DATE: MARCH 22, 2022
DEPARTMENT: PUBLIC WORKS
COMMUNITY DEVELOPMENT
FROM: DAVID JACOBS, DIRECTOR
MEGAN HUNTER, DIRECTOR
BY: LISA BRINTON, ASSISTANT DIRECTOR
TITLE: EXTRATERRITORIAL WASTEWATER SERVICE AND REIMBURSEMENT AGREEMENTS BETWEEN CITY AND SALINAS 101 LLC AND PRE-ANNEXATION AGREEMENT WITH THE COUNTY OF MONTEREY RECOMMENDED MOTION:
A motion to approve resolutions authorizing the Mayor to:
execute an Extraterritorial Wastewater Service Agreement (Sewer Agreement) and associated Reimbursement Agreement (Agreements) with Salinas 101 LLC (Owner), and execute a Pre-Annexation Agreement with the County of Monterey for portions of Economic Development Element Economic Opportunity Area K (EDE EOA K) shown on Attachment 3 to this report.
RECOMMENDATION:
It is recommended that the City Council approve resolutions authorizing the Mayor to:
execute a Sewer Agreement and associated Reimbursement Agreement (Exhibit A and B to the resolution, Agreements) with Salinas 101 LLC (Owner) to establish the terms and conditions under which the City would allow connection to its wastewater collection and disposal system, and execute a Pre-Annexation Agreement with the County of Monterey for portions of EDE EOA K shown on Attachment 3 to this report.
EXECUTIVE SUMMARY:
Owner submitted an application to the County of Monterey (County) to develop a commercial project on approximately 17.5 acres of commercially designated lands under the County of Monterey’s General Plan that is located within the County’s jurisdiction adjacent to EDE Target Area K and within the EDE Economic Development Reserve Area K near the intersection of Sala and Harrison Roads (Sala Road or Sobel Project) shown on Attachment 2 to this report. Owner has requested a Will Serve Letter from the City to construct a new sewer line (New Sewer Line) to connect to and receive service from its wastewater collection and disposal system (Disposal System). Owner and City staff have negotiated a final draft Sewer Agreement that states the terms and conditions by which the City will grant a Will Serve Letter (Attachment 6) for connection to and service from the City’s Disposal System for the Sala Road Project, which is required for the County to deem the Project’s application complete and to undertake the required environmental review and analysis for California Environmental Quality Act (CEQA) compliance. Current city policy allows for connection to and service from its Disposal System when future annexation into the City is contemplated as part of the project and/or supported by the project developers.
City staff and Owner have also negotiated a Reimbursement Agreement, which outlines the terms, conditions, methodology and process by which the Owner will be reimbursed by users or “Shared Parties” prior to future development in Target Area K and a potential farmworker housing development (Housing Project) connecting to the New Sewer Line.
Provided the Sala Road Project is constructed, the City intends to include the Sala Road Project land area and Target Area K as part of a LAFCO annexation application. The boundary of the intended annexation area (Annexation Area) is shown on Exhibit D of the Pre-Annexation Agreement. Should the City proceed with an annexation application, it will be the lead agency for the application and associated CEQA compliance.
BACKGROUND:
In 2006, the City and the County entered into the Greater Salinas Area Memorandum of Understanding (GSA-MOU, Attachment 3) to establish a broad policy framework to govern and to facilitate land use decisions in the area designated in the then-existing General Plan of Monterey as “Greater Salinas Area”, replacing the Amended Boronda Memorandum of Understanding, and in part completing a condition in the settlement of litigation between the City and the County. The GSA-MOU identified specific objectives to be achieved through the implementation of land use and associated policies for the preservation of certain agricultural land, the identification of future growth areas, and the provision of adequate financing for the services and facilities of benefit to the residents of the City and of the County.
Since the City and the County’s approval of the GSA-MOU, the City has adopted an Economic Development Element (EDE, 2017) to the 2002 Salinas General Plan and the County has adopted an updated General Plan for the non-coastal areas of unincorporated Monterey County (2010). In the EDE, the City identifies an area outside the City’s current northern Sphere of Influence boundary as a future opportunity area for economic development. The lands which comprise EDE Economic Opportunity Area K (EOA K), or the “North Entrance” as it is referred to in the EDE, are currently within the County’s jurisdiction and are designated as public/quasi-public, open space, farmlands, permanent grazing, and commercial in the County’s General Plan. EOA K, shown and marked on Attachment 1 to this staff report and on Exhibit A of the Sewer Agreement, is comprised of a Target Area, where near to mid-term development is projected by the City, and an Economic Development Reserve Area (Reserve Area K), also identified on Attachment 1 to this staff report and on Exhibit A of the Sewer Agreement, which is to accommodate the City’s longer-term economic development needs.
Recognizing that the GSA-MOU needed to be updated to reflect current land use development plans and desiring to coordinate planning efforts and entitlement of certain contemplated development projects either within the City’s adopted Sphere of Influence, or within those areas identified in the City’s EDE EOA K, the City and County entered into an addendum to the GSA-MOU in June 2019 (2019 Addendum, Attachment 4). The 2019 Addendum is limited to two areas; one being the area north of the City’s current boundaries (the “Northern Area”). The Northern Area includes EDE Target Area K and portions of Reserve Area K and is more specifically shown on the attached Exhibit A of the 2019 Addendum. The purpose of the 2019 Addendum is to mark an initial movement of the City and the County toward a more comprehensive update to the GSA-MOU. Another is to define the coordinated planning processes by which the City and the County will plan for and consider development in the aforementioned area.
DISCUSSION
Sala and Harrison Road – Proposed Retail Commercial Development The County received an application to develop a commercial project on approximately 17.5 acres of commercially designated lands under the County of Monterey’s General Plan that is located within the County’s jurisdiction adjacent to Target Area K and within the Reserve Area K near the intersection of Sala and Harrison Roads (Sala Road or Sobel Project). As stated in the 2019 Addendum, the County is to act as Lead Agency for purpose of application processing and environmental analysis and documentation (CEQA compliance) for the proposed project.
According to plans submitted to the County by the Owner, as currently proposed, the Sala Road Project consists of approximately 100,000 square feet of commercial uses including a hotel, retail, four quick service restaurants, and a gas station. Table 1 breaks down the proposed uses by square footage. The proposed site plan is attached to this report (Attachment 5).
Table 1
Proposed Use
Building Square Footage
Hotel
41,693
Retail (4)
37,300
Quick Service Restaurants (4)
11,520
Gas Station
5,511
Total
96,024
The County will not deem the Sala Road Project application complete without a wastewater treatment plan. Since neither the County nor any other public agency currently provides wastewater service to the proposed project site, Salinas 101, LLC, the owner of the Sala Road site and developer of the Sala Road Project (Owner), has requested a Will Serve Letter from the City to construct a new sewer line to connect to and receive service from its wastewater collection and disposal system (Disposal System).
Extraterritorial Wastewater Service Agreement
The City owns and operates a Disposal System which collects wastewater originating in its service area and conveys that wastewater through a 10-inch sewer main currently terminating at the intersection of Russell Road and North Main Street (Connection Point). Current city policy allows for connection to and service from its Disposal System when future annexation into the City is contemplated as part of the project and/or supported by the project developers. An exception to this policy is farmworker housing that is developed adjacent to city infrastructure connection points. Extension of wastewater service outside the City’s boundaries to a portion of the unincorporated County also requires agreement by M1W (Monterey One Water), a Joint Powers Authority (JPA), to accept the wastewater. The Sala Road Project site is within the M1W JPA boundaries and is not subject to LAFCO action(s) to receive service.
The Owner and city staff have negotiated a final draft Sewer Agreement that states the terms and conditions by which the City will grant a Will Serve Letter for connection to and service from the Disposal System for the Sala Road Project, which is required for the County to deem the Project’s application complete and to undertake the required environmental review and analysis for CEQA compliance. A draft Will Serve Letter is attached to this staff report as Attachment 6 and is to be provided to the Owner within five (5) business days of mutual execution of the Sewer Agreement. The Effective Date of the Sewer Agreement is when appropriate County approvals and entitlements and CEQA Notice of Determination is filed by the County Housing and Community Development Department. Key terms and conditions of the Sewer Agreement are summarized below.
Owner shall:
reasonably support future annexation of Sala Road Project site by the City, obtain all permits and pay all fees to construct a 10-inch sewer line (New Sewer Line) from Sala Road Project site to the City Connection Point, pay a one-time development impact fee to the City in the amount of $64,600 to address downstream impacts and system upgrades resulting from the Project, maintain the New Sewer Line pre-dedication to the City, dedicate the New Sewer Line to the City at no charge upon completion of construction, provide a 1-year warranty for defective work, labor, and materials, obtain all permits and pay all fees to construct and maintain private line(s) connecting Sala Road Project to the New Sewer Line according to city standards (Laterals), prohibit any other users from connecting to the New Sewer Line without City approval; and pay fees for Disposal System service.
The City shall:
provide written “will serve” assurance for access to Disposal System to Owner within five (5) days of execution of the Sewer Agreement, ensure that Monterey One Water will accept the wastewater and provide service, process future annexation application(s) at its sole expense, not unreasonably withhold, condition, or delay respective permits, have right to maintain, repair or modify the New Line due to Owner’s failure to maintain, and request reimbursement for maintenance costs incurred by City, be solely responsible for the maintenance, repair, and replacement of the New Sewer Line upon acceptance, not allow any connection to the New Sewer Line (other than Owner’s Private Sewer Facilities) prior to dedication; and concurrently enter into a reimbursement agreement providing for developers of, and users within, the Target Area K and the proposed farmworker housing project (Housing Project) to reimburse Owner their proportionate share of costs for building the New Sewer Line.
Reimbursement Agreement
The Reimbursement Agreement, provided as Exhibit B to the attached resolution outlines the terms, conditions, methodology and process by which the Owner will be reimbursed by users or “Shared Parties” prior to future development in Target Area K and proposed farmworker housing (Housing Project) connecting to the New Line. The term of the Reimbursement Agreement is thirty (30) years, or until such time as Owner is reimbursed for eligible Actual Costs as defined in Exhibit C of the Reimbursement Agreement. Key terms and conditions of the Reimbursement Agreement are summarized below.
Owner shall:
complete construction of New Sewer Line,
provide City invoices or other evidence of eligible costs to determine Actual Costs as defined in Exhibit C, and have right to reimbursement of its Actual Costs by future users desiring to connect to the New Sewer Line according to the methodology described in Exhibit E, which is based on a wastewater flow proration.
City shall:
collect and pursue reimbursement from future users (Sharing Parties) prior to issuance of a building permit for connecting to the New Sewer Line based on the formula described in Exhibit E, promptly pay Owner reimbursement received from Shared Parties, and provide Owner with annual financial accounting of reimbursement collected.
The City may allow property owners in Reserve Area K to connect to the New Sewer Line provided the City determines the New Sewer Line has sufficient capacity. Owners in Reserve Area K allowed to connect to the New Line would be added to and bound by the user terms and conditions outlined in the Reimbursement Agreement.
EOA K Pre-Annexation Agreement with County of Monterey
Target Area K Specific Plan
A primary property owner of Target Area K has submitted applications for a specific plan (Steinbruner Project). The specific plan area includes potential future development of approximately 123 acres of undeveloped agricultural zoned land located within the County’s jurisdiction but within the City’s Target Area K (Monterey County Assessor’s Parcel Numbers 113-151-002, 113-15-011, and a portion of 113-161-018). Proposed uses are to be consistent with the City’s EDE policies and identified land uses of Business Park and Commercial Retail.
An annexation application was received as part of the Steinbruner Project submittal. Provided the Sala Road Project is constructed the City intends to include the Sala Road Project land area and approximately 30 acres of retail/commercial zoned developed/underdeveloped lands within Target Area K to the west of Harrison Road that are not included within the Steinbruner Project boundary as part of a LAFCO annexation application. The boundary of the intended annexation area (“Annexation Area”) is shown on Attachment 8 of this report.
LAFCO Policies and Procedures
Government Code Section 56425 requires a City-County consultation prior to submittal of the application to LAFCO. Agreement between the Parties should address LAFCO’s mandate to preserve agricultural land, discourage urban sprawl, and encourage the orderly growth in government agencies, and should include a discussion of policies on regional transportation impacts and efficient development patterns. LAFCO further requires a property tax transfer agreement, approved by both the City Council and the County Board of Supervisors, to determine an application for Sphere of Influence/Annexation to be complete.
The GSA-MOU and 2019 Addendum address the topics of preservation of agricultural land, discouraging urban sprawl, encouraging the orderly growth in government agencies, and include a discussion of policies on regional transportation impacts and efficient development patterns. In April 2008, the City and the County entered into a Master Property Tax Transfer Agreement by adoption of Salinas City Council Resolution No. 19423 and Monterey County Board of Supervisors Resolution 80-249 (Master Tax Agreement). The Master Tax Agreement, provided as Exhibit F to the final draft Pre-Annexation Agreement, establishes the uniform property tax formula to be used as the basis for city annexations and remains in effect until January 1, 2023.
Pre-Annexation Agreement
The purpose of this Pre-Agreement is to acknowledge the foreseeable annexations, reaffirm coordination of land use entitlement and CEQA compliance as agreed to in the GSA-MOU 2019 Addendum, and to analyze the property tax and revenue sharing formulas between the City and the County. Key terms negotiated terms include the following.
Duration: This Agreement shall remain in full force and effect for a term of five (5) years from the Effective Date with the ability to extend an additional five (5) years upon mutual agreement.
Amendments: The City and the County may amend this Agreement by written amendment mutually executed by both Parties. Such amendments shall not invalidate this Agreement or relieve or release either party from its obligations under this Agreement unless expressly stated to by such amendment.
Consideration of Annexation:
The County supports LAFCO’s annexation policies and application processes that provide opportunity to annex unincorporated areas to ensure the orderly and efficient provision of municipal services to the areas annexed and which encourage cities to consult with affected special districts to ensure that an annexation will not adversely affect the districts’ ability to continue to provide services outside of the proposed annexation area.
Subject to compliance with all laws and regulations, including the California Environmental Quality Act, the County agrees to acknowledge the contemplated annexation of land within the Annexation Area to the City.
The County agrees to cooperate in good faith with the City in the preparation of the annexation application materials to LAFCO for the land within the Annexation Area.
Development Standards Pre- and Post-Annexation:
Projects proposed to be developed prior to annexation, will be processed and permitted in accordance with County development standards. Prior to consideration of the proposed projects, the County may seek City input on design related components of the proposed projects.
Upon annexation, the Projects may be developed subject to the same policies and development standards that would be applied to other properties in the City under similar circumstances including, but not limited to, the Salinas General Plan and Salinas Zoning Code.
Property Tax, Sales Tax, and Transient Occupancy Tax Sharing; City Measure Taxes:
Upon annexation, the City and County agree to share the additional property, sales and transient occupancy tax revenues generated from the Annexation Area pursuant to the following formulas:
Property Tax. City and County proportional sharing of property taxes as stated in the Master Tax Agreement shall remain effective until revised. The City and County will further discuss and analyze the Master Tax Agreement consistent with LAFCO laws and procedures and as provided in the GSA-MOU 2019 Addendum.
Transient Occupancy Tax (TOT). Parties agree that County will retain 100% of TOT generated from the Annexation Area prior to annexation into the City. Post-annexation, City shall receive 100% of the TOT generated from the areas annexed.
City Measure Taxes. Post-annexation the City shall receive 100% of the tax revenues attributable to City tax measures (Measure E, Measure G) generated from the areas annexed.
Cannabis Tax Revenue. Parties agree that County will retain 100% of cannabis tax revenue generated from the Annexation Area prior to annexation into the City. Post-annexation, the City shall receive 100% of the cannabis tax revenues generated within the areas annexed.
CEQA CONSIDERATION:
The City of Salinas has determined that the action of authorizing the execution of the proposed Agreements is not a project as defined by the California Environmental Quality Act (CEQA). Section 15061 (b) (3) of CEQA Guidelines states that when it can be seen with certainty that there is no possibility that the activity in question, in this case the execution of the Agreements, may have a significant effect on the environment, the activity is not subject to CEQA. The execution of the Agreements does not constitute approval of the Sala Road Project or New Sewer Line. Upon execution to the Sewer Agreement, the City may grant a Will Serve Letter for Owner to demonstrate it has a wastewater treatment plan so that the County may proceed to process Owner’s application and required CEQA compliance. The Effective Date of the Sewer Agreement is when appropriate County approvals and entitlements and CEQA documents are prepared, approved and a Notice of Determination identifying any environmental impact and proposed mitigation resulting from the proposed Sala Road Project and New Sewer Line is filed by the County Housing and Community Development Department.
Provided the Sala Road Project is constructed, the City intends to apply to LAFCO to annex Target Area K and the Sala Road Project. Should the City proceed with an annexation application, it will be the lead agency for the application and associated CEQA compliance.
STRATEGIC PLAN INITIATIVE:
Future implementation of these Agreements support City Council Strategic Plan initiatives of Investment Strategies and Risk Management and New Revenue. The Sewer Agreement establishes the terms and conditions by which the Owner, at its own expense, an estimated cost of $2 million dollars, shall construct new infrastructure, a New Sewer Line, to connect the Sala Road Project to the City’s Disposal System. In addition, the Agreements outline the terms and conditions under which future development and users in Target Area K, proposed farmworker housing, and potentially future development in Reserve Area K could connect to the New Sewer Line and the City’s Disposal System by paying their proportional share of the cost of the New Sewer Line. This approach is less costly and time-intensive for future developments than having to construct a sewer line for an individual project. Provided the Sala Road Project is constructed, the City intends to apply to LAFCO to annex Target Area K and the Sala Road Project. Upon future annexation, the City would receive new revenue from sales tax, transient occupancy tax and a percentage share of property tax generated by development in the Annexation Area.
DEPARTMENTAL COORDINATION:
Community Development coordinated preparation of the three (3) Agreements and staff report. City staff from Community Development, Public Works, Administration and the City Attorney’s Office held multiple coordination meetings with the Owner to reach the proposed terms and conditions for the Sewer and Reimbursement Agreements. For nearly two years the City has been in discussions with the County to negotiate a final draft Pre-Annexation Agreement to bring to the City Council and Board of Supervisors for consideration.
FISCAL AND SUSTAINABILITY IMPACT:
There are no direct or indirect fiscal impacts associated with preparation of the three (3) Agreements, this report or the authorization to execute these Agreements. Staff time for coordination, review and implementation of projects and issues is already allocated in the adopted budget.
Under the Sewer Agreement, the Owner, at no cost to the City, is to obtain all permits and to pay all fees to construct a 10-inch sewer line (New Sewer Line) from the Sala Road Project site to connect to the Disposal System. Estimated cost of constructing the New Sewer Line is approximately $2 million dollars. In addition, Owner is to pay the City a one-time, down-stream capacity impact fee of $64,600 to address required system infrastructure improvements to support the increase in wastewater flow from the Sala Road Project, future Target Area K and Housing Project development. At some point in the future, the City may incur capital expenditures and other maintenance costs associated with the New Line and Disposal System upgrades based on future development in Reserve Area K. These future costs will need to be incorporated into future CIP and General Fund operational budgets.
As stated above, the City intends to apply to LAFCO to annex Target Area K and the Sala Road Project, provided the Sala Road Project is constructed. Upon future annexation, the City would receive new revenue from sales tax, transient occupancy tax and a percentage share of property tax generated by development in the annexation area. The amount of future revenue would be dependent on future development and the property tax revenue sharing percentage split with the County. The term of the 2008 Master Tax Agreement ends January 1, 2023, therefore the City and County have agreed to further discuss and analyze the Master Tax Agreement consist with LAFCO laws and procedures and as provided in the GSA-MOU 2019 Addendum.
ATTACHMENTS:
Resolution authorizing Mayor to execute
Exhibit A: draft Extraterritorial Wastewater Service Agreement Exhibit B: draft Reimbursement Agreement
Resolution authorizing Mayor to execute
Exhibit A: draft Pre-Annexation Agreement
Northern Economic Opportunity Area K Figure
2006 GSA- MOU
2019 Addendum to GSA-MOU
Proposed Sala Road Project Site Plan
Draft Will Serve Letter
Annexation Area Figure
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