construct the tenant improvements. The balance of the $4,399,213 loan would be paid with Measure O funds. There is currently $1,546,706 available from “Homeless Shelter Acquisition” (Project MO5102) from City Measure O funds, previously approved for this use, therefore a new budget appropriation is not needed. The loan would utilize $1,463,948 in the already appropriated Measure O funds to provide the balance of the funds needed to fund the tenant improvement loan, leaving $82,758 of Measure O funds for the navigation center.
There is currently $347,528 in State Housing Grant PLHA Navigation Center (Project No. 215101 / account 190-5192- 826.83-64) available to fund the proposed Permanent Local Housing Allocation loan by and between the City and Mercy Housing. The City Council approved the Permanent Local Housing Allocation plan on July 21, 2020, which included the use of funds as described herein, therefore a new budget appropriation is not needed.
Staff is requesting City Council approval of a budget appropriation of $160,000 from the Low-and-Moderate Income Housing Fund of the former redevelopment agency into account 420-4700-861-8209 Project #215101 to pay for labor compliance monitoring services during the construction of the Homeless Solutions Center and to pay for the City’s share of closing costs for the donation of the City owned property where the Homeless Solutions Center to the Housing Trust Fund Ventura County, in accordance with the terms of the Donation Agreement by and between the Housing Trust Fund Ventura County and the City of Oxnard. The current available fund balance in the Low-and-Moderate Income Housing Fund of the former redevelopment agency is: $1,897,084.
The City Council has authorized the use of General Funds and Measure O funds for on-going operating costs at the new Shelter at the Homeless Solutions Center and was adopted into the current year fiscal budget. The FY21-22 year-end estimated uncommitted fund balance for Measure O is $9.4 million. The current FY 21-22 budget allocated for Homeless Services from Measure O fund is $1,105,253. The proposed FY 2022-23 budget allocated for Homeless Services from Measure O fund is $1,103,547. The current FY 21-22 budget allocated for Homeless Services from the General Fund is $452,000. The proposed FY 2022-23 budget allocated for Homeless Services from the General Fund is $452,000.
COMMITTEE OUTCOME
Request for approval of the Exclusive Negotiating Agreement was heard by the Housing and Economic Development Committee on May 26, 2020. The Committee recommended the Exclusive Negotiating Agreement to the City Council by a 3-0 vote. The Exclusive Negotiating Agreement authorizing City staff to negotiate the Disposition and Development Agreement was presented to the City Council on June 30, 2020, and approved by a 7-0 vote. On March 30, 2021 the Council unanimously approved to execute a Development and Disposition Agreement, a Memorandum of Understanding 702
for financial cost sharing for the construction and operation of the navigation center portion of the HSC, and a budget appropriations for gap-financing and personnel expenses. The March 30, 2021 staff report is attached to this report.
Prepared by: Emilio Ramirez, Housing Director
ATTACHMENTS
1. Financial Cost Sharing Resolution
2. PLHA Loan Agreement and Exhibits
3. Measure O Loan Agreement and Exhibits
4. Financial Cost Sharing Agreement by and between the City of Oxnard and the County of Ventura
5. First Amendment to the Disposition and Development Agreement
6. Surplus Land Exempt Resolution
7. Budget Appropriation
8. City Council 3-30-21 Staff Report
9. PowerPoint Presentation
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CITY COUNCIL OF THE CITY OF OXNARD
RESOLUTION NO. 2022- ______
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF OX NARD APPROVING AND AUTHORIZING THE
MAYOR TO EXECUTE A FINANCIAL COST SHARING
AGREEMENT BY AND BETWEEN THE CITY OF OXNARD
AND THE COUNTY OF VENTURA AND FURTHER
AUTHORIZING THE CITY MANAGER OR DESIGNEE TO
EXECUTE AND TAKE ALL NEEDED ACTIONS IN
CONSULTATION WITH CITY ATTORNEY RELATIVE TO
ENTERING INTO A PLHA LOAN AGREEMENT AND A
MEASURE O LOAN AGREEMENT WITH MERCY HOUSE
LIVING CENTERS FOR THE CO NSTRUCTION OF THE
TENANT IMPROVEMENTS FOR THE NAVIGATION
CENTER LOCATED WITHIN THE HOMELESS
SOLUTIONS CENTER PROJECT AND OTHER MATTERS
PERTAINING THERETO
WHEREAS, the City Council hereby finds and declares that it is necessary, essential and a public purpose for the City to enter into a variety of agreements to facilitate the development of the tenant improvements for the Navigation Center located within the Homeless Solutions Center to be located at 2nd and B Street, Oxnard, C alifornia (“Property”) and known as Tenant Improvements for the Navigation Center located within the Homeless Solutions Center Project (“Project”); and
WHEREAS, the City Council previously approved and ente red into a Disposition and Development Agreement (“DDA”) by and among the C ity, the Housing Trust Fund Ventura County, a California nonprofit public benefit corporation (“Housing Trust Fund”), and CDP Developers, LLC, a California limited liability company; and
WHEREAS, in furtherance of the Project the City Council desires to approve and authorize the Mayor to execute an Agreement to Provide Financial Support for the Construction and Operation of a Permanent, Year -Round Shelter Serving Homeless Individual s ( “Cost Sharing Agreement”) by and between the City and the County of Ventura (“County”); and
WHEREAS, in furtherance of the Project the City Council desires to approve a loan in the amount of $347,528 from Permanent Loc al Housing Allocation (“PLHA”) program funds received from the State of California and authorizes the City Manager or designee to execute a (i) PLHA Loan Agreement; (ii) Promissory Note; (iii) Deed of Trust with Assignment of Rents; and (iv) Regulatory Agr eement (collectively “ PLHA Loan Documents”) by and between City and Mercy House Living Centers (“Operator”); and
WHEREAS, in furtherance of the Project the City Council desires to approve a loan in the amount of $4,399,213 from the City’s Measure O fund s and authorizes the City Manager or 704
2 designee to execute a (i) Measure O Loan Agreement; (ii) Promissory Note ; (iii) Deed of Trust with Assignment of Rents; and (iv) Regulatory Agreement (collectively “ Measure O Loan Documents”) by and between City and Operator; and
WHEREAS, the City Council has determined that the approval of this Resolution and the acts auth orized therein are exempt from the California Environmental Quality Act (CEQA) pursuant to 14 Cal. Code of Regulations section 15280 and Public Res ources Code sections 21159.21 and 21159.23; and
WHEREAS, the City Council hereby finds and declares that t his Resolution is being adopted by the City pursuant to the powers granted to the City.
NOW, THEREFORE, the City Council of the City of Oxnard resolves as follows:
1. The City Council hereby finds and declares that the above recitals are true and correct.
2. The City Council hereby approves and a uthorizes the Mayor to execute the Cost Sharing Agreement.
3. The City Council further approves and authorizes the City Manager or designee to take all needed actions and execute all requisite documents on be half of the City in consultation with the City Attorney relative to (i) PLHA Loan Documents; (ii) Measure O Loan Document s; and (iii) any other agreements for the purpose of developing, maintaining and operating the Project.
4. That the City Clerk is di rected to prepare and file a Notice of Exemption with the County Clerk.
5. This Resolution shall take effect from and af ter the date of its passage and adoption.
(signatures appear on next page)
705
3 PASSED AND ADOPTED this day of , 2022, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
John C. Zaragoza, Mayor
ATTEST:
Rose Chaparro, City Clerk
APPROVED AS TO FORM:
Stephen Fischer, City Attorney
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1 PLHA LOAN AGREEMENT
(HOMELESS SHELTER PROJECT)
This PLHA Loan Agreement (“Loan Agreement”) is made as o f this day of May, 2022, by and between the City of Oxnard, a municipal corporation ( “Lender”) and Mercy House Living Centers, a California nonprofit public benefit corporation (“Borrower”).
RECITALS
A. Lender wishes to promote the development of housing and supportive services for homeless individuals in the City of Oxnard.
B. Borrower is in the process of completing certain tenant improveme nts for a permanent 110 bed homeless shelter located on the first floor of a five -story mixed use building located on 0.48-acre parcel located in Oxnard, California as more particularly described in Exhibit A attached hereto and incorporated by this refere nce (the “Property”). The remaining four levels will consist of fifty -six permanent supportive affordable housing units, including one unrestricted manager’s unit.
C. Lender has received funds under the Permanent Local Housing Allocation (“PLHA”) program from the State of California in order to increase the affordable housing stock in the City of Oxnard. Lender desires to loan to Borrower a total of three hundred forty-seven thousand five hundred twenty-eight dollars ($347,528) of such funds to assist i n the completion of the Project.
NOW THEREFORE, IN CONSIDERATION of the mutual agreements, obligations, and representations, and in further consideration for the making of the Loan, Borrower and Lender hereby agree as follows:
ARTICLE 1 DEFINITIONS
The following terms have the meanings and content set forth in this sec tion wherever used in this Loan Agreement, attached Exhibits, or documents incorporated into this Loan Agreement by reference.
1.1 “AT RISK OF HOMELESSNESS” has the same meaning as defined in Section 578.3 of Title 24 of the Code of Federal Regulations.
1.2 “BORROWER” is Mercy House Living Centers, a California nonprofit public benefit corporation and its authorized representatives, assigns, transferees, or successors-in- interest thereto.
1.3 “BUDGET” means that budget for the construction and installation of the Improvements attached hereto as Exhibit B , which is hereby incorporated into this Loan Agreement by this reference and which identifies the sources and uses of Project costs an d specifies the costs to be paid with Loan proceeds.
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2 1.4 “DEED OF TRUST” is that certain deed of trust, assignment of rents, and security agreement placed on the Property and the improvements to be constructed thereon as security for the Loan by Borrower as trustor with Lender as beneficiary attached hereto as Exhibit C. The terms of the Deed of Trust have been incorporated into this Loan Agreement.
1.5 “EFFECTIVE DATE” is May , 2022. All funds must be disbursed under this Agreement on or before April 30, 2024. No funds shall be disbursed after April 30, 2024.
1.6 “HAZARDOUS MATERIALS” means any hazardous or toxic substances, materials, wastes, pollutants, or contaminan ts which are defined, regulated, or listed as "hazardous substances," "hazardous wastes," "hazardous materials," "pollutants," “contaminants," or "toxic substances," under federal or state environmental and health and safety laws and regulations, includ ing without limitation petrol eum and petroleum byproducts, flammable explosives, urea formal dehyde insulation, radioactive ma terials, asbestos, and lead.
Hazardous Materials do not include substances that are used or consumed in the normal course of developing, operating, or occupying a housing proj ect, to the extent a nd degree that such substances are stored, used, and disposed of in the manner and in amounts that are consistent with normal practice and legal standards at the time of such use.
1.7 “HCD” means the California Departme nt of Housing and Community Development.
1.8 “HOMELESS” has the same meaning as defined in Section 578.3 of Title 24 of the Code of Federal Regulations.
1.9 “IMPROVEMENTS” means the construction of the tenant improvements within the
permanent 110 bed homeless shelter , as defined in Recital B, in accordance with this Loan Agreement and the Plans and Specifications approved by City, subject to all terms and conditions of approval granted pursuant thereto.
1.10 “INSURANCE REQUIREMENTS” means the insurance coverage which must be in full force and effect during the term of the Regulatory Agreement with the exception of course of construction insurance, as specified in Exhibit F.
1.11 “LENDER” means the City of Oxnard, a municipal corporation and its authorized representatives, officers, officials, directors, employees, and agents.
1.12 “LOAN” means the loan of funds in the total amount of Three Hundred Forty- Seven Thousand Five Hundred Twenty-Eight Dollars ($347,528) from the Lender to the Borrower as provided in this Loan Agreement to provide construction a nd permanent financing for the Project.
1.13 “LOAN AGREEMENT” means this loan agreement entered into between Lender and Borrower.
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3 1.14 “ LOAN DOCUMENTS” are collectively the Loan Agreement, the Note, the Deed of Trust, and the Regulatory Agreement, as they may be amended, modified, or restated from time to time, along with all exhibits and attachments to these documents.
1.15 “ NOTE” means the promissory note executed by the Borrower in favor of Lender in the amount of Three Hundred Forty- Seven Thousand Five Hundred Twenty-Eight Dollars ($347,528) to evidence the Loan substantially in the form attached hereto as Exhibit D.
1.16 “NOTICE OF COMPLETION” shall mean the notice that shall be filed by the Borrower with the City of Oxnard at completion of construction. Borrower shall not unreasonably delay filing the Notice of Completion.
1.17 “ PROJECT” means the construction of the Improvements, operation and management of the 110 bed homeless shelter according to the terms of this Loan Agreement.
1.18 “PROPERTY” means the property commonly re ferred to as 241 W 2nd Street, Oxnard, California, as more partic ularly described in Exhibit A, which is incorporated into this Loan Agreement by this reference.
1.19 “QUALIFYING HOUSEHOLD” means a household that qualifies as Homeless in accordance with 24 CFR 578.3.
1.20 “REGULATORY AGREEMENT” means the regulatory agreement executed by Borrower and Lender, attached as Exhibit E, a nd recorded against the Property in the Official Records of Ventura County which regulates the use of the Project.
ARTICLE 2 TERMS OF THE LOAN
2.1 LOAN. On and subject to the terms and conditions of the Loan Documents, Lender agrees to make and Borrower agrees to accept a loan with the following terms:
2.2 AMOUNT. The principal amount of the Loan shall be an amount not to exceed Three Hundred Forty-Seven Thousand Five Hundred Twenty-Eight Dollars ($347,528) and shall be evidenced by the Note.
2.3 NO INTEREST LOAN. Subject to the provisions of Section 2.4, the Note shall not bear interest.
2.4 DEFAULT INTEREST. In the event of a default by Borrower of any of its obligations under this Loan Agreement and expiration of applicable cure periods, Borrower shall pay to Lender interest on the outstanding principa l of the Loan, at an a nnual rate equal to the lesser of (i) ten percent (10%) or (ii) the highes t interest allowed by law, from the date of the default until the date that the default is cured or the Loan is repaid in full.
2.5 TERM OF LOAN. The principal of the Loan shall be due and payable on the earlier of: (a) fifteen (15) years after the date of Project completion as evidenced by a written 709
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4 notice of completion provided to the Borrower by the City of Oxnard, or (b) the date the Property is sold or otherwise transferred, or (c) Borrower has failed to commence construction as set forth in Section 4.1 of this Loan Agreement, or (d) an event of default by Borrower, as defined below in Section 8.1, which has not been cured as provide d for below in Section 8.2. In the event of default by Borrower, as defined below in Section 8.1, which has not been cured as provided for below in Section 8.2, the principal shall be due and payable in accordance with Section 8.3. The foregoing notwi thstanding, if Borrower remains compliant with the terms of the Regulatory Agreement, as determined by the Lender through periodic inspections of the Project and tenant files documenting occupanc y by Qualifying Househol ds, and as indicated with monitoring close-out letters from Lender to Borrower indicating compliance with the Regulatory Agreement, for the fifteen (15) year term described therein, then the principal amount of the Loan shall be forgiven.
2.6 USE OF LOAN PROCEEDS. Loan proceeds shall be used only for the construction of the Improvements and shall only be disbursed in accordan ce with the provisions of Article 3.
2.7 SECURITY. Borrower shall secure its obligation to repay the Loan by executing a Deed of Trust and recording it as a lien against the Project.
2.8 REPAYMENT OF THE LOAN. The principal shall be due and payable in accordance with the terms set forth in Section 2.5.
2.9 PREPAYMENT OF LOAN. No prepayment penalty will be charged to Borrower for payment of all or any portion of th e Loan amount prior to the end of the term described herein. However, prepayment of the Loan shall not affect Borrower's obligations under the Regulatory Agreement.
2.10 RECORDING. Concurrent with Borrower’s clos ing of the construction loan, Escrow Holder shall record the Deed of Trust and the Regulatory Agreement with the Recorder for the County of Ventura, and shall deliver conf ormed copies of the reco rded documents to the Lender and Borrower.
ARTICLE 3 LOAN DISBURSEMENTS
3.1 CONDITIONS PRECEDENT TO DISBURSEMENT. Lender shall not be obligated to make any disbursements of the Lo an proceeds or take any other action under the Loan Documents unless the following conditi ons precedent are satisfied prior to the disbursement of the Loan:
A. There exists no Event of Default nor any act, failure, omission or condition that with the giving of notice or passage of time would constitute an Event of Default;
B. Borrower has executed and deliv ered to Lender all documents, instruments, and policies required under the Loan Documents and the Deed of Trust and the Regulatory Agreement have been recorded with the Recorder for the County of Ventura; 710
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5 C. Borrower has provided to Lender a cer tificate of insurance or copy of the insurance policy, which policy shall be satisfactory to the Lender and which conforms to Exhibit F; and
D. Borrower has secured all final permits, entitlements and approvals required by all permitting and regulatory authorities and jurisdictions; and
E. Borrower has complied with all reporting requirements set forth in this Loan Agreement.
3.2 DISBURSEMENT OF LOAN PROCEEDS. Lender shall provide Loan proceeds to Borrower on a reimbursement basis for approved Project costs incurred by Borrower and approved by Lender in accordance with the Budge t and only after Project costs which are to be paid have been incurred by Borrower as evidenced by invoices. Disbursement of Loan proceeds shall not exceed a total of Three Hundred Forty-Seven Thousand Five Hundred Twenty-Eight Dollars ($347,528).
Loan proceeds shall be disbursed through periodic payments based upon Project costs incurred and work completed, as evidenced by documentation supporting the completed work signed by the Project architect and verified by Lender. Borrower shall submit to Lender disbursement requests (“Written Disbursement Re quests”) in writing no more frequently than one time per month. Written Disbursement Requests shall include itemized invoices corresponding to the Budget (Exhibit B). Borrower shall also att ach copies of receipts or other acceptable proof of payment by Borrower and that demonstrates date of payment, and additional documentation as necessary to comply with state and local regulations.
Written Disbursement Requests shall only be for items included in the Budget (Exhibit B). Changes in individual items comprising the Budget shall requir e the prior written request of Borrower and the written approval of Lender. However, Lender’s obligations shall in no event exceed the amount specified above in Section 2.2. A ny costs in excess of this amount that are necessary for the completion of the Project shall be the sole responsibility of Borrower.
City agrees to provide payment to Borrower within 30 days of City’s receipt of the Written Disbursement Request and documentation supporting the completed work signed by the Project architect.
ARTICLE 4 DEVELOPMENT OF PROJECT
4.1 COMMENCEMENT OF CONSTRUCTION. Borrower shall commence construction of the Project on or before Ap ril 30, 2024. Commencement of construction shall mean obtaining all final permits, entitlements and approvals required by all permitting and regulatory authorities and jurisdictions and comm encing work on any task associated with a line item in the Budget (Exhibit B) at the Property that requires a permit, entitlement or approval. If Borrower fails to commence construction as set forth above, Lender may terminate this Loan Agreement pursuant to Article 8 below.
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6 4.2 COMPLETION OF PROJECT. Borrower shall diligently prosecute development of the Project to completion. Borrower shall pr ovide proof of completion as evidenced by the recording of a Notice of Completion.
4.3 FINANCING. Borrower shall promptly inform Lender in writing of any changes in the amount, terms, and/or sources of fina ncing or funding for the Property acquisition and Project development work.
4.4 CONTRACTS AND SUBCONTRACTS. All development work and professional services for the Project shall be performed by persons or entities licensed or otherwise authorized to perform the applicable construction work or service in the State of California.
All costs incurred in acquisition of the Pr operty and development, construction and operation of the Project shall be the responsibility and obligation solely of Borrower.
4.5 ADDITIONS OR CHANGES IN WORK. Lender must be notified in a timely manner of any changes in the work required to be performed under this Loan Agreement. A written change order authorized by Lender must be obtained befo re any changes, additions, or deletions may be performed. If Lender has not responded to a written request for a change order by Borrower within ten (10) days of receipt of such request by Lender, such request shall be deemed approved by Lender. Consent to any additi ons, changes, or deletions to the work shall not release Borrower from any other obligations in the Loan Documents.
4.6 INSPECTIONS. Borrower shall permit and facilita te, and require its contractors to permit and facilitate, obser vation and inspection at the j ob site by Lender and by public authorities during reasonable business hours for the purposes of determining compliance with this Loan Agreement.
4.7 SITE SUPERVISION. During the development of the Project, Borrower shall maintain a full-time site superintendent to supe rvise all development and construction work on the Property. The site superintendent shall be on-site during all work hours.
4.8 CONSTRUCTION RESPONSIBILITIES. Borrower shall be solely responsible for all aspects of Borrower's conduct in connection with the Project, including, but not limited to, the quality and suitability of the construction work, the supervision of construction work, the qualifications, financial condition, and performance of all contract ors, subcontractors, suppliers, consultants, and property managers. To ensure compliance with all applicable labor code requirements, Borrower shall hire a labor comp liance monitor. Any review or inspection undertaken by Lender with reference to the Proj ect is solely for the purpose of determining whether Borrower is properly discharging its oblig ations to Lender, and should not be relied upon by Borrower or by any third pa rties as a warranty or repres entation by Lender as to the quality of the development and construction of the Project.
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7 4.9 BARRIERS TO THE DISABLED. The Project shall be developed and the Property shall be maintained to comply with all applicable federal, state, and local requirements for access for disabled persons.
4.10 LEAD-BASED PAINT AND ASBESTOS REMOVAL. Borrower and its contractors and subcontractors shall not use lead-b ased paint or asbestos in the development and construction of the Property and shall comply with Federal Regulations 24 C.F.R., 29 C.F.R., 40 C.F.R., Title X, California O.S.H.A., California health codes, and all County standards.
Borrower shall incorporate or cause to be incorporated this provision in all contracts and subcontracts for work performed on the Property which involves the application of paint and/or other construction-related surfaces.
4.11 MECHANICS LIENS AND STOP NOTICES. If any claim of lien is filed against the Property or a stop not ice affecting the Loan is serv ed on Lender or any other lender or other third party in connection with the Project, Borrower shall, within sixty (60) days of such filing or service, either pay and fully discharge the lien or stop not ice, effect the release of such lien or stop notice by delivering to Lender a sure ty bond in sufficient form and amount, provide Lender with a lien-free endorsement or prov ide Lender with other assurance reasonably satisfactory to Lender that the claim of lien or stop notice will be paid or discharged.
If Borrower fails to discharge any lien, encumbrance, charge, or claim referred to herein, then in addition to any other right or reme dy, Lender may, but shall be under no obligation to, discharge such lien, encumbrance, charge, or cl aim at Borrower's expense. Alternatively, Lender may require Borrower to immediately deposit with Lender the amount necessary to satisfy such lien or claim and any costs, pe nding resolution thereo f Lender may use such deposit to satisfy any claim or lien that is adversely determined against Borrower.
Borrower shall file a valid notice of cessati on or notice of completion upon cessation of work on the Project for a continuous period of 30 days or more, and take all other reasonable steps to forestall the assertion of claims of lien against the Property. Borrower authorizes Lender, but without any obligation, to r ecord any notices of completion or cessation of labor, or any other notice that Lender deems necessary or desira ble to protect its interest in the Project and Property.
4.12 RELOCATION. If and to the extent that development of the Project results in the permanent or temporary displacement of re sidential tenants, homeowners, or businesses, Borrower shall comply with all ap plicable local, state and federa l statutes and re gulations with respect to relocation planning, advisory assistance, and paymen t of monetary benefits. Borrower shall be solely responsible for payment of any relocation benefits to any displaced persons and any other obligations associated with complying with said relocation laws.
4.13 UNAVOIDABLE DELAY IN PERFORMANCE. The time for performance of provisions of this Loan Agreement by either pa rty shall be extended for a period equal to the period of any delay directly aff ecting the Project or this Loan Agreement which is caused by:
war; insurrection; strikes; lock-outs; riots; flood s; earthquakes; fires; casualties; acts of God; quarantine restrictions; or freight embargoes or other events beyond the reasonable control of the 713
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8 party claiming the delay. An extension of time for any of the above-specified causes will be deemed granted only if written not ice by the party claiming such extension is sent to the other party within five (5) calendar days from the co mmencement of the cause, and such extension of time is either accepted by the other party in wri ting, or is not rejected in writing by the other party within ten calendar days of receipt of the notice. In any ev ent, construction of the Project must be completed no later than ninety (90) ca lendar days after the scheduled completion date specified herein, any unavoidable delay notwithstanding. Times of performance under this Loan Agreement may also be extended for any cause for any period of time by the mutual written agreement of Lender and Borrower.
ARTICLE 5 OPERATION
5.1 OPERATION OF PROJECT. Borrower shall operate an d manage the Project after completion in full conformance with the terms of the Regulatory Agreement.
Borrower shall agree to maintain and operate the Project so as to provide decent, safe, and sanitary housing. Borrower shall provide supportive services as required by the provision of that separate Shelter Operation Agreement between Borrower and Lender.
5.2 PROJECT BEDS. The 110 permanent shelter beds shall be available for Qualifying Households.
5.3 CONFLICTS BETWEEN COVENANTS OR RESTRICTIONS
AFFECTING THE PROPERTY. Any conflicts between the restrictive provisions contained in this Loan Agreement, Note, Deed of Trust, Regulatory Agreement, and any other agreements in connection with the Loan which affect the Prope rty, are to be resolved by applying the more restrictive covenants or restrictions which affect the Property.
5.4 NONDISCRIMINATION. Borrower shall not discriminate or segregate in the rehabilitation, use, enjo yment, occupancy, conveyance, lease, s ublease, or rental of any part of the Property on the basis of race, color, ancestry, national origin, religion, sex, sexual preference or orientation, age, marital status, family status , source of income, physical or mental disability, Acquired Immune Deficiency Syndrome (AIDS) or AIDS-related conditions (ARC) acquired or perceived, or any other arbitrary basis. Borrower shall otherwis e comply with all applicable local, state, and federal laws concerning discrimination in housing.
5.5 RECORDS. Borrower shall be accountable to Lender for all funds disbursed to Borrower pursuant to the Loan Documents. Borrowe r agrees to maintain records that accurately and fully show the date, amount, purpose, and pa yee of all expenditur es drawn from Loan proceeds, and to keep all invoices, receipts, an d other documents related to expenditures from said Loan proceeds for not less than five years after completion of the Project. Records must be kept accurate and current. Lender shall notify Borrower of any records it deems insufficient.
Borrower shall have fifteen (15) calendar days from the date of said notice to correct any deficiency in the records specified by Lender in sa id notice, or, if more than fifteen (15) days shall be reasonably necessary to correct the deficiency, Borrowe r shall begin to correct the deficiency within fifteen (15) days and correct the deficiency as soon as reasonably possible. 714
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9 Borrower shall promptly comply with all requirements or condi tions of the Loan Documents relating to notices, extensions, and other events required to be reported or requested.
Borrower shall promptly supply, upon the request of Lender, any and all information and documentation which involves the Project and coope rate with Lender in the development and construction of the Project.
5.6 AUDITS. Borrower shall make available for examination at reasonable intervals and during normal business hours to Lender all books, accounts, reports, files, and other papers or property with respect to all matters covere d by these Loan Documents, and shall permit Lender to audit, examine, and make excerpts or transcripts from such records. Lender may make audits of any conditions relating to this Loan. Further, Borrower acknowledges that the PLHA Program Terms and Conditions applies to the Loan proceeds and that HCD has the right to audit Borrower’s records and interview Borrower’s empl oyees in connection w ith the use of Loan proceeds under this Loan Agreement.
5.7 ENCUMBRANCE OF PROPERTY. Except as otherwise provided in this Loan Agreement, Borrower shall not engage in any fi nancing or any other tr ansaction creating any security interest or other encumbrance or lie n upon the Property, whether by express agreement or operation of law, or allow any encumbrance or lien to be made on or attached to the Property, except with the prior written consent of Lende r. Borrower shall notify Lender in writing in advance of any financing secured by any deed of trust, mortgage, or other similar lien instrument that it proposes to enter into with respect to the Project or Property, and of any encumbrance or lien that has been created on or attached to the Property whether by voluntary act of Borrower or otherwise.
5.8 SUBORDINATION. Lender shall subo rdinate the obligations of this Loan Agreement, and the attached Regulatory Agreemen t and Deed of Trust to be recorded on the Property, to the Construction Loan and the perman ent financing obligations for the Project.
Borrower and Lender shall cooperate in the ex ecution of any such subordination agreement required to perfect such subordinations.
5.9 TRANSFER OF PROPERTY. Borrower has not made or created, and shall not, make or permit any sale, assignment, conveyance, lease (other than the l easing of units in the Project pursuant to an approved lease), or other tr ansfer of this Loan Agreement, the Project, or the Property, or any part thereof, without the prior written consent of Lender.
5.10 FEES, TAXES, AND OTHER LEVIES. Borrower shall be responsible for payment of all fees, assessments, taxes, charges, and levies imposed by any public authority or utility company with respect to the Property or th e Project, and shall pay such charges prior to delinquency. However, Borrower shall not be requi red to pay and discharge any such charge so long as (a) the legality thereof is being contested diligently and in good faith and by appropriate proceedings, and (b) if requested by Lender, Borrower deposits with Lender any funds or other forms of assurance Lender in good faith from time to time determines appropriate to protect Lender from the consequences of the contest being unsuccessful.
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10 5.11 DAMAGE TO PROPERTY. If any building or stru cture on the Property is damaged or destroyed by an insurable cause, Borrower shall, at its cost and expense, diligently undertake to repair or restore said buildings and structures consistent with the original Improvements for the Project if Borrower reasonably determines that such restoration or repair is economically feasible. Such work or repair shall be commenced within 120 days after the damage or loss occurs and shall be complete within one year fr om such commencement, subject to any extensions of time granted pursuant to the provisions of Section 4.13. Subject to Borrower's election to rebuild, all insurance pro ceeds collected for such damage or destruction shall be applied to the cost of such repairs or restoration and, if such insurance proceeds shall be insufficient for such purpose, Borrower shall make up the deficiency.
ARTICLE 6 INDEMNITY AND INSURANCE
6.1 INDEMNITY AND INSURANCE. Borrower hereby agrees to defend, indemnify and save harmless the Lender and to procure and maintain insurance in accordance with the provisions of Exhibit F attached hereto and incorporated herein by reference.
6.2 NON-LIABILITY OF OFFICIAL S, EMPLOYEES AND AGENTS. No officials, employees and agents of Lender sh all be personally liable to Borrower for any obligation created under the terms of these Loan Documents.
ARTICLE 7 HAZARDOUS MATERIALS
7.1 REPRESENTATIONS AND WARRANTIES. After reasonable investigation and inquiry, Borrower hereby represents and warrants to the best of its knowledge, as of the date of this Loan Agreement and except as previously disclosed and acknowledged in writing by Lender or as disclosed by the reports based on environmental audit(s) performed on the Property and submitted to Lender, that (a) the Property is not and has not been a site for the use, generation, manufacture, transportation, storage, or disposal of Hazardous Materials in violation of Federal or State law; (b) the Property is in compliance with all applicable environmental and health and safety laws, regulations, ordinan ces, administrative decisions, common law decisions (whether federal, state, or local) with re spect to Hazardous Materials, including those relating to soil and groundwater conditions ("Hazardous Materials La ws"); (c) there are no claims or actions pending or threatened with respect to the Property by any governmental entity or agency or any other person relating to Hazardous Materials; and (d) there has been no release or threatened release of any Hazardous Materials on, under, or n ear the Property (including in the soil, surface water, or groundwater under the Property) or any other occurrences or conditions on the Property or on any other real property that could cause the Property or any pa rt thereof to be classified as a "hazardous waste property" or as a "border zo ne property" under Califor nia Health and Safety Code Sections 25220, et seq., or regulations adopted therewith.
7.2 NOTIFICATION TO LENDER. Borrower shall promptly notify Lender in writing of: (a) the discovery of any concentrati on or amount of Hazardous Materials of which Borrower becomes aware on or under the Property requiring notice to be given to any governmental entity or agency under Hazardous Materials Laws; (b) any knowledge by Borrower (after verification of the veracity of such knowledge to Borrower's reasonable satisfaction) that the Property does not comp ly with any Hazardous Materials Laws; (c) the 716
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11 receipt by Borrower of written notice of any Hazardous Materials claims; and (d) the discovery by Borrower of any occurrence or condition on th e Property or on any real property located within 2,000 feet of the Property that could cau se the Property or any part thereof to be designated as a "hazardous waste property" or as a "border zone property" under California Health and Safety Code Sections 25220, et seq., or regulations adopted therewith.
7.3 USE AND OPERATION OF PROPERTY. Neither Borrower, nor any agent, employee, or contractor of Borrower, nor any authorized user of the Property shall use the Property or allow the Property to be used for the generation, manu facture, storage, disposal, or release of Hazardous Materials. Borrower shall comply and cause the Project to comply with Hazardous Materials Laws.
7.4 REMEDIAL ACTIONS. If Borrower has actual knowle dge of the presence of any Hazardous Materials on or under the Property, Borrower shall take, at no cost or expense to Lender, all handling, treatment, removal, storage, decontamina tion, cleanup, transport, disposal or other remedial action, if a ny, required by any Hazardous Materi als Laws or by any orders or requests of any governmental entit y or agency or any judgment, consent decree, settlement or compromise with respect to any Hazardous Ma terials claims. The foregoing, however, shall be subject to Borrower's right of contest below.
7.5 RIGHT OF CONTEST. Borrower may contest in good faith any claim, demand, levy or assessment under H azardous Materials Laws if (a) the contest is based on a material question of law or fact raised by Borrower in good faith, (b) Borrower promptly commences and thereafter diligently pursues the contest, (c) the contest will not materially impair the taking of any remedial action with respect to such claim, demand, levy or assessment, and (d) if requested by Lender, Borrower deposits with Lender any funds or other forms of assurance Lender in good faith from time to time determines appropriate to protect Lender from the consequences of the contest being unsuccessful and any remedial action then reasonably necessary. No Event of Default shall be deemed to exist with respect to any claim, demand, levy or attachment being contested by Borrower under the conditions of this section.
7.6 ENVIRONMENTAL INDEMNITY. Borrower shall defend, indemnify, and hold Lender free and harmless against any claims , demands, administrative actions, litigation, liabilities, losses, damages, response costs, and penalties, including all costs of legal proceedings and reasonable attorney's fees, that Lender may directly or indirectly sustain or suffer as a consequence of any inaccuracy or breach of any representation, warranty, agreement, or covenant contained in this Loan Agreement w ith respect to Hazardous Materials, or as a consequence of any use, generation, manufacture, st orage, release, or disposal (whether or not Borrower knew of same) of any Hazardous Materials occurring prior to or during Borrower's use or occupancy of the Property.
ARTICLE 8 DEFAULT AND REMEDIES
8.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall constitute an "Event of Default" under this Loan Agreement:
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12 A. Monetary. (1) Borrower's failure to pay when due any sums payable under the Note or any advances made by Lender under th e Deed of Trust or th is Loan Agreement; (2) Borrower's use of Loan proceeds for costs other than approved costs or for uses inconsistent with other terms and restrictions in the Loan Do cuments; (3) Borrower's failure to obtain and maintain the insurance coverage required under this Loan Agreement; (4) Borrower's failure to make any other payment or assessment due under the Loan Documents; (5) Borrowers failure to pay taxes; (6) Borrower's default under other debt secured by the Property after the applicable notice and cure periods have expired;
B. Project Development and Constr uction. (1) Borrower's substantial deviation in the construction of the Improvement s, without Lender's prior written consent; (2) Borrower's use of defective or unauthorized mate rials or defective workmanship in development and construction of the Project; (3) Borrower's failure to commence or complete construction work according to the schedule specified in this Loan Agreement; (4) the cessation of construction work prior to completion of the Proj ect for a period of more than twenty-one (21) continuous calendar days without proper justifi cation; (5) Borrower's failure to remedy any deficiencies in recordkeeping or failure to provide records to Lender upon Lender's reasonable request; (6) Borrower's failure to substantially comply with any applicable federal, state, or local laws or Lender policies governing Project development and construction;
C. Operation. (1) Discrimination by Borro wer on the basis of characteristics prohibited by applicable law or (2) the impositi on of any encumbrances or liens on the Property without Lender's prior written approval that ar e prohibited under this Loan Agreement or that have the effect of reducing the priority of or invalidating the Deed of Trust;
D. General performance of Loan obligations. Any substantial breach by Borrower beyond applicable notice and cure periods of any material obligations on Borrower imposed in the Loan Documents;
E. General performance of other obliga tions. Any substantial or continuous breach by Borrower beyond applicable notice and cu re periods of any material obligations on Borrower imposed by any other agreements, includi ng any grant agreements, with respect to the financing, construction, or operatio n of the Project or the Propert y, whether or not Lender is a party to such agreement which may materially impair Lender's security;
F. Representations and warranties. A determination by Lender that its security has or will be materially impaired due to the fact that any of Borrower's representations or warranties made in the Loan Documents, or any certificates, documents, or schedules supplied to Lender by Borrower were untrue in any ma terial respect when made, or that Borrower concealed or failed to disclose a material fact from Lender;
G. Damage to Property. Material dama ge or destruction to the Property by fire or other casualty, if Borrower does not take steps to reconstruct th e Property as required by the Loan Documents;
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13 H. Bankruptcy, dissolution, and insolvency. Borrower's (1) filing for bankruptcy, dissolution, or reorganization, or failu re to obtain a full dismissal of any such involuntary filing brought by another party before the earlier of final relief or ninety (90) days after the filing; (2) making a general assignment fo r the benefit of creditor s; (3) applying for the appointment of a receiver, trustee, custodian, or liquidator, or failure to obtain a full dismissal of any such involuntary application brought by another party before the earlier of final relief or ninety (90) days after the filing; (4) insolvency ; (5) failure, inability or admission in writing of its inability to pay its debts as they become due.
8.2 NOTICE OF DEFAULT AND OPPORTUNITY TO CURE. For all Events of Default, Lender shall give written notice to Borr ower of any Event of Default by specifying: (a) the nature of the event or deficiency giving rise to the Default, (b) the action required to cure the deficiency, if an action to cure is possible, and (c ) a date, which shall not be less than thirty (30) calendar days from the date of receipt of the notice or the date the notice was refused, by which such action to cure must be taken or if a cure is not possible within thirty (30) days, to begin such cure and diligently prosecute such to completion which shall, in any event, not exceed ninety (90) days from the date of receipt of th e notice to cure. The Lender has the sole discretion to determine whatever additional reasonable time is needed to cure.
8.3 LENDER'S REMEDIES. Upon the happening of an Event of Default by Borrower and a failure to cure said Event of De fault within the time specified in Section 8.2 above, Lender's obligation to disburse Loan proceeds shall terminate, and Lender may also, in addition to other rights and remedies permitted by the Loan Documents or applicable law, proceed with any or all of the following reme dies in any order or combination Lender may choose in its sole discretion:
A. Terminate this Loan Agreement, in which event the entire principal amount outstanding and all accrued interest unde r the Note, as well as any other monies advanced to Borrower by Lender under the Loan Documents including administrative costs, shall immediately become due and payable at the option of Lender;
B. Bring an action in equitable relief (1) seeking the specific performance by Borrower of the terms and conditions of the Loan Documents, and/or (2) enjoining, abating, or preventing any violation of said terms and conditions, and/or (3) seeking declaratory relief;
C. Accelerate the Loan, and demand immediate full payment of the principal amount outstanding and all accrued interest unde r the Note, as well as any other monies advanced to Borrower by Lender under the Loan Documents;
D. Enter the Property and take any ac tions necessary in its judgment to complete development of the Pr oject, including wit hout limitation (1) making changes in the Improvements or other work or materials with respect to the Project, (2) entering into, modifying, or terminating any cont ractual arrangements (subject to Lender's right at any time to discontinue work without liabil ity), and (3) taking any remedi al actions with respect to Hazardous Materials that Lender deems necessary to comply with Hazardous Materials Laws or to render the Property suitable for occupancy;
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14 E. Seek appointment from a court of competent jurisdiction of a receiver with the authority to complete development of Proj ect as needed to preserve Lender's interest in seeing the Project completed in a timely manner (i ncluding the authority to take any remedial actions with respect to Hazardous Materials that Lender or the receiver deems necessary to comply with Hazardous Materials Laws or to render the Property suitable for occupancy); F. Order immediate stoppage of develo pment of Project and demand that any condition leading to the Event of Default be corrected before development of Project may continue;
G. Disburse from Loan proceeds any am ount necessary to cure any monetary default;
H. Enter upon, take possessi on of, and manage the Property, either in person, by agent, or by a r eceiver appointed by a cour t, and collect rents and other amounts specified in the assignment of rents in the Deed of Trust and apply them to ope rate the Property or to pay off the Loan or any advances made under the Loan Documents, as provided for by the Deed of Trust;
I. Initiate and pursue any private and/ or judicial foreclosure action allowed under applicable law and the power of sale provision in the Deed of Trust;
J. With respect to defaults under Hazardous Materials provisions herein, pursue the rights and remedies permitted unde r California Civil Code Section 2929.5, and California Code of Civil Procedure Sections 564, 726.5, and 736; or
K. Pursue any other remedy allowed at law or in equity. Nothing in this section is intended or shall be construed as precluding Lender from proceeding with a nonjudicial foreclosure under the powe r of sale contained in the D eed of Trust in the Event of Default by Borrower.
ARTICLE 9 GENERAL PROVISIONS
9.1 BORROWER'S WARRANTIES. Borrower represents and warrants (1) that it has access to professional advice and support to th e extent necessary to enable Borrower to fully comply with the terms of these Loan Docu ments and the Regulatory Agreement, and to otherwise carry out the Project, (2) that it is duly organized, validly existing and in good standing under the laws of the State of California, (3) that it has the full power and authority to undertake the Project and to execute the Loan Documents, (4) that the persons executing and delivering the Loan Documents are authorized to execute and deliver such documents on behalf of Borrower, (5) that there ha s been no substantial adverse change in Borrower's financial condition since the date of applica tion for this loan such as judgm ent liens, tax liens, mechanic's liens, bankruptcy, etc.; and (6) that all representations in the Borrower's loan application (including all supplementary submissions) are true, correct and co mplete in all material respects and are offered to induce Lender to make this loan.
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15 9.2 MONITORING AND EVALUATION. Except as otherwise provided for in this Loan Agreement, Borrower shall maintain and submit records to Lender within fifteen (15) business days of Lender's request which clea rly document Borrower's performance under each requirement of the Loan Documents.
9.3 CONFLICTS OF INTEREST. Borrower covenants that:
A. Except for approved eligible admini strative or personnel costs, no person described in subsection (B) below who exercises or has exercised any functions or responsibilities with respect to the activities funded pursuant to th is contract or who is in a position to participate in a decision-making proce ss or gain inside information with regard to such activities, may obtain a personal or financial interest or benefit from the activity, or have an interest in any contract, subc ontract or agreement with resp ect thereto, or the proceeds thereunder, either for themselves or those with whom they have family or business ties, during, or at any time after, such person's tenure. The Borrower shall exercise due diligence to ensure that the prohibition in this Section is followed.
B. The conflict of interest provisions of Section 9.3(A) above apply to any person defined in California Government Code section 1090 and an employee, agent, consultant, officer, or any immediate family member of such person, or any elected or appointed official of the City, or any person related within the third (3rd) degree of such person.
9.4 POLITICAL ACTIVITY. None of the funds, material s, property or services contributed by Lender or Borrower under this Loan Agreement shall be used for any partisan political activity or the election or defeat of any candidate for public office.
9.5 TERM OF THIS AGREEMENT. This Loan Agreement shall commence on the Effective Date and remain in full force and effect throughout the term of this Loan.
9.6 GOVERNING LAW. The Loan Documents shall be interpreted under and be governed by the laws of the Stat e of California, except for those provisions relating to choice of law or those provisions preempted by federal law.
9.7 STATUTORY REFERENCES. All references in the Loan Documents or Regulatory Agreement to particular statutes, regulations, ordinances, or resolutions of the United States, the State of California, or the City of Oxnard shall be deemed to include the same statute, regulation, ordinance, or resolution as hereafter amended or renumbered, or if repealed, to such other provisions as may thereafte r govern the same subject as the provision to which specific reference was made.
9.8 TIME. Time is of the essence in these Loan Documents.
9.9 CONSENTS AND APPROVALS. Any consent or approval of Lender or Borrower required under the Loan Documents shall not be unreasonably withheld or conditioned. Any approval required under the Loan Documents shall be in writing and executed by an authorized representative of the party granting the approval. 721
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16 9.10 NOTICES, DEMANDS AND COMMUNICATIONS. Formal notices, demands and communications between Borrower and Lender shall be sufficiently given and shall not be deemed given unle ss dispatched by registered or certified mail, postage prepaid, return receipt requested, or delivered personally, to the principal offices of Borrower and Lender as follows:
LENDER: City of Oxnard Housing Department
435 South D Street
Oxnard, CA 93030
Attn: Housing Director
BORROWER: Mercy House Living Centers
203 N Golden Circle Drive, 3rd Floor
Santa Ana, CA 92705
Attn: Larry Haynes
9.11 BINDING UPON SUCCESSORS. All provisions of th ese Loan Documents shall be binding upon and inure to the benefit of the heirs, admi nistrators, executors, successors- in-interest, transferees, and assi gns of each of the parties; provi ded, however, that this section does not waive the prohibition on assignment of this Loan Agreement by Borrower without Lender's consent.
9.12 RELATIONSHIP OF PARTIES. The relationship of Borrower and Lender for this Project under this Loan Agreement is and at all times shall remain solely that of a debtor and a creditor, and shall not be constr ued as a joint venture, equity ve nture, partnership, or any other relationship. Lender neither undertakes nor as sumes any responsibilit y or duty to Borrower (except as provided for herein) or any third party with respect to the Project, the Property, or the Loan.
9.13 ASSIGNMENT AND ASSUMPTION. Borrower shall not assign any of its interests under this Loan Agreement or the Lo an Documents to any other party, except as specifically permitted under the terms of the Loan Documents, without the prior written consent of Lender. Any unauthorized assignment shall be void.
9.14 WAIVER. Any waiver by Lender of any oblig ation in these Loan Documents must be in writing. No waiver will be implied from any delay or failure by Lender to take action on any breach or default of Borrower or to pursue any remedy a llowed under the Loan Documents or applicable law. Any extension of time granted to Borrower to perform any obligation under the Loan Documents shall not opera te as a waiver or release from any of its obligations under the Loan Documents. Consen t by Lender to any act or omission by Borrower shall not be construed to be consent to any othe r or subsequent act or omission or to waive the requirement for Lender's written consent to future waivers.
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17 9.15 INTEGRATION. This Loan Agreement and the other Loan Documents, including exhibits, executed by Borrower for the Property, if any, contain the entire agreement of the parties and supersede any and all prior negotiations.
9.16 OTHER AGREEMENTS. Borrower represents that it has not entered into any agreements that are inconsistent with the terms of the Loan Documents. Borrower shall not enter into any agreements that are inconsistent with the terms of the Loan Docume nts without an express waiver by Lender in writing.
9.17 AMENDMENTS AND MODIFICATIONS. Any amendments or modifications to the Loan Documents must be in writing, and shall be made only if executed by both Borrower and Lender.
9.18 SEVERABILITY. Every prov ision of this Loan Agreement is intended to be severable. If any provision of this Loan Agreement shall be held invalid, illegal, or unenforceable by a court of competent jurisdiction, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired.
9.19 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The signature pages of one or more counterpart copies may be removed from such counterpart copies and all attached to the same copy of this Agreement, which, with all attached signature pages, shall be deemed to be an original.
(Signatures appear on next page)
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18 IN WITNESS WHEREOF, Lender and Borrower have caused this Loan Agreement to be executed by their duly authorized representatives.
City:
THE CITY OF OXNARD
_____________________________
Alexander Nguyen, City Manager
APPROVED AS TO FORM:
_____________________________
Stephen Fischer, City Attorney
APPROVED AS TO INSURANCE:
_____________________________
Michael More, Human Resources/Risk
Mana
ger
Borrower:
MERCY HOUSE LIVING CENTERS, a
California nonprofit public benefit
corporation
Name: Larry Haynes
Title: Chief Executive Officer
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EXHIBIT A
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
Real property in the unincorporated area of the County of Ventura, State of California, described as follows:
A leasehold estate as created by that certain [title of sublease] dated ______________, 2022, executed by and between 2nd & B, LP, a California limited partnership, as sublessor, and , a California nonprofit public bene fit corporation, as sublessee, as evidenced by that certain “Memorandum of [title of sublease]” recorded concurrently with the Deed of Trust in the Official Records of the County of Santa Barbara, California, in and to the first floor of the building located on the following described real property:
LOTS 9, 10 AND 11 OF BLOCK 12, AS SHOWN ON A MAP OF THE NORTH ADDITION TO THE
TOWN OF OXNARD, COUNTY OF VENTURA, STATE OF CALIFORNIA, RECORDED IN BOOK 5, PAGE 7, OF MISCELLANEOUS RECORDS (MAPS), IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPTING ALL URANIUM, THORIUM AND OTHER FISSIONABLE MATERIALS, ALL OIL,
GAS, PETROLEUM, ASPHALTUM, AND OTHE R HYDROCARBON SUBSTANCES AND OTHER
MINERALS AND MINERAL ORES OF EVERY KIND AND CHARACTER, WHETHER SIMILAR
TO THESE HEREIN SPECIFIED OR NOT, WITHIN OR UNDERLYING, OR WHICH MAY BE
PRODUCED FROM THE HEREINBEFORE DESCRIBED LAND, TOGETHER WITH THE RIGHT
TO USE THAT PORTION ONLY OF SAID LAND WHICH UNDERLIES A PLANE PARALLEL TO AND FIVE HUNDRED (500) FEET BELOW THE PRESENT SURFACE OF SAID LAND, FOR THE
PURPOSE OF PROSPECTING FOR, DEVELOPING AND/OR EXTRACTING SAID URANIUM,
THORIUM, AND OTHER FISSIONABLE MATERIALS, OIL, GAS, PETROLEUM, ASPHALTUM,
AND OTHER MINERAL OR HYDROCARBON SUBSTANCES FROM SAID LAND, IT BEING
EXPRESSLY UNDERSTOOD AND AGREED T HAT SAID ASSOCIATED SOUTHERN
INVESTMENT COMPANY, ITS SUCCESSORS AND ASSIGNS, SHALL HAVE NO RIGHT TO
ENTER UPON 'THE SURFACE OF SAID LAND, OR TO USE SAID LAND OR ANY PORTION THEREOF TO SAID DEPTH OF FIVE HUNDRED (500) FEET, FOR ANY PURPOSE
WHATSOEVER, AS EXCEPTED AND RESERVED IN THAT CERTAIN DEED FROM
ASSOCIATED SOUTHERN INVESTMENT COMPANY TO THE CITY OF OXNARD, DATED JUNE 20, 1974 AND RECORDED JUNE 28, 1974, IN BOOK 4281, PAGE 515 OF OFFICIAL RECORDS.
APN: 202-0-054-075 AND 080
725
A-8461
A-AA
A
EXHIBIT B
EXHIBIT B
BUDGET
Loan proceeds shall be used only for the costs attributed to the development of the Shelter, as shown below, in an amount not to exceed $347,528.
Description Total Budget
Shelter Shell $855,689
Rooftop Deck $57,986
Shelter Tenant Improvements $3,059,044
Design Costs $219,500
Construction Oversight $50,000
Insurance $73,000
Contingency 10% $431,522
Total Cost $4,746,741
The balance of this budget will be paid with loan proceeds from a separate a Loan Agreement executed between the Borrower and the City, in which City agreed to loan Borrower $4,399,213 from Local City Measure O funds and funds provided by the County of Ventura for development of the Shelter.
726
A-8461
A-AA
A
EXHIBIT C
EXHIBIT C
DEED OF TRUST
727
1 NO FEE DOCUMENT
Recording requested by and
when recorded, mail to:
City of Oxnard Housing Department
435 S. D Street
Oxnard, California, 93030
Attn: Housing Director
NO FEE DOCUMENT PURSUANT TO
GOVERNMENT CODE SECTION 27383
DEED OF TRUST, ASSIGNMENT OF RENTS,
AND SECURITY AGREEMENT
(PLHA Loan – Homeless Shelter Project)
THIS DEED OF TRUST, ASSIGNMENT OF RENTS, AND SECURITY AGREEMENT (“Deed of Trust”) is made as of this ____ day of ___________, 2022, by Mercy House Living Center, a California nonprofit public benefit corporation (“Trustor”), to Fidelity National Title Company, a Californ ia corporation as trustee (“Trustee”), for the benefit of the City of Oxnard, a municipal corporation (“Beneficiary”).
GRANT IN TRUST
1. GRANT. Trustor, in consideration of the indebtedness referred to below, hereby irrevocably grants and conveys to Trustee, IN TRUST, WITH POWER OF SALE, for the benefit and security of Beneficiary, all of Trustor’s interest in the leasehold estate in and to the first floor of the building located on the improved real property located in the County of Ventura, State of California, more particularly described in Exhibit A and incorporated herein by this reference (the “Property”)
TOGETHER WITH all interest, estates or other claims, both in law and in equity which Trustor now has or may hereafter acquire in the Property; all buildings, structures, fixtures, improvements, signs, and landscaping now or hereafter erected or located on the Property, including all equipment and machinery used for supplying or distributing heating, cooling, electricity, gas, water, air, and light, all kitchen and laundry appliances such as washers, dryers, refrigerators, garbage disposals, ovens, ranges, dishwashers, all plumbing and bathroom fixtures, all security and access control equipment, fire prevention and extinguish ment equipment, elevators, floor coverings, window coverings, paneling, cabinets, (provided, however, that Tr ustor shall have the right to remove, if necessary, such fixtures, furnishings, and equipment for the purpose of replacement with similar items of the same quality performing the same functions, which replacements shall themselves be come part of this grant); all building material and equipment either now or hereafter delivered to the Property and intended to be installed therein or any such material and equipment purchased with the Loans’ proceeds whether or not located on the Property; all reserves, accounts, deferred payments, and refunds relating to development on the Property; all rents and income generated by the Property or improvements thereon (subject however to the assignment of rents to Lender contained herein); all leases, subleases and rental agreements covering the Property or any portion thereof now existing or hereafter entered into, and all interests of Trustor in security deposits, advance rentals, accounts, or payments of similar nature with respect to such leases, subleases, or rental agreements; all easements and rights-of-way appurtenant to the Property, including parking and recreational easements, and all interests of Trustor in any land lying within the right-of-way of any street, sidewalks, and areas of land adjacent to or used in co nnection with the Property; all development rights and credits, air rights, water rights, and oil, gas or mineral rights with respect to the Property; all claims or demands with respect to insurance proceeds, and all awards made for a taking by eminent domain; all interests and rights in any private or government grants, subsidies, loans, or other financing with respect to development on the Property; all interests in personal property used in and about the Property (except furniture and other personal property of occupants of dwelling units on the Property); all intangible property and rights relating to the Property or operations on the Property, including trade names, goodwill, trademarks, and service marks; all government permits, approvals, and map rights 728
2 related to construction on the Property ; all architectural, structural, and mech anical plans, specifications, designs, studies, and data with respect to construction of improveme nts on the Property; all environmental tests, studies and reports with respect to the Property; all current and future claims and rights of action of Trustor against prior owners and operators of the Property, neighboring property owners and operators, tenants and former tenants, consultants, advisors, and other third parties with respect to environmental or any hazardous materials contamination and cleanup of the Property under any federal, state, or local ordinances, statutes, regulations, or administrative decisions or common law.
All of the foregoing, together with the Property, is herein referred to as the “Security.”
OBLIGATIONS SECURED
2. OBLIGATIONS. Trustor makes this grant for the purpose of securing the following obligations:
A. Repayment of the indebtedness of Trustor to Beneficiary in the principal sum of Three Hundred Forty-Seven Thousand Five Hundred Twenty-Eight Dollars ($347,528), with interest thereon, evidenced by a promissory note executed by Trustor on file at the offices of Beneficiary and hereby incorporated by reference into this Deed of Trust (the “Note”); and
B. Payment of any sums advanced by Beneficiary to protect the security and pr iority of this Deed of Trust; and
C. Performance of every obligation, covenant or agreement of Trustor contained in the certain PLHA Loan Agreement (Homeless Shelter Project) between Trustor and Beneficiary regarding the Note (“Loan Agreement”), this Deed of Trust, an d the Note, including all modifications, extensions and renewals of these obligations (collectively, the “Loan Documents”); and
D. Performance of any other obligation or repayment of any other indebtedness of Trustor to Beneficiary, where such evidence of obligation or indebtedness specifically recites that it is secured by this Deed of Trust; and
E. Performance of any obligations of Trustor in any other agreements with respect to financing of the Property the Security the absence of which would adversely affect Beneficiary, whether or not Beneficiary is a party to such agreements.
ABSOLUTE ASSIGNMENT OF RENTS AND RIGHT TO POSSESSION
3. ASSIGNMENT. As additional security, Trustor hereby assigns to Beneficiary: (a) all of the rents, revenues, profits, and income from the Security, any deposits now or hereafter in Trustor’s possession which have been collected with respect to the Secu rity, and any reserve or capital funds now or hereafter held by Trustor with respect to construction or operation of the Security (collectively, the “Rents”); and (b) the right to enter, take possession of, and manage the Security; provided however that Trustor shall have, before an Event of Default, as defined herein, the exclusive right to possess the Security and to collect Re nts and use them in accordance with the Loan Documents. This assignment is intended to be an abso lute and present transfer of Trustor’s interest in existing and future Rents, effective as of the date of this Deed of Trust.
4. ENFORCEMENT. Upon the happening of an Event of Default which remains uncured after expiration of the applicable cure period pursuant to the terms of the Note or other Loan Documents, Beneficiary may, in addition to other rights and remedies permitted by the Note, this Deed of Trust, or applicable law: (a) enter upon, take possession of, and manage the Security, either in person as a mortgagee-in-possession, by agent, or by a receiver appointed by a court, and do any acts which it deems necessary or desirable to preserve the value, marketability or rentability of the Security, (b) collect all Rents, including those past due and unpaid, and apply the same to pay for the costs and expenses of operation of the Security, including reasonable attorneys’ fees, and pay off any indebtedness secured by this Deed of Trust, all in such order as Beneficiary may determine and/or (c) Beneficiary may make, cancel, enforce, and modify leases and rental agreements, obtain and evict tenants, set and modify rent terms, sue for rents due, enter into, modify, or terminate any contracts or agreements, or take any legal action, as it deems necessary 729
3 with respect to the Rents or to development or operation of the Security, subject to the rent restrictions imposed against the Property.
5. APPOINTMENT OF A RECEIVER. In any action to enforce this assignment, Beneficiary may apply for the appointment of a receiver to take possession of the Security and take whatever measures are necessary to preserve and manage the Security for the benefit of Beneficiary and the public interest. Trustor hereby consents to the appointment of a receiver. The receiver shall have all of the authority over the Security that Beneficiary would have if Beneficiary took possession of the Security under this assignment as a mortgagee-in-possession, including the right to collect and apply Rents and the right to complete construction of improvements.
6. NO WAIVER OF POWER OF SALE. The entering upon and taking possession of the Security and the collection of Rents shall not cure or waive any default or notice of default hereunder or invalidate any act done in response to such default or notice of default and, notwithstanding the continuance in possession of the Security or the collection and application of Rents, Beneficiary sha ll be entitled to exercise every right provided for in this Deed of Trust or by law upon occurrence of any Event of Default, including the right to exercise the power of sale.
COMMERCIAL CODE SECURITY AGREEMENT
7. GRANT. This Deed of Trust is intended to be a security agreement and financing statement pursuant to the California Commercial Code for any of the items specified above as part of the Security which under applicable law may be subject to a security interest pu rsuant to the Commercial Code, and Trustor hereby grants Beneficiary a security interest in said items. Beneficiary may file a copy of this Deed of Trust in the real estate records or other appropriate index as a financing statement for any of the items specified as part of the Security. Trustor shall execute and deliver to Beneficiary at Beneficiary’s request any financing statements, as well as extensions, renewals, and amendments thereof, and copies of this instrument in such form as Beneficiary may require to perfect a security interest with respect to said items. Trustor shall pay all costs of filing such financing statements and shall pay all reasonable costs of any reco rd searches for financing statements and re leases. Without the prior written consent of Beneficiary, Trustor shall not create or permit any other security interest in said items. This Deed of Trust constitutes a fixture filing under Sections 9313 and 9402(6) of the California Commercial Code.
8. REMEDIES. Upon Trustor’s breach of any obligation or agreement in the Loan Documents, after expiration of any applicable cure period, Beneficiary shall have the remedies of a secured party under the Commercial Code and at Beneficiary’s option may al so invoke the remedies provided for el sewhere in this Deed of Trust with respect to said items. Beneficiary may proceed against the items of real property and personal property specified above separately or together and in any order whatsoever.
RIGHTS AND OBLIGATIONS OF TRUSTOR
9. PERFORMANCE OF SECURED OBLIGATION. Trustor shall promptly perform each obligation secured by this Deed of Trust in accordance with the Loan Documents.
10. PAYMENT OF PRINCI PAL AND INTEREST. Trustor shall promptly pay when due the principal and any interest due on the indebtedness evidenced by the Note.
11. MAINTENANCE OF THE SECURITY. Trustor shall, at the Trustor’s own expense, maintain and preserve the Security or cause the Security to be maintained and preserved in good condition, in good repair, and in a decent, safe, sanitary, habitable and tenantable condition. Trustor shall not cause or permit any violations of any laws, ordinances, regulations, covenants, conditions, rest rictions, or equitable servitudes as they pertain to improvements, alterations, maintenance or demolition on the Security. Trustor shall not commit or permit waste on or to the Security. Trustor shall not abandon the Security. Beneficiary shall have no responsibility over maintenance of the Security. In the event Trustor fa ils to maintain the Secur ity in accordance with the st andards in this Deed of Trust, Beneficiary and after any applicable cure periods, may, but shall be under no obligation to, make such repairs or replacements as are necessary and provide for payment thereof. Any amount so advanced by Beneficiary, together with interest thereon from the date of such advance at the same rate of interest as specified in the Note (unless payment of such an interest rate would be contrary to applicable law, in which event such sums shall bear interest at the highest 730
4 rate then allowed by applicable law), shall become an ad ditional obligation of Trustor to Beneficiary and shall be secured by this Deed of Trust.
12. INSPECTION OF THE SECURITY. Trustor shall permit Beneficiary to enter and inspect the Security during normal business hours for compliance with these obligations upon at least 24 hours advance notice of such visit by Beneficiary to Trustor or Trustor’s management agent.
13. LIENS, ENCUMBRANCES, AND CHARGES. Trustor shall discharge any lien or encumbrance not approved by Beneficiary in writing that may attain priority over this Deed of Trust, as provided in the Note.
14. DEFENSE AND NOTICE OF CLAIMS AND ACTIONS. Trustor shall appear in and defend, at its own expense, any action or proceeding purporting to affect the Security and/or the rights of Beneficiary. Trustor shall give Beneficiary and Trustee prompt notice in writing of the assertion of any claim, of the filing of any action or proceeding and of any condemnation of fer or action with respect to the Secu rity upon Trustor’s receipt of notice thereof.
15. SUITS TO PROTECT THE SECURITY. Beneficiary shall have power to institute and maintain such suits and proceedings as it may deem expedient (a) to prevent any impairment of the Security or the rights of Beneficiary, (b) to preserve or protect its interest in the Security and in the Rents, and (c) to restrain the enforcement of or compliance with any governmental legislation, regulation, or order, if the enforcement of or compliance with such legislation, regulation, or order would impair the Security or be prejudicial to the interest of Beneficiary.
16. DAMAGE TO SECURITY. Trustor shall give Beneficiary and Trustee prompt notice in writing of any damage to the Security. If any building or improvements erected on the Property is damaged or destroyed by an insurable cause, Trustor shall, at its cost and expense, repair or restore said buildings and improvements consistent with the original plans and specifications if Trustor reas onably determines that such restoration or repair is economically feasible. Such work or re pair shall be commenced within one hundred twenty (120) days after the damage or loss occurs and shall be complete within one (1 ) year thereafter. Subject to Trustor’s election to rebuild, all insurance proceeds collected for such damage or destru ction shall be applied to the cost of such repairs or restoration and, if such insurance proceeds shall be insufficient for such purpose, Trustor shall make up the deficiency.
17. TITLE. Trustor warrants that Trustor lawfully has legal title to the Security without any limitation on the right to encumber other than those limitations set forth in the Loan Documents or other financing documents approved by Lender.
18. GRANTING OF EASEMENTS. Trustor may not grant easements , licenses, rights-of-way or other rights or privileges in the nature of easements with respect to the Security except those required or desirable for installation and maintenance of public utilities including water, gas, electricity, sewer, cable television, telephone, or those required by law.
19. TAXES AND LEVIES. Trustor shall pay prior to delinquency, all taxes, fees, assessments, charges and levies imposed by any public authority or utility company which are or may become a lien affecting the Security.
However, Trustor shall not be required to pay and discharge any such tax, assessment, charge or levy so long as (a) the legality thereof shall be promptly and actively conteste d in good faith and by appropriate proceedings, and (b) Trustor maintains reserves adequate to pay any contested li abilities. In the event that Trustor fails to pay any of the foregoing items, Beneficiary may, but shall be under no obligation to, pay the same, after Beneficiary has notified Trustor of such failure to pay and Trustor fails to fully pay such items within seven (7) business days after receipt of such notice. Any amount so advanced by Beneficiary, together with interest thereon from the date of such advance at the same rate of interest as specified in the Note (unles s payment of such an interest rate would be contrary to applicable law, in which event such sums shall bear interest at the highest rate then allowed by applicable law), shall become an additional obligation of Trustor to Beneficiary and shall be secured by this Deed of Trust.
20. INSURANCE. Trustor shall procure or cause to be procured, and maintain or cause to be maintained, throughout the term of the Note, insurance against loss or damage to any structure constituting any part of the Property by fire and lightning, with extended coverage and vandalism and malicious mischief insurance. Said extended coverage insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, 731
5 aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. Such insurance shall be in an amount equal to the replacement cost (without deduction for depreciation) of all structures constituting any part of the Property, excluding the cost of excavations , of grading and filling and of the land, but in any event, shall be in an amount and in a form sufficient, in the event of total or partial loss, to enable the Trustor to restore the Property to the condition existing before such loss. The Trustor may, in its discretion and with the written consent of Beneficiary, insure the Property under blanket insurance po licies which insure not only the Property but also other properties as long as such blanket insurance policies comply with the requirements of this Section 20. All policies of insurance required by this Section shall provide that all proceeds thereunder shall be payable to the Beneficiary pursuant to a lender’s loss payable endorsement substantially in a form approved by Beneficiary. Each insurance policy required hereunder shall require that the Beneficiary be given thirty (30) days’ notice of any intended cancellation thereof or reduction of the coverage provided thereby. The Trustor shall provide Beneficiary with copies of such policies upon request. In the event Trustor fails to maintain the full insurance coverage required by this Deed of Trust, Beneficiary, after at least seven (7) business days prior notice to Trustor, may, but shall be under no obligation to, take out the required policies of insurance and pay the premiums on such policies. Any amount so advanced by Beneficiary, together with interest thereon from the date of such advance at the same rate of indebtedness as specified in the Note (unless payment of such an interest rate would be contrary to applicable law, in which event such sums shall bear interest at the highest rate then allowed by applicable law), shall become an additional obligation of Trustor to Beneficiary and shall be secured by this Deed of Trust.
21. CONDEMNATION. Subject to the rights of any senior lienholders, all judgments, awards of damages, settlements and compensation made in connection with or in lieu of taking all or any part of or interest in the Security under assertion of the power of eminent domain (“Funds”) are hereby assigned to and shall be paid to Beneficiary. Beneficiary is authorized (but not required) to collect and receive any Funds and is authorized to apply them in whole or in part upon any indebtedness or obligation secured hereby, in such order and manner as Beneficiary shall determine at its sole option. All or any part of the amounts so collected and recovered by Beneficiary may be released to Trustor upon such conditions as Beneficiary may impose for its disposition. Application of all or any part of the Funds collected and received by Beneficiary or the release thereof sha ll not cure or waive any default under this Deed of Trust.
Notwithstanding anything to the contrary set forth herein, Beneficiary shall, prior to the application of the Funds or any portion thereof to the indebtedness or other obligations, apply such portion of the Funds as is reasonable and necessary to repair and preserve the value, marketab ility and rentability of the Security. Trustor shall have the right to rebuild the Property, and to use all available condemnation proceeds therefor, provided that (a) such proceeds are sufficient to keep the Loans in bala nce and rebuild the Property in a manner that provides adequate security to Lender for repayment of the Loans or, if such proceeds are insufficient or such security is inadequate, then Trustor shall have funded any deficiency and/or provided additional security; (b) Lender shall have the right to approve plans and specifications for any major rebuilding and the right to approve disbursements of insurance or condemnation proceeds for rebuilding under a construction escrow or similar arrangement; and (c) no material default then exists under the Loan Documents other than any default which is a direct result of the condemnation.
22. ACCELERATION ON TRANSFER OF SECURITY. In the event that Trustor, without the prior written consent of the Beneficiary, sells, ag rees to sell, transfers, or conveys its interest in the Security or any part thereof or interest therein, Beneficiary may at its option declare all sums secured by this Deed of Trust to be immediately due and payable. This option shall not apply in case of:
A. The grant of a leasehold interest to qualifying households who will occupy units in the Property as provided for under the Loan Documents; or
B. Sale or transfer of fixtures or personal property pursuant to the grant provisions in this Deed of Trust. Consent to one (1) sale or transf er shall not be deemed to be a waiver of the right to require such consent to future or successive transactions.
=
23. RECONVEYANCE BY TRUSTEE. This trust is intended to continue for the entire term of the Loan. Upon written request of Beneficiary stating that all sums secured by this Deed of Trust have been paid and upon 732
6 surrender of this Deed of Trust to Trustee for cancellation and retention, and upon payment by Trustor of Trustee’ reasonable fees, Trustee shall reconvey the Security to Trustor, or to the person or persons legally entitled thereto.
DEFAULT AND REMEDIES
24. EVENTS OF DEFAULT. Any of the events listed in the Note or the Loan Agreement as an Event of Default shall also constitute an Event of Default under this Deed of Trust. Trustor’s limited partners shall have the same notice and cure rights contained in the Loan Agreement.
25. ACCELERATION OF MATURITY. Upon the happening of an Event of Default which has not been cured within the times and in the manner provided in the Note, Benefici ary may declare all sums advanced to Trustor under the Note and this Deed of Trust immediately due and payable.
26. BENEFICIARY’S REMEDIES. Subject to the limitations set forth in the Note and upon the happening of an Event of Default which has not been cured within the times and in the manner provided in the Note, Beneficiary may, in addition to other rights and remedies permitted by the Note, or applicable law, proceed with any or all of the following remedies:
A. Enforce the assignment of rents and right to possession as provided for in this Deed of Trust, and/or seek appointment of a receiver to take over possession of the Security and collect Rents;
B. Enter the Security and take any actions necessa ry in its judgment to complete construction on the Security, either in person or through a receiver appointed by a court;
C. Disburse from the Loans’ proceeds any amount nece ssary to cure any monetary default under this Deed of Trust, or the Note;
D. Commence an action to fo reclose this Deed of Trust pursuant to California Code of Civil Procedure Section 725(a) et seq., as amended, and/or seek appointment of a receiver from a court of competent jurisdiction with the authority to protect Beneficiary’s interests in the Security, including the authority to complete construction of improvements;
E. Deliver to Trustee a written declaration of De fault and demand for sale, and a written Notice of Default and election to cause Trustor’s interest in the Security to be sold and ex ercise its power of sale as provided for below; or
F. Pursue any other rights and remedies allowed at law or in equity.
27. FORECLOSURE BY POWER OF SALE. Should Beneficiary elect to foreclose by exercise of the power of sale contained in this Deed of Trust, Beneficiary shall notify Trustee and shall deposit with Trustee this Deed of Trust (the deposit of which shall be deemed to constitute evidence that the unpaid sums disbursed under the Notes are immediately due and payable), and such rece ipts and evidence of any expenditures made that are additionally secured hereby as Trustee may require.
Upon receipt of such notice from Beneficiary, Trustee shall cause to be recorded, published and delivered to Trustor such notice of default and election to sell as then required by law and by this Deed of Trust. Trustee shall, without demand on Trustor, after lapse of such time as may then be required by law and after recordation of such notice of default and after notice of sale having been given as required by law, sell the Security, at the time and place of sale fixed by it in said notice of sale, whether as a whole or in separate lots or parcels or items as Trustee shall deem expedient and in such order as they may determine unless specified otherwise by Trustor, at public auction to the highest bidder for cash in lawful money of the United St ates payable at the time of sale. Trustee shall deliver to the purchaser its deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matters of facts shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Trustor, Trustee, or Beneficiary, may purchase at the sale.
733
7 Trustee may postpone the sale of all or any portion of the Security by public announcement at such time and place of sale, and from time to time thereafter, and without further notice make such sale at the time fixed by the last postponement, or may, in its discretion, give a new notice of sale.
28. APPLICATION OF SALE PROCEEDS. After deducting all reasonable costs, fees and expenses of Trustee, including costs of evidence of title in connection with such sale, Trustee shall apply the proceeds of sale as follows: first, to the payment of all sums then secure d by this Deed of Trust, in such order and amounts as Beneficiary in its sole discretion determines; and second, the remainder, if any, to the person or persons legally entitled thereto.
29. REMEDIES CUMULATIVE. No right, power or remedy conferred upon or reserved to Beneficiary by this Deed of Trust is intended to be exclusive of any other rights, powers or remedies, but each such right, power and remedy shall be cumulative and concurrent and shall be in addition to any other right, power and remedy given hereunder or now or hereafter existing at law or in equity.
GENERAL PROVISIONS
30. GOVERNING LAW. This Deed of Trust shall be interpreted under and governed by the laws of the State of California, except for those provisions relating to choice of law and those provisions preempted by federal law.
31. STATEMENT OF OBLIGATION. Beneficiary may collect a f ee not to exceed the maximum allowable under applicable law for furnishing a statement of obligations as provided in the California Civil Code.
32. CONSENTS AND APPROVALS. Any consent or approval of Beneficiary required under this Deed of Trust shall not be unreasonably withheld.
33. TIME. Time is of the essence in this Deed of Trust.
34. NOTICES, DEMANDS AND COMMUNICATIONS. Formal notices, demands and communications between Trustor and Beneficiary shall be sufficiently given and shall not be deemed given unless dispatched by registered or certified mail, postage prepaid, return receipt requested, or delivered personally, to the principal offices of Trustor and Beneficiary as follows:
BENEFICIARY: City of Oxnard
435 S. D Street
Oxnard, CA 93030
Attn: Housing Director
TRUSTOR: Mercy House Living Centers
203 N Golden Circle Drive, 3rd Floor
Santa Ana, CA 92705
Attn: Larry Haynes
Such written notices, demands and communications may be sent in the same manner to such other addresses as the affected Party may from time to time designate by mail as provided in this Section 34. Delivery shall be deemed to have occurred at the time indicated on the receipt for delivery or refusal of delivery.
35. BINDING UPON SUCCESSORS. All provisions of this Deed of Trust shall be binding upon and inure to the benefit of the successors-in-interest, transferees, and assigns of Trustor, Trustee, and Beneficiary.
36. WAIVER. Any waiver by Beneficiary of any obligation of Trustor in this Deed of Trust must be in writing. No waiver will be implied from any delay or failure by Beneficiary to take action on any breach or default of Trustor or to pursue any remedy allowed under the Deed of Trust or applicable law. Any extension of time granted to Trustor to perform any obligation under this Deed of Tr ust shall not operate as a waiv er or release Trustor from any of its obligations under this Deed of Trust. Consent by Beneficiary to any act or omission by Trustor shall not be 734
8 construed to be a consent to any other or subsequent act or omission or to waive the requirement for Beneficiary’s written consent to future waivers.
37. AMENDMENTS AND MODIFICATIONS. Any amendments or modifications to this Deed of Trust must be in writing, and shall be made only if mutually agreed upon by Beneficiary and Trustor.
38. NOTE CONTROLS. If there is any contradiction between this instrument and the Note, the terms of the Note shall control, except that Trustor shall have no defense or claim that this instrument does not establish a valid lien on the Property or the Security.
39. DEFINITIONS. Capitalized terms not otherwise defined in this Deed of Trust shall have the same meaning as defined terms in the Loan Agreement.
40. PROOFS OF CLAIM. In the case of any receivership, in solvency, bankruptcy, reorganization, arrangement, adjustment, recomposition or other proceedings affecting Trustor, its creditors or its property, Trustee, to the extent permitted by law, shall be entitled to file such proofs of claim and other documents as may be necessary or advisable in order to have the claims of Beneficiary allowed in such proceedings and for any additional amount which may become due and payable by Trustor hereunder after such date.
41. SEVERABILITY. Every provision of this Deed of Trust is intended to be severable. If any term or provision of this Deed of Trust is declared to be illegal, invalid, or unenforceable by a court of competent jurisdiction, the legality, validity, and en forceability of the remaining provisions shall not be affected. If the lien of this Deed of Trust is invalid or unenforceable as to any part of the debt, or if the lien is invalid or unenforceable as to any part of the Security, the unsecured or partially secured portion of the debt and all payments made on the debt (whether voluntary or under foreclosure or other enforcement action or procedure) shall be considered to have been first paid or applied to the payment of that portion of the debt which is not secured or partially secured by the lien of this Deed of Trust.
42. SUBSTITUTION OF TRUSTEE. Beneficiary may from time to time appoint another trustee to act in the place and instead of Trustee or any successor. Upon such appointment and without conveyance, the successor trustee shall be vested with all title, powers, and duties conferred upon Trustee.
43. ACCEPTANCE BY TRUSTEE. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made public record as provided by law. Except as otherwise provided by law, the Trustee is not obligated to notify any party hereto of pending sale under this Deed of Trust or of any action or proceeding in which Trustor, Beneficiary, or Trustee shall be a party unless brought by Trustee.
44. SUBORDINATION. The lien of this Deed of Trust and the rights and interest of Beneficiary hereunder are and shall remain subordinate to the lien of th at certain Deed of Trust, Se curity Agreement, Absolute Assignment of Leases and Rents and Fixture Filing executed by Trustor for the benefit of , recorded in the Official Record s of the County of Ventura, California concurrently herewith.
45. NONRECOURSE OBLIGATION. Except as expressly provided in the second paragraph of this section, the Trustor, and the Trustor’s officers, directors, employees, partners and agents shall not have any direct or indirect personal liability for payment of the principal of, or interest on, the Note or the performance of the covenants of the Trustor under the Deed of Trust securing the Note. Th e sole recourse of the Bene ficiary with respect to the principal of, or interest on, the Note shall be to the property securing the indebt edness evidenced by the Note.
However, that nothing contained in the foregoing limitation of liability shall (a) limit or impair the enforcement against all such security for the Note of all the rights and remedies of the Beneficiary, or (b) be deemed in any way to impair the right of the Beneficiary to assert the unpaid principal amount of the Note as demand for money within the meaning and intendment of Section 431.70 of the California Code of Civil Procedure or any successor provision thereto.
The foregoing limitation of liability is intended to apply only to the obligation for the repayment of the principal of, and payment of interest on the Note, except as hereafter set forth; nothing contained herein is intended to relieve the Trustor of personal liability for (a) fraud or willful misrepresentation; (b) the failure to pay taxes, assessments or other 735
9 charges (which are not contested by Trustor in good faith) which may create liens on the Property that are payable or applicable prior to any foreclosure under the Deed of Trust (to the full extent of such taxes, assessments or other charges); (c) the fair market value of any personal property or fixtures removed or disposed of by Trustor other than in accordance with the Deed of Trust; (d) the misapplication of any proceeds under any insurance policies or awards resulting from condemnation or the exercise of the power of eminent domain or by reason of damage, loss or destruction to any portion of the Property; and € payment to the Beneficiary of any rental income or other income arising with respect to the Property received by the Trustor after the Beneficiary has given notice to the Trustor of the occurrence of an Event of Default, subject to the rights of any lender providing a loan secured by the Property to which the Lender has subordinated the Deed of Trust.
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10 IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and year first above written.
TRUSTOR:
Mercy House Living Centers, a California nonprofit public benefit corporation
By: _____________________________
Larry Haynes, President/CEO
Signature must be notarized
737
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
STATE OF CALIFORNIA )
) ss.
COUNTY OF ____________ )
On _______________________, before me, ______________________, Notary Public, personally appeared _____________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.