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HomeMy WebLinkAbout08/03/2004, PH3 - CONSIDERATION AND REVIEW OF REQUEST FOR THE CITY TO ENTER INTO A DEVELOPMENT AGREEMENT WITH THE PRO council Mnuv.D. 8"3"04 j aGEnaa Report „®�� �3 C I TY OF SAN L U IS OBISPO FROM: Jonathan Lowell, City Attorney Wendy George, Assistant City Administrative Officer �J`� Prepared By: Shelly Stanwyck,Economic Development Manager U d SUBJECT: CONSIDERATION AND REVIEW OF REQUEST FOR THE CITY TO ENTER INTO A DEVELOPMENT AGREEMENT WITH THE PROPERTY OWNER AND THE DEVELOPER OF THE SAN LUIS OBISPO MARKETPLACE PROJECT, AS WELL AS A SPECIAL TAX REIMBURSEMENT AGREEMENT AND CONSERVATION EASEMENT AGREEMENT PLANNING COMNIISSION RECOMMENDATION Do not adopt the proposed Development Agreement with the Property Owner and the Developer of the San Luis Obispo Marketplace Project. CAO RECOMMENDATION 1. Based on findings, introduce an ordinance approving the Development Agreement with the Property Owner and the Developer of the San Luis Obispo Marketplace and authorize the Mayor to execute the agreement. 2. Approve the Special Tax Reimbursement Agreement with the Property Owner and the Developer of the San Luis. Obispo Marketplace and authorize the Mayor to execute the agreement. 3. Adopt a resolution approving a Conservation Easement Agreement with the Property Owner and the Developer of the San Luis Obispo Marketplace and authorize the Mayor to execute the agreement. REPORT-IN-BRIEF The San Luis Marketplace project has a long history with the City, starting in 1994 when the revised General Plan allowed for development of part of the Dalidio property upon which it will be built, in exchange for the protection of part of the land as open space. Following that decision, an initial development proposal was rejected by the Council in 2001. The developer then applied for approval of the project in the County. After negotiations between the developer, the County and the City, the developer agreed to submit a new project application to the City, and did so in 2002. Since that time, land use and financial tracks for the San Luis Obispo Marketplace have been proceeding simultaneously. Marketplace Project Development Agreement. Page 2 On July 7, 2004, the Council granted discretionary planning approvals for the project, including certification of the Environmental Impact Report and approval of General Plan amendments, pre- zoning and annexation of the site to the City. Stated simply, the proposed Development Agreement and Special Tax Reimbursement Agreement are implementation tools for these discretionary approvals, and only make sense in this context. They do not in themselves grant discretionary approvals that do not already exist, nor do they limit them. On July 14, 2004, the Planning Commission considered the proposed Development Agreement and chose not to recommend its approval to the Council. A majority of the Commission felt approval would not be consistent with their previous recommendation to the Council that a Statement of Overriding Considerations for economic, social and other impacts of the project was inappropriate because the benefits do not outweigh those impacts. The Planning Commission felt that the project would further exacerbate the City's jobs/housing imbalance and would place an economic burden on the downtown. The key points of the agreement are summarized in question and answer format in Attachment 5, Frequently Asked Questions. In forwarding recommendations from the Planning Commission, staff typically attaches the Planning Commission report and focuses the Council report on the actions taken by the Planning Commission in responding to the report. In this case, the Planning Commission report is attached and the Council report describes the Commission action. However, the Council report also includes much (if not all) of the detail also included in the Planning Commission report. While this creates some redundancy, given the level of public interest and scrutiny associated with this issue, and the importance of a well-documented public record, it seemed prudent and more helpful to provide all pertinent information in the Council agenda report. DISCUSSION Report Overview In many communities throughout California, development agreements are a frequently utilized tool in the development process. Development agreements are used to create greater certainty in the development process in exchange for unique public benefits associated with a project. In San Luis Obispo, the review of a development agreement is a rare occasion. Because of the infrequency with which the Council has considered this type of document, and the complexity of the topic, this staff report contains extensive background information. The information is an effort to provide the Council with a thorough review of the project history, the project negotiations, and the basics of development agreements, all of which are subjects that have been previously considered by the Council on the road to this final action. This report is composed of eight major sections as follows: Marketplace Project Development Agreement Page 3 I. Background H. Development Agreement Basics III. Key Principles Guiding the Development Agreement Negotiations and Council Approved Conceptual Terms IV. Summary of Proposed Development Agreement Terms V. Summary of Proposed Special Tax Reimbursement Agreement Terms VI. Discussion of Conservation Easement Agreement VII. Development Agreement Evaluation VIII. Fiscal Impacts L Background Project History Overview The possible development of a portion of the 131-acre Dalidio Property (2005 Dalidio Drive [Vicinity Map, Attachment 1]) has been the topic of much conversation for many years. A detailed and comprehensive discussion of the property's history could take many pages. To summarize recent history, in 1991, the Dalidio family presented a land use concept to the City for incorporation into our General Plan (which was being updated at the time). After many years of thorough analysis of fiscal impacts, and innumerable public hearings, a "compromise" was reached between the City and the Dalidio Family to allow some of the 131-acre Dalidio property to be developed in exchange for protecting a portion of the property in permanent open space. This compromise, incorporated into the 1994 General Plan update, attempts to balance many things including both environmental and economic interests. The General Plan also acknowledges that for the City to have influence over the use of the property, it must be annexed into the City, and it will not be annexed without the consent of the property owners, the Dalidio family. Over the next 8 years, there were many twists and turns in the development and processing of a project application, including entering into a Memorandum of Understanding (MOU) with the developer in 1999 for funding of a needed interchange. Ultimately, however, the project was denied in February 2001. After this denial, the property owner and developer submitted an application to the County, and the County agreed to process it. At the request of the City Council, however, the County agreed to negotiate the return of the application to the City, which was submitted later in June 2002. Land use review and financial analysis of the proposed San Luis Marketplace Project have been proceeding simultaneously since project submission in 2002. The Planning Commission considered the land use actions required by the project on May 26' 2004, and Council action, including EIR certification, occurred on July 7, 2004. The Planning Commission considered the proposed Development Agreement for the project and recommended against its approval on July 14, 2004. 3 , 6 Marketplace Project Development Agreement Page 4 City Objectives Facilitated by a Development Agreement On January 6, 2004, the City Council provided staff with direction about many key terms that should be included in a proposed development agreement. A development agreement for the San Luis Obispo Marketplace project will facilitate many City objectives including: 1. Providing funding for the completion of a major General Plan goal — the Prado Road Interchange — by using a portion of sales tax revenues and transient occupancy tax (TOT) that we do not presently have, and will not have without the development of the San Luis Marketplace. I. Assisting in accomplishing the Council's major goals for 2003-05 to increase sales tax and TOT.. 3. Protecting the retail strength of the downtown through provisions that discourage the developer from direct retail competition with the downtown. 4. Providing onsite affordable housing. 5. Protecting agricultural land onsite and contributing to offsite open space protection at the edge of the City where "sprawl" is a threat. 6. Bringing to a conclusion years of uncertainty regarding the Dalidio property, by reaching agreement to annex the property and determining its ultimate use under City jurisdiction. Prior Project and Memorandum of Understanding Before discussing the terms of the proposed development agreement, a discussion of previous agreements is necessary. In March of 1998, the San Luis Obispo Marketplace development team, led by developer Bill Bird, submitted a project application for the development of San Luis Obispo Marketplace on a portion of the Dalidio Property. Because of circulation needs, in order for significant retail square footage to be constructed on the Dalidio Property, a new freeway interchange at Prado Road was required. This interchange has long been part of the City's Circulation Element; but the City has not had the financial ability to build it. Accordingly, since 1994, new development has been assigned the responsibility for funding this improvement. The developer proposed to construct the Prado Road interchange with the project. The intent was that the developer would assume the up-front risk of financing the interchange, with fair share reimbursements from other benefiting properties as they develop. Similar to a practice used in other cities with major retail projects that involve achieving public and private goals, a performance based sales tax sharing (or reimbursement agreement) was proposed. Eventually the City and the developer entered into a Memorandum of Understanding (Dalidio MOU) outlining the principles for a future development agreement. The key principles of the September 21, 1999 Dalidio MOU were as follows: 3 - � Marketplace Project Development Agreement Page 5 ... Dalidio MOU -.Key Principles of 1. The General Plan concept for the Dalidio Property would guide the project. 2. The"open space for some development compromise"would be memorialized in a development agreement. 3. Sales tax reimbursement would help finance the Prado Road interchange. But,only up to 50%of the net new sales tax revenues generated by the proposed project would be reimbursed to the developer, and reimbursement would not exceed total debt service costs for the Prado Road interchange. 4. The shared revenues would be tied directly to the proposed project's performance—before actually sharing sales tax revenues,the proposed project would have to perform at a certain level. 5. The City would assist in forming a community facilities financing district; however,the debt would be solely secured by the proposed project.. 6. Other projects would eventually share in the cost of the Prado Road interchange. The City would be responsible for its appropriate share as well as advancing the share for other participating properties. 7. The proposed project was responsible for fully paying all other City fees. 8. Construction on the proposed project could not start until a construction contract for the Prado Road interchange had been awarded. 2001-Prior Project's Denial In February 2001, the Council chose not certify the San Luis Obispo Marketplace project Environmental Impact Report (EIR) and the project was denied due to concerns about open space protection and drainage. After this denial, the San Luis Obispo Marketplace Development Team took a substantially changed development proposal to the County of San Luis Obispo for processing. The proposal had far less land designated for open space than did the prior proposal. Because of concerns about the project developing in the County (e.g., that it would preserve so little open space), the City opposed the development application. In January 2002,based on a letter from the San Luis Obispo City Council asking that the project be returned to the City for further processing, the Board of Supervisors agreed that a Board Subcommittee (Supervisors Pinard and Achadjian), San Luis Obispo Marketplace representatives, and a City Subcommittee (Council members Ewan and Marx) should meet to explore further options for the Marketplace Project proceeding under the City's jurisdiction. Council Subcommittee Process, Recommendation to Council and Council Direction Several times during the period between February 2002 and May 2002, the parties met and eventually came to conceptual agreement on terms to continue project processing in the City. On May 21, 2002, the San Luis Obispo City Council approved the Subcommittee recommendations regarding the Dalidio Property/Marketplace Development Proposal and authorized the Vice-Mayor to send a letter(Attachment 2) requesting that the Board of Supervisors refer the project back to the City for further work and processing. The principles set forth in the Subcommittee recommendations and letter were generally consistent with prior MOU principles adopted by 3 �� Marketplace Project Development Agreement Page 6 Council regarding the Dalidio Property and established a basis for a new City project application for the Dalidio Property to be processed in the City. The letter also committed to proposing a "binding development agreement" at the appropriate stage to create greater certainty for both the applicant and the City. As a result of this communication, on June 4, 2002, the Board of Supervisors put the proposed project application on hold and directed the applicant back to the City for further work and processing. In following up on this direction, the developer submitted a project that is substantially consistent with previous Council direction found in the 1999 Dalidio MOU, as well as the principles arising out of the City-County Subcommittee discussions. Below are highlights of those key Council approved principles: SubcommitteeKey Council Approved i0 1. The project should be largely consistent with the City's General Plan. 2. The project should be very similar to so-called Proposal 3,described in the Dalidio Council Letter, allowing significant development of the property,while protecting more open space than envisioned in the previous proposal to the City. 3. 58.7 acres of onsite open space should be protected,and if possible,be given in fee title to the City. 4. 20 acres of offsite open space should be acquired in the vicinity of Highway 101 at the southern end of the City,consisting of quality farmland. 5. The uncertainty of a 9-acre"reserve"should be eliminated. 6. About 47 acres of commercial development should occur and should include a hotel that will help meet the community's needs for enhanced conference facilities. 7. The property owners should provide access to the groundwater basin and work conjunctively with our water reuse project. 8. At the appropriate stage,a binding development agreement should be negotiated and presented to Council for consideration and approval,to create greater certaintyfor both the applicant and City. Project Submittal and Development Review Process San Luis Obispo Marketplace and Associates submitted anew application for the development of parts of the Dalidio Property on June 27, 2002. The proposed project consists of a retail component, open space component, business park component, residential component, road dedications and a freeway interchange. Land use and financial tracks for the proposed San Luis Marketplace Project have been proceeding simultaneously for the past two years since project submission. The specifics of the Project were evaluated by the Planning Commission on May 26, 2004, when it evaluated the EIR, request for annexation, proposed General Plan amendment and pre-zoning, use permit and preliminary development plan. The Planning Commission recommended certifying the EIR, recommended against the adoption of a Statement of Overriding Considerations, and recommended denial of the annexation, General Plan amendment, prezoning, use permit, and preliminary development plan. � � P i Marketplace Project Development Agreement Page 7 On July 7, 2004, the City Council adopted a resolution certifying the EIR, including the mitigation monitoring program and adoption of overriding considerations relative to traffic/circulation, air quality,noise,cultural resources, and loss of agricultural land and endorsed EIR Alternative 7 which includes a housing component. The Council also upheld the applicant's appeal and adopted resolutions for annexation of the property, amending the General Plan Land Use Element Map and approving pre-zoning. Fiscal Analysis and Development Agreement Discussions In addition to the developmental review work that has been undertaken for the project thus far, on September 17, 2002, Council approved an agreement with Allan D. Kotin and Associates to perform and update an economic impact study of the proposed project (the "2002 Kotin Study"). The 2002 Kotin Study was in satisfaction of General Plan Land Use Element Section 3.1.3, which says, "before approving an expansion plan (on the Dalidio and other properties), the City should consider an evaluation of how much it would transfer sales from existing retail areas in the City and whether the proposed uses could be developed in existing retail areas." As is the City's practice with EIRs, the 2002 Kotin Study was funded by the project applicant, but managed entirely by the City, thereby maintaining objectivity and independence. The 2002 Kotin Study was published in October 2002 and concluded that the project would annually add about $1.5 million net new sales tax revenues to the City, which, when adjusted for transfer effects, became about $1.1 million annually, and net new transient occupancy tax at $280,000 annually, for a total of annual net new revenues of about $1.4 million. (Note: As discussed later in this report, subsequent analysis by Kotin has increased the "net new" revenues slightly,to about$1.5 million annually.) With respect to the fiscal impacts of the proposed San Luis Marketplace Project on downtown, the following conclusions were reached in the 2002 Kotin Study: 1. The types of stores will not provide significant competition to downtown. 2. The design of the project encourages retailers similar to the Promenade and Madonna Plaza, so called "box" retailers, and is consistent with the Downtown Strategic Plan's goal of discouraging other"main street"type projects outside of downtown. 3. Provisions to be included in a development agreement will provide strong financial disincentives to discourage competition with downtown. 4. The added shoppers at the proposed San Luis Marketplace Project will be a net benefit to the City overall as well as to downtown. In May 2004, after being commissioned by several business and property owners to comment on the 2002 Kotin Study, Jerry Keyser of Keyser, Marston and Associates (KMA) released a report entitled Impact on Downtown Retailing of Proposed San Luis Marketplace (the KMA Report) in which he took exception to the transfer impacts of the project on downtown. On May 25, 2004, Allan D. Kotin and Associates responded to the KMA Report in its Response to Keyser, Marston Comments on the Impact of Downtown Retailing of the Proposed San Luis Marketplace. In his response, Allan Kotin stated that his original conclusions from the 2002 Kotin Study were still I Marketplace Project Development Agreement Page 8 valid, and changes in the proposed tenant mix and the size of the project further supported his original determinations. Council received these reports and discussed them at the Special Meeting June 28, 2004 (a copy of the June 28, 2004, Agenda Report is available for review in the Council Reading File). Planning Commission Discussion and Recommendation Regarding the Proposed Development Agreement At its July 14, 2004 meeting, the Planning Commission discussed the proposed Development Agreement with the Property Owner and Developer of the San Luis Obispo Marketplace Project (the minutes of the Planning Commission meeting and resolution are Attachment 3 and the Planning Commission Agenda packet is Attachment 4). The majority of citizens addressing the Commission believed that the Marketplace project would not be good for the community. The Commissioners, on a 5 to 2 vote, (Aiken and Loh) forwarded to Council the recommendation that it not adopt the proposed Development Agreement. A majority of the Planning Commission felt approval would be inconsistent with their previous recommendation to Council on the project itself, would further exacerbate the City's jobs/housing imbalance, would create economic hardship in the downtown and would not result in substantial public benefits that outweigh the impacts of the project. The dissenting commissioners felt the proposed development agreement was consistent with Council's direction on the project and therefore could be recommended for approval. When the Development Agreement was presented to the Planning Commission, it included a proposed Open Space Easement Agreement as an exhibit, in order to protect the open space portion of the property. As discussed further on pages 18-19, staff is now proposing Council approve a conservation easement in order to strengthen the level of protection provided to the open space. Since the Planning Commission chose not to recommend approval of the Development Agreement, it did not recommend approval of the Open Space Easement. However, there was some discussion among the Commissioners that a conservation easement would be better than an open space easement at protecting the property. Certain draft exhibits to the Development Agreement submitted to the Planning Commission have been modified slightly by staff following Planning Commission review of July 16. More specifically, the Project Plan, Exhibit D, reflects the plan most recently reviewed by staff and the ARC. These changes are minor, non-substantive revisions, and continue to be subject to further City review pursuant to the Applicable Rules under the Development Agreement. The Planning Commission took no action on the Special Tax Reimbursement Agreement, as a separate item, as it does not fall under the required purview of the Planning Commission. However, since it occurs as an exhibit to the Development Agreement, it was presented to the Commission for informational purposes. Marketplace Protect Development Agreement Page 9 II. Development Agreement Basics Frequently Asked Questions Attachment 5 is a handout with a series of "Frequently Asked Questions" about the project and proposed agreements. It summarizes the preceding historical discussion and addresses some of the issues commonly brought up with respect to the project and the proposed agreements. The following report sections address many of those same questions in greater detail. Purpose of a Development Agreement Since 1979, California has statutorily authorized local governments to enter into agreements for the development of property, which memorialize regulations that are in effect when the agreement is executed, along with other conditions and terms agreed to by the parties. These statutes were enacted in order to create greater certainty in the development process in exchange for unique public benefits associated with a project. By entering into a development agreement, local agencies do not give up rights of approval; rather they merely enshrine what rules, regulations and policies are in place when the agreement is signed. Again, the intended effect is to strengthen the public planning process and reduce the economic costs of development in situations where there exists a "quid pro quo" of benefits between the agency and developer. Thus, while a development agreement would prohibit the City from changing the zoning applicable to the subject parcel such that the proposed project would no longer be permissible, it also allows the City to obtain benefits it would not otherwise be lawfully entitled to require, such as construction of the freeway interchange. California Government Code Sections 65864 et seq. - Principle Provisions Governing Development Agreements 1. Cities are authorized to enter into development agreements by resolution or ordinance. 2. Development agreements are enforceable by any party to the agreement. 3. Unless otherwise provided for in the development agreement itself, the applicable rules, regulations and policies are those in force when the development agreement is executed. 4. Our City's exercise of its power to enter into a development agreement is a legislative act. The act of approving a development agreement must, therefore, be approved by ordinance, be consistent with the General Plan and is subject to referendum. 5. There is a 90-day statute of limitations to bring a legal challenge to a development agreement. 6. Development agreements are to be reviewed annually by the Planning Commission and City Council to ensure compliance with their provisions. Why the City Needs a Development Agreement In seeking the return of the San Luis Obispo Marketplace Project application from the County; the Council agreed to pursue a binding development agreement at the appropriate time. Typical Marketplace Project Development Agreement Page 10 contents of a development agreement include the term of the agreement, permitted uses of the property, density or intensity of use, and provisions for reservation or dedication of land for public purposes. Development agreements also frequently include provisions for the financing of necessary public facilities. The San Luis Obispo Marketplace Project requires the construction of a freeway interchange at Prado Road in order to mitigate traffic impacts and to provide more efficient access to the project itself. This public improvement adds a level of cost that is disproportionate to the impact of the project, but is nonetheless triggered by the project. In the short term, the City has no capacity to build an interchange at Prado Road, though it has been, since the adoption of the 1994 Circulation Element, a long-term goal to provide a cross-town connection at Prado Road. In order to make this necessary improvement feasible, some form of public-private partnership is needed. Following Council's direction on the prior MOU, and due in large part to the substantial net new sales tax the project is expected to generate, a sales tax reimbursement mechanism is proposed to be a part of the development agreement. Thus, both the Development Agreement and the Special Tax Reimbursement Agreement are needed to require the developer to construct the interchange. III. Key Principles Guiding Development Agreement Negotiations and CouncilApproved Conceptual Terms The drafting of the proposed Development Agreement for the project has been based on key principles first outlined in the Dalidio MOU, Council's direction following the subcommittee process in 2002, and Council approval of conceptual terms on January 6, 2004. At the January 6, 2004, meeting, in addition to the direction on specific terns, Council provided direction regarding recitals to be included in the Development Agreement. Council also authorized staff to continue with negotiations.. Summary of Conceptual Development Agreement Terms Approved by Council on January 6, 2004 Terlm, Council Direction 1.Development Agreement Term 5-year term for retail/hotel portion and 15-year terms for the business park/residential portion of the project to reflect phased development. 2.Amount of Onsite Open Space 54.67 acres as the amount of onsite open space allowed,if affordable housing can be built on 4 acres of the Dalidio Farm property. 3.Open Space Easement The grant of an easement for onsite open space with the possibility of fee title in the future and direction to staff to explore the acquisition,if necessary,of a small portion of the property in fee,if needed for water treatment facilities. 4.Additional Offsite Open Space The financial equivalent of 24 acres of offsite open space or$192,000, assuming on-site affordable housing 5.Open Space Easement The acquisition of offsite open space that is prime agricultural land at the City's southern boundary in the Airport Area. 3- f0 Marketplace Project Development Agreement Page 11 Term Council Direction 6.Sulkey Racing Stadium The possible relocation of the Sulkey Racing stadium to an open space location historically consistent with its original location,pending advisory body review and Council final approval;.requirement that the property owner restores and maintains the structure. 7.Credit of Water Impact Fee A credit against the project's water impact fee in exchange for an agreement by the property owner to use recycled water instead of ground water for agricultural uses on the property. (The effect of Council's recent action regarding Nacimiento water has made this option no longer beneficial to the City.) 8.Will-Serve Letter Provision,if necessary,of a"will-serve letter",indicating the availability of City utilities within the timeframe of the agreement. 9.Drainage Evaluation of the project's compliance with City guidelines related to drainage through the EIR process and approval of the inclusion of language in the Development Agreement regarding drainage compliance following EIR certification. 10.Affordable Housing The project's satisfaction of the City's Affordable Housing requirement by the construction of onsite affordable housing,if allowed,and if not allowed,satisfaction of the fee consistent with City policies. 11.Transportation Impact Fee The computation of the Transportation Impact Fee(TIF)rate using that Rate which was in effect when the project application was submitted to the City. 12.Defined Excess Sales Tax The DESTR between the City and the developer to be the total sales tax Revenue(DESTR)and Transfer of all San Luis Marketplace Retail Outlets(excluding those in the Hotel) Amounts less a 33%transfer effect(sales tax transferred from other City businesses)plus TOT and sales tax from the Hotel in the Project less.a hotel transfer of 20%). 13.Future Adjustments For the non-hotel 33%retail sales tax transfer,accept downwards adjustment of this factor in year six by 1%for that year and by I%for the next four years so that in the 10`s year the sales tax transfer is 28%. 14.Non-Downtown Transfer Exclude from the DESTR sales from businesses that are deemed to be Exclusion from DESTR transfers from non-downtown retail outlets. 15.Downtown Transfer Exclusion Exclude from the DESTR two times the sales from an outlet that closes from DESTR downtown within a defined 2-year period and reopens in the project. 16.Adjustment of Retail Chain Downward adjustments to the DESTR fora new branch of a retail chain Outlets Not Exclusively in the that is not located exclusively in the downtown that locates in the project. Downtown 17.Adjustment of Retail Chain Downward adjustments to the DESTR,including a penalty,for a new Outlets Exclusively in the branch of a retail chain that is located exclusively in the downtown that Downtown locates in the project to reflect sales losses from the downtown branch. 18.Small Space Penalties Penalties to the DESTR for small store space,5,000 square feet or less, created after the project has been constructed. J � I Marketplace Project Development Agreement Page 12 Term Council Direction Or 19.Cumulative mechanism A cumulative reimbursement of revenues so that the project,if it receives less than its maximum eligible amount in one year,may recapture it in subsequent years,but in no event will it be eligible for reimbursement that is more than its cumulative debt obligation. 20.Financing Mechanism The interchange would be funded by a community facilities district and bond issuance. 21.Guarantee Form The use of a completion bond or similar financial guarantee for the completion of the construction of the interchange. 22.The"Triple Flip" The developer's option to increase the bond payment size to accommodate an additional 6 months capitalized interest if the so-called "triple flip"sales tax legislation becomes effective. 23.Benefiting Properties The"fronting"by the developer for the other properties that benefit from the construction of the Prado Road interchange. 24.Dalidio Street Name The use of the name Dalidio for the street that is in front of the project, from Madonna Road to the Prado Road interchange. IV. Summary of Proposed Development Agreement Terms The proposed Development Agreement is attached (Attachment 6). What follows is a discussion of the general topics addressed by the proposed Development Agreement. Recitals The proposed Development Agreement first identifies the parties to the agreement and then sets forth a series of recitals. The recitals are intended to describe the principles upon which the agreement is based. They serve as a road map for the agreement. They describe previous actions and findings relevant to the agreement. They also introduce the concurrent agreement that would be entered into simultaneously, the proposed Special Tax Reimbursement Agreement. Although contained within the proposed Development Agreement; as is the case with all agreements, the recitals are nonbinding. Agreement Timing The Development Agreement is proposed to be effective when the annexation of the subject property is complete. The term of the agreement varies by type of use. It is for 5 years with respect to the retail portion of the project and 15 years with respect to the business park and residential portions. Language is contained to allow for term extensions if there is a legal challenge to the agreement or its attendant approvals (basically, the "clock" stops during those periods). The agreement extends for a minimum of 30 years (the anticipated term of the interchange financing). Marketplace Project Development Agreement Page 13 Development of the Property The proposed agreement describes the developer's vested rights and imposes some limitations on the ability to make revisions or changes to the vested rights. Development of the property will be in substantial conformity with the preliminary project plan approved by the City Council on July 7, 2004. Applicable Rules and Regulations The rules and regulations that are in effect when the agreement is entered into are those which will govern the agreement, such as the City's Municipal Code. Subsequently enacted rules and regulations may be applicable if they are not in conflict with specifically enumerated terms and if they are not more stringent and do not impose more limitations or increase costs. Sections 5.4 and 5.5 specifically enumerate the rules and regulations applicable to public art and drainage issues. Timing of Development Section 6 describes how if a later-adopted initiative restricts or limits the timing or sequencing of development of the project, it is the intent of the parties that the agreement governs rather than the later adopted regulation. This does not preclude a referendum on the Development Agreement itself, or other legislative acts related to the project. Processing Section 7 of the proposed agreement describes how approvals, made subsequent to the agreement, will become vested components of the agreement. It also requires that the City, in processing final approvals, must be consistent with the agreement and the applicable rules and regulations defined in the agreement. Fees The applicant will pay fees in accordance with the City's rules and regulations with a few notable exceptions. a. Water Impact Fees — will be those fees effective upon the project application submission, January 1, 2002. b. Traffic Impact Fees — with respect to the retail portion of the project, will be those fees effective upon the project submission,January 1, 2002. c. Affordable Housing — an onsite, residential project is intended to satisfy the inclusionary housing requirement. If the onsite residential project is precluded from construction within five (5) years of the effective date of the agreement, then the developer will have to pay the fee in place at that time. 343 Marketplace Project Development Agreement Page 14 Dedication of Land for Public Purposes A conservation easement is proposed to preserve conservation land and is discussed more particularly in Section VI on page 18. In the Development Agreement, there is discussion about the placement by the developer of the Grandstand Structure on the conservation land, if all necessary permits and entitlements are obtained. Further, offsite open space will be preserved, as the developer is obligated to pay for additional offsite open space preservation of about 24 added acres in an amount not to exceed $192,000 (roughly $8,000 per acre for easements). The cost per acre for offsite open space is an amount based on the Natural Resource Manager's estimates, in light of his past experience with properties in the area, and current negotiations for similar acquisitions of open space. Freeway Interchange a. Freeway Interchange Funding. The Prado Road Interchange is an integral component of the project. The Prado Road Interchange has been long planned for by the City, has been included in the Circulation Element, and shall be totally funded by new development resources. The proposed mechanism for funding the developer's portion of the Prado Road Interchange is a community facilities district, with the balance of the cost funded by Transportation Impact Fees (TIF)by new development in other areas of the City. The developer's share for the project is approximately 52%. The remaining 18% is attributable to undeveloped properties at Prado and the Margarita Area (the "benefiting properties"). Consistent with City policy that "development pay its own way," the Developer will pay for its share of the interchange, and has agreed to "front" the money for the "benefiting properties," provided that these "benefiting properties" will pay back the developer in the future as they develop. This is described in both the proposed Development Agreement and the proposed Special Tax Reimbursement Agreement. This represents about 70% of the project cost, and will be financed through community facilities district bonds secured solely by the project. The remaining balance of the project cost (about 30%) is attributable to new development in other parts of the City, and will be financed by a separate but concurrent bond issue funded by TIF fees. While the underlying security for this bond issue will be the General Fund, this only places the General Fund at risk in the event that annual TIF revenues in a given year are less than debt service costs. Based on past TIF revenue trends, this is highly unlikely. However, should this occur in any given year, the General Fund can be reimbursed from subsequent year TIF revenues. b. Acquisition of Land for Freeway Interchange. Also described in Section 11 are the methods used to acquire land necessary for the freeway interchange and the valuation methodology. c. Preconstruction Costs Reimbursable. The developer's "soft costs" incurred preconstruction are eligible for inclusion in the Special Tax Reimbursement Agreement. 3 - 14 Marketplace Project Development.Agreement Page 15 d. Timing of Funding and Construction of the Freeway Interchange. No building permits will be issued for the project until the construction contract for the Prado Road Interchange has been awarded. As described in the agreement, however, use of the project may occur prior to completion of the Prado Road Interchange. It is anticipated some smaller buildings will be completed prior to the completion of the freeway interchange as is typical of large retail projects of this type that see completion of buildings in phases. e. City Street Name. The extension of Dalidio Drive from Madonna Road to the Freeway Interchange, at which point the street connects with Prado Road, will be named Dalidio Road. Standard Contract Language The remaining sections in the agreement establish how various situations, ranging from default to severability, will be handled. This is standard contract language, and is drafted to provide certainty and fair means for resolving potential disputes between the parties. V. Summary of Proposed Special Tax Reimbursement Agreement Terms The proposed tax reimbursement agreement is provided in Attachment 7. As previously indicated, the purpose of the sale tax reimbursement agreement is to provide for the sharing of up to 50% of the net new sales tax and transient occupancy tax revenues generated by the Retail Project (tax revenues the City would not have at all, except for the project), less certain exclusions and adjustments, in order to help finance the cost of constructing the Prado Road interchange. The general topics addressed by the proposed Special Tax Reimbursement Agreement are as follows: Recitals The proposed Special Tax Reimbursement Agreement first identifies the parties to the agreement and then sets forth a series of recitals. As with the Development Agreement, the recitals are intended to describe the principles upon which the agreement is based. They serve as a road map for the agreement. As is the case with all agreements, the recitals are nonbinding. Term The term of the agreement is intended to last until one year after the final payment by the developer of special taxes related to debt payments. The agreement, at a minimum, is expected to last 30 years. Funding of the Freeway Interchange As with the proposed Development Agreement, the proposed Special Tax Reimbursement Agreement describes the apportionment of costs (shares) for the Prado Road Interchange. The J- 1� .. 1 Marketplace Project Development Agreement Page 16 commercial property's share, the benefiting properties' shares and shares allocable to new development in other areas of the City are described in Section 2 of the proposed tax reimbursement agreement and have been previously discussed. The approximate shares are as follows: PradoAllocation of Road, Developer(Community Facilities District) Marketplace Project 52.4% Other Directly Benefiting Properties Prado Road Area 4.7% Margarita Area 13.0% Total Developer Responsibility 70.1% Other New Development(Transportation Impact Fees) 29.9% Total 100.0% Excluded from this funding mechanism are the Conservation Land and the Residential Land. As part of the formation of the community facilities district, the City will prepare a rate and method apportionment (RMA) which will specify the details of the district's boundaries and the special tax for all of the properties in the district. Advances for Benefiting Properties Because of the City's changed financial circumstances, during negotiations, the developer agreed to assume the benefiting properties' shares of the Prado Road Interchange costs until such time as they develop. As described in Section 3 of the proposed tax reimbursement agreement, the benefiting properties would pay to the City their share of the Prado Road Interchange payments made on its behalf together with interest, in a lump sum, prior to the issuance of City building permits. The City will then reimburse the developer for advances made on behalf of the benefiting properties. Definition and Measurement of Defined Excess Sales Tax Revenue (DESTR) The Defined Excess Sales Tax Revenue (DESTR) is referred to and defined in the tax reimbursement agreement Section 4. DESTR is a financial term used to describe the net new sales tax and TOT, less adjustments, that could be shared, up to 50% between the City and the Developer. The formula for the DESTR, including adjustments, looks like this: The Defin,ed Ex.ces,s Sales Tax Revenue(DESTR) Total sales tax of all San Luis Marketplace Retail outlets(excluding those in the hotel) Less a 33%transfer effect(sales tax taken from other City businesses) Plus TOT from the hotels in the Project(less 20%transfer effect Plus sales tax from retail outlets in the hotel in the Project(less a hotel transfer of 20%) Equals the"DESTR" c3- 1 Marketplace Project Development Agreement Page 17 Exclusions and Adjustments to the DESTR Exclusions and adjustments are described particularly in Sections 4.2-4.4 of the proposed Special Tax Reimbursement Agreement. Most of exclusions and adjustments to the DESTR were included as protections to downtown. The effect of these exclusions and adjustments is to lower the amount of DESTR that can be shared with the developer, thereby creating a strong disincentive to engaging in transactions that trigger them. Their purpose is to provide economic protection to the downtown and to discourage the developer from recruiting tenants already within the City. The following protections are included in the reimbursement agreement: a. Non-Downtown Transfers. Sales from non-downtown business retail outlets that close and reopen in the project beginning one year before the opening of the project and reopening in the project within one year of its completion, should be excluded from the DESTR. b. Downtown Transfers. Sales from an outlet that closes in downtown within a 2-year period, beginning one year before the opening of the project and ending one year after, and reopens in the project should be excluded from the DESTR plus a penalty that results in a total deduction equal to double the tax generated. c. Retail Chain Outlets Not Exclusively Downtown. Adjustments downward should be made to the DESTR for a branch of a retail chain that is not located exclusively downtown that locates in the project. d. Retail Chain Outlets Exclusively Downtown. Adjustments downward should be made to the DESTR for a branch of a retail chain that is exclusively located in the downtown that locates in the project, to reflect the sales losses from the downtown branch, plus a penalty that doubles the downward adjustment e. Small Store Space. Sales tax exclusions will be imposed for small store space created after the project has been constructed, to preclude the subdivision of larger spaces into smaller spaces, encouraging direct competition with downtown. 5,000 square feet and below will define a "small store." The developer can appeal for relief from this penalty, but is not guaranteed automatic relief. f. Transfer Factor Amount and.Future Adjustment. The formula for the DESTR contains an acknowledgement that the 33% Sales Tax Transfer Factor was arrived at. based on assumptions about the impact of the project on existing retail outlets in the City and that those assumptions may change over time. In recognition of the tendency for transfer effects to moderate over time, the transfer factor is proposed to adjust in year six downwards by 1% and by 1% for the next four years so that in the 10'h year of the project the Sales Tax Transfer Factor would be 28%. These protections for downtown were conceptually approved by Council on January 6, 2004. At the time, the Downtown Association endorsed the provisions and acknowledged in a letter to Council on.January 15, 2004 (Attachment 8) that mutually beneficial retail centers can coexist if special attention is paid up front. While the Downtown Association's position on the San Luis Obispo Marketplace itself has changed since its endorsement of the protective provisions to be c3—fI Marketplace Project Development Agreement Page 18 included in the proposed Special Tax Reimbursement Agreement, the provisions protecting the downtown have not changed and continue to be an integral part of the proposed Special Tax Reimbursement Agreement. Changes in State Sales Tax Law The proposed Special Tax Reimbursement Agreement in Section 4.5 contains language addressing possible changes in state sales tax laws. Cumulative Mechanism As described in Section 4.6 of the proposed Special Tax Reimbursement Agreement, the proposed sharing of tax revenues is performance based. The City's reimbursement of revenues under the DESTR formula will be cumulative. If the project receives less than the maximum amount it is eligible for in any one year, this loss can be recaptured in subsequent years. In no event, however, would the project be eligible for reimbursement for more than its cumulative debt service obligation. DESTR Reimbursement Application The Developer must submit an annual DESTR Reimbursement Application providing the required information as defined in Section 5 of the proposed Special Tax Reimbursement Agreement in order to qualify for reimbursement by the City. The City will have 30 days to review the application for completeness and accuracy and no reimbursement payments shall be made until the DESTR Reimbursement Application is complete_d and reviewed. The City will make disbursements of the DESTR twice a year. Dispute Resolution and Rights of Appeal Arbitration is the proposed method of dispute resolution described in Section 6 of the proposed Special Tax Reimbursement Agreement. Standard Contract Language The remaining sections in the agreement establish how various situations will be handled per the agreement and contain standard contract language: VI. Open Space Conservation Easement Agreement City Policies To ensure that approximately half of the project (referred to in the Development Agreement as the "Conservation Land") remains substantially in its present state as both agricultural land (referred to in the Conservation Easement as the "Agricultural Area") and essentially unimproved land that contains plant and animal life (referred to in the Conservation Easement as the "Creek Area"), the parties have negotiated for the Developer to grant to the City a 3- i� Marketplace Project Development Agreement Page 19 Conservation Easement over the 54.7 acre Conservation Land portion of the project. The effect of the Conservation Easement is to ensure that the current property owner, or any successor or assignee, utilizes the Conservation Land only in ways consistent with the purpose of the grant, i.e. to preserve the natural and scenic character of the Property for public enjoyment, to protect plant and animal habitat in the Creek Area, and to preserve the Agricultural Area primarily for agricultural, historical, open space and scenic uses. At Section 2, the grant specifically enumerates the types of uses prohibited by the Conservation Easement; and, at Section 3, sets forth the permitted uses. Council should be aware that the prohibited uses portion exempts from its prohibitions paved pathways and roadways specifically reserved under the Conservation Easement. This language was included in order to allow for the possible extension of the proposed road to the Residential Land portion of the project to connect with the signal at LOVR and Froom Ranch Way, as called for in Program 8.15 of the Circulation Element. The possible roadway extension will utilize approximately 1.3 acres. One of the Council's actions of July 7, 2004 was to prezone a portion of the Conservation Land as "C/OS," Conservation/Open Space, and a portion as "AG," Agriculture. The roadway extension will fall within the portion of the property covered by the Conservation/Open Space zoning. The property development standards for Conservation/Open Space, at Section 17.32.020, and for Agriculture, at Section 17.33.020, of the Zoning Ordinance, set a maximum paving and building area of 3% of the total site area (for smaller parcels, a 5% calculation is applied). 3% of 54.7 acres is 1.641 acres. Thus, consistent with the Conservation/Open Space and Agriculture zoning, a 1.3 acre portion of the area may eventually be utilized for roadway purposes, as contemplated by the Circulation Element. In addition, the exception in the Conservation Easement is reserved in order to allow for the potential construction of a Class 1 Bicycle trail, as contemplated by the City's Bicycle Transportation Plan (May 2002). A bicycle trail, even when paved (provided it constitutes a "landscaped course for bicycle passage"), is a permitted passive recreational use under the Open Space Element of the General Plan. If such a trail is eventually developed, it will utilize 0.6 of an acre of the Conservation Land. Conservation Easement vis-ti-vis Open Space Easement Past negotiations regarding the project had always involved the grant of an open space easement. While an open space easement provides for similar protections as a conservation easement,an open space easement can be modified by the easement holder upon making certain findings required under state law concerning how the purpose of the original grant of easement is no longer being served by the easement, thereby allowing for removal of the easement's restrictions. When the proposed Development Agreement and draft Open Space Easement went before the Planning Commission on July 16, 2004, comments were received from the public, through written testimony, and concerns raised by the Commission itself over the use of an open space easement vis-a-vis a conservation easement. The primary difference between these two instruments, is that a conservation easement may only be extinguished by a court. Thus, the conservation easement is less flexible, and will lock in the permitted and prohibited uses, unless and until modified by a court, rather than by a future City Council. q 3- t 1 Marketplace Project Development Agreement Page 20 VII. Development Agreement Evaluation The City's Municipal Code states the following about development agreements: Development agreements specify the rights and responsibilities of the City and developers. Used in conjunction with subdivision approval, annexation, rezoning, or architectural approval, development agreements establish the terms and conditions under which development projects may proceed. Development agreements are best used for large, complex or phased projects which require extended construction time and which involve numerous public improvements such as streets, utilities, flood improvements, schools, parks and open space and other improvements of community-wide benefit. Under a development agreement, projects may proceed under the rules, standards, policies and regulations in effect at the time of original project approval. (17.94.010) Required Findings There are required findings that must be made for a development agreement to be executed. Consistent with San Luis Obispo Municipal Code Section 17.94.010, the Planning Commission shall consider the proposed Development Agreement and shall make its recommendation to the Council. The Planning Commission did not recommend approval of the proposed Development Agreement because of perceived inconsistencies with the City's jobs housing balance and with benefits compared to impacts. For Council approval, the proposed Development Agreement shall meet the following findings: 1. The proposed Development Agreement is consistent with the General Plan and any applicable specific plan; 2. The proposed Development Agreement complies with zoning, subdivision and other applicable ordinances and regulations; 3. The proposed Development Agreement promotes the general welfare, allows more comprehensive land use planning, and provides substantial public benefits or necessary public improvements, making it in the City's interest to enter into the Development Agreement with the applicant; and 4. The proposed project and Development Agreement: a. Will not adversely affect the health, safety or welfare of persons living or working in the surrounding area; b. Will be appropriate at the proposed location and will be compatible with adjacent land uses; or c. Will not have a significant adverse impact on the environment. (17.94.100) 3- � Marketplace Project Development Agreement Page 21 Discussion of Findings 1. General Plan Consistency On July 7, 2004, the Council certified the Final Environmental Impact Report for the San Luis Obispo Marketplace Project (the Dalidio EIR) and adopted findings of overriding considerations.. In making this decision, the Council found that the San Luis Obispo Marketplace Project is consistent with the earlier General Plan and therefore the proposed Development Agreement is also consistent for the following reasons: a. The project location, as described in the General Plan, is appropriate for regional retailing. The adopted General Retail Land Use Element Map designation for the 48.7-acre portion of the site planned for the shopping center development known as "The Marketplace" is consistent with the goals and policies of the General Plan. b. The required plans have been fulfilled. The required preliminary development plan for development of the commercial area of the site fulfills the intention of LUE Policy 1.13.3, Required Plans, which calls for the master planning of proposed annexation areas so that the City has an adopted plan showing the project layout, physical development plan, required open space protection, and provision of streets and utilities. c. The open space dedications are consistent with the General Plan. With the proposal for General Retail development of 48.7 acres of the site, 78.7 acres of on-site and off-site open space will be dedicated to the City for long-term protection of prime agricultural soils. The City Council determined that this combination of site development and open space protection was consistent with Land Use Element. Policy 1.13.5. and 8.8, and Open Space Element 10.2.1. d. The open space uses are consistent with the General Plan's preservation policies. The proposed Open Space Land Use Element Map designation, for both the 45 acres of farmland in the eastern and southern portions of the property and the 9.7 acre portion of the property identified as an extension of Laguna Lake Park, is consistent with the goals and policies of the General Plan regarding preservation of sensitive habitat and prime agricultural soils. e. The office use land use designation is appropriate. The proposed Office Land Use Element Map designation for the 8.1-acre portion of the site planned for the business park is consistent with the goals and policies of the General Plan. Land Use Element Policy 7.2 states that development should be permitted only if it is consistent with the San Luis Obispo County Airport Land Use Plan. The area of the site is that was designated as Medium-High Density Residential was inconsistent with the Airport Land Use Plan (ALUP). The proposed Office land use is consistent with the ALUP and is an appropriate transition between the more intensive retail development along Madonna Road and the residential neighborhoods to the south and west. f. The residential land use designation is appropriate. The proposed Medium-High Density Residential Land Use Element Map designation for the 3.3-acre portion of the site planned 3r )VI Marketplace Project Development Agreement Page 22 for affordable housing is consistent with the goals and policies of the General Plan. Land Use Element Policy 2.6.2 states that the City may adjust land use boundaries in a way that would reduce land designated as residential, only if: a significant, long-term neighborhood or citywide need, which outweighs the preference to retain residential capacity, will be met. Public safety and compliance with General Plan Policy LU 7.2 outweighs the preference to maintain the residential land use designation on the Dalidio property as shown on the 1994 General Plan Land Use Map. Policy LU 2.6.1, which states that substantial areas designated for residential use should not be changed to nonresidential designations, is the basis for preserving as much residential capacity on the Dalidio property as possible. In this case, 3.3 acres is the maximum residential area permitted under the Airport Land Use Plan. The 3.3 acre area is outside of the airport safety zone of most severe concern crossing the site and beyond the 55-decibel noise contour, which are the criteria that the Airport Land Use Commission has identified in its preliminary review of the proposal as being acceptable for residential development. 2. Compliance with Applicable Zoning Ordinances and Regulations The terms set forth in the proposed Development Agreement and the Project are in compliance with the City's ordinances and regulations presently in effect. Council at its July 7, 2004, meeting made the following findings about compliance with applicable ordinances and regulations with respect to the project: a. General Plan and zoning consistency. The project is consistent with the General Plan as amended and the proposed land uses will be allowed within adopted zoning districts. The project complies with all applicable provisions of the City's Zoning Regulations other than those modified by the PD rezoning. Approved modifications to the development standards of the Zoning Regulations via the planned development zoning are necessary and appropriate to accommodate the superior design of the proposed project, its compatibility with adjacent land uses, and its successful mitigation of environmental impacts. b. Consistent with Design Guidelines. The project complies with all applicable City Design Guidelines. c. Sufficient infrastructure exists. All affected public facilities, services, and utilities are adequate to serve the proposed project. d. Site and project compatibility. The location, size, site planning, building design features, and operating characteristics of the project are highly suited to the characteristics of the site and surrounding neighborhood, and will be compatible with the character of the site, and the land uses and development intended for the surrounding neighborhood by the General Plan. The site is adequate for the project in terms of size, configuration, topography, and other applicable features, and has appropriate access to public streets with adequate capacity to accommodate the quantity and type of traffic expected to be generated by the use. e. Satisfaction of requirements regarding project features. The project meets the requirement for mandatory project features contained in 17.62.045A. by providing an Marketplace Project Development Agreement Page 23 affordable housing component and preserving 54.7 acres of on-site open space and providing funds to protect an additional 24 acres of off-site farmland of a similar soil type. 3.Agreement is in the City's Interest As previously discussed, in approving the final EIR and adopting overriding conditions, the Council has found that the economic, social, and other considerations of the Project outweigh the unavoidable environmental impacts identified. a. Promotion of General Welfare. First, the annexation will enable the City to achieve its General Plan goals(and the community's general welfare), including: i. Providing a regional shopping center. Consistency with LUE Policy LU 3.1.2 through the development of a regional-serving shopping center in the area around the intersection of Highway 101 and Madonna Road. ii. Preserving open space and agricultural uses. Consistency with LUE Policies LU 1.13.5 and LU 8.8 & Open Space Policy OS 10.2.1 (A) by preserving significant parts of the Dalidio property as a signature working agricultural landscape at the southern gateway to the City. iii. Creating a needed circulation improvement. Consistency with Circulation Element policies (8.10 & 8.15) by creating a new highway interchange at Prado Road and improving Citywide circulation by having another east-west arterial street that crosses Highway 101. iv. Creating improved economic conditions. The project will enhance the City's tax base (increased sales taxes, transient occupancy taxes and utility taxes), create more jobs, provide for diverse shopping opportunities for residents of the City, reduce sales tax leakage and potentially avoid even greater leakage. b. Comprehensive Land Use Planning. Comprehensive land use planning is achieved through the annexation and control by the City over the property. The project will provide high quality new commercial uses that will complement the commercial development already in the area. If however, agreement is not reached with the property owner, this property will not be annexed. If this property is not annexed, then the future of the land use shall be determined by the County or by some future City Council at an unknown time. c. Substantial Public Benefits and Public Improvements are Accomplished through the Project. The Project provides both significant public benefits and significant public improvements. In addition to the previous policy discussions about project benefits and the Prado Road Interchange there are numerous fiscal benefits that come with the project. i. Net new revenue to the City. Under the proposed sales tax/TOT sharing agreement, the initial new net revenue to the City will be about$750,000 annually. 3 - 3 i I Marketplace Project Development Agreement Page 24 ii. Per the agreements, in no case will the City reimburse more than the apportioned debt service costs. In short, 50% of the net is a maximum for the developer to receive and a minimum for the City to receive. iii. City not liable for debt. The City will have no liability for the community facilities district debt financing. Regardless of how the project performs, and whether the 50% "net" tax sharing covers the developer's debt obligations, the City has no liability for payment of the community facilities district debt service; it is solely the developer's responsibility. Therefore, although the developer's estimated costs of the Prado Road Interchange have increased (from an earlier estimate of $13 million to $22 million), the net benefit to the City has not changed. Again, even with increased costs, the City will not be liable for the developer's debt and shall share no more than 50% of the "net" new sales tax revenues as defined in the reimbursement agreement. iv. The proposed reimbursement agreement contains disincentives to protect downtown from adverse economic impacts. These have been previously summarized on page 17. 4. Other Findings a. Proposed project will not adversely affect health, safety or welfare of persons in surrounding area. This topic has been addressed in the discussion of the EIR Certification and adoption of Statement of Overriding Considerations by Council on July 7, 2004. Some of the reasons that the Council made a statement of overriding considerations for those significant and unavoidable environmental impacts were: i. The project mitigation strategies will help to reduce project emissions to the degree feasible and ultimately put the air basin in closer compliance with established State and Federal standards. ii. Noise levels to some residents living in neighborhoods along Madonna Road, west of Los Osos Valley Road and between Los Osos Valley Road and Oceanaire Drive will increase above thresholds of significance, but will ,be partially mitigated by the applicant's contribution to pay for noise mitigation and trip reduction programs. iii. There will only be a significant and unavoidable impact to Cultural Resources if any on- site structures, which are deemed by the City's Cultural Heritage Committee(CHC) to be historically significant, are not retained with future development. With the review of a specific development proposal for the business park, it may be feasible to retain any significant structures or appropriately relocate them, consistent with the recommendations of the CHC, thus eliminating the potential significant and unavoidable impact. b. Proposed project is appropriate at proposed location and is compatible with adjacent land uses. The Council has determined the appropriateness and compatibility of the project and Development Agreement by its recent action amending the General Plan approving the preliminary project development plan. 3 �� Marketplace Project Development Agreement Page 25 c. Proposed project will not have significant adverse impact on the environment. The Council has previously certified the final EIR to this effect. VIII. Fiscal Impact Under the proposed sales tax/TOT sharing agreement, the new net revenue to the City from these two sources will be about $750,000 annually in the early years; over time, this will increase as project revenues grow. _ Other Ongoing The following summary of fiscal impacts is based There will be other ongoing revenues from on a detailed analysis of project revenues and the the project in addition to sales tax and developer's debt service obligations prepared by TOT, such as utility user taxes,franchise Allan Kotin and the City's Financial Advisor fees and business taxes. On the other (Fieldman Rolapp). As summarized below, there hand, the City will incur added operating are two key variables in determining net new costs for in serving the project,such as revenues from the project: police protection and street maintenance. Kotin previously analyzed these added 1. Annual sales tax and TOT revenues from the costs and revenues, and found them project and adjustments for transfer affects. closely matched, with revenues exceeding operating costs by about$100,000. Accordingly, in the interest of simplicity in 2. Annual debt service costs, which are driven by what is already a complex transaction, the the project cost, issuance costs, interest rate agreement focuses solely on sharing and the term (repayment period). sales tax and TOT revenues. Using "Year Three" as an example (when Kotin projects that all revenues will be fully on-line), the following summarizes annuall project revenues, "net" amounts after transfer affects, and the distribution between the developer and the City. Annual Project Revenues Net Sales TaxrrOT Revenues("Year 3") Gross Deduction for Transfer Revenues Percent Amount Net Sales Tazc Retail Project 1,751,000 33% (577,800) 1,173,400 Transient Occupancy Tax 443,000 20% (88,600) 354,600 Sales Tax: Hotel 2,500 20% 500 2,000 Total Net Revenues DESTR $1,530,000 Revenues are slightly different than noted above from the 2002 Kotin Study due to the use of "Year 3"projections as well as revisions to estimates since then based on more recent information. Ailocatioh . Maximum Dedicated to Developer's Debt Service Reimbursement @ 50% $765,000 Minimum Available to the Ci @ 50% $765,000 As noted above, the `•50% of the net" sharing of revenues with the developer for its debt service obligations is a maximum: it cannot exceed the allocated amount of debt service. As such, if the 3, � Marketplace Project Development.Agreement Page 26 allocated amount of debt service is less than 50% of the net new revenues,this lower amount will be shared, not 50%. However, if net revenues are less than the allocated debt service for the project, the developer is solely responsible for the difference. On the other hand, the "50% of the net" to the City is a minimum: it can be higher than this, depending on debt service costs and project performance. Debt Service Costs Developer's Obligation: Community Facility District (CFD). As noted above, annual debt service costs depend on project costs, issuance costs, interest rates and term. The following is the estimated annual debt service cost assuming the developer's share of project costs is $15.4 million (70.1% of$22 million), total CFD bond issuance of$19.1 million, 7% interest rate and thirty-year term: DeveloperEstimated Bondlssue Sizing Allocated Project Cost (Based on 70.1%of the$22 million interchange cost) 15,422,000 Issuance Costs 632,500 Capitalized Interest for 18 Months 1,509,800 Reserve Fund 1,560,500 Estimated Bond Issue Size 19,124,800 Estimated Service 0 7%,Interest 30 Year Term $1,563,0001 Note: This assumes level debt service payments. The reimbursement agreement provides the developer with an option for escalating debt service payments, as long as the annual increase is not greater than 1%. However, the City's obligation to share only up to 50%d of the "net" is unaffected by this;and the resulting debt service in "Year 3" if this option is selected is not significantly different:$1.445 million versus$1.533 million. As reflected in the above "Year 3" example, the developer's estimated debt service obligation is $788,000 greater than the "50% of the net" maximum reimbursement from the City ($765,000 in shared revenues versus a debt service obligation of$1,553,000). This is likely to be the case for several of the early years. (Kotin's analysis indicates that the "50% of the net" will not begin to cover the developer's debt service obligations until "Year 16.") However, under the proposed agreement, the developer is eligible for future reimbursement of these underages from future year surpluses, which is likely at some point as revenues grow. Additionally, the developer will be reimbursed—by other developers—for its advances on their behalf for the Margarita and Prado Areas as they develop. The important concept that this example illustrates is that in no case—regardless of actual revenues or debt service costs—will the City reimburse more than 50% of the net new revenues; and in no case will the City reimburse more than apportioned debt service costs (albeit on a cumulative basis). In short, the "50% of the net" is a maximum for the developer; and a minimum for the City. Other New Development: Transportation Impact Fees. As noted above, the developer is responsible for funding 70.1% of the interchange costs through a CFD bond issue; the remaining balance of 29.9% will be financed by a separate but concurrent bond issue funded by TIF fees. 3- JD� Marketplace Project Development Agreement Page 27 The annual debt service cost for this is estimated at$375,000, assuming an interest rate of 4.75% and a 30-year term. (Note: The difference in interest rates between the "TIF' portion at 4.75% and the CFD portion at 7% reflects the credit differences between a City-supported bond issue and a land-based, CFD financing.) As noted above, while we recommend funding the remaining 29.9% share of the project through TIF revenues, the underlying security for the bond issue will be the General Fund. However, this only places the General Fund directly at risk in the event that annual TIF revenues are less than $375,000. This has never occurred. Moreover, in the event that available TIF revenues should be less than this—perhaps due to other TIF-funded projects with a priority over this use—the General Fund can be reimbursed from subsequent year TIF revenues. ALTERNATIVES 1. Reject Proposed Agreements. The rejection of the proposed agreement is not recommended as it would be inconsistent with previous Council direction. 2. Recommend Revisions to Proposed Agreements. Council could suggest alternative language or provisions. The contract language in all of the agreements as presented has been heavily negotiated and is consistent with prior Council direction. The proposed agreements compose a compromise that fairly meets each party's major needs, and manage each party's risks, in the fairest and most reasonable way possible, given our respective interests. However, because these documents are very complex, there may be refinements to the agreements that Council identifies in its review, and it could direct staff to make those refinements and proceed with the transactions. ATTACHMENTS 1. Vicinity Map 2. Council Letter to Supervisors 3. Planning Commission Meeting Minutes (July 14, 2004 and Resolution No. 5402-04 4. Planning Commission Agenda Report 5. Frequently Asked Questions Handout 6. Ordinance Approving Development Agreement and Agreement 7. Special Tax Reimbursement Agreement 8. January 15, 2004 Letters to Council from the Downtown Association 9. Resolution Approving Conservation Easement Agreement and Agreement REFERENCE MATERIALS June 28, 2004 (Fiscal Impact Analyses) Council Agenda Report is available in the Council reading file G:adminlprojects\dalidio\council agenda reports\development agreement agenda report—FINAL 080304 �� U I `1I�♦ 1111 �1 ����� 11♦O 11iI11I♦ • 1 � ♦1��1.I1�11 � •� � �1. 11 ♦♦ ♦ •. � ♦♦ �:�j1�=.111 �i11 z1j � , �, ♦♦ ,11"1111 1�1 1�1 .' Kim FF 100 *Zft ME 16 ♦ ♦ ♦ .� , ` :s /T �� .. , MAW 1 �% XIN ■i it■ i ATTACHMENT 2 `'� °� O Sdn WIS OBISPO H 444 � C �!8 y OFFICE OF THE CITY COUNCIL �! S 0 990 Palm Street a San Luis Obispo,CA 93401.3 s 805f781-71 i9 May 22,2002 Chairperson Shirley Bianchi Supervisor Harry Ovitt Supervisor Peg Pinard Supervisor K.H. Achadjian Supervisor Mike Ryan County Board of Supervisors County.Government Center San Ltus Obispo,CA 9340$ Dear Chairperson Bianchi and Supervisors Ovitt,Pinard,Achadjian,and Ryan: On June 4,2002,your Board will again consider a proposed General Plan Amendme t thatwill allow for the processing of an application to develop the Dalidio Farm Property withinjurisdiction. Development of such an urban-like project i the unincorporated The City Council inconsarea is istent with both County and City policies and g planning principles. urged that your Board den alsoereq est when You c xpressed a willingnrk ess m th the applicant to fment on in a 5� 2002. However,the tyroach to developing the property within the City of San Luis Obispo. mutually satisfactory aPamendmeP e.City to Your Board ultimately decidedBoard memberseand applicant representativesto action on the discuss hal alternatives meet with a committee of B Subsequently,Supervisors Pinard and Achadjian were for the development of the property. Marx and Ewan were appointed to appointed to represent the County and Council members represent the City. We wish to thank the Supervisors Achadjian and Pinard for the helpful and constructive.role each played during these sometimes difficult discussions. We believe that their leadership helped to produce promising and workable alternatives. On May 10,2002, Supervisors Pinard and Achadjian asked to meet with the Council Subcommittee to present what they viewed as a very promising compromise(see Attached and more details to work out,in genera "Proposal T). Although there remain fu mise oquestions ffered.some significantdvantages,over earlierl the Subcommittee agreed that the comp options,including the application now before the County. Therefore,on May 2�,the Co cil nciles to subcommittee presented the concept to the full City Council. In summary, our work with the applicant to accomplish a project that will: 3-2�1 a �' city of san lues oBlspo ^-' ATTACHMENT 2 -- 1. Be largely consistent with the city's General Plan,thus reducing the amount of new studies and other application requirements; 2. Be very similar to Proposal 3 (attached),allowing significant development of the property,while protecting more open space than envisioned in the previous proposal to the City(56 acres vs.about 79 acres); 3. Protect the 58.7 acres of open space in fee title, instead of via an easement(as in the former proposal); 4. Require-that the acquiition of 20 acres the City and consistffsite be of qualilocated rml de vicinity of Highway 101 at the southern end of 5. Eliminate the uncertainty of the previous 9-acre"reserve". 6. Provide for about 47 acres of commercial development,a portion of which is to include a .hotel that would help meet the community's need for enhanced conference facilities. 7.• Provide for access to the groundwater basin to improve the City's water supply and work conjunctively with the City's water reuse project; 8. Involve a binding development agreement at the d the appropriate stage in order to create greater certainty for both the app en During the past three and a half months,all parties have ore verand re issues hardand some dto ddress evelopment issues involved in the future use of the Dalidio prop rty, review processes remain before development can be foanally approved. We see the primary question before the Board of Supervisors to be: Is the City pian for the Dalidio property.? Luis Obispo willingo er work with the applicant in good faith to process a revised development —we think the answer is clearly`yes" The City therefore respectfully a is did City a Board San Luis s mateObispthe General Plan that the process Amendment tg the before you and refer the app project can be initiated,consistent with the concepts outlined in this letter. Sincerely, ,r Jan Howell Marx Vice Mayor cc: city council Staff distribution 3 _ Vu a-33 Attachment 3 Draft SAN LUIS OBISPO PLANNING COMMISSION MINUTES July 14, 2004 CALL TO ORDER/PLEDGE OF ALLEGIANCE: The San Luis Obispo Planning Commission was called to order at 7:00 p.m. on Wednesday, July 14, 2004, in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo. ROLL CALL: Present: Commissioners Andrea Miller, Orval Osborne, Michael Boswell, Alice Loh, Jim Aiken, Carlyn Christianson and Chairperson James Caruso Absent: None Staff: Senior Planner Pam Ricci, Deputy Community Development Director Ronald Whisenand, City Attorney Jonathan Lowell, Economics Director Shelly Stanwyck, and Recording Secretary Irene Pierce ACCEPTANCE,OF THE AGENDA The agenda was accepted as presented. APPROVAL OF THE MINUTES: The Minutes of May 26, 2004, were accepted as amended. PUBLIC COMMENTS ON NON-AGENDA ITEMS Mary Beth Schroeder, 2085 Wilding Lane, requested that some of these large projects be turned down because of the impact they will have on the city. Jan Howell-Marc, 265 Albert Drive, SLO, noted that currently there is a petition circulating to put a referendum on the ballot, appealing the decision the City Council made regarding the Dalidio Project. There were no further comments made from the public. PUBLIC HEARING ITEMS: 1. 2005 Dalidio Drive. O 108-02; Review and recommendation to the City Council regarding the Development Agreement for the San Luis Marketplace project; SLO Marketplace Associates, LLC, applicant. (Shelly Stanwyck and Pam Ricci) Economic Development Director Shelly Stanwyck presented the staff report recommending that the Commission adopt the Draft.Resolution recommending that the 3--�1 Draft Planning Commission hh.,_Aes _ Attachment 3 July 14, 2004 Page 2. City Council enter into the proposed development agreement with San Luis Obispo Marketplace Associates, Inc., based on findings. PUBLIC COMMENTS: Donna Wilson, 1850 Oceanaire Drive, SLO, expressed concerns that the proposed project will create traffic and noise problems because of the delivery trucks that will be frequenting the proposed project. She specifically asked how close to her home the delivery area would be and felt that the project would disrupt her quality of life. Deborah Cash, Administrator for the Downtown Association, SLO, presented a letter to the Commission, which described a funding mechanism that had been set up between Wal-Mart and the Paso Robles Main Street program. She noted that her Board of Directors would like to see a similar program implemented in San. Luis Obispo through the development agreement. She voiced concern with the amount of fashion-style stores proposed in the development that would compete with the downtown. Tom Swem,,570 Marsh Street, SLO, Downtown Business Owner, pointed out there is currently 30,000 square feet vacant in the downtown. He mentioned that Pier 1 has left the downtown and wondered if they will relocate to this development. He felt this project, if approved, would create a downhill spiral for the downtown especially considering the seismic retrofitting that must be done in the downtown. Mary Beth Schroeder, 2085 Wilding Lane, SLO, expressed her opposition.to the project. She noted there is water in the aquifer and that the people of San Luis Obispo could benefit from it. Jan Howell-Marx, 265 Albert Drive, SLO, spoke on behalf of the Sierra Club. She noted that many people are dissatisfied with the decision made by the. City. Council and encouraged the Commission to not get discouraged because of the Council's action. She felt there are many impacts in the EIR that the citizens will have to incur, and that the findings the Commission is being asked to recommend are not in the best interest of the people in the surrounding area. Terry Treves, 799 Higuera Street, SLO, noted that Target owns Mervyn's and wondered how sound Mervyn's is. She expressed disappointment that the day after the Council meeting, it was mentioned that three more stores will be .locating to this development, which she felt is dishonest. Ralph Whitaker, 764 Azalea Court, SLO, .noted that this project demonstrates the City's dependency on sales tax revenues, which destroys the ambience of the City that people love. There were no further comments made from the public. 3-3� Draft Planning Commission Minutes Attachment 3 July 14, 2004 Page 3 COMMISSION COMMENTS: Vice-Chair Boswell moved to deny the development agreement. for the project. Seconded by Commr. Osborne. Consistent with his prior vote on the various entitlements for the development project, Vice-Chair Boswell indicated that he felt that the project would further exacerbate the City's jobs/housing imbalance and would not result in substantial public benefits that outweigh the impacts of the project. Commr. Loh opposed the motion because she felt that the.development agreement was a well-written document. Commr. Aiken concurred with Commr. Loh. AYES: Commrs. Boswell, Osborne, Miller, Christianson, and Caruso NOES: Commrs. Loh and Aiken ABSENT: None ABSTAIN: None The motion carried on a 5:2 vote. 2. 735 Tank Farm Road. AP-PC 107-04: Appeal of the Director's action denying two attorney's offices; C-S-SP-PD zone, Edna Valley Office, LLC, applicant. (Tyler Corey) Senior Planner Pam Ricci presented the staff report that recommended adoption of the resolution denying the appeal and upholding the Director's determination, based on findings. PUBLIC COMMENTS: Marshall Ochylski, appellant's representative, presented a letter to the Commission. He explained what the definition is of the proposed attorneys and that their business operations would be similar to that of a plant for a title company or other allowed PD uses and feels these speck users could be allowed into the C-S zone. Ralph Whitaker, 764 Azalea Court, SLO, as a neighbor to the project, expressed his support for the proposed uses. There were no further comments made from the public. COMMISSION COMMENTS: Commr. Loh moved to uphold the appellant's request. Seconded by Commr. Aiken. AYES: Commrs. Loh and Aiken. NOES: Commrs. Miller, Osborne, Boswell, Christianson, and Caruso ABSENT: None 3- 33 ��I��III�IIIIII��II fl��IIIIIIIIII JJ Attachrnent 3 IIIIIIII�IIIIIU IIIICI .IIIIV of SM WIS OBISPO 990 Palm Street, San Luis Obispo, CA 93401-3249 July 21, 2004 Bill Bird SLO Marketplace Assoc. LLC 510 S. Grand Ave. #300 Glendora, CA 91740 SUBJECT: O 108-02 —2005 Dalido Drive Review and recommendation to the City Council regarding the Development Agreement for the San Luis Marketplace project. Dear Mr. Bird: The Planning Commission, at its meeting of July 14, 2004, recommended that the City Council deny the Development Agreement, based on findings noted in the attached resolution. The action of the Planning Commission is a recommendation to the City Council and, therefore, is not final. This matter has been tentatively scheduled for public hearing before the City Council on August 3, 2004. This date, however, should be verified with the City Clerk's office at (805) 781-7100. If you have any questions, please contact Pam Ricci at (805) 781-7168. Sincerely, Ronald Whisenand Deputy Community Development Director Development Review cc: SLO County Assessor's Office Andrew Merriam, 364 Pacific Street, San Luis Obispo, CA 93401 Ernest Dalidio Jr. Tre Etal, 2706 Rodman Drive, Los Osos, CA 93402 Attachment: Resolution No. 5402-04 The City of San Luis Obispo is committed to include the disabled in all of its services, programs and activities. Telecommunications Device for the Deaf(805)781-7410. PLANNING COMMISSION Attachment 3 RESOLUTION NO. 5402-04 A RESOLUTION OF THE SAN LUIS OBISPO PLANNING COMMISSION RECOMMENDING TO THE CITY COUNCIL APPROVAL OF A DEVELOPMENT AGREEMENT FOR THE SAN LUIS OBISPO MARKETPLACE PROJECT FOR THE PROPERTY LOCATED AT 2005 DALIDIO DRIVE APPLICATION # ER, GP/R, U, PD, U 108-02 WHEREAS, the Planning Commission of the City of San Luis Obispo conducted a public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California, on July 14, 2004, for the purpose of considering a proposed development agreement for the San Luis Obispo Marketplace Project at 2005 Dalidio Drive;and WHEREAS, said public hearing was for the purpose of formulating and forwarding recommendations to the City Council of the City of San Luis Obispo regarding the proposed development agreement pursuant to Chapter 17.94 (Development Agreements) of the San Luis Obispo Municipal Code; and WHEREAS, notices of said public hearing were made at the time and in the manner required by law; and WHEREAS, the proposed development agreement was analyzed in the Final Environmental Impact Report (FEIR) for the San Luis Obispo Marketplace project, and the City Council certified said FEIR and adopted statements of overriding considerations on July 7, 2004; and WHEREAS, the Planning Commission has duly considered the proposed development agreement and exhibits, including the proposed open space easement, all evidence, including the testimony of the applicant, interested parties, and the evaluation and recommendations by staff, presented at said hearing. NOW, THEREFORE, BE IT RESOLVED by the Planning Commission of the City of San Luis Obispo as follows: Section 1. Findings. Based upon all the evidence, the Commission makes the following findings: 1. The proposed development agreement is inconsistent with the City's General Plan because it will further exacerbate the City's jobs/housing imbalance. 2. The proposed development agreement does not promote the general welfare because it is not clear that there are substantial public benefits stemming from the project that outweigh the negative impacts of the proposed development. Section 2. Recommendation. The Planning Commission does hereby recommend to the City Council denial of the proposed development agreement and exhibits, including the proposed open space easement, application# ER, GP/R , U, PD, U 108-02.. 3 , TS Resolution No. 5402-04 Attachment 3 Page 2 On motion by Commr. Boswell, seconded by Commr. Osborne, and on the following roll call vote: AYES: Commrs. Boswell, Osborne, Miller, Christianson, and Caruso NOES: Commrs. Loh, Aiken REFRAIN: None ABSENT: None The foregoing resolution was passed and adopted this 14th day July, 2004. ona hi nand, ecretary Planning Commis on by: 3' 3A4 w ,r Attachment 4 CITY OF SAN LUIS OBISPO PLANNING COMMISSION AGENDA REPORT BY: Shelly Stanwyck,Economic Development Manager 3" �6 II. ETING DATE: July 14, 2004 FROM: Jonathan Lowell, City Attorney dlt- �V Wendy George, Assistant City Administrative Officer CITY FILE NUMBER: Other-108-02 PROJECT ADDRESS: 2005 Dalidio Drive SUBJECT: Consideration and review of a request for the City to enter into a development agreement with the property owner and the developer of the San Luis Obispo Marketplace Project. SUMMARY RECOMMENDATION Adopt the Draft Resolution (Attachment 1)recommending to the City Council that the proposed development agreement with San Luis Obispo Marketplace Associates, Inc., be entered into because the following findings can be made: 1. The proposed development agreement is consistent with the City's General Plan. 2. The proposed development agreement complies with City zoning, subdivision and other applicable ordinances and regulations. 3. The proposed development agreement promotes the general welfare, allows more comprehensive land use planning, and provides substantial public benefits or necessary public improvements. 4. The proposed project and development agreement: a. Will not adversely affect the health, safety or welfare of persons living or working in the surrounding area; b. Will be appropriate at the proposed location and will be compatible with adjacent land uses; or c. Will not have a significant adverse impact on the environment. REPORT OVERVIEW The City Municipal Code requires the Planning Commission to review and make recommendations on development agreements to be considered by the City Council. In many communities throughout California, development agreements are a frequently utilized tool in the development process. Development agreements are used to create greater certainty in the development process in exchange for unique public benefits associated with a project. In San Luis Obispo, the review of a development agreement is a rare occasion. Because of the infrequency with which the Planning Commission considers this type of document, and the complexity of the topic, this staff report contains an extensive background section. The City of San Luis Obispo page 1 3-39 Planning Commission Agenda Report(2005 Dalidio Drive:Other 108-02) a Attachment 4 background section is an effort to provide the Planning Commission with a thorough understanding of the project history, the project negotiations, and the basics of development agreements, all of which are subjects that have been previously reviewed by the Council. This report is composed as follows: 1. Background 2. Development Agreement Basics 3. Key Principles Guiding the Development Agreement Negotiations and Council Approved Conceptual Terms 4. Summary of Proposed Development.Agreement Terms 5. Development Agreement Evaluation L BACKGROUND Project History Overview The possible development of a portion of the 131-acre Dalidio Property (2005 Dalidio Drive) has been the topic of much conversation for many years. A detailed and comprehensive discussion of the property's history could take pages. To summarize recent history, in 1991, the Dalidio family presented a land use concept to the City for incorporation into our General Plan (which was being updated at the time). After many years of thorough analysis of fiscal impacts, and innumerable public hearings, a "compromise" was reached between the City and the Dalidio Family to allow some of the 131-acre Dalidio property to be developed in exchange for protecting a portion of the property in permanent open space. This compromise, incorporated into the 1994 General Plan update, attempts to balance many things including both environmental and economic interests. The General Plan also acknowledges that for the City to have influence over the use of the property, it must be annexed into the City, and it will not be annexed without the consent of the property owners, the Dalidio family. Over the next 8 years, there were many twists and turns in the development and processing of a project application, including entering into a Memorandum of Understanding with the developer in 1999 for funding of a needed interchange. Ultimately, however, the project was denied in February 2001. After this denial, the property owner and developer submitted an application to the County, and the County agreed to process it. At the request of the City Council, however, the County agreed to negotiate the return of the application to the City (Attachment 2), which was submitted later in June 2002. Land use review and financial analysis of the proposed San Luis Marketplace Project have been proceeding simultaneously since project submission in 2002. The Planning Commission most recently considered the proposed San Luis Obispo Marketplace Project on May 26`s and the Council took several land use actions on July 6. 2004. At this point, it is necessary for the public,Planning Commission and, ultimately the City Council to consider a development agreement proposed for the project. City of San Luis Obispo page 2 r �� Planning Commission Agenda Report(2005 DaGdio Drive:Other 108-02) w % Attachment 4 On January 6, 2004, the City Council provided staff with direction about many key terms that should be included in a draft development agreement. A development agreement for the project will facilitate many City objectives including- 1. Providing funding for the completion of a major General Plan goal — the Prado Road Interchange— by using a portion of sales tax revenues and transient occupancy tax (TOT) that.we do not presently have, and will not have without the development of the San Luis Marketplace. 2. Assisting in accomplishing the Council's major goals for 2003-05 to increase sales tax and TOT. 3. Protecting the retail strength of the downtown through provisions that discourage the developer from direct retail competition with the downtown. 4. Providing onsite affordable housing. 5. Protecting agricultural land onsite and contributing to offsite open space protection in an area where "sprawl" is a threat. 6. Bringing to a conclusion years of uncertainty regarding the Dalidio property by reaching agreement to annex the property and determining its ultimate use under City jurisdiction. Prior Project and Memorandum of Understanding Before discussing the terms of the proposed development agreement, a discussion of previous agreements is necessary. In March of 1998, the San Luis Obispo Marketplace development team, led by developer Bill Bird, submitted a project application for the development of San Luis Obispo Marketplace on a portion of the Dalidio Property. Because of traffic demands, in order for significant retail square footage to be constructed on the Dalidio Property, a new freeway interchange at Prado Road was required. This interchange has long been part of the City's Circulation Element, but the City has not had the financial ability to build it. Accordingly, since 1994, new development has been assigned the responsibility for funding this improvement. The developer proposed to construct the Prado Road interchange with the project. The intent was that the developer would assume the up-front risk of financing the interchange, with fair share reimbursements from other benefiting properties as they develop. Similar to a practice used in other cities with major retail projects that involve achieving public and private goals, a performance based sales tax sharing (or reimbursement agreement) was proposed. Eventually the City and the developer entered into a Memorandum of Understanding (Dalidio MOU) outlining the principles for a future development agreement. The key principles of the September 21, 1999 Dalidio MOU were as follows: City of San Luis Obispo page 3 Planning Commission Agenda Report(2005 Dalidio Drive:Other 108-02) Attachment 4 Key Principles ofDalidio N/IOU 1.The General Plan concept for the Dalidio Property would guide the project. 2.The"open space for some development compromise"would be memorialized in a development agreement. 3. Sales tax reimbursement would help finance the Prado Road interchange. But, only up to 50% of the net new sales tax revenues generated by the proposed project would be reimbursed to the developer, and reimbursement would not exceed total debt service costs for the Prado Road interchange. 4. The shared revenues would be tied directly to the proposed project's performance — before actually sharing sales tax revenues,the proposed project would have to perform at a certain level. 5. The City would assist in forming a community facilities financing district; however, the debt would be solely secured by the proposed project. 6. Other projects would eventually share in the cost of the Prado Road interchange. The City would be responsible for its appropriate share as well as advancing (referred to as "fronting") the share for other participating properties. 7.The proposed project was responsible for fully paying all other City fees. 8. Construction on the proposed project could not start until a construction contract for the Prado Road interchange had been awarded. 2001- Prior Project's Denial In February 2001, the Council did not certify the San Luis Obispo Marketplace project Environmental Impact Report (EIR) and the project was denied due to concerns about open space protection and drainage. After this denial, the San Luis Obispo Marketplace Development Team took a substantially changed development proposal to the County of San Luis Obispo for processing. The proposal had far less land designated for open space than did the prior proposal. Because of concerns about the project developing in the County, the City opposed the development application. In January 2002, based on a letter from the San Luis Obispo City Council asking that the project be retumed to the City for further processing, the Board of Supervisors agreed that a Board Subcommittee (Supervisors Pinard and Achadjian), San Luis Obispo Marketplace representatives, and a City Subcommittee (Council members Ewan and Marx) should meet to explore further options for the Marketplace Project proceeding under the City's jurisdiction. Council Subcommittee Process,Recommendation to Council and Council Direction Several times during the period between February 2002 and May 2002, the parties met and eventually came to conceptual agreement on terms to continue project processing in the City. On May 21, 2002, the San Luis Obispo City Council approved the Subcommittee recommendations regarding the Dalidio Property/Marketplace Development Proposal and authorized the Vice-Mayor to send a letter requesting that the Board of Supervisors refer the project back to the City for further work and processing. The principles set forth in the Subcommittee recommendations and letter were generally consistent with prior principles adopted by Council regarding the Dalidio Property and established a basis for a new City project application for the Dalidio Property to be processed in the City. The letter also committed to proposing a "binding development agreement" (point 8) at the appropriate stage to create greater certainty for both the applicant and the City. As a result of City of San Luis Obispo page 4 3 .40 Planning Commission Agenda Report(2005 Dalidio Drive:Other 108-02) Attachment 4 this communication, on June 4, 2002, the Board of Supervisors put the proposed project application on hold and directed the applicant back to the City for further work and processing. In following up on this direction, the developer has submitted a project that is substantially consistent with previous Council direction found in the 1999 Dalidio MOU,as well as the principles arising out of the City-County Subcommittee discussions. Below are highlights of those key Council approved principles: Key Council Approved Subcommittee Recommendations 1.The project should be largely consistent with the City's General Plan. 2. The project should be very similar to so-called Proposal 3, described in the Dalidio Council Letter, allowing significant development of the property, while protecting more open space than envisioned in the previous proposal to the City. 3. 58.7 acres of onsite open space should be protected, and if possible, be given in fee title to the City. 4. 20 acres of offsite open space should be acquired in the vicinity of Highway 101 at the southern end of the City,consisting of quality farmland. 5.The uncertainty of a 9-acre"reserve"should be eliminated. 6. About 47 acres of commercial development should occur and should include a hotel that will help meet the community's needs for enhanced conference facilities. 7. The property owners should provide access to the groundwater basin and work conjunctively with our water reuse project. 8. At the appropriate stage, a binding development agreement should be negotiated and presented to Council for consideration and approval, to create greater certainty for both the applicant and City. Project Submittal and Development Review Process San Luis Obispo Marketplace and Associates submitted anew application for the development of parts of the Dalidio Property on.June 27, 2002. The project consists of a retail component, open space component; business park component, residential component, road dedications and a freeway interchange. Land use and financial tracks for the proposed San Luis Marketplace Project have been proceeding simultaneously since project submission. The specifics of the Project were evaluated by the Planning Commission on May 26 when it evaluated the EIR, request for annexation, proposed general plan amendment and prezoning, use permit and preliminary development plan. On July 6, 2004, the City Council adopted a resolution certifying the EIR, including the mitigation monitoring program and adoption of overriding considerations relative to traffic/circulation, air quality, noise, cultural resources, and loss of agricultural land and endorsed EIR Alternative 7 which includes a housing component. The Council also upheld the applicant's appeal and adopted resolutions for annexation of the property, amending the General Plan Land Use Element Map and prezoning. City of San Luis Obispo page 5 3-0 Planning Commission Agenda Report(2005 DaGdio Drive:Other 108-02) Attachment 4 Fiscal Analysis and Development Agreement Discussions In addition to the developmental review work that has been undertaken for the project thus far, on September 17, 2002, Council approved an agreement with Allan D. Kotin and Associates to perform and update an economic impact study of the proposed project on (the"2002 Kotin Study"). The 2002 Kotin Study was in satisfaction of General Plan Land Use Element Section 3.1.3 which says, "before approving an expansion plan (on the Dalidio and other properties), the City should consider an evaluation of how much it would transfer sales from existing retail areas in the City and whether the proposed uses could be develop in existing retail areas". As is the City's practice with EIRs, the 2002 Kotin Study was funded by the project applicant, but managed entirely by the City, thereby maintaining objectivity and independence. The 2002 Kotin Study was published in October 2002 and concluded that the project would annually add about $1.5 million net new sales tax revenues to the City, which, when adjusted for transfer effects,became about$1.1 million annually, and net new transient occupancy tax at$280,000 annually, for a total of annual net new revenues of about$1.4 million. With respect to the fiscal impacts of the proposed San Luis Marketplace Project on,the following conclusions were reached in the 2002 Kotin Study: 1. The types of stores will not provide significant competition to. 2. The design of the project encourages retailers similar to the Promenade and Madonna Plaza, so called"box"retailers, and is consistent with the Downtown Strategic Plan's goal of discouraging other"main street"type projects outside of downtown. 3. Provisions to be included in a development agreement will provide strong financial disincentives to discourage competition with downtown. 4. The added shoppers at the proposed San Luis Marketplace Project will be a net benefit to the City overall as well as to the. In May 2004, after being commissioned by several business and property owners to comment on the 2002 Kotin Study, Jerry Keyser of Keyser, Marston and Associates (KMA) released a report entitled Impact on Downtown Retailing of Proposed San Luis Marketplace (the KMA Report) in which he took exception to the transfer impacts of the project on downtown. On May 25, 2004, Allan D. Kotin and Associates responded to the KMA Report in its Response to Keyser, Marston Comments on the Impact of Downtown Retailing of the Proposed San Luis Marketplace. In his response, Allan Kotin stated that his original conclusions from the 2002 Kotin Study had not changed and changes in the proposed tenant mix and the size of the project further supported his original determinations. Council received these reports and discussed them at its June 28, 2004 meeting (Attachment 3 is the Agenda Report for this meeting). 2.DEVELOPMENT AGREEMENT BASICS Purpose of a Development Agreement Since 1979, California has statutorily authorized local governments to enter into agreements for the development of property, which memorialize regulations that are in effect when the agreement is executed, along with other conditions and terms agreed to by the parties. These statutes were enacted in order to create greater certainty in the development process in exchange for unique public benefits associated with a project. By entering into a development agreement, City of San Luis Obispo page 6 3 — `D 1. Planning Commission Agenda Report(2005 Dalidio Drive:Other 108-02) Attachment 4 local agencies do not need to give up rights of approval; rather they merely enshrine what rules, regulations and policies are in place when the agreement is signed. Again, the intended effect is to strengthen the public planning process and reduce the economic costs of development in situations where there exists a "quid pro quo" of benefits between the agency and developer. Thus, while a development agreement would prohibit the City from changing the zoning applicable to the subject parcel such that the proposed project would no longer be permissible, it also allows the City to obtain benefits it would not otherwise be lawfully entitled to require, such as construction of the freeway interchange. California Government Code Section 65864 et seq Principle Provisions Governing Development Agreements • Cities are authorized to enter into development agreements by resolution or ordinance. • Development agreements are enforceable by any party to the agreement. • Unless otherwise provided for in the development agreement itself, the applicable rules, regulations and policies are those in force when the development agreement is executed. • Our city's exercise of its power to enter into a development agreement is a legislative act. The act must therefore be approved by ordinance, be consistent with the general plan and any applicable specific plans and is subject to repeal by referendum. • There is a 90-day statute of limitations to challenge a development agreement. Why the City Needs a Development Agreement As mentioned earlier in seeking the return of the San Luis Obispo Marketplace Project application from the County, the Council agreed to pursue a binding development agreement at the appropriate time. Typical contents of a development agreement include the term of the agreement, permitted uses of the property, density or intensity of use, and provisions for reservation or dedication of land for public purposes. Development agreements also frequently include provisions for the financing of necessary public facilities. As previously discussed, the San Luis Obispo Marketplace Project requires the construction of a freeway interchange at Prado Road in order to mitigate traffic issues and to provide more efficient access to the project itself. This public improvement adds a level of cost that is disproportionate to the impact of the project, but is nonetheless triggered by the project. In the short term, the City has no capacity to build an interchange at Prado Road, though it has been, since the adoption of the 1994 Circulation Element, a long-term goal to provide a cross-town connection at Prado Road. In order to make this necessary improvement feasible, some form of public-private partnership is needed. Following Council's direction on the prior MOU, and due in large part to the substantial net new sales tax the project is expected to generate, a sales tax reimbursement mechanism is proposed to be a part of the development agreement. Thus, the development agreement and Reimbursement Agreement are needed to require the developer to construct the Interchange. 3. KEY PRINCIPLES GUIDING DEVELOPMENT AGREEMENT NEGOTIATIONS AND COUNCIL APPROVED CONCEPTUAL TERMS The drafting of the proposed development agreement for the project has been based on key principles first outlined in the Dalidio MOU, Council's direction following the subcommittee City of San Luis Obispo page 7 3 - 45 Planning Commission Agenda Report(2005 Dalidio hive:Other 108-02) Attachment 4 process in 2002, and Council approval of several conceptual terms on January 6, 2004. At the January 6, 2004 meeting, in addition to the direction on specific terms, Council provided direction regarding several recitals to be included in the development agreement. Council also authorized staff to continue with negotiations. Summary of Conceptual Development Agreement Terms Approved by Council on January 6, 2004 Term Council Nrection 1.Development Agreement 5 and 15-year terms for the development agreement to reflect Term phased development. 2.Amount of Onsite Open Space 54.67 acres as the amount of onsite open space allowed, if affordable housing can be built on 4 acres of the Dalidio Farm property. 3.Open Space Easement The grant of an easement for onsite open space with the possibility of fee title in the future and direction to staff to explore the acquisition, if necessary, of a small portion of the property in fee, if needed for water treatment facilities. 4. Additional Offsite Open Space The financial equivalent of 24 acres of offsite open space or $192,000, assuming on-site affordable housing 5.Open Space Easement The acquisition of offsite open space that is prime agricultural land at the City's southern boundary in the Airport Area. 6.Sulkey Racing Stadium The possible relocation of the Sulkey Racing stadium to an open space location historically consistent with its original location,pending advisory body review and Council final approval; requirement that the property owner restores and maintains the structure. 7.Credit of Water Impact Fee A credit against the project's water impact fee in exchange for an agreement by the property owner to use recycled water instead of ground water for agricultural uses on the property. (The effect of Council's recent action regarding Nacirniento water have made this position unnecessary) 8.Will-Serve Letter Provide, if necessary, a"will-serve letter"indicating the availability of City utilities within the timeframe of the agreement. 9.Drainage Evaluate the project's compliance with City guidelines related to drainage through the EIR process and approve of the inclusion of language in the development agreement regarding drainage compliance following EIR certification. 10.Affordable Housing The project's satisfaction of the City's Affordable Housing requirement by the construction of onsite affordable housing if allowed, and if not allowed, satisfaction of the fee consistent with City policies. 11.Transportation Impact Fee The computation of the Transportation Impact Fee (TIF)rate Rate using that which was in effect when the project application City of San Luis Obispo page 8 4q Planning Commission Agenda Report(2005 Dalidio Drive:Other 108-02) Attachment 4 Term Council Direction was submitted to the City. 12.Defined Excess Sales Tax The DESTR between the City and the developer to be the total Revenue(DESTR)and Transfer sales tax of all San Luis Marketplace Retail Outlets (excluding Amounts those in the Hotel)less a 33% transfer effect(sales tax transferred from other City businesses)plus TOT and sales tax from the Hotel in the Projectless a hotel transfer of 20%). 13.Future Adjustments For the non-hotel 33% retail sales tax transfer,accept downwards adjustment of this factor in year six by 1%for that year and by I% for the next four years so that in the 10'hyear the sales tax transfer is 28%. 14.Non-Downtown Transfer Exclude from the DESTR sales from businesses that are Exclusion from DESTR deemed to be transfers from non-downtown retail outlets. 15.Downtown Transfer Exclude from the DESTR sales from an outlet that closes Exclusion from DESTR downtown within a defined 2-year period and reopens in the project. 16.Adjustment of Retail Chain Downward adjustments to the DESTR for a new branch of a Outlets Not Exclusively in the retail chain that is not located exclusively in the downtown Downtown that locates in the project. 17.Adjustment of Retail Chain Downward adjustments to the DESTR for a new branch of a Outlets Exclusively in the retail chain that is located exclusively in the downtown that Downtown locates in the project to reflect sales losses from the downtown branch. 18.Small Space Penalties Penalties to the DESTR for small store space, 5,000 square feet or less,created after the project has been constructed. 19. Cumulative mechanism A cumulative reimbursement of revenues so that the project,if it receives less than its maximum eligible amount in one year, may recapture it in subsequent years,but in no event will it be eligible for reimbursement that is more than its cumulative debt obligation. 20.Financing Mechanism The interchange would be funded by a community facilities district and bond issuance. 21.Guarantee Form The use of a completion bond or similar financial guarantee for the completion of the construction of the interchange. 22.The"Triple Flip" The developer's option to increase the bond payment Size to accommodate an additional 6 months capitalized interest if the so-called"triple flip"sales tax legislation becomes effective.. 23.Benefiting Properties The"fronting"by the developer for the other properties that benefit from the construction of the Prado Road interchange. 24.Dalidio Street Name The use of the name Dalidio for the street that is in front of the project,from Madonna Road to the Prado Road interchange. City of San Luis Obispo page 9 C Planning Commission Agenda Report(2005 Dalidio Drive:Other 108-02) Attachment 4 4. SUMMARY OF PROPOSED DEVELOPMENT AGREEMENT TERMS The proposed Dalidio development agreement is attached(Attachment 4). What follows is a discussion of the general topics addressed by the proposed development agreement. Recitals The proposed development agreement first identifies the parties to the agreement and then sets forth a series of recitals. The recitals are intended to describe the principles upon which the agreement is based. They serve as a road map for the agreement. They describe previous actions and findings relevant to the agreement. They also introduce the concurrent agreement that would be entered into simultaneously, the proposed. The proposed, describing financial obligations regarding the Prado Road Interchange, is an exhibit to the proposed development agreement. The purpose of the proposed is two-fold. One is to outline the terms regarding the financing of the Prado Road Interchange. Two, is to impose restrictions on reimbursable sales taxes (described specifically in the agreement) to protect the. Although contained within the proposed development agreement, as is the case with all agreements, the recitals are nonbinding. Agreement Timing The proposed development agreement is proposed to be effective when the annexation of the subject property is complete. The term of the agreement varies by type of use. It is for 5 years with respect to the retail portion of the project and 15 years with respect to the business park and residential portions. Language is contained to allow for term extensions if there is a legal challenge to the agreement or its attendant approvals (basically, the "clock" stops during those periods). The agreement extends for a minimum of 30 years (the anticipated term of the interchange financing). Development of the Property The proposed agreement describes the developer's vested rights and places some limitations on the ability to make revisions or changes to the vested rights. Applicable Rules and Regulations The rules and regulations that are in effect when the agreement is entered into are those which will govern the agreement, such as the City's Municipal Code. Subsequently enacted rules and regulations may be applicable if they are not in conflict with specifically enumerated terms and if they are not more stringent and do not impose more limitations or increase costs. Sections 5.4 and 5.5 specifically enumerate the rules and regulations applicable to public art and drainage issues. Timing of Development If a later adopted initiative restricts or limits the development of the project, it is the intent of the parties that the agreement governs rather than the later adopted regulation. Processing Section 7 of the proposed agreement describes how approvals, made subsequent to the agreement, will become vested components of the agreement. It also requires that the City, in processing final approvals, must be consistent with the agreement and the applicable rules and regulations defined in the agreement. City of San Luis Obispo page 10 v - 4 LP Planning Commission Agenda Report(2005 Dalidio Drive:Other 108-02) Attachment 4 Fees The applicant will pay fees in accordance with the City's rules and regulations with a few notable exceptions. a. Water Impact Fees —will be those fees effective upon the project application submission, January 1, 2002. b. Traffic Impact Fees — with respect to the retail portion of the project, will be those fees effective upon the project submission, January 1, 2002. c. Affordable Housing—an onsite, residential project is intended to satisfy the inclusionary housing requirement. If the onsite residential project is precluded from construction within five (5) years of the effective date of the agreement, then the developer will have to pay the fee in place at that time. Dedication of Land for Public Purposes The grant of an open space easement is proposed to preserve conservation land. The proposed easement is Exhibit H to the proposed development agreement. There is also a discussion about the placement by the developer of the Grandstand Structure on the conservation land, if all necessary permits and entitlements are obtained to do so. Offsite open space will also be preserved, as the developer is obligated to pay for additional offsite open space preservation of about 24 added acres in an amount not to exceed $192,000 (roughly $8,000 per acre for easements). The estimated cost per acre for offsite open space is an amount based on the Natural Resource Manager's estimates, in light of his past experience with properties in the area, and current negotiations for similar acquisitions of open space. Freeway Interchange a. Freeway Interchange Funding. The Prado Road Interchange is a necessary mitigation measure of the project. The Prado Road Interchange has been long planned for by the City, has been included in the Circulation Element, and shall be totally funded by new development resources. The proposed mechanism for funding the Prado Road Interchange are bond issuances. The City's proportionate share of the costs of the interchange, for existing uses, is approximately 30% and will be funded by a separate bond and paid off by transportation impact fee (TIF) revenues. The developer's share for the project is approximately 52%. The remaining 18% is attributable to undeveloped properties at Prado and the Margarita Area (the "benefiting properties"). Consistent with City policy that "development pay its own way" the Developer shall pay for its share of the interchange, and has agreed to front the money for the "benefiting properties" with the expectation that they will payback the developer in the future. This is described in the proposed development agreement and the proposed. This represents about 70% of the project cost, and will be financed through community facilities district bonds secured solely by the project. As noted, the remaining balance (about 30%) of the project is attributable to new development in other parts of the City, and will be financed by a separate but concurrent bond issue funded by TIF fees. While the underlying security for this bond issue will be the General Fund, this only places the General Fund at risk in the event that annual TIF 3 - �=1 City of San Luis Obispo page I I Planning Commission Agenda Report(2005 Dalidio Drive:Other 108-02) Attachment 4 revenues in a given year are less than debt service costs. Based on past TIF revenue trends, this is highly unlikely. However, should this occur in any given year, the General Fund can be reimbursed from subsequent year TIF revenues. b. Acquisition of Land for Freeway Interchange. Also described in Section 11 are the methods used to acquire land necessary for the freeway interchange and the valuation methodology. c. Preconstruction Costs Reimbursable. The developer's "soft costs" incurred preconstruction are eligible for inclusion in the . d. Timing of Funding and Construction of the Freeway Interchange. No building permits will be issued for the project until the construction contract for the Prado Road Interchange has been awarded. As described in the agreement however, use of the project however may occur prior to completion of the Prado Road Interchange. It is anticipated some smaller buildings will be completed prior to the completion of the freeway interchange as is typical of large retail projects of this type that see completion of buildings in phases. e. City Street Name. The extension of Dalidio Drive from Madonna Road to the Freeway Interchange, at which point the street connects with Prado Road, shall be named Dalidio Road. f. Reimbursement Agreement. The , Exhibit 7 to the development agreement is included as part of Attachment 4. The purpose of the is to provide for the sharing of up to 50% of the net new sales tax and transient occupancy tax revenues generated by the Retail Project (tax revenues the City would not have at all, except for the project), less certain exclusions and adjustments. This is referred to and defined in Section 4, as the Defined Excess Sales Tax Revenue (DESTR). The exclusions and adjustments are described specifically in Sections 4.2-4.4 of the . A significant amount of the exclusions and adjustments to the DESTR were drafted and included as protections to the . Their purpose is to provide economic protection to the downtown and to discourage the developer from recruiting tenants already within the City. The following protections have been included in the : i. Non-Downtown Transfers. Sales from non-downtown business retail outlets that close and reopen in the project beginning one year before the opening of the project and reopening in the project within one year of its completion, should be excluded from the DESTR. ii. Downtown Transfers. Sales from an outlet that closes downtown within a 2-year period, beginning one year before the opening of the project and ending one year after, and reopens in the project should be excluded from the DESTR. iii. Retail Chain Outlets Not Exclusively Downtown. Adjustments downward should be made to the DESTR for a branch of a retail chain that is not located exclusively downtown that locates in the project. iv. Retail Chain Outlets Exclusively Downtown. Adjustments downward should be made to the DESTR for a branch of a retail chain that is exclusively located in the downtown that locates in the project, to reflect the sales losses from the downtown branch. City of San Luis Obispo page 12 L— 42 Planning Commission Agenda Report(2005 DaGdio Drive:Other 108-02) r� I Attachment 4 V. Small Store Space. Sales tax exclusions will be imposed for small store space created after the project has been constructed, to preclude the subdivision of larger spaces into smaller spaces, encouraging direct competition with downtown. 5,000 square feet and below will define a "small store". The developer can appeal for relief from this penalty,but is not guaranteed automatic relief. vi. Transfer Factor Amount and Future Adjustment. The formula for the DESTR should contain an acknowledgement that the 33% Sales Tax Transfer Factor was arrived at based on assumptions about the impact of the project on existing retail outlets in the City and that those assumptions may change over time. In recognition of the tendency for transfer effects to moderate over time, the transfer factor is proposed to adjust in year six downwards by 1% and by 1% for the next four years so that in the 10"' year of the project the Sales Tax Transfer Factor would be 28%. These protections for downtown were conceptually approved by Council on January 6, 2004. At the time, the Association endorsed the provisions and acknowledged in a letter to Council on January 15, 2004 (Attachment 5) that mutually beneficial retail centers can coexist if special attention is paid up front. While the Downtown Association's position on the San Luis Obispo Marketplace itself has changed since its endorsement of the protective provisions to be included in the the provisions protecting the have not changed and continue to be an integral part of the proposed . Standard Contract Language The remaining sections in the agreement establish how various situations, ranging from default to severability, will be handled per the agreement and contain standard contract language. 5. DEVELOPMENT AGREEMENT EVALUATION The City's Municipal Code states the following about development agreements: Development agreements specify the rights and responsibilities of the City and developers. Used in conjunction with subdivision approval, annexation, rezoning, or architectural approval, development agreements establish the terms and conditions under which development projects may proceed. Development agreements are best used for large, complex or phased projects which require extended construction time and which involve numerous public improvements such as streets, utilities, flood improvements, schools, parks and open space and other improvements of community-wide benefit. Under a development agreement, projects may proceed under the rules, standards, policies and regulations in effect at the time of original project approval. (17.94.010) Required Findings There are required findings that must be made for a development agreement to be executed. Consistent with San Luis Obispo Municipal Code Section 17.94.010, the Planning Commission shall consider the proposed development agreement and shall make its recommendation to the Council. The recommendation shall include whether or not the proposed development agreement meets the following findings: City of San Luis Obispo page 13 3 -49 Planning Commission Agenda Report(2005 Dalidio Drive:Other 108-02) - Attachnnnt 4 I. The proposed development agreement is consistent with the general plan and any applicable specific plan; 2. The proposed development agreement complies with zoning, subdivision and other applicable ordinances and regulations; 3. The proposed development agreement promotes the general welfare, allows more comprehensive land use planning, and provides substantial public benefits or necessary public improvements, making it in the city's interest to enter into the development agreement with the applicant; and 4. The proposed project and development agreement: a. Will not adversely affect the health, safety or welfare of persons living or working in the surrounding area; b. Will be appropriate at the proposed location and will be compatible with adjacent land uses; or c. Will not have a significant adverse impact on the environment. (17.94.100) Discussion of Findings I. General Plan Consistency On July 6, 2004 the Council certified the Final Environmental Impact Report for the San Luis Obispo Marketplace Project (the Dalidio EIR) and adopted findings of overriding considerations.. In making this decision, the Council found that the San Luis Obispo Marketplace Project is consistent with the General Plan and therefore the proposed development agreement is also consistent for the following reasons: a. The project location, as described in the General Plan, is appropriate for regional retailing. The adopted General Retail Land Use Element Map designation for the 48.7-acre portion of the site planned for the shopping center development known as "The Marketplace" is consistent with the goals and policies of the General Plan. b. The required plans have been fulfilled. The required Preliminary Development Plan for development of the commercial area of the site fulfills the intention of LUE Policy 1.13.3, Required Plans, which calls for the master planning of proposed annexation areas so that the City has an adopted plan showing the project layout, physical development plan, required open space protection, and provision of streets and utilities. c. The open space dedications are consistent with the General Plan. With the proposal for General Retail development of 48.7 acres of the site, 78.7 acres of on-site and off-site open space will be dedicated to the City for long-term protection of prime agricultural soils. The City Council determined that this combination of site development and open space protection was consistent with Land Use Element Policy 1.13.5. and 8.8, and Open Space Element 10.2.1. d. The Open Space uses are consistent with the General Plan's preservation policies. The proposed Open Space Land Use Element Map designation, for both the 45 acres of farmland in the eastern and southern portions of the property and the 9.7 acre portion of the property identified as an extension of Laguna Lake 3 '0 City of.San Luis Obispo page 14 Planning Commission Agenda Report(2005 Dalidio Drive:Other 108-02) J' Attachment 4 Park, is consistent with the goals and policies of the General Plan regarding preservation of sensitive habitat and prime agricultural soils. e. The office use land use designation is appropriate. The proposed Office Land Use Element Map designation for the 8.1-acre portion of the site planned for the business park is consistent with the goals and policies of the General Plan. Land Use Element Policy 7.2 states that development should be permitted only if it is consistent with the San Luis Obispo County Airport Land Use Plan. The area of the site is that was designated as Medium-High Density Residential was inconsistent with the Airport Land Use Plan (ALUP). The proposed Office land use is consistent with the ALUP and is an appropriate transition between the more intensive retail development along Madonna Road and the residential neighborhoods to the south and west. f. The residential land use designation is appropriate. The proposed Medium- High Density Residential Land Use Element Map designation for the 3.3-acre portion of the site planned for affordable housing is consistent with the goals and policies of the General Plan. Land Use Element Policy 2.6.2 states that the City may adjust land use boundaries in a way that would reduce land designated as residential, only if: a significant, long-term neighborhood or citywide need, which outweighs the preference to retain residential capacity, will be met. Public safety and compliance with General Plan Policy LU 7.2 outweighs the preference to maintain the residential land use designation on the Dalidio property as shown on the 1994 General Plan Land Use Map. Policy LU 2.6.1, which states that substantial areas designated for residential use should not be changed to nonresidential designations, is the basis for preserving as much residential capacity on the Dalidio property as possible. In this case, 3.3 acres is the maximum residential area permitted under the Airport Land Use Plan. In addition the 3.3 acre area is outside of the airport safety zone of most severe concern crossing the site and beyond the 55-decibel noise contour, which are the criteria that the Airport Land Use Commission has identified in its preliminary review of the proposal as being acceptable for residential development. 2. Compliance with Applicable Ordinances and Regulations The terms set forth in the proposed development agreement and the Project are in compliance with the City's ordinances and regulations presently in effect. Council at its July 6, 2004 meeting made the following findings about compliance with applicable ordinances and regulations with respect to the project: a. General Plan and zoning consistency. The project is consistent with the General Plan as amended and the proposed land uses will allowed within adopted zoning districts. The project complies with all applicable provisions of the City's Zoning Regulations other than those modified by the PD rezoning. Approved modifications to the development standards of the Zoning Regulations via the planned development zoning are necessary and appropriate to accommodate the superior design of the proposed project, its compatibility with adjacent land uses, and its successful mitigation of environmental impacts. b. Consistent with Design Guidelines. The project complies with all applicable City Design Guidelines. City of San Luis Obispo page 15 3 1 Planning Commission Agenda Report(2005 DaGdio Drive:Other 108-02) I - ' Attachment 4 c. Sufficient infrastructure exists. All affected public facilities, services, and utilities are adequate to serve the proposed project. d. Site and project compatibility. The location, size, site planning, building design features, and operating characteristics of the project are highly suited to the characteristics of the site and surrounding neighborhood, and will be compatible with the character of the site, and the land uses and development intended for the surrounding neighborhood by the General Plan. The site is adequate for the project in terms of size, configuration topography, and other applicable features, and has appropriate access to public streets with adequate capacity to accommodate the quantity and type of traffic expected to be generated by the use. e. Satisfaction of requirements regarding project features. The project meets the requirement for mandatory project features contained in 17.62.045A. by providing an affordable housing component and preserving 54.7 acres of on-site open space and providing funds to protect an additional 24 acres of off-site farmland of a similar soil type. 3.Agreement is in the City's Interests As previously discussed, Council has found that the economic, social, and other considerations of the Project outweigh the unavoidable impacts identified. a. Promotion of General Welfare. First, the annexation will enable the City to achieve its General Plan goals (and the community's general welfare), including: i. Providing a regional shopping center. Consistency with LUE Policy LU 3.1.2 through the development of a regional-serving shopping center in the area around the intersection of Highway 101 and Madonna Road. ii. Preserving open space and agricultural uses. Consistency with LUE Policies LU 1.13.5 and LU 8.8 & Open Space Policy OS 10.2.1 (A) by preserving significant parts of the Dalidio property as a signature working agricultural landscape at the southern gateway to the City. iii. Creating a needed circulation improvement. Consistency with Circulation Element policies (8.10 & 8.15) by creating a new highway interchange at Prado Road and improving Citywide circulation by having another east-west arterial street that crosses Highway 101. iv. Creating improved economic conditions. The project will enhance the City's tax base (increased sales taxes, transient occupancy taxes and utility taxes), create more jobs, provide for diverse shopping opportunities for residents of the City, reduce sales tax leakage and potentially avoid even greater leakage. b. Comprehensive Land Use Planning. Comprehensive land use planning is achieved through the annexation and control by the City over the property. The project will provide high quality new commercial uses that will complement the commercial development already in the area. If however, agreement is not reached with the property owner, this property will not be annexed. If this property is not annexed, then the future of the land use shall be determined by the County, or by some future City Council at an unknown time. City of San Luis Obispo page 16 Planning Commission Agenda Report(2005 Dalidio Drive:Other 108-02) Attachment 4 c. Substantial Public Benefits and Public Improvements are Accomplished Through the Project The Project provides both significant public benefits and significant public improvements. In addition to the previous policy discussions about project benefits and the Prado Road Interchange there are numerous fiscal benefits that come with the project. i. Net new revenue to the City. Under the proposed sales tax/TOT sharing agreement, the initial new net revenue to the City from will be about $750,000 annually. ii. Per the agreements, in no case will the City reimburse more than the apportioned debt service costs. In short, 50% of the net is a maximum for the developer to receive and a minimum for the City to receive. iii. City not liable for debt. The City will have no liability for the community facilities district debt financing. Regardless of how the project performs, and whether the 50% "net" tax sharing covers the developer's debt obligations the City has no liability for payment of the community facilities district debt service, it is solely the developer's. Therefore, although the developer's estimated costs of the Prado Road Interchange have increased (from an earlier estimate of$13 million to $22 million) the net benefit to the City has not changed. Again, even with increased costs, the City will not be liable for the developer's debt and shall share no more than 50% of the "net" new sales tax revenues as defined in the reimbursement agreement. iv. The proposed contains disincentives to protect from adverse economic impacts. These have been previously summarized and previously endorsed by the Downtown Association (although the Downtown Association does not support the project at this time). 4. Other Findings The establishment, maintenance, or operation of the proposed project will not, in the circumstances of the particular case, be detrimental to the health, safety, or general welfare of persons residing or working in the vicinity of the proposed use, or detrimental or injurious to property and improvements in the neighborhood or to the general welfare of the City. This topic has been addressed in the discussion of the EIR Certification and adoption of Statement of Overriding Considerations by Council on July 6, 2004. Some of the reasons that the Council found that the adverse environmental effects are acceptable and made a statement of overriding considerations for those significant and unavoidable environmental impacts were: a. The project mitigation strategies will help to reduce project emissions to the degree feasible and ultimately put the air basin in closer compliance with established State and federal standards. b. Noise levels to some residents living in neighborhoods along Madonna Road, west of Los Osos Valley Road and between Los Osos Valley Road and Oceanaire Drive will increase above thresholds of significance, but will be partially mitigated by the applicant's contribution to pay for noise mitigation and trip reduction programs. c. The identified loss of agricultural land is significant and unavoidable, but the City of.San Luis Obispo page 17 3 ,�3 Planning Commission Agenda Report(2005 DaGdio Drive:Other 108-02) Attachment 4 impact was previously evaluated and documented in the EIR that was done for the LUE update. The City Council adopted a statement of overriding considerations for this impact on August 23, 1994. To be consistent with that previously identified impact and also with General Plan Policy 1.13.5, 24 acres of off-site agricultural land of similar soil type that is currently not protected will be added to the City's greenbelt. d'. There will only be a significant and unavoidable impact to Cultural Resources if any on-site structures, which are deemed by the City's Cultural Heritage Committee (CHC) to be historically significant, are not retained with future development. With the review of a specific development proposal for the business park, it may be feasible to retain any significant structures or appropriately relocate them, consistent with the recommendations of the CHC, thus eliminating the potential significant and unavoidable impact. e. Traffic and circulation impacts may be reduced to less than significant under the Existing Baseline plus Project Scenario with the implementation of mitigation measures identified in the EIR. It is with cumulative development under 10 Year plus Project Conditions and Buildout Plus Project Conditions that the weaving sections of proposed auxiliary lanes, and the Los Osos Valley Road southbound onramp will experience Level of Service below established thresholds. ALTERNATIVES An alternative to the project is not presented with this report. This is because the project has been considered on several occasions over a long period of time and now has all of its formal City Council approvals and discretionary permits. With regard to the legal agreements, while the Planning Commission could suggest alternative language or provisions, the contract language as presented has been very heavily negotiated and is consistent with prior Council direction. Therefore, any significant changes would require more time and negotiation. This is not recommended because we believe that the proposed agreements compose a compromise that fairly meets each party's major needs, and manage each party's risks, in the fairest and most reasonable way possible, given our respective interests. Further negotiation is not likely to improve upon this result. Thus, the most practical alternative to the recommended contracts would be to conclude negotiations and not proceed with the transaction. Attachments 1. Resolution 2. Council Letter to Supervisors 3. June 28, 2004 (Fiscal Impact Analyses) Council Agenda Report 4. Development agreement ( is Exhibit##) 5. January 15, 2004 Letters to Council from the Downtown Association Reference Materials The July 6 Council Agenda Report regarding this matter is available electronically on the City's website under Council Agendas or at this specific address: http://www.slocity.org/cityclerk/agendas/2004/070604packet/p 1 a.pdf City of San Luis Obispo page 18 3' Planning Commission Agenda Report(2005 Dalidio Drive:Other 108-02) 1 Attachmnt 4 PLANNING COMMISSION RESOLUTION NO. -04 A RESOLUTION OF THE SAN LUIS OBISPO PLANNING COMMISSION RECOMMENDING TO THE CITY COUNCIL APPROVAL OF A DEVELOPMENT AGREEMENT FOR THE SAN LUIS OBISPO MARKETPLACE PROJECT FOR THE PROPERTY LOCATED AT 2005 DALIDIO DRIVE APPLICATION # ER, GP/R, U, PD, U 108-02 WHEREAS, the Planning Commission of the City of San Luis Obispo conducted a public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California, on July 14, 2004, for the purpose of considering a proposed development agreement for the San Luis Obispo Marketplace Project at 2005 Dalidio Drive; and WHEREAS, said public hearing was for the purpose of formulating and forwarding recommendations to the City Council of the City of San Luis Obispo regarding the proposed development agreement pursuant to Chapter 17.94 (Development Agreements) of the San Luis Obispo Municipal Code; and WHEREAS, notices of said public hearing were made at the time and in the manner required by law; and WHEREAS, the proposed development agreement was analyzed in the Final Environmental Impact Report (FEIR) for the San Luis Obispo Marketplace project, and the City Council certified said FEIR and adopted statements of overriding considerations on July 7, 2004; and WHEREAS, the Planning Commission has duly considered the proposed development agreement and exhibits, all evidence, including the testimony of. the applicant, interested parties, and the evaluation and recommendations by staff, presented at said hearing. NOW, THEREFORE, BE IT RESOLVED by the Planning Commission of the City of San Luis Obispo as follows: Section 1. Findings. Based upon all the evidence, the Commission makes the following findings: 1. The proposed development agreement is consistent with the City's General Plan; 2. The proposed development agreement is consistent with zoning, subdivision, and other applicable ordinances; 3. The proposed development agreement promotes the general welfare, allows more comprehensive land use planning, and provides substantial public benefits and necessary public improvements, making it in the city's interest to enter into the development agreement with the applicant; and 4. The proposed development agreement: will not adversely affect the health, safety or welfare of the persons living or working in the surrounding area; will be appropriate at the proposed location and Resolution No. [ ] Attachm Arlt 4 Page 2 will be compatible with the adjacent land uses; and will not have a significant adverse impact upon the environment, except as specifically identified in the FEIR and addressed through mitigations or the City Council's statement of overriding considerations. Section 2. Recommendation. The Planning Commission does hereby recommend to the City Council approval of the proposed development agreement and exhibits, application # ER, GP/R , U, PD, U 108-02. On motion by Commr. seconded by Commr and on the following roll call vote: AYES: Commrs. NOES: None REFRAIN: None ABSENT: None The foregoing resolution was passed and adopted thisl4th day July, 2004. Ronald Whisenand, Secretary Planning Commission by: 3 -Sly Attachment-4 .. G�ti o� -_' I s4� o CIty Of SAn IuIS OBIS" Q % OFFICE OF THE CITY COUNCIL !4!S O� 990 Palm Street ■ San Luis Obispo,CA 93401-3249 ■805/781.7119 May 22,2002 Chairperson Shirley Bianchi Supervisor Hairy Ovitt Supervisor Peg Pinard Supervisor K.H. Achadjian Supervisor Mike Ryan County Board of Supervisors County Government Center San Luis Obispo, CA 9340$ Dear Chairperson Bianchi and Supervisors Ovitt,Pinard,Achadjian,and Ryan: On June 4,2002,your Board will again consider a proposed General Plan Amendment that will allow for the processing of an application to develop the Daiidio Farm property within County jurisdiction. Development of such an urban-like project in the unincorporated area is inconsistent with both County and City policies and good planning principles. The City Council urged that your Board deny the request when you considered this amendment on January 15, =' 2002. However,the City also expressed a willingness to work with the applicant to find a mutually satisfactory approach to developing the property within the City of San Luis Obispo. Your Board ultimately decided to postponeaction on the amendment and invited the.City to meet with a committee of Board members and applicant representatives to discuss alternatives for the development of the property. Subsequently,Supervisors Pinard and Achadjian were appointed to represent the County and Council members Marx and Ewan were appointed to represent the City. We wish to thank the Supervisors Achadjian and Pinard for the helpful and constructive role each played during these sometimes difficult discussions. We believe that their leadership helped to produce promising and workable alternatives. On May 10,2002, Supervisors Pinard and Achadjian asked to meet with the Council Subcommittee to present what they viewed as a very promising compromise(see Attached "Proposal 3"). Although there remain further questions and more details to work out,in general the Subcommittee agreed that the compromise offered some significant advantages over earlier options,including the application now before the County. Therefore,on May 21",the Council subcommittee presented the concept to the full City Council. In summary, our Council agrees to work with the applicant to accomplish a project that will: c+ty of San luls OBlspo �. Attachment 4 1. Be largely consistent with the City's General Plan,thus reducing the amount of new studies and other application requirements; 2. Be very similar to Proposal 3 (attached),allowing significant development of the property,while protecting more open space than envisioned in the previous proposal to the City(56 acres vs.about 79 acres); 3. Protect the 58.7 acres of open space in fee title,instead of via an easement(as in the former proposal); 4. Require-that.the acquisition of 20 acres offsite be located in the vicinity of Highway 101 at the southern end of the City and consist of quality farmland. 5. Eliminate the uncertainty of the previous 9-acre"reserve". 6. Provide for about 47 acres of commercial development,a portion of which is to include a .hotel that would help meet the community's need for enhanced conference facilities. 7.• Provide for access to the groundwater basin to improve the City's water supply and work conjunctively with the City's water reuse project; 8. Involve a binding development agreement at the appropriate stage in order to create greater certainty for both the applicant and the City; During the past three and a half months,all parties have worked very hard to address the many issues involved in the future use of the Dalidio property,and more issues and some development review processes remain before development can be formally approved. We see the primary question before the Board of Supervisors to be: Is the CitySaguisf bispo willing rry� with the applicant in good faith to process a revised develo development lan or the Dalidio property? —we think the answer is clearly"yes." The City therefore respectfully requests that the Board terminate the General Plan Amendment before you and refer the applicants to the City of San.Luis Obispo so that the process of revising the project can be initiated,consistent with the concepts outlined in this letter. Sincerely, Jan Howell Marx Vice Mayor cc: City Council Staff distribution a-3� Attachment-4 council agenda Report "° CITY OF SAN LUIS OBISPO FROM: Wendy George,Assistant City Administrative Officer � { Prepared By: Shelly Stanwyck,Economic Development Manager SUBJECT: DISCUSSION REGARDING REVIEW OF FISCAL IMPACT ANALYSES OF THE PROPOSED SAN LUIS MARKETPLACE PROJECT CAO RECOMMENDATION Receive and discuss the following reports:(1)Impact on Downtown Retailing of Proposed San Luis Marketplace prepared by Keyser Marston Associates, Inc, May 2004; and (2) Response to Keyser Marston Comments on the Impact on Downtown Retailing of the Proposed San Luis Marketplace by Allan.D.Kotin and Associates,May 25,2004. DISCUSSION Background In order to make well informed decisions, the City often hires consultants to perform services that require expertise in an area less familiar to members of the City staff. One of the most common examples of this is an Environmental Impact Report (EIR). EIRs require extensive study of the impacts and mitigations of a proposed project. It is the City's practice to require project applicants to fund the costs of an EIR, with the City managing the actual publication and public review process in order to maintain the highest standards of objectivity and.independence. In the City's General Plan, Land Use Element (LUE) Section 3.1.3 requires that before approving any plans for development in the Madonna Road Retail area, "the City should consider an evaluation of how much it would transfer sales from existing retail areas on the City and whether the proposed uses could be developed in existing retail areas". The City has contracted with an economic consultant, Allan D. Kotin, on several occasions to provide this service for us. The contract has been handled like an EIR, in that the project applicant for the proposed San Luis Marketplace Project has reimbursed the City for the costs associated with the analysis, while the City has managed and maintained the study, thereby ensuring objectivity on the part of the economist and the report conclusions. The Original Kotin Study In February, 1999, in conjunction with the development review of the then proposed San Luis Marketplace Project, and consistent with LUE 3.13, Allan D. Kotin completed the Economic and Fiscal Impact of Proposed San Luis Marketplace and Implications for Downtown Retail Activity (the "Original Kotin Study'). The Original Kotin Study provided detailed analysis of retail conditions in the City, as well as regionally, and listed various strategies for the Downtown to implement in order to respond to then market conditions. The Original Kotin Study also analyzed the transfer effects the project would have on existing retail establishments and I - t 3 �I Attachment 4 Council Agenda Report—Fiscal Impact Reports - - -Page 2 identified existing sales tax leakage occurring from the City. Finally, it identified the anticipated costs of a Prado Road Interchange and analyzed'a sales tax sharing arrangement between.the Developer and the City to fund a portion of those costs. In February 2001, the Council did not certify the San Luis Obispo Marketplace Project EIR and the project was denied due to concerns about open space protection and drainage. 2002 Kotin Study On June 27, 2002, a new development proposal for the Dalidio Property was submitted to the City for review and processing. Accordingly, Council determined that the Original Kotin Study should be updated. In the three.plus years since the Original Kotin Study was published, significant changes in the City's retail character had occurred including: the renovation of SLO Promenade, the remodel of Madonna Plaza, the construction of Home Depot at Froom Ranch and the approval of the Copelands Project. Regionally, the neighboring_ communities of Arroyo Grande, Atascadero, Santa Maria, ;and Paso Robles had added significant new retail opportunities. Last,the Downtown Association had adopted a Strategic Plan, funded by the City, which required integration into the fiscal analysis report. The Applicant reimbursed the City for the costs associated with the update of the Original Kotin Study so that the proposed project could be analyzed within the context of these changed circumstances and the changes to the project itself. Allan D. Kotin and Associates, Inc., completed the updated economic impact analysis of the proposed San Luis Marketplace Project in October 2002 and published Fiscal Impact of Proposed San Luis Marketplace and Implications for Downtown Retail Activity (the 2002 Kotin Study). The 2002 Kotin Study is comprised of six sections. The sections are as follows: Introduction, Executive Summary, Project Description. and Comparison, Regional Retail Analysis, Fiscal Impact Analysis and Interaction with .Downtown Retailing. The Project Description and Comparison describes the proposed project as currently designed and compares the proposed project with the 1999 proposal. The Regional Retail Analysis evaluates the impacts of the proposed project on existing retailing throughout the Central Coast Analysis Area. Both existing and projected retail conditions are analyzed. The Fiscal Impact Analysis determines the fiscal impact (public costs and revenues) that the proposed project is expected to generate. Finally, the Interaction with Downtown Retailing section provides conclusions as to the impacts of the proposed project on the Downtown and on the Downtown Association's Strategic . Business Plan. With respect to the fiscal impacts of the proposed San Luis Marketplace Project on Downtown the following conclusions were made in the 2002 Kotin Study: 1. The types of stores will not provide significant competition to Downtown. 2. The design of the project encourages retailers similar to the Promenade and Madonna Plaza, so called"box"retailers,and is consistent with the Downtown Strategic Plan's goal of discouraging other"main street"type projects. 3. Provisions to be included in a development agreement will provide strong financial disincentives to discourage competition with downtown. 4. The added shoppers at the proposed San Luis Marketplace Project will be a net benefit to the City and Downtown. l�D i _-Attachment 4 Council Agenda Report—Fiscal Impact Reports —- Page 3 Keyser Marston Associates,Inc.(KMA) Continents on the 2002 Kotin Study In May 2004, KMA released a report, Impact on Downtown Retailing of Proposed San Luis Marketplace(the KMA Report), after being commissioned by several business and property owners to comment on the 2002 Kotin Study(Attachment 1). In the KMA Report,economist Jerry Keyser agrees with the 2002 Kotin Study's estimated amount of anticipated sales taxes to be generated by the proposed San Luis Marketplace Project. The KMA Report differs from the 2002 Kotin Study with respect to the estimated amount of sales taxes transferred from Downtown as a result of the proposed Project. Mr. Keyser concluded that the retail space in the proposed San Luis Marketplace Project would adversely affect all or most Downtown merchants. Mr. Keyser's impact analysis is based on a comparison of the retail square footages of Downtown to those in a defined "Madonna Road Area" with the conclusion that as retail square footages in the Madonna Road Area increase, Downtown's share of retail sales will decrease. Kotin Response On May 25,2004, Allan D. Kotin and Associates responded to the KMA Report in its Response to Keyser Marston Comments on the impact on Downtown Retailing of the Proposed San Luis Marketplace(Attachment 2). In this response, Allan Kotin states that his original conclusions from the 2002 Kotin Study have not changed He believes that based on both the design of the proposed project(the site plan) and the tenant mix (which no longer includes specialty retailer Macy's) that there will be only a modest impact on Downtown retailing. Mr. Kotin disagrees with the KMA Report's premise that the project's addition of retail square footage automatically creates competition with Downtown. Mr. Kotin believes it is the type of tenant that is the issue, not the amount of retail square footage. Additionally,-Mr. Kotin concludes that the critical role.the proposed San Luis Marketplace Project will play in enhancing the City as a regional retailing center and stemming the significant retail sales leakage we continue to experience to our neighbors to the north and south will offset the potential modest transfer from Downtown. Further Comment by Kotin Regarding KMA Report's Estimated Impact to Downtown After the Kotin Response was published, several Downtown merchants expressed continued concern with respect to the KMA Report's assertion that there would be a 13% decline to all Downtown businesses when the proposed San Luis Marketplace Project opened. Allan Kotin and Associates have responded more specifically to this particular concern in a June 10, 2004 Memorandum, Further Comments on Analysis of Downtown Impact of San Luis Marketplace Prepared by Keyser Marston Associates(Attachment 3,the"Further Kotin Comments")where they provide a re-creation of the analysis KMA undertook and conclude that it (a) does not consider the fact that some of the proposed San Luis Marketplace Project's transfer effect will be spread to stores outside of Downtown and(b) even if the KMA Report's premise were true the amount of sales tax losses on the basis of sales space in the Downtown would be much closer to 9%rather than the 13% proposed in the KMA Report. Mr. Kotin again objects to the methodology of the KMA Report based on square footages and concludes that there will not be a 13% reduction to all Downtown businesses across the board because the Marketplace is not a clear alternative to all shopping in Downtown. He asserts that the big box nature of the proposed San Luis Marketplace is a different shopping experience from Downtown, and in his opinion, is better for the City and the Downtown to have the Marketplace bring customers to the City rather than having them go elsewhere. t - 3 B- � f Council Agenda Report—Fiscal Impact Reports At<ac h m e f it Page 4 Summary Allan Kotin and Associates have worked for the City of San Luis Obispo for many years in a variety of capacities. The Fiscal Impact Analysis of the proposed San Luis Marketplace Project was conducted on behalf of the City and, although paid for by the project applicant, the service contract, just like an EIR,has never been under the developer's maintenance and control. The Original Kotin Study provided several strategies for the Downtown to implement in response to the then proposed San Luis Marketplace project — two of which have already been implemented: the adoption of a strategic plan and the construction of new retail space(underway at Court Street). The City has long recognized that competition is a risk factor in the retail environment. The retail environment in San Luis Obispo is dynamic. A quick review of the retail sales taxes remitted to the City over the past 13 years in the Downtown,Madonna Road Area and Los Osos Valley Road Area (Attachment 4) show changes over time to reflect both new retail space and changes in consumer habits (e.g. buying more cars more often). However,throughout all of these changes, although the rate may change, the trend line for the Downtown has been consistently upward as a result of its continuing retail strength. The key to responding to competition is to look ahead and be best positioned to confront it when it comes. The City's role in helping the Downtown in this task is not to prevent all competition, but rather to exert our influence over future planned development in a way that compliments the strategic plan. This is exactly what the City is attempting to do in its review and negotiations relative to the Marketplace project. The City also appropriately provides the Downtown with a level of support and service that far exceeds what is provided to any other area of the City, given its vital role in the economic and social life of the community. ATTACHMENTS 1. Impact on Downtown Retailing of Proposed San Luis Marketplace,Keyser Marston Associates, Inc,May 2004 2. Response to Keyser Marston Comments on the impact on Downtown Retailing of the Proposed San Luis Marketplace,Allan D. Kotin and Associates,May 25, 2004. 3. Memorandum, Further Comments on Analysis of Downtown Impact of San Luis Marketplace Prepared by Keyser Marston Associates, Allan D.Kotin and Associates,June 10,2004. 4.City of San Luis Obispo Geographic Comparison Chart Reference Material The following reports are also available online at www.slocity.orakconomiedevelonmentlonlinedocs.asQ and in the City Clerk's Office for review. 1. Original Kotin Study 2. 2002 Kotin Study 3. Downtown Strategic Plan 3 - � a Attachment 4 J n PA Impact on Downtown Retailing of Proposed San Luis Marketplace Prepared by.' ftserManton AmdatG4 Ina(lam MW 2004 3 "Le Attachment m,.nt. 4 mackaround Keyser Marston Associates, Inc. (KMA)has been asked to assess the range of impacts to downtown San Luis Obispo retailing that will likely occur If the San Luis Marketplace Project Is approved In its current size, proposed configuration and reported major tenant les. .Our assessment begins with a brief review of downtown retailing in the last twenty-five years in the United States and In San Luis Obispo. Discussion The fragility.of downtown retailing in the U.S.and in San Luis Obispo over the last 50 years is well recognized and well documented. First came the competition from the suburban regional shopping center,and the decision by the department stores to follow their customers to the suburbs. More recently, the competition has emerged from the.big box retailer,who,with their need to retail on cheap land and Inexpensive as possible buildings,almost always selects suburban locations. Downtown retailing has never rebounded from this competition in many downtowns in the country and in California. Examples of downtowns with Ilttle or weak retail are plentiful and Include diverse.communities throughout California and U.S. Today, by contrast retailing in downtown San Luis Obispo Is healthy. But over the years, it has not always been so: In the 1970's and 1980's,after the opening of suburban competition and the-relocation of department stores to the Freeway,downtown retailing began to hurt and by the early 1990's, huge vacancy occurred and downtown retailing came dose to being lost. It was only after the opening of Downtown Center in 1993, and the reentry of national brand retailers into downtown.combined with the presence of the local,independent merchant,that downtown again emerged as.a thriving retail location. However,a pivotal moment in time for downtown retelling In San Luis Obispo could be at hand. On the positive side,the under construction Court Street and other planned retail projects will be positive.However, the need for many downtown buildings to be selsmically retrofitted has been given new foams by the recent earthquake in the area.Such retrofit could both be physically disruptive and require an Increase In rent structure(to offset the cost)and disturb the economics that currently prevail.-This is the fragile setting into which the impacts of major new competition outside of downtown and along the Freeway must be assessed. Analysis Proposed Shift In the Competitive Supply of Retail.Space:A dramatic shift In the competitive. supply of regional retell space In the City of San Luis Obispo is now belag proposed in the categories of retail space which are most pertinent to downtown.These most pertinent Vftw WSW Asudatm Ina txrz oo��ooiaosaoo Pape I i Attachm?nt 4- categories are:apparel, general merchandise(not including drug, liquor and food), home fumishkngstappliances and specialty retail,as well as eating and drinking.These are the categories we have focused on in assessing shifts In the competitive supply of retail space that Is underway in San Luis Obispo and the potential Impact of that space shift on downtown retailing. KMA has based its understanding of the proposed shift In pertinent,competitive regional retail space on a review of the recent site plans(2003)available for the proposed San Luis Marketplace,the 2002 Fiscal Impact of Proposed San Luis Marketplace prepared by Allan D. Kohn&Associates,its predecessor report of 1999,statistics included.in the SLO Downtown Strategic Business Plan of 2001, and discussions with downtown stakeholders conducted within the past 60 days by KMA. Based on the foregoing sources, It appears to us that the following data are reasonable to use to assess the space change that is underway and proposed, and to assess current and prospective sales that are occurring In Downtown and In the Madonna area which is the location of the proposed San Luis Marketplace project. Currently, it appears that there is between 500,000 and 600,000 square feet(sf)of region serving retell In the downtown in the pertinent categories of space,including about 150,000 sf of eating and drinking space. Similar space In the Madonna area along the Freeway has been estimated at nearly 600,000 sf not including a recently added Home Depot.and under construction Costco. To the existing 600,000 sf,San Luis Marketplace proposes to add 600,000 sf,including Macys(110.000'4,Target(about 125,000 sf)and regional shop space of about 165,000 sf. This 400,000 sf must be considered as competitive space to downtown and will bring the total of competitive space in the Madonna area to about 1,000,000 sf (600,000 sf plus 400,000 sf). At the same time,the downtown now has under construction another 40,000 sf,which will bring its total to about 600,000 of(rounded). Thus,we can see that,after the addition of San Luis Marketplace,the Madonna area will contain about63%of the competitive regional retail space and downtown 37%.This will be a dramatic shift from the current space'relationship of just over 50%In Madonna and just under 50%in downtown. Exhibit 1 Illustrates this shit In retail concentration away from the downtown. As a further Indicator of how San Luis Marketplace may Impact downtown retailing,we have assessed not only the shift in competitive space that is occurring out also reviewed current sales performance in the downtown.The basis for our assessment Is sales performance data presented by the Kohn report of 1999(page 48),sales assessment data presented by the Kohn 2002 report(exhibit A-10 In particular)and our assessment of sales changes that have likely occurred in downtown.based on local Interviews and our knowledge of national trends. Taking all the above into account,it appears to us that downtown probably produced about $150 million In sales in the pertinent categories in 2003. Sales performance by retail category probably is dose to the following profile: Kayaw Li amn AzwdMe,lna ttzrl oo�wo�,aoa doo -Attachment -4 Apparel and General Merchandise 200,000 sf estimated @ 275/sf =$55M Specialty incl. Home Furnishings 250,000 sf estimated @ 200/sf = $50M Total Retail 4501000 sf. 4105M Eating and Drinking 150,000 sf estimated 290/sf =$45M Total of Pertinent Categories 600,000 sf estimated ® =$150M. Based on our estimate of current level of sales in the downtown,we have two observations. The first observation is that in 2003,.#appears that sales In downtown as a percentage of total city sales are quite dose to the distribution of space between downtown and the Madonna area. Downtown sales are about$150 million and total.city sales In the pertinent categories appears to be about$350 million.Thus downtown Is likely capturing slightly less than 43%of total city sales,whereas we have previously estimated that downtown space Is slightly under 50%. However,downtown space is about to drop to about 37%of total space. Clearly significant sales transfer will occur as this dramatic shin In space allocation occurs. The second observation is that sales per sf In downtown are estimated at about$250 per sf Including Eating and Drinking.These performance levels are reasonable by today's national standards and Indicative of a healthy downtown. But these sales levels are not outstanding. In part the sales levels probably reflect the fad that the dominentamount of space In downtown Is operated by independents rather than c halrr operators. However at these sales levels,It Is our opinion that businesses operating at these levels have a higher degree of vulnerability if sales were to decree a-by 10%or more. Businesses operating at these levels are also likely to be.vulnemble if they had to endure an Increase of significance In the cost of doing business to offset the likely upcoming need to seismically retrofit. These observations set the stage for looking at the conclusions of the 2002 Kotin report in assessing the impact of San Luis Marketplace on downtown retalling. The 2002 Kotin report concludes that the transfer of retail sales from other stores in San Luis . Obispo to San Luls Marketplaoa should be estimated at$37 million,which represents 25%of the total sales projected for the Marketplace of $150 million(the same dollar volume that we estimate downtown does today). However,page 17 of the report reads as follows:•(we) recommend using a range estimate of the retail transfer effect of.25%to 30%..'At 30%,the transfer effect would be nearly$45 million. For the purpose of further understanding of the potential Impact-on downtown retailing, KMA has used the round number of$40 million,which is part way between the Kotin range of$37 million to nearly$45 million. Before assessing the potential impact of transfer on downtown retailing, recognition should be given to a few of the assumptions that have gone Into the 2002 Kotin estimate of transfer.The �tzM ooiuoonaan doe K"="Lbfttm .I= Pape 9 / A .h R'1.�'�(1 4 I stimate gives implicit if not explicit recognition that San Luis Obispo is,In retailer terms,a small.market and slow growth community, and that growth per so only provides a portion of the dollars that will flow to San Luis Marketplace,and that'a portion will be transfer dollars from existing stores within the city. The report,.then states (again on page 17)that the reason that the transfer is not larger than the 25%to 300/6 projected is that"the Inevitable store to store effects are not given more weight In the regional analysis is the expectation that the total sales volume'Pie'wig get bigger and overcome these effects.'to other words,the case is made that more shopping trips with substantial sates will be retained in the region because San''Luls-Marketplace will bring more and a new kind ofshopping Space that does not currently exist- We accept the concept of retention but flag as a question whether the total sales dollars to be retained will be as high as projected;in part because of the amount.of growth occurring In South County and the continued ease for many to shop south rather than to shop north. But,having flagged the Issue that the retention may be high and therefore the transfer estimate may actually be somewhat low, KMA has accepted the Kadin transfer estimate for the purposes.of drawing our own conclusions as to what is.the likely resulting impact on downtown retalling. KMA 2004 assessment of irwWor lmaact on Downtown Retafllna To formulate our opinions of transfer impact on downtown, KMA first reviewed the 2002 Kohn report conclusion which does not quantify the possible impact on downtown retailing but Instead concludes win summary,there should be relatively modest adverse impacts on downtown retailing resulting from the proposed San Luis Marketplace project as it is currently configured."The KMA 2004 opinion is based on the following three factors; 1. With San Luis Marketplace existent,the Madonna area retail space wilt have Increased from a size that was rowdy about the same as downtown(600,000 sf)and will be two thirds larger than downtown(1,000,000 sf In Madonna and.600,000 sf in downtown);further.the percentage of total space between the two areas wig have* changed from about 50-50 to 37%downtown and 63%Madonna;(Exhibit 1) 2. Department stores.Macy's especially.and Target carry as primary fines of merchandise woman's,men's and children's apparel,as well as jewelry and beauty (cosmetics),all merchandise lines that are today important to the downtown,when the department stores are located in the same shopping complex,the industry standard is that because of their attraction power,the departrnent.store can still be a positive for adjacent stores, but when located In the Madonna area,the department stores will.be competition to stores carrying similar merchandise In the downtown, 3. The latest configuration of San Luis Marketplace calls for about 165,000 sf of specialty stores In a'smair format ccMguration;that 165,000 sf of space is over 26%of all the space In downtown today. 112720011001-003 ebC KeYaerVamtm Awodata%Ina rr__Pepe 4 AttacflmeII G'F • Summary Of Rndlnos There Is of course no way to predict with certainty how the many variables will come together that will Impact on downtown retailing of San Luis Marketplace. But given the powar.of the three factors noted above,we think It prudent to assume that at least 56%of the transfer dollars will come out of downtown. In other words,we think that it Is prudent to anticipate that as much as 50%of the Kotin projected transfer of$40 million may come out of downtown,or $20'mllllon. A potential transfer In the twenty million range would have the following effects on downtown: ■ It would represent a decrease in sales of about 13%in categodes.that make downtown Important,that Is In apparel and fashion and possibly to eating/drinking and entertainment. a It would cause on average a$30 plus per-sf loss of sales If spread evenly over all 800,000 sf downtown. ■ It will cause the loss of`top°dollars to all the stores of downtown,which are the - highest profit dollars to any store. ■ . Also, It should be noted that the dollar transfer loss will probably fall most heavily on the profit margins of the Independent stores who offer so much to the character of downtown but who typically have the least resources to cope with new competition and a loss of their top dollar sales. a Finally, it should be noted that the transfer Impact will occur at the same time monies will have to be spent on seismic upgrading;transfer impact and seismic upgrade will result In revenue decrease and cost increase. Therefore,our opinion is that there could be a dramatic negative impact and significant challenge for downtown retailing If the San Luis Marketplace proceeds at the currently proposed size,tenant makeup and configuration. KeyserMaraWAUMM2K WC. 1127L MI-0 0 dace . 5 J Attachment 4 Ono •sR1»yae�•a:• •..•.. ,;':""1. �. Nl r CD ca 0 CL ul CL 0 CD co r: 20. CL •«$+ C a N do i' CL H W O J o LLL aRCD C o 0 • ` 0 0 N _N so G ® Gf a g o Q O c F' c 00 Q Z3 k l r' 3 109 Attar,hmeant"4 RDKJI atasw.awo 213.6233sar Allan D. Kotin&Assodates Fax 213.03.4231 Real Estate Consulting for Public Pd ate joint Ventures 949 S. Hope Street,Suite.200,Los Angeles,CA 90015 akotin@adkotfn.com Memorandum TO: Ken Hampian,CAO,City of San Luis Obispo DATE:May 25,2004 Cc: Shelly Stanwyck FROM: Allan D.Kotin RE: RESPONSE TO KEYSER MARSTON COMMENTS ON THE IMPACT ON DOWNTOWN RETAILING OF THE PROPOSED SAN LUIS MARKETPLACE At your request, Allan D. Kotin &Associates (ADK&A) has reviewed the document prepared by Keyser Marston Associates (KMA) entitled Impact on Downtown Retailing of Proposed San Luis Marketplace dated May 2004. Due to the need for a prompt response, this review is primarily a logical and generalized review, rather than a detailed technical one, since the KMA report itself is largely non technical and deals only with highly aggregated statistics. ADK&A would make two initial observations; (1) the analysis of economic impact is far from an exact science and there exists significant room for experts to differ within the range of professional analysis; and (2) ADK&A has had the benefit of considering the Marketplace project as it has evolved through the loss of Macy's and physical reconfiguration while the KMA report necessarily considered only the previously published description of the project. SUMMARY The central thesis of the KMA report is the large amount of new retail space to be created at the proposed San Luis Obispo Marketplace project.on the Dalidio property(the Marketplace)will result in sales of all or most Downtown merchants likely being adversely affected. This thesis is based on two explicitly stated,but clearly challengeable,assumptions. One is that,with the addition of the Marketplace, the total retailing space in the generously defined "Madonna Area" (including Costco and Home Depot, for example) leans heavily in favor of this area and against Downtown. Implicit in this assumption is the contention that retailing in this amorphous Madonna Area,much of which has coexisted with Downtown for many years, competes directly and harmfully with Downtown merchants. This leads to the second explicit assumption: which is that fully 400,000 square feet of the sales area at the Marketplace is directly competitive with Downtown, an assertion clearly at odds with the stated tenant mix and physical layout of the Marketplace. The issue of possible impact of the Marketplace on Downtown was dealt with in detail in the ADK&A report of October 2002 entitled Fiscal Impact of Proposed San Luis Marketplace and 4 -�.p Attachm_nt 4 ADIGR Memorandum RE: RESPONSE TO KEYSER MARSTON ON THE IMPACT OF SAN LUIS MARKETPLACE Implications for Downtown Retail Activity. That report included a detailed analysis of Downtown retailing patterns and reached the following critical conclusions: The general merchandise and home improvement anchor stores [will not] provide significant competition-to existing retailing in Downtown. Because of its design configuration(which is not conducive to pedestrian oriented cross shopping)and the relatively small allocation of"line retail"space, it is far more lilcely that retailers similar to those found in the neighboring Promenade and Madonna Plaza will occupy... retail space at the Marketplace. The design configuration of for the...Marketplace is consistent with the[Downtown] Strategic Plan's objective of discouraging competitive"main street"type projects. The generation of substantial additional shopping traffic to the Marketplace, whether it comes from new visitors, new out-of-town shoppers, or from in-town shoppers no longer leaving town to seek these[new big box]retail offerings elsewhere will a clear benefit for the City and the Downtown. Based on the current configuration and tenant mix, which eliminates Macy's and sharply reduces space available to small retailers, ADK&A is even more confident that there will be only a very modest impact on Downtown retailing. Finally, and not at all trivially, KMA gives little consideration to the critical role the Marketplace will play in enhancing the City as a regional retailing center. KEY DIFFERENCES The balance of this memo deals sequentially with six issues on which ADK&A differs from KMA in its interpretation of the data: 1. The need to put the Marketplace and current SLO retailing in a regional context. 2. Whether or not KMA's large "Madonna Area" really functions as a single rival to Downtown. 3. Is it correct to assume that all of the competitive effects of the Marketplace will be focused on Downtown? (Since only with that assumption can KMA conclude that Downtown merchants will suffer average losses of 13%or$30 per square foot.) 4. How much of the space in the Marketplace really does compete with Downtown merchants? 5. A failure to consider the barriers to direct competition with Downtown created by the tenant mix, physical design of the Marketplace, and disincentives set forth in the proposed Development Agreement. Q\Proiects&PromamsWalidigWemosMotin Response Final.Doc Allan D.Kotin&Associates Page 2 May 3,2004 1 Attachmeant 4 ADKA Memorandum RE: RESPONSE TO KEYSER MARSTON ON THE IMPACT OF SAN LUIS MARKETPLACE 6. The extent to which the barriers to making the Marketplace more competitive with Downtown are truly permanent and that the Marketplace really cannot "morph" into a "fashion center"directly competitive with Downtown. 1.The Regional Context KMA uses aggregate sales projections for the Marketplace and other Madonna Road retailers to paint a picture of allegedly massive competition to Downtown that is very misleading. It is important to put the proposed SLO Marketplace project in context of the regional retail landscape. In 2003, San Luis Obispo County retailers generated approximately $2.5 billion in sales, a $400 million increase over Year 2000 levels. With the nearby University,the Mission Plaza,the Farmer's Market,the creek,the eclectic shops,late 19'h and early 20`h Century architecture,the movie theaters and night clubs, and ease of parking, Downtown San Luis Obispo provides a unique entertainment and shopping experience for the entire region and beyond. In the categories of apparel,general merchandise and specialty retail the County's 2003 annual sales were approximately $700 million or$6,600 per household. Based on average statewide household spending patterns of$9,000 per household, San Luis Obispo County residents should be spending almost$950 million in those categories. For comparison, Santa Barbara County retailers generated $1.3 billion in sales for apparel, general merchandise and specialty stores, just at the statewide average of$9,000 per household. There appears to be significant leakage of retail sales outside SLO County approaching $200 million. The proposed SLO Marketplace project total sales at stabilized occupancy in 2006 are only $150 million,just 6 percent of the total County sales in 2003.. Based on the average population growth of 1 percent per year over the past decade, the proposed Project sales could theoretically be absorbed by new residents within the next 5 to 10 years. Of course there will be some adverse impact on individual merchants in downtown San Luis Obispo as a consequence of the development of San Luis Obispo Marketplace. However,it is the even more emphatic opinion of ADK&A, that the impact on Downtown-will be modest. In our judgment, the only stores likely to be hurt are those stores carrying standardized merchandise, similar to Home Depot, Sears etc. (overlapping the lines carried in the SLO Marketplace project),with relatively high margins and a limited tradition of service. 2.Inappropriate Aggregation of Diverse Retailing into a Single"Madonna Area" In arriving at the conclusion that. the balance between downtown and the "Madonna Area" in retailing will be materially and adversely affected by the construction of 600,000 square feet of retail space at San Luis Obispo marketplace, KMA created a potentially inappropriate level of aggregation. Home Depot and Costco(when it is constructed)are almost as far in driving time from Madonna Plaza and The Promenade as is Downtown. G-NPmiects&Prumu=\Datidid\Mw \Kotin Response Final DO Allan D.Kotin&Associates Page 3 May 3,2004 3 9a Attachment 4 IIDK&R Memorandum RE: RESPONSE TO KEYSER MARSTON ON THE IMPACT OF SAN LUIS MARKETPLACE Furthermore, KMA ignores the nature of the decision to be made by the City. This is not an example of cumulative impact analysis as required under CEQA. The decision facing the City Council is a fairly narrow one that has two parts: (1) does the City have a basis for rejecting or modifying a project based on its land use regulations? and (2) is it appropriate to provide the reimbursement agreement that would divert some of the net additional sales taxes that the City receive from this project to underwriting a major public improvement already in the Circulation Element of the City's General Plan? In this regard it is critical to note that downtown merchants continue to thrive while coexisting with the older Madonna Plaza and the more recent conversion of the prior weak regional center known as Central Coast Plaza into a strong new big box center identified as The Promenade. In fact, it is widely believed that the big box tenants in The Promenade have brought new customers to the City and may actually benefit downtown by keeping local residents here for shopping. 3.Ignoring Other Competing Retail and Ascribing Half of All Potential Losses to Downtown KMA's implied statement that downtown and non downtown retail stores should be in perfect balance is illogical, since there are numerous categories of retailers that would never locate in the Downtown. It also ignores two other factors. One is that the non downtown experience is itself diverse and does not function as a single counterweight. Secondly,the non downtown experience is not only composed of the three centers loosely and inappropriately grouped as "Madonna Area" in the KMA report Other competing retail areas include Foothill-Chorro, Upper Monterey, Santa Barbara Street, Santa Rosa Street, the Marigold Center, South Higuera and various other outlets in the Southern quasi industrial portion of town. In the aggregate, in 1997 when the last detailed count was done, there were almost 460 retail outlets located outside of the Madonna area and downtown, representing at that time over 44%of the total taxable retail sales in the City. KMA's representation that half of the total transfer effect created by the Marketplace project will be absorbed by downtown merchants is at odds with the fact that downtown retailing represented only 30% of total sales in the City in 1997, a share that is probably lower now that The Promenade and other outlets are open. Another puzzling aspect of the KMA analysis is the total absence of any comments about the impact of the Marketplace on other directly competing merchants within the generously defined"Madonna area". For example, the impacts of Target and Lowe's are much more likely to be felt by Home Depot and Sears than by specialty retailers.in Downtown. The pet store will compete with pet stores in Madonna Plaza,the Marigold Center and on Monterey Street. 4.Considering Most Marketplace Retail as Directly Competitive with Downtown The central premise of the KMA analysis is that by adding a 400,000 square foot block of retail space in the vicinity of Madonna Road, the Marketplace project will materially and adversely W?ro�s&PromamWalidioNemoslKotin Response Fine1.DOC Allan D.Kotin&Associates Page 4 May 3,2004 Attachmant 4 RDIGR Memorandum RE: RESPONSE TO KEYSER MARSTON ON THE IMPACT OF SAN LUIS MARKETPLACE change the balance between Downtown and this somewhat overlarge"Madonna Area". Specifically KMA states that the Target (125,000 so, the Macy's (110,000 so and all of the "regional shop space"(165,000)all"must be considered as competitive space to downtown." This representation is at odds with the facts, even as they existed with the original Macy's-based proposal. There are, in ADK&A's opinion, two key assumptions by KMA that are not necessarily true. First of all, Target, with its limited and generally lower priced merchandise lines and heavy emphasis on non-apparel grocery and hardware type items is not directly competitive with a downtown dominated by small apparel and specialty shops and eating and drinking places. A critical element in the KMA analysis is the characterization of both Macy's and 165,000 square feet of`regional shop space" as directly competitive to Downtown. As originally proposed and outlined in the earlier ADK&A report, there was a total of 458,000 square feet of space occupied by four major anchors, Macy's, Kohl's, Lowe's and Target. Of the remaining 167,000 square feet, 41,000 square feet was taken up by two sub anchors with more than 20,000 square feet each,neither of which had an apparel orientation or could be accommodated in Downtown. This suggests, that even before the loss of the Macy's, the potentially competitive space outside the department store anchors was only about 125,0000 rather than 165,000 square feet. In the current configuration proposed for the Marketplace, there is no Macy's store, which . eliminates from the Marketplace any outlet that could be reasonably considered to be a fashion oriented store directly competitive to the apparel stores that make up much of downtown retailing. Furthermore, even considering Target and Kohl's to be in some sense"department stores", there are now only three such stores,not four as originally proposed,including the existing Gottschalk's. 5.Barriers to the Marketplace Becoming More Competitive with Downtown. Even the competitive threat posed by Macy's would have been very much blunted by the configuration of the Marketplace. Fashion based department stores are particularly threatening to smaller stores in downtowns, not merely because of what they sell, but because they are typically anchors in malls that offer a directly competitive shopping experience to the downtown. The shopping experience in virtually every mall in America includes a large number of smaller apparel and shoe stores of precisely the same type found in downtown SLO. The configuration of the SLO Marketplace project is specifically that of a"big box"or power center, with little traditional shop space. Even more important is the complete absence of a block of small shops adjoining or near the entrance to the department stores which is a critical element in creating the pedestrian "sampling" experience so specifically characteristic of both successful malls and viable downtown shopping areas. Even a casual review of the Marketplace site plan shows the absence of any area of concentration of small shops and the deliberate elimination of a pedestrian comparison shopping experience or entertainment oriented shopping space. The few restaurants are all fast food or national chains not O:\Proiects&Pro¢rarnMalidioNemoffiatin Response Final.170C Allan D.Kotin&Associates Pages May 3,2004 3 HU � �1 � Attachment 4 RDK&A - Memorandum RE: RESPONSE TO KEYSER MARSTON ON THE IMPACT OF SAN LUIS MARKETPLACE desirable to tourists and residents seeking an "evening out". This is a traditional auto parking dominated center largely designed for the convenience of shoppers visiting a single store and then leaving: Over the last 18 months, the design of the Marketplace has been altered to substantially reduce both the amount of small shop space and reduce any physical area that would create a meaningful entertainment oriented shopping experience. In the currently proposed plan a substantial proportion of the"non-anchor"space is accounted for by "sub anchors",i.e. non apparel chain stores occupying upward of 8,000 square feet,which could not be accommodated in downtown and are not directly competitive with most downtown merchants. These include major pet store,a large electronics store and a party supply store. The total amount of space available forrent in unit sizes under 6,000 square feet is less than 60,000 square feet spread out over three distinct locations in the center, substantially separated by large parking fields. Even if all these stores were to be directly competitive with downtown merchants, it would be only about ten percent of the Downtown sales area,and the lack of cohesion and proximity would clearly undermine the ability of these stores to compete effectively with the downtown shopping experience. 6.The Permanence of Barriers to Any Future Transformation of the Marketplace There are two key reasons why it is most unlikely that the Marketplace could ever be transformed into a fashion oriented center with numerous small stores directly competitive with Downtown. One is physical and the other is financial. The physical reason lies in the general "open doughnut"format of the Marketplace site plan with a ring of large store buildings,mostly well separated from each other, surrounding a large parking lot with one or two individual large buildings in the center. This is the exact opposite of a traditional mall or pedestrian oriented downtown in which numerous small stores are clustered closely together specifically to create a pedestrian shopping experience. The second and financial reason the center is unlikely"to change its spots"is that this center cannot support the cost of the required freeway interchange without some reimbursement by the City which is to be based on sales tax. The proposed reimbursement agreement penalizes the developer for either pirating existing Downtown merchants or increasing the number of stores with 5,000 square feet or less, (which is the typical size of most downtown retailers). If any these events occur, not only is the sales tax resulting from these retailers excluded from the calculation of reimbursement, but an equal amount is deducted from the remaining sales taxes otherwise considered for reimbursement. This creates a deliberate "double hit" for anything that looks like it is directly competing with Downtown. There is also a penalty for opening new branches of downtown merchants. GAProiects&PmumyNDalidio\Mctnos\Kotin Response Final.DOC Allan D.Kotin&Associates Page 6 May 3,2004 1 r 3-rK Attachment 4 RDK&A Memorandum RE: RESPONSE TO KEYSER MARSTON ON THE IMPACT OF SAN LUIS MARKETPLACE CONCLUSION The Marketplace is a power center designed for the convenience of regional shoppers. It is NOT a center that relies on numerous small stores for either its attraction or any significant portion of its revenue. In this regard it is not, and cannot be, directly competitive with the downtown San Luis Obispo experience. At the same time,it is true that some of the big boxes transfer sales from Downtown merchants,and other retailers in the community. That is a fact of retail life and is likely to occur whether these big box tenants are situated in the Marketplace, elsewhere in the City or, even more likely, elsewhere outside the City, in which event the City and its Downtown merchants will suffer all the same bad effects, without the offsetting benefits of increased City revenues, lowered retail leakage, increased visitation to the City, and a means of financing a public improvement long identified in the City's Circulation Plan,to wit the Prado Road Interchange. The proposed annexation of this project allows the City to continue to be involved in the design and development of the Marketplace Project. This allows the City to institute controls through negotiated development and reimbursement agreements which balance the concerns of the community with the needs of the developer. 0.\P oieM&Pmjtmms�Delidio\b4emos\Kotin Response n al.DOC Allan D.Kotin&Associates Page 7 May 3,2004 t �i$ Attachm eant 11DKdN 3I0.8�A900 213.8�3.584t Pet 213jW.4231 Allam 1J. Icotln&Assodates "Estate Cormthing for Public Private latrrc Vetmrres 949 S.Hope Street Suite 200, Loc Angeles,CA 90015 akoiin@adkoffn.com Memorandum TO: Shelly Stauwyd;City of San Luis Obispo DATE: June 21,2004 FROM: Allan D.Kotin RE: FunTam ComMENTS ON ANALYsts OF DOWNTOWN IMPACT OF SL MARKEMACE PREPARED BY KEYSER XARSrON AssociATES As your request, Allan D. Kotin &Associates (ADK&K) has further pursued one particular aspect of the analysis of the report prepared by Keyser Marston Associates (KMA) on the impact on the proposed San Luis Marketplace on Downtown retailing. You suggested that the estimate of a 13% decline quoted in that report has been widely circulated and is a critical element in the considerations of the Downtown merchants and the Downtown association. As mentioned before and described in more general terms in the prior memorandum,Response To Keyser Marston Comments On The Impact On Downtown Retatling Of The .Proposed San Luis Marketplace,dated May 242 I do not agree with this conclusion. As requested,I have prepared these specific comments about the 13%. My comments rest on two general observations: 1. The inappropriate cluaracter=ation of space in Marketplace as competive to Downtown 2. A reconstruction of KMA estimates with more accurate numbers to show that even if one accepts KMA's premises,the appropriate percentage reduction is smaller than 13%. General Comparability Of Space The KMA report concludes that atotal of 400,000 sq.ft. of space in the Marketplace will be directly competitive with Downtown. The 400,000 sq. R of space is made up of 125,000 sq. ft_ for Target, 110,000 for Macys, and 165,000 sq.& of"small shop space". Through no fault of their owu.KMA has misstated the actual space allocations since they have changed as the project 1ias evolved. At this paint, the space allocation corresponding to KMA's.initial estiate is much more like 290,000 swuare feet(per plans of April, 2004) with a Target store of 1350,000 square feet and Kohl's of 96,000 square feet and approximately 60,00 square feet in smaller shop space. The balance of the space is accounted for primarily by subanchors occupying relativel large footprints which could not be accommodated in Downtown and for the most part do not directly compete with the Dowtown merchandising mix which is focused on apparel The credibility of the 13%redaction alleged by KMA rests on challengable three premises: 1. That Target is directly competitive with Downtown. 2. That Kohl's is directly competitivc with Downtown. 3. That there is 165,000 sq. ft. of shop space. 3 , Attachment RDK&R -. Memorandum M: Further Cotnmcnts on KMA's Amalysis Of Downtown Impact of San Luis Marketplacc ADK&A would submit that people deciding to make shopping trips to Target and Kohl's are doing so as a function of that store's merchandizing and advertising and not as an alternative to patronizing the small shops of Downtown. Since Kohl's and Target are both in the marketplace serving San Luis Obispo already or clearly plan to enter it at directly competitive locations outside the City, it seems highly mapprptiade to ascribe all their sales impact to Downtown. Furthermore, the presence of large other anchor stores which materially reduces the amount of competitive shop space further erodes the comparison. It is the 60,000 sq. ft. of small shop space that could arguably be compared meanutgfully to Downtown San Luis Obispo. This 602000 sq. ft. represents only approximately 10% of the Downtown inventory: If,as KMA assumes elsewhere,impact were based solely on area,the impact would be about 10%. But since, ADK&A believes that not all of the small space will be directly competitive,therefore the impact is much IiWy to be less than one for one. Numerical Analysis While ADK&A continues to believe that the basic premise of interchangeable shopping that underlies the KMA analysis is flawed, an examination of the specific numbers shows that,even with this flawed premise,the caleulelated impact would be much smaller than shown in the KMA report. The 13% estimate of impact arrived at by KMA rests on two reinforcing computation. In one, the balance between Downtown retailing and the Madonna area is alleged to shift from"50—50"to 63 —37 for 13%shift. In another analysis, the $20,000,000 representing half of the total transfer effect is ascribed to hit only Downtown. If that $20,000,000 were to effect Downtown it would represent by a reconstruction that KMA has undertaken approximately a 13%loss. ADK&A has undertaken to recreate the analysis with what it believes to be a more accurate treatment of the critical factors. This recreation is summarized in the attached Exhibit 1. The fust part of Exhibit 1 shows that in the KMA analysis, the allocation of impact of the project as between 50'/o to Downtown and 50% everywhere else completely ignores that fact that much of the impact will felt on stores outside of Downtown and on stores already m the "expanded Madonna area" that KMA has identified. If in fact,the impact were in somewhat general proportion to the allocation of sales space there would not be a 13%loss,there would be something much closer to 9%loss as shown in Exhibit 1. Similarly,the other analysis, which concerns the change in the balance between square feet, is also flawed. (ADK&A would note that the inherent premise that sales follow square feet without regard MOMMKMA-0521 acx Allan D.Katin&Associates Page 2 6)21/2004 {� " ` 0 3-`1 g Attachment 4 RDK&A Memorandum PM- Further Comments on KMA's Analysis Of Downtown Impact of San Luis Marketplace to their composition is one that is weak and does not support the conclusion.) Nevertheless, even using this logic it is inappropriate to ascribe 400,000 sq. R of competitive space even by the most generous definition of competition to the SLO marketplace. ADK&A has reduced the 400,000 sq. & m 290,000 sq. ft. to specifically account for sub-anchor apace representing types of stores that cannot, will not locate in Downtown San Luis Obispo and are not directly competitive with stores that are located there. Somewhat coincidentally in the case of the ADK&A analysis, as in of KMA, .the results are generally similar showing a 10%reduction rather than a 13%reduction. Conelading Observations. First of all, ADK&A does not accept the idea that there is a reduction of 13% since it implies that the bulls of the space in the Marketplace represents a clear alternative choice to shopping in Downtown. This is not the case since big box retailing, which dominates the Marketplace, is a different shopping experience than Downtown shop retailing and that difference will remain. Even if the logic of the KMA position is supportable, its computations using corrected data would produce a much lower impact. Finally and perhaps most critically,Target and Kohl's are forces in the market whether or not they locate at Marketplace_ VAuft er adverse effect they may have on Downtown merchants,it is clearly better for the City and for the Downtown merchants that the Marketeplace bring the customers of these big boxes to the City rather than draw them away. MoroonxMw-on�.ax Allan D.Kenn&Associates Page 3 6212004 Attachment 4 2 CD .0 Co K ) 2 E 4)@ � � § k � \ ■ . a \ • � � \ ` I © Z 2 | ) �♦ IN \ !/ �\ B / k } ■ ] § � \ @ a � ) Zf § CL fZ e . o 0 0 � § 4=) COL k k § . ° / L E £ W 2$to L f f E © @ k@ CD § o 7 � 2 ± � $ _ C £ u ! _ » 2 �$ � ■ .� & & _§ �(@K§ 3' > ke\ k C ��00 ƒ§ Co \ k2 > e � 2 2 -0 - '0 $ k CD Cd:Ca -0 CS § ° = � cco » ( | § Ca $ § mak) = 2 k k § § § o iA A k § C k ¢ o # # # a C w w ___u XBJL Saln � � Attachment 4 PLANNING COMMISSION REPORT ATTACHMENT 4 In order to save paper, Planning Commission Attachment 4,the proposed Development Agreement and proposed Special Tax Reimbursement Agreement (as an Exhibit to the proposed Development Agreement) has been eliminated. For these documents, please see Attachments 6 and 7 to the Council Agenda Report. Jul -09-04 01 : 12P City f SLO-CD Dept_ 80781 7173 P_01 ( /1 - Attachment 4 - 15 January 2004 San Luis Obispo To: Mayor Dave Romero and City Council members Downtown From. Correne Weaver, President Association SLO Downtown Association P.O.Dox 1401 San LUIS Obdtpv Prepared by: Deborah Cash, Administrator Catrfomia 93406 Re: San Luis Marketplace Project Phone:805.5410286 FAX-805.781.2647 The-decision of the City Council at its 6 January 2004 meeting to concur with www.downtownvlo.com measures proposed for the Development Agreement which affirm the City's commitment to a strong Downtown is applauded by the Downtown Association. As you can see by the attached article written by Deborah Cash, Administrator, for the San Luis Obispo Journal; the Downtown Association feels that symbiotic, or mutually beneficial, retail centers can coexist if special attention is paid to the preventing duplication of market appeal up front. Therefore, we appreciate the Council's sensitivity to retaining the power center characteristics of the Market Place, rather than encouraging its development as a lifestyle center similar to the Downtown. While the final design of the center must consider pedestrian safety and flow, the Downtown Association believes that the Main Street"theme" or feel of Downtown is unique and should not be duplicated within our community—a move that would dilute each entity. We are also understandably thankful that disincentives are proposed for the. agreement exist to discourage new development from deliberately attracting away existing Downtown businesses. Strategic protections, like those offered by staff and conceptually approved by Council, demonstrate foresight, open mindedness and sincere interest in retaining the essence of our City while still moving forward with the times. While we do not seek to discourage free enterprise in the community, it is our mission to preserve a healthy business climate for those businesses that are within our boundaries and that we do not want to lose. Because we have seen the fallout of past projects that fared poorly due to inadequate planning or understanding of the unique nature of our city-wide business community, we feel the action of the Council provides for success, not failure, in a controversial but inevitable change to the commercial history of our community. Cc: Ken Hampian John Mandeville Ron Whisenand Pam Ricci Shelly Stanwyck � �ga r Attachment 4 qp aoWhat. ' s Up Around Dontown ' has merit and allows each area to develop a niche and exchange cus- etting out of the"us v.them" mentality is a key task this a i tomers rather than compete for the same buyer. upcoming year because there's a general tendency to believe that periph- his thinking came about as a result of a Strategic Plan exercise eral City developments and projects toll that was completed for the Downtown Association a couple of death knells for Downtown. While we've Tyears ago when the Dalidio Project first appeared on the radar. The plan suggests that this community can support a variety of shop- across heard honor stories of"sprawlmart" ,a�j'' � P 99 tY PP° �Y P across the U.S.where edge-of-the-town ping "centers" as long as each was symbiotic with the other,that is, development has negatively impacted " , xr -u they complement and enhance what exists,not compete head-to- cities'centers,we're happy to report that ° , head with. This can be accomplished through zoning,contractual x a` agreements,tax sharing subsidy arrangements...all designed to pro- in our circumstance,the City and Deborah Cash 9 9 y Downtown Association have developed mote overall economic health—developing a new balance,if you some rather sophisticated mechanisms to Administrator will—without bringing ruin to anyone. Which isn't to say there won't assist in positive play between "us and them" rather than its opposite. be some impact, but typically business is like nature and those who meet the challenges are most likely to be stronger because of them. Referring mainly to the 11alidio project,scheduled for discussion The City's economic development manager and the Downtown on the January 6 City Council Agenda(business points only, not Association are available to work with business owners about business design),the considerations include denying the developer the plans—a key element to anyone's success. ability to participate in sales tax sharing agreements for certain types of businesses that may leave Downtown for Dalidio—and perhaps eantime,we're excited about changes in our own district even penalizing the project owner—along with disallowing subdivid- M that will bring a new look to Downtown, namely the Court i ing larger"pads"that could potentially attract the"lifestyle"stores Street(Copeland's Project)and New County Government that Downtown will be targeting to keep. This"protectionist" mode Center. As a word of advice,9 you're traveling past these projects, on the COVer:Unique and eye catching, window displays in Downtown SLO are part of the charm that separates the vibrant shopping area from Every-other-place, USA. Collectibles, art and seasonal items work well in the window at NOVO,one of Downtown's most popular eateries. Photo by Deborah Cash ' i :i -k•. -z S� F ja.. Zy M: �� � .f Classics «e y w • " ' ; Come sn on;the 20th n' of each mantic in 2004w T tq see our spec%alS ;2 ti and products p DECORAINE' CCESSORIES Mont °5nee�y FAQ } `_I - �Z - �1 j G r ® v '�h;�^ In the historic Sinshetmer r What ' s U0 Around DASH t0W� '''�'� IIt 441 pay careful attention to the closures of Osos and Morro calls inquiring about getting a booth or providing Y Downtowli Euents - street lanes and occasional closures near the County entertainment,so in case you're wondering, the event r �� project on Monterey Street At least one lane will be has guidelines and an application process but we do ;daati ft 2004 ,s r open but you may have to take a detour or two before encourage those who are eligible to participate to do farmer market candcele you ultimately end up at your destination. In that area, so. ,31a �t look for colorful,artsy new banners along Monterey NP catetgories are:vendors,food vendors,not- Street ot Street proclaiming: Welcome to Downtown SLO,get- for-profit or information booths,entertainment "; ArE After Dark ` Downtov�,c�Gallehes`" ting better all the time. It's true...and while new Bevel- and the Fanners'Market Association. Vendors opment may occur,the charm and attraction of are STRICTLY limited to those businesses conducting Downtown will be as strong as ever, and even more so business in the Downtown Association boundaries ` '" Ihusday;January IS' ,��, in about a year or so. including food vendors. However, not for profit or S snowNlgbt „ "-Q Farmer'Markel We hope you enjoyed the holiday season in information groups may apply to be at the market and Chono 6n Higuer'a Downtown SLO--the 28th Annual Holiday there is a small fee. The same is true for entertainers 6 00 9 ooPM Parade was one of the biggest and finest though auditions are required, usually in the form of Dem s sag ozae ever---more than 100 entries. From singing church submitting a CD. Anyone wishing to sell home-grown 'Den2Forged Fannersii 'Ms kec; choirs and marching bands to dancers, hot rods and produce needs to contact the Farmers Market .rytnursdey;Nigtic.:{`;; hot dogs(Walking in a Weenie Wonderland was a riot!) Association. The application is available online at Coming next month to Santa and Mrs.Claus, it was a delightful and magical www.downtownsio.com and once completed,should '';Fcbcusryla-ik_ ; " P.reside6t!s Day Weekend way to kick off the holiday season. Thanks to the many be returned to the Downtown Associaition office for –, volunteers,participants,staff and workers who pulled it committee review. Upon approval and payment of Feb uayts iNatdrGras P,reylew N�ht ,: off with great success—and to the neighbors who were fees, a permit is issued. Its a fairly easy process and a gracious enough to allow us to block their streets for a great way to obtain exposure for special interest groupsTeb few hours getting it ready to roll. We're proud to including scouting,schools, politicians—anyone who arol zt .;., 9 9 dY P 9 9 P Y tvtar�i sponsor the parade,one of the community's finest wants great exposure and public contact. in Mission Playa events. veryone at the Downtown Association would like Fef2Fuag22 Iso of interest to the general public is informa- to thank you for supporting Downtown through MardrGras parade tion about participating in Thursday Night out the year and wishes you a wonderful Promotions Fanners' Market. We receive many 2004...around Downtown. ` ;THE HOMETOWN SPECIALIST ::M ,fid S1e�;$rlllo `i;, tAi,�T M&,Co tIIJ„ 1ik n. °r 414 � V. ,jay �' ,�"�,�ay t 'yyppQt�+z,y_.'yk '•� A `.1 More Homes Sold From This Location I< Than Any Other In San Luis Obispo! �* ° ` �� o r RE SERVE BETTER! EL N TO a OCATIO S • Monterey at Chorro,San Luis Obispo • y.� ,yam .. • � 'ti: v r ��r • First and Union Streets in Old Town OrcLrtt• •Spyglass at Shell Beach Road, Shell Beach • " °` ` 805) 543-8500 FAX (805) 545-7500 ?' µa •^ 41=20. info®comerstonerealstate.com N 0 0 e3 ( 4 Attachment 5 Freauentiv Asked Questions About-ahe Marketplade Development • Reimbursement Agreements August 2004 Improved General Fund Revenues. The Marketplace will generate substantial new sales and hotel tax The following answers a dozen frequently asked revenues that will help deliver important day-to-day questions about the proposed development and tax services like police, fire, street maintenance, parks, reimbursement agreements for the San Luis Marketplace recreation and added open space acquisitions. These project. added revenues will also help offset significant State budget cuts to cities. 1 What is a Development Agreement and why is one proposed for the Marketplace project? Expanded Shopping Opportunities. The project will offer shopping opportunities locally that many of our State law allows development agreements as a way of residents want but now must go elsewhere to find. On offering greater certainty for the developer in the review the other hand, because the retail mix within the process in exchange for unique public benefits Marketplace is so different and there is significant associated with a project. When the Council negotiated leakage to other parts of the Central Coast region for the return of the Marketplace project to the City from the these types of retail, an independent economic analysis County, it offered a development agreement as a way of has shown that the project should have a modest impact formalizing these benefits for both the City and the on the Downtown. developer. « „ 3 What is the greater certainty offered to the 2 What "unique public benefits" are offered by developer in exchange for these benefits? the Marketplace project? The development agreement does not change any of the The project helps achieve a number of General Plan City's development rview "ground rules" for the project. objectives and major City goals, including:. However, it does provide assurance to the developer that they won't change for 5 years in the case of the retail Open Space Protection. In most communities, freeway portion of the project, and for 15 years for the residential frontage like the Dalidio property would be developed in and business park components. And as noted above, it its entirety. In this case, 55 acres of the property will be also sets forth the developer's financial responsibilities preserved as open space as well as an additional 24 acres for building the Prado Road interchange. offsite in an area where sprawl is a significant threat. The conditions of the development approval granted by /� Who is responsible for paying for the the Council on July 7, 2004 assure that these 79 acres of 4 interchange? open space will be protected forever. As noted above, the interchange will be solely funded by Prado Road Interchange. The proposed agreements new development, summarized as follows: create a financing mechanism—totally funded by new development—to help construct the Prado Road ' MEEMM interchange, a long-standing General Plan Circulation Developer(Community Facilities District) Element goal. Along with mitigating the traffic needs of Marketplace Project 52.4% the Marketplace, this interchange will also serve the Other Directly Benefiting Properties Prado, Margarita and Airport areas as well as other areas Prado Road Area 4.7% of the community. The proposed agreements also assure Margarita Area 13.0% that building permits for the project will not be issued Total Developer Responsibility 70.1% until the construction contract for.the interchange has Other New Development(Impact Fees) 29.9% been awarded. Total 100.0% Affordable Housing. The project includes 60 affordable The developer's share of interchange costs (70.1%) will housing units. be funded by the issuance of Community Facilities District (CFD) bonds. Repayment of this debt will be Strengthened Tourism. The project also includes the sole responsibility of the developer, funded by construction of a 150-unit hotel, which will help "special taxes"levied specifically on the property. The strengthen the City's market position for destination remaining 29.9% will be financed by a separate City tourism and conferences, as set forth in the Council's bond issue funded by transportation impact fees. _ major City goal for 2003-05. 5 ^SS Attachment 5 Frequently Asked Questions: Market�.,dce Development and Tax Reimburseme_.Agreements 5 What are the key terms of the proposed tax developer to do so. Secondly, any significant change in reimbursement agreement? the type of tenants—whether smaller or larger—is likely to require changes in the physical lay-out of the project, The City is proposing to reimburse the developer for and thus trigger additional City review. some of its interchange special tax obligation by sharing up to 50% of the "net" new sales and hotel taxes—after Who is in charge of approving the interchange accounting for transfers from existing businesses— design and who is responsible for building it? generated by the project. Based on comprehensive analyses by two independent economists, the transfer Since it is part of the State's freeway system,CalTrans is affects are estimated to be 33% for the retail uses and responsible for approving the interchange design. 20% for the hotel. This results in "net" new revenues to However, under an agreement with CalTrans, the City the City—after transfer affects and the 50% will be responsible for awarding and managing the reimbursement—of about$750,000 annually. construction contract. It is important to note that the tax sharing agreement O What happens if the project generates lower does not obligate the City for any of the CFD debt sales and hotel tax revenues than expected,or service payments for the interchange: the City is only the cost of the interchange is Higher than estimated? agreeing to share "50% of the net", it is not agreeing to share any of the financial liability for repayment of If these revenues are lower, then the City's "net new the CFD bonds. As such, the developer is responsible revenues"will be lower—but so will the reimbursements for paying any differences between its debt service to the developer. However, this will not relieve the obligations and the amount of the shared revenue. In the developer of its full responsibility for the CFD debt early years of the project, this difference will be service payments. In the event that the cost of the significant. For example, by "Year 4," the developer's interchange is more than $22 million, either the City or debt service obligation is projected to be about $1.3 the developer may withdraw from the agreements, unless million, but the amount of shared tax revenues from the both agree to renegotiate them. City will only be$765,000. Can stores open before the interchange is 6 Why is the City proposing to share revenues 1 completed? with the Developer to pay for the interchange when the City continues to face budgetary As noted above, under the proposed agreements; the City challenges? will not issue building permits for construction of the stores and hotel until the construction contract for the Stated simply, without this project, there will be no interchange is awarded. This means that construction of added revenues at all. In short, 50% of something the interchange and the Marketplace will occur on (especially a very large something) is a lot more than roughly the same timeline, although some stores may 100% of nothing. And without this agreement, there open a few months before the interchange is completed will be no project. (store openings are expected to occur in phases). 7 How does the tax reimbursement agreement What further design review will occur, and protect the Downtown? 12 how will mitigation measures be It provides a number of economic disincentives for incorporated into the project? creating smaller, competing store spaces by excluding After approval of the development and tax any revenues from these stores from the calculation of reimbursement agreements, there will still be a number net taxes to be shared. It also excludes revenues from of review steps remaining, including: final review and stores relocating from the other areas of the City, with an approval by the Architectural Review Commission of added penalty if they relocate from the Downtown. design issues such as the .site plan, building design, Since the City cannot specify tenants, how can colors, landscaping, lighting, signage and public art; L we be assured that there won't be a major incorporation of all project changes mandated in Lange in the type of proposed tenants over time? previous reviews and required by mitigation measures into the final plan; and subsequent public hearings for st, as noted above, in the case of creating additional the business park and affordable housing components of `ller spaces that might more directly compete with the project. _kntown, there are significant disincentives for the -��_ Attachment 6 ORDINANCE NO._ (2004)Series) AN ORDINANCE OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO APPROVING A DEVELOPMENT AGREEMENT BETWEEN THE CITY,THE DALIDIO FAMILY AND SAN LUIS OBISPO MARKETPLACE,LLC FOR THE SAN LUIS OBISPO MARKETPLACE PROJECT WHEREAS, the City Council of the City of San Luis Obispo conducted a public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California, on August 3, 2004, for the purpose of considering a proposed development agreement (hereinafter "Development Agreement") for the San Luis Obispo Marketplace Project at 2005 Dalidio Drive; and WHEREAS, said public hearing was conducted pursuant to Chapter 17.94 entitled Development Agreements of the San Luis Obispo Municipal Code; and WHEREAS, notices of said public hearing were made at the time and in the manner required by law; and WHEREAS, the proposed Development Agreement was analyzed in the Final Environmental Impact Report (FEIR) for the San Luis Obispo Marketplace project, and the City Council certified said FEIR and adopted statements of overriding considerations on July 7, 2004; and WHEREAS, at a public hearing held on July 14, 2004, the Planning Commission of the City of San Luis Obispo considered the subject Development Agreement and recommended against its approval; and WHEREAS, the City Council has duly considered the proposed Development Agreement and exhibits, the recommendation of the Planning Commission, all evidence, including the testimony of the applicant, interested parties, and the evaluation and recommendations by staff, presented at said hearing. NOW, THEREFORE, BE TT ORDAINED by the City Council of San Luis Obispo as follows: SECTION 1. The City of San Luis Obispo; Ernest F. Dalidio, Jr., Successor Trustee of Dalidio Family Trust u/t/a dated October 29, 1987, Ernest Dalidio Jr., Successor Trustee of the Thelma F. Perrozi Trust u/t/a dated February 7, 1991, and Clara B. Dalidio, Trustee of the Clara B. Dalidio Trust u/t/a dated January 15, 1991 (collectively, "Dalidio Family"); and San Luis Obispo Marketplace Associates, LLC, desire to enter into a Development Agreement pursuant to Government Code Sections 65864 through 65869.5, and Chapter 17.94 of the San Luis Obispo Municipal Code with respect to real property located at 2005 Dalidio Drive in San Luis Obispo. The legal descriptions of said parcels are more particularly described in the proposed Development Agreement, attached hereto as Exhibit "A" and incorporated herein by reference. " 0 1 Ordinance No. (2004 Series) f AttaCnment 6 Page 2 SECTION 2. The Planning Commission conducted a public hearing to consider the Development Agreement pursuant to Municipal Code Section 17.94.100 on July 14, 2004 and recommended against approval of the agreement, citing a potential inconsistency with the General Plan due to skewing of the jobs/housing balance, and questionable public benefit to be gained by the project. The City Council held a properly noticed public hearing regarding the proposed Development Agreement pursuant to Section 17.94.110 et seq. on August 3, 2004. Oral and written evidence were presented both to the Commission and the Council. SECTION 3. Based upon substantial evidence in the record of the proceeding including, without limitation, the written and oral staff reports, testimony of the applicant and other interested parties, the FEIR prepared for the San Luis Obispo Marketplace project pursuant to the California Environmental Quality Act, the General Plan, and the record and decision of the Planning Commission, the City Council hereby finds that the proposed Development Agreement is consistent with the General Plan of the City of San Luis Obispo. The City Council further finds that the proposed Development Agreement complies with the zoning, subdivision, and other applicable ordinances and regulations. SECTION 4. The proposed Development Agreement furthers the public convenience, general welfare, and good land use practice, making it in the public interest to enter into the Development Agreement with the applicant. The Development Agreement provides for the orderly and comprehensive development of a land area in a visible and important location in the City. The Development Agreement ensures that the project can be developed over time in its approved form, and that the applicant will provide substantial public benefits as a part of the development. SECTION 5. Taking into account all of the conditions of approval that have been applied to the project, the City Council further finds that: (a) The Development Agreement will not adversely affect the health, peace, comfort or welfare of persons residing or working in the surrounding area, since the project is in keeping with the character and general development pattern of the existing area; (b) The Development Agreement will not be materially detrimental to the use, enjoyment or valuation of property of other persons located in the vicinity of the site, since the Development Agreement ensures that public improvements, additional infrastructure and other public benefits will be provided as the project is constructed; (c) The Development Agreement will not jeopardize, endanger or otherwise constitute a menace to the public health, safety or general welfare, since the Development Agreement will provide public safety improvements such traffic improvements contemplated by the separate finding that the Development Agreement will help the City pay for the freeway interchange as contemplated by the Circulation Element that the City could not otherwise afford. Further, the project is conditioned to comply with applicable fire, building and life safety codes and regulations; 3 Ordinance No. (2004 Series) AttSC�lt11e ftt 6 Page 3 (d) The Development Agreement will be in the best interests of the City in that it implements the proposed San Luis Obispo Marketplace project and will provide certainty to the City and the Applicant regarding that project's development time table, impact fees, applicable ordinances, overall development standards and similar matters. The proposed project will provide for a functional and attractive development that will contribute to the City's tax base while preserving a considerable amount of land for agricultural, conservation and open space uses. Because of this, the Development Agreement is in the best interests of the City and its residents; (e) The Development Agreement is consistent with the General Plan, any applicable Specific Plan and the Municipal Code. The administrative record and findings of this Ordinance demonstrate conformance with City requirements; (f) The project will be appropriate at the proposed location and will be compatible with neighboring uses, in light of the existing adjacent commercial uses, and as the Conservation Land and the proposed residential uses separate much of the proposed project from existing residential uses; and (g) The Development Agreement would promote the public interest and welfare of the City. The development project will preserve open space, provide for public improvements contemplated by the Circulation Element and expand the City's tax base through regional serving retail uses different from those in the downtown area. The development project also provides for a residential use adjacent to an existing residential area and limits the commercial-retail use to an area adjacent to existing commercial and retail development. SECTION 6. The proposed Development Agreement complies with the terms, conditions, restrictions and requirements of Chapter 17.94 of the San Luis Obispo Municipal Code. Pursuant to San Luis Obispo Municipal Code Section 17.94.130, the Development Agreement and the project approvals incorporated therein provide for a duration of the agreement, uses to be permitted on the property, permitted density, maximum height, size and location of buildings, and the reservation of land for public purposes such as open space. SECTION 7. The proposed Development Agreement was analyzed in the Final Environmental Impact Report (FEIR) for the San Luis Obispo Marketplace project, and the City Council certified said FEIR and adopted statements of overriding considerations on July 7, 2004. The City Council finds and determines that the Final Environmental Impact Report adequately addresses the potential significant environmental impacts of the proposed Development Agreement, and reflects the independent judgment of the City Council. The Council, through the certification of the Final Environmental Impact Report, incorporated the mitigation measures listed in the Mitigation Monitoring Program into the project and the Development Agreement. In light of adoption of the overriding considerations and incorporation of the mitigation measures, the project and Development Agreement will not have a significant adverse impact on the environment. Ordinance No. (2004 Series) Attachment 6 Page 4 SECTION 8. Based upon the foregoing, the City Council hereby approves the Development Agreement attached hereto as Exhibit "A" and authorizes the Mayor to execute said Development Agreement on behalf of the City. SECTION 9. A summary of this ordinance, together with the names of the Council members voting for and against, shall be published at least five (5) days prior to its final passage, in the Telegram-Tribune, a newspaper published and circulated in this City. This ordinance shall go into effect upon final approval of annexation of the site by the Local Agency Formation Commission. INTRODUCED on the 3rd day of August, 2004, AND FINALLY ADOPTED by the Council of the City of San Luis Obispo on the day of , 2004, on the following roll call vote: AYES: NOES: ABSENT: Mayor Dave Romero ATTEST: Diane Reynolds Acting City Clerk APPROVED AS TO FORM: Jonkhan . Lowell City Attorney G:\Agenda-Ordinances-Resol\Marketplace Development Agreement Ordinance.doc 3 - 9 © Attachment 6 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: ANDRE,MORRIS&BUTTERY P.O.BOX 730 SAN LUIS OBISPO,CA 93406 SPACE ABOVE THIS LINE FOR RECORDER'S USE DEVELOPMENT AGREEMENT THIS DEVELOPMENT AGREEMENT (hereafter "Agreement") is made and entered into on (the "Agreement Date"),by and between: (i) the CITY OF SAN LUIS OBISPO, a Municipal Corporation and Charter City ("City"); (ii) ERNEST F. DALIDIO, JR, Successor Trustee of Dalidio Family Trust u/t/a dated October 29, 1987, ERNEST DALIDIO JR, Successor Trustee of the Thelma F. Perrozi Trust u/t/a dated February 7, 1991, and CLARA B. DALIDIO, Trustee of the Clara B. Dalidio Trust u/t/a dated January 15, 1991 (collectively, "Dalidio Family"); and (iii) SAN LUIS OBISPO MARKETPLACE ASSOCIATES, LLC, a California limited liability company ("SLO Marketplace"). Dalidio Family and SLO Marketplace are referred to collectively as "Developer." Additional specified terms are defined in Exhibit"A"hereto. RECITALS A. The Development Agreement Statute authorizes City to enter into an agreement for the development of real property with any person having a legal or equitable interest in such property in order to establish certain development rights in such property. B. Dalidio Family is the owner of the Real Property. The Real Property consists of approximately 131 acres of land that is included in City's General Plan and sphere of influence. The Real Property is intended to be annexedto City. C. SLO Marketplace has entered into an option agreement with Dalidio Family whereby SLO Marketplace has an option to purchase a portion of the Real Property. Dalidio Family and SLO Marketplace each have a legal and/or equitable interest in the Real Property. D. Developer intends to: (i) develop the Project on the Real Property as follows: a) on the Retail Land, SLO Marketplace intends to cause to be constructed the Retail Project;b) on the Business Land, Dalidio Family intends to construct the Business Project; c) on the Residential Land, SLO Marketplace intends to construct the Residential Project; and (ii) not develop those portions of the Real Property as follows: a) the Conservation Land will be preserved as open space via an easement; and b)approximately 16.2 acres of the Real Property committed to public roads, including a freeway interchange approximately 11.7 acres in size. The "Project" shall mean collectively,the Retail Project, the Business Project,the Residential Project, the creation of FANFW\Da1ifa04U)rn1oM=Apr t\DWidio DA 072 Aoc 1 3 -q Attachment 6 open space on the Conservation Land and the Real Property committed to public roads including the Freeway Interchange. E. In 2002 Developer submitted a development proposal, and on May 21, 2002, the City Council determined that the proposed Project constitutes an appropriate basis for a City project application and directed further processing of the proposal. F. The purpose of this Agreement is to facilitate the implementation of City's General Plan through the development of the Project,thereby realizing various public benefits to City and private benefits to Developer, including those described in these Recitals. The development of the Project requires a major investment by Developer in public facilities, substantial front-end investment in on-site and off-site improvements, dedications of land, participation in other programs for public benefit and purposes, and substantial commitments of resources to achieve both the private benefits of the Project for Developer and the public purposes and benefits of the Project for City. Developer will be unable to make and realize the benefits from such commitments of land and resources without the assurances of a realized Project provided by this Agreement. G. Developer is willing, pursuant to the terms of this Agreement, to make expenditures and provide benefits to City including, without limitation, contributions toward construction of a full freeway interchange at U.S. Highway 101 and Prado Road, as described in Exhibit "B" (the "Freeway Interchange"), the development cost of which is estimated to be approximately $22 million. City and Developer desire to provide a mechanism whereby the Freeway Interchange will be constructed and funded in whole or in part by utilizing tax-exempt debt financing which is secured by a portion of the Real Property and is reimbursed through sales tax and transient occupancy tax revenues. H. The general benefits to be received by City from this Agreement and the implementing of the Project include,without limitation: 1. Implementing the General Plan and furthering it goals; 2. Implementing City's Circulation Element by providing improved access to the Project and adjacent areas by constructing the Freeway Interchange; 3. Causing Developer to accelerate and provide specific public infrastructure improvements and facilities in advance of City's opportunity to require Developer to provide same; 4. Providing for Developer to dedicate approximately 54.7 acres of the Real Property as a conservation easement; 5. Providing for Developer to contribute to City's open space acquisition fund an amount determined by City to be sufficient to acquire a fee interest or an open space/conservation easement on approximately 24 acres of additional off-site land; FANETD%DahfhO4\Dm1op=u Ageenww0abdio DA 0726044oc 2 3 x94, Attachment 6 6. Providing City with anticipated increased sales and transient occupancy tax revenues; 7. Providing City with an opportunity for a portion of the Real Property to be developed as a business park or such related use, in support of economic development; 8. Providing for the opportunity of preserving the historic "Sulkey Racing Stadium" structure, a grandstand structure that was constructed on the Real Property approximately 100 years ago and used by City residents for horse racing, and which is currently stored on the Real Property in a non-functional condition (the "Grandstand Structure"); 9. Providing for added commercial hotel development; and 10. Proving for affordable housing in furtherance of City's inclusionary housing goals. I. The parties acknowledge that it is the Dalidio Family's desire to make a voluntary, charitable contribution to City of fee interest in and to the Conservation Land, at such time as development of the Business Project is completed. J. Some of those expenditures and dedications of land by Developer are over and above those that City could require of Developer in the normal course of granting project approvals. Developer is willing to make such additional expenditures and/or grant such additional dedications in return for receiving the benefits conferred on Developer by this Agreement. K. City desires the timely, efficient, orderly, and proper development of the Project, and believes it is in the public interest to obtain the benefits conferred by the additional expenditures and additional dedications by Developer referred to above. City further believes itis in the public interest to provide for the vesting of Developer's rights to develop the Project in conformance with the Project Approvals-and the terms and conditions contained herein so that such vested rights shall not be disturbed by changes in laws; rules, or regulations, including measures passed by initiative,that occur after the Effective Date of this Agreement. L. The parties are entering into the Reimbursement Agreement concurrently with this Agreement. The Reimbursement Agreement is intended to provide for reimbursement of costs of construction, including related administration, design, and financing costs, of the Freeway Interchange. The Reimbursement Agreement is intended to survive the expiration of all terms of this Agreement. The Reimbursement Agreement shall provide for the sharing of up to 50% of the net new sales tax and transient occupancy tax revenues generated by the Retail Project, less certain exclusions and adjustments, as more particularly described in the Reimbursement Agreement, not to exceed the Developer's special tax obligations under the Reimbursement Agreement M. For the reasons recited herein, Developer and City have determined that the development of the Real Property in accordance with the Project Approvals is a development project for which this Agreement is appropriate. Further, this Agreement will: (i) eliminate F:', i=ZAhoaZMdOMrm nV==0Abmo na one 4 doc 3 �3 Attachment 6 uncertainty in planning and provide for the orderly development of the Real Property; (ii) insure progressive installation of necessary improvements,provide for public services appropriate to the development of the Real Property; (iii) help insure attainment of the maximum effective utilization of resources within City at the least economic cost to its citizens; and (iv) otherwise achieve the goals and purposes of the Development Agreement Statute. In exchange for these benefits to City, together with the public benefits created by the development of the Real Property,Developer desires to receive the assurance that it may proceed with development of the Real Property; (i) in accordance with the Applicable Rules of City; (ii)pursuant to the terms and conditions contained in this Agreement; and (iii) based on both existing and subsequent Project. Approvals. N. City and Developer have reached agreement and desire to express herein a development agreement that will facilitate development of the Project subject to the conditions set forth in this Agreement and set forth in the Project Approvals, as defined herein. O. In connection with the development of the Project, City approved an amendment to the General Plan on [INSERT DATE], by Resolution No. [INSERT NUMBER] (the "General Plan Amendment"). Among other things, the City Council found that this Agreement and the Project: (i) are consistent with its General Plan, as amended; (ii) are compatible with the uses authorized in, and the regulations prescribed for, the Real Property; (iii) are in conformity with public convenience, general welfare, and good land use practice; (iv) will not be detrimental to the health, safety, or general welfare; and (v) will not adversely affect the orderly development of property or the preservation of property values. P. The Environmental Impact Report ("EIR") was certified by the City Council on [INSERT DATE],by Resolution No. [INSERT NUMBER] (the "EIR Certification"). Pursuant to CEQA, a mitigation/monitoring program for the Project was approved by the City Council. With respect to all environmental impacts identified in the EIR as not being capable of mitigation to an insignificant level, City has determined that the benefits of the proposed Project outweigh these unmitigated environmental effects and, accordingly, City adopted a Statement of Overriding Considerations on [INSERT DATE]. Q. Pursuant to California Government Code Section 65859 and City's General Plan,City prezoned the Real Property as set forth in Exhibit "C" on [INSERT DATE], by Ordinance No. [INSERT NUMBER] (the "Prezoning"). The Prezoning shall become effective upon the date of completion of annexation of the Real Property to City ("Annexation"). Because Annexation is a necessary prerequisite to the development of the Project, it is the intent of the parties that if Annexation is not completed within the time specified herein, the Agreement and all rights and obligations hereunder will thereupon terminate. R. Consistent with City's General Plan, City approved that certain Development Plan (the "Development Plan") for a portion of the Project, including the Retail Project, on [INSERT DATE],by Resolution No. [INSERT NUMBER]. S. On [INSERT DATE],the Planning Commission of City, after giving notice pursuant to Government Code Sections 65867, 65090 and 65091, held a public hearing on Developer's application for this Agreement. F:WFDDV4W4Vm1opmm AgaaneaMdidio DA 072604.doc 4 Attachment 6 T. The City Council, after providing public notice as required by law, held a public hearing on the Conservation Easement on [INSERT DATE]. On [INSERT DATE], the City Council approved the Conservation Easement by Resolution No. [INSERT NUMBER]. U. The City Council, after providing public notice as required by law, held a public hearing on this Agreement on [INSERT DATE]. On [INSERT DATE], the City Council adopted Ordinance No. [INSERT NUMBER]approving this Agreement. V. The parties acknowledge that the Project represents a unique development in the City of San Luis Obispo by virtue of its composition, scale, public improvement components and open space protection component, and as such is unlikely to be reproduced in the foreseeable future in San Luis Obispo. The parties further acknowledge that City's interest in reaching project-specific agreements with Developer as to the specifications of the Project, including providing for a non-pedestrian oriented design and construction of the Freeway Interchange, is served by this Agreement. By providing incentives and disincentives in this Agreement and the Reimbursement Agreement, City intends that the Commercial Project will continue to be a "hybrid power shopping center," and as such will not have a material adverse impact on downtown San Luis Obispo retail activities from either an economic or social standpoint. NOW, THEREFORE, with reference to the above recitals and in consideration of the mutual promises, obligations and covenants herein contained, City and Developer agree as follows: AGREEMENT 1. Real Property Subiect to the Aare ement This Agreement applies to and governs the development of the Real Property. 2. Relationship of City and Developer. This Agreement is a contract that has been negotiated and voluntarily entered into by City and Developer. Developer is not an agent of City. City and Developer hereby renounce the existence of any form of joint venture or partnership between them, and agree that nothing contained in this Agreement or in any document executed in connection with this Agreement shall be construed as making City and Developer joint venturers or partners. 3. Effective Date and Term. 3.1. Effective Date. The parties anticipate that completion of Annexation (having the meaning in this Agreement that the phrase 'completion of annexation proceedings annexing the property to the city' has in Section 65865(b) of the Development Agreement Statute),triggering the Effective Date, shall occur prior to December 31, 2004 and shall use their best efforts to achieve Annexation by that date. In the event that Annexation has not occurred on or before December 31, 2005(subject to extension as set forth in Section 3.4,below), despite the parties best efforts to achieve Annexation, this Agreement shall be null and void and shall be terminated without any further obligations hereunder, unless the parties mutually agree to an extension of the time for Annexation. F:WE 0\Dalifa04\De WpmM AgeemmTalidio DA 072504.doc 5 Attachment 6 3.2. Term. The Term shall commence on the Effective Date and extend for the following periods, unless this Agreement is otherwise terminated or modified as set forth herein: (i) with respect to development of the Retail Project, the Term shall be five (5) years from the Effective Date; and (ii) with respect to the development of the Business Project and the Residential Project,the Term shall be fifteen(15)years from the Effective Date. 3.3. Tern of Project Approvals. The tern of any Subdivision Map and the other Project Approvals shall automatically be extended for the Term. Expiration of this Agreement shall not affect any rights of Developer arising from the Project Approvals, except to the extent that Subdivision Maps or other entitlements have a validity coterminous with this Agreement. 3.4. Effect of Challenge. If any litigation is filed, referendum commenced or any legal or political action taken challenging this Agreement, the General Plan Amendment, the EIR Certification, the Development Plan, the Prezoning, the Annexation or any other Project Approval (including but not limited to any environmental determinations related to any of the foregoing) or otherwise raising issues concerning the validity of such matters or the validity and binding nature of this Agreement, the Term shall be extended for the period of time such action is pending. Upon the conclusion of such action (by dismissal, final entry of judgment or otherwise), Developer and City shall indicate on an addendum to this Agreement the period of any such extension and may record a notice to that effect. Further, in the event of any such action, City shall, upon Developer's request and at Developer's discretion, cause the Annexation to be postponed until the later of the conclusion of such action providing for a resolution which allows the Project to proceed, or the date upon which Developer requests the Annexation process to resume. During any such postponement of Annexation, the dates for Annexation set forth in Section 3.1 shall toll and be extended for a like period of time. In the event of a delay in the letting of the contract for the construction of the Freeway Interchange, such that the contract is not let within one (1) year after Annexation, then the Term shall be extended for the period beginning one(1)year after Annexation and ending upon letting of such contract. 4. Development of the Real Property. 4.1. Right to Develop. Developer shall have the vested right to develop the Project on the Real Property in accordance with the Vested Components. No part of the Vested Components may be revised or changed during the Term without the consent of the owner of the portion of the Real Property to which the change applies (taking into account the terns of Sections 21 and 22 hereof, relating to assignment of rights under this Agreement). The Vested Components shall be effective against, and shall not be amended by, any subsequent ordinance or regulation, whether adopted or imposed by the City Council or by the initiative or referendum process. Notwithstanding anything to the contrary herein, in accordance with the Development Agreement Statute, this Agreement specifies, with respect to the Project, the duration of this Agreement, the permitted uses of the Real. Property, the density and intensity of use, the maximum height and size of the proposed buildings,and provisions for reservation or dedication of land for public uses. 4.2. Project Plan. The Project is more specifically described and defined in Exhibit "D", (the "Project Plan"), provided that the parties acknowledge that certain components of the Project Plan are subject to Discretionary Approvals. The parties acknowledge that the City Council approves in concept the designs and specifications contained in the Project Plan, F:WERD1DaliC ADmlomem AWC=Oalidio DA 072W,doc 6 �G Attachment 6 provided that certain items contained in and components of the Project Plan are subject to approval by advisory bodies of City. If any such advisory body of City denies approval of any component of the Project, Developer shall be entitled to appeal any advisory body action to the City Council Notwithstanding anything to the contrary set forth herein, in the event that any component of the Project Plan is subjected to a final rejection by City, Developer shall be entitled to terminate this Agreement; and thereupon the parties shall have no further obligations hereunder. 4.3. Permitted Uses. The permitted uses of the Real Property, the maximum density and intensity of use, the maximum height, bulk and size of proposed buildings, the provisions for reservation or dedication of land for public purposes, the location and maintenance of on-site and off-site improvements, the location of public utilities, and any other terms and conditions of development applicable to the Real Property, shall be those set forth in this Agreement, the Project Approvals, any Subsequent Approvals, and any amendments to this Agreement, the Project Approvals or any Subsequent Approvals, and the Applicable Rules. The permitted uses of the Real Property include those set forth in this Agreement, including the description of the Project herein. Developer shall be entitled to construct the Project to the maximum density, intensity, height and size set forth in the Project Plan, in this Agreement and as permitted under the Applicable Rules. 4.4. Subdivision. Developer shall have the right from time to time to subdivide or reconfigure the parcels comprising the Real Property, as may be necessary in order to develop the Project or to lease, mortgage or sell a portion of the Real Property in connection with its development, as long as the subdivision or reconfiguration is consistent with the terms of this Agreement,the Subdivision Map.Act and Applicable Rules. 4.5. Development of the Business Proiect and Residential Project The parties acknowledge that as of the Effective Date development planning for the Business Project and the Residential Project will be in their early stages. As such, substantial Subsequent Approvals are expected to be required with respect to the Business Project and the Residential Project. The terms and conditions of this Agreement shall apply to the development of the Business Project and the Residential Project,and Subsequent Approvals related thereto. 5. Applicable Rules,Regulations,and Official Policies. 5.1. Laws Applicable to the Proiect The Applicable Rules shall remain in full force and effect for the Term. For convenience, some of the Applicable Rules are listed in Exhibit"E." 5.2. Subsequently Enacted Rules and Regulations. During the Term, City may apply to the Real Property New Rules, provided that they are not in conflict with or more stringent than the Applicable Rules and do not: 5.2.1. Limit the permitted uses of the Real Property; 5.2.2. Reduce the maximum density or intensity of use, or reduce the maximum height,bulk or size of the proposed buildings; F.NEr=a1A04Tcn1oM=Ageemem\Datidio DA 0nWdoc 7 Attachment 6 5.2.3. Increase the provisions of the.Project Approvals requiring the reservation or dedication of land for public purposes; 5.2.4. Increase the on-site or off-site improvements required by the Project Approvals or change the location thereof, 5.2.5. Limit or control the availability of public utilities, services or facilities or any privileges or rights to public utilities, services, or facilities (for example, water rights,water connections or sewage capacity rights, sewer connections, etc.) for the Project; 5.2.6. Limit the rate, timing, phasing or sequencing of the approval, development or construction of all or any part of the Project in any manner, 5.2.7. Limit or control the location of buildings, structures,grading, or other improvements of the Project in a manner that is inconsistent with or more restrictive than the limitations included in the Project Approvals; 5.2.8. Apply to the Project any New Rules otherwise allowed by this Agreement that are not uniformly applied on a City-wide basis or that discriminate against Developer, 5.2.9. Substantially increase the cost of constructing or developing the Project or any portion thereof; 5.2.10. Result in Developer having to substantially delay construction of the Project; 5.2.11. Establish, enact, increase or impose against the Project any rules, regulations, policies or standards that were not in force and effect on the Effective Date (except as expressly permitted by this Agreement), or otherwise impose against the Project any condition,dedication or other exaction not specifically authorized by Applicable Rules; 5.2.12. Limit the processing or procuring of applications or approvals of Project Approvals; or 5.2.13. Affect any other terms or conditions of this Agreement without the approval of Developer. If there is any conflict between the New Rules and this Agreement, the Vested Components or the Applicable Rules;the latter shall control and prevail. If there is any conflict between the Project Approvals and this Agreement,the Vested Components or the Applicable Rules,the former shall control and prevail. 5.3. Moratorium Not Applicable. Notwithstanding anything to the contrary contained in this Agreement, in the event an ordinance, resolution, or other measure is enacted, whether by action of City, by initiative, referendum, or otherwise, that imposes a building moratorium that would otherwise affect the Project or all or any part of the Real Property or which would require a vote of the people as a condition to the grant of any approvals for the Project, City shall not apply such ordinance, resolution, or other measure to the Project, the Real F:WE=ahLO4TcWoM=A®eeme 021idio DA 072W4,dm 8 3 -�g Attachment 6 Property, this Agreement, or the Project Approvals. If, however, it is determined by a court of competent jurisdiction that a building moratorium or voter approval referenced above is effective as to any portion of the Project, this Agreement shall remain unchanged and in full force and effect as to the portion of the. Project not affected by such moratorium or voter approval; provided, however, that Developer may elect to terminate this Agreement within ninety (90) days after Developer receives written notice of such court determination. The parties acknowledge and agree that this Section 5.3 shall in no manner be interpreted to affect the validity of any challenge to the legislative adoption of this Agreement or approval of the Project. 5.4. Public Art. City acknowledges and agrees that Developer's installation of works of art substantially consistent with the designs and locations set forth in Exhibit "F," subject to approval of such works in accordance with City's public art approval process, shall be in full performance of any applicable City public art requirement or fees, and City shall impose no additional public art requirements, approval requirements or fees with respect to the Project. 5.5. Drainage. City acknowledges and agrees that Developer shall be entitled to construct the Project substantially in accordance with the general elevations set forth in the plans attached hereto as Exhibit "G" and that said plans and specifications comply with adopted City guidelines and are consistent with the EIR. 5.6. City Discretion. This Section 5 shall not be construed to limit the authority or obligation of City under law to hold necessary public hearings, to limit discretion of City or any of its officers or officials with regard to Applicable Rules that require the exercise of discretion by City or any of its officers or officials, provided that subsequent discretionary actions shall not conflict with the terms and conditions of this Agreement or any public financing as approved pursuant to this Agreement, and City shall process such subsequent discretionary actions expeditiously. 6. Timing of Development. 6.1. Later-Adopted Initiative. It is the parties'specific intent that this Agreement shall prevail over any later-adopted initiative that might otherwise have the effect of restricting or limiting the timing or sequencing of development of the Project. Therefore, subject to the terms of this Agreement, the Project Approvals, any Subsequent Approvals and the Applicable Rules,Developer shall have the right,but.not the obligation,to develop the Real Property in such order and at such rate and times as Developer deems appropriate within the exercise of its subjective business judgment,and such order,rate, and time selected by Developer shall in no way affect or impair Developer's vested rights under this Agreement. The parties acknowledge that the California Supreme Court held in Pardee Construction Co. v. City of Camarillo, 37 Cal. 3d 465 (1984), that the failure of the parties therein to provide for the timing of development resulted in a later-adopted initiative restricting the timing of the development. It is the intent of City and Developer to avoid such a result by hereby acknowledging and providing that Developer has the right to develop the Project in such order and at such rate and times as Developer deems appropriate within the exercise of its sole and subjective business judgment, except as specifically stated otherwise in this Agreement. F.WEn=i1faNOCvC1W=W AF=MN)ah&o DA 072W4.dw 9 Attachment 6 7. Processing. 7.1. Further Approvals and Permits. Subsequent to the Effective Date, development of the Project may require Subsequent Approvals. Each Subsequent Approval obtained by Developer shall automatically vest and become a Vested Component upon the effective date of such approval. On satisfactory completion by Developer of all required preliminary actions and payment of all required processing fees, City shall, in accordance with this Agreement and the Applicable Rules, expeditiously process all requests or applications for any Subsequent Approvals, and promptly initiate, commence, and complete all steps and actions required to grant such Subsequent Approvals, that are necessary or desirable for the Project; including,but not limited to,the following: 7.1.1. The processing of Discretionary Approvals; and 7.1.2. The processing of applications for and issuing of all Ministerial Approvals. 7.2. No Abridgement of Density or Height. Notwithstanding its ability to issue Subsequent Approvals in relation to site, architectural and design review, City shall not refuse such approvals, or require changes in the Project, that would have the effect of restricting or preventing Developer from constructing buildings at the maximum density, height and size allowed in the Project Approvals. 7.3. Conditions of Approval. City may impose conditions of approval on applications of Developer to the extent such conditions of approval are consistent with this Agreement and Applicable Rules. If City denies any application for a Project Approval, City must specify in writing the basis for its denial in order to assist Developer in resubmitting.and ultimately securing City's approval of the requested Project Approval. Any such denial shall be consistent with this Agreement and Applicable Rules. 7.4. Processing_During Third Party Litigation. City shall not delay or stop the Project, processing or construction of the Project, or issuance of Discretionary Approvals or Ministerial.Approvals because of the filing of any litigation against City or Developer relating to this Agreement, the Project, the Project Approvals or Subsequent Approvals unless a court order prevents the activity or except as expressly provided herein. City shall not stipulate to the issuance of any such order. 7.5. Significant Actions By Third Parties Necessary To Implement The Existing Approvals. The parties acknowledge that development of the Project requires actions by and agreements with other private, public and quasi-public entities other than City to issue permits and approvals. Developer shall be responsible for the acquisition of permits, approvals, easements(subject to the provisions of section 66462.5 of the Subdivision Map Act)and services required to serve the Project from all non-City providers of utilities at Developer's cost. 7:5.1. At Developer's sole discretion and in accordance with Developer's construction schedule,Developer may apply for such other permits and approvals as may be required by private and public and quasi-public entities other than City (including, without limitation, districts and special districts providing flood control, sewer and fire protection) in connection with the development of, or the provision of services to, the Project. F:VNr0\Dahfa04MtvdopmeN Ageemcof0abdio DA 072604.dw 10 3, ( (DO Attachment 6 City shall cooperate with Developer to obtain such permits and approvals and shall, from time to time at the request of Developer, use its best efforts to enter into binding agreements with any such other entity as may be necessary to ensure the timely availability of such permits and approvals. In the event that any such permit or approval as set forth above is not obtained within three(3) months from the date the application is deemed complete by the appropriate entity, and such circumstance materially deprives Developer of the ability to proceed with development of the Real Property or any portion thereof, or materially deprives City of a bargained-for public benefit of this Agreement,'then; in such case, and at the election of Developer, Developer and City shall meet and confer with the objective of attempting to agree on alternatives and/or amendment to this Agreement to allow the development of the Real Property to proceed with each party substantially realizing its bargained-for benefit therefrom. 8. Fees,Assessments, and Taxes. 8.1. Proiect Fees. Except as expressly provided herein, fees imposed by City in connection with the Project and Project Approvals (including but not limited to planning, engineering, building permit, fire plan check and development impact fees) shall be in accordance with Applicable Rules and subject to the terns and conditions of this Agreement. 8.2. Water Fees; Water Rights. Developer shall be responsible for payment of water impact fees for the Retail Project in effect as of January 1,2002 (which the parties agree were the fees in place as of the date of Developer's application to City for development of the Project).Water impact fees for the Business Project and the Residential Project shall be in accordance with the Applicable Rules. Developer may request a reduction of water impact fees in accordance with the Applicable Rules. The parties acknowledge that Developer neither relinquishes nor conveys to City any rights with respect to groundwater or other water rights with respect to the Real Property,and Developer expressly reserves any and all water rights it has in connection with the Real Property. Developer shall be entitled to irrigate the Conservation Land utilizing groundwater,and shall not be required by City to irrigate the Conservation Land with reclaimed water in lieu of groundwater.For the Business Land and the Retail Land,the parties acknowledge that pursuant to the Applicable Rules, Developer may use well water for landscaping and irrigation purposes provided that appropriate agreements are in place in the event that such well water crosses property lines. 8.3. Transportation Impact Fees. All transportation impact fees with respect to the Retail Project.shall be in the amounts determined by such fees in effect as of January 1, 2002 (which the parties agree were the fees in place as of the date of Developer's application to City for development of the Project). Transportation impact fees for the Business Project and the Residential Project shall be in accordance with the Applicable Rules. Except as expressly provided herein,no additional transportation impact fees,including but not limited to traffic, noise or pollution impact fees shall be imposed in connection with the Project. 8.4. E1R Impact Mitigation Fees..Developer shall be responsible for payment of all impact mitigation fees required by the EIR. 8.5. Affordable Housing' City acknowledges and agrees that construction of the Residential Project, without payment of any special fees or assessments, satisfies all requirements applicable to the Project with respect to inclusionary housing and similar RVE11DlNIM040mlopmem Apw=Malidio DA 072604.doc 11 a � . Attachment 6 residential housing requirements and, in particular, all affordable housing requirements, ordinances and regulations. 8.5.1. Notwithstanding anything to the contrary set forth herein,in the event Developer is precluded for any reason from causing the Residential Project to be constructed within five (5)years after the Effective Date, Developer shall pay the in-lieu affordable housing fee in accordance with the Applicable Rules. 8.5.2. Notwithstanding anything to the contrary set forth herein, in the event Developer is precluded for any reason from causing the Residential Project to be constructed: (a)the Conservation Land shall be increased by approximately 3.3 acres to include the Residential Land,which shall be subject to the Conservation Easement described in Section 10.1.1; (b) the Off-Site Open Space shall be reduced by 3.3 acres, and City shall immediately refund to Developer the sum of Twenty-Six Thousand Four Hundred Dollars($26,400.00) representing the sum paid by Developer for such 3:3 acres of Off-Site Open Space. 8.6. New Fees. Except as expressly provided herein, any new or increased fees, dedications, and exactions relating to or imposed upon new development that are adopted by City after the Effective Date, as well as any new or increased fees (including but not limited to application, development and impact fees), dedications, and exactions that result from any modification of any Applicable Rules after the Effective Date, shall not be applicable to or imposed upon the Project. 8.7. New Taxes. Except for taxes solely imposed on new development, any subsequently enacted City-wide taxes shall apply to the Project provided that(1) such taxes have general applicability on a City-wide basis and do not discriminate against Developer; (2) the application of such taxes to the Real Property is prospective; and(3) the application of such taxes would not prevent development in accordance with this Agreement. 8.8. Right_to Contest. Nothing contained in this Agreement shall prevent Developer from paying any such fee, tax, or assessment under protest, or otherwise asserting its legal rights to protest or contest a given fee,tax, or assessment assessed against the Project or the Real Property.. 9. Infrastructure Capacity. City hereby acknowledges that, upon implementation of the Project (including the Freeway Interchange) and its environmental mitigation measures, it has sufficient capacity in its existing infrastructure, services, and utility systems, including, without limitation, traffic circulation, flood control, sewer collection, sewer treatment, sanitation service and, except for services not provided by and outside City's control, water supply, treatment, distribution, and service, to accommodate the Project as provided in this Agreement. To the extent that the Project completes its necessary improvements, the will City render these services or provides such utilities, and shall serve the Project and shall not restrict hookups or service for the Project, except for reasons beyond City's control. Upon request from Developer, City shall provide a letter, addressed to a recipient specified by Developer, acknowledging the sufficiency of City's infrastructure capacity to service the Project based upon the assumption that the Project completes its necessary improvements and environmental mitigation measures to the satisfaction of the City. 10. Dedication of Land for Public Purposes. F:WhllDlD2M04MenWpmem ApeemcmMalidio DA 072W4.doc 12 Attachment 6 10.1. Grant of Conservation Easement. 10.1.1. Promptly after both recordation of a Subdivision Map for the Project and issuance of building permits necessary to construct the Retail Project,Dalidio Family shall offer to dedicate to City, and City shall promptly accept, a conservation easement preserving the Conservation Land, (the "Conservation Easement") in substantially the form set forth in Exhibit"H." Developer shall be entitled to make use of the Conservation Land that is consistent with the easement and the Applicable Rules, including but not limited to: agriculture; a well; groundwater treatment facilities; water lines; and recreational and educational uses as contemplated under the Applicable Rules, including bicycle and pedestrian paths, roadways and land use studies areas. 10.1.2. The Conservation Easement described in Section 10.1.1 shall not prohibit placement by Developer, at Developer's sole cost,of the Grandstand Structure on the Conservation Land. However; Developer must secure all necessary permits and entitlements to relocate the Grandstand Structure from its current location to the Conservation Land, as may be requested by Developer under the Applicable Rules, e.g., authorization from the Cultural Heritage Commission and or the Architectural Review Committee. City shall not be responsible for the costs of moving,maintenance or repair of the Grandstand Structure. 10.2. Off-Site Open Space Preservation. Promptly after recordation of a Subdivision Map for the Project and issuance of building permits necessary to construct the Retail Project, Developer shall fund the perpetual preservation as open space twenty-four (24) acres of land(the "Off-Site Open Space")by acquisition of a fee, conservation easement or open space easement on and over land in or around the City of San Luis Obispo. Developer's obligation under this Section 10.3 shall be limited to the payment to City of One Hundred and Ninety-Two Thousand Dollars ($192,000.00), and any excess cost arising from the Off-Site Open Space shall be paid by City. City shall be responsible for all obligations arising from acquisition and ownership of the Off-Site Open Space. City shall apply the funds received by it pursuant to this Section 10.3 to acquire, as promptly as reasonably practical, the Off-Site Open Space land. The parties acknowledge that the Off-Site Open Space will be comprised of prime agricultural land located within City's sphere of influence. Irrespective of City's acquisition of land under this Section, Developer may pay to City the sum of One Hundred and Ninety-Two Thousand Dollars($192,000.00)in full performance of its obligations under this Section 10.3. 10.3. Roadways. In accordance with the Subdivision Map Act, a Subdivision Map for the Project prepared and submitted by Developer shall irrevocably offer to dedicate to City that portion of the Real Property as is necessary for roadways and walkways in relation to the Project for no additional consideration. Upon recordation of the Project's Subdivision Map said offer of dedication shall be accepted by the City in accordance with the City's standard roadway acceptance policies. This shall not apply to land necessary for construction of the Freeway Interchange, the property transfer of which land shall be governed.by the terms of Section 11. 11. Freeway Interchange. The Freeway Interchange improvements shall be constructed and funded as set forth in this Agreement. 11.1. Fundin¢of Freeway Interchanize. F\NETD1D96040mloM=Agc=m Malidio DA 072604.doc 13 Attachment 6 11.1.1. Funding of the Freeway Interchange will be accomplished through the issuance of public financing obligations by the City in an amount such as to be able to fund the total cost of the Freeway Interchange which is now estimated to be approximately $22 million. 11.1.2. Debt service on this public financing will be supported among other things by a special tax on the Project and other benefiting properties,as provided in the Reimbursement Agreement. Pursuant to the Reimbursement Agreement, Developer will receive a contingent reimbursement of special taxes on properties as a function of certain designated revenues City derives from the Retail Project. The Reimbursement Agreement shall survive the term of this Agreement,and Developers obligations hereunder with respect to the Freeway Interchange are expressly conditioned upon Developer's right to receive contingent reimbursement in accordance with the Reimbursement.Agreement. 11.1.3. Notwithstanding anything to the contrary herein, in the event that,prior to the date the Freeway Interchange financing becomes an obligation of Developer,the total cost of the Freeway Interchange is increased to an amount whereby financing of such amount, and recovery of such amount from tax revenues generated by the Project,is not reasonably feasible, then the parties shall meet and confer in an effort to agree upon terms and conditions for the construction and financing of freeway interchange improvements which are adequate for the Project and which are reasonably feasible as to cost. In'the event that the parties are unable to reach such an agreement, either party may terminate this Agreement by giving thirty(30)days' prior written notice to the other party,provided that Developer shall not be obligated to pay any amounts associated with public financing of the Freeway Interchange. The parties acknowledge and agree that financial calculations exchanged by the parties in connection with the preparation of this Agreement shall constitute competent evidence of the reasonableness of the cost of the Freeway Interchange, and that changed circumstances other than the total cost of the Freeway Interchange shall not entitle either party to terminate this Agreement pursuant to this Section 11.1.3. In no event shall a total development cost of$22 million for the Freeway Interchange be deemed reasonably infeasible. 11.2. Acquisition of Land. Developer shall use its best efforts to negotiate the acquisition of land determined necessary or desirable for the Freeway Interchange and that is not the Real Property or City-owned real property. Should Developer fail to acquire said property, the City shall use all means at its disposal for property acquisition. The cost of acquiring all such land shall be a Freeway Interchange Cost, and such acquisition shall be consummated as soon as practicable after the funding of the Freeway Interchange financing. The purchase price of such land shall be subject to the prior written consent of City, which shall not be unreasonably withheld or delayed. 11.2.1. Upon funding of the Freeway Interchange financing, Dalidio Family shall convey that portion of the Real Property described in Exhibit"I" for construction of the Freeway Interchange,in exchange for the consideration set forth below. As a Freeway Interchange Cost, Dalidio Family shall be paid the fair market value,calculated as provided in this section,of the portion of the Real Property required for the purpose constructing the Freeway Interchange. Such payment shall be made within ten(10)days after the date of recordation of deed by Dalidio Family of such land to City or the State of California..The fair market value of such portion of the Real Property means the sale value at the time of the F:WFM%Da i&U\Dc%T1W mt AUccuinMAdio DA 072W4.dw 14 3- IU4 - Attachment 6 appraisal for comparable real property in San Luis Obispo County,comparable in area and location to the Real Property,assuming that the land will not be used for road purposes and that there are no special restrictions on its use,and taking into consideration other comparable factors,as determined by an independent real estate appraiser appointed by City. Furthermore, the fair market value determination shall be based upon the valuation of the property used for agricultural purposes, added to the valuation of the property used for retail commercial purposes, and then divided by two (2). In this way,the appraised value reflects the fact that approximately one half the real property will remain as open space. The appraiser shall be selected by City and shall have competed for inclusion on the City's approved list of consulting appraisers and selected for such inclusion. The fees of the appraiser shall be advanced by Developer and shall be a Freeway Interchange Cost. 11.2.2. City shall provide and make available that portion of City- owned real property necessary for construction of the Freeway Interchange,in exchange for the consideration set forth below. As a Freeway Interchange Cost,City shall be paid the fair market value of City-owned real property required for the purpose constructing the Freeway Interchange. The fair market value of such real property means the sale value at the time of the appraisal for comparable real property in San Luis Obispo County, comparable in area and location to such.real property,assuming that the land will not be used for road purposes and that there are no special restrictions on its use,and taking into consideration other comparable factors,as determined by an independent real estate appraiser appointed by City. The appraiser shall have competed for inclusion on the City's approved list of consulting appraisers and selected for such inclusion.The fees of the appraiser shall be provided by Developer and then capitalized into the cost of the Freeway Interchange. 11.3. Freeway Desien and Development Applications. Developer and City shall diligently pursue all aspects of the application for construction of the Freeway Interchange, all environmental processing and supporting technical studies. Developer shall diligently pursue the planning, initial study, and other efforts necessary to specify in final form the cost and character of the Freeway Interchange. City shall provide timely review and response to applications made in respect of the Freeway Interchange. By entering into this Agreement, Developer specifically acknowledges its obligation and agrees to vote for and participate in the District to fund a portion of the cost of the Freeway Interchange contemplated under this Agreement. 11.4. Scope of Freeway Interchange Work. The scope of work for the Freeway Interchange shall be those improvements between and including the intersections described in Exhibit "B" as "Intersection D" (on the west side of the Freeway Interchange) and Intersection A" (on the ease side of the Freeway Interchange),and all work conducted on State Highway 101. 11.5. Pre-Construction Costs. Until the funding of the Freeway Interchange financing, Developer shall be responsible for advancing all costs associated with obtaining Caltrans approval of all documents necessary to allow construction of the Freeway Interchange to commence. All such costs advanced by Developer, as well as costs of design and approval of the Freeway Interchange shall be a Freeway Interchange Cost. Freeway Interchange Costs shall also include 100%of the billings of Mark Thomas Company to Developer in connection with the Freeway Interchange, and that portion of the billings of Cannon Associates and Andre Moms & F:WEf\ Tzbfa.%V vdopm=AgemenMaMo DA OMW4.dw 15 Attachment 6 Buttery reasonably attributable to the design, development and construction of the Freeway Interchange. 11.6. Time for Funding and Construction of Freeway Interchange. The parties acknowledge and agree that completion of the Freeway Interchange is integral to the Project. As no building permits will be issued by the City for any portion of the Developer's projects until such time as the Freeway Interchange construction contract has been awarded, each party hereto will use its best efforts to cause, in cooperation with Caltrans and other public agencies and private parties, the Freeway Interchange construction contract to be awarded and completed as soon as practical. Once the contract for Freeway Interchange Construction has been awarded, either City or Caltrans shall manage the project and Developer will be relieved of any further involvement. Upon completion of the Freeway Interchange all, if any, remaining proceeds of the Freeway Interchange financing not otherwise expended shall be applied to the outstanding principal and interest of any such financing outstanding, on a pro-rata basis. In the event that City manages the Freeway Interchange construction project, City's reasonable construction management costs with respect to the Freeway Interchange shall be Freeway Interchange Costs. 11.6.1. Subject to the terms and conditions of this Agreement, the Applicable Rules and mitigations required by the EIR, including requirements for Discretionary Approvals: (i) City shall issue grading permits for the Project irrespective of the status of the Freeway Interchange; (ii) City shall.issue building permits for the Project only upon successful award of contract for construction of the Freeway Interchange; and (iii) Developer may commence use of the Project(and City shall issue all necessary Certificates of Occupancy)prior to completion of construction of the Freeway Interchange. 11.7. Approval by State A eg ncies. The parties acknowledge that the design and completion of the Freeway Interchange is subject to California laws, rules and regulations, and the parties shall use their best efforts to promptly obtain approvals from State agencies, including Caltrans,for the Freeway Interchange. 11.8. Naming of City Street. The extension of Dalidio Drive from Madonna Road to the Freeway Interchange, at which point such street connects with Prado Road, shall be named and for all purposes identified as "Dalidio Road." 11.9. Reimbursement of Freeway Interchange Costs. All Freeway Interchange Costs advanced or incurred by Developer or City,respectively, shall be reimbursed to them from the Freeway Interchange financing proceeds. Such reimbursements shall be made promptly after the funding of the Freeway Interchange financing, and after Developer and City, respectively,produce reasonable documentation of such costs and their relation to the Freeway Interchange. 12. Fees. Conditions and Dedications. Developer or any other person with respect to the Project shall have and be subject to only those obligations, conditions, and exactions expressly provided in this Agreement or in force and applicable to the Project as of the Effective Date of this Agreement. 13. Public Improvements; Dedication of Public Roads. The on-site and off-site improvements, public roads and other infrastructure related to the Project shall be made and constructed in accordance with the terms of this Agreement, including the description of the F:WETD1Dali(a04 mloM AUcc=\DWidio DA072604.doc 16 3—(C) W Attachment 6 Project herein,which terns City acknowledges and agrees meet all applicable statutory and other legal requirements. 14. Amendment or Cancellation. 14.1. Conflict.of City and State or Federal Laws. In the event that state or federal laws or regulations enacted after the Effective Date of this Agreement prevent or preclude compliance with one or more provisions of this Agreement or require changes in plans, maps or permits approved by City, the parties shall modify or suspend this Agreement, as required by Section 65869.5 of the Government Code, to the extent necessary to comply with such state or federal laws or regulations. In such event, either party may provide the other party with written notice of such state or federal law or regulation, a copy of such law or regulation and a statement concerning the conflict with the provisions of this Agreement. The parties shall, within thirty (30) days after such notice is provided, meet and confer in good faith in a reasonable attempt to modify this Agreement to comply with such state or federal law or regulation. 14.1.1. Council Hearings. After the parties have met and conferred pursuant to Section 14.1 hereof,regardless of whether the parties have reached an agreement of the effect of the change upon this Agreement of the state or federal law or regulation,the matter shall be scheduled for hearing before the City Council. Written notice of such hearing shall be given pursuant to Government Code Section 65867 or any other then-applicable statute. The City Council, at such hearing, shall determine the extent of the modification or suspension necessitated by the change in the state or federal law or regulation. Developer, at the hearing, shall have the right to offer oral and written testimony. 14.1.2. Cooperation in Securing Permits. City shall cooperate with Developer in the securing of any permits which may be required as a result of modifications or suspensions made pursuant to Section 14.1.1 hereof. 14.2. Amendment. This Agreement may be amended'in writing from time to time by mutual consent of the parties to this Agreement and in accordance with the procedures of State law. Modifications that are minor in nature and do not require legislative action may be made by Developer and City's Administrative Officer. Substantive modifications shall be approved by City under the appropriate approval process. Any amendment to this Agreement which does not relate to the Term, permitted uses, provisions for reservation and dedication of land, or conditions, terms, restrictions and requirements relating to subsequent discretionary actions, monetary contributions by Developer or any conditions or covenants relating to the use of the Real Property, shall not require notice or public hearing pursuant to Government Code Sections 65867, 65867.5 and 65868. Any amendment of the Project Approvals by either City's Administrative Officer or City, whichever is applicable, pursuant to Section 14.3 of this Agreement, shall not require an amendment to this Agreement. For purposes of this Agreement, the resubdivision of the Real Property, or the filing of an amended subdivision map, that creates new legal lots(including the creation of new lots within any designated remainder parcel) or that merges lots, shall not require an amendment to this Agreement. Subsequent Approvals that are consistent with City's General Plan shall also not require an amendment to this Agreement. Such Subsequent Approvals shall be deemed incorporated into this Agreement,and shall bean integral part hereof. F:MM\DalirA4\DmIoM=AF=nanlDddio DA 072604.dw 17 3 �ID '1 Attachment 6 14.3. Amendment of Proiect Approvals. Upon the written request of Developer for a minor amendment or modification to the Project Approvals including, but not limited to, (i) the location of buildings, streets and roadways and other physical facilities, or(ii) the configuration of the parcels, lots or development areas, Community Development Director shall determine whether the requested amendment or modification is consistent with this Agreement and the Applicable Rules. For purposes of this Agreement, the determination of whether such amendment or modification is minor shall be made by reference to whether the amendment or modification is minor in the context of the overall Project. If City's Community Development Director finds that the proposed amendment is both minor and consistent with this Agreement and the Applicable Rules,City's Community Development Director may approve the proposed amendment without notice and public hearing. If such findings are not made, the request shall be processed in accordance with the Applicable Rules. For purposes of this Agreement and notwithstanding any City ordinance or resolution to the contrary, lot line adjustments shall be deemed minor amendments or modifications. 14.4. Cancellation by Mutual Consent. Except as otherwise permitted in this Agreement, this Agreement may be cancelled in whole or in part only by the mutual consent of the parties or their successors-in-interest, in accordance with the same procedure used when entering into this Agreement. 15. Annual Review. 15.1. Review Date. The Review Date shall be one year following the Effective Date and the annual anniversary of said date each year thereafter. 15.2. Annual Review Process. City's designee shall initiate the annual review by giving to Developer no later than sixty (60) days following the Review Date written notice that City intends to undertake such review for the annual period ending with the Review Date. Developer shall provide evidence of good faith compliance with the terms and conditions of this Agreement to City's designee within thirty (30) days following receipt of City's notice. City's designee shall review the evidence submitted by Developer and shall, within thirty (30) days following receipt of Developer's evidence,make a recommendation to the City Council either: (i) that the City Council finds that Developer has demonstrated good faith compliance with the terms and conditions of this Agreement; or(ii) that the City Council finds that Developer has not demonstrated good faith compliance with the terms and conditions of this Agreement, setting forth with specificity the basis on which City's designee makes his/her recommendation of a finding of non-compliance. Developer shall provide additional evidence as and when reasonably determined necessary by City's designee. 15.3. Hearins. The recommendation of City's designee shall be considered by the City Council at a regularly scheduled meeting following the CounciI's receipt of the recommendation. If the recommendation is that the City Council find that Developer has demonstrated good faith compliance with the terms and conditions of this Agreement, the matter shall be placed on the "consent calendar." If the matter is either removed from the consent calendar or the recommendation is that the City Council find that Developer has failed to demonstrate good faith compliance with the terms and conditions of this Agreement, the matter shall be heard by the City Council. F:NEM\DaUfa04TcMgm m AS==\DaH&DA 0726WAw 18 Attachment 6 15.4. Determination. If the City Council finds and determines that Developer has complied in good faith with the terms and conditions of this Agreement during the period under review, the review for that period shall be concluded. If the City Council finds and determines, on the basis of substantial evidence, that Developer has not complied in good faith with the terms and conditions of this Agreement during the period under review, and Developer has been notified and given an opportunity to cure in accordance with the provisions of Section 16.2,below,the Council may modify or terminate this Agreement in accordance with State law. 15.5. Failure to Hold Review. In the event that City does not initiate an annual review or that the City Council does not make its determinaton within six (6) months of the Review Date for a given year, then it shall be deemed conclusive that Developer has complied in good faith with the terms and conditions of this Agreement during the period under review. 16. Default. 16.1. Other Remedies Available. In the event either party is in default of or breaches the terms or conditions of this Agreement, the nondefaulting party may pursue all other remedies at law or in equity that are not otherwise provided for in this Agreement, expressly including the remedy of specific performance of this Agreement. 16.2. Notice and Cure. On the occurrence of an event of default of the terms or conditions of this Agreement by either party, the nondefaulting party shall serve written notice of such default on the defaulting party. If the default is not cured by the defaulting party within thirty (30) days after service of such notice of default, the nondefaulting party may then commence any legal or equitable action to enforce its rights under this Agreement; provided, however, that if the default cannot be cured within the thirty (30) day period, the nondefaulting party shall refrain from any such legal or equitable action so long as the defaulting party begins to cure such default within the thirty (30) day period and diligently pursues such cure to completion. Failure to give notice shall not constitute a waiver of any default. 16.3. Judicial Reference. Pursuant to California Code of Civil Procedure Sections 638 et sea., all legal actions shall be heard by a referee who shall be a retired judge from either the San Luis Obispo County Superior Court, the California Court of Appeal, the United States District Court, or the United States Court of Appeals, provided that the selected referee shall have experience in resolving land use and real property disputes. Developer and City shall agree on a single referee who shall then try all issues, whether of fact or law, and report a finding and judgment thereon and issue all legal and equitable relief appropriate under the circumstances of the controversy before such referee. If Developer and City are unable to agree on a referee within ten (10) days of a written request to do so by either party to this Agreement, either party may seek to have one appointed pursuant to Code of Civil Procedure Section 640. The cost of such proceeding shall initially be borne equally by the parties. Any referee selected pursuant to this Paragraph shall be considered a temporary judge appointed pursuant to Article 6, Section 21 of the California Constitution. 16.4. Estoppel Certificate. Either party may, at any time, and from time to time, request written notice from the other party requesting such party to certify in writing that, to the knowledge of the certifying party, (i) this Agreement is in full force and effect and a binding obligation of the parties, (ii) this Agreement has not been amended or modified either orally or in writing, or if so amended, identifying the amendments, and (iii) the requesting party F.V4EM0a1ifz00\Dm1opmau Agccum Dalidio DA 072W4.doe 19 r Attachment 6 is not in default in the performance of its obligations under this Agreement, or if in default, to describe therein the nature and amount of any such defaults. A party receiving a written request under this Section shall execute and return such certificate within thirty (30) days following the receipt thereof, or such longer period as may reasonably be agreed to by the parties. City's Administrative Officer of City shall be authorized to execute any certificate requested on behalf of City. The failure to deliver such certificate within such time shall be conclusive evidence on the party which fails to deliver such statement that this Agreement is in full force and effect without modification and that there are no uncured defaults in the performance of the requesting party.Failure to execute such an estoppel certificate shall not be deemed a default. 16.5. Freeway Interchange Plans. In the event of Developer's material breach hereunder with respect to the construction of the Freeway Interchange, Developer shall, upon City's written request, deliver to City all plans, specifications, engineering work product and similar written materials with respect to the Freeway Interchange in Developer's possession or control,and Developer shall convey to City all Developer's right,title and interest thereto. 17. Mortgagee Protection; Certain Riuhts of Cure. 17.1. Mortgagee Protection. This Agreement shall be superior and senior to any Mortgage.Notwithstanding the foregoing, no breach hereof shall defeat,render invalid, diminish or impair the lien of any Mortgage made in good faith and for value, but all of the terms and conditions contained in this Agreement shall be binding upon and effective against any Mortgagee. 17.2. Mortgagee Not Obligated. Notwithstanding the provisions of Section 17.1, above, no Mortgagee shall have any obligation or duty under this Agreement to construct or complete the construction of improvements, or to guarantee such construction or completion of improvements. 17.3. Notice of Default to Mortgagee. If City receives notice from a Mortgagee requesting a copy of any notice of default given Developer hereunder and specifying the address for service thereof, then City shall deliver to such Mortgagee, concurrently with service thereon to Developer, any notice given to Developer with respect to any claim by City that Developer has committed an event of default. Each Mortgagee shall have the right during the same period available to Developer to cure or remedy,or to commence to cure or remedy, the event of claimed default set forth in City's notice. 18. Hold Harmless; Developer's Activities. 18.1. Developer hereby agrees to,and shall defend,indemnify, save and hold City and its elected and appointed boards, commissions, officers, agents,and employees harmless from any and all claims,costs, and liability for any damages,personal injury or death, which may arise, directly or indirectly, from Developer's or Developer's contractors, subcontractors, agents,or employees' operations under this Agreement, whether such operations be by Developer or by any of Developer's contractors or subcontractors or by any one or more persons directly or indirectly employed by or acting as agent for Developer of any of Developer's contractors or subcontractors.Nothing contained in the foregoing indemnity provision shall be construed to require indemnification for claims, demands, damages, costs, expenses or judgments resulting from the sole negligence or willful misconduct of City. F:1NEI1D\DWiW41Dm[opmem Ageem=Ma6aio na oncoa.aoe 20 3 -f10 Attachment 6 18.2. Developer hereby agrees to, and shall defend,indemnify and hold harmless City and its agents,officers, and employees from any claim, action,or proceeding against the City or its agents,officers,or employees to attack,set aside,void,or annul an approval of the City concerning City's issuance of any approval,permit,certificate, or acceptance relating to the Project, including entering into this Development Agreement or the Reimbursement Agreement.Notwithstanding the foregoing: (a) City shall promptly notify Developer of any claim,action,or proceeding,tender the defense to Developer,and cooperate fully in the defense; (b)if the City fails to promptly notify Developer of any claim,action,or proceeding,or if City fails to cooperate fully in the defense,then,(in addition to any claims of Developer for City's breach) Developer shall not thereafter be responsible to defend,indemnify, or hold the City harmless; and(c)upon the tender to Developer by City of the defense of a claim, action or proceeding, Developer shall at its sole cost and expense defend such claim,action or proceeding,and provided that Developer does so,Developer shall not be obligated under this Section 18.2 to indemnify,defend or hold harmless City with respect to City's own expenses, time and attorneys' fees,which shall be borne solely by City.Nothing contained in this Section 18.2 prohibits City from participating in the defense of any claim, action or proceeding,provided that City bears its own attorneys' fees and costs,and City defends the action in good faith. 19. Severability. The unenforceability, invalidity, or illegality of any provision, covenant, condition, or term of this Agreement shall not render the other provisions unenforceable, invalid, or illegal, except that if it is determined in a final judgment by a court of competent jurisdiction that Developer's rights are not vested in the manner and to the extent agreed to in this Agreement, then the Parties shall meet and confer in a good faith attempt to agree on a modification to this Agreement that shall fully achieve the purposes hereof. If such a modification cannot be agreed on, then Developer or City may terminate this Agreement on 90- days'written notice to the other Party. 20. Attorneys' Fees.and Costs. If City or Developer initiates any action at law or in equity to enforce or interpret the terms and conditions of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and costs in addition to any other relief to which it may otherwise be entitled. In addition to the above award of allomeys' fees to the prevailing party,the prevailing party in any lawsuit shall be entitled to its attorneys'fees incurred in any post judgment proceedings to collect or enforce the judgment. This provision is separate and several and shall survive the merger of this Agreement into any judgment on this Agreement. If any person or entity not a party to this Agreement initiates an action at law or in equity to challenge the validity of any provision of this Agreement or the Project Approvals, the parties shall cooperate in defending such action at their own cost and expense. City shall not reject any financial settlement acceptable to Developer, provided that Developer pays any and all consideration which is part of said settlement; if City does reject any financial settlement acceptable to Developer,City shall continue to defend such action at its own expense. 21. Transfers and Assignments. 21.1. Right to Assign. The interests, rights, or obligations of Developer under this Agreement and under the Project Approvals may be transferred or assigned, provided such transfer or assignment is made as a part of the transfer, assignment, sale or lease of all or a portion of the Real Property. Any such transfer or assignment shall be subject to the provisions of this Agreement. If all or any portion of the Real Property is transferred by Developer. F:WM\Dah&O4TrPAop ncM A&=MDalift DA 072W4 d= 2.1 2 V r 1 1 I " AttachmPnt 6 (''Transferred Real Property"), any transferee desiring the benefits of this Agreement shall expressly assume this Agreement as it pertains to the Transferred Real Property; and such transferee shall succeed to all of Developer's rights under this Agreement as they relate to the Transferred Real Property. Thereafter, a default under this Agreement by Developer regarding that portion of the Real Property other than the Transferred Real Property shall not be considered or acted upon by City as a default by the transferee regarding the Transferred Real Property and shall not affect the transferee's rights regarding the Transferred Real Property. Likewise, a default by a transferee relating to the Transferred Real Property shall not be considered or acted upon by City as a default by Developer regarding any remaining property and shall not affect Developer's rights regarding such remaining property. City and Developer may amend this Agreement without the assent of the transferee (i) if the amendment is pursuant to Section 14.3; or (ii) if the amendment relates to portions of the Real Property other than the Transferred Real Property; or(iii)if the amendment does not require notice and public hearing pursuant to Section 14, or (iv) if the amendment is to effectuate a change in the required public improvements and the value and usability of the Transferred Real Property are not substantially and materially affected thereby. 21.2. Release Upon Transfer. Upon the transfer, sale, or assignment of Developer's rights and interests hereunder pursuant to the preceding subparagraph of this Agreement, Developer shall be released from the obligations under this Agreement with respect to the Transferred Real Property arising after the date of such transfer, sale, or assignment; provided, however, that if any transferee, purchaser, or assignee expressly assumes the obligations of Developer under this Agreement, Developer shall be released with respect to all such assumed obligations. The transferee, purchaser, or assignee shall be subject to all the provisions of this Agreement. Notwithstanding the foregoing, any such transferee shall be obligated by this Agreement to vote for and participate in the District to fund the cost of the Freeway Interchange contemplated under this Agreement. 21.3. Foreclosure. Nothing contained in this Section 21 shall prevent a transfer of the Real Property, or any portion of the Real Property, to a lender as a result of a foreclosure or deed in lieu of foreclosure, and any lender acquiring the Real Property, or any portion of the Real Property, as a result of foreclosure or a deed in lieu of foreclosure shall take such Real Property subject to the rights and obligations of Developer under this Agreement; provided, however, in no event shall such lender be liable for any defaults or monetary obligations of Developer arising before acquisition of title to the Real Property by such lender, and provided further, in no event shall any such lender or its successors or assigns be entitled to a building permit or occupancy certificate until all fees due under this Agreement(relating to the portion of the Real Property acquired by such lender)have been paid to City. 22. Aereement Runs with the Land. Except as otherwise provided in this Agreement; all of the provisions, rights, terms, covenants, and obligations contained in this Agreement shall be binding on, and inure to the benefit of, the parties and their respective heirs, successors, and assignees, representatives, lessees, and all other persons acquiring the Real Property, or any portion of the Real Property, or any interest therein, whether by operation of law or in any manner whatsoever. All of the provisions of this Agreement shall be enforceable as equitable servitudes and shall constitute covenants running with the land pursuant to applicable laws, including,but not limited to,California Civil Code Section 1468.Each covenant to do, or refrain from doing, some act on the Real Property under this Agreement, or with respect to any owned F:WM\DP1iW4\ocWwmcnAFcmem\Da1fdionn0726N.mo 22 3 ��1a- i 1 Attachment 6 property, (i) is for the benefit of such properties and is a burden on such properties, (ii)runs with such properties, and (iii) is binding on each party and each successive owner during its ownership of such properties or any portion thereof, and shall be a benefit to and a burden on each party and its property hereunder and each other person succeeding to an interest in such properties. 23. Force Maieure. In addition to any specific provisions of this Agreement, performance of obligations under this Agreement shall be excused and the term of this Agreement shall be similarly extended during any period of delay caused at any time by reason of acts of God such as floods, earthquakes, fires, or similar catastrophes; wars, riots, or similar hostilities; strikes and other labor difficulties beyond the party's control; shortage of materials; the enactment of new laws or restrictions imposed or mandated by other governmental or quasi- governmental entities preventing this Agreement from being implemented; litigation involving this Agreement or the Project Approvals, which delays any activity contemplated under this Agreement; or other causes beyond a party's control. City and Developer shall promptly notify the other party of any delay under this Agreement as soon as possible after the delay has been ascertained. 24. Recordation of Development Agreement, Amendment, or Cancellation. Within ten (10) days after the Effective Date of this Agreement, the City Clerk shall submit a fully- executed original of this Agreement for recording with the County Recorder. If the parties to the Agreement or their successors-in-interest amend or cancel the Agreement or if City terminates or modifies the Agreement for failure of Developer to comply in good faith with the terms or conditions of the Agreement, the City Clerk shall submit for recording the notice of such action with the County Recorder of San Luis Obispo County. 25. Miscellaneous Provisions. The following miscellaneous provisions shall apply to this Agreement: 25.1. Counterparts. This Agreement may be executed in any number of counterparts which together shall constitute the agreement of the parties. 25.2. Laws. It is specifically stipulated that this Agreement will be interpreted and construed according to the laws of the State of California. Venue for any dispute arising under this Agreement shall be San Luis Obispo County, California. 25.3. Amendments. No modification or amendment of this Agreement will be of any force or effect unless made in writing and executed by all parties hereto. 25.4. Successors and Assigns. This Agreement.shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, legal representatives and successors. . 25.5. Further Documents. The parties agree that they will execute such other instruments and documents as are or may become necessary or convenient to carry out the intent and purposes of this Agreement. F:vNErnQ4htao4\nMioamcM AVMA&nn 0726W.doc 23 3 -[ 13 Attachment 6 25.6. Pronouns. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or.neuter, singular or plural, as the identity of the person, persons or entities may require. 25.7. Entire Agreement. This instrument contains all of the understandings and agreements of whatsoever kind and nature existing between the parties hereto with respect to this Agreement, and the rights, interests, understandings, agreements and obligations of the respective parties and their prior oral agreements, if any. 25.8. Headings. All headings in this Agreement are inserted only for convenience and ease of reference, and are not to be considered in the construction or interpretation of any provision of this Agreement. 25.9. Authori . Each individual executing this Agreement on behalf of a party hereto,by his or her signature, represents that he or she maintains full authority on behalf of the applicable party to execute this Agreement, and thereby bind the applicable party to all covenants,duties and obligations contained herein. 25.10. Exhibits. All exhibits, schedules and recitals to this Agreement as referenced in any portion hereof are hereby incorporated by this reference, as though fully set forth in the body of this Agreement; provided, however, notwithstanding any other provisions of this Agreement, if for any reason any exhibit or schedule referenced herein is not attached to this Agreement at the time of its execution by the parties, then when.such exhibit or schedule becomes available, it shall be initialed by the parties and attached to this Agreement, bearing no impact on the enforceability of this Agreement. 25.11. Time. Time is agreed to be of the essence with respect to this Agreement. 25.12. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed duly given (i) if delivered personally, when received; (ii) if transmitted by facsimile, upon the generation by the transmitting facsimile machine of a confirnmation that the entire document has been successfully transmitted; (iii)if sent by recognized courier service, on the business day following the date of deposit with such courier service,or(iv)if sent by registered mail,postage prepaid, return receipt requested,on the third business day following the date of deposit in the United States mail. All such notices shall be addressed to a party at its address as set forth below, or to such other address or facsimile number as a party shall notify the other of in accordance with this Section. If to City: City of San Luis Obispo Ken Hampian City Administrative Officer 990 Palm Street San Luis Obispo,CA 93401 facsimile: (805) 781-7109 F:V&-nU09W\Devc1oMW AV=mW4&o DA 072604&c 24 3 , t14 Attachment 6 With a Copy to: Jonathan Lowell City Attorney 990 Palm Street San Luis Obispo,CA 93401 facsimile: (805) 181-7409 If to Developer: Ernest Dalidio,Jr. 2706 Rodman Drive Los Osos, CA 93402 facsimile: (805) 528-0941 SC Properties Attn: Bill Bird 510 S. Grand Avenue Glendora,CA 91741 facsimile: (626)963-1505 With a Copy to: Andre,Morris&Buttery Attn: Michael J. Morris P.O. Box 730 San Luis Obispo,CA 93406-0730 facsimile:(805)543-0752 25.13. Project is a Private Undertaking. It is specifically understood and agreed to by and between the parties hereto that: (i) the subject development is a private development; (ii) City has no interest or responsibilities for or duty to third parties concerning any improvements until such time and only until such time that City accepts the same pursuant to the provisions of this Agreement or in connection with the various subdivision map approvals; and (iii) Developer shall have full power over and exclusive control of the Project subject only to the limitations and obligations of Developer under this Agreement; and (iv) the contractual relationship between City and Developer is such that Developer is an independent contractor and not an agent of City. 25.14. Enforceability. City acknowledges that SLO Marketplace has an equitable interest in a portion of the Real Property, in that SLO Marketplace has entered into an option agreement with Dalidio Family whereby SLO Marketplace has an option to purchase such portion of the Real Property. Dalidio Family hereby consents to SLO Marketplace's entering into this Agreement, and to this Agreement becoming effective with respect to SLO Marketplace on the Effective Date, irrespective of whether or not SLO Marketplace has then acquired fee title to a portion of the Real Property. City agrees that, to the extent that, and for so long as, SLO Marketplace's interest in the Real Property as an option holder is deemed under California law to be insufficient to enforce its rights under this Agreement, Dalidio Family may, in its sole discretion, enforce all rights and interests of SLO Marketplace hereunder. Rights and obligations of Developer hereunder shall be deemed to apply to Dalidio Family or SLO marketplace, respectively,only insofar as those parties are owners of respective portions of the Real Property. F:WETIDOa11604Omlopmem Ageemm0alidio DA 072604.doc 25 � - i l� Attachment 6 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date and year first above written. "City" "Dalidio Family" CITY OF SAN LUIS OBISPO, a Municipal Corporation ERNEST DALIDIO, JR. Successor Trustee of Dalidio Family Trust u/t/a dated October By: 29, 1987 Its: ERNEST DALIDIO JR., Successor Trustee of the Thelma F. Perrozi Trust u/t/a dated I HEREBY APPROVE the form and legality February 7, 1991 of the foregoing Agreement this day of _ CLARA B. DALIDIO, Trustee of the Clara B. Dalidio Trust u/t/a dated January 15, 1991 City Attorney "SLO Marketplace" SAN LUIS OBISPO MARKETPLACE ASSOCIATES, LLC, a California limited liability company By: Its: F:1i4TD\DalirzD4Zcydcpmmt A&==\Da&o DA 0720X,&c 26 Attachment 6 DEVELOPMENT AGREEMENT EXHIBITS Exhibit A— Defined Terms Exhibit B — Freeway Interchange Exhibit C— Prezoning Exhibit D— Project Plan Exhibit E— Applicable Rules Exhibit F— Public Art Exhibit G— Drainage Plans Exhibit H— Conservation Easement Exhibit I— Freeway Land Exhibit J— Business Land Exhibit K— Open Space Land Exhibit L— Real Property Exhibit M— Reimbursement Agreement Exhibit N— Residential Land Exhibit O— Retail Land Attachment 6 DEVELOPMENT AGREEMENT EXHIBIT "A" DEFINED TERMS "Annexation" is defined in Recital Q. "Applicable Rules" means City's ordinances,.resolutions,rules,fees,regulations,uniform codes and official policies (including,without limitation, the existing Project Approvals), governing the permitted uses of the Real Property, and any standards and specifications relating to environmental review, growth management,density,and design for improvements and construction on the Real Property(including,but not limited to, any and all public improvements), shall be those in force and effect on the Agreement Date. "Business Land" means the approximately 8.1 acres of the Real Property described in Exhibit"J". "Business Project" means the business park improvements consisting of commercial buildings,which is intended to be developed on the Business Land. "CEQA"means the Califomia.Environmerital Quality Act. "Conservation Land" means the approximately 54.7 acres of the Real Property described in Exhibit"K". "Development Agreement Statute"means California Government Code Section 65864 et seq. "Discretionary Approvals" means applications for and issuing of all discretionary approvals requiring the exercise of judgment and deliberations by City. "District"means the Community Facilities District formed by City to fund the cost of the Freeway Interchange. "Effective Date" means the effective date of this Agreement,which shall be the date on which Annexation occurs,as provided in Section 3.1 "EIR" means the Environmental Impact Report prepared for the Project and for this Agreement,pursuant to CEQA. "EIR Certification" is defined in Recital P. "Freeway.Interchange" is defined in Recital G. F:WETD\DalifaO41DA FxbibiWDA Exldblt Ada Attachment 6 "Freeway Interchange Cost" or"Freeway Interchange Costs" shall mean all expense and cost reasonably necessary for the design,planning, approval and construction of the Freeway Interchange, which expense and cost shall be funded by means of the issuance of public financing obligations,as described in Section 11 of this Agreement and in the Reimbursement Agreement. "General Plan"means City's General Plan. "General Plan Amendment" is defined in Recital O. "Grandstand Structure"is defined in Recital H. "Ministerial Approvals" means all ministerial approvals requiring the determination of conformance with the Applicable Rules,including,without limitation, site plans, development plans, land use plans, grading plans, improvement plans,building plans and specifications, final maps,zoning clearances,grading permits, improvement permits,wall permits,building permits, lot line adjustments,encroachment permits,certificates of use and occupancy and approvals, and entitlements and related matters necessary or desirable for the completion of the Project. "Mortgage"means any lien placed upon the Real Property, or any portion thereof after the date of recording this Agreement, including the lien for any deed of trust or mortgage. "Mortgagee" means any person or entity,including any deed of trust beneficiary or mortgagee who acquires title to the Real Property, or any portion thereof,by foreclosure, trustee's sale,deed in lieu of foreclosure or otherwise. "New Rules" means new or modified ordinances,resolutions,rules,regulations and official policies that were not in force and effect on the Effective Date. "OfPSite Open Space" is defined in Section 10.4. "Conservation Easement" is defined in Section 10.1. "Prezoning" is defined in Recital Q. "Project" is defined in Recital D. "Project Approvals" means the General Plan Amendment,the EIR Certification,the Prezoning,the preliminary and final development plans,any existing or necessary land use, zoning, site plan or subdivision approvals,use permits and all other approvals and entitlements required for the development of the Project,including,but not limited to, development allocations,zone changes,zone variances,conditional use permits, grading permits,building permits, lot line adjustments, encroachment permits,business licenses, site plan approvals,parcel maps,tentative subdivision maps, subdivision improvement agreements, and any accompanying conditions of approval that will accomplish the goals, objectives,policies and plans referenced, described,implied and shown in this Agreement. F:WEr1DTAQ04VA Ex1u'Wm\DA Exhibit AEoc i Attachment 6 "Project Plan" is defined in Section 4.2. "Real Property"means that certain real property located in an unincorporated area of the County of San Luis Obispo,California,more particularly described in Exhibit "L" attached hereto. "Reimbursement Agreement"means the Special Tax Reimbursement Agreement between City and Developer of even date herewith,a copy of which is attached hereto as Exhibit"M" (the "Reimbursement Agreement"), i 'Residential Land" means that approximately 3.3 acres of the Real Property described.in Exhibit"N". "Residential.Project" means, collectively,residential improvements on the Residential Land including approximately sixty(60) dwelling units and related improvements. "Retail Land"means that approximately 48.7 acres of the Real Property described in Exhibit"0". "Retail Project" means,collectively, commercial improvements, including,but not limited to, approximately 615,000 square feet of gross leasable area that may include retail units, up to three(3)anchor stores of 100,000 to 140,000 square feet of gross leasable area each, restaurants and other uses permitted under the applicable zoning regulations,with additional areas allocated to uncovered outdoor sales and,a hotel with approximately 150 guest rooms. 'Review Date" means the annual review date for this Agreement, as specified in Section 15.1. "Subsequent Approvals" means additional City approvals or permits or amendments to the Project Approvals, which may include,but are not limited to: (i) a vesting tentative map, multiple final vesting maps and/or parcel maps for each phase of the Project(as determined by Developer);(ii) final maps; (iii) site plans; (iv) development plans; (v)land use plans-, (vi) grading plans; (vii) improvement plans; (viii)building plans and specifications; (ix)zoning clearances; (x)grading permits; (xi) improvement permits; (xii)building and use permits-, (xiii) lot line adjustments; and(xiv) encroachment permits. "Subdivision Map" shall mean a map created in accordance with the Subdivision Map Act. "Subdivision Map Act" shall mean California Government Code Section 66410 et seq.. "Term"means the term of this Agreement, as provided in Section 3.2. "Transferred Real Property" is defined in Section 2 1.1 FANtTDtDabfM\DA FxhibiutDA Exhibit Adoc Attachment 6 "Vested Component"means this Agreement, the Project Approvals,any Subsequent Approvals ad any amendments to any of the foregoing as may, from time to time,be approved pursuant to this Agreement. F:V4EM\D2liQ04tDA ExhibiM\DA Exhibit Adw Attachment 6 DEVELOPMENT AGREEMENT EXHIBIT "B" DESCRIPTION OF FREEWAY INTERCHANGE 1. PROPOSED PROJECT A. PROJECT DESCRIPTION The City of San Luis Obispo is proposing to upgrade Route 101/Prado Road interchange. The existing Prado Road interchange is a partial interchange located at KP 43.2 (PM 26.8). This interchange is being converted to a full interchange with a tight diamond configuration on the northbound side and a partial cloverleaf configuration on the southbound side. In addition, Prado Road will be extended to Madonna Road in accordance with the City's circulation element of the General Plan and will be consistent with the 1994 Regional Transportation Plan for San Luis Obispo County. The proposed project will improve access and circulation for the adjacent commercial developments, accommodate build-out of the City's General Plan and relieve traffic congestion at Madonna Road interchange and Los Osos Valley Road interchange. The project proposes improvements as follows: 1. Construct an overcrossing structure over Route 101 with four 3.6 in through lanes, dual 3.6 in left turn pockets, a 2 in wide striped median, two 2.4 in standard bicycle lanes and two 2.4 m wide sidewalks on both sides of the structure. 2. Reconstruct the northbound Route 101 single lane diagonal on-ramp and off-ramp on the east side. At the ramp termini, the northbound diagonal off-ramp will be widened to three lanes (two left and one right). The northbound on-ramp will have two receiving lanes for the dual left turn movements, but will transition to a standard one lane on-ramp. 3. Construct a new southbound Route 101 loop off-ramp, along with a southbound Route 101 diagonal on-ramp, for the west side. These two ramps will be single lane ramps. At the ramp termini, the southbound loop off-ramp will be widened to three lanes (one left, one shared left/right and one right). The southbound diagonal on-ramp will have two receiving lanes for the dual left turn movements, but will transition to a standard one lane on-ramp. 4. Construct an auxiliary lane in northbound and southbound directions of Route 101 between the Prado Road interchange and the Madonna Road interchange. U.S. Route 101 is part of the National Highway System and is presently a four lane freeway that runs north-south through the project area, connecting the Pismo Beach area with San Luis Obispo. In the project area, Route 101 has full interchanges at Los Osos Valley Road (KP 41.7, PM 25.91) to the south and Madonna Road (KP 44.27, PM 27.5) to the north. At Prado Road, there is access to and from Route 101 on the east side only. This access is a buttonhook ramp configuration terminating at Prado Road to provide northbound off-ramp and FAnWDtDalif&N\DA Exhibiu\DA Eahibit B pan 1.Aoc 3-�aa Attachment 6 on-ramp access to Route 101. These ramps do not meet current design standards. The northbound off-ramp is located 1.52 km north of the Los Osos Valley Road interchange, and the northbound on-ramp is located 1.04 km south of the Madonna Road interchange. The interchange at Prado Road is situated on relatively flat terrain, except for the incised stream channels of San Luis Obispo and Prefumo Creeks. Agricultural fields, US Border Patrol Office and a commercial development complex are located on the west side of the freeway. The City's corporation yard, an old drive-in movie theatre, fallow fields, commercial building, storage yards and the City's wastewater treatment plant are located on the east side. During the past 40 years since the freeway was constructed, developments in the southern part of the City of San Luis Obispo have resulted in an increase in demand for access to and from Route 101. However, only minor improvements have been made which include inside median shoulder widening, outside shoulder widening, the.installation of a median barrier and the addition of the auxiliary lane between Madonna Road and Marsh Road. C. SAFETY IMPROVEMENTS With the construction of a full interchange, drivers would be less likely to get confused, thereby eliminating or reducing the potential for wrong way movements. This project will remove the existing partial interchange and replace it with a full interchange. The northbound Route 101 on- ramp and off-ramp at Prado Road will be upgraded to current ramp design standards and provided with standard deceleration, acceleration and lane drop lengths to improve traffic merges and to reduce traffic conflicts. D. SITE PLAN The attached plan illustrates the Freeway Interchange, which shall be built substantially in accordance with such plans. As provided in Section 11.4, the scope of the Freeway Interchange shall be the improvements shown on the attached plan between and including the intersections described as "Intersection D" on the west side and "Intersection A" on the east side. F:M0\D\Da1i(a00\DA ExhiblsstDA Exhibit B pa"IAm /� •L.C..�. r I r• a g� Y 1•,i. �f$ iF s � M u x x g ° g s 15 r mz = ~ O GGK :.1 1• J••,F./r.Y' p��N fF"\1♦•r�.f(, \tea 4'p D I � C. n Rin€ ��� C£� ,V�� \ o r�. b�� Ar� •y�+��ry`,���? . IN .00 S3 \ _ � L V.♦ F �. ri CIH m r �, m� ro F - a •� .121 6 11P �IT Attachment 6 DEVELOPMENT AGREEMENT EXHIBIT "c" PREZONING is\tet\D\D.W.GA\DA Eahibhs\DA Exhibk C 4. / '' Attachment 6 ROAD RIGHT OF WAY NN LAG E PARK EXTENSI MIXEMEN 1 OPEN SPACE LEGEND ® COMMERCIAL I RETAIL(C-R-PD) ® BUSINESS PARK(OS) LAGUNA LAKE PARK EXTENSION(C103-40) OPEN SPACE(AG) ® AFFORADABLE HOUSING(R-M) ® ROAD RIGHT OF WAY SOURCE CANNON ASSOCIATES, JUNE 10,2004 174 DEVELOPMENT AGREEMEN 0 5100 1000 EXHIBIT C: PREZONING 1 INCH =500 FEET Attachment 6 DEVELOPMENT AGREEMENT EXHIBIT "D" PROJECT PLAN The Retail Project will be built substantially in accordance with the Site Plan attached hereto, subject to the approvals described in Section 4.2. F:WETD\Dali604MA Fxhbiu\DA Exhbn D.doc �I' ` �. a�L CA -chment S Z q 3 ' Cu $g$ �.— Fav �= �e O<€y0 . L v d Nb O (IO , cu , , g , Q rr afHH4{9;'r NNNI IN Ifs , , i ' U co o- -------------------- cu_ , � a j a °e ! �! 19! E!s!! rg � If to 3or r i !T It !j� tea' � ffi6 � vfE f. f. f r a ♦o 9e � �il ! j rt � r� A r — S�r ' EEE •.� i Cr J Attachment 6 DEVELOPMENT AGREEMENT EXHIBIT "E" APPLICABLE RULES I^\ny\D\DalifelM\pA iahitrits\DA Et11111Y f:.dnr Attachment 6 A. General Plan 1. Land Use Element 2. Housing Element 3. Open Space Element 4. Circulation Element 5. Noise Element 6. Safety Element 7: Conservation Element 8. Energy Conservation Element 9. Parks and Recreation Element 10. Water and Wastewater Element B. City of San Luis Obispo Municipal Code C. Fee Schedules and Ordinances DEVELOPMENT AGREEMENT EXHIBIT E: APPLICABLE RULES F:WtVAfhfifa(WV)A ExhlhitSV)A Exhibit E.dw `' ' Attachment 6 DEVELOPMENT AGREEMENT EXHIBIT "F" PUBLIC ART PUBLIC ART TO BE DISPLAYED IN THE SAN LUIS OBISPO MARKETPLACE The Public Art will consist of a combination of life-sized bronze figures and bas relief monuments depicting the County history. The life-sized bronze figures will be either a mustang horse or horse and rider and a replica of the western farmer and his wife. The four bas relief monuments are two sided, made of simulated stone and bronze depicting the stages of history in San Luis Obispo in both pictures and text. These items will be placed at various locations on the property where public access is most logical. I � - Attachment 6 DEVELOPMENT AGREEMENT EXHIBIT "G" DRAINAGE PLANS F:%M\D\DalihfW\DA Exhihi[SMA Exhihii GAA _ I V � 1 I ME It ilk —1SA.��l 4^ �'- , ` ,•`�\!'� . r wall Iq � � ,:�r' ■ si a •,`�„,,,,,—._ .- r Attachment 6 DEVELOPMENT AGREEMENT EXHIBIT "H" CONSERVATION EASEMENT (SEE ATTACHMENT 9 OF COUNCIL AGENDA REPORT) 3 -tom Attachment 6 DEVELOPMENT AGREEMENT EXHIBIT 1I" FREEWAY LAND F:N %D%DaiifaOIVA E.AibiWDA F lAii Ldoc \ /� Attachment 6 INTERCHANGE RIGHT OF WAY DEVELOPMENT AGREEMENT No '°°° EXHIBIT is FREEWAY LAND 1 INCH =500 FEET 3 1 I I Attachment S DEVELOPMENT AGREEMENT EXHIBIT "J" BUSINESS LAND F.%wt%D%DaliW%DA ExnvissTA Ese-,Wl l.*x f 1 �r Attachment 6 BUSINESS LAND DEVELOPMENT AGREEMENT - 'w 10°° EXHIBITJ: BUSINESS LAND 1 INCH ®500 FEET -;� - I 6D -�' Attachment 6 DEVELOPMENT AGREEMENT EXHIBIT "K" OPEN SPACE LAND F.1.1\D\D0ifNi\DA Fx NMIDA E Mbit K.Eot ' j� q Attachment 6 OPEN SPACE LAND DEVELOPMENT AGREEMENT ° --- '00 '°°° EXHIBIT K: OPEN SPACE LANE I INCH -500 FEET ^ ( 1 " Attachment 6 DEVELOPMENT AGREEMENT EXHIBIT "L" REAL PROPERTY Real property in the Unincorporated area of San Luis Obispo said County of San Luis Obispo, State of California, described as follows: Parcel 1: That portion of Lot 64 of the Subdivisions of the Ranchos Canada de Los Osos and La Laguna,in the County of San Luis Obispo, State of California,according to map filed for record in Book A, Page 83 and 84 of Maps,in the office of the County Recorder of said County,described as follows: Beginning at the Northeast corner of said Lot 64; thence North 55 1/2'West, 10.10 chains to post marked M. R. No. 3; thence South 41'24'West, 19.96 chains to post marked M.R.No.4; thence South 55 1/2' East, 15.25 chains to the Southeast corner of said Lot 64; thence North 26 I/2'.East,20.00 chains to the point of beginning. EXCEPTING therefrom that portion conveyed to the State of California by deed dated October 15, 1947 and recorded December 18, 1947 in Book 464, Page 87 of Official Records. PARCEL 2: That portion of Lot 65 of the Subdivisions of the Ranchos Canada de Los Osos and La Laguna, in the County of San Luis Obispo, State of California, according to map filed for record in Book A, Page 83 and 84 of Maps, in the office of the County Recorder of said County, described as follows: Beginning at the Northeast corner of said Lot 65; thence North 55 1/2'West, 12.19 chains; thence South 50 1/2'West, 19.42 chains to a point in the line of fence; thence along said fence South 55 1/2'East,20.15 chains to post on the Southeast line of said Lot; thence Northerly 18.90 chains to the point of beginning. EXCEPTING therefrom that portion conveyed to the State of California by deed dated October 15, 1947 and recorded December 18, 1947 in Book 464,Page 87 of Official Records. PARCEL 3: All of Lot"K'of the Resubdivision of Lots 58,61,62,63, 64,and 65 as per 3.T.Stratton's Survey and map of the Subdivisions of the Ranchos Canada de Los Osos and La Laguna,iri the County of San Luis Obispo,State of California, according to map filed for record January 30, 1875 In Book A, Page 161 of Maps, In the office of the County Recorder of saki County. EXCEPTING therefrom that portion conveyed to United States Postal Service by deed dated August 5, 1980 and recorded September-5, 1980 In Book 2266,Page 904 through 906 of Official Records as subsequently corrected by a Grant Deed dated May 7, 1981 and recorded June 16, 1981 in Book 2332, Page 318 through 320 of Official Records. PARCEL 4: That portion of Lots L, M and N of the Resubdivision of Lots 58,61, 62, 63,64, and 65 as per J. T.Stratton's Survey and Map of the Subdivisions of the Ranchos Canada de Los Osos and La First American 77& 3- 11 FA %D\Da6faDADA Eahibiu\DA Eahibh L dm Attachment 6 APM: 067-121-022 First American Title F.%vm:tXMDmlihO4NDA ExbibdsXDA Exhibit Ldm AtfachmPnt 6 Laguna, in the County of San Luis Obispo,State of California,according to map riled for record January 30, 1875 in Book A, Page 161 of Maps,in the office of the County Recorder of said County,described as follows: Beginning at stake marked"N.N."at the most Southerly corner of said Lot"L"thence South 55 1/20 East along the Northeasterly line of said Lot"M",3.06 chains to the.most Easterly corner of said Lot"M", thence South 50 1/20 West along the Southeasterly line of said Lots"M"and"N", 19.44 chains to the Southerly corner of said Lot"N"; thence North 55 1/2'West along the Southwesterly line of said Lot"N", 11.12 chains to post marked"A.E"at the Easterly comer of Lot"0"of said subdivisions; thence North 37°West along the Northeast line of said lot"O", 1.42 chains to the center of Foreman Creek and the most Southerly corner of the lands of Rosa Machado;thence along the center of said creek and along the Easterly fine of the lands of Rosa Machado on the following courses and distances: North 18 1/4°East, 1.17 chains; North 6 1/40 West, 2.62 chains, North 13 3/40 East,2.50 chains; North 181/2°East,2.50 chains; North 130 East,2.50 chains, North 3 1/2°East,2.25 chains, North 18°East,4 chains to the top of the bank as the Easterly side of a ditch carrying the water out of the Laguna into Foreman Creek;thence along the Easterly bank of said ditch and the Easterly Line of the lands of said Rosa Machado, North 11/4* East,2.25 chains;North 211/20 West,2.79 chains; North 9°West, 4.21 chains to the Southerly line of the Los Osos Road;thence North 62 1/20 East,along the.Southerly line of the said Road 9.83 chains to a stake marked"M.M."at the most Northerly comer of said Lot"L"; thence South 460 East along the lines between Lots"K"and"L"of said subdivision;24.72 chains to post marked "A.L."at the most Easterly corner of said Lot"L"; thence South 41.3/40 West along the Southeasterly line of said Lot"L",8.90 chains to the point of beginning. EXCEPTING from said Parcel 4 that portion thereof conveyed to Ray C.Skinner,et Lx., by deed dated January 12, 1960 and recorded January 29, 1960 in Book 1045,Page 234 of Official Records. ALSO EXCEPTING from said Parcel 4 that portion described in the Final Judgment of Condemnation recorded June 26, 1975 In Book.1840,Page 217 of Official Records. Said portion is more particularly described as follows: A portion of Lots M and N of the R. R. Harris Resubdivision of Lots 58 and 61 of the Ranchos Canada de Los Osos and La Laguna as filed in Book A, Page 161 of Maps, in the office of the Recorder of the County of San Luis Obispo,California,described as follows: Beginning at the most Northerly point of Tract 169, as recorded in Book 6,Page 45 of Maps as filed in the office of the Recorder of the County of San Luis Obispo,California,said point being on the Southerly One of Madonna Road,thence along said Southerly line of Madonna Road which bears North 62930'Easter distance of 54.90 feet;dwce.South 5°48'47"East a distance of 246.80 feet;thence South 19057'37"East a distance of 24439 feet;thence South 0026'53"West a distance of 182.46 feet;thence South 20°33'06 west a distance of 235.26 feet;thence South 3'SO'S7'West a distance of 252.36 feet;thence South 14021'20"West a dance of 373.89 feet, thence South 1°00'32'East;a chstame of 322.13 feet;thence.North S5°30'West a distance of 63.90 feet; thence along the Easterly line of Tract 169 to the true point of beginning through the following courses:. North 7025'16"East,a distance of 116.08 feet;thence North 1000'32"West,a distance of 154.16 feet;thence North 9039'39"East,a distance of 128.27 feet;thence North 14021'20"East,a distance of 267.10 feet; thence North 3050'57"East,a distance of 228.68 feet;thence North 11°14'33"East,a distance of 101.44 feet;thence North 16°4Y13"East,a distance of 207.16 feet;thence North 0026'53"East,a distance of 100.02 feet;thence North 19957'37"West,a distance of 215.04 feet;thence.North 50484"West,a distance of 201.68 feet;thence North 14°39'55'West,a distance of 71.55 feet to the point of beginning. First Arrredcan i rtle FAnn%D%D.1ifa04\DA ExbibinNVA Eabiba I-Am - (43 Attachment 6 CN t � i .yy j Y/ $� .R cr i U. i3O 3 h f �o= M..0 o s :9pyo O t HSm �Wm yf -' npm 'L m�0 a f m aIV, B y gy=m : a oym 5. t i cDc r� -J Y FZ8 09 e _ d2 n< k r - Az d�~•t4. i� ^^��'!! ' app Z 'fit � Y� • �0 Description:San Luis Obispo,CA Assessor Map 67.12 Page:! of 1 Order.Lisa Comment F%rc\D\DalifaDADA Exhbits\DA Exhbd Ldo Attachment 6 DEVELOPMENT AGREEMENT EXHIBIT "M" SPECIAL TAX REIMBURSEMENT AGREEMENT Please see Attachment 7 J Attachment 6 DEVELOPMENT AGREEMENT EXHIBIT "N" RESIDENTIAL LAND F:U a\Malif.090A&hNUZA&Ju'a N.d= Attachment 6 RESIDENTIAL LAND 7 4 DEVELOPMENT AGREEMENT ° 900 1ow EXHIBIT N: RESIDENTIAL LAND - 1 INCH -500 FEET �3 ' 41 Attachment 6 DEVELOPMENT AGREEMENT .EXHIBIT "O" RETAIL LAND FAWUMalifAMA Exhibiu\DA EANI 0AW Law 3, �-o Attachment 6 RETAIL LAND 07 DEVELOPMENT AGREEMENT ° °°0 7000 EXHIBIT 0: RETAIL LAND 1 INCH s 500 FEET ` � i Attachment 7 SPECIAL TAX REIMBURSEMENT AGREEMENT THIS SPECIAL TAX REIMBURSEMENT AGREEMENT (hereafter "Agreement") is made and entered into on by and between: (i)the CITY OF SAN LUIS OBISPO, a Municipal Corporation and Charter City ("City"); (ii) ERNEST F. DALIDIO, JR., Successor Trustee of Dalidio Family Trust u/t/a dated October 29, 1987, ERNEST DALIDIO JR., Successor Trustee of the Thelma F. Perrozi Trust u/t/a dated February 7, 1991, and CLARA B. DALIDIO, Trustee of the Clara B. Dalidio Trust u/t/a dated January 15, 1991 (collectively, "Dalidio Family"); and (iii) SAN LUIS OBISPO MARKETPLACE ASSOCIATES, LLC, a California limited liability company("SLO Marketplace"). Dalidio Family and SLO Marketplace are referred to collectively as "Developer." Additional specified terms are defined in Exhibit "A" hereto. RECITALS A. Dalidio Family is the owner of the Real Property. The Real Property consists of approximately 131 acres of land that is included in City's General Plan and sphere of influence. The Real Property is intended to be annexed to City. B. SLO Marketplace has entered into an option agreement with Dalidio Family whereby SLO Marketplace has an option to purchase a portion of the Real Property. Dalidio Family and SLO Marketplace each have a legal and/or equitable interest in the Real Property. C. Developer intends to develop the Project on the Real Property as follows: (i) on the Retail Land, SLO Marketplace intends to construct the Retail Project; (ii) on the Business Land, Dalidio Family intends to construct the Business Project; (iii) on the Residential Land, Developer intends to cause to be constructed the Residential Project; (iv) the Conservation Land will be preserved as open space; and (v) approximately 16.2 acres of the Real Property will be committed to public roads, including a freeway interchange. The parties entered into that certain Development Agreement of even date herewith (the "Development Agreement") to facilitate the implementation of the Project. D. Developer is willing, pursuant to the terms of this Agreement and the Development Agreement, to make expenditures and provide benefits to City, specifically, contributions toward construction of a full freeway interchange at U.S. Highway 101 and Prado Road, as described in Exhibit "B" (the "Freeway Interchange"), the development cost of which is estimated to be approximately $22 million (the "Freeway Interchange Cost"). City and Developer desire to provide a mechanism whereby the Freeway Interchange will be constructed and funded in whole or in part by utilizing tax-exempt debt financing which is secured by a portion of the Real Property and is reimbursed through sales tax and transient occupancy tax revenues. 52.4% percent of the total construction cost shall be allocated to the Commercial Property and 17.7%to the Benefiting Properties. Developer's willingness to enter into obligations set forth in the Development Agreement with respect to the Freeway Interchange is conditioned on the benefits conferred to Developer under this Agreement. E. The. general benefits to be received by City from this Agreement and the construction of the Freeway Interchange include,without limitation: F^nmlDQalifaOARcimbu int Agme 'Dalidio RA 072704.DOC 1 3- t� Attachment 7 1. Implementing the General Plan and furthering it goals; 2. Implementing City's Circulation Element by providing improved access to the Project and adjacent areas by constructing the Freeway Interchange; and 3. Causing Developer to accelerate and provide specific public infrastructure improvements and facilities in advance of City's opportunity to require Developer to provide same: F. The parties acknowledge that the Project represents a unique development in the City of San Luis Obispo by virtue of its composition, scale and open space protection component, and as such is unlikely to be reproduced in the foreseeable future in San Luis Obispo. The parties further acknowledge that City's interest in reaching project-specific agreements with Developer as to the specifications of the Project, including providing for a non- pedestrian oriented design and construction of the Freeway Interchange, is served by this Agreement. By providing incentives in this Agreement and the Development Agreement, City intends that the Retail Project will continue to be a "hybrid power shopping center," and as such will not have a material adverse impact on downtown San Luis Obispo retail activities from either an economic or social standpoint. G. City and Developer have reached agreement and desire to express herein the terms and conditions applicable to the funding of the cost of the Freeway Interchange, and Developer's reimbursement with respect to such costs. H. The purpose of this Reimbursement Agreement is to provide for the sharing of up to 50% of the net new sales tax and transient occupancy tax revenues generated by the Retail Project, less certain exclusions and adjustments, as more particularly described herein, in order to assist the Developer in paying its Special Tax obligations for the construction of the Freeway Interchange. Accordingly, in no event will the City share more than the cumulative amount of Special Taxes paid by the Developer, even if this is less than 50% of the DESTR; and in no case will the City share more than 50%of the DESTR. I. The City Council, after providing public notice as required by law, held a public hearing on this Agreement on [INSERT DATE]. On [INSERT DATE], the City Council adopted Ordinance No. [INSERT NUMBER] approving this Agreement. NOW, THEREFORE, with reference to the above recitals and in consideration of the mutual promises, obligations and covenants herein contained, City and Developer agree as follows: AGREEMENT I. Effective.Date and Term. 1.1. Effective Date. This Agreement shall be effective as of the Effective Date of the Development Agreement. F:MmkDXDa1ifa04\Rcrmb=a t Agt\Dalidio RA 072304.DOC 2 /I G 4 IS 3 Attachment 7 1.2. Term. The Term shall commence on the Effective Date and extend to the later of thirty-five(35) years from the effective date set forth in Section 1.1, above, or one (1) year after final payment by the Developer of any special taxes related to debt service payments for special tax bonds (the "District Bonds") issued through the Community Facilities District ("District'')formed pursuant to Section 2.1. 2. Funding of Freeway Interchange. 2.1. City's Share of Freeway Interchange Cost. City shall be responsible for promptly funding and paying directly 29.9%ofthe Freeway Interchange Cost, and City shall provide evidence satisfactory to the underwriter of the District Bonds, in a timely fashion and prior to the time for issuance of the District Bonds, that City has committed funding for its 29.9% share of the Freeway Interchange Cost. 2.2. Formation of District. The remaining 70.1%of the Freeway Interchange Cost, after City's payment of its 29.9% share, shall be financed by the issuance of tax exempt District Bonds. City shall use its best efforts to form the District and issue the District Bonds with a bond authorization amount equal to approximately 70.1%of the Freeway Interchange Cost,to finance the Commercial Property's and Benefiting Properties' share of the Freeway Interchange Cost, with a repayment term of thirty(30)years, and the terms of which shall be subject to City's policies for land-based financings, attached hereto as Exhibit "C." 2.3. Obligation for Repayment. The obligation for repayment of the District Bonds shall be allocated among the Commercial Property and the Benefiting Properties, respectively, in accordance with the Freeway Cost Allocation. The parties acknowledge and agree that the Freeway Cost Allocation represents the parties' good faith estimate, based on traffic analysis and other factors, of the respective utilization of the Freeway Interchange by increased traffic generated by the Project and the Benefiting Properties, and other new development in the City of San Luis Obispo. 2.4. Commercial Property Share. The District shall include the Commercial Property, and the Commercial Property shall be subject to District Special Tax, which totals the full amount payable with respect to the District Bonds,multiplied by the Commercial Property's percentage of the Freeway Cost Allocation, amortized over the repayment term of the District Bonds. 2.5. Benefiting Property Share. The Benefiting Properties shall bear that portion of the cost of the Freeway Interchange set forth in the Freeway Cost Allocation, in the manner provided in Section 3 below. 2.6. Exclusion of Land. The Conservation Land and the Residential Land shall be excluded from the District and shall not be obligated hereunder to bear any portion of the Freeway Interchange cost. 2.7. Identification of Properties and Required Taxes. Promptly after the Effective Date,City will use its best efforts to form the District and prepare a Rate and Method of Apportionment to be prepared, which specifies in detail boundaries of the District and special tax of all properties in the District(the "RMA"). Developer shall have the opportunity to review and comment on the RMA prior to its final adoption. The RMA shall not, without Developer's F:�=\D%Da1ifa04Uicimba =t Ag. \Dalidio RA 077304.DOC 3 — /�� Attachment 7 prior written consent: (a)provide for allocation of District Special Taxes to the Commercial Property in excess of the Freeway Cost Allocation; (b)provide for allocation of District Special Taxes to the Benefiting Properties in excess of the Freeway Cost Allocation; (c) contain terms which are unreasonable or arbitrary; or(d)vary materially from the terms and conditions of this Agreement. Each year, Developer shall obtain and incorporate within the DESTR Reimbursement Application a copy of the tax schedule for all the properties for which Developer is responsible for advancing payments including the Commercial Property and the Benefiting Properties. 2.8. Debt Service Structure. Upon timely written request by Developer, City shall cause the District Bonds to be amortized such that repayment is escalated over the term of the District Bonds,thereby reducing the obligation of Developer and the Benefiting Properties for District Special Taxes during the initial years of the term of the District Bonds, and increasing such obligations during the later years of the term of the District Bonds, provided that the annual escalation amount of the payments is not less than one percent(M)per year. 2.9. Security Upon Commencement of Construction. At the time of commencement of construction of the Retail Project, in order to ensure financing of the Freeway Interchange contemplated herein through sales tax revenues, Developer shall provide security in a manner satisfactory to the issuers of the District Bonds and their legal counsel,provided that any securitization of the District Bonds in addition to or other than encumbrance of the Retail Property shall be subject to the prior written agreement of City and Developer. In the event City and Developer are unable to timely agree upon.such securitization,then the commercially reasonable manner of securing the District Bonds shall be submitted to arbitration in accordance with Section 6,below. 3. Advances for Other Properties Benefiting from the District . 3.1. Payment by Developer on Behalf of Benefiting Properties. The Benefiting Properties'share of the Freeway Interchange costs shall initially be funded with the proceeds of the District Bonds, such payments shall be secured by the Commercial Property, and payment of the portion of the District Special Taxes attributable to the Benefiting Properties shall initially be advanced and paid by Developer(the "BP Advances"),until such time as each Benefiting Property bears its share of the District Special Taxes,as set forth in this Section 3. Other than the District Special Taxes, Developer shall be responsible for no property taxes or other taxes or obligations with respect to the Benefiting Properties. Developer shall be reimbursed for the BP Advances(which amount shall include interest thereon accruing from the date of the advances at an annual rate of five and one-quarter percent(5.25%).compounded annually)as follows: 3.1.1. City shall pay to Developer the amount of all unreimbursed BP Advances to the extent of Developer's share of DESTR remaining after Developer has been reimbursed for all District Special Taxes related to the Commercial Property, as set forth in Sections 4 and 5; and 3.1.2. At such time as each of the Benefiting Properties are approved for development,City shall require the owners of each such Benefiting Property, prior to issuance of a building permit thereon,to make a lump sum payment to City in an amount equal to the total District Special Tax payments previously made on behalf of that Benefiting Property, FAne\D\D21ifa04\Rc'mb6 MMt Ag=mmADalidio RA 072 U DOC 4 Attachment 7 together with interest thereon at the rate of 5.25%per year compounded annually. From that total payment, the City shall pay Developer any and all unreimbursed BP Advances with respect to such Benefiting Property, with interest thereon at 5.25%per year compounded annually. Thereafter, such Benefiting Property shall either be annexed to the District and the owner thereof shall be responsible for making applicable District Special Tax payments; or pay the total allocated District Special Tax obligation remaining in a lump sum, including any costs associated with the prepayment of District Bonds. Upon annexation to the District of a Benefiting Property, a portion of the District Bonds shall be secured by such Benefiting Property in proportion to its share of the Freeway Cost Allocation, the Commercial Property shall no longer secure such portion of the District Bonds, and Developer shall thereafter not be liable for such portion of the District Special Taxes or the District Bonds. 3.2. City shall use its best efforts to cause any portion of the real property constituting a portion of the Benefiting Properties which is necessary or desirable to be utilized for location of a portion of the Freeway Interchange to be dedicated for such use at no cost,with the reasonable value of such dedicated land, as agreed upon by Developer and City, being deducted from District Special Taxes that may be imposed on the dedicating party in the future by causing such amount to be allocated proportionately among all District Special Taxes. 4. Definition and Measurement of Defined Excess Sales Tax Revenue(DESTR). City shall reimburse Developer for District Special Taxes in accordance with the terms hereof. Such reimbursements shall be paid in installments in an amount cumulatively equal to fifty percent(50%) of DESTR(the"Developer DESTR'). 4.1. Basic Definition. Except as provided elsewhere in this Agreement, "DESTR" shall be the sum of three components: (1)total sales and use taxes remitted by the State of California to the City(as adjusted pursuant to Sections 4.2 and 4.4, below, "Remitted Sales Taxes")based on collections at all of the retail outlets in the Retail Project, excluding those in the hotel,reduced by the "Retail Transfer Factor," which shall be initially set at thirty-three percent(33%)(the "Adjusted Sales Tax"); (2)total transient occupancy tax collected by City from hotels within the Retail Project reduced by the "Hotel Transfer Factor" which shall be set at twenty percent(20%) (the Adjusted Transient Occupancy Tax"); and(3) Remitted Sales Taxes from retail outlets within the hotel reduced by the Hotel Transfer Factor. 4.2. Exclusions from Remitted Sales Tax. Excluded from.Remitted Sales Tax shall be the following items: 4.2.1. Deemed Transferred Sales -Not from Downtown Merchants. Excluded from Remitted Sales Tax shall be the reported Remitted Sales Taxes for any outlet which is a Deemed Non-Downtown Transfer. A"Deemed Non-Downtown Transfer"shall be any outlet previously located elsewhere in the City of San Luis Obispo but not in Downtown which, within a two (2)-year period beginning one (1)year before the opening of the outlet within the Retail Project, closed its store in San Luis Obispo. The designation of Deemed Non- Downtown Transfer and the resulting exclusion of the sales taxes from Remitted Sales Tax shall be subject to limited appeal as provided for in Section 6. 4.2.2. Deemed Transfer from an Outlet Within Downtown San Luis Obispo. If, as set forth above with respect to a Deemed Non-Downtown Transfer, a retail outlet opens in the Retail Project and, within a two (2)-year period, commencing one (1)year before F:tndt MatifaWReitnbm int Age M\Dalidio RA OM04.DOC 5 3 -rs� Attachment 7 the opening,closes an existing outlet in Downtown,then the Remitted Sales Taxes for that outlet shall be excluded from Remitted Sales Tax. Further, an amount equal to that sales tax being excluded pursuant to the preceding sentence shall be deducted from Remitted Sales Tax. "Downtown" shall, for this purpose,be defined as that area bounded by Santa Rosa Street on the North, Broad Street on the South, Marsh Street on the East, and Mill Street on the West. The designation of a Deemed Downtown Transfer may be subject to limited appeal as provided in Section 6. 4.2.3. Branch Outlet Adiustment Non-Downtown. If an outlet of a chain retail operation were to open within the Retail Project and that chain already had outlets elsewhere in San Luis Obispo not exclusively located within Downtown,then the amount of sales tax eligible for inclusion in Remitted Sales Tax would be limited to the lesser of: (1)the actual Remitted Sales Taxes for the branch outlet within the Retail Project; or(2)the amount by which the Aggregate Chain Sales Tax exceeded the Projected Chain Sales Tax during any calendar year. The "Aggregate Chain Sales Tax" shall be the Remitted Sales Taxes from all that chain's branch outlets located within the City of San Luis Obispo. The "Projected Chain Sales Tax" shall be the Remitted Sales Taxes for all of that chain's branch outlets in the year immediately prior to the opening of the outlet within the Retail Project increased annually for the Consumer Price Index for all urban wage earners as reported for the Los Angeles Metropolitan area. 4.2.4. Branch Outlet Adiustment—Downtown. For any outlet opening in the Retail Project which is a branch of a chain which has outlets exclusively within Downtown, an adjustment to Remitted Sales Tax shall be computed as follows: the steps outlined in Section 4.2.3 above with respect to the branch outlet adjustment for non-Downtown locations shall be followed. If this calculation results in a situation in which the excess of Aggregate Chain Sales Tax over Projected Chain Sales Tax is smaller than the actual sales tax for the Retail Project outlet, then not only shall the contribution to Remitted Sales Tax be limited to this lower amount but an additional amount equal to the amount by which the excess falls short of the sales in the Retail Project outlet shall be deducted from Remitted Sales Tax. 4.2.5. No Multiple Exclusions. In no event shall the terms of more than one of Subsections 4.2.1,4.2.2, 4.2.3 or 4.2.4 (each, an "Exclusion Section")be applied to a single retail operation located in the Retail Project. In the event that a single retail operation in the Retail Project.qualifies under more than one of the Exclusion Sections,then City shall elect which one of the Exclusion Sections shall be applied fora particular calendar year. 4.2.6. Example Calculations. In Exhibit-"D" an example set of calculations is provided for each of the four exclusions or adjustments identified above. 4.2.7. Exceptions from Exclusions and Deductions. Notwithstanding anything to the contrary herein, due to mitigating circumstances which minimize the sales tax transfer effect, the following shall not be subject to any sales tax exclusion or deduction set forth in this Section 4.2: (a) the location of any retailer occupying less than 1,000 square feet in any hotel structure in the Retail Project; and(b) any kiosk, computer sales terminal, automated transaction terminal, concession, farmer's market or any point of sale that occupies less than 1,000 square feet of floor space and that is not located in a separately demised premises leased by Developer to a retailer(as an example only, should a supermarket tenant provide for the sale of Jamba Juice from within the tenant's leased premises, or if Cingular wireless products are F:V a 00alifa00ULeimbors m Ageemen\IMidio RA 071304.000 6 2 J I Attachment 7 Provided from a kiosk in a public area, such operations shall not be subject to sales tax exclusions or reductions under this Section 4.2).Notwithstanding anything to the contrary herein, any retail operation that does not separately report sales tax shall not be subject to any sales tax exclusion or deduction set forth in this Section 4.2. 4.3. Adjustment of Retail Transfer Factor. Developer and City acknowledge that in developing the Retail Transfer Factor, assumptions were made about the prospective impact of the project on existing retail outlets in the City of San Luis Obispo and that such assumptions may not apply to the same degree over time. In recognition of the tendency for transfer effects to moderate over time, the Retail Transfer Factor shall be adjusted downwards by one percent(1%) for the sixth(6`h) full calendar year of operation of the Retail Project and by one percent(1%) per year for each of the next four(4) calendar years. This means that commencing with the tenth(10`h) full calendar of operation of the project and for the remaining term of this Agreement, the Retail Transfer Factor shall be twenty-eight percent(28%). 4:4. Exclusions from Remitted Sales Tax for Additional"Pedestrian Oriented" Space. 4.4.1. Purpose in General Statement. Due to the special nature of downtown merchandising in the City of San Luis Obispo and its strong pedestrian orientation, City has, in making this Agreement, relied heavily on representations by Developer that the Retail Project will remain a"big box" shopping center and not become heavily pedestrian oriented. The measure of pedestrian orientation is the number and location of new demised spaces created each of which is less than five thousand(5,000) square feet of gross leasable area. For any such new spaces, the total Remitted Sales Taxes shall be excluded from the calculation of Remitted Sales Tax. In addition, an amount equal to such total sales taxes from such new "pedestrian oriented" outlets shall be deducted from the Remitted Sales Tax otherwise calculated. 4.4.2. Method of Calculation. At the opening of Retail Project, Developer will provide a detailed floor plan of all buildings in the Retail Project together with the site plan,a prototype of which is attached herein as Exhibit"E". This floor plan will reflect the "as built"condition of the Retail Project and will serve as the baseline for subsequent calculations. Developer will concurrently provide a tabulation of all spaces in the Retail Project occupying less than 5,000 square feet of gross leasable area according to Developer' current rent roll, a copy of which should be provided to the City with the understanding that Developer may omit the actual dollar rents. The purpose of the rent roll is to establish a baseline of tenant occupancies and sizes which can serve for future reference. As part of the annual Remitted Sales Tax Reimbursement Application to be provided by Developer as described below, Developer shall provide an updated version of this floor plan indicating any changes and identifying any spaces that have been created or demised that are less than 5,000 square feet and were formerly in a store space larger than 5,000 square feet. Changes in the dimensions of individual stores, division of one small store into another small store, or creation of kiosks,concessions, farmer's markets or space that is not separately demised premises shall not count as a creation of new "pedestrian oriented" space provided that the aggregate number of square feet devoted to stores with less than 5,000 square feet has not changed. In the Remitted Sales Tax Reimbursement Application,the developer shall disclose and describe any changes in space previously occupied by tenants with over 5,000 square feet. All exclusions and penalties in this Section 4.4 shall apply only to retail spaces demised to be less than 5,000 square feet after the initial opening of F:'.W\DMalifa04\M.b..t Ar�M.Iidia RA 072304DOC 7 i Attachment 7 the Retail Project, and shall not apply to retail space that is less than 5,000 square feet in size upon initial opening of the Retail Project. Notwithstanding anything to the contrary herein,no commercial space of less than 1,000 square feet in any hotel structure in the Retail Project shall be subject to any sales tax exclusion or deduction set forth in this Section 4.4. 4.4.3. Appeal for Relief from Penalty for Small Space. In the event that one or more of the anchor tenants currently occupying 5,000 square feet or more as designated on the site plan in Exhibit "E" vacate their premises and Developer, after expending all commercially reasonable efforts, has been unable to rent the space to tenants requiring adding a minimum of 5,000 square feet, Developer may, if Developer wishes, appeal to City for relief against the penalty associated with the demising in space of additional space less than 5,000 square feet. 4.4.3.1. Application Requirement. An application for such relief shall be made in writing and shall describe among other things: (1)the nature and scope and timing of the"commercially reasonable efforts"used to rent the space to a large tenant; (2) the designation by name or by likely store type of the smaller tenants whose tenancy will be solicited because a larger tenant could not be found; and(3)a detailed discussion of why these smaller tenants will not operate in a manner directly competitive with the merchants in Downtown. 4.4.3.2. No Requirement to Relax Penalty. Nothing in this clause shall, in any way,require that City relieve Developer from the provisions of this Section 4.4.3. 4.5. Chancre in Sales Tax Laws. With respect to Adjusted Sales Tax only (and without regard to Adjusted Transient Occupancy Tax), in the event that, after the date of this Agreement, the Remitted Sales Taxes for taxes attributable to point of sale taxes are modified by law,regulation or otherwise,then the calculation of Adjusted Sales Tax shall remain in effect, provided that the reimbursements made under this Agreement subsequent to the date of such change with respect to Adjusted Sales Tax shall be the lesser of: 4.5.1. The reimbursements that would have been made under the prior law as described in this Agreement (as an example only, an increase in the local sales tax rate shall not increase City's obligation to make such reimbursements); or 4.5.2. All sums remitted to City that are attributable to, or calculated by reference to,point of sale taxes with respect to the Retail Project, whether directly or indirectly derived or paid from sales tax revenue, less the adjustments set forth in Sections 4.2 and 4.5 and less the Transfer Amount. As an example, in the event that City receives revenues based on,or calculated with reference to,point of sale taxes with respect to the Retail Project, and some portion of that amount is paid to City from sources of funds other than sales tax revenues, then the fall sum subvened to City which is directly or indirectly attributable to point of sale taxes at the Retail Project shall be included in the calculation of Adjusted Sales Tax. As a farther example, in the event that Remitted Sales Taxes are reduced by law, and the reduction is compensated for by a subvention or"in-lieu"payments to City of a like or related amount of revenue from another source, then such amount received that is attributable to reduced sales taxes with respect to the Retail Project shall be included in the calculation of Adjusted Sales Taxes. Further, in the event that remittance of revenue to City attributable to point of sale taxes PIme MXDalifuMRcimburs M Agre m\Dalidio RA 072704.DOC p O Attachment 7 are substituted or replaced by remittance of revenues to City from other sources,whether or not such substitution is permanent,the substituted amount remitted to City shall be included in the calculation of Adjusted Sales Tax. In the event of a dispute between the parties regarding a characterization of a source to replace sales taxes, said issue may be submitted to arbitration pursuant to Section 6. 4.5.3. Developer shall have no entitlement to any funds nor shall the City have any obligation to pay until such time as funds are disbursed by the State to the City and specifically identified in a manner that meets the standards,set forth in 4.5.2 above. 4.5.4. City agrees, with respect to Transient Occupancy Tax regulations or formulas, that it will make no revisions to City's Transient Occupancy Tax regulations or formulas which are in any way discriminatory against the hotel in the Project, and that any such revisions, if they occur, shall be applied uniformly to all hotels throughout the City of San Luis Obispo. 4.6. AnWication of Reimbursement Payments. City's reimbursement payments to Developer shall be paid to Developer to the extent of Developer DESTR, and applied to reimbursements in the following order of priority: 4.6.1. First, City shall pay to Developer the total of any and all District Special Taxes paid by Developer(or to be paid with the property tax bill following City's payment to Developer) which are allocable to the Commercial Property, and which have not previously been reimbursed under this Agreement plus interest thereon from the date of payment until the date of reimbursement at the rate of five and one-quarter percent(5.25%)per annum, compounded annually; 4.6.2. Second, City shall pay Developer the total of any and all District Special Taxes paid by Developer(or to be paid with the property tax bill following City's payment to Developer) which are allocable to the Benefiting Properties, and which have not previously been reimbursed under this Agreement plus interest thereon from the date of payment until the date of reimbursement at the rate of five and one-quarter percent(5.25%)per annum, compounded annually; and 4.6.3. Finally,to the extent that Developer DESTR for any year exceeds the amounts payable in that year to Developer in reimbursements for that year, City shall accumulate a reserve and make that reserve available to Developer in any subsequent year the DESTR is inadequate to meet Developer's reimbursement requirements for that year. This reserve shall be accumulated year-to-year and shall not exceed the amount of District Special Tax for which Developer is liable in any one year, including advances for Benefiting Properties for which Developer is liable. 4.6.4. City shall have the option, in its sole discretion,to substitute for the formally separate reserve fund described.above, an obligation by City to Developer to disburse such funds as might be drawn from a reserve fund in the amounts and under the conditions described in 3.6.3 above,provided: (i) that such obligation be in writing; (ii)that it extend for the duration of this Agreement; (iii)that it identify the source of funds to be used for payment which source may be the City's retained share of total sales and transient occupancy FAnM\D\Dalifa04\R&mbm=mt Apee M\Dalidio RA V2304.00C 9 Attachment 7 taxes from the Project without regard to transfer deductions; and(iv)that the document securing be in a form acceptable to Developer in Developer's reasonable discretion. 5. Application and Processing for Reimbursement Based on DESTR. 5.1. Overview of Process. Within ninety (90) days of the end of each calendar year, Developer shall submit to City a completed application for reimbursement of special taxes from DESTR(the "DESTR Reimbursement Application"). City shall have thirty (30)days in which to review such application and to challenge any facts alleged therein. Failure to provide such a challenge within thirty(30) days shall constitute a deemed approval of the DESTR Reimbursement Application. The major elements in the DESTR Reimbursement Application shall be a provision of evidence that the District Special Taxes have been paid,that any transferred or branch stores opened within the Retail Project have been appropriately accounted for, and that any additional "pedestrian oriented" space has been appropriately accounted for. 5.2. Format and Contents of Application. The DESTR Reimbursement Application shall contain the following elements: 5.2.1. Evidence of Payment A government-issued receipt or canceled check indicating the District Special Taxes due have been paid(except those District Special Taxes not yet delinquent), not only for the Commercial Project but,until such time as the Benefiting Properties are developed,that their District Special Taxes due have also been paid by Developer, and the amount of such District.Special Taxes. 5.2.2. Cumulative Balance Calculations. Developer shall also provide a cumulative accounting of the amount that Developer has advanced for District Special Taxes with respect to Benefiting Properties, and the amount that he has been reimbursed with the understanding that all unreimbursed amounts bear interest compounded annually at the rate of five and one-quarter percent(5.25%). Developer shall provide an annual accounting of the outstanding balance, if any, owed to Developer, including but not limited to the District Special Taxes that will be paid by Developer in the calendar year following the date of the balance calculations(collectively, the "Cumulative Balance"). 5.2.3. Tenant and Leased Space Schedule. The DESTR Reimbursement.Application shall also include a complete rent roll for the Retail Project(from which, at Developer's election,the actual rent figures may be omitted) showing the date the space was leased, the amount of leasable area,the scheduled expiration of the lease. Appended to this rent roll shall be the following information for every tenant in the space: (a)the corporate address at which the tenant may be contacted, a statement of whether or not the tenant had prior to opening its facility in the Retail Project, any other outlet within the City of San Luis Obispo; and(b) if such outlet was opened, its location size and name and whether it is still open or plans to close. 5.2.4. Space Allocation Calculation. Developer shall also provide a current layout of the stores in the center if such layout is at all different from the one accompanying the prior application. Developer shall identify whether or not any changes in spaces larger than 5,000 square feet have been made and whether the result of such changes is to create any additional spaces smaller than 5,000 square feet. Should such changes have occurred, P:tndU)M2J1G04U4nmbne mt Agrt t\M idio RA 072304.DOC 10 Attachment 7 the developer shall describe them in detail and indicate how the aggregate amount of tenant space in spaces less than 5,000 square feet has changed from the prior application. 5.2.5. Comments and Other Information. In a separate section entitled "Comments", Developer should provide any narrative description Developer thinks relevant to an understanding by City of issues involving either transfer or branch locations as described above or additional pedestrian orientation. Specifically,Developer should identify any areas in which Developer would seek to avoid the traditional deduction or penalty calculations by virtue of special circumstance and outline such special circumstances. A failure to identify such special circumstances or to indicate a basis for prospective appeal of the City's determination that there shall be a deduction or exclusion from DESTR in this part of the DESTR Reimbursement Application shall constitute a waiver of any such rights of appeal. 5.3. City Review and.Approval of DESTR Reimbursement Application. City shall have thirty(30) days in which to review the application for completeness and accuracy in the depiction of the various tenants and spaces. Before the end of that period, City shall inform Developer in writing that Developer's application has been approved as submitted or approved with modifications, which modifications shall be specified. More specifically, City shall identify any outlets for whom the retail sales taxes will be excluded from DESTR and any amounts equal to the retail sales taxes will deducted from DESTR,together with its reasons therefor. City shall accompany its notice to Developer with detailed documentation of the amounts of applicable sales taxes subvened and all other material factors affecting the calculation of reimbursements hereunder. City shall make no disallowances, deductions or exclusions from payments to Developer except as expressly provided in this Agreement. 5.4. Amount of Payment. No payment shall be made to Developer prior to the receipt of a completed and approved DESTR Reimbursement Application. At that time, the amount calculated for reimbursement shall be the lesser of. (a) one half of the DESTR after all adjustments; or(b) that amount necessary to retire the Cumulative Balance of unrecovered District Special Taxes. The Cumulative Balance shall consist of all payments made by Developer on behalf of the Retail Project and the Benefiting Properties,reduced by all prior reimbursements by DESTR, prior reimbursements from owners of the Benefiting Properties, increased by interest on the unrecovered amounts at the rate of 5.25%per annum compounded annually, and increased by the amount of the District Special Tax payable by Developer in the calendar year following the date of the subject DESTR Reimbursement Application. Developer shall have provided a calculation of this cumulative balance as part of Developer's DESTR Reimbursement Application. An example calculation is provided in Exhibit "F." 5.5. Disbursement Sequence. Under the terms of the proposed municipal financing, Developer will be obligated to make special tax payments twice a year with its regular property tax payments. To accommodate this, City proposes to make disbursements of DESTR twice a year. 5.5.1. First Ouarter Payment. The first such disbursement shall be made in conjunction with the annual DESTR Reimbursement Application and shall be made based on the prior calendar year's DESTR in a timely manner to permit timely payment of the property taxes (and District Special Taxes) due on April 10th of each year. F:�netUhMdife04Vteimhmsemem Agect tOWidio RA 072-304.DOC 11 3 - I�v Attachment 7 5.5.2. Fourth Quarter Payment. A second payment,based on the DESTR receipt to City through the third quarter of the year, shall be made to Developer in time for the payment of property taxes due on December 10th of each year. This second payment, however, shall be limited, (since no DESTR Reimbursement Application is required)to that amount necessary to pay the current year's special taxes including any advances that Developer is required to make for special taxes on the Benefiting Properties. Such payment will not be used to fund a surplus balance, or to recover prior deficits, since those calculations will be made only on an annual basis together with the payment made in the fust quarter of each year. 5.5.3. First Year Payment. Notwithstanding anything to the contrary herein,Developer shall be entitled to submit one DESTR Reimbursement Application at any time during the first calendar year in which District Special Taxes are unposed, and Developer shall be entitled to payments under Section 5.5.1 and/or Section 5.5.2 based upon such DESTR Reimbursement Application and DESTR receipt to City through the end of the calendar quarter preceding City's payment,provided that City shall not be obligated to make such payment.sooner than thirty(30)days after Developer submits the DESTR Application to City. 5.6. Disputed Payment. In the event that there is a dispute about some portion of the DESTR, these dates shall apply but only to that amount of DESTR reimbursement not under dispute. Any disputed amounts will be paid within thirty (30) days after the arbitrator has issued his award under provisions of Section 6.2. 5.7. Special Provisions for Accommodating the "Triple Flip." For the fiscal year 2003-2004, the State of California plans to reduce the City's sales tax rate by 25%(by one- quarter percent from the current 1%City sales tax rate) in order to allow the State to enact a new '/a-cent sales tax to be dedicated solely to the repayment of deficit reduction bonds, thus resulting in no net increase in the overall sales tax rate paid by consumers and businesses. The State plans to backfill this loss to the City through an"in-lieu sales tax"that will ultimately be funded by the State's General Fund by reallocating proceeds from the Educational Revenue Augmentation Fund. This change in sales tax rates and allocations,known as"the triple flip,"may or may not be in effect at the time the District Bonds are sold. 5.7.1. Developer Option to Increase Capitalized Interest. If the "triple flip" is in effect, Developer has the right but not the obligation to request an increase in the bond size to accommodate an additional six (6)months of capitalized interest so as to offset the delay in receipt of DESTR created by the"triple flip". For this purpose, the delayed additional"in-lieu sales taxes" allocated to City to offset the earlier reduction in City's sales tax rate shall be included in the calculation of DESTR as if they were Remitted Sales Taxes. 5.7.2. Developer's Absomtion of Increased Special Tax. Developer agrees, in turn,that the total additional District Special Taxes created by this addition of capitalized interest to the District Bond, shall be paid solely by Developer and shall not be ALLOCATED TO City or to the Benefiting Properties, but shall be subject to reimbursement from Developer DESTR. 5.7.3. Relief from Requirement to Absorb Increased Special Tax. At such times as Benefiting Properties assume their share of the District Special Taxes obligation, they shall assume their pro rata share of the entire special tax including the small premium associated with the additional capitalized interest. F:nd\D\Dalifa04V4imbu =t Agm=mADalidio RA OM04.00C 12 Attachment 7 6. Disputes Resolution and Rights of Appeal. 6.1. Potentially Disputed Area Topics and Rights to Appeal. Developer may challenge the characterization of any outlets for whom sales taxes are deducted from DESTR on the basis that there exists an explicitly extenuating circumstance, i.e.,that the outlet would have left the City of San Luis Obispo if it had not located in the Retail Project,because of which the traditional transfer penalty should not apply. Further, the parties hereby expressly acknowledge that the retailers known as "Pier 1" and "Famous Footwear" qualify as such extenuating circumstances because they have closed their outlets in the City of San Luis Obispo without respect to the status of the Retail Project, and as such there shall be no sales tax deduction or exclusion under this Agreement with respect to the location of those retailers in the Retail Project. 6.2. Arbitration. In the event of any dispute as to the provisions of this Agreement, the parties shall promptly meet and confer in a good faith effort to resolve such disputes. If the parties are unable to voluntarily agree upon a resolution of any dispute between them with respect to the provisions of this Agreement only, then within fifteen(15) days of a notice of dispute by a party hereto,then the dispute shall be resolved by arbitration in the following manner: 6.2.1. Within five(5) days after the parties' failure to resolve a dispute informally,the parties shall jointly name one (1) independent arbitrator(the "Arbitrator"). If the parties are unable to agree on the Arbitrator, the Arbitrator shall be named by the Superior and Municipal Court of the State of California, in and for the County of San Luis Obispo. No person shall be appointed or designated an arbitrator unless he/she is then qualified to arbitrate contractual disputes. 6.2.2. The Arbitrator shall,within fourteen (14) calendar days after appointment, receive from each of the parties a written statement outlining its determination of the matters at issue, supported by the reasons therefor, with counterpart copies to each party. The Arbitrator shall arrange for a simultaneous exchange of such proposed resolutions. The Arbitrator shall thereafter within fourteen(14) calendar days select which of the two (2) proposed resolutions most closely approximates his/her own determination of the matters at issue, and the Arbitrator shall have no right to propose a middle ground or any modification of either of the two (2)proposed values. The resolution the Arbitrator chooses as most closely approximating his/her own determination shall constitute the decision of the Arbitrator and will be final and binding upon the parties, absent fraud or gross error. 6.2.3. In the event of a failure, refusal or inability of the Arbitrator to act, his/her successor shall be appointed in the same manner as such Arbitrator was first chosen hereunder. Each party shall pay the fees and expenses of its respective arbitrator and the parties shall equally share the fees and expenses of the Arbitrator. 6.2.4. The Arbitrator shall have the right to consult experts and competent authorities with factual information or evidence pertaining to a determination of a resolution of the dispute. The Arbitrator shall render his/her decision in writing with counterpart copies to each party. The Arbitrator shall have no power to modify the provisions of this Agreement. The substantive law of the State of California shall be applied by the Arbitrator to the resolution of the dispute. The prevailing party shall be entitled to reimbursement of attorney F:\u\DtDaIU 04Uteimbmennrnt Ageemo Malidio RA 07DO4.DM 13 3 - luc Attachment 7 fees, costs, and expenses incurred in connection with the arbitration, as determined by the Arbitrator. All decisions of the Arbitrator shall be final,binding, and conclusive on all parties. 6.2.5. The provisions of this Section may be enforced by any Court of competent jurisdiction, and the party seeking enforcement shall be entitled to an award of all costs, fees and expenses, including attorneys fees,to be paid by the party against whom. enforcement is ordered. Judgment on the award rendered by the Arbitrator may be entered in any court having jurisdiction. 6.2.6. BY INITIALING IN THE SPACE BELOW THE PARTIES ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THIS "ARBITRATION OF DISPUTES"PROVISION DECIDED BY NEUTRAL ARBITRATION AND ARE GIVING UP ANY RIGHTS THEY MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. INITIALED: 7. Miscellaneous Provisions. The following miscellaneous provisions shall apply to this Agreement: 7.1. Counterparts. This Agreement may be executed in any number of counterparts which together shall constitute the agreement of the parties. 7.2. Laws. It is specifically stipulated that this Agreement will be interpreted and construed according to the laws of the State of California. Venue for any dispute arising under this Agreement shall be San Luis Obispo County, California. 7.3. Amendments. No modification or amendment of this Agreement will be of any force or effect unless made in writing and executed by all parties hereto. 7.4. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, legal representatives and successors. This Agreement is personal to Developer and does not run with the land of the Real Property. Developer may assign its rights and obligations under this Agreement with the prior consent of City, which consent shall not be unreasonably withheld or delayed, subject to the following: Developer may not assign its rights and obligations under this Agreement, except in conjunction with the sale of the Shopping Center Property. There shall be no transfer or partitioning of rights under this Agreement associated with the sale or transfer of an individual pad or the hotel site. Furthermore, Developer cannot sell the Shopping Center Property and concurrently assign rights under this Agreement until the Freeway Interchange construction contract is let and the Retail Project is open for business. Nothing in this section shall prevent the sale of the Shopping Center Property, but will prevent the assignment of this Agreement until these conditions are met; thereafter, for the Agreement to be assigned it must be in conjunction with the sale of the Shopping Center Property. Developer shall be released from all liabilities arising subsequent to such assignment. 7.5. Further Documents. The parties agree that they will execute such other instruments and documents as are or may become necessary or convenient to carry out the intent and purposes of this Agreement. F:\nVU30Wifa04\Rcnnbo m1 Ageccme t\Dali(io RA 072706.DOC 14 Attachment 7 7.6. Pronouns. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person, persons or entities may require. 7.7. Entire Agreement. This instrument contains all of the understandings and agreements of whatsoever kind and nature existing between the parties hereto with respect to this Agreement, and the rights, interests, understandings, agreements and obligations of the respective parties and their prior oral agreements, if any. 7.8. Headings. All headings in this Agreement are inserted only for convenience and ease of reference, and are not to, be considered in the construction or interpretation of any provision of this Agreement. 7.9. Authodiy. Each individual executing this Agreement on behalf of a party hereto, by his or her signature, represents that he or she maintains full authority on behalf of the applicable party to execute this Agreement, and thereby bind the applicable party to all covenants, duties and obligations contained herein. 7.10. Exhibits. All exhibits, schedules and recitals to this Agreement as referenced in any portion hereof are hereby incorporated by this reference, as though fully set forth in the body of this Agreement; provided, however, notwithstanding any other provisions of this Agreement, if for any reason any exhibit or schedule referenced herein is not attached to this Agreement at the time of its execution by the parties, then when such exhibit or schedule becomes available, it shall be initialed by the parties and attached to this Agreement, bearing no impact on the enforceability of this Agreement. 7.11. Time. Time is agreed to be of the essence with respect to this Agreement. 7.12. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed duly given (i) if delivered personally, when received; (ii) if transmitted by facsimile, upon the generation by the transmitting facsimile machine of a confirmation that the entire document has been successfully transmitted; (iii) if sent by recognized courier service, on the business day following the date of deposit with such courier service, or(iv) if sent by registered mail, postage prepaid, return receipt requested, on the third business day following the date of deposit in the United States mail. All such notices shall be addressed to a party at its address as set forth below, or to such other address or facsimile number as a party shall notify the other of in accordance with this Section. If to City: City of San Luis Obispo Ken Hampian, City Administrative Officer 990 Palm Street San Luis Obispo, CA 93401 Facsimile: (805) 781-7109 With a Copy to: Jonathan Lowell, City Attorney 990 Palm Street San Luis Obispo, CA 93401 Facsimile: (805) 781-7409 FAgrcemc Malidio RA M304DOC 15 Attachment 7 If to Developer: Ernest Dalidio, Jr. 2706 Rodman Drive Los Osos, CA 93402 facsimile: (805) 528-0941 SC Properties Attn: Bill Bird 510 5. Grand Avenue Glendora, CA 91741 facsimile: (626)963-1505 With a Copy to: Andre,Morris &Buttery Attn: Michael J. Morris P.O. Box 730 San Luis Obispo, CA 93406-0730 facsimile: (805) 543-0752 7.13. Project is a Private.Undertaking. It is specifically understood and agreed to by and between the parties hereto that: (i)the subject development is a private development; (ii) City has no interest or responsibilities for or duty to third parties concerning any improvements until such time and only until such time that City accepts the same pursuant to the provisions of this Agreement or in connection with the various subdivision map approvals; and (iii) Developer shall have full power over and exclusive control of the Project subject only to the limitations and obligations of Developer under this Agreement; and (iv) the contractual relationship between City and Developer is such that Developer is an independent contractor and not an agent of City. 7.14. Enforceability. City acknowledges that SLO Marketplace has an equitable interest in a portion of the Real Property, in that SLO Marketplace has entered into an option agreement with Dalidio Family whereby SLO Marketplace has an option to purchase such portion of the Real Property. Dalidio Family hereby consents to SLO Marketplace's entering into this Agreement, and to this Agreement becoming effective with respect to SLO Marketplace on the Effective Date, irrespective of whether or not SLO Marketplace has then acquired fee title to a portion of the Real Property. City agrees that, to the extent that, and for so long as, SLO Marketplace's interest in the Real Property as an option holder is deemed under Califomia law to be insufficient to enforce its rights under this Agreement, Dalidio Family may, in its sole discretion, enforce all rights and interests of SLO Marketplace hereunder. Rights and obligations of Developer hereunder shall be deemed to apply to Dalidio Family or SLO marketplace, respectively,only insofar as those parties are owners of respective portions of the Real Property. F:\ne\D\Da1ifa04Utcimba =t Agm =Malidio RA 072304.DOC 16 3— c�� Attachment 7 IN WITNESS WHEREOF,the parties hereto have caused this Agreement to be executed as of the date and year first above written. "City" "Dalidio Family" CITY OF SAN LUIS OBISPO, a Municipal Corporation ERNEST DALIDIO, JR., Successor Trustee By of Dalidio Family Trust u/t/a dated October 29, 1987 Its: I HEREBY APPROVE the form and legality ERNEST DALIDIO JR., Successor Trustee of the foregoing Agreement this of the Thelma F. Perrozi Trust u/t/a dated day of February 7, 1991 CLARA B. DALIDIO, Trustee of the Clara B. Dalidio Trust u/t/a dated January 15, 1991 City Attorney "SLO Marketplace" SAN LUIS OBISPO MARKETPLACE ASSOCIATES, LLC, a California limited liability company By: Its: F-�nCt00alifaMRcimbalS mt Agree M)alidia IU 072304.DOC 17 3 •I�O� Attachment 7 REIMBURSEMENT AGREEMENT EXHIBITS Exhibit A—Defined Terms Exhibit B—Freeway Interchange Description Exhibit C—City Policies for Land-Based Financings Exhibit D—Example DESTR Calculations Exhibit E—Prototype Floor and Site Plan Exhibit F—Example Reimbursement Application Calculations Exhibit G—Benefiting Properties Exhibit H—Business Land Exhibit I—Conservation Land Exhibit J—Freeway Cost Allocations Exhibit K—Real Property Exhibit L—Residential Land Exhibit M—Retail Land F:WET TalifaDMILA ExhibitSUtA Exhibit Indax.doc - Attachment 7 REIMBURSEMENT AGREEMENT EXHIBIT "A" DEFINED TERMS "Adjusted Sales Tax" is defined in Section 4.1. "Adjusted Transient Occupancy Tax" is defined in Section 4.1. "Aggregate Chain Sales Tax" is defined in Section 4.2.3. "Arbitrator" is defined in Section 6.2.2. "Benefiting Properties" means the real properties identified as the "Prado Area" and the "Margarita Area," as more fully described in Exhibit "G", which will significantly benefit from the Freeway Interchange. "BP Advances" is defined in Section 3.2. "Business Land" means the approximately 8.1 acres of the Real Property described in Exhibit "H". "Business Project" means the business park improvements consisting of commercial buildings,which is intended to be developed on the Business Land. "Commercial Property"means the Retail Land and the Business Land. "Conservation Land" means the approximately 54.67 acres of the Real Property described in Exhibit "Cumulative Balance" is defined in Section 5.2.2. "Deemed Non-Downtown Transfer" is defined in Section 4.2.1. "DESTR" is defined in Section 4.1. "DESTR Reimbursement Application" is defined in Section 5.1. "Developer DESTR" is defined in Section 4. "Development Agreement" is defined in Recital D. "District" means the Community Facilities District formed by City to fund the cost of the Freeway Interchange. F:McNY0Wi[nWUTA ExhibitsvRA Exhibit AAW ' LA - Attachment 7 "District Bonds" is defined in Section 1.2. "District Special Tax" means the special tax resulting from the formation of the District. "Downtown" is defined in Section 4.2.2. "Freeway Cost Allocations" means the allocation of the District Bond allocations between the Commercial Property and the Benefiting Properties set forth in Exhibit "J." "Freeway Interchange" is defined in Recital D. "Freeway Interchange Cost" is defined in Recital D. "Hotel Transfer Factor"is defined in Section 4.1. "Project" shall mean collectively, the Retail Project, the Business Project,the Residential Project,the creation of open space on the Conservation Land, the approximately 16.2 acres of the Real Property committed to public roads, and the Freeway Interchange. The Project is more specifically described and defined in the Development Agreement. "Projected Chain Sales Tax"is defined in Section 4.2.3. "Real Property" means that certain real property located in an unincorporated area of the County of San Luis Obispo, California, more particularly described in Exhibit "K" attached hereto. "Remitted Sales Tax"is defined in Section 4.1. "Residential Land" means that approximately 3.3 acres of the Real Property described in Exhibit "L." "Residential Project" means, collectively, residential improvements on the Residential Land including approximately sixty(60) single family homes and related improvements. "Retail Land" means that approximately 48.7 acres of the Real Property described in Exhibit "M" and all improvements thereto. "Retail Project" means, collectively, commercial improvements, including,but not limited to, approximately 650,000 square feet of gross leasable area that may include retail units, up to three (3) anchor stores of 100,000 to 140,000 square feet of gross leasable area each,a hotel with approximately 150 guest rooms, restaurants and other uses permitted under the applicable zoning regulations,with additional areas allocated to outdoor sales. "Retail Transfer Factor"is defined in Section 4.1. F:MaMMMifn041XA 5chibiaUtA Exhibit A.doc Attachment 7 "Shopping Center Property" shall mean that portion of the Retail Land, as shown on Exhibit"M," which is southwest side of Dalidio Road, upon which the shopping center improvements are to be built. "Term" means the term of this Agreement, as provided in Section 4.2. F:netOTWif2DORA ExhINUIRA Exhibit AAM � Attachment 7 REIMBURSEMENT AGREEMENT EXHIBIT "B" DESCRIPTION OF FREEWAY INTERCHANGE 1. PROPOSED PROJECT A. PROJECT DESCRIPTION The City of San Luis Obispo is proposing to upgrade Route 101/Prado Road interchange. The existing Prado Road interchange is a partial interchange located at. KP 43.2 (PM 26.8). This interchange is being converted to a full interchange with a tight diamond configuration on the northbound side and a partial cloverleaf configuration on the southbound side. In addition, Prado Road will be extended to Madonna Road in accordance with the City's circulation element of the General Plan and will be consistent with the 1994 Regional Transportation Plan for San Luis Obispo County. The proposed project will improve access and circulation for the adjacent commercial developments, accommodate build-out of the City's General Plan and relieve traffic congestion at Madonna Road interchange and Los Osos Valley Road interchange. The project proposes improvements as follows: L Construct an overcrossing structure over Route 101 with four 3.6 in through lanes, dual 3.6 in left tum pockets, a 2 in wide striped median, two 2.4 in standard bicycle lanes and two 2.4 in wide sidewalks on both sides of the structure. 2. Reconstruct the northbound Route 101 single lane diagonal on-ramp and off-ramp on the east side. At the ramp termini, the northbound diagonal off-ramp will"be widened to three lanes (two left and one right). The northbound on-ramp will have two receiving lanes for the dual left turn movements,but will transition to a standard one lane on-ramp. 3. Construct a new southbound Route 101 loop off-ramp, along with a southbound Route 101 diagonal on-ramp, for the west side. These two ramps will be single lane ramps. At the ramp termini, the southbound loop off-ramp will be widened to three lanes (one left, one shared left/right and one right). The southbound diagonal on-ramp will have two receiving lanes for the dual left tum movements, but will transition to a standard one lane on-ramp. 4. Construct an auxiliary lane in northbound and southbound directions of Route 101 between the Prado Road interchange and the Madonna Road interchange. U.S. Route 101 is part of the National Highway System and is presently a four lane freeway that runs north-south through the project area, connecting the Pismo Beach area with San Luis Obispo. In the project area, Route 101 has full interchanges at Los Osos Valley Road (KP 41.7, PM 25.91) to the south and Madonna Road (KP 44.27,PM 27.5) to the north. At Prado Road, there is access to and from Route 101 on the east side only. This access is a buttonhook ramp configuration terminating at Prado Road to provide northbound off-ramp and 3 - I'll F:Mte\D\Do1ifa04\1iA ExhibinUtA Exhibit Bp+tt IAuc Attachment 7 on-ramp access to Route 101. These ramps do not meet current design standards. The northbound off-ramp is located 1.52 km north of the Los Osos Valley Road interchange, and the northbound on-ramp is located 1.04 km south of the Madonna Road interchange. The interchange at Prado Road is situated on relatively flat terrain, except for the incised stream channels of San Luis Obispo and Prefumo Creeks. Agricultural fields, US Border Patrol Office and a commercial development complex are located on the west side of the freeway. The City's corporation yard, an old drive-in movie theatre, fallow fields, commercial building, storage yards and the City's wastewater treatment plant are located on the east side. During the past 40 years since the freeway was constructed, developments in the southern part of the City of San Luis Obispo have resulted in an increase in demand for access to and from Route 101. However, only minor improvements have been made which include inside median shoulder widening, outside shoulder widening, the installation of a median barrier and the addition of the auxiliary lane between Madonna Road and Marsh Road. C. SAFETY IMPROVEMENTS With the construction of a full interchange, drivers would be less likely to get confused, thereby eliminating or reducing the potential for wrong way movements. This project will remove the existing partial interchange and replace it with a full interchange. The northbound Route 101 on- ramp and off-ramp at Prado Road will be upgraded to current ramp design standards and provided with standard deceleration, acceleration and lane drop lengths to improve traffic merges and to reduce traffic conflicts. D. SITE PLAN The attached plan illustrates the Freeway Interchange,which shall be built substantially in accordance with such plans. As provided in Section 11.4, the scope of the Freeway Interchange shall be the improvements shown on the attached plan between and including the intersections described as "Intersection D" on the west side and "Intersection A" on the east side. F:4rttM)TAifz04\PA ExhibitsVtA Exhibit 8 pan I dm 3 — I� d— \ V P�i Ilk w 8�(1i e3ati CM All Uj ' n .,,iii:�✓'` -..\�.�• ' �4-.. 3�� tri' ,��•�-"..'�y�t.-�,�T'`• ��� � .' H�W 8 - / r / �l b. S• .CL- -..:� �� VIWJ �,1 �11•�. •\`�. g� I S'✓�ry �� `y��.�iYN�u�m�U a..: ...., }}'.�. �'�' _ `i\,•, mZy < Y rrt .-. .. yyy.� 1. OY[i W W rl 11111 H 2 � � � � `•2�gin;.._w:, 8s ' KKW ZZ N_ .. ,y 6�r■fes,., �- v n •, dli.�'` -..� O 1- 4 rr O y I is a s a s a a a a N a a a ,�• � < 9 R X8 R E 9 I ;��• a o - H �t0000Op © .1� i i Attachment 7 REIMBURSEMENT AGREEMENT EXHIBIT "C" CITY POLICIES FOR LAND-BASED FINANCINGS - Attachment 7 l city of san lues ompo Exhibit C MENNEM City Policies for Land-Based Financing The following is an excerpt from the 2003-05 sidewalks and other pedestrian paths; transit Financial Plan Supplement of the City's Budget and facilities; and bike paths. Fiscal Policies regarding land-based financings e. Storm drainage, creek protection and flood (Section E. under Capital Financing and Debt protection improvements. Management). f Parks, trails, community centers and other Land-Based Financings recreational facilities. g. Open space. I. Public Purpose. There will be a clearly h. Cultural and social service facilities. articulated public purpose in forming an assessment or special tax district in financing i. Other governmental facilities and public infrastructure improvements. This should improvements such as offices, information include a finding by the Council as to why this technology systems and telecommunication form of financing is preferred over other funding systems. options such as impact fees, reimbursement agreements or direct developer responsibility for School facilities will not be financed except the improvements. under appropriate joint community facilities agreements or joint exercise of powers 2. Eligible Improvements. Except as otherwise agreements between the City and school determined by the Council when proceedings for districts. district formation are commenced, preference in financing public improvements through a special 3. Active Role. Even though land-based financings tax district shall be given for those public may be a limited obligation of the City, we will improvements that help achieve clearly play an active role in managing the district. This identified community facility and infrastructure means that the City will select and retain the goals in accordance with adopted facility and financing team, including the financial advisor, infrastructure plans as set forth in key policy bond counsel, trustee, appraiser, disclosure documents such as the General Plan, Specific counsel, assessment engineer and underwriter. Plan, Facility or Infrastructure Master Plans, or Any costs incurred by the City in retaining these Capital Improvement Plan. Such improvements services will generally be the responsibility of include study, design, construction and/or the property owners or developer, and will be acquisition of advanced via a deposit when an application is filed; or will be paid on a contingency fee basis a. Public safety facilities. from the proceeds from the bonds. b. Water supply, distribution and treatment systems. 4. Credit Quality. When a developer requests a district, the City will carefully evaluate the c. Waste collection and treatment systems. applicant's financial plan and ability to carry the d. Major transportation system improvements, project, including the payment of assessments such as freeway interchanges; bridges; and special taxes during build-out. This may intersection improvements; construction of include detailed background, credit and lender new or widened arterial or collector streets checks, and the preparation of independent (including related landscaping and lighting); appraisal reports and market absorption studies. - 1 - 3 -I'll _ Attachment 7 City Policies for Land-Based Financings Exhibit C For districts where one property owner accounts similar districts)should generally not exceed I% for more than 25% of the annual debt service of the sales price of the property; and total obligation, a letter of credit further securing the property taxes, special assessments and special financing may be required. taxes payments collected on the tax roll should generally not exceed 2%. 5. Reserve Fund A reserve fund should be established in the lesser amount of: the 10. Benefit Apportionment. Assessments and maximum annual debt service; 125% of the special taxes will be apportioned according to a annual average debt service; or 10% of the bond formula that is clear, understandable, equitable proceeds. and reasonably related to the benefit received by—or burden attributed to—each parcel with 6. Value-to-Debt Ratios. The minimum value-to- respect to its financed improvement. Any date ratio should generally be 4:1. This means annual escalation factor should generally not the value of the property in the district, with the exceed 2%. public improvements, should be at least four times the amount of the assessment or special 11. Special Tax District Administration In the tax debt. In special circumstances, after case of Mello-Roos or similar special tax conferring and receiving the concurrence of the districts, the total maximum annual tax should City's financial advisor and bond counsel that a not exceed 110% of annual debt service. The lower value-to-debt ratio is financially prudent rate and method of apportionment should under the circumstances, the City may consider include a back-up tax in the event of significant allowing a value-to-debt ratio of 3:1. The changes from the initial development plan, and Council should make special findings in this should include procedures for prepayments. case. 12. Foreclosure Covenants. In managing 7. Appraisal Methodology. Determination of administrative costs, the City will establish value of property in the district shall be based minimum delinquency amounts per owner, and upon the full cash value as shown on the ad for the district as a whole, on a case-by-case valorem assessment roll or upon an appraisal by basis before initiating foreclosure proceedings. an independent Member Appraisal Institute (MAI). The definitions, standards and 13. Disclosure to Bondholders. In general, each assumptions to be used for appraisals shall be property owner who accounts for more than 10% determined by the City on a case-by-case basis, of the annual debt service or bonded with input from City consultants and district indebtedness must provide ongoing disclosure applicants,and by reference to relevant materials information annually as described under SEC and information promulgated by the State of Rule 15(c)-12. California, including the Appraisal Standards for Land-Secured Financings prepared by the 14. Disclosure to Prospective Purchasers. Full California Debt and Investment Advisory disclosure about outstanding balances and Commission. annual payments should be made by the seller to prospective buyers at the time that the buyer 8. Capitalized Interest During Construction. bids on the property. It should not be deferred to Decisions to capitalize interest will be made on after the buyer has made the decision to case-by-case basis, with the intent that if purchase. When appropriate, applicants or allowed, it should improve the credit quality of property owners may be required to provide the the bonds and reduce borrowing costs, City with a disclosure plan. benefiting both current and future property owners. 9. Maximum Burden. Annual assessments (or special taxes in the case of Mello-Roos or 2 - �� 1 Attachment 7 REIMBURSEMENT AGREEMENT EXHIBIT "D" EXAMPLE DESTR CALCULATIONS F.WEPDUDsIifsD4\RA ExhibeskKA Exhibit D.doc Prepared for SLO RDA by ADK&A San Luis Marketplace "Exhibit D" 3:03 PM 7//23/2004 C AA hment 7 Exhibit D: Illustrative Example Calculation of DESTR DESTR Component#1: Adjusted Sales Tax Illustrative Sales Net Sales Tax for Store Name Sq Ft GLA Tax Less Exclusions Less Penalty DESTR Store A 5,000 $15,000 ($12,000) (a) $0 $3,000 Store B 3,000 $9,750 ($4,500) (b) ($9,750) ($4,500) Store C 4,000 $11,600 ($5,600) (c) $0 $6,000 Store D 1,500 $6,750 ($1,750) (d) ($1,750) $3,250 Store E 96,000 $230,400 $0 $0 $230,400 All other stores(excluding those in hotel) 650,000 $1,423,500 Lo $0 $1,423,500 Total for Retail Outlets 759,500 $1,697,000 ($23,850) ($11,500) $1,661,650 Less: Reduction per Retail Transfer Factor of 33% (initial value) ($548,345) Adjusted Sales Tax $1,113,306 DESTR Component#2: Adjusted Transient Occupancy Tax Total Transient Occupancy Tax from Project Hotel $460,000 Less: Reduction per Hotel Transfer Factor of 20% ($92,000) Adjusted Transient Occupancy Tax $368,000 DESTR Component#3: Adjusted Sales Tax from Hotel Retail Outlets Total Sales Tax from Hotel Retail Outlets $6,000 Less: Reduction per Hotel Transfer Factor of 20% ($1,200) Adjusted Sales Tax from Hotel Retail Outlets Tax $4,800 TOTAL DESTR (Illustrative) $1,486,106 TOTAL DEVELOPER DESTR @ 50% (Illustrative) $743,053 N&V An numbers included herein are illustrative only and do not represent actual tax collections. ►hey are provided merely to illustrate the calculations with potential exclusions and penalties as defined in the Special Tax Reimbursement Agreement Notes to Exclusions: (a) "Deemed Transfer Sales-Not from Downtown Merchants" Assumes a Store A outlet from outside Downtown SLO had$12,000 inreported sales tax prior to relocating to the Retail Project. (b) "Deemed Transfer Sales-From Downtown Merchants" Assumes a Store B outlet from within Downtown SLO had$4,500 in reported sales tax prior to relocating to the Retail Project. (c) "Branch Outlet Adjustment-Not from Downtown Merchants" Assumes a branch outlet(Store C)of a chain with existing outlet(s)in SLO but outside Downtown SLO opens in the Retail Center,with$11,600 in reported sales tax. Assumes further that Aggregate Sales Tax from all this chain's outlets in SLO exceeds the Projected Sales Tax by$6,000. The amount allowed to DESTR is therefore the lesser of the two amounts. (d) "Branch Outlet Adjustment-From Downtown Merchants" Assumes abranch outlet(Store D)of a chain with existing outlet(s)in Downtown SLO opens in the Retail Center, with$6,750 in reported sales tax Assumes further that Aggregate Sales Tax from all this chain's outlets in SLO exceeds the Projected Sales Tax by$5,000,which is lower than Tax. (x� SLMktptaceupdatedDistributed w Exhlbs v3.xtsADKBA Working Draft-Subject to Change " Attachment 7 REIMBURSEMENT AGREEMENT EXHIBIT "E" PROTOTYPE FLOOR AND SITE PLANS 3- 111 F.AwkDOali(a"RA Ealvbiu%RA Esbibe E.d= Affachmenf 7 '111 (iii(` Z � 3;a� �E� ���. �ii fD • 9� 1 � � A a jy J t i = t a 1314;c§15x \ � ! i tigt it i! iigii tii i\ '19;1�i Y 777i • ':-i as ai .a... .Ie a� !\1i IPi _ _ _ _______________ _ _ _----______ .m.. ill' ... _ „ O cn 0 O tF�� I fNf#11f#fHHI�'r .= -• — --- ---- 01 ' \� _ O � ' r, O CD CD d: !� 6 H ��y1111 1 ; Ol NN N.b. b z A &O mm VJ ' \� a C N � Attachment 7 REIMBURSEMENT AGREEMENT EXHIBIT "F" EXAMPLE REIMBURSEMENT APPLICATION CALCULATIONS � - (gl F:%wZ\DalifaD4\RA Eahbhs\RA Eahbe FAA Prepared for SLO RDA by ADK&A San Luis Marketplace "Exhibit F (1)" 12:34 PM 7/27/2004 Exhibit F: Illustrative Example Calculation of the Cumulative Balance of Unrecovered District Special Taxes, as Required for DESTR Reimbursement Application (Note a) Version A: Example illustrating full payoff of cumulative balance Year 1 2 3 4 5 6 7 8 9 10 Memo: Illustrative DESTR 1,487 1,556 1,618 1,662 1,704 1,768 1,832 1,897 1,965 2,035 Total Payments Made by Developer on Behalf of RetailProiect and-Benefiting Properties -(Note.b): Project Share of Total Bond 596 596 596 596 596 596 596 596 .596 596 Margarita Share of Bond Payment 288 288 288 288 288 0 0 0 0 0 Prado Share of Bond Payment 104 104 104 104 1.04 104 104 104 104 104 Total Payments Made by Developer for Project and Benefiting Properties 988 988 988 988 988 700 700 700 700 700 Less: Prior Reimbursements from DESTR (Note c) 0 (743) (778) (809) (831) (852) (884) (916) (949) 0 Less: Prior Reimbursements from Owners of Benefitting Properties: Margarita Payoff 0 0 0 0 (1,656) 0 0 0 0 0 Prado Payoff 0 0 0 0 0 0 0 0 0 (1,438) Total Prior Reimbursements from Owners of Benefiting Properties 0 0 0 0 (1,656) 0 0 0 0 (1,438) Net Payments Made by Developer 988 245 210 179 (1,499) (152) (184) (216) (249) (738) Plus: Interest at 5.25% 0 52 67 82 96 22 15 6 IQ (18) Net Payments Made by Developer with Interest 988 297 278 261 (1,403) (130) (169) (209) (253) (756) Cumulative Payments Made by Developer with Interest 988 1,285 1,562 1,823 420 290 121 (88) (341) (1,098) Plus: District Special Tax Payable by Developer in Following Year 988 988 988 988 700 700 700 700 700 0 DEFINED"CUMULATIVE BALANCE" OF UNRECOVERED DISTRICT SPECIAL TAXES (Noted) 1,976 2,273 2,550 2,811 1,120 990 821 612 359 (1,098) (a) All numbers included herein are illustrative only and do not represent actual payments or reimbursements. They are provided merely to illustrate the calculation of the Cumulative Balance as defined in the Special Tax Reimbursement Agreement. (b) The interest rate and resulting payment calculations are purely illustrative in that first;the interest rate cannot be predicted in advance and second,the Reimbursement Agreement provides that the developer may request escalating rather than constant debt service. (c) Per section 4 of the Reimbursement Agreement,developer reimbursements may be no greater than 50%of DESTR. (d) The"Cumulative Balance°is the potential maximum payment due the developer under section 5.4 of the Reimbursement Agreement SLMktpiaceupdated0istributed w Exhibs v4.xisADK&A Working Draft-Subject to Change Ju oL Prepared for SLO RDA by ADK&A ' - San Luis Marketplace "Exhibit F (2)" 12:34 PM 7/27/2004 Exhibit F: Illustrative Example Calculation of the Cumulative Balance of Unrecovered District Special Taxes, as Required for DESTR.Reimbursement Application (Note a) Version 8: Example illustrating no retirement of cumulative balance Year 1 2 3 4 5 6 7 8 9 10 Memo: Illustrative DESTR 1,487 1,556 1,618 1,662 1,704 1,768 1,832 1,897 1,965 :2,035 Total Pavments Made by Developer on Behalf of Retail Project and Benefiting Properties (Note b): Project Share of Total Bond 1,161 1,161 1,161 1,161 1,161 1,161 1,161 1,161 1,161 1,161 Margarita Share of Bond Payment 288 288 288 288 288 0 0 0 0 0 Prado Share of Bond Payment 104 104 104 104 104 104 104 104 104 104_ Total Payments.Made by Developer for Project and Benefiting Properties 1,553 1,553 1,553 1,553 1,553 1,265 1,265 1,265 1,265 1,265 Less: Prior Reimbursements from DESTR (Note c) 0 (743) (7.78) (809) (831) (852) (884) (916) (949) (983) Less: Prior Reimbursements from Owners of Benefitting Properties: Margarita Payoff 0 0 0 0 (1,656) 0 0 0 0 0 Prado Payoff 0 0 0 0 0 0 0 0 0 (1,438) Total Prior Reimbursements from Owners of Benefiting Properties 0 0 0 0 (1,656) 0 0 0 0 (1,438) Net.Payments Made by Developer 1,553 810 775 744 (934) 413 381 349 316 (1,156) Plus: Interest at 5.25% 0 82 128 176 224 187 218 250 281 313 Net Payments Made by Developer with Interest 1,553 891 903 920 (710) 600 599 599 598 (843) Cumulative Payments Made by Developer with Interest 1,553 .2,444 3;348 4;268 3,558 4;157 4,757 5,355 5,953 5,110 Plus: District Special Tax Payable by Developer in Following Year 1 553 1 553 1 553 1 553 1 265 1265 11265 1 265 1265 1 161 DEFINED"CUMULATIVE BALANCE" OF UNRECOVERED DISTRICT SPECIAL TAXES (Noted) 3,106 3,997 4,901 5,821 4,823 5,422 6,022 6,621 7,218 6,271 (a) All numbers included herein are illustrative only and do not represent actual payments or reimbursements. They are provided merely to illustrate the calculation of the Cumulative Balance as defined in the Special Tax Reimbursement Agreement. (b) The interest rate and resulting payment calculations are purely illustrative in that first,the interest rate cannot be predicted in advance and second,the Reimbursement Agreement provides that the developer may request escalating rather than constant debt service: (c) Per section 4 of the Reimbursement Agreement,developer reimbursements may be no greater than 50%of DESTR. (d) The"Cumulative Balance"is the potential maximum payment due the developer under section 5.4of the Reimbursement Agreement SLMktplaceUpdatedDistributed w Exhibs v4.)dsADK&A Working Draft-Subject to Change 3 - fg5 J Attachment 7 REIMBURSEMENT AGREEMENT EXHIBIT "G" BENEFITING PROPERTIES F kmXMpiliWAILA EahibitsULA Eshibu G.duc l San Luis_Marketplace and Benefiting Properties R of� ��� u.u•.rutmP �• r IIPr'r,� ���. ,.� 11 rrrrl I !�✓L ��� �r�11'����� %t�'•�i� w (lull:41ii{IIPI hr ���� �.r{�� �� •IJ �r rlrPillll 401.1 P�°1111•i�� - ` .� . ' y Iltl'lllill4411111❑I ri11 i ti��. . r`� . � t '� •pnN un a r�.m r r m iii . / Prado �j4 ,�� Z, Area, ■r � ' �� 'f t.` San Luis �W ;il:.,...s;,.,r ttt.•t,, �s �,.- I Marketplace �`/� � .-?� 11rr` � •,� rq,s,`�„Y Iii, i! t ` IAIfit Ali 1 i ; .•* j � �. i Attachment 7 REIMBURSEMENT AGREEMENT EXHIBIT "H" BUSINESS LAND 3' 1� F-Ve VADalAAARA Ezhbnf�RA E+hba H dm � Attachment 7 BUSINESS LAND 4\ REIMBURSEMENT AGREEMENT ° aw 1ow EXHIBIT H: BUSINESS LAND 1 INCH -500 FEET FAw\D\Da1if44\RA ExhbinsIRA Exhibit Wdx Attachment 7 REIMBURSEMENT AGREEMENT EXHIBIT "I" CONSERVATION LAND 3 r� F:VwMM)Wifa0/W1 Exhayo\RA ExAbn I.dx Attachment 7 CONSERVATION LAND 4\ REIMBURSEMENT AGREEMENT ° am —low EXHIBIT I: CONSERVATION LAND I INCH -500 FEET 3 , 129 F_\,W\DOalifaMVU Exhibits\RA Exhbu I.dm Attachment 7 REIMBURSEMENT AGREEMENT EXHIBIT 'Jill FREEWAY COST ALLOCATIONS The obligation for.tbe District Bonds shall be as follows: Commercial Property: 74.8% Benefiting Properties Prado Area: 6.7% Margarita Area: 18.5% Total 100% F INFTJNJI�t:(vM1R A F.h;Kt3XRA EANi J de Attachment 7 REIMBURSEMENT AGREEMENT EXHIBIT "K" REAL PROPERTY Real property in the Unincorporated area of San Luis Obispo said County of San Luis Obispo, State of California,described as follows: Parcel 1: That portion of Lot 64 of the Subdivisions of the Ranchos Canada de Los Osos and La Laguna; in the County of San Luis Obispo,State of California,according to map filed for record In Book A, Page 83 and 84 of Maps,In the office of the County Recorder of said County,described as follows: Beginning at the Northeast corner of said Lot 64;thence North 55 1/20 West, 10.10 chains to post marked M.R.No.3;thence South 41024'West, 19.96 chains to post marked M. R.No.4; thence.South 55 1/20 East, 15:25 chains to the Southeast corner of said Lot 64;thence North 26 1/20 East,20.00 chains to the point of beginning. EXCEPTING therefrom that portion conveyed to the State of California by deed dated October 15, 1947 and recorded December 18, 1947 in Book 464, Page 87 of Official Records. PARCEL 2: That portion of Lot 65 of the Subdivisions of the Ranchos Canada de Los Osos and La Laguna,In the County of San Luis Obispo,State of California,according to map filed for record in Book A, Page 83 and 84 of Maps, in the office of the County Recorder of said County,described as follows: Beginning at the Northeast corner of said Lot 65;thence North 55 1/2°West,12.19 chains; thence South 50 1/2°West,19.42 chairs to a point In the line of fence;thence along said fence South 55 1/2"East,20.15 chains to post on the Southeast One of said Lot;thence Northerly 18.90 chains to the point of beginning.. EXCEPTING therefrom that portion conveyed to the State of California by deed dated October 15, 1947 and recorded December 18,1947 In Book 464,Page 87 of Official Records. PARCEL 3: AO of Lot'K"of the Resubdivislon of Lots 58,61,62,63,64,and 65 as per).T.Stratton's Survey and map of the Subdivisions of the Ranchos Canada de Los Osos and La Laguna,In the County of San Luis Obispo,State of California,according to map fled for record January 30,.1875 In Book A,Page.161 of Maps,In the office of the County Recorder of said county. EXCEPTING therefrom that portion conveyed to United States Postal Service by deed dated August 5,1980 and recorded September 5, 1980 in Book 2266,Page 904 through 906 of Official Records as subsequently corrected by a Grant Deed dated May 7, 1981 and recorded June 10, 1981 in Book 2332,Page 318 through 320 of Official Records. PARCEL 4: That portion of Lots L,M and N of the Resubdivisions of Lots 58,61,62,63,64,and 65 as per J. T.Stratton's Survey and Map of the Subdivislons of the Ranchos Canada de Los Osos and La First Amerfon Tile Q 1 I F.\wNDhDa1ifa04'\RA EahlbdskRA Exhbd K.doc Attachment 7 Laguna,in the County of San Luis Obispo, State of California, according to map riled for record January 30, 1875 in Book A, Page 161 of Maps,in the office of the County Recorder of said County,described as follows: Beginning at stake marked"N.N."at the most Southerly corner of said Lot"L"thence South 55 1/20 East along the Northeasterly line of said Lot "M", 3.06 chains to the most Easterly corner of said Lot"M", thence South 50 1/20 West along the Southeasterly line of said Lots"M"and"N", 19.44 chains to the Southerly corner of said Lot"N"; thence North 55 1/2"West along the Southwesterly One of said Lot"N", 11.12 chains to post marked"A.E"at the Easterly comer of Lot'O"of said subdivisions;thence North 371 West along the Northeast line of said Lot"0", 1.42 chains to the center of Foreman.Creek and the most Southerly corner of the lands of Rosa Machado; thence along the center of said creek and along the Easterly line of the lands of Rosa Machado on the following courses and distances: North 18 1/4°East, 1.17 chains; North 6 1/40 West,2.62 chains; North 13 3/40 East,2.50 chains; North 18 1/26 East,2.50 chains; North 130 East,2.50 chains,North 3 1/20 East,2.25 chains,North 180 East,4 chains to the top of the bank as the Easterly side of a ditch carrying the water out of the Laguna into Foreman Creek;'therce along the Easterly bank of said ditch and the Easterly Line of the lands of said Rosa Machado, North 1 1/40 East,2.25 chains; North 21 1/2°West,2.79 chains; North 90 West,4.21 chains to the Southerly line of the Los Osos Road;thence North 62 1/2"East,along the Southerly line of the said Road 9.83 chains to a stake marked"M.M."at the most Northerly corner of said Lot'L"; thence South 460 East along the lines between Lots"K"and"L"of said subdivision;24.72 chains to post marked "A.L."at the most Easterly corner of said Lot"L";,thence South 413/40 West along the Southeasterly line of said Lot"L", 8.90 chains to the point of beginning. EXCEPTING from said Parcel 4 that portion thereof conveyed to Ray C.Skinner,et ux., by deed dated January 12, 1960 and recorded January 29, 1960 in Book 1045, Page 234 of Official Records. ALSO EXCEPTING from said Parcel 4 that portion described in the Final Judgment of Condemnation recorded June 26, 1975 in Book 1846, Page 217 of Official Records. Said portion is more particularly described as follows: A portion of Lots M and N of the R. R. Harris Resubdivision of Lots 58 and 61 of the Randoms Canada de Los Osos and La Laguna as flied in Book A, Page 161 of Maps, in the office of the Recorder of the County.of San Luis Obispo,California,described as follows: Beginning at the most Northerly point of Tract 169,as recorded in Book 6, Page 45 of Maps as filed in the office of the Recorder of the County of San Luis Obispo,California,said point tieing on the Southerly One of Madonna Road;thence along said Southerly line of Madonna Road which bears North 62030'East a distance of 54.90 feet;thence South 5048'47"East a distance of 246.60 feet;thence South 105737'East a distance of 244.39 feet;thence South 0026'53"West a distance of 182.46 feet;thence South 20033'06"West a distance of 235.26 feet;thence South 3°50'57"West a distance of 25236 feet;thence South 14"2120"West a distance of 373.89 feet; thence South 100032"East,a distance of 322.13 feet;thence North 55036'West a distance of 63.90 feet;thence along the Easterly line of Tract 169 to the true point of beginning through the .fon owing COMM North 7025'16"East,a distance of 116.08 feet;thence North 1°00'32"West,a distance of 154.16 feet; thence North 9°39'39'East,a distance of 128.27 feet;thence North 14°2120"East,a distance of 267.10 feet;thence North 3950'57"East,a distance of 228.68 feet;thence North 11014'33"East,a distance of 101.44 feet; thence North 16042'13"East,a distance of 207.16 feet;thence North 0026'53'East,a distance of 100.62 feet;thence Nath 19057'37"West,a distance of 215.04 feet;thence North 5044'West,a distance of 201.68 feet;thence North 14039'55"West,a distance of 7155 feet to the point of beginNng. FirstAmentan Tide Vkmn D\DalifaOARA Exhibhs%RA Exhibh K,dx Attachment 7 AM 067-121-022 First American Title 3- 193 F:%r ,kMD.14.04%RA Exhib4l;LA Erhibii K.doc Attachment 7 • N .. ills RAUQ h i..:.',n c 03 �. f;0 �M `.eo C go a g. ^v _ J -•`:p CA a zag f MMn ga ap _ nd o CP A4F s Description.•San Luis Obfspo,CA Assessor Map 67.12 Page:1 of 1 Order.Lisa Comment F\ml\MDaliraONtA Eahbi,,MtA Eahibk K da Attachment 7 REIMBURSEMENT AGREEMENT EXHIBIT "L" RESIDENTIAL LAND F:%NETTL%Linkjo011CoreAA Exh,'W Ldoc a J Attachment 7 RESIDENTIAL LAND REIMBURSEMENT AGREEMENT ° °00 t00° EXHIBIT L• RESIDENTIAL LAND I INCH —.W Fr 2 � I�I rA?4ETLU.mkjoOl%Con%RA Eah3n L.dm Attachment 7 REIMBURSEMENT AGREEMENT EXHIBIT "M" RETAIL LAND 3- (9� F. "V 0alifaO4\KA EshibnskRA Eahbe M doc Attachment 7 RETAIL LAND REIMBURSEMENT AGREEMENT ° — aw 1NG EXHIBIT M: RETAIL LAND 1 MCH -500 FEET 3- 199 F:%wO\DdifaM\AA EshibinsVtA Exhibit M,Ouc Jul -09-04 01 : 12P City,—r,)f SLO-CD Dept . 805781 7173 P-01 i Attachment 8 - is January 2004 San Luis Obispo To: Vor Dave Romero and City Council members Downtown From. Correne Weaver, President Association SLO Downtown Association P.O. sox 1402 San Luys ObLspo Prepared by: Deborah Cash, Administrator California 93406 Re: San Luis Marketplace Project Phone:805-5410286 FAX-805.781.2647 The-decision of the City Council at its 6 January 2004 meeting to concur with www.downrow.uloxom measures proposed for the Development Agreement which affirm the City's commitment to a strong Downtown is applauded by the Downtown.Association. As you can see by the attached article written by Deborah Cash, Administrator, for the Sin Uis Obispo Journal, the Downtown Associadon feels that symbiotic, or mutually beneficial, retail centers can coexist if special attention is paid to the preventing duplication of market appeal up front. Therefore, we appreciate the Council's sensitivity to retaining the power center characteristics of the Market Place, rather than encouraging its development as a lifestyle center similar to the Downtown. While the final design of the center must consider pedestrian safety and flow,the Downtown Association believes that the Main Street"theme" or feel of Downtown is unique and should not be duplicated within our community—a move that would dilute each entity. We are also understandably thankful that disincentives are proposed for the. agreement exist to discourage new development from deliberately attracting away existing Downtown businesses. Strategic protections, like those offered by staff and conceptually approved by Council, demonstrate foresight,open mindedness and sincere interest in retaining the essence of our City while still moving forward with the times. While we do not seek to discourage free enterprise in the community, it is our mission to preserve a healthy business climate for those businesses that are within our boundaries and that we do not want to lose. Because we have seen the fallout of past projects that fared poorly due to inadequate planning or understanding of the unique nature of our city-wide business community, we feel the action of the Council provides for success,not failure, in a controversial but inevitable change to the commercial history of our community. Cc: Ken Hampian John Mandeville Ron Whisenand Pam Ricci Shelly Stanwyck 3 -1 i 40Attachment 8 W h a t. ' s U p A r o u n d D o w n t o w n ? G etting out of the'us v.them" has merit and allows each area to develop a niche and exchange cus- •ry tomers rather than compete for the same buyer. mentality is a key task this �v - upcoming year because there's a "` general tendency to believe that periph- his thinking came about az a result of a Strategic Plan exercise eral City developments and projects toll that was completed for the Downtown Association a couple of death knells for Downtown. While we've Tyears ago when the Dalidio Project first appeared on the radar. heard horror stores of"sprawlmart' x y The plan suggests that this community can support a variety of shop- across the U.S.where edge-of-the-town �y '* JQ ping 'centers"as long as each was symbiotic with the other,that is, development has negatively impacted ick they complement and enhance what exists, not compete head-to- cities'centers,we're happy to report thattx�r head with. This can be accomplished"through zoning,contractual in our circumstance, the City and agreements,tax sharing subsidy arrangements...all designed to pro- Deborah Cash mote overall economic health—developing a new balance, If you Downtown Association have developed Administrator some rather sophisticated mechanisms to will—without bringing ruin to anyone. Which isn't to say there won't assist in positive play between "us and them" rather than its opposite. be some impact,but typically business is like nature and those who meet the challenges are most likely to be stronger because of them. eferring mainly to the 4alidio project,scheduled for discussion The City's economic development manager and the Downtown on the January 6 City Council Agenda(business points only, not Association are available to work with business owners about business design),the considerations include denying the developer the plans--a key element to anyone's success. ability to participate in sales tax sharing agreements for certain types eantime we're excited about changes in our own district of businesses that may leave Downtown for Dalidio--and perhaps even penalizing the project owner-Tong with disallowing subdivid- that will bring a new look to Downtown, namely the Court ing larger'pads'that could potentially attract the"lifestyle"stores M Street(Copeland's Project)and New County Government that Downtown will be targeting to keep. This"protectionist"mode Center. As a word of advice,if you're traveling past these projects, 't On the COVer.Unique and eye catching,window displays in Downtown 51.0 are part of the charm that separates the vibrant shopping area . from Every-other-place,USA Collectibles,art and seasonal items work well in the window at NOVO,one of Downtown's most popular eateries. Photo by Deborah Cash i 200A s t t. ♦ A �' � � � (P� H e • ZZ tiotneI&Y Yn the ,Qt 711.07Lf;�t3'ti3.*�0 77 .-+. ll ��irv{riottioi s ggFis(tyy{L,}�µ�wrc�ukt: r x s •'� Z5. 18 'sGIFl`S`* CQC�'IBLES' ' o y, ���COR�111fCCESORI1 V ' `. �Y Gr' �1 Y W.L 0 19 �. �FI,U1S'UDISPO; 1 c " ''IathehistorteVboshem i N �.'%v'/.a•+1`,i / amu. L 5 Y � 3 � 1�. AttadiirrmPni` 8 '41 W h a is U A r o u n d D o n t o w n ? pay careful attention to the closures of Osos and Morro calls inquiring about getting a booth or providing x� ' ?'h " Dawnto.Vr1:Events street lanes and occasional closures near the County entertainment so in case you're wondering, the event MW-.,V c.: ,. and t IOU project on Monterey Street At least one lane will be has guidelines and an application process but we do . - open but you may have to take a detour or two before encourage those who are eligible to participate to do you ultimately end up at your destination. In that area, so. 'an took for colorful,artsy new banners along Monterey NP catetgories are:vendors,food vendors,not- ;fat a ., no Street proclaiming: Welcome to Downtown SLO,get- for-profit or information booths,entertainment ting better all the time. It's true...and while new devel- Tand the Farmers'Market Association. Vendors �' `«>4 »,�• . x00..• gM`":�; 3 opment may occur,the charts and attraction of are STRICTLY limited to those businesses conducting ' Downtown will be as strong as ever,and even more so business in the Downtown Association boundaries, ;4`c ua Jam+a Ys A n 1, in about a year or so. including food vendors. However, not for profit or � SnNat Ot e hope you enjoyed the holiday season in information groups may apply to be at the market and +3xa cRp7Y rip h �J9 W Downtown SL0—the 28th Annual Holiday there is a small fee. The same is true for entertainers pm­ Downtown a�t5"et"ails:r528�rvr.;`�'.� Parade was one of the biggest and finest though auditions are required, usually in the form of n O,�s� s, ever—more than 100 entries. From singing church submitting a CD. An one wishing to sell home- rows S rift F�n flt k �`- a 9 9 9 Y. 9 g Ra . a �WK , r choirs and marching bands to dancers, hot rods and produce needs to contact the Farmers Market hot dogs(Walking in a Weenie Wonderland was a riot!) Association. The application is available online at 'm ° hxu to Santa and Mrs. Claus,it was a delightful and magical www.downtownslo.com and once completed, should' � =�(�` S way to kick off the holiday season. Thanks to the many be returned to the Downtown Associaition office for volunteers,participants,staff and workers who pulled it committee.review. Upon approval and payment of off with great success—and to the neighbors who were fees,a permit is issued. It's a fairly easy process and a gracious enough to allow us to block their streets for a great way to obtain exposure.for special interest groups F few hours getting it ready to roll. We're proud to including scouting,schools,politicians—anyone who ? sponsor the parade,one of the community's finest wants great exposure and public contact events. veryone at the Downtown Association would like •n — � s Iso of interest to the general public is inform- to thank you for supporting Downtown through- tion about participating in Thursday Night Eout the year and wishes you a wonderful Promotions Farmers'Market. We receive many 2004...around Downtown. R. :Y �Gn,zCr-Swne Rea Estate... ;THE HOMETOWN SPECIALIST X � e — , 'F i C k More Homes Sold From This Location Than Any Other In San Luis Obispo! o t . REE LOCATIONS TO SERVE YOU BETTER! • Monterey at Chorro,San LuLs Obispo 116 11111,11RI :11; ' • First and Union Streets In Old Tovvn Orrxrtt• C • Spyglass at Shell Beach Road,Shell Beach 805) 543-8500 FAX(805) 545-7500 i 00 `c infoccomerston ereawtate.com c t f Attachment 9 RESOLUTION NO. (2004 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO ACCEPTING A CONSERVATION EASEMENT FOR LANDS ADJACENT TO THE SAN LUIS OBISPO MARKETPLACE PROJECT WHEREAS, Ernest F. Dalidio, Jr., Successor Trustee of Dalidio Family Trust u/t/a dated October 29, 1987, Ernest Dalidio Jr., Successor Trustee of the Thelma F. Perrozi Trust u/t/a dated February 7, 1991, and Clara B. Dalidio, Trustee of the Clara B. Dalidio Trust u/t/a dated January 15, 1991 (collectively, "Grantors") have offered to dedicate a conservation easement over a portion of their property at 2005 Dalidio Drive (hereinafter the "Property"); and WHEREAS, this offer of dedication is made pursuant to California Civil Code section 815 et seq. pertaining to conservation easements; and WHEREAS, the offer of dedication is made in conjunction with the development application for the San Luis Obispo Marketplace project and related development agreement; and WHEREAS, the purpose of the easement is to preserve the natural and scenic character of the Property for public enjoyment, to protect plant and animal habitat in the Creek Area, and to preserve the Agriculture Area primarily for agricultural, historical, open space and scenic uses NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of San Luis Obispo as follows: SECTION 1. The Council of the City of San Luis Obispo hereby accepts and gratefully acknowledges the dedication of the perpetual conservation easement as shown in Exhibit "A", attached. SECTION 2. Findings. 1. The conservation easement is consistent with the City's General Plan, specifically: a. Land Use Element Policy LU 1.13.5 E., Open Space, which states that approximately one half of the Dalidio annexation land area should be preserved as open space either through dedication of land or easements. b. Land Use Element Policy LU 8.8, Dalidio-Madonna-McBride Area, which states that the "City intends to preserve significant parts of this signature working agricultural landscape at the southern gateway to San Luis Obispo." c. Open Space Policy OS 10.2.1 (A), Preserving Agricultural Land, which provides that the "southern portion of the Dalidio property. . . . should be preserved as agriculture." 2. Preservation of the land shown in Exhibit "A" through a conservation easement will serve the public interest in that a portion of the Property, which exists in an essentially unimproved state, provides an open view corridor of great natural 3 r^L/ ,�- i Resolution No. (2004 Serie`sj' Attachment 9 Page 2 beauty at the entrance of the City of San Luis Obispo, and also represents a valuable scenic, open space, historical and agricultural resource to the City of San Luis Obispo. SECTION 3. The City Council authorizes and directs the Mayor to accept this conservation easement on behalf of the City of San Luis Obispo. SECTION 4. Dedication of an open space easement, in substantially the same form as this conservation easement, was considered by the City Council on July 7, 2004, when it certified the Final Environmental Impact Report for the San Luis Obispo Marketplace project, pursuant to the California Environmental Quality Act Guidelines Section 15090. Upon motion of seconded by and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this day of 2004. David F. Romero, Mayor ATTEST: Diane Reynolds Acting City Clerk APPROVED AS TO FORM: Jon . Lowell City Attorney G:Wgenda-Ordinances-Resol\Marketplace Conservation Easemt Reso.doc 3�� Attachment 9 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: ANDRE,MORRIS&BUTTERY P.O.BOX 730 SAN LUIS OBISPO,CA 93406 SPACE ABOVE THIS LINE FOR RECORDER'S USE GRANT OF CONSERVATION EASEMENT THIS GRANT OF CONSERVATION EASEMENT (the "Grant") is made on 200—(the "Effective Date") , by ERNEST F. DALIDIO, JR., Successor Trustee of Dalidio Family Trust u/t/a dated October 29, 1987,ERNEST DALIDIO JR., Successor Trustee of the Thelma F. Perrozi Trust u/t/a dated February 7, 1991; and CLARA B. DALIDIO, Trustee of the Clara B. Dalidio Trust u/t/a dated January 15, 1991 (collectively, "Grantors"), in favor of the CITY OF SAN LUIS OBISPO, a Municipal Corporation and Charter City (the "City"). RECITALS A. Grantors are the sole owners of the real property located in the City of San Luis Obispo, State of California, legally described as approximately 54.7 acres of land near the intersections of Prado Road, Dalidio Road and Madonna Road, in San Luis Obispo, California, as fully described in Exhibit A, which is attached to and made a part of this Grant by reference (the "Property"). B. The Property possesses natural, scenic, open-space, historical, cultural and agricultural values. In particular, the Property, which exists in an essentially unimproved state, provides an open view corridor of great natural beauty at the entrance of the City of San Luis Obispo. The approximately 7-acre portion of the Property along Prefumo Creek, more specifically described in Exhibit 'B" (the "Creek Area"), harbors plant and animal life. The remaining approximately 47.7 acres of the Property (the "Agricultural Area") is primarily agricultural land, which presents a valuable scenic, open space, historical and agricultural resource to the City of San Luis Obispo. C. The Grantors and San Luis Obispo Marketplace Associates, LLC, a California limited liability company ("Marketplace") entered into that certain Development Agreement dated 2004 with the City providing for the annexation of 131 acres of real property to the City, with the intent that Grantor and Marketplace would develop approximately 60.1 acres of such real property for commercial and residential use, that 16.2 acres of such real property would be utilized for roadways, and that approximately 54.7 acres of such real property would be preserved in essentially its present scenic beauty and openness, and available for habitat protection and ongoing agricultural use, through the imposition of a perpetual conservation COOCUME-IIslousaUACAIS-I\Temp\CONSER-IDOC 1 ,J Attachment 9 easement with conditions hereinafter expressed. In connection with the Development Agreement and approval of Marketplace's development project, the City prezoned a portion of the Property "C/OS," Conservation/Open Space, and a portion "AG," Agriculture. Grantor is willing to grant this conservation easement as a part of the governmental approval of the commercial development described above. D. It is the intention of Grantors to grant to the City a conservation easement on, over and across the Property pursuant to the California Civil Code Section 815 (the "Act"), whereby Grantors relinquish certain rights and enter into certain covenants concerning the Property, as more particularly set forth below. E. The purpose of this Grant of a conservation easement in the Property is to preserve the natural and scenic character of the Property for public enjoyment, to protect plant and animal habitat in the Creek Area, and to preserve the Agricultural Area primarily for agricultural, historical, open space and scenic uses. F. By accepting this Grant, the City agrees to honor the intentions of Grantors, to act in a manner consistent with the purposes of this grant, and to preserve and protect in perpetuity the conservation values of the Property. AGREEMENT 1. Grant of Easement. In consideration of the above and the mutual covenants, terms, conditions, and restrictions contained in this grant deed, and pursuant to the laws of California and in particular to the Act, Grantors voluntarily grant and convey to the City a conservation easement in the Property in accordance with the terms and conditions set forth herein. The term of the granted conservation easement shall be perpetual. 2. Prohibited Uses. In order to maintain the existing open space and agricultural character of the Property, except as provided herein, Grantors and Grantors' successors in interest will refrain from doing, causing, or permitting any of the following acts with respect to the Property: 2.1. Constructing improvements on the Property, other than those that exist at the time of the grant of this Grant, except appurtenances consistent with the open space and agricultural zoning of the Property and are consistent with the stated purposes, terms,conditions, restrictions, and covenants of this Grant, with the provisions of the Act, and except those improvements for which the right is expressly reserved in this Grant or the Act, including paved pathways and roadways. 2.2. Locating any advertising of any kind or nature on the Property. 2.3. Constructing, placing, or maintaining a parking lot, storage area, or dump site for the storage or disposal of anything that is not indigenous or natural to the Property or related to the permitted uses of the Property. 3 COOCUME-IWouseeLOCA1S-IWenWXCONSER-LDDC Attachment 9 2.4. Constructing,placing, or maintaining overhead pipes„conduits, or wires above the Property for the purpose of transmitting communications or power. 2.5. Conducting agricultural operations on the Creek Area or making any recreational use of the Creek Area that significantly interfere with the plant and wildlife protection values of the Creek Area. 3. Permitted Uses. Subject to applicable law and governmental regulation, Grantors reserve the right to all uses and occupancy of, and ingress and egress to and from,the Property in any manner consistent with the stated purposes, terms, conditions, restrictions, and covenants of this Grant. Without limiting the generality of the foregoing, the following rights are consistent with the purpose of this Grant and with the Act, and are expressly reserved by Grantors: 3.1. To engage in any and all agricultural uses of the Agricultural Area, including but not limited to: planting, raising, harvesting, and producing agricultural, aquacultural, horticultural, and forestry crops and products of every nature and description; the primary processing, storage, and sale, including direct retail sale to the public, of cropsand products harvested and produced principally on the Agricultural Area; breeding, raising, pasturing, and grazing livestock; and breeding and raising bees, fish, poultry, and other fowl, intensive or otherwise. To use and store agricultural equipment and products on the Agricultural Area. To install improvements and structures in support of permitted agricultural uses, fencing, utilities and facilities in connection with the permitted agricultural uses on the Agricultural Area, and consistent with the intent of this Grant. To use the Property as a buffer between adjacent urban uses and the agricultural uses on the Agricultural Area. 3.2. In furtherance of the historical values of the Property, and to provide for the preservation of the historic "Sulkey Racing Stadium" grandstand structure that was located on or near the Property approximately 100 years ago and used by residents of the City of San Luis Obispo for horse racing(the "Grandstand Structure"), nothing in this Grant shall prohibit installation by Grantors of the Grandstand Structure on the.Property. 3.3. To use the Property for any and all irrigation, agricultural, agricultural accessory and currently-existing water resources purposes, including but not limited to water wells, water lines, water treatment, drainage, and retention, and the construction of improvements related thereto. 3.4. To engage in any and all passive recreational uses of the Property. 3.5. To install, alter, relocate and maintain surface and subsurface utilities, utility easements, roads and facilities on the Agricultural Area. 3.6. To use any existing structure on the Property and any structure permitted to be installed on the Property pursuant to this Grant. 3.7. To maintain the Property and all improvements thereto, including but not limited to natural resource management, pruning and removal of trees and plants, and preventing damage from potential natural hazards. 3., U C%DOCUME� 1\s1ous=M.0CAIS—Mcmp\CONSER—IDOC 3 Attachment 9 4. Public Facilities. Notwithstanding any provision herein, this Grant shall in no way restrict the construction of either public service facilities installed for the benefit of the land which is the subject of this Grant, or public service facilities installed pursuant to an authorization by the City Council or the Public Utilities Commission. 5. Right to Prevent Prohibited Use. Grantors grant to the City and the City's successors and assigns, for the term of this Grant, the right,but not the obligation, to prevent or prohibit any activity that is inconsistent with the stated purposes, terms, conditions,restrictions, or covenants of this grant and the right to enter the Property for the purpose of removing any building, structure, improvement, or any material whatsoever constructed, placed, stored, deposited, or maintained on the Property contrary to any term, condition, restriction, or covenant of this Grant. 6. Monitoring and Enforcement. The purposes, terms, conditions, restrictions, and covenants in this Grant may be specifically enforced or enjoined by proceedings in the Superior Court of the State of California, consistent with the terms of Section 51086(a)of the California Government Code. To that end, Grantor specifically permits City to enter upon the Property upon reasonable notification to Grantor for the purpose of determining that no violations of purposes, terms, conditions, restrictions or covenants contains within the Grant have occurred. Such inspections shall be undertaken on a reasonable schedule, but no less than once per year. 7. Costs of Enforcement. If any legal proceeding, arbitration or other action is brought or threatened for the enforcement or interpretation of this Grant, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Grant, and the prevailing party in any such actions) should incur any legal fees,including, but not limited to, attorneys' fees, paralegal fees, expert witness fees and other similar costs, the successful or prevailing party or parties to any such dispute or action shall be entitled to recover their reasonable attomeys'fees and additional legal costs incurred, together with any other relief to which they may otherwise be entitled, as determined by an arbitrator,judge at trial, or upon appeal or petition. 8. Acts Beyond Grantors' Control. Nothing contained in this instrument may be construed to entitle the City to bring any action against Grantors for any injury to or change in the Property resulting from causes that are beyond Grantors'control, including, but not limited to, fire, flood, storm, earth movement, or any prudent or reasonable action undertaken by Grantors in emergency situations to prevent or mitigate significant damage or injury to the Property resulting from such causes. 9. No Authorization for Public Trespass. The granting of this conservation easement by this instrument and the acceptance of the easement by the City do not authorize, and are not to be construed as authorizing, the public or any member of the public to enter, trespass on, or use all or any portion of the Property, or as granting to the public or any member of the public any tangible rights in or to the Property. It is understood that the purpose of this grant is solely to restrict the use of the Property, so that it may be kept as near as possible in its current state. 10. Costs,Taxes, and Liabilities. Grantors retain all responsibility and shall bear all costs and liabilities of any kind concerning the ownership, operation, and maintenance of the Property, including maintaining comprehensive liability insurance. Grantors must pay before delinquency 'Ou� CADOCUW�IWm�uocus-I\TcnT\cousm-LDDC 4 -� Attachment 9 all taxes, assessments, fees, and charges of whatever description levied on or assessed against the Property by competent authority. 11. Condemnation. If an action in eminent domain for condemnation of any interest in the Property is filed, or if the Property is acquired for a public improvement by a public agency or person, these restrictions will be null and void as to the interest in the Property actually condemned or acquired. However, all conditions, restrictions, and covenants of this grant will be in effect during the pendency of such an action; if such an action is abandoned before the recordation of a final order of condemnation, any portion of the Property that is not actually acquired for public use will once again be subject to all of the terms, conditions, restrictions, and covenants of this grant. Grantors will be entitled to the amount of compensation as if the Property had not been burdened by the conservation easement. 12. Extinguishment. If circumstances arise in the future that render the purpose of this Easement impossible to accomplish, this Grant can only be terminated or extinguished, whether in whole or in part, by judicial proceedings in a court of competent jurisdiction. 13. Amendment. This conservation easement may not be amended in whole or in part as to any term, condition, restriction, or covenant without the prior written consent of the Grantors and the City, as may be permitted by applicable California law. 14. Binding on Successors and Assigns. This Grant, and each and every term, condition, restriction, and covenant of this grant, is intended for the benefit of the public and is enforceable pursuant to the provisions of the Act. This Grant binds Grantors and Grantors' successors and assigns and constitutes a servitude on the Property that runs with the land. 15. Liberal Construction. This Grant is to be liberally construed in favor of the Grant in order to effectuate the purposes of the easement and the policy and purpose of the Act. If any provision in this Grant is found to be ambiguous, an interpretation consistent with the purpose of this easement that would render the provision valid will be adopted over any interpretation that would render it invalid. 16. Severability. If any provision of this Grant is found to be invalid, or if the application of this easement to any person or circumstance is disallowed or found to be invalid, the remainder of the provisions of the grant, or the application of the grant to persons or circumstances other than those to which its application was disallowed or found invalid, will not be affected and will remain in full force and effect. 17. ControllingLaw. This Grant is to be interpreted, enforced, and performed in accordance with the laws of the State of California.. 18. Entire Agreement. This Grant sets forth the entire agreement of the parties with respect to the conservation easement and supersedes all previous conversations, negotiations, understandings, settlements, or agreements related to the conservation easement. 19. Captions. The captions in this Grant have been inserted solely for the purpose of convenience of reference and are not to be construed as part of this instrument and do not affect the construction or interpretation of the Grant. 3-X� CAD000ME-1 klowceJ.00ALS-1\TempiCONSER-LDOC 5 - Attachment 9 20. Counterparts. The parties may execute this instrument in two or more counterparts, which shall, collectively, be signed by all parties. Each counterpart shall be deemed an original instrument as against any party who has signed it. In the event of any disparity between the counterparts produced, the recorded counterpart controls. "Grantor" ERNEST DALIDIO, JR. Successor Trustee of Dalidio Family Trust u/t/a dated October 29, 1987 ERNEST DALIDIO JR., Successor Trustee of the Thelma F. Perrozi Trust u/t/a dated February 7, 1991 CLARA B. DALIDIO, Trustee of the Clara B. Dalidio Trust u/t/a dated January 15, 1991 3 CADOCUME-IVlowcALOCALS—Mcnip�CONSER-1 DOC 6 Attachment 9 11 �- ACCEPTANCE OF CONSERVATION EASEMENT The CITY OF SAN LUIS OBISPO, a Municipal Corporation and Charter City accepts this grant of a conservation easement. Dated: "City" CITY OF SAN LUIS OBISPO, a Municipal Corporation and Charter City By: Its: I HEREBY APPROVE the form and legality of the foregoing Agreement this day of Jonathan Lowell, City Attorney CADOCUME-1\s1ouscUACAIS-I\Temp\CONSER-I.DOC 7