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HomeMy WebLinkAbout17 - Amendment to Agreement regarding FundingCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item 17 June 12, 2007 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Managers Office Homer Bludau, City Manager 949/644 -3000 or hbIudau @city.newport- beach.ca.us SUBJECT: Council Consideration of an Amendment to a Prior Agreement with Orange County Regarding Redevelopment Agency Funding for the Santa Ana Heights Fire Station and the Santa Ana Heights Community Center ISSUE: Does the City Council agree to amend the prior agreement with Orange County to provide an additional $5.5M to the Santa Ana Heights fire station project and delete all funding for the Santa Ana Heights recreation facility project? RECOMMENDATION: 1. Authorize the Mayor to execute the 2nd Amendment to the Memorandum of Agreement — Santa Ana Heights Fire Station and Santa Ana Heights Recreation Facility (Fire Station Agreement) regarding new funding for the SA Heights fire station; 2. Determine that the development of a specific Recreation Facility for Santa Ana Heights (using RDA funds) is no longer appropriate. DISCUSSION: Background: In July, 2003, the City Council approved an agreement with Orange County regarding two redevelopment (RDA) projects in Santa Ana Heights — a fire station project and a community center project. Within this Agreement, the County agreed to provide $1.6M for the City's purchase of a fire station site in Santa Ana Heights and another $2.5M for the fire station's construction, for a total of $4.1 M. At the time, the parties thought that this would be enough revenue to cover the fire station's costs. Within the same agreement, the County agreed to provide $4M for the City to purchase land for a recreation facility and $7.5M to construct it, for a total of $11.5M. Both land and construction costs in the Agreement were based for current 2003 land and construction prices. Amendment to a Prior Agreement with Orange County Regarding Redevelopment Agency Funding for the Santa Ana Heights Fire Station and the Santa Ana Heights Community Center June 12, 2007 Page 2 By the time the fire station Agreement was entered into, there were few parcels in SA Heights that were considered viable in terms of access and central location for the fire station. The parcel at Mesa and Acacia Street was deemed to be the best site, and after the City Council initiated a condemnation process, a successful negotiation was concluded at a cost of roughly $4.181M. This amount was significantly higher than previously anticipated, in part because the City was obligated to purchase a remnant parcel adjacent to the parcel needed for the fire station to avoid an inverse condemnation of the smaller parcel. Construction costs were higher than expected, too. By the time construction documents were prepared, the Engineer's Estimate for the 11,027 square foot project was $4,900,000 ($444 per square foot). By the time bids were opened, the low bid was 33% higher than that — at $6,495,000 ($589 per square foot). Rapid escalations in the price of steel, cement, other key materials, as well as labor, contributed to this spike. As to the recreation facility, initial meetings with City staff, the SAH Project Advisory Committee (PAC) and the SA Heights YMCA staff resulted in a Concept Plan for a 30,000 square foot facility. About $100,000 in cost was incurred for the Concept Plan, which included design time and materials from JZMK Architects plus survey and geotechnical work. Similar to what happened to the fire station, huge increases in the cost of construction materials and labor put the cost of this concept at in excess of $16M. The operations plan for the new center, including its aquatics concept, was never fully agreed to between City and YMCA staff. For this reason, the project planning languished. In 2005 and 2006 the City of Newport Beach sought to interest the County in language within our so- called "Spheres Agreement' that would turn over the SAH RDA to the City, so the City could proceed with six key projects that had been talked about for many years. These projects are: • The SAH Fire Station • A view park a the corner of Mesa and Birch • Park improvements at a small pocket park at Orchard Street • A community equestrian arena • Road rehabilitation at Old Kline Drive • Utility undergrounding at Cypress and Mesa While the City came close to including the terms of the RDA transfer in the Spheres Agreement, elections at both the City and County level changed the elected officials, and such an agreement was never reached. A provision in the Spheres Agreement that was supported by County staff was to provide the City additional money for the SAH fire station project, in recognition of the escalation of land and construction prices involved. With the election of Supervisor John Moorlach in 2006, the RDA issues received new attention at the County. County supervisors talked about ending the life of the SAH RDA earlier than previously anticipated; however, both the SAH PAC and the City pushed for the six long awaited projects to be accomplished. Supervisor Moorlach, on a 3 -1 -1 vote, a Amendment to a Prior Agreement with Orange County Regarding Redevelopment Agency Funding for the Santa Ana Heights Fire Station and the Santa Ana Heights Community Center June 12, 2007 Page 3 received approval from his fellow Board members to end the RDA at a time certain, complete the six projects, and to provide the City with additional funds to address the cost escalations for the Fire Station. This Agenda Item accomplishes part of that goal — if approved by the City and the Board, a 2nd Amendment to the Fire Station Agreement would provide the City with an additional $5.5M in RDA money. This would bring the total of RDA money into the project to $9.6M. At the same time, the 2nd Amendment would recognize that the recreational facility is no longer a high priority for the City, the RDA, nor the SAH PAC. The fire station is expected to be opened and become operational in August, 2007. Here is a summary of the Fire Station's costs and revenues: Sources of Funds OCDA Payment for Site Purchase $ 2,500,000 City GF Supplemental Payment for Land P urchase $ 1.681 ,000 Initial OCDA Obligation for Facility Construction $ 1,600,000 Supplemental OCDA Payment for Facility Cons[rudion $ 5,500,000 Net GttYFu lementa€ 7 PP ayment fog F ' l(L$ - gaquoto X381458 Total Sources of Funds $ 12,019,458 Uses of Funds Purchase of Site $ 4,181,000 Station and Training Center Design (RRM) $ 363,561 Property - Related Legal Services, Appraisals $ 65,500 Engineering, Plan Check, and Incidentals $ 17,000 Award of Construction Bid (Bamards) $ 6,495,000 Contingency at 10% $ 650.000 Construction Management Fee $ 227,397 Total Uses of Funds $ 12,019,458 _770-,__7 fFUnds Received from OCDA, Spent Budgeted in FY 2005 -06, Spent OCDA has been invoiced Invoice sent 4 Council Oks 2nd Amendment Budgeted in FY 2006 -07, portion spent according to construction contract 100% Spent 94% Spent 100% Spent 100% Spent 88% Spent roughly 50% spent 86% spent As the reader can see, the City's net obligation (besides staff time) for the $12 million project is anticipated to be at about $2,419,458, provided that the Council and the Board of Supervisors agrees to this $5,500,000 amendment to the fire station's payment plan. As to that $2,419,458 General Fund contribution to the Project, the fire station contains a training room that will, when not used for training, serve the meeting space needs of the Santa Ana Heights community, thereby negating the need for one or more community meeting rooms envisioned for the Recreation Facility. The Project also contains a 4 -story training tower that will be used as a training facility for Newport Beach firefighters, resulting in far less firefighter training time (and cost) being 3 Amendment to a Prior Agreement with Orange County Regarding Redevelopment Agency Funding for the Santa Ana Heights Fire Station and the Santa Ana Heights Community Center June 12, 2007 Page 4 spent outside our community. Both the community room and the training tower are recognized by both parties as being "above and beyond" components that would normally be associated with a fire station, and should not be financially supported by the County. The cost of the tower is $950,000 with Rancho Santiago Community College contributing $350,000; the Building Excise Tax contributing $30,000 and the City contributing $570,000. The plans for the training tower are currently in plan check. The Agreement contains a listing of other RDA projects contemplated for Santa Ana Heights and funded by RDA money. As envisioned today, the City will coordinate three of these projects (UUD #19), the horse arena, and the Mesa -Birch Park, and the County will do the remainder. Environmental Review: The City Council's approval of this Agenda Item does not require environmental review. Public Notice: This agenda item may be noticed according to the Brown Act (72 hours in advance of the public meeting at which the City Council considers the item). Submitted by: Homer Bludau City Manager Attachments: Second Amendment to the MOU First Amendment to the MOU MOU Santa Ana Heights Fire Station and Santa Ana Heights Recreation Facility SECOND AMENDMENT TO THE MEMORANDUM OF AGREEMENT SANTA ANA HEIGHTS FIRE STATION AND SANTA ANA HEIGHTS RECREATION FACILITY THIS SECOND AMENDMENT (2nd AMENDMENT) to the July 8, 2003 MEMORANDUM OF AGREEMENT, SANTA ANA HEIGHTS FIRE STATION AND SANTA ANA HEIGHTS RECREATION FACILITY, is made and entered into this _ th day of , 2007, by and among the COUNTY OF ORANGE ( "COUNTY "), the ORANGE COUNTY DEVELOPMENT AGENCY ( "AGENCY ") and the CITY OF NEWPORT BEACH ( "CITY ") (collectively referred to as "PARTIES ", and individually as "PARTY'). RECITALS WHEREAS, the COUNTY Board of Supervisors has previously approved Ordinance No. 3595 on July 15, 1986 adopting a Redevelopment Plan (the "Redevelopment Plan ") for a redevelopment project area known as the Santa Ana Heights Redevelopment Project (the "Project Area ") which Project Area, with CITY's approval, included a portion of the CITY; and WHEREAS, the CITY annexed a portion of that unincorporated area commonly referred to as Santa Ana Heights, effective July I, 2003, and was, at that time, considering annexation of the remaining unincorporated area; and WHEREAS, on or about July 8, 2003, the PARTIES entered into the MEMORANDUM OF AGREEMENT, SANTA ANA HEIGHTS FIRE STATION AND SANTA ANA HEIGHTS RECREATION FACILITY, hereinafter referred to as "AGREEMENT ", wherein AGENCY agreed to contribute towards the purchase of land and construction of a Fire Station and a Recreation Facility on specified parcels of land in the Santa Ana Heights area; and WHEREAS, on or about Julv 13, 2004, the PARTIES entered into the FIRST AMENDMENT TO THE MEMORANDUM OF AGREEMENT, SANTA ANA FIRE STATION AND RECREATION FACILITY, (151 AMENDMENT), wherein COUNTY agreed to the substitution of the parcels of land the CITY had chosen for the Fire Station; and WHEREAS, CITY has purchased the land for the Fire Station and constructed the Fire Station improvements which include a Community Room that negates the need for a separate Recreation Facility; and WHEREAS, AGENCY has planned for the construction of certain projects within the PROJECT AREA, however, some of those projects have changed in cost or are no longer required as planned; and WHEREAS, AGENCY, CITY, COUNTY, and the Santa Ana Heights Project Advisory Committee (PAC) have reached consensus on what projects should be completed and what projects are no longer necessary within the PROJECT AREA; and WHEREAS, AGENCY, CITY, COUNTY, and the PAC, agree that the projects listed on Exhibit A- PROJECTS (Projects), attached hereto and incorporated herein by this reference, are the final Projects that AGENCY is required to construct in the Project Area using AGENCY funds; and 758%08\1 68920.7 5 WHEREAS, the PARTIES desire that the provisions of this 2 "d AMENDMENT supersede and replace Paragraphs 4 and 5 of the Pre - Annexation Agreement dated September 30, 2002, and Paragraphs 2, 3, 5, 6, and 7 of the AGREEMENT, which paragraphs pertain to AGENCY assistance to the CITY for the purchase of land and construction of a Fire Station and Recreation Facility; and WHEREAS, prior to approval of the AGREEMENT, and on or about July 1, 2003, in accordance with Health and Safety Code Section 33679, the City Council of the CITY, and the Board of Supervisors of the COUNTY acting as the Board of Supervisors of the COUNTY and as the Governing Board of the AGENCY, published notice of and held public hearings on the AGENCY's expenditure of funds for the Fire Station Project and the Recreation Facility Project, and the AGENCY made available to the public the information required by Health and Safety Code Section 33679, and the City Council and the Board of Supervisors have made the findings required pursuant to Health and Safety Code Section 33445 necessary to authorize the AGENCY to spend its funds for the Fire Station Project and the Recreation Facility Project; and WHEREAS, prior to approval of this 2"1 AMENDMENT, and on or about 12007, in accordance with Health and Safety Code Section 33679, the City Council of the CITY, and the Board of Supervisors of the COUNTY acting as the Board of Supervisors of the COUNTY and as the Governing Board of the AGENCY, published notice of and held public hearings on the AGENCY's expenditure of funds for the Fire Station Project and the Other Projects, as defined below, and the AGENCY made available to the public the information required by Health and Safety Code Section 33679, and the City Council and the Board of Supervisors have made the findings required pursuant to Health and Safety Code Section 33445 necessary to authorize the AGENCY to spend its funds for the Fire Station Project and the Other Projects. NOW, THEREFORE, the PARTIES hereto state and agree as follows: I. The purpose of this 2 "d AMENDMENT is to set forth the understanding and agreement of the PARTIES with respect to the Fire Station Project, the Recreation Facility Project, and all other Projects that are listed on the attached Exhibit A- PROJECTS. The contents of this 2 "d Amendment are intended to be as comprehensive as possible yet not necessarily exhaustive with respect to the issues that may arise relative to the construction of the Projects. In the event that issues arise that are not identified in this 2nd AMENDMENT, the PARTIES agree to work together in good faith to resolve each matter. The Projects that are described on the attached Exhibit A, other than the Fire Station Project, are herein referred to as the "Other Projects." 2. Concurrent with the execution of this 2nd AMENDMENT, the CITY shall complete the Fire Station Project. The total amount that the AGENCY agrees to contribute towards the costs of acquiring the land and building the Fire Station improvements shall be Nine Million Six Hundred Thousand Dollars ($9,600,000), which amount represents the original Four Million One Hundred Thousand Dollars ($4,100,000), plus an additional Five Million Five Hundred Thousand Dollars ($5,500,000), and includes any amounts already advanced to the CITY as of the date of this 2 "d AMENDMENT for the purchase of the land and construction of the Fire Station. The AGENCY reserves the right to substitute proceeds of "Bonds" (as described in Paragraph 6 below) in place of Tax Increment to cover some or all of the AGENCY's contributions towards the purchase of the land and construction of the Fire Station if said proceeds of "Bonds" are not otherwise necessary for the completion of the remaining Projects within the Project Area. 3. The Parties have reached agreement that due to the fact that the Fire Station has been constructed with space available for a community room, that there is no longer a need for the purchase and construction of the Recreation Facility as was originally proposed. Therefore, that Facility and the related cost of that Facility ($11,500,000) will no longer be required, nor will it be an obligation upon the CITY to acquire the specified land and construct the required improvements 758%08ue8920.7 2 6 thereon, or for the AGENCY to fund the aforementioned amount to the CITY. However, funds previously paid by AGENCY to CITY or its contractors for preliminary design costs (architectural, survey, etc.) for the Recreation Facility, as of the date of this 2nd Amendment, shall be deemed by the PARTIES to be reflective of the costs incurred, and CITY is not required to repay AGENCY or COUNTY for any of those payments. 4. Following completion of the Fire Station Project and until such time as the Parties agree that these services are not necessary, the CITY agrees to provide fire suppression and emergency medical services to the Santa Ana Heights Project Area and to neighboring jurisdictions (including, but not limited to, County unincorporated areas) per existing mutual aid and automatic aid agreements between the COUNTY and the CITY. If necessary, the COUNTY and CITY shall amend those existing agreements to make clear that the CITY is responsible for first response for calls for fire suppression and emergency medical services from that portion of the Santa Ana Heights Project Area that is within the CITY's incorporated boundaries, from that portion of Santa Ana Heights that CITY is responsible for providing automatic aid and mutual aid, and from the adjoining unincorporated areas. The Fire Station Project and the Fire Station Property shall be owned, operated, and maintained by the CITY without COUNTY or AGENCY contribution. 5. The AGENCY Executive Director and the CITY Manager shall cooperate to design payment procedures for the AGENCY's funding of the acquisition of the land and the construction of the Fire Station Project, and any of the Other Projects that CITY may choose to be responsible to construct. Those procedures shall provide for the CITY's submittal to the AGENCY of detailed documentation of expenditures or expected expenditures and for the AGENCY's prompt payment of costs after receipt of the necessary documentation. 6. The CITY understands and agrees that the source of funds that the AGENCY will use to find the Fire Station and the Other Projects will include the proceeds of tax exempt bonds secured by the tax increment revenue the Agency receives pursuant to Health and Safety Code Section 33670 (the "Bonds "). In light of the funding sources, the CITY covenants and agrees with respect to the Fire Station and any Other Projects that CITY may choose to construct, to comply with all applicable requirements of the federal Internal Revenue Code (the "Code ") necessary to preserve the tax- exempt status of the interest on the Bonds and specifically covenants, without limiting the generality of the foregoing, as follows: (a) Private Activity. The CITY will take no action or refrain from taking any action or make any use of the proceeds of the Bonds or of any other monies or property which would cause the Bonds to be "private activity bonds" within the meaning of Section 141 of the Code; (b) Arbitra¢e. The CITY will make no use of the proceeds of the Bonds or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action which will cause the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code; 758+08%168920.7 3 (c) Federal Guaranty. The CITY will make no use of the proceeds of the Bonds or take or omit to take any action that would cause the Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code; (d) Information Reporting. The CITY will cooperate with the AGENCY in providing information that the AGENCY needs to comply with the informational reporting requirement of Section I49(e) of the Code; (e) Hedge Bonds. The CITY will make no use of the proceeds of the Bonds or any other amounts or property, regardless of the source, or take any action or refrain from taking any action that would cause the Bonds to be considered "hedge bonds" within the meaning of Section 149(g) of the Code unless the CITY takes all necessary action to assure compliance with the requirements of Section I49(g) of the Code to maintain the tax exempt status of interest on the Bonds for federal income tax purposes and such action has been approved by the AGENCY. 7. In contemplation of the provisions of Section 895.2 of the California Government Code imposing certain tort liability jointly upon public entities solely by reason of such entities being Parties to an Agreement as defined in Section 895 of said code, the PARTIES hereto, as between themselves pursuant to the authorization contained in Sections 895.2 and 895.6 of said code, will each assume the full liability imposed upon it or any of its officers, agents or employees by law for personal injury, property damage or loss to third parties caused by a negligent or wrongful act or omission of that PARTY occurring in the performance of their obligations. To achieve the above stated purpose, each PARTY indemnifies and holds harmless the other PARTY for any damage, loss, cost or expense arising out of its own negligent or wrongful acts or omissions 8. This 2 "d AMENDMENT shall be governed by the laws of California and together with the attached exhibits represents the entire agreement of the PARTIES as to the subject matter of this 2nd AMENDMENT. The PARTIES intend that this 2nd AMENDMENT supersede and replace the provisions of Paragraphs 4 and 5 of the Pre - Annexation Agreement dated September I0, 2002 and Paragraphs 2, 3, 5, 6, and 7 of the AGREEMENT dated July 8, 2003, entered into among the PARTIES, and, upon execution of this 2 "d AMENDMENT, said provisions of Paragraph 4 and 5 of the Pre - Annexation Agreement and Paragraphs 2, 3, 5, 6, and 7 of the AGREEMENT shall have no further force or effect. 9. Following completion of the Fire Station project and the Other Projects listed on Exhibit A- PROJECTS, the AGENCY shall not be required to do any additional projects of any type or nature within the Project Area, and will develop a plan that will accumulate sufficient Property Tax Increment to pay off the existing Project Area bonded indebtedness during Fiscal Year 20I5- 2016. IN WITNESS WHEREOF, the COUNTY, AGENCY and CITY have approved the foregoing 2 "d AMENDMENT and caused the same to be executed by their duly authorized officers as set forth below. 758\08%168920.7 COUNTY Chairman of the Board of Supervisors AGENCY 4 iN Chairman of the Board of Supervisors, Acting as the Chair of the Board of the Orange County Development Agency CITY By; Mayor of the City of Newport Beach APPROVED AS TO FORM APPROVED AS TO FORM Goldfarb & Lipman Stradling Yocca Carlson & Rauth Special Counsel to the COUNTY and AGENCY A Professional Corporation C Lee C. Rosenthal 758108 \168920.7 5 C Special Counsel to the CITY EXHIBIT A - PROJECTS PROJECTS Fund15A Fund173 SAH Water System 240,000.00 Kline Drive 850,000.00 Community Horse Arena 175,000.00 Park improvements-Orchard Dr. 295,000.00 SAH Fire Station 0 7,200,000.00 Sidewalk - Bristol Street 150,000.00 Mesa -Birch Park * ** 378,000.00 Utilitv Under rounding (Mesa-Cypress) 7,500,000.00 Irvine Street Widening" — 0 0 Sewer Improvements 850,000.00 TOTAL BUDGETED PROJECTS 9,588,000.00 8,050,000.00 Park will be maintained by City of Newport Beach from City funding sources * * ** Project funding from non -RDA sources $1,205,139 - MPAH funds $1,104,905 - GMA funds $3,618,000 - County Road Funds $5,928,044 - Cost of Project 7581081168920.7 f0 FIRST AMENDMENT TO THE MEMORANDUM OF AGREEMENT SANTA ANA HEIGHTS FIRE STATION AND SANTA ANA HEIGHTS RECREATION FACILITY This FIRST AMENDMENT ( "I" Amendment') to the July 8, 2003 MEMORANDUM OF AGREEMENT ( "Agreement') is made and entered into this J&h day of July, 2004, by and between the COUNTY OF ORANGE ( "County ") and the ORANGE COUNTY DEVELOPMENT AGENCY ( "Agency ") and the CITY OF NEWPORT BEACH ( "City ") (the "Parties")- RECITALS WIfEREAS, the Parties entered into the Agreement on July 8, 2003 to expend Agcncy revenue for the purposes of. 1. Purchasing land for a Fire Station in Santa Ana Heights 2, Designing and Constructing a Fire Station in Santa Ana Heights 3. Purchasing land for a Recreation Facility in Santa Ana Heights; and 4, Designing and Constructing a Recreation Facility in Santa Ana Heights. WHEREsAS, the Agreement identified three separate parcels that the Ci,y might purchase for the purposes of constructing a Fire Station; and WHEREAS; the City has entered into proceedings to purchase two parcels of land that were not identified as alternative Fire Station Property within Exhibit A of the July 8, 2003 Agreement; and WHEREAS, the Parties seek to amend the Agreement to expressly allow for the parcels to be used for the Santa Ana Heights Fire Station envisioned by the Agreement; NOW; THEREFORE, the Parties hereto state and agree to amend the Agreement as follows: Exhibit A of the July 8, 2004 Agreement shall be replaced by Exhibit A attached hereto. IN WITNF,SS WHEREOF, the County, Agency, and City have approved the foregoing FIRST AMENDMENT to the MEMORANDUM OF AGREEMENT and caused the same to be executed by their duly authorized officers as set forth below. APPROVED AS TO FORM G'oldfarb,and Lipman sl)cQi-,Ii Counsel to the County and Agency I' Amendment to MOA Page 2 of 3 COUNTY By: Count} Executive Officer AGENCY By - joa� Executive Director CITY By: City y anager APPROVED AS TO FORM 47 By� By: - 7 / City Attorney 11--Z I" Amendment to MOA Page 3 of 3 Exhibit A FIRE STATION PROJECT SITE MAP l3 MEMORANDUM OF AGREEMENT SANTA ANA HEIGHTS FIRE STATION AND SANTA ANA HEIGHTS RECREATION FACILITY THIS MEMORANDUM OF AGREEMENT ( "Agreement "), is made and entered into this q6 day of July, 2003 by and between the COUNTY OF ORANGE ( "County "), the ORANGE COUNTY DEVELOPMENT AGENCY ( "Agency ") and the CITY OF NEWPORT BEACH ( "City ") (the "Parties "). RECITALS WHEREAS, the County Board of Supervisors has previously approved Ordinance No. 3595 on July 15, 1986 adopting a Redevelopment Plan (the "Redevelopment Plan ") for a redevelopment project area known as the Santa Ana Heights Redevelopment Project (the "Project Area ") which Project Area included a portion of the City at the time of adoption of the Redevelopment Plan in 1986; and WHEREAS, the City has annexed an additional portion of the Santa Ana Heights area effective July 1, 2003 and is considering annexation of additional territory in Santa Ana Heights effective July 1, 2004; and WHEREAS, the Orange County Fire Authority's fire station located on Campus Drive in the Airport/Santa Ana Heights area was severely damaged by a fire in December 2000 and service has been provided by the City since that event with only a temporary fire station; and WHEREAS, to replace the temporary fire station, the City seeks to construct the Santa Ana Heights Fire Station (the "Fire Station Project ") to provide fire and emergency response services to areas both in the City today, in the area to be annexed to the City as of July 1, 2003, and in the unincorporated area of the County previously served by the Orange County Fire Authority; and WHEREAS, there is an existing privately owned recreation facility in the Santa Ana Heights Project Area that is in need of substantial repair and improvement to properly serve recreation needs in the area; and WHEREAS, the City seeks to acquire that existing recreation facility and repair and improve it (the "Recreation Facility Project ") to provide recreation services to areas both in the City today, in the area to be annexed to the City as of July 1, 2003, and in the unincorporated area of the County; and WHEREAS, the construction of the Fire Station Project and the Recreation Facility Project will benefit the Santa Ana Heights Project Area by providing needed fire service in a permanent building strategically located to provide optimum response time to the area and by providing needed and improved recreation facilities; and WHEREAS, the Agency is willing to fund land purchase costs and site development costs for the Fire Station Project and the Recreation Facility Project subject to the limits set out in this Agreement; and 756 \p6 \166920.6 )q WHEREAS, the City is willing to purchase the needed property for the Fire Station Project and the Recreation Facility Project, coordinate design and construction of the improvements for the projects using Agency funding as described in this Agreement, and operate the Fire Station Project and the Recreation Facility Project; at no cost to the County or the Agency; and WHEREAS, the Parties have reached concurrence on the manner in which the Fire Station Project and the Recreation Facility Project will be financed and developed and wish to utilize this Agreement to commit said understanding to writing; and WHEREAS, the Parties desire that the provisions of this Agreement supercede and replace Paragraphs 4 and 5 of the Pre - Annexation Agreement dated September 30, 2002, among the Parties, which paragraphs pertained to Agency assistance to the City for the fire station and recreation facility; and WHEREAS, prior to approval of this Agreement, in accordance with Health and Safety Code Section 33679, the City Council of the City, the Board of Supervisors of the County acting as the Board of Supervisors of the County and as the Governing Board of the Agency have published notice of and held public hearings on the Agency's expenditure of funds for the Fire Station Project and the Recreation Facility Project, the Agency has made available to the public the information required by Health and Safety Code Section 33679, and the City Council and the Board of Supervisors have made the findings required pursuant to Health and Safety Code Section 33445 necessary to authorize the Agency to spend its funds for the Fire Station Project and the Recreation Facility Project. NOW, THEREFORE, the Parties hereto state and agree as follows: I . The purpose of this Agreement is to set forth the understanding and agreement of the Parties with respect to the Fire Station Project and the Recreation Facility Project. The contents of this Agreetent are intended to be as comprehensive as possible yet not necessarily exhaustive with respect to the issues that may arise relative to the development of the Fire Station Project and the Recreation Facility Project. In the event that issues occur that are not identified in this Agreement, the Parties agree to work together in good faith to resolve each matter. 2. Concurrent with the execution of this Agreement, the City shall commence and complete the acquisition of property for the Fire Station Project. The County, Agency, and City agree that the City may exercise the power of condemnation or eminent domain associated with any property acquisition in the event that condemnation becomes necessary. The County, Agency, and City agree to cooperate fully in any acquisition effort. As the first step in that effort, the City has identified three possible alternative sites for the location of the station, all of which are in the Project Area. The proposed sites are shown on the map attached to this Agreement as Exhibit A. Promptly following execution of this Agreement, the City shall, after consultation with the Agency, select the site for the Fire Station Project (which selected site is referred to in this Agreement as the "Fire Station Property "). Promptly following selection of the Fire Station Property, the City shall obtain an appraisal of the fair market value of the parcel or parcels that constitute the Fire Station Property from an appraiser approved by the Agency. Upon completion of the appraisal, the City shall submit it to the Agency for review and approval. Once the appraisal has been approved, the City shall make good faith efforts to acquire the parcel or parcels by voluntary acquisition. If the City is unable to acquire a parcel or parcel by voluntary agreement, the City may proceed to use its eminent domain authority to acquire the parcel or parcels, provided, however, that nothing in this Agreement is intended to limit the City's discretion as to whether or not it should exercise its eminent domain 759 \09 \168920.6 15 authority. Once the City has obtained Agency approval for the appraisal, the City shall not agree to purchase a parcel or offer to purchase a parcel for more than its appraised value or settle an eminent domain lawsuit for more than the appraised value of the parcel without the consent of the Agency. The total amount that the Agency shall be required to pay for the acquisition costs of the Fire Station Property shall not exceed the lesser of the City's acquisition costs or $2.5 million. Acquisition costs shall include the purchase price the City pays for the parcel or parcels to be acquired, relocation costs the City is required to pay by law to owners or occupants of the parcels, and reasonable transaction costs for attorneys, experts, consultants, closing costs and other similar costs. 3. Following or concurrent with the acquisition of the Fire Station Property, the County and Agency herewith appoint, direct and empower the City to act on their behalf to undertake or cause to be undertaken the development, including design, construction and related activities of the Fire Station Project on the Fire Station Property. The estimated costs of the Fire Station Project (excluding acquisition of the Fire Station Property) are reflected in the Fire Station Project Cost Estimate attached to this Agreement as Exhibit B. The Parties acknowledge that this cost estimate represents only an estimate of the Fire Station Project's cost and that the actual costs may exceed the amount of this estimate. The City has responsibility for managing all aspects of the Fire Station Project's design and construction. The Agency shall fund the development costs -- exclusive of acquisition costs identified above -- up to and including $1.6 million. In the event that actual development costs are less than $1.6 million, the Agency shall pay only the actual development costs. In the event that actual development costs are more than $1.6 million, the City shall pay any amount over $1.6 million. Once final plans for the Fire Station Project have been completed, the City shall prepare a cost estimate and budget for the remaining costs of the Fire Station Project and submit the estimate and budget to the Agency for approval. 4. Following completion of the Fire Station Project and until such time as the Parties agree that these services are not necessary, the City agrees to provide fire suppression and emergency medical services to the Santa Ana Heights Project Area and to neighboring jurisdictions (including, but not limited to, County unincorporated areas) per existing mutual aid and automatic aid agreements between the County and the City. If necessary, the County and City shall amend those existing agreements to make clear that the City is responsible for first response for calls for fire suppression and emergency medical services from the Santa Ana Heights Project Area and adjoining unincorporated areas (but excluding John Wayne Airport aircraft and aircraft- related improvements). The Fire Station Project and the Fire Station Property shall be owned by the City. 5. Concurrent with the execution of this Agreement, the City shall commence and complete the acquisition of property for the recreation facility. The County, Agency, and City agree to cooperate fully in any acquisition effort. As the first step in that effort, the Parties have jointly identified the property where the recreation facility would be located (the "Recreation Facility Property "). The proposed Recreation Facility Property is shown on the map attached to this Agreement as Exhibit C. The Parties expect that the City will be able to enter into a voluntary purchase agreement for the City's purchase of the Recreation Facility Property from its current owner. Promptly following execution of this Agreement, the City shall make good faith and diligent efforts to enter into an agreement with the current owner to purchase the Recreation Facility Property. The total amount that the Agency shall be required to pay for the acquisition costs of the Recreation Facility Property shall not exceed the lesser of the City's acquisition costs or $4 trillion. Acquisition costs shall include the purchase price the City pays for the Recreation Facility Property and reasonable closing costs for the acquisition. The current owner of the Recreation Facility Property is a nonprofit entity that operates a recreation program on the property. 758108 \168920.6 a 6. Following or concurrent with the acquisition of the Recreation Facility Property, the County and Agency herewith appoint, direct and empower the City to act on their behalf to undertake or cause to be undertaken the development, including design, construction and related activities of the Recreation Facility Project on the Recreation Facility Property. The estimated costs of the Recreation Facility Project (excluding acquisition of the Recreation Facility Property) are reflected in the Recreation Facility Project Cost Estimate attached to this Agreement as Exhibit D. The Parties acknowledge that this cost estimate represents only an estimate of the Recreation Facility Project's cost and that the actual costs may exceed the amount of this estimate. The City has responsibility for managing all aspects of the Recreation Facility Project's design and construction. The Agency shall fund the development costs -- exclusive of acquisition costs identified above -- up to and including $7.5 million. In the event that actual development costs are less than $7.5 million, the Agency shall pay only the actual development costs. In the event that actual development costs are more than $7.5 million, the City shall pay any amount over $7.5 million. Once final plans for the Recreation Facility Project have been completed, the City shall prepare a cost estimate and budget for the remaining costs of the Recreation Facility Project and submit the estimate and budget to the Agency for approval. 7. Following completion of the Recreation Facility Project and until such time as the Parties agree that these services are not necessary, the City agrees to provide recreation facilities and services on and from the Recreation Facility Property and the buildings and facilities thereon to those who live and work in the Santa Ana Heights Project Area and to neighboring jurisdictions (including, but not limited to, County unincorporated areas). The Recreation Facility Project and the Recreation Facility Property shall be owned by the City. At the time the City obtains fee title to the Recreation Facility Property, the City shall execute and record a covenant running with the Recreation Facility Property land requiring that the Recreation Facility Property and the improvements thereon be operated and used as a recreation facility, and that, if not so used and operated for a continuous period of six (6) months or more, tide to the Recreation Facility Property and all improvements thereon shall be conveyed to the Agency. S. The Agency Executive Director and the City Manager shall cooperate to design payment procedures for the Agency's funding of the acquisition of the Fire Station Property and the Recreation Facility Property and for the development of the Fire Station Project and the Recreation Facility Project. Those procedures shall provide for the City's submittal to the Agency of detailed documentation of expenditures or expected expenditures and for the County's prompt payment of costs after receipt of the necessary documentation. 9. The City understands and agrees that the source of funds that the Agency will use to fund the acquisition of the Fire Station Property and the Recreation Facility Property and to fund the development costs for the Fire Station Project and the Recreation Facility Project will include the proceeds of tax exempt bonds secured by the tax increment revenue the Agency receives pursuant to Health and Safety Code Section 33670 (the "Bonds'). In light of the funding sources, the City covenants and agrees with respect to the Fire Station Property and the Recreation Facility Property and the Fire Station Project and the Recreation Facility Project to comply with all applicable requirements of the federal Internal Revenue Code (the "Code") necessary to preserve the tax - exempt status of the interest on the Bonds and specifically covenants, without limiting the generality of the foregoing, as follows: 758\06 \168920.6 4 ('7 (a) Private Activity. The City will take no action or refrain from taking any action or make any use of the proceeds of the Bonds or of any other monies or property which would cause the Bonds to be "private activity bonds" within the meaning of Section 141 of the Code; (b) Arbitrage. The City will make no use of the proceeds of the Bonds or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action which will cause the Bonds to be "arbitrage bonds" within the meaning of Section 14$ of the Code; (c) Federal Guaranty. The City will make no use of the proceeds of the Bonds or take or omit to take any action that would cause the Bonds to be "federally guaranteed' within the meaning of Section 149(b) of the Code; (d) Information Reverting. The City will cooperate with the Agency in providing information that the Agency needs to comply with the informational reporting requirement of Section 149(e) of the Code; (e) Hedge Bonds. The City will make no use of the proceeds of the Bonds or any other amounts or property, regardless of the source, or take any action or refrain from taking any action that would cause the Bonds to be considered "hedge bonds" within the meaning of Section 149(8) of the Code unless the City takes all necessary action to assure compliance with the requirements of Section 149(8) of the Code to maintain the tax exempt status of interest on the Bonds for federal income tax purposes and such action has been approved by the Agency. In addition, the City shall, prior to entering into an operating or management agreement or lease for the Recreation Facility Property and/or the facilities thereon, provide to the Agency an opinion of counsel acceptable to the Agency that the execution and performance of that operating or management agreement or lease will not affect the tax exempt status of the interest on the Bonds. 10. In contemplation of the provisions of Section 895.2 of the California Government Code imposing certain tort liability jointly upon public entities solely by reason of such entities being Parties to an Agreement as defined in Section 895 of said code, the Parties hereto, as between themselves pursuant to the authorization contained in Sections 895.2 and 895.6 of said code, will each assume the full liability imposed upon it or any of its officers, agents or employees by law for personal injury, property damage or loss to third Parties caused by a negligent or wrongful act or omission of that party occurring in the performance of the Agreement. To achieve the above stated purpose, each party indemnifies and holds harmless the other patty for any damage, loss, cost or expense arising out of its own negligent or wrongful acts or omissions. 11. This Agreement shall be governed by the laws of California and together with the attached exhibits represents the entire agreement of the Parties as to the subject matter of this Agreement. The Parties intend that this Agreement supercede and replace the provisions of Paragraphs 4 and 5 of the Pre- Annexation Agreement dated September 10, 2002 and entered into among the Parties, and, upon execution of this Agreement, said provisions of Paragraph 4 and 5 of the Pre - Annexation Agreement shall have no further force or effect. 758\M168920.6 l8 IN WITNESS WHEREOF, the County, Agency and City have approved the foregoing MEMORANDUM OF AGREEMENT and caused the same to be executed by their duly authorized officers as set forth below. APPROVED AS TO FORM Goldfarb & Lipman Special Couns to the County and Agency By: Lee C. Rosenthal 75e\oa\768920,6 COUNTY By: `�7�c -sdC •I �— County Executive Officer AGENCY By: %�..�s a Executive Director CITY By: C y Manager APPROVED AS TO FORM Stradling Yocca Carlson & Rauth, A Professional Corporation By: 4 Special Counsel to the City la EXHIBIT A FIRE STATION PROJECT SITE MAP 758108 \168920.5 A EXHIEIT S FIRE STATION PROJECT COST ESTIMATE LAND ACQUISITION COSTS NOT TO EXCEED $2,500,000 LWROVEMENT COSTS NOT TO EXCEED $1,600,000 TOTAL $4,100,000 1i EXHIBIT C RECREATION FACILITY PROJECT SITE MAP 758 \0811689205 a a, ACQUISITION COSTS IMPROVEMENT COSTS RECREATION FACILITY PROJECT COST ESTIMATE m-re"Um $7,500,000 TOTAL DEVELOPMENT COSTS NOT TO EXCEED $11,500,000 -�3