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HomeMy WebLinkAbout7/11/2012 - STAFF REPORTS - 2.W. �Ot P P`M Sp9 iy a V N • r •roucp Cq</FORN�P CITY COUNCIL STAFF REPORT DATE: July 11, 2010 CONSENT SUBJECT: Approve a Reimbursement Agreement Related to Subdivision Improvements for Tract No 33162 between the City of Palm Springs and Palm Springs Wessman Holdings, LLC, in form and content approved by the City Attorney FROM: David H. Ready, City Manager BY: Douglas Holland, City Attorney SUMMARY The proposed Reimbursement Agreement provides that the City will make a demand on Palm Springs Modem Homes, VI, LLC ("Modem Homes") to complete the public improvements required pursuant to a subdivision improvement agreement between Modern Homes and the City for Tract No. 33162 (Pedregal). In the event Modern Homes does not complete the improvements, the City will essentially assign the City's rights to make a claim on the bonds that have been posted to secure Modem Homes' performance under the subdivision improvement agreement to Palm Springs Wessman Holdings, LLC, ("WHLCC"), the successor to Modern Homes and WHLCC's attorney will be authorized to commence proceedings to use the proceeds of the Modem Homes bonds to fund the completion of the public improvements for Tract No. 33162. RECOMMENDATION: Approve the proposed Reimbursement Agreement for Subdivision Improvements, Tract No. 33162 between the City of Palm Springs and Wessman Holdings, LLC. In a form and content approved by the City Attorney. STAFF ANALYSIS: In July of 2007, the City approved final Tract Map No. 33162. At the time of the Map's approval, the developer of the property, Modem Homes entered into a Subdivision Improvement Agreement dated August 3, 2005 with the City (the "SIA"). Pursuant to the terms of the SIA, Modem Homes agreed to make certain subdivision improvements to the property as a condition of approval of the Final Map (the "Subdivision Improvements"). In accordance with the terms of the SIA, the City required Modern Homes to post certain security to assure performance of the condition to build the Subdivision Improvements. Although a portion of the subdivision improvements have been installed, Modem Homes has as of this date failed to complete all Subdivision Improvements as required under the terms of its SIA with the City. Modern Homes ultimately lost ownership of the property as a result of a default on a loan secured by a first trust deed recorded against the property. WHLCC is the City Council Staff Report; July 11,2012 Reimbursement Agreement,Tract 33162 Page 2 of 2 successor-in-interest in the ownership of the property within the subdivision (the "WHLCC Property") which it acquired following recordation of the Final Map for Tract No. 33162. When WHLCC acquired the WHLCC Property, WHLCC did not assume Modem Homes's obligations under the SIA regarding the completion of the Subdivision Improvements. The City has the option of enforcing the SIA on its own as a remedy under the terms of the SIA. The City could incur the upfront cost of initiating legal proceedings against Modem Homes and its bonds in order to secure the completion of the Subdivision Improvements. All City costs could be recovered through the bonds posted as security of Modem Homes' performance under the SIA. The City also has the option of requiring WHLCC as the new subdivider of the property, to execute a new SIA for the completion of the improvements and post new security to ensure the performance of WHLCC, thereby relieving Modem Homes of all of its obligations under the SIA. Most of the City's costs under this alternative would be recovered through typical city fees; however,WHLCC would incur the costs for the posting of bonds. WHLCC has proposed a third alternative which is provided under the terms of the proposed Reimbursement Agreement. Under this alternative, the City would make a formal written demand on Modem Homes to complete the remaining Subdivision Improvements as required under the SIA. In the event Modern Homes fails to complete such work after the demand, the City would authorize WHLCC's attorney to make a claim on the bonds securing Modem Homes' performance under the SIA to pay for the costs of completing and performing the Subdivision Improvements. In the event such payments are not forthcoming, the City would authorize WHLCC's attorney to initiate legal proceedings to perfect the claim and enforce payment under the bonds. The proceeds of any funds recovered would be used to first reimburse the City for any costs that the City incurs in this process, second, to fund the completion of the Subdivision Improvements, and last, reimburse WHLCC its costs. ENVIRONMENTAL REVIEW The Mitigated Negative Declaration prepared in conjunction with the approval of Tentative Tract Map No. 33162, is the controlling environmental document for Tract No. 33162 and this proposed Agreement. FISCAL IMPACT: City costs should be minimal and will be reimbursed through any bond proceeds recovered; thus there is no fiscal impact. Douglas Holland, City Attorney David H. Ready, City Ida r Attachment: Proposed Reimbursement Agreement O�?ALM Spy iy a Y N ♦ tico � Murto`°°s c4ZOOS CITY COUNCIL STAFF REPORT DATE: July 11, 2010 CONSENT SUBJECT: Approve a Reimbursement Agreement Related to Subdivision Improvements for Tract No 33162 between the City of Palm Springs and Wessman Holding, LLC, in form and content approved by the City Attorney FROM: David H. Ready, City Manager BY: Douglas Holland, City Attorney SUMMARY The proposed Reimbursement Agreement provides that the City will make a demand on Palm Springs Modern Homes, VI, LLC ("Modern Homes") to complete the public improvements required pursuant to a subdivision improvement agreement between Modern Homes and the City for Tract No. 33162 (Pedregal). In the event Modern Homes does not complete the improvements, the City will essentially assign the City's rights to make a claim on the bonds that have been posted to secure Modern Homes' performance under the subdivision improvement agreement to Palm Springs Plaza Del Sol, LLC, ("Plaza Del Sol"), the successor to Modern Homes and Plaza Del Sol's attorney will be authorized to commence proceedings to use the proceeds of the Modern Homes bonds to fund the completion of the public improvements for Tract No. 33162. RECOMMENDATION: Approve the proposed Reimbursement Agreement for Subdivision Improvements, Tract No. 33162 between the City of Palm Springs and Wessman Holdings, LLC in a form and content approved by the City Attorney. STAFF ANALYSIS: In July of 2007, the City approved final Tract Map No. 33162. At the time of the Map's approval, the developer of the property, Modern Homes entered into a Subdivision Improvement Agreement dated August 3, 2005 with the City (the "SIA"). Pursuant to the terms of the SIA, Modern Homes agreed to make certain subdivision improvements to the property as a condition of approval of the Final Map (the "Subdivision Improvements"). In accordance with the terms of the SIA, the City required Modern Homes to post certain security to assure performance of the condition to build the Subdivision Improvements. Although a portion of the subdivision improvements have been installed, Modern Homes has as of this date failed to complete all Subdivision Improvements as required under the terms of its SIA with the City. Modern Homes ultimately lost ownership of the property as a result of a default on a loan secured by a first trust deed recorded against the property. Plaza Del Sol is REM N11 �� City Council Staff Report; July 11,2012 Reimbursement Agreement,Tract 33162 Page 2 of 2 Property")which it acquired following recordation of the Final Map for Tract No. 33162. When WHLLC acquired the WHLLC Property, WHLLC did not assume the Modern Homes's obligations under the SIA regarding the completion of the Subdivision Improvements. The City has the option of enforcing the SIA on its own as a remedy under the terms of the SIA. The City could incur the upfront cost of initiating legal proceedings against Modern Homes and its bonds in order to secure the completion of the Subdivision Improvements. All City costs could be recovered through the bonds posted as security of Modern Homes' performance under the SIA. The City also has the option of requiring WHLLC as the new subdivider of the property, to execute a new SIA for the completion of the improvements and post new security to ensure the performance of WHLLC, thereby relieving Modern Homes of all of its obligations under the SIA. Most of the City's costs under this alternative would be recovered through typical city fees; however, WHLLC would incur the costs for the posting of bonds. WHLLC has proposed a third alternative which is provided under the terms of the proposed Reimbursement Agreement. Under this alternative, the City would make aformal written demand on Modern Homes to complete the remaining Subdivision Improvements as required under the SIA. In the event Modem Homes fails to complete such work after the demand, the City would authorize WHLLC's attorney to make a claim on the bonds securing Modern Homes' performance under the SIA to pay for the costs of completing and performing the Subdivision Improvements. In the event such payments are not forthcoming, the City would authorize WHLLC's attorney to initiate legal proceedings to perfect the claim and enforce payment under the bonds. The proceeds of any funds recovered would be used to first reimburse the City for any costs that the City incurs in this process, second, to fund the completion of the Subdivision Improvements, and last, reimburse WHLLC its costs. ENVIRONMENTAL REVIEW The Mitigated Negative Declaration prepared in conjunction with the approval of Tentative Tract Map No. 33162, is the controlling environmental document for Tract No. 33162 and this proposed Agreement. FISCAL IMPACT: City costs should be minimal and will be reimbursed through any bond proceeds recovered; thus there is no fiscal impact. Douglas olland, City Attorney David H. Ready, City Man Attachment: Proposed Reimbursement Agreement 02 REIMBURSEMENT AGREEMENT This Reimbursement Agreement ("Agreement") is entered into this _ day of 2012 by and between the City of Palm Springs, State of California("City") and Wessman Holdings LLC, a California limited liability company' ("WHLLC") with respect to the following: RECITALS A. WHEREAS, on or about August 19, 2007, the City approved final Tract Map Number 33162 (the "Map", and the real property included in such Map being referred to herein as the "Underlying Property"); and B. WHEREAS, at the time of the Map's approval, the developer of the Underlying Property, Palm Springs Modern Homes, VI, LLC ("Original Developer") entered into a Subdivision Improvement Agreement dated on or about August 19, 2007 with the City (as amended to date, the "SIA") wherein said Original Developer agreed to make certain subdivision improvements to the Underlying Property as a condition of receipt of the final map (the "Subdivision Improvements"); and C. WHEREAS, in accordance with Government Code Section 66462(c), and pursuant to the SIA, the City required that the Original Developer post certain security to assure performance of the promise to build said Subdivision Improvements; and D. WHEREAS, the Original Developer failed to complete all Subdivision Improvements; and E. WHEREAS, WHLLC is the successor in interest in the ownership of the Underlying Property (the "WHLLC Property") and acgluired the WHLLC Property following recordation of the final map for Tract No. 33162; and F. WHEREAS, WHLLC did not assume the Original Developer's obligations under the SIA regarding the completion of the Subdivision Improvements upon WHLLC's acquisition of the WHLLC Property; and NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. BONDS. The City hereby warrants and represents that it currently holds surety bonds posted by the Original Developer intended to 'secure the Original Developer's obligation to complete the Subdivision Improvements (collectively referred 03 to hereinafter as the `Bonds".) The Bonds currently held by the City are all issued by Bond Safeguard Insurance Company and are as follows: Faithful Performance Bond(Street), Bond No. 5022347 for$2,688,636.20 Faithful Performance Bond(Water, Sewer, Storm Drain), Bond No. 5022348 for $2,378,858.75 Labor/Materials Bond(Street), Bond No. 5022347 for$1,420,000.00 Maintenance/Warranty Bond(Street), Bond No. 5022347 for$426,000.00 Labor/Materials Bond (Water, Sewer, Storm Drain), Bond No. 5022348 for $2,085,250.00 Maintenance/Warranty Bond (Water, Sewer, Storm Drain), Bond No. 5022348 for $625,575.00 Monumentation, Bond No. 5022349 for$3,500.00 Within three (3) business days of full execution of this Agreement, the City agrees to make written demand upon the Original Developer to commence within twenty (20) days, and to diligently pursue the completion of, the Subdivision Improvements (the "City Demand"). In the event that the Original Developer does not agree in writing, within five (5) business days of receipt of the City Demand, to commence and complete the Subdivision Improvements in accordance with said City Demand, or if the Original Developer does not timely commence or does not diligently pursue the completion of the Subdivision Improvements following receipt of the City Demand, the City hereby unconditionally and irrevocably authorizes WHLLC's counsel, on behalf of the City, to draw up and make a claim on the Bonds to pay for the costs of completing and performing the remaining Subdivision Improvements (each a "Bond Claim"). If said Bond Claim is not promptly honored and fully paid by the surety, the City hereby unconditionally and irrevocably authorizes WHLLC's counsel to file suit on behalf of the City against the surety in order to execute on and enforce the Bond Claims and to seek recovery on and under the Bonds (each an "Enforcement Action"). WHLLC shall have the right, but not the obligation, to make Bond Claims and to pursue any Enforcement Actions. Any funds recovered by the City pursuant to the Bond Claims or an Enforcement Action or otherwise recovered from an issuer of any of the Bonds (collectively, "Recovered Funds") shall be held in trust in the Escrow (as hereafter defined) and distributed in accordance with the terms of this Agreement. The City further agrees to fully cooperate with WHLLC and its counsel in connection with the making of the Bond Claims and the pursuit of the Enforcement Actions, including the execution of any documents related thereto or required thereby. 2 04 The parties hereto acknowledge that the terms of the Bonds require that a claim be made prior to completion of the bonded improvements, and the parties therefore agree to make the Bond Claims as soon as possible after full execution hereof. Subject to the reimbursement provisions contained herein with respect to any Recovered Funds, WHLLC agrees to pay for any costs it incurs in making said Bond Claims or pursuing any Enforcement Actions. WHLLC further agrees to provide the City with cost estimates for completion of said remaining Subdivision Improvements, which cost estimates will be used as the basis for the amount claimed against the Bonds. The City agrees that any Recovered Funds first shall be paid to WHLLC up to the amount of funds actually expended or needed in order to complete the Covered Improvements, as defined and described in paragraph 2 below, plus the amount of any legal''fees and costs and expert witness and consultant fees and costs incurred by WHLLC in connection with the Bond Claims, the Enforcement Actions, the drafting and negotiating of this Agreement and any activities related to the foregoing(collectively, the "Reimbursable Items"). 2. COMPLETION OF COVERED IMPROVEMENTS: In reliance on and in consideration of the City's delivery of the City Demand, and the City's obligation to reimburse WHLLC for the costs associated with completing the Covered Improvements from Recovered Funds as provided herein, WHLLC agrees that once the Bond Claim has been made and the Bond Issuer approves the claim, subject to the City's full cooperation in connection with WHLLC's pursuit of any Enforcement Actions, and so long as the City has not materially defaulted in any of its obligations hereunder, WHLLC shall coordinate and cause the completion of the Subdivision Improvements identified in Schedule I attached hereto (collectively, the "Covered Improvements") that were the subject of such Bond Claim in accordance with the milestone schedule also set forth in such Schedule 1, provided such completion of the Covered Improvements does not jeopardize collections pursuant to such Bond Claims or related Enforcement Actions. WHLLC's completion of the Covered Improvements, if and to the extent required hereunder, shall be completed in accordance with accepted City standards and in accordance with the conditions of approval applicable to Tract No. 33162. In the event that the Bond Claim is ultimately unsuccessful in whole or in part, and WHLLC elects to develop the Underlying Property, it shall be obligated to complete the Improvements described in the SIA or as otherwise required pursuant to any conditions of approval to any new or amended entitlement for all or any relevant portion of the Underlying Property. In the event the proceeds from the Bonds are insufficient for any reason to pay the full cost of the Covered Improvements, if WHLLC elects to develop the Underlying Property, the City reserves the right to require WHLLC to post Ior provide new or additional security to secure the completion of Covered Improvements related to the SIA or any improvements required pursuant to a new or amended entitlement from the City. 3. REIMBURSEMENT FOR COVERED IMPROVEMENTS. In the event that the City is successful in securing any Recovered Funds, WHLLC shall be entitled to payment of or reimbursement for the Reimbursable Items from the Escrow, pursuant to and in accordance with the terms hereof. Upon completion of all or any portion of the Covered Improvements, WHLLC may submit payment or reimbursement 3 05 demands to the City, with a copy to Escrow Holder(as hereafter defined), for that portion of the costs incurred for which reimbursement is then being sought, which demands shall include invoices, proof of payment (if applicable) and a reasonably detailed description of the work or services performed (each a "Payment Demand"). All such Payment Demands shall be accompanied by any appropriate lien releases and/or conditional lien releases from the primary contractors, subcontractors, laborers and materialmen employed in the completion of the Covered Improvements for which payment is sought. WHLLC shall also submit to the City any and all invoices for legal fees and costs incurred by WHLLC in collecting on the Bonds pursuant to any Bond Claims, Enforcement Actions or otherwise (which submitted legal bills shall be deemed Payment Demands hereunder). Upon the City's receipt and approval of a Payment Demand, which approval shall not be unreasonably withheld, conditioned or delayed, the City shall authorize Escrow Holder (as hereafter defined) to immediately pay to WHLLC the amount requested in the Payment Demand. If the City has not disapproved of a Payment Demand within 10 days of receipt thereof the City shall be deemed to have approved of same, and the City shall provide WHLLC with a reasonable detailed explanation if any Payment Demand is not approved by the City. WHLLC acknowledges that reimbursement of the Reimbursable Items shall be made solely from the Recovered Funds, if any. In the event that the Bond issuer denies a Bond Claim and a court of competent jurisdiction finds that the Bond issuer is not liable for the cost of the Covered Improvements in connection with an Enforcement Action related thereto, then WHLLC shall not be required to complete the Covered Improvements. 4. BOND PROCEEDS HELD IN TRUST. The parties hereto agree that any Recovered Funds shall be held in trust and immediately shall be deposited into an escrow account ("Escrow") with First American Title Insurance Company ("Escrow Holder"). Escrow Holder shall deposit all such Recovered Funds into an interest bearing account, and said funds, including accumulated interest thereon, shall be used solely to pay Payment Demands. Upon completion of the Covered Improvements and payment to WHLLC in full for all of the Reimbursable Items, any funds remaining in the Escrow shall thereafter be used to complete any Subdivision Improvements not included as part of the Covered Improvements, if any, and thereafter, any remaining funds shall be disbursed to the City. 5. TERM. This Agreement shall remain in effect until the later of. (a) WHLLC has been reimbursed all of its costs for completion of the Covered Improvements to the extent available from Bond proceeds or, (b) the Bond issuer has denied coverage under the Bonds and a court of competent jurisdiction has determined that the Bond issuer is not liable for the cost of the Covered Improvements. 6. ASSIGNMENT. WHLLC shall have the right to 'assign its rights and benefits under the terms of this Agreement to any successors, and assigns, and all other persons or entities acquiring all or any portion of the Project, or any interest therein, provided however that such assignment must be effected via a written assignment and assumption whereby WHLLC specifically assigns and the Assignee specifically assumes some or all of WHLLC's rights and responsibilities hereunder. 4 06 7. RELATIONSHIP OF PARTIES. It is specifically understood and agreed by and between the parties hereto that the development of the WHLLC Property is a private development and that neither party is acting as the agent of the other in any respect hereunder. The City and WHLLC also hereby renounce the existence of any form of joint venture or partnership between them, and agree that nothing contained herein or in any document executed in connection herewith shall be construed,as making the City and WHLLC joint venturers or partners. 8. NO THIRD PARTY BENEFICIARIES. The only parties to this Agreement are WHLLC and the City. There are no third party beneficiaries and this Agreement is not intended, and shall not be construed, to benefit, or be enforceable by any other person whatsoever. 9. SEVERABILITY. If any term, provision, covenant or condition of this Agreement is repealed by referendum or is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions, if any, of this Agreement shall continue in full force and effect, unless enforcement of this Agreement as so invalidated would be unreasonable or grossly inequitable under all the circumstances or would frustrate the purposes of this Agreement. 10. SINGULAR AND PLURAL; GENDER; AND PERSON. Except where the context requires otherwise, the singular of any word shall include the plural and vice versa, and pronouns inferring the masculine gender shall include the feminine gender and neuter, and vice versa, and a reference to "person" shall include, in addition to a natural person, any governmental entity and any partnership, corporation,joint venture or any other form of business entity. 11. TIME IS OF THE ESSENCE. Time is of the essence of this Agreement and of each and every term and condition hereof. 12. EVENTS OF DEFAULT. Subject to any extensions of time by mutual consent in writing, the failure or unreasonable delay by either party to perform any material term or provision of this Agreement for a period of thirty (30) days after the dispatch of a written notice of default from the other party shall constitute a default under this Agreement. If the nature of the alleged default is such that it cannot reasonably be cured within such 30-day period, the commencement of the cure within such time period and the diligent prosecution to completion of the cure shall be deemed a cure within such period. Any Notice of Default given hereunder shall specify in detail the nature of the alleged Event of Default and the manner in which such Event of Default may be satisfactorily cured in accordance with the terms and conditions of this Agreement. 13. GENERAL DEFAULT REMEDIES. After notice and expiration of the 30-day period without cure, the non-defaulting parry shall have such rights and remedies against the defaulting parry as it may have at law or in equity, including, but not limited to, the right to terminate this Agreement or seek mandamus, specific 5 07 performance, injunctive or declaratory relief Any rights or remedies available to non- defaulting party under this Agreement and any other rights or remedies that such party may have at law or in equity upon a default by the other parry under this Agreement shall be distinct and separate, providing the non-defaulting party with cumulative rights and remedies. None of such rights or remedies, whether or not exercised by the non- defaulting party, shall be deemed to exclude any other rights or remedies available to the non-defaulting party. The non-defaulting party may, in its discretion, exercise any and all of its rights and remedies, at once or in succession, at such time or times as the non- defaulting party considers appropriate. 14. LEGAL ACTION; ATTORNEYS' FEES. Either parry may, in addition to any other rights or remedies, institute legal action to cure, correct or remedy a default, enforce any covenant or agreement herein, enjoin any threatened or attempted violation hereof, or enforce by specific performance the obligations and rights of the parties hereto. The prevailing party in any such action shall be entitled to its reasonable attorneys' fees and costs to be paid by the losing party. 15. WAIVER. All waivers must be in writing to be effective or binding upon the waiving party, and no waiver shall be implied from any omission by a party to take any action with respect to an Event of Default. Failure by a party to insist upon the strict performance of any of the provisions of this Agreement by the other party shall not constitute waiver of such party's right to demand strict compliance by the other party in the future. In addition, no express written waiver of any Event of Default shall affect any other Event of Default, or cover any other period of time specified in such express waiver. 16. AMENDMENTS. This Agreement may be amended from time to time by mutual consent of the original parties or their successors in interest. 17. AMBIGUITIES OR UNCERTAINTIES. The parties hereto have mutually negotiated the terms and conditions of this Agreement and each party received independent legal advice from its attorneys with respect to the advisability of executing this Agreement and the meaning of the provisions contained herein. As such, this Agreement is a product of the joint drafting efforts of both parties and neither party shall be deemed to have solely or independently prepared or framed this Agreement. Therefore, any ambiguities or uncertainties are not to be construed against or in favor of either party. 18. APPLICABLE LAW This Agreement shall be construed and enforced in accordance with the laws of the State of California. 19. VENUE In the event that suit is brought by',either party to this Agreement, venue shall be exclusively vested in the State courts of the County of Riverside, California or where appropriate, in the United States District Court, Southern District of California, Riverside, California. 6 08 20. NOTICES. Any notice or communication required hereunder between City or WHLLC shall be in writing, and may be given either personally or by registered mail, return-receipt requested. Notice, whether given by registered mail or personal delivery, shall be deemed to have been given and received on the actual receipt by any of the addresses designated below as the party to whom notices are to be sent. Any party hereto may at any time, upon written notice to the other party hereto, designate any other address in substitution of the address to which such notice or communication shall be given. Such notices or communications shall be given to the parties at their addresses set forth below: To City: City of Palm Springs 3200 E. Tahquitz Canyon Way Palm Springs, CA 92262 Attention: City Manager To WHLLC: WHLLC Palm Springs, CA 92262 With a copy to: W. Curt Ealy Ealy, Hemphill & Blasdel, LLP 71905 Highway 111, Suite H Rancho Mirage, CA 92270 21. ENTIRE AGREEMENT. This Agreement and the Schedules attached hereto, contain all the representations and the entire agreement between the parties with respect to the subject matter hereof, any prior correspondence, memoranda, agreements, warranties or representations are superseded in total by those documents except as otherwise specified. 22. COUNTERPARTS. This Agreement may be executed in duplicate counterpart originals, each of which is deemed to be an original, and all of which when taken together shall constitute one and the same instrument. Electronically transmitted signatures shall be deemed and accepted as if they were originals. IN WITNESS WHEREOF, the parties hereto have executed this instrument the day and year first hereinabove written. CITY OF PALM SPRINGS By: Mayor Dated: 7 09 ATTEST: City Clerk [Signature page continues.] [Signature page continued.] Wessman Holdings, LLC A California limited liability company By: Its: 8 10