PISMO BEACH CITY COUNCIL STAFF REPORT
Agenda Item #9.H
SUBJECT/TITLE:
SETTLEMENT AGREEMENT WITH PISMO BEACH SELF STORAGE, LP
RECOMMENDATION:
Adopt a Resolution approving a Settlement Agreement with Pismo Beach Self Storage, LP, and authorizing the City Manager to execute the Agreement on behalf of the City.
BACKGROUND:
In 2019, Pismo Beach Self-Storage, L.P. (PBSS) brought a lawsuit against the City to challenge the City’s adoption of Resolution R-2018-030, which set the development impact fees payable by PBSS for its self-storage facility on Five Cities Drive. PBSS objected to the fees imposed on its project by the City’s conditions of approval, so PBSS paid for a new nexus study to determine impact fees specifically for self-storage uses.
The City’s prior impact fee study did not have a specific category for self-storage uses, and the prior fees were imposed under the closest analogue, retail/office use. The City Council adopted the new impact fee study with Resolution R-2018-030, establishing impact fees for self-storage land uses. PBSS did not agree with those fees, either. PBSS filed suit in San Luis Obispo Superior Court, successfully challenging the impact fees via a petition for a writ of mandate. The City thereafter refunded $889,254.67 to PBSS for its development impact fees, plus interest.
Following the City’s payment of the judgment in the first lawsuit, a new dispute arose between PBSS and the City over the impact fees, and the building permit and inspection fees PBSS owed for Phase 1 of the self-storage project. PBSS filed a new lawsuit against the City contesting PBSS’s obligation to pay any fees to the City for Phase 1. On September 5, 2023, PBSS and the City engaged in a voluntary mediation before the Honorable Martin Tangeman, Retired Justice of the California Court of Appeal, at which time the parties agreed to a settlement framework that involves PBSS paying the City $400,000 upon execution of a settlement agreement. The settlement agreement also provides that PBSS will pay the City $441,000 in impact fees and other fees for a proposed modification to Phase 2 of the project. The modification would involve changing the approved use from industrial condominiums to recreational vehicle storage in Phase
2. There would also be a change from retail use to additional self-storage use in Phase
3. PBSS would be required to pay impact fees for self-storage use, indoor water use only and normal City building permit and inspection fees for Phase 3. Finally, the settlement agreement provides that the City will process a development agreement for the project to allow the changes to Phases 2 and 3. PBSS would then process Phases 2 and 3 of the project through the City’s normal development review process.
The proposed settlement would end several years of litigation over the project. It would also provide certainty about the nature of the remaining development on the property, as well as the impact fees that PBSS would be obligated to pay for its development on Phases 2 and 3.
Council Agenda 10-17-2023 9.H-1
Council Agenda 10-17-2023 9.H-2
Conclusion and Recommendation
Staff recommends that the Council adopt a Resolution (Attachment 1) approving the settlement agreement (Attachment 1.A) and authorizing the City Manager to execute the agreement on behalf of the City.
FISCAL IMPACT:
The fiscal impact of adopting the attached Resolution is an additional $400,000 of revenue in the FY 2024 General Fund, and $441,000 to be distributed into various impact fee accounts for Phase 2 of the project. The amount of impact fees and other fees payable for Phase 3 will be dependent on the size of the self-storage facility proposed by PBSS and the timing of development.
ALTERNATIVES:
1.Do not adopt the resolution; provide direction to staff.
2.Modify as appropriate and approve staff’s recommendations.
ATTACHMENTS:
1. Resolution
1.A. Exhibit A to Resolution: Settlement Agreement
Meeting Date: October 17, 2023 Submitted by:
Dave Fleishman, City Attorney
City Manager Approval:
RESOLUTION NO. R-2023-XXX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PISMO BEACH,
CALIFORNIA APPROVING A SETTLEMENT AGREEMENT WITH PISMO BEACH
SELF-STORAGE, LP, AND AUTHORIZING THE CITY MANAGER TO EXECUTE THE
AGREEMENT ON BEHALF OF THE CITY
WHEREAS, in 2019, Pismo Beach Self-Storage, LP (PBSS) brought a lawsuit against the City of Pismo Beach to challenge the City’s adoption of Resolution R-2018-030, which set the development impact fees payable by PBSS for its self-storage facility on Five Cities Drive; and
WHEREAS, PBSS successfully challenged the impact fees via a petition for a writ of mandate; and
WHEREAS, the City thereafter refunded $889,254.67 to PBSS for its development impact fees, plus interest; and
WHEREAS, following the City’s payment of the judgment in the first lawsuit, a new dispute arose between PBSS and the City over the impact fees, and the building permit and inspection fees PBSS owed for Phase 1 of the self-storage project; and WHEREAS, PBSS filed a new lawsuit against the City contesting PBSS’s obligation to pay additional development impact fees to City for Phase 1; and WHEREAS, on September 5, 2023, PBSS and the City engaged in a voluntary mediation before the Honorable Martin Tangeman, Retired Justice of the California Court of Appeal, at which time the parties agreed to a settlement framework; and WHEREAS, the City and PBSS have agreed to resolve the lawsuit through a settlement agreement and by processing a development agreement to allow PBSS to develop its property as recreational vehicle parking and additional self-storage facilities.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Pismo Beach hereby approves the Settlement Agreement substantially in the form attached hereto as Exhibit A, and authorizes the City Manager to execute the agreement on behalf of the City.
UPON MOTION OF Council Member , seconded by Council Member , the foregoing resolution was adopted by the City Council of the City of Pismo Beach this 17th day of October 2023, by the following vote:
AYES:
NOES:
ABSENT:
Council Agenda 10-17-2023 9.H-3
Attachment 1
ABSTAIN:
RECUSED:
Approved: Attest:
________________________ ________________________
Ed Waage, Mayor Erica Inderlied, City Clerk
Council Agenda 10-17-2023 9.H-4
Attachment 1
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release (“Agreement”) is entered into as of this ____ day of October, 2023 (“Effective Date”) and is made by and between Pismo Beach Self-Storage, LP (“PBSS”), and the City of Pismo Beach, a California general law city (the “City”). PBSS and the City are hereinafter referred to individually as a “Party,” and collectively as the “Parties.”
RECITALS
WHEREAS, PBSS is the owner of real property located at 100 Five Cities Drive within the City (the “Property”).
WHEREAS, in 2008, PBSS applied for and received land use approvals to construct a three-phase development project that included a self-storage facility (“Phase 1”), industrial condominiums (“Phase 2”) and a retail site (“Phase 3”).
WHEREAS, PBSS has, as of the date of this Agreement, constructed Phase 1 on the Property, but to date, PBSS has not constructed either Phase 2 or Phase 3.
WHEREAS, subsequent to the 2008 land use approvals, a dispute arose between the Parties as to the impact fees owed by PBSS for development of Phase 1.
WHEREAS, PBSS subsequently filed litigation against City in San Luis Obispo Superior Court under Case No. 18CV0535, alleging various claims against City over City’s application of development impact fees to Phase 1 (the “First Lawsuit”).
WHEREAS, PBSS obtained judgement in its favor in the First Lawsuit, and City refunded to PBSS $889,254.67, plus interest.
WHEREAS, following City’s payment of the judgment in the First Lawsuit, a new dispute arose between the Parties over the impact fees, and building permit and inspection fees PBSS owed for Phase 1.
WHEREAS, PBSS filed a new lawsuit against City in San Luis Obispo Superior Court under Case No. 23CV0201, contesting PBSS’s obligation to pay the newly assessed development impact fees to City for Phase 1 (the “Second Lawsuit”), and the City’s refusal to consider PBSS’s requested modification of Phase 2. Together, the First Lawsuit and the Second Lawsuit and any claims that could have been raised therein are referred to as the “Dispute”.
WHEREAS, for Phase 2, PBSS asserted that it intended to revert back to the historical use of RV storage and began preparatory work on Phase 2 for that purpose, but on April 26, 2022, the City issued a stop work order on those improvements.
Council Agenda 10-17-2023 9.H-5
Attachment 1.A
WHEREAS, the City requested, and PBSS submitted, an application for modification of the approved use of Phase 2 from industrial buildings to RV storage, but City refused to process the application pursuant to Pismo Beach Municipal Code Section
17.133.060.
WHEREAS, PBSS and the City have communicated through legal counsel during the period following the filing of the Second Lawsuit, and the Parties engaged in a voluntary mediation on September 5, 2023 before the Honorable Martin Tangeman, Retired Justice of the California Court of Appeal.
WHEREAS, during the mediation, the Parties reached a settlement wherein the Parties agreed that PBSS will pay City a total of $400,000 in exchange for City’s agreement to process and adopt a development agreement, as well as other consideration between the Parties, as more fully set forth herein, to resolve the Dispute.
WHEREAS, the Parties now desire to memorialize the terms of their settlement by this Agreement and to resolve all claims which may exist between them arising out of and relating to the Dispute.
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein by reference, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as follows:
AGREEMENT
1.Payment of the Settlement Amount. Within thirty (30) calendar days of the Effective Date, PBSS shall pay to City in one lump sum the amount of Four Hundred Thousand Dollars ($400,000.00). Upon receipt of this payment and confirmation of the validity of the funds by City’s bank, City shall confirm to PBSS in writing that PBSS’s obligations to pay impact fees, building permit and inspection fees, and other related fees ordinarily due and payable at the time a building permit is obtained, are fully satisfied for Phase 1. PBSS shall also file an acknowledgment of satisfaction of judgment in full in the First Lawsuit.
2.Development Agreement.
a.As additional consideration for this Agreement, City agrees to accept and process PBSS’s application for a development agreement (“Development Agreement”) to modify the approvals for Phase 2 and Phase 3, to allow for recreational vehicle parking with no outdoor water use on the portion of the property previously approved for industrial condominiums (“New Phase 2”), and to allow for an additional self-storage facility not to exceed forty thousand square feet on the portion of the property previously approved for retail use (“New Phase 3”).
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Attachment 1.A
b. The Development Agreement shall set forth the duration of the Development Agreement, the permitted uses for the portion of the Property subject to the Development Agreement, the density or intensity of the permitted uses, site plans, elevations, floor plans, provisions for reservation or dedication of land for public purposes, if any, and any other provisions required by state law. c.The Development Agreement shall also state that PBSS’s total obligation to City for building permit, inspection, development impact fees, and any other regularly assessed City fees for New Phase 2 shall be four hundred forty-one thousand dollars ($441,000.00), payable in one lump sum at the time the last discretionary permit for New Phase 2 is issued to PBSS by City. d. The Development Agreement shall also state that PBSS shall have six months after the City’s issuance of the final discretionary permits for New Phase 3 to obtain building permits with development impact fees for New Phase 3 fixed at six thousand seven hundred sixty-one dollars ($6,761.00) per one thousand square feet of self-storage development or portion thereof with no outdoor water use. Thereafter, the impact fees applicable to New Phase 3 shall be annually increased by a cost escalator equal to the Consumer Price Index for the Los Angeles-Long Beach-Anaheim area, all urban consumers, all items (CPI-U) for the month most recently published preceding the building permit issuance date over the same month in the preceding year(s). PBSS’s obligation to City for building permit and inspection fees for New Phase 3 shall be those fees in effect at the time building permits are issued for New Phase 3. e.Not later than ten days after the effective date of the Development Agreement, PBSS shall file a request for dismissal, with prejudice, of the entire action in the Second Lawsuit.
f.The Parties agree that, notwithstanding the fact that the Property is located in the Coastal Zone and is therefore not subject to Chapter 17.48 of the Pismo Beach Municipal Code, the Development Agreement shall be processed using the procedures set forth in Chapter 17.48. PBSS shall not be required to pay a processing fee for submitting the Development Agreement application pursuant to Section 17.48.020(C). All other requirements under the City’s Coastal Zoning Code, Local Coastal Plan and state law shall otherwise be applicable to approvals for New Phase 2 and New Phase 3.
3.Release by the City. The City hereby and forever releases PBSS, and its respective insurers, attorneys, successors, assigns, heirs, transferees, agents, principals, officers, directors, employees, shareholders, members, co-venturers, partners, affiliates, subsidiaries, and representatives from any and all claims, demands, damages, debts, Council Agenda 10-17-2023 9.H-7
Attachment 1.A
liabilities, accounts, obligations, costs, expenses, liens, and judgments of every kind and nature, whether known or unknown, suspected or unsuspected, relating to or otherwise arising out of the relating to or otherwise arising out of the First Lawsuit regarding Phase 1 only pending approval of the Development Agreement at which time the Dispute is deemed released.
4. Release by PBSS. PBSS hereby and forever releases the City, and its respective insurers, attorneys, successors, assigns, heirs, transferees, agents, principals, elected officials, officers, directors, employees, and representatives from any and all claims, demands, damages, debts, liabilities, accounts, obligations, costs, expenses, liens, and judgments of every kind and nature, whether known or unknown, suspected or unsuspected, relating to or otherwise arising out of the First Lawsuit regarding Phase 1 only pending approval of the Development Agreement at which time the Dispute is deemed released.
5. Waiver of Civil Code Section 1542. This provision shall become effective upon approval of the Development Agreement contemplated by this Agreement. It is understood and agreed that this is a full and final release applying to all known, unknown, anticipated and unanticipated injuries, losses, expenses and damages arising out of or related to the relating to or otherwise arising out of the Dispute and is intended to be as broad as possible as to any and all claims that the City may have against PBSS relating to the Dispute and any and all claims PBSS may have against the City relating to the Dispute, whether specifically set forth herein or not. The Parties understand California Civil Code Section 1542, and expressly waive its provisions, which provides as follows:
Section 1542. General Release - Claims Extinguished.
A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.
The Parties acknowledge and agree that the foregoing waiver of the provisions of Section 1542 of the California Civil Code was separately bargained for.
6. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective grantees, transferees, successors, assigns, employees, and agents of each Party to this Agreement to the extent permitted by law.
7. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument.
Council Agenda 10-17-2023 9.H-8
Attachment 1.A
8.Severability. The provisions of this Agreement are severable, and if any one or more provisions may be determined judicially unenforceable, in whole or in part, the remaining provisions and any partially unenforceable provisions, to the extent enforceable, shall nevertheless be binding upon and enforceable against the Parties hereto to the extent they may reasonably be enforced apart from that which is invalidated.
9.Attorney’s Fees and Costs. Each Party shall bear its own attorney’s fees and costs arising from the Dispute. If any claim, controversy, or action arises out of or relates to this Agreement following the Effective Date, the prevailing party in such action shall be entitled to recover reasonable attorneys’ fees, costs, and expenses in addition to all other appropriate relief.
10.Controlling Law and Venue. This Agreement shall be governed and construed in accordance with the laws of the State of California. Venue for any action commenced regarding the terms, interpretation, or enforcement of this Agreement shall be in the Superior Court for the County of San Luis Obispo, California.
11.No Amendment. This Agreement may not be altered, amended, modified, or otherwise changed in any respect, except by a writing signed by all Parties to this Agreement.
12.Authorizations. The undersigned, by their signatures, represent and warrant that they are authorized agents of their respective entities and are authorized to execute this Agreement.
13.No Admission of Liability. It is expressly understood and agreed that this Agreement is being made solely for the purpose of avoiding the expense and inconvenience of further litigation and it is not to be construed as an admission on the part of any Party or of any unlawful or wrongful conduct, or of any liability to any other Party as alleged in the Dispute or otherwise, all of which is expressly denied.
14.Integrated Agreement. This Agreement contains the entire Agreement and understanding between and among the Parties concerning the subject matter of this Agreement and supersedes and replaces all prior negotiations, proposed agreements and agreements, written or oral concerning the subject matter of this Agreement. All Parties acknowledge that no other Party nor any agent or attorney of such Party has made any promise, representation or warranty, express or implied, which is not contained in this Agreement, to induce any other Party into executing this Agreement. All Parties herein further acknowledge that they are not executing this Agreement in reliance on any promise, representation or warranty not contained in this Agreement.
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Attachment 1.A
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date set forth above.
PISMO BEACH SELF-STORAGE, LP
By:
_________________________________
William Kendall, Partner
APPROVED AS TO FORM
By:
_________________________________
Michelle L. Gearhart
Adamski, Moroski, Madden, Cumberland
& Green
Counsel for Pismo Beach Self-Storage,
LP
CITY OF PISMO BEACH
By:
___________________________________
By: Jorge E. Garcia, City Manager
APPROVED AS TO FORM
By:
_________________________________
Dave Fleishman, City Attorney
Richards Watson & Gershon
Counsel for City
Council Agenda 10-17-2023 9.H-10
Attachment 1.A