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CITY COUNCIL AGENDA ITEM NO. 9

Meeting Date: July 11, 2006

Subject/Title: Adopt a Resolution approving and authorizing the City Manager to execute a Reimbursement Agreement with Brentwood Sand Creek Partners, LLC, Subdivision No. 8788, for costs associated with northern phase of the Lone Oak Road, and Gracie Lane Sewer and Water Improvements.

Prepared by: Public Works: B. Bornstein

Submitted by: Public Works: B. Grewal

RECOMMENDATION
Adopt a Resolution approving and authorizing the City Manager to execute a Reimbursement Agreement with Brentwood Sand Creek Partners, LLC, Subdivision No. 8788, for costs associated with northern phase of the Lone Oak Road, and Gracie Lane Sewer and Water Improvements.

PREVIOUS ACTION
On March 2, 2004, Planning Commission of the City of Brentwood adopted Planning Commission Resolution No. 04-10, approving Vesting Tentative Subdivision Map (VSTM) No. 8788, with conditions.

On May 3, 2005, Planning Commission amended Resolution No. 04-10, to modify eleven of the conditions of approval for Vesting Tentative Subdivision Map No. 8788.

On February 28, 2006, by Resolution No. 2006-38, City Council approved and authorized the City Manager to execute a Reimbursement Agreement with Brentwood Sand Creek Partners, LLC, Subdivision No. 8788, for costs associated with southern phase of the Lone Oak Road, Lone Oak Court and Saddle Creek Court Sewer and Water Improvements and also directed staff to establish a benefit district for these and related improvements.

On May 23, 2006, by Resolution No. 2006-126, City Council adopted the City’s 2006/07 – 2010/11 Capital Improvement Program (CIP), which included the Lone Oak Road Utility Improvements.

BACKGROUND
Brentwood Sand Creek Partners, LLC (Lennar Homes), Subdivision No. 8788, is located south of Grant Street and east of the Union Pacific Railroad. This subdivision consists of 311 lots, a four acre and a one acre park and the new Marsh Creek Elementary School. Condition of Approval No. 31 for Subdivision No. 8788 requires the Developer to construct certain off-site sewer and water improvements on Lone Oak Road, Lone Oak Court, Saddle Creek Court and Gracie Lane. Since these are off-site improvements and do not directly benefit the Developer, under the State Subdivision Map Act they are subject to reimbursement from the City. These improvements were required to provide sewer and water facilities for the existing residents and properties on the above mentioned roads; these improvements provide the option for them to connect to City services since their properties are all on septic systems and private wells that have deteriorated significantly over the years.

Staff has been working closely with Lennar Homes, the developer, to complete the design and procure the necessary right-of-way to complete these utility improvements. This project is broken into “South” and “North” utility improvements. The ”South” improvements are on Lone Oak Court, Lone Oak Road up to Caper Drive and Saddle Creek Court. Lennar Homes was conditioned to construct these improvements prior to the 101st building permit. These improvements are completed and Lennar Homes is requesting City acceptance of these improvements. The “North” improvements are on Lone Oak Road north of Caper Drive to Grant Street and Gracie Lane. Lennar Homes is conditioned to construct these improvements prior to the 201st building permit. By approval of this agreement with Lennar Homes, construction of the “North” improvements will commence by the end of July. It is critical to proceed with this work and complete these improvements before winter, or the project will most likely incur construction delays and increase the total project cost.

Staff has reviewed Lennar Homes’ contractor’s bid for the Lone Oak “North” improvements. The total construction bid includes any unforeseen change orders that may occur in the field including construction, change orders, design, engineering, staking, soils inspection/testing, and construction management for this work. Lennar Homes has agreed to a not to exceed reimbursement of $1,643,000 to complete these improvements. This reimbursement is actually less than the bid amount received from the contractor, Delta Excavating, Inc., therefore Lennar Homes and Suncrest Homes, who is also benefiting from the work, will be absorbing the additional costs estimated to be approximately $600,000. In negotiations with Lennar Homes and Suncrest Homes to take on this additional financial responsibility, City staff agrees to make every effort to modify the requested project condition of approval and project acceptance. Staff will be taking the Lennar Homes’ and Suncrest Homes’ project conditions of approval modifications to either City Council or the Planning Commission for approval and agree that the modification of the conditions requested does not cause the City any financial responsibility or relieve the developer of any critical master planned improvements. The revised conditions relate to construction and acceptance timing and do not revise the intent of the Conditions of Approval. Staff will return with a formal action for these revisions in the very near future.

It is staff’s recommendation that a portion of the Redevelopment Agency’s costs to construct the north and south Lone Oak improvements be recovered. The best mechanism for reimbursement is the formation of a benefit district. By establishing a benefit district, any future subdivision of the adjacent 48 parcels that would benefit from the installed water and sewer improvements will be required to pay their fair share of the costs. The level of recovered costs is uncertain at this time and should not be considered a guarantee of 100% recovery. In February 2006, Council approved a resolution directing staff to proceed with the formation of a benefit district for both north and south improvements. Once this agreement has been approved, the total cost for both Lone Oak Road “North” and “South” will be determined and staff can begin the formation of a benefit district in an attempt to recover as much cost paid by Redevelopment Agency as possible. The City Council is not being asked to form a benefit district this evening. Formation of a district can only occur after a noticed public hearing.

When the Capital Improvement Program and the Agency’s operational budget that included Lone Oak Road Utility Improvements were approved in 2005, Council and Agency members believed that a benefit district would be established among both the existing and future homeowners to recover the Agency’s costs to fund this project. However, during the ongoing discussions with the homeowners in the Lone Oak Road area regarding the adjacent S&S Farms development, there were no discussions about existing dwellings sharing a portion of the cost of water and sewer improvements except for connection fees. Consequently, the existing dwelling owners will pay into the proposed benefit district only if they subdivide to create more lots than existing dwellings or construct any new dwelling additions to their properties in the future.

Currently, a written policy does not exist for the Council and Agency to use in its evaluation to fund public improvements in existing developments and subdivisions. In situations where Agency funds are the identified funding source, a measurement of benefit is analyzed prior to making a funding commitment, findings are made that the project meets the Agency’s investment strategies, or a recovery of the costs is identified. In this case, the formation of a benefit district paid by the existing homeowners as a method to recover the Agency costs was not pursued as intended by the Council and Agency. The funding of the Lone Oak Utility Improvements should not be construed as setting precedent for funding by the Agency or the City of future public improvements in existing developments or subdivisions. Analysis of the appropriateness of the City and Agency’s financial participation in projects and programs has been and will continue to be, an examination of benefit districts, fair share payments, economies of benefit, return of tax increment, funding priorities, investment strategies and necessary findings and criteria for consideration by the City and Agency prior to making funding commitments to projects. A formal, written policy establishing the guidelines for analyzing the appropriateness of the City and Agency’s financial participation in projects and programs is being drafted and is expected to be before the Council and Agency Board for consideration and approval in August.

FISCAL IMPACT
The Lone Oak Road Utility Improvements project is included in the adopted 2006/07 – 2010/11 Capital Improvement Program and the total project budget contains $2,285,000 from Redevelopment Funds. The Lone Oak “North” Reimbursement Agreement is also on tonight’s Redevelopment Agency agenda for funding approval. In the event that the Redevelopment Agency does not approve the funding, it will be necessary to continue this agenda item at a later date to reevaluate funding options. The Reimbursement Agreement with Brentwood Sand Creek Partners, LLC to design and construct the Lone Oak “North” improvements is for the amount of $1,643,000, and falls within the remaining budget.

The reimbursement to Lennar Homes for the cost of these improvements will be paid entirely by the Brentwood Redevelopment Agency’s Tax Allocation Bonds, Series 2001. There is no impact on the City’s General Fund.

Attachments:
Resolution
Reimbursement Agreement with Exhibits

RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BRENTWOOD APPROVING AND AUTHORIZING THE CITY MANAGER TO EXECUTE A REIMBURSEMENT AGREEMENT WITH BRENTWOOD SAND CREEK PARTNERS, LLC, SUBDIVISION NO. 8788, FOR COSTS ASSOCIATED WITH NORTHERN PHASE OF THE LONE OAK ROAD, AND GRACIE LANE SEWER AND WATER IMPROVEMENTS.

WHEREAS, on March 2, 2004, Planning Commission of the City of Brentwood adopted Planning Commission Resolution No. 04-10, approving Vesting Tentative Subdivision Map (VSTM) No. 8788, with conditions; and

WHEREAS, on May 3, 2005, Planning Commission amended Resolution No. 04-10, to modify eleven of the conditions of approval for Vesting Tentative Subdivision Map No. 8788; and

WHEREAS, on February 28, 2006, by Resolution No. 2006-38, City Council approved and authorized the City Manager to execute a Reimbursement Agreement with Brentwood Sand Creek Partners, LLC, Subdivision No. 8788, for costs associated with southern phase of the Lone Oak Road, Lone Oak Court and Saddle Creek Court Sewer and Water Improvements and also directed staff to establish a benefit district for these and related improvements; and

WHEREAS, on May 23, 2006, by Resolution No. 2006-126, City Council adopted the City’s 2006/07 – 2010/11 Capital Improvement Program (CIP), which included the Lone Oak Road Utility Improvements; and

WHEREAS, Brentwood Sand Creek Partners, LLC, is required to construct certain off-site sewer and water improvements on Lone Oak Road and Gracie Lane; and

WHEREAS, since these are off-site improvements and provide no benefit to the Developer, they are subject to reimbursement from the City; and

WHEREAS, these improvements were required to provide sewer and water facilities for the existing residents on the above mentioned roads; these improvements provide the option for them to connect to City services since their properties are all on septic systems and private wells that have deteriorated significantly over the years; and

WHEREAS, this allows these residents the option to convert over to City utilities when their existing on-site systems have failed or are too costly to maintain; and

WHEREAS, staff has reviewed all of Brentwood Sand Creek Partners, LLC contractor’s bid for this project which represent the lowest responsive responsible bid, as well as change orders, design, engineering, staking, and soils inspection/testing.

NOW, THEREFORE BE IT RESOLVED that the City Council of the City of Brentwood does hereby approve and authorize the City Manager to execute a Reimbursement Agreement with Brentwood Sand Creek Partners, LLC, Subdivision No. 8788, for costs associated with northern phase of the Lone Oak Road, and Gracie Lane Sewer and Water Improvements.

PASSED, APPROVED AND ADOPTED by the City Council of the City of Brentwood at a regular meeting on the 11th day of July 2006 by the following vote:
 

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