HomeMy WebLinkAboutItem 6g. Amendment No. 1 to the Reimbursement Agreement with Covelop, Inc. for the 600 Tank Farm Project (Spec. 2000056-01) Item 6g
Department: Public Works
Cost Center: 4003
For Agenda of: 5/21/2024
Placement: Consent
Estimated Time: N/A
FROM: Timmi Tway, Community Development Director
Prepared By: Luke Schwartz, Transportation Manager
Brent Taylor, Financial Analyst
SUBJECT: AMENDMENT NO. 1 TO THE REIMBURSEMENT AGREEMENT FOR 600
TANK FARM PROJECT
RECOMMENDATION
1. Adopt a Draft Resolution entitled, “A Resolution of the City Council of the City of San
Luis Obispo, California, approving Amendment No. 1 to the 600 Tank Farm
Reimbursement Agreement”; and
2. Authorize the transfer of $267,138.10 from the Airport Area Specific Plan
Transportation Impact Fee undesignated fund balance (Fund 503) to the Development
Agreements project account (2000056-01).
POLICY CONTEXT
Public improvements associated with the 600 Tank Farm Project are being installed in
greater size and capacity than required to serve only the project (i.e. Excess Public
Improvements), qualifying the developer for reimbursement as set forth in San Luis
Obispo Municipal Code Section 4.56.080 and 16.20.110. Because of this, the developer
and City have entered into a Reimbursement Agreement , and that agreement needs to
be amended to update the costs which are the basis of the reimbursement obligation.
REPORT-IN-BRIEF
The Reimbursement Agreement for 600 Tank Farm Road, executed between the City and
Covelop, Inc. (the “Developer”) in February 2022, specifies that the City will provide
reimbursements to the Developer for certain oversized transportation improvements
eligible for reimbursement. Reimbursement is to be provided from a mix of fund sources,
including General Fund and Transportation Impact Fees (TIF). The Reimbursement
Agreement originally included estimates provided by the Developer for the cost of these
improvements; however, since then, the anticipated costs of these improvements have
significantly increased above the original estimates, which requires an amendment to the
agreement.
Page 605 of 888
Item 6g
Need for a Reimbursement Agreement Amendment
Mirroring national and local trends of significant infrastructure construction cost escalation
over the past several years, actual costs for the public improvements included in the
Reimbursement Agreement have escalated significantly beyond original estimates. This
has been exacerbated by added complexity, administrative costs , and delays related to
challenges with regulatory agency permitting and right-of-way acquisition for the Tank
Farm/Santa Fe Roundabout. As a result of these circumstances, the Developer has
submitted change orders to the original cost estimates identifying an additional
$4,818,675 in reimbursable costs, increasing the total reimbursement-eligible project
costs from $5,003,980 to $9,822,654.
The original and updated reimbursement costs are summarized in Table 1 below, and
broken down in detail in Attachment B.
Table 1: Reimbursable Project Cost Summary
Not reflected in the table above are the Developer’s share of these costs, which are not
eligible for public reimbursement, which currently total approximately $5.3 million.
Pursuant to Section 6(a), 6(b), and 6(c) of the Reimbursement Agreement, any inc rease
or decrease in cost must be reflected in the contractor bid or change order and approved
by the City. The developer has submitted change orders and cost documentation totaling
$4,818,675 which exceeds the amounts authorized by Section 6(b) for approval by a City
Engineer ($45,000) or City Manager ($175,000). Since these limits are exceeded , City
Council approval of the cost increase is required. The cost documentation has been
reviewed by the City Engineer, or their official designee, and deemed complete as of April
22, 2024.
Table 2 below provides summary of how the City’s reimbursement obligations are
impacted by these cost increases, and reflects the additional funding required to provide
reimbursement for eligible public improvements.
Area 3
(Santa Fe Road)
Area 4
(Tank Farm Road)
Acacia Creek
Bike Path
Tank Farm Bike
Path PS&E TOTAL
Original Reimbursement
Agreement
(February 2022)
$424,251 $3,976,023 $376,006 $227,700 $5,003,980
Reimbursement Agreement
Amendment #1 (April 2024)$547,286 $7,872,264 $1,060,712 $342,392 $9,822,654
Change $123,035 $3,896,241 $684,706 $114,692 $4,818,675
% Change 29%98%182%50%96%
Reimbursable Costs by Project
Page 606 of 888
Item 6g
Table 2: Reimbursable Costs by Fund Source
As a result of the substantial cost increases, staff is recommending the following actions:
1. Adopt a Resolution (Attachment A) approving Amendment #1 to the 600 Tank Farm
Reimbursement Agreement (Attachment B), and
2. Approve appropriation of $267,138 in undesignated Airport Area Specific Plan
(AASP) Transportation Impact Fee fund balance towards this reimbursement
obligation.
As discussed further below in the Fiscal Impact section, it should be noted that the
approval of the amended Reimbursement Agreement itself does not require the City to
appropriate additional funding at this exact moment or guarantee that the additional
funding needed will be available at a specific date in the future . It does, however, affirm
City’s good faith intent to request appropriation of additional funds at the next budget-
setting opportunity (the 2025-27 Financial Plan) and pursue updates to the Citywide TIF
program to reflect updated costs for the Tank Farm/Santa Fe Roundabout project. There
is already an update to the Citywide TIF program in progress, with plans to present
updated fees to the City Council for consideration in early 2025. Approving these
recommended actions will allow the orderly and timely completion of high priority
transportation improvements and production of additional housing, both of which are
aligned with the City Council’s adopted Major City Goals.
Area 3
(Santa Fe Road)
Area 4
(Tank Farm Road)
Acacia Creek
Bike Path
Tank Farm Bike
Path PS&E TOTAL
General Fund $254,551 $1,560,657 $376,006 $68,310 $2,259,523
Citywide TIF $169,700 $2,415,366 $0 $159,390 $2,744,457
Total $424,251 $3,976,023 $376,006 $227,700 $5,003,980
General Fund $328,372 $2,361,679 $1,060,712 $102,718 $3,853,481
Citywide TIF $218,915 $5,483,121 $0 $0 $5,702,036
AASP TIF $0 $27,464 $0 $239,674 $267,138
Total $547,286 $7,872,264 $1,060,712 $342,392 $9,822,654
$3,853,481
$2,460,000
$1,393,481
$5,969,174
$267,138
$3,718,915
$1,983,121
$9,822,654
Citywide TIF Authorized (On-Site Credits & Off-Site Fees from Benefiting Properties)
Additional Citywide TIF Funds Requiring 2025 Citywide TIF Update
Total
Reimbursement Funds Available or Requiring Further Authorization
General Fund
Already Appropriated
Additional Funds Requiring Future Budget Request
Transportation Impact Fees
Reimbursable Costs by Project
Original Reimbursement Agreement
Amendment #1 to Reimbursement Agreement
Existing AASP TIF Available
Page 607 of 888
Item 6g
DISCUSSION
Background
On February 15, 2022, Covelop, Inc. (the “Developer”) obtained approval for a new
mixed-use development project consisting of 280 residential units and up to 12,500
square feet of commercial uses within the Airport Area Specific Plan. The 11.7-acre
project site is located at 600 Tank Farm Road.
As conditions of approval, the project is required to design and construct several
transportation improvements envisioned in the City’s General Plan Circulation Element,
Airport Area Specific Plan, and Active Transportation Plan. Several of these required
improvements will be constructed in greater size and capacity than required by the project
and are therefore eligible for reimbursement under the City’s Municipal Code. The
improvements which have been identified as eligible for reimbursement include:
1. Santa Fe Road: Construction of a portion of the Santa Fe Road Extension north
of Tank Farm Road (includes two travel lanes, landscaped parkway, northbound
protected bike lane, southbound striped bike lane, and sidewalk on east side)
2. Tank Farm Road: Construction of a roundabout at the intersection of Tank Farm
Road and Santa Fe Road.
3. Acacia Creek Bike Path: Construction of the Acacia Creek Bikeway, a shared-use
bicycle/pedestrian path along the western bank of Acacia Creek, connecting the
Damon Garcia Path network to Santa Fe and Tank Farm Roads.
4. Tank Farm Bike Path Project Specifications and Estimates (PS&E): Advanced
planning and preparation of 65% designs and environmental technical studies to
accelerate future construction of a shared-use pedestrian/bicycle path along Tank
Farm Road connecting Santa Fe Road to Innovation Way.
The City and Developer executed a Reimbursement Agreement on February 18, 20221,
authorizing reimbursement in the amount of up to $5,003,980 to the Developer for eligible
costs related to design, permitting and construction of these improvements that exceed
the development’s fair share costs. This reimbursement included a mix of approximately
$2,259,523 from the General Fund and $2,744,457 from the Citywide TIF. These figures
do not include additional costs for portions of these public improvements that are the sole
responsibility of the developer and not eligible for public reimbursement, which includes
the portions of Santa Fe Road and Tank Farm Road that are considered frontage
improvements for the development, and a portion of the on-site Acacia Creek Bike Path.
Between 2022 and 2023, the City appropriated a total of $2,460,000 in General Funds
towards the 600 Tank Farm reimbursement obligations—covering the full amount of
reimbursement required from the General Fund per the original Reimbursement
Agreement.
1 City Council Resolution 11305 (2022 Series) Approving a Reimbursement Agreement
for 600 Tank Farm Road
Page 608 of 888
Item 6g
The share of the reimbursements coming from the Citywide TIF fund source were to come
from a mix of credits towards the 600 Tank Farm development’s on-site fees, and TIF
fees paid by neighboring off-site development projects that also benefit from these
infrastructure improvements. As of April 2024, there have been no eligible TIF fees paid
by either the Developer or by Benefiting Properties.
See Table 1 and Table 2 above for a summary of the original costs, or Attachment B to
Exhibit 4 of the February 18, 2022 Reimbursement Agreement for a detailed breakdown
of reimbursable project costs and funding sources, as originally approved.
Amendment to Reimbursement Agreement
To address the necessary updates to the projected costs of the reimbursable
improvements, Amendment No. 1 to the Reimbursement Agreement includes:
A. Updating and replacing several of the exhibits to reflect and document the new cost
estimates, the new funding sources/amounts/limits, and providing an updated excerpt
of the Citywide and AASP Transportation Impact Fee Program Project Lists.
B. Adds reference to AASP TIF Fund as a funding source.
C. Adds the City’s intent to allocate the AASP TIF undesignated balance of $267,138
prior to July 1, 2024.
D. Affirms the City’s intent to submit a budget request for an additional $1,393,481 in
General Funds to be used towards this reimbursement obligation during or prior to the
2025-27 Financial Plan. Should the budget requests be declined; staff will request
again at the next available budgeting opportunity until the additional General Fund
appropriation has been approved.
E. Affirms the City’s intent to update the Citywide TIF program to reflect updated project
costs in the amount of $1,983,121 for the Tank Farm/Santa Fe Roundabout project.
This is required to reimburse the developer for elig ible costs. The TIF update is
currently in progress and these updated costs will be incorporated into that new Impact
Fee Study, which is estimated to be presented to City Council early in 2025.
F. Clarifies that since reimbursement requires amending the Citywide TIF program, the
Developer’s fair share percent of the increased project cost coming from the TIF will
need to be subtracted from the Developer’s eligible TIF reimbursement, as the
Developer’s share of this increased cost would not be captured in th e current fee
schedule applied to the 600 Tank Farm development . This fair share increment is
estimated at $33,421, as calculated by the City Transportation Division, and is not
eligible for reimbursement.
It should be noted that Amendment No. 1 to the Reimbursement Agreement includes no
costs or reimbursement funding for right-of-way acquisition. As noted above, due to the
challenges and delays encountered during right -of-way negotiations, there is still much
uncertainty regarding timing and cost with this acquisition. For this reason, no right-of-
way costs are built into the updated agreement—staff expects to return to the Council for
subsequent adjustments to this agreement at a future date when there is greater
confidence on the anticipated costs for this component of the project.
Page 609 of 888
Item 6g
Appropriation of the Airport Area Transportation Impact Fee Fund
Due to the need for additional funding and the lack of eligible impact fees paid by
developer and/or benefiting property owners to date, staff has identified the AASP TIF as
an additional funding source for the reimbursement of certain projects. The AASP TIF
was previously a subarea TIF fee that was ultimately collapsed into the Citywide TIF in
2018. The AASP TIF program collected costs towards Tank Farm Road corridor
improvements, the Tank Farm/Santa Fe Roundabout, the Santa Fe Road Extension, and
future pedestrian/bicycle paths along Tank Farm Road. City Council Approval of
Amendment No. 1 to the Reimbursement Agreement and adoption of the related
Resolution allocates the existing uncommitted fund balance of $267,138 to the
reimbursable project components (as of 4/24/2024), which is not eligible for use for any
other City-led capital improvement projects currently in development. Per AB 1600
requirements, the City could risk the need to forfeit these funds if not used for eligible
projects in a timely manner.
Inclusion of the AASP TIF as a funding source will provide immediate availability of funds
to provide reimbursements for the Developer’s ongoing pre-construction activities on
transportation infrastructure improvements, as well as reduce the amount of additional
appropriation needed from the Citywide TIF Fund.
Appropriation of Additional General Fund
Per the original Reimbursement Agreement, the City has committed to providing a
specific percentage of the reimbursable cost of each improvement from the General Fund,
which represents the costs for these public improvements that cannot be legally collected
via the TIF program. Since the cost of the improvements have increased, the City must
plan to allocate sufficient General Funds in the future to satisfy the updated
reimbursement obligation. The City has already allocated $2,460,000 in General Funds
and would need to request additional $1,393,481 in General Funds at a future budget-
setting opportunity--during or prior to the 2025-27 Financial Plan.
Impact Fee Study to Update the Citywide TIF Program
The existing Citywide TIF program is collecting up to $3 ,500,000 from new development
towards the Tank Farm/Santa Fe Roundabout project. For the City to increase the amount
of TIF credits and/or reimbursements based on the updated costs, the City must complete
a Impact Fee Study to update the Citywide TIF Program to update the project costs for
the roundabout project. It is expected that roughly $1,983,121 in updated project costs
will need to be added to the Citywide TIF Program to fully satisfy the reimbursement
obligation to Developer. An Impact Fee Study is currently in progress which will update
all the City’s Impact Fees, including the TIF programs. Staff is anticipating this Impact
Fee Study will be completed and presented to Council in early 2025. Due to the
uncertainty of the timing for the Impact Fee Study to be completed, and fact that the final
Impact Fee Study and TIF rates may not allow for full collection of the additional
$1,983,121 needed for this reimbursement, the amendment includes a provision that
clarifies if the TIF Program update is not completed by July 1, 2025, then City Staff will
meet with Developer to discuss and explore alternative funding sources which may be
appropriately used towards the reimbursement obligations.
Page 610 of 888
Item 6g
Previous Council or Advisory Body Action
The entitlement process for the 600 Tank Farm development project included review by
the City’s Active Transportation Committee, Planning Commission, and ultimately the City
Council. The following is a list of the specific Council Resolutions and Ordinanc es
approved in conjunction with the entitlement process and original Reimbursement
Agreement:
1. February 15, 2022, Resolution No 11304 – A Resolution Approving the 600 Tank
Farm Development Project
2. February 15, 2022, Resolution No 11305 – A Resolution Approving a
Reimbursement Agreement with Covelop, Inc.
3. February 18, 2022, Resolution No 11307 – A Resolution Approving Amendments
to the Adopted 2021-22 Budget Appropriations
4. March 4, 2022, Ordinance 1708 – Approving a Rezone for Property at 600 Tank
Farm Rd (PR-0005-2021, GENP-0814-2019, SPEC-0407-2020, EID-0608-2020)
Public Engagement
Consistent with the City’s Public Engagement and Noticing (PEN) Manual and the City’s
Municipal Code, the specific Council action requested in this staff report has a “notify”
level of public engagement, which has been accomplished through public notification of
this agenda item and associated staff report.
CONCURRENCE
The City’s Attorney, Community Developm ent Department, Finance Department, Public
Works Department, and Community Services Group have reviewed this staff report and
concur with its recommendation.
ENVIRONMENTAL REVIEW
The proposed Amendment to the Reimbursement Agreement relates only to the financial
mechanism by which the developer’s cost which exceeds their fair share will be
reimbursed and does not cause change to the project or the environment and therefore
no further environmental review is required. The 600 Tank Farm development and related
infrastructure improvements were thoroughly evaluated in the Final Environmental Impact
Report (EIR; State Clearinghouse Number 2020110426) for the project and certified by
Resolution No 11304 (2022 Series), on February 1, 2022
FISCAL IMPACT
Budgeted: No Budget Years: 2023-27
Funding Identified: Yes
Page 611 of 888
Item 6g
Fiscal Analysis:
Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $2,139,255* $0** $2,139,255 N/A
State $0 $0 $0 N/A
Federal $0 $0 $0 N/A
Fees:
AASP TIF
(Fund 503)
$0 $267,138 $267,138 N/A
Fees:
Citywide-TIF
(Fund 507)
$0*** $0*** $0 N/A
Total $2,139,255 $267,138 $2,406,393 N/A
*Reflects $2,460,000 starting balance minus reimbursement s already paid to date.
**No funding request at this time; however, approval of Reimbursement Agreement
Amendment affirms City’s intent to request at least $1,393,481 in additional general funds
in the future, as part of 2025-27 Financial Plan.
***No existing Citywide TIF fund balance to be programmed to 600 Tank Farm
Reimbursement Agreement. Per Agreement, reimbursement from TIF will be from not yet
realized TIF revenues in the form of on-site fee credits from 600 Tank Farm and off -site
TIF fees to be received from other benefiting private development, totaling a commitment
of up to $5,702,036 future Citywide TIF revenues in total towards reimbursement.
As described above, the immediate fiscal impact associated with the proposed
Reimbursement Agreement Amendment would involve appropriating $267,138 in
undesignated fund balance from the AASP TIF fund towards this reimbursement.
Additional fiscal impacts would be realized in the future, as the agreement affirms the
City’s intent to request appropriation of $1,393,481 in additional General Funds at the
2025-27 Financial Plan and prioritize up to $5,702,036 in yet-to-be realized Citywide TIF
funds towards reimbursement to the Developer.
ALTERNATIVES
1. Council could decide not to approve the amendment to the 600 Tank Farm
Reimbursement Agreement. This action is not recommended by staff because the
reimbursement agreement is related to the delivery of a high-priority transportation
improvement that is needed not only to accommodate development of the 600 Tank
Farm development, but additional planned housing and non -residential development
envisioned in the Margarita Area and Airport Area Specific Plans. The reimbursement
agreement is a mutually beneficial agreement that allows the housing project to move
forward without realizing significant carrying costs and uncertainty that would be the
result if reimbursement for these additional costs was not available in the near term.
Page 612 of 888
Item 6g
The infrastructure costs, if not appropriately reimbursed, would delay both the delivery
of housing and important transportation infrastructure. This project is identified as a
“Partnership Project” in the City’s Capital Improvement Plan and includes important
public benefits. Pursuant to the Reimbursement Agreement Section 6(b), change
orders greater than $175,000 require City Council Approval and Section 6(c) specifies
that the City’s approval of a change order shall not be unreasonably withheld, delayed,
or conditioned.
2. Council could direct staff to modify the Amendment to the Reimbursement
Agreement to approve only cost increases associated with Developer’s pre -
construction activities, with staff to return for Council approval for a
subsequent amendment to fund construction costs when there is more
certainty regarding construction schedule for the Tank Farm/Santa Fe
Roundabout. This action is not recommended by staff, as this identification of
additional funding sources enables the Developer to advance the reimbursable
improvements.
3. Council could decide to continue consideration of this item. The City Council
may continue consideration of the recommendation if more information is needed to
make a determination. Direction should be provided to staff regarding the additional
analysis or data needed for the Council to conclude the item.
ATTACHMENTS
A - Draft Resolution adopting Amendment No. 1 to the 600 Tank Farm Reimbursement
Agreement
B - Exhibit A to Resolution - Amendment No. 1 600 Tank Farm Reimbursement
Agreement
Page 613 of 888
Page 614 of 888
R ______
RESOLUTION NO. _____ (2024 SERIES)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, APPROVING AMENDMENT #1 TO THE 600
TANK FARM REIMBURSEMENT AGREEMENT
WHEREAS, Covelop, Inc (Developer) is owner of the real property located at 600
Tank Farm Road; and
WHEREAS, the City Council has approved a residential mixed-use project at 600
Tank Farm Road, which is within the Airport Area Specific Plan (AASP), through a series
of actions and approved entitlements as follows:
1. The Final Environmental Impact Report and associated Mitigation Monitoring
and Reporting Plan (including all mitigation measures therein) for the Project
certified and adopted by Resolution No. 11304 (2022 Series), on February 1,
2022.
2. An amendment to the General Plan (Resolution No. 11304 , 2022 Series),
adopted on February 1, 2022, including amendments to the Land Use/
Circulation Element (“LUCE Update”) adopted by Resolution No 10586 (2014
Series), on December 14, 2014.
3. The AASP as amended by Ordinance No. 1708 (2022 Series), on March 1,
2022.
4. The City’s Zoning Ordinance as amended by Ordinance N o. 1708 (2022
Series), on March 1, 2022.
5. The Vesting Tentative Map SBVD-0407-2021 approved on February 1, 2022.
WHEREAS, there are certain public improvements associated with the 600 Tank
Farm Mixed-Use project that must be installed and are greater in size and capacity than
required to serve only the project (“Excess Public Improvements”), qualifying said Excess
Public Improvements for reimbursement as set forth in San Luis Obispo Municipal Code
Section 16.20.110; and
WHEREAS, on February 1, 2022, the City Council approved Resolution No. 11305
(2022 Series), authorizing the Mayor to execute a Reimbursement Agreement for 600
Tank Farm; and
WHEREAS, on February 18, 2022, the Mayor executed a Reimbursement
Agreement with the Developer which specifies (1) the portion of transportation
improvements to be constructed by Developer and (2) the transportation improvements
eligible for reimbursement; and
WHEREAS, since the execution of the Reimbursement Agreement, antic ipated
costs for transportation improvements to be constructed by developer have increased
substantially. As a result of these increases, the Developer has requested a change order
to update the reimbursable costs of required transportation improvements; and
Page 615 of 888
Resolution No. _____ (2024 Series) Page 2
R ______
WHEREAS, the Developer has presented estimates of the costs to design, permit
and construct said Excess Public Improvements, and fair share proportionality of the
properties that may benefit from the installation of the Excess Public Improvements; and
WHEREAS, the total amount of the requested change order exceeds the authority
limit of the City Engineer ($45,000) and City Manager ($175,000) and therefore must be
approved by City Council; and
WHEREAS, the parties have agreed to resolve the increased costs by amending
the Reimbursement Agreement to update the costs and eligible reimbursable amounts of
the required transportation improvements and to include the increased cost into the
calculation of the Citywide Transportation Impact Fee Program ; and
WHEREAS, the approval of an amendment to the Reimbursement Agreement will
assist in the orderly and timely completion of public infrastructure.
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis
Obispo as follows:
SECTION 1. Recitals. The above recitals are true and correct and are
incorporated herein by this reference.
SECTION 2. Amendment. The “Amendment No. 1 to Reimbursement Agreement
for 600 Tank Farm Road”, attached as Exhibit A, is hereby approved, and the Community
Development Director is authorized to approve minor revisions and execute this
Agreement on behalf of the City.
SECTION 3. The Finance Director is authorized to administer and implement the
Reimbursement Agreement as provided therein.
SECTION 4. The Mayor and City staff are authorized to take any actions necessary
to carry out the intent of this Resolution.
Page 616 of 888
Resolution No. _____ (2024 Series) Page 3
R ______
SECTION 5. Environmental Review. The 600 Tank Farm Mixed-Use
Development Plan and associated Final Environmental Impact Report (FEIR) were
approved and certified by the City Council on February 1, 2022. Installation of the public
improvements contemplated under the Reimbursement Agreement were identified as
required mitigation measures to address significant transportation impacts resulting from
the development proposal. The Reimbursement Agreement relates only to the financial
mechanism by which the developer’s costs in excess of fair share will be reimbursed and
does not implicate any physical change to the project or the environment. Therefore, no
further environmental review is required for this action.
Upon motion of Council Member ___________, seconded by Council Member
___________, and on the following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing resolution was adopted this _____ day of _______, 2024.
___________________________
Mayor Erica A. Stewart
ATTEST:
______________________
Teresa Purrington
City Clerk
APPROVED AS TO FORM:
______________________
J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the
City of San Luis Obispo, California, on ______________________.
___________________________
Teresa Purrington
City Clerk
Page 617 of 888
Page 618 of 888
1
AMENDMENT NO. 1 TO REIMBURSEMENT AGREEMENT
FOR 600 TANK FARM ROAD
This Amendment No. 1 to Reimbursement Agreement for 600 Tank Farm Road
(“Amendment No. 1”) is entered into on the ______ day of _____________, 2024, by and
between the City of San Luis Obispo, a municipal corporation and charter city (“City”) and
Covelop, Inc., a California corporation, or its successor(s)-in-interest, (the “Developer”),
hereinafter referred to in this Amendment No.1 as “Party” and collectively as “Parties”, as
appropriate.
RECITALS
A. WHEREAS, on February 18, 2022, the City and Developer executed a
Reimbursement Agreement (the “Agreement”) for the 600 Tank Farm Road
development (the “Development”), and
B. WHEREAS, as a condition of approval for the Development, Developer is required
to build certain public improvements that are of greater size and capacity than
required to serve only the project. The construction of excess public improvements
qualifies Developer for reimbursement as set forth in San Luis Obispo Municipal
Code Section 16.20.110; and
C. WHEREAS, pursuant to the Agreement, the City will provide reimbursements to
Developer for certain oversized transportation improvements eligible for
reimbursement (“Infrastructure Improvements”), with reimbursement provided
from a mix of fund sources, including City General Fund, Citywide Transportation
Impact Fees (TIF) collected from other off-site Benefiting Properties, and credits
towards Developer’s on-site Citywide TIF obligation for the 600 Tank Farm Road
Project; and
D. WHEREAS, the anticipated costs to design, permit and construct the Infrastructure
Improvements have increased above the estimates initially provided by the
Developer and included the Agreement due to ongoing escalation of construction
costs, and added complexity related to environmental permitting and right-of-way
acquisition. As a result of these circumstances, Developer has submitted change
orders totaling $4,818,675 to increase the total project costs eligible for
reimbursement from $5,003,980 to $9,822,654, a 96% increase overall (See
Exhibit A and B to this Amendment for details); and
E. WHEREAS, pursuant to Section 6(a), 6(b) and 6(c) of the Agreement, any increase
or decrease in cost must be reflected in the Contractor bid or change order
submitted by Developer and approved by the City. Developer has submitted
change orders totaling $4,818,675, which exceed the amounts authorized by
Page 619 of 888
2
Section 6(b) of the Agreement for City Engineer ($45,000), and City Manager
($175,000) approval, and are therefore requiring City Council approval. Cost
documentation submitted by Developer, which has been reviewed by City
Engineer (or their designee) and deemed complete as of April 22, 2024.
F. WHEREAS, the cost for reimbursement-eligible Infrastructure Improvements
exceeds the General Fund amounts previously appropriated by the City, and
amounts that can be legally collected in the current Citywide TIF program for the
Tank Farm/Santa Fe Roundabout project. Availability of funding needed to satisfy
full reimbursement to the Developer will depend on approval of additional General
Fund appropriations and forthcoming amendments to the Citywide TIF program to
increase costs collected from new development for the Tank Farm/Santa Fe
Roundabout project.
AGREEMENT
NOW , THEREFORE, in consideration of the foregoing Recitals, which are hereby
incorporated into the provisions of this Amendment by this reference, and for good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties agree as follows:
1. Effective Date of Amendment. This Amendment No. 1 shall become effective upon
the date that the resolution approving this Amendment No. 1 becomes effective.
2. Amendment. The City and Developer hereby amend the February 18, 2022,
Agreement as follows:
A. Exhibit A to this Addendum replaces Attachment A to Exhibit 4 (Developer
Cost Estimate).
B. Exhibit B to this Addendum replaces Attachment B to Exhibit 4 (Estimated
Cost and Funding Sources).
C. Exhibit C from this Addendum replaces Exhibit 2 (TIF Program Project List).
D. Section 2(i) is amended to add Section 2(i)(vi) as follows:
(vi) Existing uncommitted Airport Area Specific Plan (AASP) TIF fund
funds, not to exceed the amounts programmed in the AASP TIF towards
eligible Infrastructure Improvements.
E. Section 3(a) is replaced with the following:
(a) To budget and appropriate the necessary Eligible Fees to provide
reimbursements, including, but not limited to timely appropriation of
General Fund amounts, and reservation of any Citywide TIF fees paid by
Page 620 of 888
3
Benefitting Properties. To this end, the City has already appropriated
$2,460,000 in General Funds ($1,545,000 at the 2021-22 Mid-Year
Budget; $715,000 at the 2021-23 Financial Plan; $200,000 at the 2023-
25 Financial Plan), and the City Manager presently intends to request
that the City Council, subject to the City Council’s plenary discretion in
the exercise of its budgeting authority and availability of funding,
appropriate $267,138 in existing uncommitted AASP TIF funds prior to
July 1, 2024, and request appropriation of an additional $1,393,481 in
General Funds during or prior to the 2025-27 Financial Plan.
F. Section 3 is amended to add Section 3(h) as follows:
(h) To complete and present to the City Council for consideration a
Impact Fee Study compliant with AB 1600 to update the Citywide TIF
program to reflect updated project costs for the Tank Farm/Santa Fe
Roundabout project (currently included in Citywide TIF Project #14, per
Exhibit 2). It is assumed that an additional $1,983,121 will need to be
collected for the roundabout project in the Citywide TIF to reimburse the
Developer for eligible costs. The Citywide TIF program update is currently
in progress and planned to be presented to the City Council for
consideration in early 2025. If the Citywide TIF program has not been
updated to capture increased costs related to the Tank Farm/Santa Fe
Roundabout by July 1, 2025, City Staff will meet with Developer to
discuss and explore alternative funding sources which may be
appropriately used towards the reimbursement obligation .
G. Section 5 is amended to add Section 5(f) as follows:
(f) Where reimbursement to Developer requires amending an existing TIF
program to increase costs collected in the TIF for eligible Infrastructure
Improvements, the fair share percent of the increased project cost
attributable to the 600 Tank Farm development will be subtracted from
the Developer’s eligible reimbursement. It is understood that the Citywide
TIF program will need to be amended to increase fees collected to cover
the increased cost of the Tank Farm/Orcutt Roundabout project by
approximately $1,983,121. Because the 600 Tank Farm development is
vested under a Citywide TIF rate schedule that does not include this
additional cost, the fair share portion of this cost attributed to the 600
Tank Farm development will be subtracted from the reimbursement to
Developer coming from the Citywide TIF fund source. This fair share
amount is calculated at approximately 1.69% of the $1,983,121 project
cost increase ($33,421) based on the traffic growth projections and trip
generation rates published in the City’s 2019 Citywide TIF Update Impact
Fee Study.
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4
3. Remainder of Agreement Unchanged. Except as specifically stated herein, the
February 18, 2022 Agreement remains in full force and effect.
4. Counterparts. This Amendment No. 1 may be executed in counterparts, each of
which shall be deemed an original, but which together shall constitute one and the
same instrument.
5. Authority. The parties hereby represent that the persons executing this
Amendment are expressly authorized to do so for and on behalf of the parties.
6. Exhibits. The following exhibits are incorporated into this Amendment for
reference.
A. Exhibit A – Attachment A to Exhibit 4, as Amended (Updated Developer
Cost Estimates)
B. Exhibit B – Attachment B to Exhibit 4, as Amended (Updated Estimated
Cost and Funding Sources)
C. Exhibit C – Exhibit 2, as Amended (TIF Project List)
IN WITNESS WHEREOF, the Parties have executed this Amendment No. 1 as of the first
date above.
DEVELOPER:
Covelop, Inc.
By: _______________________________
Pat Arnold, President
By: _______________________________
Damien Mavis, Secretary
CITY:
City of San Luis Obispo, a California Charter City and Municipal Corporation
By: ________________________________
Timothea Tway, Community Development Director
APPROVED AS TO FORM AND LEGAL EFFECT:
By: _________________________________
J. Christine Dietrick, City Attorney
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5
ACKNOWLEDGMENT
State of California }
County of San Luis Obispo }
On _____________ , before me, _______________________________, Notary Public,
Date Name and Title of the Officer
personally appeared
Name of Signer(s)
,
who proved to me on the basis of satisfactory evidence to be the person(s) whose
name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she
/they executed the same in his/her/their authorized capacity(ies), and that by his/her/
signature(s) on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the
foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature _____________________________
Signature of Notary Public Place Notary Seal Above
A Notary Public or other officer completing this certificate verifies only the identity of the
individual who signed the document to which this certificate is attached, and not the
truthfulness, accuracy, or validity of that document.
Page 623 of 888
EXHIBIT A
Attachment A to Exhibit 4 (Developer Cost Estimate), as Amended
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EXHIBIT B
Attachment B to Exhibit 4 (Estimated Cost and Funding Sources), as Amended
Uses Santa Fe Road
(Area 3)
Tank Farm Road
(Area 4)
Acacia Creek
Bike Path
Tank Farm Bike
Path PSE Total
Design 30,306.93$ 262,682.72$ 36,024.83$ 189,750.00$ 518,764.48$
Rights of Way 37,375.00$ 525,500.00$ -$ -$ 562,875.00$
Direct Expense 316,159.86$ 2,837,596.79$ 475,468.73$ -$ 3,629,225.38$
Contingency 40,409.24$ 350,243.63$ 62,049.67$ 37,950.00$ 490,652.54$
Total 424,251.03$ 3,976,023.14$ 573,543.23$ 227,700.00$ 5,201,517.40$
Reimbursement Sources Santa Fe Road
(Area 3)
Tank Farm Road
(Area 4)
Acacia Creek
Bike Path
Tank Farm Bike
Path PSE Total
General Fund 254,550.61$ 1,560,656.94$ 376,005.65$ 68,310.00$ 2,259,523.20$
Offsite Paid TIF (benefiting properties)120,555.17$ 1,715,876.15$ -$ 159,390.00$ 1,995,821.32$
Direct Project Contribution -$ -$ 197,537.58$ -$ 197,537.58$
Onsite TIF (credits)49,145.24$ 699,490.05$ -$ -$ 748,635.29$
Total 424,251.02$ 3,976,023.14$ 573,543.23$ 227,700.00$ 5,201,517.39$
Total Eligible for Public Reimbursement 424,251.02$ 3,976,023.14$ 376,005.65$ 227,700.00$ 5,003,979.81$
Uses Santa Fe Road
(Area 3)1
Tank Farm Road
(Area 4)2
Acacia Creek
Bike Path3
Tank Farm Bike
Path PSE4 Total
Design 78,071.72$ 448,912.38$ 15,000.00$ 342,391.80$ 884,375.90$
Rights of Way -$ -$ -$ -$ -$
Construction Costs 145,223.40$ 4,951,060.65$ 824,013.20$ -$ 5,920,297.25$
Soft Costs5 302,207.76$ 1,729,632.11$ 98,096.81$ -$ 2,129,936.68$
Construction Contingency 21,783.51$ 742,659.10$ 123,601.98$ -$ 888,044.59$
Total 547,286.39$ 7,872,264.24$ 1,060,711.99$ 342,391.80$ 9,822,654.42$
Reimbursement Sources Santa Fe Road
(Area 3)1
Tank Farm Road
(Area 4)2
Acacia Creek
Bike Path3
Tank Farm Bike
Path PSE4 Total
General Fund 328,371.83$ 2,361,679.27$ 1,060,711.99$ 102,717.54$ 3,853,480.64$
Citywide TIF
(On-Site Credits and Off-Site Fees from Others)218,914.56$ 5,483,121.13$ -$ -$ 5,702,035.68$
Airport Area TIF (Existing Fund Balance)-$ $27,463.84 -$ 239,674.26$ 267,138.10$
Total Eligible for Public Reimbursement 547,286.39$ 7,872,264.24$ 1,060,711.99$ 342,391.80$ 9,822,654.42$
Cost Increase ($)123,035.37$ 3,896,241.10$ 684,706.34$ 114,691.80$ 4,818,674.61$
Cost Increase (%)29%98%182%50%96%
Direct Developer Contribution6 306,573.00$ -$ 5,309,848.96$
3 Excludes developer share of costs ($306,573), which is equivalent to construction off on-site sidewalk in lieu of wider Class I path.
6 Direct Developer Contribution includes share of improvement costs not eligible for public reimbursement, including 600 Tank Farm
frontage improvements along the Santa Fe Extension, within the Tank Farm/Santa Fe Roundabout, and the equivalent cost for a standard
sidewalk along the Acacia Creek.
4 30% from GF; 70% from Citywide TIF
Amended -- Attachment B to Exhibit 4
Estimated Costs and Funding Sources
1 60% of cost from GF; 40% from Citywide TIF
$5,003,275.96
5 Soft costs include expenses related to permitting, soils testing/monitoring, construction management and admin., bonding, etc.
2 Costs split 30% GF and 70% Citywide TIF. No right-of-way costs included in this agreement per Amendment #1. No more than $3,500,000
may be reimbursed from Citywide TIF for Tank Farm/Santa Fe Roundabout until Citywide TIF program is amended to update cost this
project. If TIF is amended to increase cost collected for this project, the fair share of this cost increase (1.7% of increase) will be
subtracted from the reimbursement to 600 Tank Farm Developer from the TIF fund source. This adjustment is not included in the values
presented in this table.
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EXHIBIT C
Exhibit 2: Adopted TIF Project Lists
Citywide TIF (Adopted 7/2/2019)
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Airport Area Specific Plan TIF (Adopted 8/23/2005)
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