Item 18 2023-00739 Appropriation of Funds for Redemption of Delta Shores Impact Fee Credits

City of Sacramento
City Council - 5PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2023-00739 6/20/2023 Consent Item 18.

Appropriation of Funds for Redemption of Delta Shores Impact Fee Credits File ID: 2023-00739
Location: Districts 7, Represented by Councilmember Jennings; and District 8, Represented by Mayor Pro Tem Vang and Mayor Steinberg
Recommendation: 1) Adopt a Resolution a) authorizing the City Manager or the City Manager’s designee to increase the revenue and expenditure budgets by $270,198 for the Delta Shores MYOP Project (I06132130) in the Delta Shores Fee Fund (3217); and b) authorizing the City Manager or the City Manager’s designee to redeem Delta Shores Impact Fee credits in accordance with the amounts stated in Exhibit A; 2) Pass a Motion: a) approving the attached Waiver and Release Agreement as a standard-form agreement for the redemption of Delta Shores Impact Fee credits in cash; and b) authorizing the City Manager or the City Manager’s designee to sign this Agreement.

Contact: Jessica Steinhauer, Senior Development Project Manager, (916) 808-8243, [email protected]; Sheri Smith, Special Districts Manager, (916) 808-7204, [email protected], Department of Finance
Presenter: None
Attachments:
1-Description/Analysis
2-Resolution
3-Exhibit A
4-Waiver & Release Agreement
Description/Analysis
Issue Detail: As required by City Code Chapter 18.56 and the Delta Shores Finance Plan, the City collects the Delta Shores Impact Fee (“DS Fee”) for each Delta Shores building permit for the purpose of constructing or reimbursing developers that construct or advance-fund construction of the public infrastructure and facilities needed to serve the Delta Shores Planned Unit Development Project and the Stone Boswell Sub-Area Project. There are several components of the Delta Shores

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File ID: 2023-00739 6/20/2023 Consent Item 18.

Impact Fee, including the Regional Infrastructure, Backbone Infrastructure, and Public Facilities components.

In 2020, the City and M&H executed the Acquisition, Reimbursement, and Credit Agreement for Construction of Delta Shores Public Infrastructure, designated as City Agreement No. 2020-2502, dated August 18, 2020 (”ARC Agreement”). Per the ARC Agreement, (1) M&H agreed to construct or advance-fund specified regional and backbone infrastructure and public facilities included in the DS Fee program (2) the City agreed to acquire the improvements from M&H; and (3) the City agreed to reimburse M&H for the eligible costs of the improvements by providing credits against, and cash reimbursement from, the DS Fee in accordance with Chapter 18.56, article X, of the Sacramento City Code and the ARC Agreement.

Section 4 of the ARC Agreement authorizes M&H to assign the fee credits issued under the ARC Agreement to any person or entity by entering into a written assignment agreement, approved by the City, by which the assignee agrees to be subject to the ARC Agreement with respect to the fee credits. Subsequently, M&H entered into written agreements designated as City Agreement No. 2020 -3635 and City Agreement No. 2022-0650 which assigned a portion of M&H’s fee credits to Kaiser Foundation Health Plan, Inc. (“Kaiser”), and DS Shopping Center, LLC (“DS”).

The fee Credits that M&H retains and the fee credits that it assigns have the same redemption priority, per Section 5 of the ARC Agreement, which requires that the City to redeem credits in the order in which each Acquisition, Reimbursement, and Credit Agreement is signed. If the funds then available in the Delta Shores Impact Fee accounts are not sufficient to redeem all fee credits of the same priority, then redemption of the tendered fee credits will be pro rata based on each Developer’s credit balance as of April 1, 2023.

Approximately $270,000 in infrastructure impact fee revenues have been collected by the City and need to be appropriated for redemption of infrastructure fee credits. The recommended actions will authorize the redemption of M&H, Kaiser, and DS infrastructure fee credits in accordance with the ARC Agreement as follows:

Developer
Delta Shores
Regional
Infrastructure Fee
Credits Redemption
Allocation Amount
Delta Shores
Backbone
Infrastructure Fee
Credits Redemption
Allocation Amount
Payments to
Developer
M & H Realty Partners VI, LP 116,398.20$ 73,205.68$ 189,603.88$ Kaiser Foundation Health Plan, Inc. 30,593.48$ 44,461.92$ 75,055.39$ DS Shopping Center, LLC 2,248.20$ 3,289.92$ 5,538.13$ Total 149,239.88$ 120,957.52$ 270,197.40$

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File ID: 2023-00739 6/20/2023 Consent Item 18.

The ARC Agreement requires the City to offer impact fee credit redemption bi-annually if there is cash in the fee fund to do so. As residential development in Delta Shores is increasing, staff expects regular redemption of Delta Shores impact fee credits in the future. Approval of the standard-form Waiver and Release Agreement, attached to this staff report, and City Manager signature authorization will ensure that both the City and credit holders consent to the amount of redemption of Delta Shore Impact Fee credits in cash.

Policy Considerations: The recommendation is consistent with the ARC Agreement and will provide for the distribution of Delta Shores Impact Fee revenues, collected to date, to redeem M&H, Kaiser, and DS in cash for their infrastructure fee credits. The Delta Shores Impact Fee revenues may not be used for the reimbursement or redemption of fee credits unless appropriated by the City Council for that purpose (see City Charter section116).

Economic Impacts: Not applicable
Environmental Considerations:

California Environmental Quality Act (CEQA): Under the CEQA Guidelines, continuing administrative activities do not constitute a project and are therefore exempt from review (14 Cal.

Code Regs. §15378(b)(2)).

The City prepared an environmental impact report (“EIR”) that evaluated the environmental effects of the Delta Shores project (P06-197). The City Council certified the EIR on January 13, 2009 (Resolution No. 2009-030), and the Planning and Design Commission later certified the EIR and an addendum for the commercial-development portion of the Delta Shores project (P14-025) on April 16, 2015. The Stone-Boswell area will be evaluated when a formal project application is submitted to the City, and at that time the impacts related to the project and its infrastructure will be analyzed.

Approval of the redemption of fee credits and Waiver and Release Agreement is not subject to further review because the improvements subject to fee credits and potential redemption were identified in the DS Fee and addressed in the EIR and related addendum.

Sustainability: Not applicable
Commission/Committee Action: Not applicable
Rationale for Recommendation: Appropriating funds from Fund 3217 will allow M&H, Kaiser, and DS to redeem Delta Shores Impact Fee credits in accordance with the ARC Agreement for advance funding a portion of the construction of regional and backbone infrastructure. The recommended actions are consistent with the City Code Chapter 18.56, Article X.

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File ID: 2023-00739 6/20/2023 Consent Item 18.

Financial Considerations: The Delta Shores MYOP Project (I06321700) budget needs to be increased by $270,198 in the Delta Shores Fee Fund (Fund 3217) to provide for the Delta Shores infrastructure fee credits redemption authorized under the ARC Agreement. There are adequate deposits available to increase the revenue budget in the project by the same amount.

Local Business Enterprise (LBE): Not applicable.

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RESOLUTION NO. 2023-
Adopted by the Sacramento City Council

Resolution Appropriating Funds for Redemption of Delta Shores Impact Fee Credits

BACKGROUND

A. In 2020, the City and M&H executed the Acquisition, Reimbursement, and Credit Agreement for Construction of Delta Shores Public Infrastructure, designated as City Agreement No. 2020-2502, dated August 18, 2020 (“ARC Agreement”). Per the ARC Agreement, (1) M&H agreed to construct or advance-fund specified regional and backbone infrastructure and public facilities included in the DS Fee program (2) the City agreed to acquire the improvements from M&H; and (3) the City agreed to reimburse M&H for the eligible costs of the improvements by providing credits against, and cash reimbursement from, the DS Fee in accordance with Chapter 18.56, article X, of the Sacramento City Code and the ARC Agreement.

B. The City has confirmed that M&H constructed the regional infrastructure, certain backbone infrastructure, and public facilities as required by the ARC Agreement and is entitled to redemption of fee credits for those improvements.

C. Section 4 of the ARC Agreement authorizes M&H to assign the fee credits issued under the ARC Agreement to any person or entity by entering into a written assignment agreement, approved by the City, by which the assignee agrees to be subject to the ARC Agreement with respect to the fee credits. M&H therefore entered into written agreements designated as City Agreement No. 2020-3635 and City Agreement No. 2022-0650 and assigned a portion of M&H’s fee credits to Kaiser Foundation Health Plan, Inc., and to DS Shopping Center, LLC.

D. The fee Credits that M&H retains and the fee credits that it assigns have the same redemption priority, per Section 5 of the ARC Agreement which is determined by the effective date of the ARC Agreement. The City must redeem credits in the order in which each Acquisition, Reimbursement, and Credit Agreement is signed.

If the funds then available in the Delta Shores Impact Fee accounts are not sufficient to redeem all fee credits of the same priority, then redemption of the tendered fee credits will be pro rata based on each Developers credit balance as of April 1, 2023.

E. Since July 2022, the City has collected Delta Shores Impact Fee revenues totaling $270,197.40 that can be used to redeem Delta Shores Impact Fee credits in cash.

BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:

Section 1. The City Council finds that background statements A through E are true and correct.

Section 2. The City Manager or the City Manager’s designee is hereby authorized to increase the revenue and expenditure budget in the Delta Shores MYOP (I06132130) project in the Delta Shores Fee Fund (Fund 3217) by $270,198.

Section 3. The City Manager or the City Manager’s designee is hereby authorized to redeem Delta Shores Impact Fee credits in accordance with the amounts stated in Exhibit A attached hereto.

Section 4. Exhibit A is part of the resolution.

Table of Contents:

Exhibit A – Delta Shores Impact Fee Credit Redemption Amounts

Exhibit A

Delta Shores Impact Fee Credit Redemption Amounts

This Waiver & Release Agreement, dated [ ], for reference only, is between the CITY OF SACRAMENTO (the “City”), a California municipal corporation and charter city; and [ ], a [ ] (the “Credit Holder”).

Background
A. Credit Holder is the owner and developer of property subject to the Delta Shores Impact Fee (the “Fee”). In 2019, the Sacramento City Council created Article X in Chapter 18.56 of the Sacramento City Code to establish the Fee. Also in 2019, the City Council set the amount of the Fee by adopting Resolution No. 2019-0378. Article X of Chapter 18.56 authorizes the City to issue credits against the Fee (“Credits”) to developers that construct or advance fund the construction of the public infrastructure and facilities needed to serve the Delta Shores sub-area and Stone Boswell sub-area (as defined in City Code section

18.56.1010). The Fee is imposed on all parcels located within the Delta Shores and Stone Boswell sub-areas. Credits may be used to offset the Fee owed, or the City, in its discretion, may redeem the Credits for cash using revenues generated by the Fee.

B. Developers who construct or advance funds for the construction of the applicable public infrastructure and facilities enter into an Acquisition, Reimbursement, and Credit Agreement with the City that identifies the public infrastructure or facilities constructed and specifies the maximum amount of Credits that may be issued to that developer for the constructed projects.

C. Credit Holder is the lawful owner of Credits issued under the Acquisition, Reimbursement, and Credit Agreement dated [ ], and designated as City Agreement No. [ ] (the “Reimbursement Agreement”). The total value of the Credits issued to Credit Holder as of [ ], is $[ ].

D. Section 4.5(A) of the Reimbursement Agreement allows for Credit Holder’s tender of Credits to the City for redemption in cash. On [ ], Credit Holder tendered Credits in the amount of $[ ] to City for redemption. The City has decided, in its discretion, to use the revenues generated by the Fee as of [ ], to redeem Credits, including those owned by Credit Holder. The City’s redemption of Credit Holder’s Credits will therefore be made according to the terms and conditions of this Agreement.

With these background facts in mind, the parties agree as follows:

1. City’s Redemption of Credits. The City shall pay $[ ] to the Credit Holder, by check, within 45 days after the effective date of this agreement (which is specified in Section 7 below).

This amount represents redemption by the City of a portion of the Credits issued under the Reimbursement Agreement.

2. Credit Holder’s Release of Liability. The following provisions are effective when the City has fully performed its obligation under Section 1:

Waiver & Release for Delta Shores Impact Fee Program | Page 2 of 4

(a) Release. Credit Holder unconditionally and forever releases and discharges the City and the City’s elected officials, officers, employees, and agents from all debts, claims, damages, and causes of action of any kind that pertain to, arise out of, or are in any way connected with, the City’s obligations under the Reimbursement Agreement. This release and discharge is to be broadly interpreted. It covers all acts, omissions, transactions, and events that relate to the City’s obligations under the Reimbursement Agreement to reimburse Credit Holder for the improvements transferred under that agreement. It also includes any claim by the Credit Holder for attorneys’ fees, penalties, interest, and costs in any way connected with reimbursement for the improvements transferred under the Reimbursement Agreement. This release and discharge—
(1) applies not just to Credit Holder but also to all persons and entities claiming by, through, under, or in concert with Credit Holder; and
(2) covers all claims, rights, liabilities, demands, obligations, duties, promises, costs, expenses, damages, and other losses or rights of any kind—past, present, and future—whatever the theory of recovery, and whether known or unknown, patent or latent, suspected or unsuspected, fixed or contingent, or matured or un- matured.
(b) Waiver of Civil Code Section 1542. The Credit Holder waives all rights and benefits that it has, and all rights and benefits that any person or entity claiming by, through, under, or in concert with it may have, under California Civil Code section 1542, which provides as follows:

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.

This release under Civil Code section 1542 applies only to the claims the Credit Holder may have concerning reimbursement for the improvements transferred under the Reimbursement Agreement.
(c) Future Claims. The Credit Holder acknowledges that after it enters into this agreement it may discover unknown or unsuspected claims or facts that are in addition to, or different from, the facts and claims it intends hereby to release fully, finally, and forever. The Credit Holder further acknowledges that those unknown or unsuspected facts and claims are covered by the release in Section 2(a) and the waiver in Section 2(b) to the extent they pertain to, or arise out of, any acts, omissions, transactions, or events that relate to any agreement or understanding the City and Credit Holder may have concerning reimbursement for the improvements transferred under the Reimbursement Agreement.

Waiver & Release for Delta Shores Impact Fee Program | Page 3 of 4

3. Binding Effect. This agreement binds and inures to the benefit of the parties’ successors and assigns.

4. Severability. If a court of with jurisdiction rules that any provision of this agreement is invalid, unenforceable, or contrary to law or public policy, then the parties want the court to interpret this agreement as follows:
(a) by modifying the provision to the minimum necessary to make it enforceable or, if that modification is not permitted by law, by disregarding the provision; (b) by holding that the rest of the agreement will remain in effect as written; (c) by holding that the provision will remain as written in any circumstances other than those in which the provision is held to be unenforceable; and (d) by holding the entire agreement unenforceable if modifying or disregarding the unenforceable provision would result in the failure of an essential purpose of this agreement.

5. Interpretation. This agreement is to be interpreted and applied in accordance with California law, except that the rule of interpretation in California Civil Code section 1654 will not apply.

6. Litigation Costs and Attorneys’ Fees. The parties shall bear their own costs and attorneys’ fees incurred in connection with this agreement.

7. Effective Date. This agreement is effective on the date both parties have signed it, as indicated by the dates in the signature blocks below. The parties shall sign any additional documents that are reasonably necessary to carry out the intent and purposes of this agreement.

8. Counterparts. The parties may execute this agreement in counterparts, each of which will be considered an original, but all of which will constitute the same agreement. The parties agree this agreement may be executed with electronic signatures.

9. Waiver. A party’s failure to insist on strict performance of this agreement or to exercise any right or remedy upon breach of this agreement will not constitute a waiver of the performance, right, or remedy. No waiver is binding unless set forth in a writing signed by the waiving party.

10. Integration and Modification. This agreement sets forth the parties’ entire understanding regarding the matters set forth above and is intended to be their final, complete, and exclusive expression of those matters. It supersedes all prior or contemporaneous agreements, representations, and negotiations—written, oral, express, or implied—and may be modified only by another written agreement signed by both parties. (Signature Page Follows)

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City of Sacramento,
a municipal corporation

By: ________________________________
Name ___________________________
Title ____________________________
for [ ], City Manager

[ ],
[ ]

By: ________________________________
[ ]
[ ]

Approved as to Form:

By: ________________________________
Senior Deputy City Attorney

Attest:

By: _________________________________
Assistant City Clerk

Sacramento City CouncilJune 20, 2023

Sacramento City Council
June 20, 2023