HomeMy WebLinkAboutItem 5d - Authorize City Manager to Execute Avila Ranch Settlement Agreement Item 5d
Department: Community Development
Cost Center: 4003
For Agenda of: 11/4/2025
Placement: Consent
Estimated Time: N/A
FROM: Timmi Tway, Community Development Director
Prepared By: Callie Taylor, Senior Planner
SUBJECT: AUTHORIZE CITY MANAGER TO EXECUTE AVILA RANCH
SETTLEMENT AGREEMENT
RECOMMENDATION
Authorize City Manager to execute the draft Avila Ranch Settlement Agreement
(Attachment A), including all attachments and associated agreements contained therein,
and disperse escrow funds to resolve a 2022 dispute and protest regarding development
impact fees and other project implementation items.
REPORT-IN-BRIEF
In 2022, a dispute arose between the City and the Avila Ranch developer over the
interpretation of several items included in the project’s Development Agreement. Avila
Ranch submitted numerous letters to the City in which they protested the payment of certain
impact fees under the Development Agreement. On March 17, 2023, City Council met in
closed session regarding the anticipated litigation. It was determined that the dispute would
be best resolved through a negotiated settlement overseen by a neutral third party in
mediation. City Council authorized staff to proceed with execution of a tolling agreement of
statutes of limitations and authorized staff to participate in mediation in an attempt to resolve
the dispute.
Between August 2023 and September 2025, City staff, legal counsel, and the Avila Ranch
developer participated in many meetings, including several with a mediator, to work towards
practical solutions to resolve the contested issues. Through mediation, the City and the
developer came to agreement regarding the fees in question. A fiscal reconciliation was
completed to evaluate all development impact fees that were being charged to the Avila
Ranch project. This detailed permit by permit analysis was done to ensure accuracy of the
permit charges and ensure consistency with the approved Development Agreement.
A draft Settlement Agreement (Attachment A) has been prepared to resolve the 2022
dispute. The agreement includes a list of action items for both parties, as well as
disbursement of the disputed funds which are being held in an escrow account. The
Settlement Agreement is being presented to City Council for authorization to execute the
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agreement, including all attachments and associated agreements contained therein, and
close the dispute.
POLICY CONTEXT
A Settlement Agreement is a formal action to resolve a legal dispute, and therefore, City
Council authorization is required to execute a Settlement Agreement. This report is being
presented to City Council with a request for Council to authorize the City Manager to
execute the draft Avila Ranch Settlement Agreement and disperse escrow funds to
resolve the 2022 dispute and protest regarding development impact fees and other
project implementation items. Action items identified in the Settlement Agreement,
including recordation of additional agreements, deeds, and notifications, would be
completed upon City Council authorization to execute the Settlement Agreement.
Background
On September 19, 2017, the City Council approved the Avila Ranch Develo pment Plan,
Vesting Tentative Tract Map (VTTM) 3089, and Final EIR by Resolution No. 10832 (2017
Series), and a Development Agreement (DA) between the City and Avila Ranch, LLC by
Ordinance No. 1639 (2017 Series). Article 5 of the Development Agreement sets forth
various financial commitments of the City and Avila Ranch, including the payment of certain
development impact fees by Avila Ranch to defray the costs of the project’s impacts on City
infrastructure. The agreement was amended in April 2019 to address an update to the Los
Osos Valley Road (LOVR) Interchange Transportation Impact Add-On Fee to reflect the
land uses within the Avila Ranch project.
Per the Development Agreement, the project developer is required to pay the project’s
fair share of costs to mitigate project impacts as identified in the EIR, Avila Ranch
Development Plan, conditions of approval, or as otherwise specified in the Development
Agreement. The Development Agreement is a contract and can alter and take precedent
over any vested fees or expirations that are normally tied to a vested tentative map. The
Development Agreement was negotiated as a method to extend the life of the Avila Ranch
tentative map to provide a 20-year project build out, provided that there is a “true up” of
fees at the time each final map phase is recorded. This provides the developer with the
time needed to build out the project while also providing the City with the funds needed
to provide services and infrastructure at the time of phased project build out. The
Development Agreement stipulates that impact fees for the project shall be those in effect
when each phase of the final map is recorded. The City may adjust the development
impact fees not more than once a year wi th changes no greater than the inflation index
identified upon imposition of the fee.
In 2022, a dispute arose between the City and the Avila Ranch developer over the
interpretation of the project’s fees identified in the Development Agreement, as well as
several other items related to project implementation. Avila Ranch submitted numerous
letters to the City in which they protested the payment of certain development impact fees.
Under San Luis Obispo Municipal Code Section 4.56.060, a party may protest the imposition
of impact fees by paying them under protest and providing a statement of reasons for the
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protest. Avila Ranch paid those fees under protest at the time of building permit issuance,
while demanding a refund of portions of the impact fees paid. The developer asserted that
building permits were being overcharged by approximately $19,000 per permit.
The 2022 dispute between the Avila Ranch developer and the City involved a number of
project implementation issues, including the following six (6) primary items:
1) Interpretation of the Development Agreement, with respect to development
impact fees and vesting rights,
2) Entitling condominium units in Phase 4 of Avila Ranch,
3) Reimbursements pursuant to the Private Infrastructure Reimbursement
Agreement,
4) City acceptance of Basin A as a public improvement,
5) Implementation of the Down Payment Assistance Program with respect to
Workforce Housing units, and
6) Distribution and location of “for-rent” affordable housing units in Phase 3.
On March 17, 2023, the City Council met in closed session regarding the anticipated
litigation. Thereafter, the parties executed a tolling and escrow agreement to allow the
parties to continue working through this dispute without Avila Ranch commencing litigation
against the City. Because there are short timelines for Avila Ranch to file suit pursuant to
applicable Government Code sections, the tolling agreement suspended those deadlines to
give the parties an opportunity to attempt a resolution of the dispute without litigation. The
tolling agreement allowed Avila Ranch to continue to develop Phase 1 of the project by
paying the development impact fees under protest.
The tolling agreement also required that the City would escrow the disputed fee amount
pending final resolution of the dispute. As conditioned by the tolling agreement, the City
deposited the sum of $1,136,000 to the escrow account, which was funded from the
respective development impact fee accounts for which the disputed fees were deposited.
This amount represented the contested impact fees (approximately $19,000 per permit) for
the first 60 building permits that had been previously issued in Phase 1. Throughout the
build out of the remaining dwelling units in Phase 1 in 2023 and 2024, Avila Ranch continued
to deposit $19,000 per dwelling unit (the protested impact fee amount) into the escrow
account, pending resolution of the dispute. The escrow account currently retains a total sum
of $2,846,000 of disputed fees.
DISCUSSION
On August 10, 2023, August 24, 2023, and November 16, 2023, City staff, the Avila Ranch
developer, and legal counsel for each party engaged in voluntary mediation sessions with a
mediator. Further discussions continued between the City, the developer, and legal counsel
for each party through September 2025. A draft Settlement Agreement (Attachment 1) has
been prepared to memorialize all items agreed upon through those discussions and to
resolve all claims relating to the dispute.
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The resolutions for each item addressed in the Settlement Agreement are consistent with
the Avila Ranch Development Agreement and applicable law. Development impact fees for
the project, which are specified in the Development Agreement, are not modified by the
Settlement Agreement. The Settlement Agreement memorializes the agreement between
the City and the Avila Ranch developer to clarify and properly implement the Development
Agreement as it was originally intended.
Resolution for the six (6) primary disputed items is reflected in the Settlement Agreement as
follows:
Dispute Item #1: Interpretation of the Development Agreement, with respect to
development impact fees and vesting rights
Central to the dispute between the City and Avila Ranch is the timing of the “imposition” of
the impact fees. Avila Ranch paid all Phase 1 impact fees under protest at the time of
building permit issuance, asserting the misapplication and/or miscalculation of certain
impact fees to the project. While the parameters for fee imposition and escalation are
identified in the Avila Ranch Development Agreement, it is a relatively complicated fee
structure to track and implement, which led to some confusion and misapplication in the
early stages of the project’s permit process.
Through mediation, a fee schedule for Phase 1 of Avila Ranch was developed to clearly
define each fee described in the Development Agreement, as interpreted and agreed to
by both parties. The fee schedule does not make any changes to the provisions of the
Development Agreement, but ensures clarity in application. Impact fees for Police, Fire,
Traffic (LOVR Base Fee, which is the Citywide Transportation Impact Fee for properties
within the LOVR Sub Area, and LOVR Add On Fee), Water, and Wastewater are imposed
on the project by the Development Agreement. Once the parties were in agreement to
the applicable fees listed in the Phase 1 fee schedule, a thorough reconciliation analysis
was prepared jointly by the City and the Avila Ranch developer to identify overpayment
and underpayment of each building permit issued for Phase 1. Exhibit “1” of the
Settlement Agreement is an “Impact Fee Summary” which summarizes this lot -by-lot fee
reconciliation. The Impact Fee Summary details the required impact fee obligations, the
impact fees paid by Avila Ranch, the credits issued by City, the reconciliation credits to
be issued as part of this Settlement Agreement, and the final overpayment/underpayment
amounts for Phase 1 permits. Tables 1 and 2 below summarize the results of the Impact
Fee Summary.
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Table 1: Avila Ranch Developer Underpaid Impact Fees (Phase 1)
Police $ 8,804.60
Table 2: Avila Ranch Developer Overpaid Impact Fees (Phase 1)
Fire $ 93,887.06
Traffic LOVR Base Fee $ 803,454.21
Traffic LOVR Add On Fee $ 48,858.23
Water $ 171,888.01
Wastewater $ 159,633.77
The Avila Ranch developer is entitled to fee credits towards impact fees and/or
reimbursements where they have installed certain infrastructure projects with citywide
benefit or additional capacity. Several offsite transportation improvements have been
constructed by the Avila Ranch developer and a parcel for a future fire station (to be
constructed by Avila Ranch) has been dedicated to the City. In the early stages of
issuance of the project permits, some of these impact fee credits to the developer were
not yet available and, in some cases, available credit balances were not consistently
applied to eligible building permits. The fee reconciliation developed through med iation
accurately applies the project’s Fire and Traffic impact fee credits earned by the developer
to eligible permits. The refund amounts that are owed to the Avila Ranch developer for
Fire, Traffic LOVR Base Fee, and Traffic LOVR Add On Fee (identified on the tables
above) are the result of the fee credits that are now available. This reconciliation is typical
for Credit/ Reimbursement Agreements because actual construction costs are typically
not known until the developer completes construction and provides the City with records
of actual costs.
Per the Development Agreement, the City is permitted to escalate Avila Ranch impact
fees, except the Water and Wastewater fees, once annually by the inflationary index in
place at the time the final map for that phase records. The inflationary index in place at
the time of the recordation of the Phase 1 Final Map is California Construction Cost Index
(“CCCI”), as described in Section 4.56.040 of the City’s Municipal Code. With respect to
Phase 1 only, the Development Agreement states that Water and Wastewater impact
fees may be adjusted once annually by the Consumer Price Index (Los Angeles, All Urban
Consumers, All Items) (“CPI”). The overpayment on the Water and Wastewater fees
(identified on the tables above) is simply the difference between the fees escalated by
CCCI percentage change and the fees escalated by CPI percentage change. Due to the
incorrect escalation of Phase 1 Water and Wastewater fees by the City in the early stages
of the project using CCCI rather than CPI, the City must refund the overpayment on Water
and Wastewater fees in order to be compliant with terms of the Development Agreement.
The Settlement Agreement identifies disbursement of the escrow funds. The amount
currently held in escrow is $2,846,000, which includes approximately $19,000 in impact
fees which were paid under protest for each building permit in Phase 1. Concurrently with
the execution of the Settlement Agreement, the parties will direct the escrow holder to
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immediately release a total sum of $1,577,083.32 to the City, and a total sum of
$1,268,916.68 the Avila Ranch developer. Upon receipt of escrow funds, the City will
deposit funds to the respective development impact fee accounts as identified by the
reconciliation analysis.
It is worth noting that this disbursement of funds is not a negotiated amount, but rather, a
precise accounting of the corrected fees and credits applied to the Phase 1 building
permits at Avila Ranch, based on accurate implementation of the approved De velopment
Agreement. The reconciliation of Avila Ranch fees and disbursement of escrow funds
does not impact other City projects or programs. The disputed fees have been held in
escrow and have not been applied to impact fee program fund balances that were
otherwise appropriated or earmarked for other projects or programs .
The City and the developer are now in agreement on the basis for imposition and annual
escalation of impact fees and credits for the remaining phases of the project. With respect
to all future phases (i.e. Phases 2, 3, 4, and 5) of the project, each phase will vest
consistent with impact fees in place at the time of recordation of the final map for that
phase. Both parties acknowledge that Development Agreement Section 5.04.2(C)
allowed for CPI increases on Water and Wastewater fees for Phase 1 only. All subsequent
phases will be increased by the City’s current inflationary index, which is CCCI, as
described in Section 4.56.040 of the Municipal Code. CCCI will be applied to all impact
fees applicable to the project, including Water and Wastewater impact fees, for Phases 2
through 5 of Avila Ranch.
Dispute Item #2: Entitling condominium units in Phase 4 of Avila Ranch
In 2022, the Avila Ranch developer asserted that the original project entitlements provided
for the processing of a “condominium plan” with the Department of Real Estate without
requiring additional subdivision of Phase 4 pursuant to the Subdivision Map Act. Through
the mediation process, the developer acknowledged that the City’s Subdivision Ordinance
requires approval of a subdivision map for condominium purposes in order to establish for-
sale condominiums in Phase 4.
The Settlement Agreement states that the Avila Ranch developer shall submit an application
for a tentative map for the condominium subdivision of the six lots currently designated as
Phase 4 of the project. This resolution is consistent with the City’s Subdivision Ordinance
and the Subdivision Map Act. The developer’s entitlement application for a Phase 4 tentative
map for condominium purposes was submitted in March 2025 and is currently being
processed.
Dispute Item #3: Reimbursements pursuant to the Private Reimbursement Agreement
On June 18, 2019, the City and Avila Ranch executed a Private Infrastructure
Reimbursement Agreement to provide a mechanism by which Avila Ranch will be
reimbursed for certain transportation improvements, constructed by Avila Ranch, which
benefit properties in the City and County of San Luis Obispo, beyond that of the project’s
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proportionate share. Exhibit “A” to the Private Reimbursement Agreement identifies the
properties which benefit from these transportation improvements and attributes a
“proportionate share” of the actual costs of the improvements to each property. For
benefitting properties within the City’s jurisdiction, the City will require payment of the
prorated shares of the reimbursable costs as a condition of any discretionary entitlement or
approval. For benefitting properties in the County’s jurisdiction, City will require benefitting
properties to pay their prorated share of documented reimbursable costs as a condition of
annexation.
As part of the 2022 dispute, the Avila Ranch developer cited concerns regarding payment
of reimbursable costs as part of the East Airport Annexation. The East Airport Annexation
was conditioned to pay the City a combined total of $1,000,000 as a Traffic Impact Fee
Payment to fulfill the annexation property's participation in the City's citywide transportation
impact fee program and/or other area transportation improvement reimbursement
obligations as stipulated in the “Pre-Annexation Agreement” dated March 17,
2020. Payment of those funds was processed through Statewide Community Infrastructure
Program (“SCIP”), which took several years to complete. The City is now in possession of
the required $1,000,000 Traffic Impact Fee Payment provided as part of the East Airport
Annexation.
The Avila Ranch Private Reimbursement Agreement estimates that properties within the
East Airport Annexation area have a proportionate share of improvements installed by Avila
Ranch in the amount of $478,491. As identified in the Settlement Agreement, $417,452 from
the East Airport Traffic Impact Fee Payment will be reimbursed to Avila Ranch upon
execution of the Settlement Agreement for improvements which are now complete and final
cost documentation has been provided. In addition, $61,039 will be held by the City and
reimbursed to Avila Ranch upon City approval of cost documentation for the South
Higuera/Vachell intersection improvement which Avila Ranch is constructing.
The City will continue to track development applications for the benefiting properties and
inform the owners of their obligation to provide reimbursement for the infrastructure work
Avila Ranch has completed as allowed by applicable law. As part of the Settlement
Agreement, the City agrees to record a Memorandum and Notice of Reimbursement
Agreement against all benefitting properties, which is required by the terms of the original
Reimbursement Agreement.
Dispute Item #4: Acceptance of Basin A as a public improvement
Basin A is an approximately 2-acre bioretention basin located within Lot 30 of Phase 1 of
Avila Ranch. Basin A is a deep basin (greater than 2-feet deep) providing flood control for
Phases 1 through 5. Due to high ground water in the area, Basin A holds water year-round.
After construction of the basin, a dispute arose between the City and Avila Ranch over
whether Basin A was constructed and is performing as designed and intended. Avila Ranch
has asserted that Basin A was constructed as approved by the City and is performing as
intended. The City has asserted that although Basin A may have been constructed as
approved, it is not performing as expected in that it has standing water year-round. The City
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had concerns regarding the costs of long-term maintenance of this basin, and has therefore
not accepted ownership of the improvement.
The City and the developer met with a panel of experts in 2023 and 2024 to provide
background on the design, construction, and operation of Basin A. The panel of experts
were gathered to answer extensive questions from the City to prove that the basin was
constructed correctly and to look at potential options to determine how to proceed. The
experts explained that groundwater can fluctuate over time, and it was determined that
between the time of testing exploration in 2015 and construction of the basin in 2022,
ground water in the area rose. Continued flow of groundwater into Basin A is comin g from
the storm drain lines and their adjacent sand backfill. It does not appear that groundwater
is coming from the bottom of the basin. The project’s Final EIR and all relevant regulatory
documents were analyzed, and it was found that nothing in those documents prohibit the
basin as currently constructed. Two engineering consultants (RRM and Wallace Group)
confirmed that the volume of water storage needed for the project is provided in Basin A.
An updated Stormwater Control Plan was provided. A maintenance plan and cost
estimates were developed by consultants, including a cost comparison to that of a dry
basin. A biological evaluation was provided, which states that the basin is a stormwater
facility and not considered a jurisdictional wetland. Project en gineers confirmed that all
other basins and stormwater improvements within future phases of Avila Ranch are
designed as shallow basins that will not hold water for longer than 24 hours.
In order to bring resolution to this dispute, the parties agree that the Avila Ranch developer
will continue to own and maintain Basin A, at its expense, until the completion of construction
of the for-sale single family units in Phase 1, 2, and 3. This is expected to be approximately
a 5-year timeframe. Avila Ranch will secure its faithful performance of the obligations by
providing a separate maintenance bond in the sum of $182,500, which is based upon the
estimated annual cost of maintenance multiplied by 5 years.
Park A at Avila Ranch is co-located with Basin A on Lot 30 of Phase 1. Since the
improvements are located on a single parcel, the City has not yet accepted Park A for
ownership and maintenance. Upon execution of the Settlement Agreement, Park A will be
separated from Basin A by deed, and the City will accept ownership and maintenance of
Park A upon recordation of the deed. Construction of Park A has been completed with no
outstanding issues. Staff recommends that the City Council authorize acceptance of Park A
in conjunction with execution of the Settlement Agreement.
Upon completion of the single family homes Phases 1, 2, and 3, Avila Ranch and City staff
will meet and confer regarding the acceptance of Basin A. Avila Ranch will provide
documentation from a qualified biological consultant to confirm that there are no additional
permits required for the maintenance or operation of Basin A from other regulatory agencies
(e.g. Regional Water Quality Control Board, California Department of Fish and Wildlife, etc.).
Other requirements include confirmation of compliant fencing around Basin A, confirmation
that the capacity of Basin A is equivalent to its design capacity and has not been materially
reduced through means of siltation or sedimentation, and that construction of improvements
and homes in Phases 1 through 3 have not materially contaminated Basin A. Avila Ranch
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will provide cost maintenance documentation to show that the annual scope of the
maintenance activities performed by Avila Ranch for Basin A is similar to the City’s originally
estimated scope and cost of annual maintenance for Basin A as detailed in the Community
Facilities District budget. The City may request pond aeration be installed by Avila Ranch
prior to acceptance, if deemed necessary. Provided that Basin A meets these criteria for
acceptance, the City will accept Basin A in its entirety, take over the maintenance of the
basin, and release the developer from the maintenance bond upon completion of Phases 1,
2, and 3 (anticipated to occur in 5 years). Said acceptance shall be in accordance with
Municipal Code Section 16.20.230 without further conditions or discretionary approvals.
Dispute Item #5: Implementation of the Down Payment Assistance Program for the
Workforce Housing units
As required by the Avila Ranch Development Agreement, the developer is required to
provide an amount of 5% of the purchase price up to $20,000 as a "silent second" to the
initial purchasers of the 25 units in the Workforce Housing Incentive Program. As part of the
2022 dispute, Avila Ranch asserted that requiring the developer to provide down payment
assistance was inconsistent with lending practices and violated commercial lender rules and
regulations.
In an effort to avoid conflict with commercial lending practice, Avila Ranch agrees to provide
the required matching down payment assistance to a City fund, and the City will administer
the down payment assistance program for the development. The workforce units are
required to be occupied by an income-qualifying workforce housing household for a
minimum of ten (10) years. If resold within this ten-year period, the units would need to be
sold to another income qualifying workforce housing buyer and the 10-year deed restriction
would reset to 10 more years with the new buyer of the home. The down payment assistance
loan would be repaid upon sale of the unit or refinancing, and the proceeds would be placed
in a revolving loan fund to assist future workforce, moderate-, or lower-income home buyers
within the City.
Unlike a reduction in price that would be captured by a future seller at the end of the
affordability term, this assistance would continue throughout the life of the funds to assist
affordable home buyers within the City. This will establish a revolving loan fund of
approximately $500,000 to be administered by the City of San Luis Obispo. The parties
agree that once paid, this contribution by Avila Ranch constitutes compliance with the down
payment assistance obligations under Exhibit G of the Development Agreement. The
developer acknowledges that the down payment assistance funds will be subject to an
interest-bearing promissory note, secured by a deed of trust in favor of the City. The City
may utilize said recouped down payment assistance funds in conjunction with affordable
housing assistance throughout the City of San Luis Obispo, consistent with the City’s Down
Payment Assistance Program.
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Dispute Item #6: Distribution and location of “for-rent” affordable housing units in Phase 3
Exhibit “G” to the Development Agreement requires a total of 40 low- and moderate-income
“for-rent” apartment units to be constructed in Phase 3 (the R-4 zoned portion of the project).
This was originally contemplated to be achieved by the developer’s dedication of a 1.2-acre
parcel (Lot 300) to an affordable housing provider for the construction of 24 lower-income
apartments, and by providing 8 low-income and 8 moderate-income apartments to be
dispersed throughout the market rate for-rent apartments on Lot 301. With respect to the
location of affordable units, the Avila Ranch developer asserted that the unit distribution of
the 8 low-income and 8 moderate-income to be constructed Lot 301 was impractical and
requested a modification of said distribution.
The City, the Avila Ranch developer, and the affordable housing provider (C&C
Development) commenced discussions in 2022 regarding the construction and
development of the affordable units. In 2023, Avila Ranch and C&C Development submitted
a Phase 3 Development Review application which proposed increasing the number of
affordable units on the project site through a density bonus to include an additional 19
affordable units. On January 23, 2024, in conjunction with the Phase 2/3 Final Map
acceptance, the City Council reviewed a draft Phase 3 Affordable Housing Agreement which
included transfer of the 8 moderate-income and 8 low-income units to the C&C Development
affordable housing site in exchange for the addition of 19 affordable moderate-income
density bonus units. On February 14, 2024, the Planning Commission approved a density
bonus and site design for the Phase 3 (R-4 zone) multifamily sites. The Phase 3 Affordable
Housing Agreement was recorded on April 1, 2025, to reflect this affordable housing
distribution. Avila Ranch has dedicated the 1.2-acre parcel (Lot 300) to the affordable
housing provider as required by the Development Agreement, who will construct a total of
32 low-income and 27 moderate-income for-rent affordable housing units.
In order to ensure that the affordable housing site is completed earlier in the project, as
opposed to the last phase of the project, the Phase 3 Affordable Housing Agreement states
that the City will not issue building permits for Avila Ranch’s 500th unit until the affordable
housing provider begins construction on Lot 300. Construction of the affordable housing site
shall be substantially completed prior to the issuance of a building permit for the 550th unit
within Avila Ranch. If the affordable housing provider fails to construct the 32 low-income
and 27 moderate-income for-rent affordable housing units, the obligation remains with the
Avila Ranch developer to complete.
Previous Council or Advisory Body Action
The following City Council or Advisory Body actions have occurred relevant to the project:
Vesting Tentative Tract Map (VTTM) Tract 3089, Avila Ranch Devlopment Plan,
and the Final EIR were approved by the City Council on September 19, 2017, by
Resolution No. 10832 (2017 Series).
The Avila Ranch Development Agreement was adopted by the City Council on
October 3, 2017, by Ordinance No. 1639 (2017 Series).
Avila Ranch Community Facilities District (CFD) No. 2017 -1 was created on
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November 21, 2017 by Ordinance No. 1642 (2017 Series), which levies a special
tax within the CFD providing a funding source for maintenance and operation of
facilities within the District.
The final map for Tract 3089 Phase 1 was approved by City Council on December
4, 2018, by Resolution No. 10968 (2018 Series).
The City Council adopted Resolution No. 11393 (2023 Series) for partial
acceptance of public improvements and certification of completion of required
private improvements for Tract 3089 Phase 1 on February 21, 2023.
Public Engagement
An extensive public review process was completed with the approval of the Tentative Map
and Avila Ranch Development Plan, as well with the Draft and Final EIR. The current
request for City Council authorization to execute the Avila Ranch Settlement Agreement
has a “notify” level of public engagement, which has been accomplished through this
agenda item and associated staff report.
CONCURRENCE
The Community Development Director, Public Works Director, Utilities Director, Parks
and Recreation Director, and City Attorney concur with the recommended action.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act (CEQA) does not apply to the recommended
action in this report because the action does not constitute a “Project” under CEQA
guidelines Section 15378. The Settlement Agreement does not change any aspect of the
approved Avila Ranch project, nor does it introduce the potential for any new
environmental impacts. Therefore, the proposed action does not require further analysis
under CEQA.
FISCAL IMPACT
Budgeted: Yes Budget Year: Annually beginning 2025-26
Funding Identified: Yes
Fiscal Analysis:
Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund
State
Federal
Fees
Other:
Total $0 $0 $0 $0
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The distribution of funds identified by the Settlement Agreement represent a complete fee
reconciliation which was done to ensure that fees were accurately charged in accordance
with the Avila Ranch Development Agreement. The distribution acknowledges
overpayments and underpayments made by the developer at the time of permit issuance
and reconciles those errors and credits due by truing up the fees to reflect the corrected
amounts. There is no financial obligation from the General Fund or any of the Impact Fee
Funds because the established escrow account will be the funding source for the
disbursement. The amount due to the developer relating to the Private Infrastructure
Reimbursement Agreement will be funded from a separately established reimbursement
pass-through fund, specifically used to hold amounts collected that must be turned over
to the developer.
ALTERNATIVES
1. Council could direct staff to not execute the Settlement Agreement. This
alternative is not recommended as it may lead to litigation. The attached
Settlement Agreement represents a mutual understanding of a proper resolution
for each of the items detailed in this report, and failure to enter into this agreement
may leave legal action as the only course of action available to the Avila Ranch
developer. It is likely that the City would still have to refund the fee amounts
identified through reconciliation, while also incurring further legal defense costs.
2. Council could request modifications to the Settlement Agreement prior to
authorization. This alternative is not recommended because it would further
delay the negotiation process and distribution of the escrow funds. City staff, the
developer, and the mediator negotiated the Settlement Agreement over several
years of mediation in order to come to solutions that both parties could agree to.
The Settlement Agreement, as currently written, implements the Development
Agreement as adopted without any amendments and correctly applies permit fees
for all issued permits.
ATTACHMENTS
A – Avila Ranch Settlement Agreement
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Page 1 of 30
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
(Avila Ranch)
This Settlement Agreement and Mutual Release (“Agreement”) is entered into as of
Effective Date (defined herein) and is made by and between Avila Ranch Developers, Inc.
(“AR D”), TH Avila Ranch, LLC, a California limited liability company (“THAR”), Trumark
Construction Services, Inc., a California corporation (“TCS”), and the City of San Luis Obispo, a
California charter city (the “City”). ARD and the City are hereinafter referred to individually as a
“Party,” and collectively as the “Parties.”
RECITALS
WHEREAS, Avila Ranch is a 720-unit residential project, including 197
townhomes/duplexes and 125 apartments, and 15,000 square feet of neighborhood serving retail
and office uses, being developed on a 150-acre site north of Buckley Road within the boundaries
of the Airport Area Specific Plan (the “Project”); and
WHEREAS, on September 19, 2017, the San Luis Obispo City Council certified the Final
Environmental Impact Report; approved the Avila Ranch Development Plan, Airport Area Specific
Plan Amendment 1318-2015, General Plan Amendment 1319-2015, Vesting Tentative Tract Map
3089, Ordinance 1638 (2017 Series) approving a rezone of the Avila Ranch Property, and
Ordinance 1639 (2017 Series) approving Development Agreement 2017-1 (“DA”) and formation
of a Community Facilities District (collectively “Project Entitlements”); and
WHEREAS, the Project Entitlements require, among other things, the developer to
construct a designated number of Low-income for-rent apartment units in certain locations within
Phase 3, the multi-family portion of the Project; provide for down payment assistance to certain
Workforce housing units; and construct certain improvements, including but not limited to an
approximately 2 acre bioretention basin commonly referred to as “Basin A” in Phase 1 of the
Project.
WHEREAS, in conjunction with the Project Entitlements, the City and ARD entered into a
number of reimbursement agreements wherein the developer would be reimbursed for certain
public improvements benefiting properties beyond that of the Project, including but not limited to
that certain “Infrastructure Reimbursement Agreement – Private (Avila Ranch Vesting Tentative
Tract Map 3089)” dated June 18, 2019 (“Private Reimbursement Agreement”).
WHEREAS, the Project is being developed in phases, commencing with Phase 1,
consisting of 179 single family units (“Phase 1”); Phase 2 consisting of 29 single family units
(“Phase 2”); Phase 3 consisting of 125 apartment units and 92 single family units (“Phase 3”);
Phase 4 consisting of 197 Townhomes/Duplexes (“Phase 4”); Phase 5 consisting of 101 single
family units (“Phase 5”); and Phase 6 consisting of 15,000 sf of neighborhood commercial
(“Phase 6”).
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WHEREAS, in 2022, a dispute arose between the City and ARD over a number of issues,
including but not limited to:
a. Interpretation of the DA, with respect Development Impact Fees, and the
vesting rights of ARD (“Impact Fees”); and
b. Entitling Condominium Units in Phase 4 of Avila Ranch (“Phase 4
Townhomes”)
c. Reimbursements pursuant to the Private Reimbursement Agreement; and,
d. Acceptance of Basin A as a public improvement.
WHEREAS, in addition to the above described “Disputes”, the City and ARD engaged in
discussions regarding practical solutions to the following items:
a. Implementation of the Down Payment Assistance Program, with respect to
WHIP units, as detailed in the DA (“DPAP”); and
b. Distribution and location of “For-Rent” Units (“Affordable Housing”)
WHEREAS, with respect to Development Impact Fees, ARD submitted numerous letters
to the City, in conjunction with ARD’s application for Phase 1 building permits, wherein ARD paid
Impact Fees under protest, asserting the misapplication and/or miscalculation of certain Impact
Fees to the Project; and
WHEREAS, with respect to the DPAP, ARD asserted that the language in Exhibit “G” to
the DA requiring ARD to provide down payment assistance of up to $20,000.00 to the initial
purchaser of a Workforce Housing Incentive Program (“WHIP”) unit was inconsistent with lending
practices and violated commercial lender rules and regulations; and
WHEREAS, with respect to location of Affordable Units, ARD asserted that the unit
distribution was impractical and requested a modification of said distribution; and
WHEREAS, with respect to the Phase 4 Townhomes, ARD asserted that the Project
Entitlements provided for the processing of a “Condominium Plan” with the Department of Real
Estate without requiring additional subdivision of Phase 4 pursuant to the Subdivision Map Act.
WHEREAS, with respect to the Private Reimbursement Agreement, ARD asserted that
the City is obligated to reimburse ARD for certain improvements constructed by ARD when certain
properties are annexed into the City, and ARD specifically demanded funds with respect to the
annexation of the East Airport Business Park and, demanded that the City record notices of the
Private Reimbursement Agreement against all properties subject to the Private Reimbursement
Agreement; and
WHEREAS, with respect to Basin A, there is a dispute between the Parties over the
construction and operation of Basin A; and
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WHEREAS, the various disputes set forth in these recitals are referred to herein
collectively as “the Dispute”; and
WHEREAS, in March 2023, in response to the above-described Dispute, the City and
ARD entered into a Tolling and Escrow Agreement (“Tolling Agreement”) by which the Parties
agreed that the City would continue to issue building permits and ARD would continue to develop
the Project by paying the Development Impact Fees under protest, depositing an agreed upon
sum, $19,000 per dwelling unit, which represents the protested Development Impact Fees on
Phase 1 permits, into an escrow established with Old Republic Title Company (“ARD Escrow
Funds ”) pending resolution of the Dispute; and
WHEREAS, as conditioned by the Tolling Agreement, the City deposited the sum of One
Million One Hundred Thirty-Six Thousand and 00/100 Dollars ($1,136,000.00) with Old Republic
Title Company (“City Escrow Funds”).
WHEREAS, ARD and the City have continued communication during the period following
the execution of the Tolling and Escrow Agreement, and the Parties engaged in voluntary
mediation sessions on August 10, 2023, August 24, 2023, and November 16, 2023, before
mediator Bruce Edwards; and
WHEREAS, Section 8.06 of the DA provides in part that anticipated refinements of the
Project may require appropriate clarifications and refinements to be made regarding the details
of the performance of the City and ARD under the DA; and
WHEREAS, the Parties now desire to memorialize the terms of their settlement by this
Agreement and to resolve all claims which may exist between them arising out of and relating to
the Dispute.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated
herein by reference, and for other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is hereby agreed as follows:
1. Development Impact Fees. As described in the above recitals, ARD disputed the
City’s interpretation of Sections 5.04.2 (b), (c) and (e) of the DA, and the calculation and
application of Impact Fees to the Project.
Section 5.04.2 (b) of the DA, as amended by the April 16, 2019, Amendment No. 1 to
Development Agreement, provides,
The Developer shall be required to pay all City-wide, and Project-specific
development impact fees, excluding sewer and water impact fees
addressed in section 5.04.2(c) immediately below, for the Project's fair
share of the cost to mitigate Project impacts as identified in the Final
Environmental Impact Report (FEIR), Specific Plan, conditions of approval
or otherwise specified in the Development Agreement in effect when each
final map is recorded in accordance with AB1600 analysis. City may adjust
development impact fees not more than once a year with changes no
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greater than the inflation index identified upon imposition of the fee. The
Developer shall be required to pay the Los Osos Valley Road (LOVR)
Interchange Impact Fees as revised generally consistent with the impact
fee methodology set forth in the April 3, 2018 letter agreement between the
City and Developer.
Section 5.04.2 (c) of the DA provides:
The Developer shall be required to pay sewer and water impact fees in
accordance with the AB 1600 analysis in effect when each Final Map is
recorded plus any adjustments based on CPI until issuance of each
building permit. Subsequent payments shall be adjusted annually by the
inflation index identified upon imposition of the fee as determined by the
City.
Section 5.04.2 (e) of the DA Provides:
If the City amends any existing Development Impact Fee (DIF) program to
include additional projects or costs for the benefit of the Project (either new
projects or increased costs for projects included in the analysis supporting
existing fees) for improvements necessary to satisfy Project requirements,
Developer will be required to pay the amended fees. Credits applied
towards infrastructure costs advanced by Developer shall apply when
building permits are issued or fees are otherwise due and shall arise only
from Developer-funded construction of infrastructure or community
facilities included in the project list on which a particular fee was based.
Credits applied when building permits are issued or fees are otherwise due
pursuant to this section shall be adjusted for inflation consistently with such
adjustments of the fees against which credits are allowed.
With respect to the foregoing sections of the DA, the Parties agree to the following
interpretation:
a. Development Impact Fees. The following line-item Impact Fees
(collectively “Avila Ranch DIF”) are imposed on the Project by the DA, as amended by
the First Amendment to the DA:
1) Police
2) Fire1
3) Traffic (LOVR Base Fee and LOVR add on Fee)
4) Water
5) Wastewater
b. Phase 1. With respect to the Phase 1 map, ARD vested in the value of the
Avila Ranch DIF with the recordation of the Phase 1 Final Map on December 23, 2021.
The City is permitted to adjust Avila Ranch DIF, except the water and wastewater fees,
1 The City has confirmed that an interim fire station is to be constructed on Lot 197 of Avila Ranch Phase 1 and that
ARD is entitled to a fee credit against the Fire Impact Fee.
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once annually by the inflationary index in place at the time the Phase 1 Final Map records.
The Parties acknowledge that the inflationary index in place as of the recordation of the
Phase 1 Final Map is California Construction Cost Index (“CCCI”), as described in Section
4.56.040 of the City’s Municipal Code. With respect to Phase 1 only, the water and
wastewater Development Impact Fees may be adjusted once annually by the Consumer
Price Index (Los Angeles, All Urban Consumers, All Items) (“CPI”). Consistent with the
foregoing, attached hereto as Exhibit “1” is an “Impact Fee Summary,” which was
prepared jointly by the Parties, following a reconciliation analysis of each building permit
issued for Phase 1. The applicable fees that have been agreed to, and the Exhibit “1”
Impact Fee Summary reconciliation is based on the Phase 1 Avila Ranch Fee Schedule,
attached hereto as Exhibit “6”.
c. It is acknowledged that ARD paid $138,226.14 in LOVR TIF Add-on Fees
to the City which City is unable to refund at this time. The City is no longer in possession
of these fees, as they were required to be passed through to another developer pursuant
to obligations of a separate reimbursement agreement that pre-dates any agreements
between the City and ARD. The City will ensure that payment of these fees is reflected
accordingly in the amount of LOVR Add-on TIF credits available to ARD for reimbursement
of eligible expenses on future permits.
d. Future Phases. With respect to all future phases (i.e. Phases 2, 3, 4, 5
and 6) of the Project, each phase subsequent to the Phase 1 Final Map will vest in the
published Avila Ranch DIF in place at the time of recordation of the particular final map.
Thereafter, the City may adjust the fees once annually based upon the inflationary index
established by ordinance and in place at the time of adjustment. The Parties acknowledge
that the current inflationary index is the CCCI, as described in Section 4.56.040 of the
Municipal Code.
e. Amendment to Existing Fees. Prior to implementing any amendments
provided for in Section 5.04.2 (e) with respect to the Project and imposing such increased
costs on the Project, the City shall give ARD advance written notice of the same, as
required by the Mitigation Fee Act, and ARD may submit a letter to the City Clerk
requesting special notice of any such fee increase pursuant to the Mitigation Fee Act.
2. Down Payment Assistance Program.
Exhibit “G” to the DA provides:
Down Payment Assistance Program. Avila Ranch agrees to provide a
matching down payment assistance (DPA) of five percent of the purchase
price up to $20,000 as a "silent second" on the initial sale of the 25
Workforce homes. These units would have to be occupied by an income
qualifying Workforce Housing household for a minimum of ten (10) years;
if resold within this ten-year period, the units would need to be sold to
another income qualifying Workforce Housing buyer and the 10-year deed
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restriction would reset to 10 more years with the new buyer of the home.
The DPA loan would be repaid upon sale of the unit or refinancing, and the
proceeds would be placed in a revolving loan fund to assist future
workforce, moderate, or lower income home buyers in Avila Ranch. Unlike
a reduction in price that would be captured by a future seller at the end of
the affordability term, this assistance would continue throughout the life of
the funds to assist buyers in the development. · The intent is that these
funds will be used in conjunction with the initial 25 Workforce units, but
these funds could be used for any income qualifying household who
purchases a home in Avila Ranch after the initial ten-year workforce
affordability period. This will establish a revolving loan fund of
approximately $500,000 to be administered by the City of San Luis Obispo.
The Parties acknowledge the potential for the above provision to be in conflict with
commercial lending practices and/or otherwise violate commercial lender rules and regulations
imposed on ARD. In an effort to avoid conflict with commercial lending practice and/or violations
of the commercial lender rules and regulations imposed on ARD; and, maintain the intent of the
above provision, the Parties agree that the DPAP may be implemented as follows:
Prior to the initial Closing of each WHIP Unit, ARD agrees to contribute a
sum equal to five (5%) percent of the purchase price of the Workforce
home, not to exceed $20,000 to the City’s Down Payment Assistance
Program Fund (“DPA Funds”). The parties agree that once paid, this
contribution by ARD constitutes compliance with ARD’s down payment
assistance obligations under Exhibit G of the Development Agreement.
ARD may alternatively make a lump-sum contribution of $500,000 to City
for all covered WHIP Units to satisfy ARD’s down payment assistance
obligations under Exhibit G of the Development Agreement. The City
agrees to utilize said DPA Funds to assist the buyer of such WHIP unit with
the purchase of that WHIP unit, including but not limited to, contributing
said funds to buyer’s down payment as a loan consistent with the City's
DPA program. ARD acknowledges that the DPA Funds will be subject to
an interest-bearing promissory note, secured by a deed of trust in favor of
the City and when said DPA Funds are recouped by the City, in keeping
with the terms of the Development Agreement, City will utilize these
recouped DPA Funds to assist any income qualifying household who
purchases a home in Avila Ranch. Notwithstanding the foregoing, City may
utilize said recouped DPA Funds in City’s discretion in conjunction with
affordable housing assistance throughout the City of San Luis Obispo.
The Parties further agree that the foregoing language will be incorporated, as appropriate,
in each Affordable Housing Agreement associated with a phase of the Project, where applicable.
3. Affordable Units.
Exhibit “G” to the DA contemplates 32 low-income and 8 moderate-income “For Rent”
apartment units to be constructed in Phase 3 (the R-4 portion of the Project). The DA requires
the developer to dedicate a 1.2 acre parcel, described as Lot 300 of the Vesting Tentative Tract
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Map, to an affordable housing provider, for the construction of 24 lower-income apartments. The
DA also indicates that 8 low-income and 8 moderate-income apartments will be provided on Lot
301 of the Vesting Tentative Tract Map. Finally, Exhibit “G” to the DA provides, “. . . should an
affordable housing provider fail to construct the units, the obligation to provide for the 24 deed-
restricted low income affordable housing units on the lot remains with Avila Ranch to complete.”
The Parties acknowledge that certain lots within Phase 1 are currently burdened by the
Affordable Housing Agreement that requires ARD to dedicate Lot 188 of the Phase 1 Final Map
(formerly Lot 300) to an affordable housing provider for construction of 24 low-income housing
units.
Subsequent to the recordation of the Phase 1 Final Map, including the recordation of the
Phase 1 Affordable Housing Agreement, ARD, the City and C & C Development (an affordable
housing provider) commenced discussions regarding the construction and development of the
Affordable Units. The Parties, including C & C Development, have discussed the best
configuration of location for the Affordable Units and received approval from the Planning
Commission on February 14, 2024, on the recommendations from the Architectural Review
Commission (“ARC”), and after the January 23, 2024 City Council review of the draft Phase 3
Affordable Housing Agreement which included transfer of the 8 moderate-income and 8 low-
income units and addition of 19 affordable moderate-income Density Bonus units.
With the approval of the Phase 2 & 3 Final Map, including the Phase 3 Affordable Housing
Agreement, and both documents having been recorded on April 1, 2025 as Document Numbers
2025008789 and 2025008792, respectively, ARD has dedicated Lot 186, rather than Lot 188, to
an Affordable Housing Provider (C&C Development); and, relocated the 8 moderate-income and
8 low-income apartments from Lot 188 (formerly Lot 301) to Lot 186 to be constructed by the
Affordable Housing Provider in conjunction with the 24 low income units, and 19 moderate-income
Density Bonus units approved by Planning Commission on February 14, 2024. Moreover, the
Phase 3 Affordable Housing Agreement contains the following provisions to ensure that these
Affordable Units are constructed:
Construction Timing of Affordable Housing Project. For purposes of this
Agreement, the term “Commence Construction” means issuance by the City of a
“ready to issue” letter for a building permit for the R-4 Affordable Housing Project,
the only condition for which is the payment of City fees. For purposes of this
Agreement, the term “Substantially Complete Construction” means completion of
seventy-five percent (75%) of the construction of the R-4 Affordable Housing
Project as demonstrated by the construction budget attached to the first lender
construction loan documents for the R-4 Affordable Housing Project and draw
requests approved by the first lender. In order to ensure that the Affordable
Housing Project is completed earlier in the Project, as opposed to the last phase
of the Project, the City reserves the right to withhold the issuance of building
permits to ARD if the Affordable Housing Provider has not Commenced
Construction by the issuance of a building permit for ARD’s 500th unit, and/or if
the Affordable Housing Provider has not Substantially Completed Construction by
the issuance of a building permit for ARD’s 550th unit.
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In consideration of the foregoing, concurrently with the execution of this Agreement, the
Parties shall execute and cause to be recorded an amendment to the Phase 1 Affordable Housing
Agreement, in substantially the form attached hereto as Exhibit “2”, to change the lot to be
dedicated by ARD from Lot 188 to 186, and to set the maximum rents that may be charged for
the low-income units on Lot 186. ARD’s obligations regarding construction of the low-income
units shall be fully satisfied upon dedication of Lot 186 to an affordable housing provider and as
specified by the construction timing requirements detailed above and as memorialized in the
Phase 3 Affordable Housing Agreement, provided the amendment to the Affordable Housing
Agreement is recorded prior to such dedication.
4. Processing of Phase 4 Subdivision. ARD shall, at such time as it deems
appropriate, submit an application for a tentative map for the condominium subdivision of the six
lots currently designated as Phase 4 of the Project. Upon receipt of the tentative map application
and development review application, City shall process the tentative map concurrently with the
development review application through City’s ARC and planning commission as required by the
City’s Subdivisions Ordinance (Municipal Code Chapter 16), but no hearing before City’s city
council shall be required. Notwithstanding the foregoing, the City has agreed to charge ARD the
cost of processing at the parcel map rate and not the tentative map rate. Nothing in this paragraph
shall be deemed to entitle ARD to any increase in unit count over the 197 units previously
approved for Phase 4. Nothing in this paragraph shall prevent City from applying to the Phase 4
subdivision standards contained in uniform building, construction, fire or other uniform codes, or
standards and specifications for public improvements, all as the same may be adopted or
amended from time to time by City, provided that the provisions of any such uniform codes or
standards and specification are in effect on a City-wide basis.
5. Private Reimbursement Agreement.
The Parties acknowledge that the “Infrastructure Reimbursement Agreement Private”
dated June 18, 2019, (“Private Reimbursement Agreement”) provides a mechanism by which
ARD will be reimbursed for certain traffic improvements, constructed by ARD, which benefit
properties in the City and County of San Luis Obispo, beyond that of the Project ’s proportionate
share. Exhibit “A” to the Private Reimbursement Agreement identifies the properties which benefit
from these traffic improvements (“Benefitted Properties”) and attributes a “proportionate share” of
the actual costs of said improvements exceeding the prorate share attributable to the Project, to
each property (“Reimbursable Costs”). Additionally, the Agreement provides an estimated dollar
amount attributable to each Benefitted Property based upon the budget established in 2019.
Pursuant to the Private Reimbursement Agreement, the City agreed, for Benefitted Properties in
its jurisdiction, to “require payment of the prorated shares of the Reimbursable Costs as a
condition of any discretionary entitlement or approval, including Architectural Review Committee
(whether administrative, quasi-judicial, or legislative) . . . and payment shall be required prior to
the issuance of building permits. For [Benefitted] properties in the County’s jurisdiction, City will
require Benefitted Properties to pay their prorated share of documented Reimbursable Costs as
a condition of annexation.”
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a. Morabito Property. Included among the Benefitted Properties identified in Exhibit “A” to
the Private Reimbursement Agreement is the “Morabito Business Park” (sometimes
referred to herein simply as “Morabito”). The City acknowledges that the annexation of
the East Airport Commerce Park (which includes Morabito) is conditioned upon the East
Airport Commerce Park Association (33 parcels, including Morabito) and Senn-Glick (3
parcels) paying the City a combined total of $1,000,000.00 (“East Airport Annexation
Traffic Impact Fee Payment”) to fulfill the Annexation Property's participation in the City's
Citywide Transportation Impact Fee program (TIF) and/or other area transportation
improvement reimbursement obligations as stipulated in the “Pre-Annexation Agreement”
dated March 17, 2020. Exhibit “A” to the Private Reimbursement Agreement estimates
that Morabito’s proportionate share to be $478,491.00 (“Morabito’s Estimated Share”).
The City acknowledges that it has received Morabito’s Estimated Share in the East Airport
Annexation Traffic Impact Fee Payment, and upon final execution of this Agreement, City
will reimburse ARD as provided in subparagraph “b” below from the East Airport Traffic
Impact Fee Payment.
The Parties acknowledge that $417,452 is eligible for reimbursement immediately, and
$61,039 will be held by the City and reimbursed to ARD upon City approval of cost
documentation for the S. Higuera/Vachell Intersection. As identified in the Pre-
Annexation Agreement, the City will continue to collect additional reimbursement fees,
where required, from future development that occurs within this area that proposes
additional building area and/or intensity beyond what was approved in previous
entitlements and reflected in the Pre-Annexation Agreement and as consistent with
otherwise applicable law.
b. Cost Increases. The City acknowledges that ARD’s cost of construction of certain public
improvements identified in the Private Reimbursement Agreement, exceeded the
estimated amount. Final Reimbursable Costs shall be updated according to the change
order terms of the Private Reimbursement Agreement. Exhibit “A” of the Private
Reimbursement Agreement (Reimbursement Costs and Allocation to Benefitted
Properties) shall be updated upon completion and approval of the change order, per the
terms of the Private Reimbursement Agreement, which shall govern only those fees
applicable to any property subject to the fee that receives development entitlements in
excess of those previously approved and reflected in the Pre-Annexation Agreement after
the relevant update to the extent allowed by applicable law. Notwithstanding the
foregoing, the Parties acknowledge that modifications to the Reimbursement Agreement
are necessary to account for cost increases in order for Developer to be properly
reimbursed; ; and, it will be the responsibility of Developer to request such modification
and pay the appropriate City fees in place at the time of such request.
c. Notice of Agreement. The City staff confirmed that they are continuing to track
development applications in their system which triggers them to inform owners of
Benefitted Properties of their obligation for a fair share contribution to the reimbursement
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for the work ARD has completed. City also agrees to record a Memorandum and Notice
of Reimbursement Agreement against all Benefitted Properties. Within thirty (30) calendar
days after the Effective Date, City shall record with the San Luis Obispo County Recorder’s
Office a Memorandum of Reimbursement Agreement, in substantially the form attached
hereto as Exhibit “3”. Upon recordation, City shall provide a conformed copy of the
Memorandum to ARD.
6. Basin A.
Basin A, is an approximately 2 acre bioretention basin located within Lot 30 of Phase 1 of
Avila Ranch. Lot 30 includes other improvements required as a condition of development of the
Project, including but not limited to Park A, an improved pedestrian pathway, a portion of the
community-wide bike path, and a small bioretention basin located along Vachell Lane. All that
portion of Lot 30, which is otherwise not Basin A, is collectively referred to as Park A. See Exhibit
“4” illustrating Park A and Basin A.
A dispute arose between the City and ARD over whether Basin A was constructed and
performing as designed and intended. ARD has asserted that Basin A was constructed as
approved by the City and performing as intended. The City has asserted that although Basin A
may have been constructed as approved, it is not performing as expected in that it is retaining a
significant amount of water year round.
In order to bring resolution to the above described dispute, the Parties agree as follows:
a. Within 30 days of the Effective Date, ARD will prepare a legal description
and Grant Deed for Park A. Upon recordation of a Grant Deed to separate Park A from
Basin A, City will accept ownership and maintenance of Park A. Except as set forth in
the next sentence, ARD agrees that the City will be in sole control of the irrigation controller
relating to Basin A and Park A; and, ARD will not access or otherwise modify the irrigation
control system without the express written consent of the City. Any repairs or work to the
irrigation system within the Basin A parcel shall be performed by ARD at its sole expense,
subject to authorization and access to the irrigation controller by the City.
b. Except as expressly provided in subparagraph (a) above, in consideration
of the foregoing, ARD will continue to own and maintain Basin A, at its expense, until the
“Close Out” of the for-sale single family units in Phase 1, 2, & 3 (i.e. the closing of the final
single family dwelling units in Phase 1, 2, & 3).
c. As additional consideration and to secure its faithful performance of the
obligations set forth in the foregoing subsections (a) and (b), ARD will provide a separate
maintenance bond in the sum of $182,500.00 which is based upon the City’s estimated
annual cost of maintenance multiplied by 5 years, which is ARD’s estimated build out
period of Phases 1, 2, & 3.
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d. Not later than one year prior to the estimated Close Out, ARD agrees to
brief the City on the maintenance activities, including cost thereof, employed by ARD in
the maintenance of Basin A.
e. Upon the Close Out, ARD will notify the City of the same and make demand
upon the City to immediately accept Basin A, in its entirety. Thereafter, ARD and City will
meet and confer to establish that Basin A, is substantially in the same condition that it was
in at the time this Agreement was executed, notwithstanding normal wear and tear; that
ARD provides documentation from Althouse & Meade, or another qualified consultant
approved by City, that there are no additional permits required for the maintenance or
operation of Basin A from other regulatory agencies (e.g. Regional Water Quality Control
Board, California Department of Fish and Wildlife, etc.); that the fence around Basin A is
in compliance with the City’s municipal code and Building Code; that the capacity of Basin
A is equivalent to its design capacity and has not been materially reduced through means
of siltation, sedimentation, erosion, or other means; that construction of improvements and
homes in Phases 1, 2, and 3 have not materially contaminated Basin A resulting from non-
stormwater discharges to the storm drainage system that is tributary to Basin A, and that
the annual scope of the maintenance activities, and the annual cost associated with such
activities, performed by ARD for Basin A from the Effective Date until the Close Out is
similar to the City’s originally estimated scope and cost of annual maintenance for Basin
A as detailed in the CFD budget. Notwithstanding the foregoing, if at the time Close Out
and upon City’s demand for pond aeration, the matter shall be tendered to a mutually
agreed upon and qualified engineer to make the determination that the functionality of
Basin A will be substantially improved by pond aeration. Upon such determination, ARD
agrees to install such equipment, at ARD’s sole expense.
f. Provided that upon the delivery of the demand noted in subsection (e),
Basin A meets the criteria for acceptance listed in subsection (e), excepting normal wear
and tear and vegetative growth, ARD will deed to the City the balance of Lot 30, which
constitutes Basin A and City will otherwise accept Basin A in its entirety, take over the
maintenance thereof, at the City’s expense as paid for by and through Community
Facilities District No. 2017-1; and release ARD from the above referenced maintenance
bond. Said acceptance shall be in accordance with Section 16.20.230 of the San Luis
Obispo Municipal Code without further conditions or discretionary approvals.
7. Mutual Escrow Instructions for the Release of Funds.
Pursuant to the Tolling Agreement, the City issued ARD, from and after the effective date
of the Tolling Agreement, a total of 90 building permits. Said permits were issued under protest
by ARD as to the amount of the development impact fees being charged. In consideration of the
issuance of said permits, ARD deposited into the Escrow Account the sum of $19,000.00 per
building permit, representing the amount paid under protest . From the effective date of the Tolling
Agreement, ARD deposited the total sum of $1,710,000.00 into the Escrow Account (“ARD
Escrow Funds”).
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Additionally, pursuant to the Tolling Agreement, City deposited the sum of $1,136,000.00
into the Escrow Account (“City Escrow Funds”).
As of the Effective Date of this Agreement, the Escrow Account retains a total sum of
$2,846,000.00.
The Parties have jointly prepared the Impact Fee Summary, attached hereto as Exhibit 1
which details the Required Impact Fee Obligations, the Impact Fees Paid by ARD, the Credits
Issued by City, the Reconciliation Credits to be Issued as part of this settlement agreement, and
the final Overpayment/ Underpayment amounts. This summary reflects the reconciliation analysis
which was completed jointly by the Parties for each building permit issued for Phase 1. Tables
1 and 2 below summarize the results of the Impact Fee Summary.
Tabel 1: ARD Underpaid Impact Fees
The amounts detailed in the below table correspond to the total amount underpaid by ARD
with respect to the building permits obtained in Phase 1 for each line itemed Impact Fee.
Police $ 8,804.60
Fire $ 0
LOVR Base Fee $ 0
LOVR Add On Fee $ 0
Water $ 0
Wastewater $ 0
Table 2: ARD Overpaid Impact Fees
The amounts detailed in the below table correspond to the total amount overpaid by ARD
with respect to the building permits obtained in Phase 1 for each line itemed Impact Fee.
Police $ 0
Fire $ 93,887.06
LOVR Base Fee $ 803,454.21
LOVR Add On Fee $ $48,858.23
Water $ 171,888.01
Wastewater $ 159,633.77
Concurrently with the execution of this Agreement, the Parties will execute the Mutual Escrow
Instructions attached hereto as Exhibit “5”. Said Mutual Escrow Instructions direct the Escrow
Holder to immediately release the following sums to each Party.
a. To the City, the total sum of $1,577,083.32, less any costs of escrow
attributable to the City.
b. To ARD, the total sum of $1,268,916.68, less any costs of escrow
attributable to ARD.
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Upon release of the above funds, the Escrow Holder is instructed to close the Escrow.
The Parties shall further jointly direct the Escrow Agent to terminate the Escrow account
established pursuant to the Tolling and Escrow Agreement and to submit a final bill for escrow
agent services to the Parties, which bill shall be shared equally by the Parties.
8. Release by the City. The City hereby and forever releases ARD, and its respective
insurers, attorneys, successors, assigns, heirs, transferees, agents, principals, officers, directors,
employees, shareholders, members, co-venturers, partners, affiliates, subsidiaries, and
representatives from any and all claims, demands, damages, debts, liabilities, accounts,
obligations, costs, expenses, liens, and judgments of every kind and nature, whether known or
unknown, suspected or unsuspected, relating to or otherwise arising out of the Dispute.
9. Release by ARD. ARD hereby and forever releases the City, and its respective
insurers, attorneys, successors, assigns, heirs, transferees, agents, principals, elected officials,
officers, directors, employees, and representatives from any and all claims, demands, damages,
debts, liabilities, accounts, obligations, costs, expenses, liens, and judgments of every kind and
nature, whether known or unknown, suspected or unsuspected, relating to or otherwise arising
out of the Dispute.
10. Waiver of Civil Code Section 1542. It is understood and agreed that this is a full
and final release applying to all known, unknown, anticipated and unanticipated injuries, losses,
expenses and damages arising out of or in relation to the Dispute and is intended to be as broad
as possible as to any and all claims that the City may have against ARD relating to the Dispute
and any and all claims ARD may have against the City relating to the Dispute, whether specifically
set forth herein. The Parties understand California Civil Code Section 1542 provides as follows:
Section 1542. General Release- Claims Extinguished.
A general release does not extend to claims that the creditor or
releasing party does not know or suspect to exist in his or her favor
at the time of executing the release and that, if known by him or her,
would have materially affected his or her settlement with the debtor
or released party.
The Parties expressly waive the provisions of Section 1542, and the Parties acknowledge and
agree that waiver of the provisions of Section 1542 has been separately bargained for.
11. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the respective grantees, transferees, successors, assigns, employees, and agents of
each Party to this Agreement to the extent permitted by law.
12. Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which when taken together shall constitute one and the
same instrument.
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13. Severability. The provisions of this Agreement are severable, and if any one or
more provisions may be determined judicially unenforceable, in whole or in part, the remaining
provisions and any partially unenforceable provisions, to the extent enforceable, shall
nevertheless be binding upon and enforceable against the Parties hereto to the extent they may
reasonably be enforced apart from that which is invalidated.
14. Attorney’s Fees and Costs. Each Party shall bear its own attorney’s fees and costs
arising from the Dispute. If any claim, controversy, or action arises out of or relates to this
Agreement following the Effective Date, the prevailing party in such action shall be entitled to
recover reasonable attorneys’ fees, costs, and expenses in addition to all other appropriate relief.
15. Controlling Law and Venue. This Agreement shall be governed and construed in
accordance with the laws of the State of California. Venue for any action commenced regarding
the terms, interpretation, or enforcement of this Agreement shall be in the Superior Court for the
County of San Luis Obispo, California.
16. No Amendment. This Agreement may not be altered, amended, modified, or
otherwise changed in any respect, except by a writing signed by all Parties to this Agreement.
17. Authorizations. The undersigned, by their signatures, represent and warrant that
they are authorized agents of their respective entities and are authorized to execute this
Agreement. All Parties represent and warrant that no portion of any claim which they have or
might have arising out of the matters referred to herein, nor any portion of any recovery or
settlement to which they might be entitled, has been assigned or transferred to any other person,
firm or corporation not a party to this Agreement, in any manner, including by way of subrogation
or operation of law or otherwise. In the event that any claim, demand, or suit should be made or
instituted against any Party because of any such purported assignment, subrogation, or transfer,
each Party agrees to defend, indemnify and hold harmless the other Party against such claim,
demand or suit, and to pay and satisfy any such claim, including necessary expenses of
investigation, actual attorneys’ fees and costs.
18. No Admission of Liability. It is expressly understood and agreed that this
Agreement is being made solely for the purpose of avoiding the expense and inconvenience of
potential litigation and it is not to be construed as an admission on the part of any Party or of any
unlawful or wrongful conduct, or of any liability to any other Party as alleged in the Dispute or
otherwise, all of which is expressly denied.
19. Integrated Agreement. This Agreement contains the entire Agreement and
understanding between and among the Parties concerning the subject matter of this Agreement
and supersedes and replaces all prior negotiations, proposed agreements and agreements,
written or oral concerning the subject matter of this Agreement. All Parties acknowledge that no
other Party nor any agent or attorney of such Party has made any promise, representation or
warranty, express or implied, which is not contained in this Agreement, to induce any other Party
into executing this Agreement. All Parties herein further acknowledge that they are not executing
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this Agreement in reliance on any promise, representation or warranty not contained in this
Agreement.
20. Effective Date. The Effective Date of this Agreement is the last date set forth
opposite the signatures of the Parties at the end of this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective
Date.
AVILA RANCH DEVELOPERS, INC.
By: _________________________________
Joshua Peterson, President
Dated: _____________, 2025
APPROVED AS TO FORM
By: ________________________________
Michael Slater, General Counsel
Avila Ranch Developers, Inc.
CITY OF SAN LUIS OBISPO
By: _________________________________
Whitney McDonald, City Manager
Dated: _____________, 2025
APPROVED AS TO FORM
By: ________________________________
J. Christine Dietrick, City Attorney
TH AVILA RANCH, LLC,
a California limited liability company
By: __________________________
Joshua E. Peterson,
Authorized Agent
Dated ________________, 2025
TRUMARK CONSTRUCTION SERVICES,
INC.,
a California corporation
By: __________________________
Joshua E. Peterson
Authorized Agent
Dated: ____________________, 2025
Page 49 of 349
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Exhibit “1”
Impact Fee Summary
Fire Police TIF LOVR Base TIF LOVR Add-on Water Wastewater
Total Required Impact Fees Due - Phase 1 121,780.74$ 142,969.80$ 1,885,814.26$ 461,677.18$ 2,215,158.81$ 2,058,750.02$
Actual Fees Paid (93,887.06)$ (134,165.20)$ (803,454.21)$ (187,084.37)$ (2,387,046.82)$ (2,218,383.79)$
Actual Credits Issued (27,494.38)$ -$ (246,598.30)$ (64,434.28)$ -$ -$
Reconciliation Credits to be Issued (94,286.36)$ -$ (1,639,215.96)$ (259,016.76)$ -$ -$
(Overpayment)/ Underpayment (93,887.06)$ 8,804.60$ (803,454.21)$ (48,858.23)$ (171,888.01)$ (159,633.77)$
Refund ARD ARD Pay to City Refund ARD Refund ARD Refund ARD Refund ARD
Fire Police TIF LOVR Base TIF LOVR Add-on Water Wastewater
Total Credits Used After Reconciliation (121,780.74)$ -$ (1,885,814.26)$ (323,451.04)$ -$ -$
Total Fees Paid After Reconciliation -$ (142,969.80)$ -$ (138,226.14)$ (2,215,158.81)$ (2,058,750.02)$
Total After Reconciliation (121,780.74)$ (142,969.80)$ (1,885,814.26)$ (461,677.18)$ (2,215,158.81)$ (2,058,750.02)$
IMPACT FEE SUMMARY
RECONCILIATION SUMMARY
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Exhibit “2”
Amendment to Phase 1 Affordable Housing Agreement
RECORDING REQUESTED BY AND WHEN
RECORDED MAIL TO:
City of San Luis Obispo
Community Development Department
919 Palm Street
San Luis Obispo, CA 93401-3249
Attn: Community Development Director
No fee for recording pursuant to
Government Code Section 27383
(Space Above for Recorder’s Use)
FIRST AMENDMENT TO
AFFORDABLE HOUSING AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS
(For-Sale Moderate-Income Units, WHIP Units, and Land Dedication for Phase 1 of Avila Ranch)
This First Amendment To Affordable Housing Agreement and Declaration of Restrictive Covenants
(For-Sale Moderate-Income Units, WHIP Units, and Land Dedication for Phase 1 of Avila Ranch) (this “First
Amendment”) is made and entered into as of __________, 2025, (the “Effective Date”) by and between
Avila Ranch Developers, Inc., a California corporation (“ARD”) and Yellowfin Holdings, LP, a California
limited partnership and, CJ Holdings, LP, a California limited partnership (collectively “Adjoining
Landowners”) and the City of San Luis Obispo, a California charter city and municipal corporation (“City”).
ARD, Adjoining Landowners and City are sometimes referred to herein individually as a “Party” and
collectively as the “Parties.”
RECITALS
A. The Parties have entered into that certain Affordable Housing Agreement and Declaration
of Restrictive Covenants (For-Sale Moderate-Income Units, WHIP Units, and Land Dedication for Phase 1
of Avila Ranch) recorded on December 23, 2021 in San Luis Obispo County Records as Document No.
2021083395 which in part required the Adjoining Landowners to dedicate Lot 188 of the Phase 1 Final
Map (“Lot 188”) to an Affordable Housing Provider for the development of 24 Low-Income Units; and, if
the Affordable Housing Provider did not complete said Low-Income Units by the fourth (4th) development
phase of the Project (as defined in the Original Agreement) the obligation to complete the Low-Income
Units remained with ARD to complete (“Original Agreement”).
B. Subsequent to the Original Agreement, ARD and the City entered into discussions with C
& C Development, an affordable housing provider for the construction of the 24 Low-Income Units, ARD’s
eight (8) Low-Income and eight (8) Moderate-Income Units together with an additional 19 Low-Income
Units pursuant to a Density Bonus (collectively “Affordable Rental Units”), all on Lot 186 of the Phase 1
Final Map (“Lot 186”).
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C. Thereafter, ARD conveyed Lot 186 to Avila Ranch, LP, an affiliated entity of C & C
Development for the construction of the Affordable Rental Units.
D. On January 23, 2024, the San Luis Obispo City Council approved Final Tract Map No. 3089
Phases 2 & 3, together with the “Avila Ranch Phase 3 Affordable Housing Agreement and Declaration of
Restrictive Covenants (For-Sale Moderate-Income Units, WHIP Units, and R-4 For-Rent Affordable Units)”
(“Phase 3 Affordable Housing Agreement”) which acknowledged the construction of Affordable Rental
Units on Lot 186 and established a new timeframe within which the Affordable Rental Units were to be
constructed.
E. On April 1, 2025, the Phase 3 Affordable Housing Agreement was recorded, in part,
against Lot 186, burdening Lot 186 with the obligation to construct, develop and manage the Affordable
Rental Units.
F. ARD and City desire to amend the Original Agreement to reflect the transfer of the eight
(8) Low-Income and eight (8) Moderate-Income Units from Lot 188 to Lot 186, as detailed in the Phase 3
Affordable Housing Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, the promises and covenants
of the Parties in this First Amendment, and other good and valuable consideration, the receipt and
sufficiency of which the Parties acknowledge, the Parties agree as follows:
AGREEMENT
1. Article 5 of the Original Agreement, entitled “Dedication of Real Property for Low Income
Housing” is deleted in its entirety and with the deletion of Article 5 the Original Agreement no longer
imposes any burden on Lot 188 and shall have no force and effect as to Lot 188. Article 5 of the Original
Development agreement has been superseded by requirements identified in the Phase 3 Affordable
Housing Agreement.
2. Recordation. This First Amendment shall be recorded against the real property described
in Exhibit “A” attached hereto and shall run with the land.
3. Capitalization. If a capitalized term used herein is not otherwise defined in this First
Amendment, it shall have the same meaning as given to it in the Original Agreement.
4. Conflict. In the event of conflict between this First Amendment and the Original
Agreement, the terms of this First Amendment shall prevail.
5. Counterparts. This First Amendment may be executed in two or more fully or partially
executed counterparts, each of which will be deemed an original binding the signer thereof against the
other signing parties, but all counterparts together will constitute one and the same instrument.
Signatures to this First Amendment and any notice given hereunder, transmitted by telecopy or electronic
mail shall be valid and effective to bind the party so signing. Each party agrees to promptly deliver an
executed original of this First Amendment with its actual signature to the other party, but a failure to do
so shall not affect the enforceability of this First Amendment, it being expressly agreed that each party to
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this First Amendment shall be bound by its own telecopied or e-mailed signature and shall accept the
telecopied or e-mailed signature of the other party to this First Amendment.
6. Effect. Except as expressly modified by this First Amendment, the Original Agreement
remains in full force and effect as originally written. From and after the execution of this First
Amendment, all references in the Original Agreement to the “Agreement” shall be deemed as references
to the Original Agreement as modified by this First Amendment.
IN WITNESS WHEREOF, the Parties have executed this First Amendment as to the date first written
above.
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
ARD:
AVILA RANCH DEVELOPERS, INC.,
a California corporation
By: ______________________________
Joshua E. Peterson, President
ADJOINING LANDOWNERS:
Yellowfin Holdings, LP,
a California limited partnership
By: Spyglass Real Estate, Inc., a California
corporation,
Its General Partner
By: _________________________
Joshua Peterson, President
CJ HOLDINGS, LP,
a California limited partnership
By: Spyglass Real Estate, Inc., a California
corporation,
Its General Partner
By: _________________________
Joshua Peterson, President
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EXHIBIT “A”
LEGAL DESCRIPTION OF THE PROPERTY
Adjoining Landowners’ Property:
Lot 327 of Final Map 3089 Phases 2 & 3 as said map was filed and recorded April 1, 2025, in Book 43 of
Maps at pages 49 through 61, inclusive, in the office of the San Luis Obispo Recorder.
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Exhibit “3”
Memorandum of Infrastructure Reimbursement Agreement
Prepared by, recording requested by and
return to:
Name:
Company:
Address:
City:
State: Zip:
Phone:
Fax:
------------Above this Line for Official Use Only------------
MEMORANDUM AND NOTICE OF AGREEMENT
This Memorandum and Notice of Agreement (“Memorandum”) is provided by City of San Luis
Obispo (“City”) pursuant to that certain “Infrastructure Reimbursement Agreement Private”, dated July
18th, 2019, entered into between the City and Avila Ranch, LLC, in which the City agreed to collect
reimbursement fees from certain properties benefitted by certain oversized traffic improvements
constructed by the developer of Avila Ranch in accordance with the City’s approvals permitting the
development of Avila Ranch, including, but not limited to the Avila Ranch Development Agreement and
Vesting Tentative Tract Map 3089 (“Private Reimbursement Agreement”). The Private Reimbursement
Agreement was subsequently assigned and assumed by Avila Ranch Developers, Inc., (“ARD”) the
developer of Avila Ranch.
The Private Reimbursement Agreement was entered into in accordance with Government Code
section 66485 and 16.20.110 of the City’s Municipal Code. Exhibit “1” attached hereto, is Exhibit “A” to
the Private Reimbursement Agreement and identifies those properties benefitted by the transportation
improvements constructed by ARD (“Benefitted Properties”). The amounts set forth in Exhibit “1” are
subject to change. This Memorandum and Notice does not constitute a lien on the referenced
properties.
The Private Reimbursement Agreement terminates on the date which is fifteen (15) years from
the date of termination of the Avila Ranch Development Agreement or until all Reimbursable Costs have
been fully reimbursed to Developer, whichever is sooner.
For additional information or to obtain a copy of the Private Reimbursement Agreement, please
contact City of San Luis Obispo, Community Services Group – Infrastructure Finance at (805) 781-7100.
CITY OF SAN LUIS OBISPO
By: __________________________
Timothea Tway, Director of Community
Development
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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.
STATE OF CALIFORNIA
COUNTY OF SAN LUIS OBISPO
On ___________, 2025, before me, ______________________________________, Notary Public in and
for said State, personally appeared ______________________________________, 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/their 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 ___________________________ (Seal Above)
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Exhibit “1”
Reimbursement Costs and Allocation to Benefited Properties
OwnerEarthwood ExtensionSuburban Extension East of EarthwoodHorizon ExtensionSouth Higuera/ VachellBuckley Road ExtensionEarthwood ExtensionSuburban Extension East of EarthwoodHorizon ExtensionSouth Higuera/ VachellBuckley Road ExtensionTotal AssessmentAvila RanchAvila Ranch LLC, Avila Family Trust75.00%34.70%75.00%50.00%25.00%351,980$ 156,150$ 575,084$ 174,641$ 1,315,885$ 2,573,741$ Froom RanchMadonna18.00%947,437$ 947,437$ Existing Regional Traffic21.20%-$ -$ -$ -$ 1,115,871$ 1,115,871$ 053-141-131.70%-$ -$ -$ -$ 89,418$ 89,418$ 053-161-201.72%-$ -$ -$ -$ 90,697$ 90,697$ 053-258-042Ernie Ball Trust, Steve Dorsi Trustee25.00%0.00%117,327$ -$ -$ -$ -$ 117,327$ 053-258-027Pat and Janet Stone6.65%0.00%-$ 29,919$ -$ -$ -$ 29,919$ 053-258-025JCC Suburban LLC21.64%0.00%-$ 97,371$ -$ -$ -$ 97,371$ 053-258-024JCC Suburban LLC14.63%0.00%-$ 65,849$ -$ -$ -$ 65,849$ 053-258-018Wallace Trust, John Wallace, Trustee1.90%2.12%0.00%-$ 8,548$ 16,271$ -$ -$ 24,820$ 053-258-023Wallace Trust, John Wallace, Trustee4.57%5.11%0.00%-$ 20,570$ 39,153$ -$ -$ 59,722$ 053-258-017Richard Ferris Trust5.22%5.84%0.00%-$ 23,508$ 44,746$ -$ -$ 68,254$ 053-258-014Holdgrafer and Associates5.34%5.97%0.00%-$ 24,042$ 45,763$ -$ -$ 69,805$ 053-258-015Holdgrafer and Associates5.34%5.97%0.00%-$ 24,042$ 45,763$ -$ -$ 69,805$ 053-258-007Robert J Miller Trust0.00%-$ -$ -$ -$ -$ -$ 053-258-005Robert J Miller Trust0.00%-$ -$ -$ -$ -$ -$ 053-258-004Kaiser Sand and Gravel Company0.00%-$ -$ -$ -$ -$ -$ 053-258-009Robert J Miller Trust0.00%-$ -$ -$ -$ -$ -$ MultipleMorabito Business Park (Remaining)17.48%7.93%-$ -$ -$ 61,039$ 417,453$ 478,491$ 053-259-001Sport Warehouse Properties, LLC5.46%4.34%-$ -$ -$ 19,085$ 228,538$ 247,623$ 053-259-002Melton/Johnson Properties, LLC9.59%5.04%-$ -$ -$ 33,497$ 265,494$ 298,991$ 076-071-016 (North)Caltrans (w/Annexation or EIR, Net of Octagon Barn)13.00%11.94%-$ -$ -$ 45,391$ 628,671$ 674,062$ 076-071-016 (South)Caltrans (w/Annexation or EIR, Net of Flood Plain )4.47%3.12%-$ -$ -$ 15,630$ 164,076$ 179,706$ Total Allocations100.00%100.00%100.00%100.00%100.00%469,307$ 450,000$ 766,779$ 349,281$ 5,263,541$ 7,298,909$ Total Cost469,307$ 450,000$ 766,779$ 349,281$ 5,263,541$ 117,327$ 293,850$ 191,695$ 174,641$ 2,831,785$ 3,609,298$ Avila Ranch Fair Share351,980$ 156,150$ 575,084$ 174,641$ 1,315,885$ Existing Regional Traffic Share1,115,871$ Reimbursement Agreement Total117,327$ 293,850$ 191,695$ 174,641$ 2,831,785$ Share of ImprovementsCost AllocationsPage 57 of 349
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Exhibit “4”
Illustration Depicting Park A and Basin A
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Exhibit “5”
Mutual Escrow Instructions
September __ 2025
Sent via U.S. Mail and Email: jmegown@oldrepublictitle.com
Joseph C. Megown
Construction Disbursing Manager
Westport Branch
Old Republic Title
11960 Westline Ind. Dr., Suite 232
St. Louis, MO 63146
Re: Mutual Escrow Instructions
Dear Mr. Megown,
Reference is made to that certain Tolling and Escrow Agreement dated March 28, 2023, as
amended, between Avila Ranch Developers, Inc, (“ARD”) and the City of San Luis Obispo (“City”) wherein
ARD and City acknowledged a dispute arising out of the development of the Avila Ranch project, which
included a dispute over certain fees and reimbursements paid by ARD or owed to ARD (“Tolling
Agreement”).
Pursuant to the terms of Tolling Agreement, the City and ARD agreed to stay litigation to allow
the parties to mutually resolve these disputes, including, but not limited to establishing an escrow with
Old Republic Title Company (“Escrow Holder”) wherein ARD would deposit the sum of $19,000 per
dwelling unit developed (“ARD Escrow Funds”); and the City deposited the sum of One Million One
Hundred Thirty-Six Thousand and 00/100 Dollars ($1,136,000.00) with Old Republic Title Company (“City
Escrow Funds”).
ARD and the City are advised that Escrow Holder is currently holding the sum of $2,846,000.00
representing the sum of ARD Escrow Funds and City Escrow Funds as detailed in Exhibit “A” attached
hereto (“Escrowed Funds”).
ARD and City have entered that certain Settlement Agreement, wherein ARD and City have
reached agreement on the issues in dispute, including, but not limited to the distribution of the Escrow
Funds.
This letter (this “Escrow Letter”) shall constitute the mutual escrow instructions of ARD and City,
to be followed by Escrow Holder and our request that Escrow Holder distribute the Escrowed Funds as
provide herein.
MUTUAL INSTRUCTIONS
1. Distribution of Escrowed Funds. Pursuant to the terms and conditions of the Settlement
Agreement, Escrow Holder is hereby instructed to distribute the Escrowed Funds to ARD and City in the
amounts set forth in Exhibit “B”.
a) Funds distributed to ARD shall be made by wire pursuant to separate wire instructions
provided by ARD to Escrow Holder (“ARD Distribution”).
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b) Funds distributed to City shall be made by wire transfer pursuant to separate wire
instructions provided by City to Escrow Holder (“City Distribution”).
c) ARD and City shall equally share in any fees charged by the Escrow Agent for the
administration of this Escrow and Escrow Holder is instructed to deduct each Party’s share
of the Escrow Fees from each Party’s respective Distribution.
d) The Distributions shall occur no later than 2:00 p.m. Pacific Time on _____________,
2025.
2. Close of Escrow. Upon the Distribution of the Escrowed Funds according to these Mutual
Escrow Instructions, Escrow Holder is instructed to Close Escrow.
3. Notice. Any notice to be given hereunder to either Party shall be in writing and shall be
given either by personal delivery, telecopier transmission, or by registered or certified mail, with return
receipt requested, postage prepaid and addressed as follows:
To ARD:
Avila Ranch Developers
2505 Alluvial Avenue
Clovis, CA 93611
Attention: Michael Slater
To City:
City Attorney’s Office
City of San Luis Obispo
990 Palm Street
San Luis Obispo, CA 93401
Attn: Christine Dietrick
Should you have any questions regarding the foregoing, please do not hesitate to contact the
undersigned. Thank you for your assistance.
AVILA RANCH DEVELOPERS, INC.
a California corporation
By: _________________________________
Joshua Peterson, President
Dated: _____________, 2025
CITY OF SAN LUIS OBISPO
a California charter city
By: _______________________________
Whitney McDonald, City Manager
Dated: _____________, 2025
APPROVED AS TO FORM
By: _______________________________
J. Christine Dietrick, City Attorney
TH AVILA RANCH, LLC,
a California limited liability company
By: __________________________
Joshua E. Peterson,
Authorized Agent
Dated ________________, 2025
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TRUMARK CONSTRUCTION SERVICES, INC.
a California corporation
By: __________________________
Joshua E. Peterson
Authorized Agent
Dated: ____________________, 2025
ACKNOWLEDGED AND AGREED TO THIS ________ DAY OF ________________, 2025, AS TO PROVISIONS
RELATING TO ESCROW HOLDER:
Old Republic Title Company
By:
Joseph C. Megown
Construction Disbursing Manager, Westport Branch
cc: Jessica Moreno, Old Republic Title Company
David Fleishman, Richards Watson Gershon
Timmi Tway, Director of Community Development, City of San Luis Obispo
Callie Taylor, Senior Planner, City of San Luis Obispo
Michael P. Slater, Vice President Land Use, Trumark Homes
Dan Garson, Director of Land Development, Trumark Homes
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Exhibit “A”
Escrowed Funds
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Exhibit “B”
Distribution of Escrowed Funds
Initial Deposit from City 1,136,000.00$
Subsequent Deposits ($19k/ permit)1,710,000.00$
TOTAL ESCROW DEPOSITS 2,846,000.00$
Fire Refund (93,887.06)$
Police Underpayment 8,804.60$
TIF LOVR Base Refund (803,454.21)$
TIF LOVR Add-on Refund (48,858.23)$
Water Refund (171,888.01)$
Wastewater Refund (159,633.77)$
ARD DUE FROM ESCROW (1,268,916.68)$
CITY DUE FROM ESCROW (1,577,083.32)$
Escrow Ending Balance -$
ESCROW DESPOSITS & DISTRIBUTION
ARD DISTRIBUTION
CITY DITSTRIBUTION
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Exhibit “6”
Avila Ranch Phase 1 Impact Fee Schedule
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