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HomeMy WebLinkAbout2003-04-01; City Council; 17123; Palomar Forum Financial GuaranteekB# ATG. 4/01/03 IEPT. ENG 17,123 CITY OF CARLSBAD - AGENDA BILL TITLE: PALOMAR FORUM FINANCIAL GUARANTEE FOR FARADAY/MELROSE FINANCE DISTRICT CITY ATTY. RECOMMENDED ACTION: Review Palomar Forum developers proposal for compliance with the requirements to provide a financial guarantee for Faraday Avenue and Melrose Drive. ITEM EXPLANATION: Backaround The property owners for the areas known as the Palomar Forum (Forum), the Carlsbad Raceway (Raceway) and Carlsbad Oaks North (“Oaks”) have requested that the City consider forming a Community Facilities District (CFD) to finance the following road segments, as well as other related improvements: 1. Faraday Avenue from terminus west of Melrose Drive to Orion Street 2. Melrose Drive from Palomar Airport Road to terminus at City of Vista boundary 4. Palomar Airport Road westbound widening from Vista to Melrose Drive The improvements to be financed and the proposed boundaries of the CFD are shown on the accompanying map (Exhibit 1). The estimated cost of the proposed CFD is $26.5 million dollars. 3. El Fuerte Street from Palomar Airport Road to Faraday Avenue Construction of Melrose Drive and Faraday Avenue combined is designed to relieve traffic congestion on Palomar Airport Road and on El Camino Real, as well as to reduce traffic on adjacent intersections surrounding these arterials. The construction of one of these roadways (Melrose or Faraday) without the other, would cause congestion and overcapacity of intersections due to regional and peak hour traffic. Each of these properties has conditions on their tentative maps and LFMP’s that require them to build one or a portion of the roads and to provide a ‘Yinancial guarantee” for the construction of the other. Specifically, the Forum condition, as amended by City Council, reads: “Prior to recordation of a final map or issuance of a grading permit, whichever occurs first, a financial guarantee for the construction, as specified in the appropriate agency permissions, of Faraday Avenue extension between Orion Way and Melrose Drive shall be approved by the Carlsbad City Council.” The Oaks project is conditioned to build Faraday Avenue and Melrose Drive with the financial mechanism providing for reimbursement beyond their proportionate share. The financial guarantee was anticipated to be the formation of an assessment district, CFD or other type of financing district. Each of these properties is at a different stage of development and, thus, has a different timeframe in which it will need to provide the “financial guarantee”. Forum has its approvals from the Resource Agencies and, with the exception of the financial guarantee, is ready to final its tentative map. Raceway also has its agency approvals and tentative map, but is still working on completing design and conditions of approval. The property owners would like to proceed with their development, but they are not as close to final map approval as Forum. Page 2 of Agenda Bill No. I I ,ILJ The Oaks project is waiting for Resource Agency approvals. These approvals are for both the Oaks project, as well as for the construction of Faraday Avenue. It is expected that an answer from the Resource Agencies will be forthcoming sometime in the summer of 2003. The actual formation of the Community Facilities District would occur no sooner than three to four months after resource agency approvals which would place the district formation date sometime at the end of 2003 or early 2004. Council Policy 33, which governs the formation of financing districts, requires that the right-of-way for the roads to be financed must be dedicated or acquired prior to formation of the district. It also generally disallows the cost of the right-of-way to be financed through the district. This is to ensure that all significant costs are known at district formation. In most cases, road right-of-way is required to be dedicated as part of the map conditions for the development. In order to form the proposed CFD under Council policies, the right-of-way for the roads would need to be dedicated and all environmental permissions need to be received to the satisfaction of the City Council. At this time, the Oaks project has not dedicated the right-of-way for Faraday Avenue and the project has not received all of its environmental approvals. The property owner (Tchang) has indicated that they will not dedicate the right-of-way until they have final approvals for their project from the Resource Agencies. Thus, the formation of this CFD cannot occur under Council policies until the agency permits are received for the Oaks project, which is expected in Summer 2003. The Request The inability to form the CFD and, thus, financially guarantee the construction of Faraday Avenue and Melrose Drive has caused concern with the owner of the Forum property. He is ready to final his tentative map and only has the “financial guarantee” condition remaining to fulfill. He has told staff that it is costing him significant amounts of money each month that he has to hold up his project while waiting for the formation of the CFD. There is also a concern that if the agency permits are denied or the process is prolonged, this condition may push his project into bankruptcy. Thus, the Forum’s property owner is proposing an alternative plan as the “financial guarantee” required by their map conditions (see Exhibit 2) The following is a summary of their proposal. 1. Developers will dedicate the right-of-way for Melrose Drive (current map condition). 2. Developers will provide a bond for the full construction of Melrose Drive (current map condition). 3. Developers will rough grade Melrose Avenue at this time and complete construction within one year of the order to begin construction from Council. 4. Developers will construct the 3rd westbound lane on Palomar Airport Road along the southerly portion of the Forum property (current map condition). 5. Developers will agree in writing to not oppose the formation of the CFD. 6. Developers will post a bond or security for their portion of the proposed CFD. 7. Developer will only develop the east half on their project in advance of the CFD formation. Page 3 of Agenda Bill No. 17,123 There are numerous advantages and disadvantages associated with Forum’s proposal. Staff has listed the more significant ones below. Advantages Palomar Airport Road widening can move forward relieving some of the congestion on Palomar Airport Road Construction of Melrose Drive is assured. Grading and partial improvements will expedite the eventual completion of this arterial. Some funding for Faraday may be secured. Staff would suggest that Forum’s share of Faraday Avenue construction cost should be bonded or paid at final map if they were to develop prior to the formation of the CFD. Disadvantaqes The proposal does not provide full funding for the construction of Faraday Avenue. The proposal provides no assurance that Oaks will ever enter into the CFD or build Faraday Avenue. If the Oaks does not develop and Melrose Drive is built, the traffic on Melrose Drive may cause a growth management failure at the intersection of Melrose Drive and Palomar Airport Road, effectively shutting down development in the area until Faraday Avenue is funded. Compliance with the conditions of approval may be subject to challenge by outside parties. The Raceway project would likely request similar treatment which could result in the early completion of Melrose Drive and acceleration of a potential growth management concern. SUMMARY: Staff is seeking a determination from Council on whether or not developers proposal satisfies the Council’s requirement to provide a financial guarantee for Faraday Avenue. If acceptable, staff would return with implementing documents and the final map for recordation. If Council has concern about this approach, staff would suggest that no final maps proceed until the appropriate financial mechanism has been approved consistent with City Policies. FISCAL IMPACT: The request allows for the developer to record his subdivision and seek a return for his investment while waiting for The Raceway and the Oaks, as well as the CFD to be approved. There is no change in the fiscal impact to the City of Carlsbad by allowing the developer to proceed as proposed. In all cases, if the developments do not proceed, the financial burden of constructing the roads will fall upon the remaining developers and/or the City. EXHIBITS: ’ 1. Location map including CFD boundary. 2. Proposal for the Financing of Faraday Avenue and Melrose. 3 EXffl61T 7 CARLSMD OAKS IORTff J.N. 961005 WKH 2003 I CONS-ULThTS I t EXHIBIT 2 DAWS P!MRS LIMITED LIABILITY COMPANY Date: March 20,2003 To: City of Carlsbad Council Members From: Larry Nelson, Partner RE: Proposal for the Financing of Faraday Avenue and Melrose Purpose The purpose of this memorandum is twofold: first, to provide assurance to the City of Carlsbad that the Developer ( “Palomar Forum”) will hlly cooperate in the formation of the Faraday Avenue and Melrose Avenue Community Facilities District (“District”) and, second, to request that the City of Carlsbad allow Palomar Forum to obtain land development permits in advance of the formation of the District. Additionally, in support of this request, included herein are a Brief Chronology of the Entitlement Process, Additional Facts Supporting the Request, Consequences to Palomar Forum of the Delay in the Formation of the District, Developer Deliveries to the City of Carlsbad and a Review of the Benefits to the City of Carlsbad. Proposal At this time, Palomar Forum requests permission to complete the following work (Phase 1) prior to the actual formation of the Community Facilities District for Faraday Avenue and Melrose Avenue: 0 Allow the final map recordation of CT 99-06. 0 Rough grade the entire Palomar Forum site and all required off sites as required by our conditions of approval. 0 Allow building permits for the east half of the property. If this proposal is approved, then Palomar Forum would provide the following: 0 The dedication of Melrose Avenue along the Palomar Forum frontage. 0 A bond for the construction of Melrose Avenue from Palomar Airport Road to the city boundary. 0 A bond for the construction of Palomar Forums’ fair share of Faraday Avenue and other CFD improvements. 0 The construction of the third lane of Palomar Airport Road along the southern property line of the Palomar Forum property. 0 A written agreement that Palomar Forum will not oppose the formation of the CFD and that it will hlly participate in this CFD. Phase 1 would not include the actual construction of Melrose Avenue. This work would commence after district formation following a schedule as prescribed by the City of Carlsbad. Other work required by the Conditions of Approval that would be delayed include: completion of the open space lot to be located at the northwestern corner of the future intersection of Palomar Airport Road and Melrose; and construction of Street C. Brief Chronology of the Entitlement Process February 9,1999 October 17,2001 January 2002 February 2002 July 22,2002 September 25,2002 October 4,2002 Palomar Forum’s application for a tentative tract map and related applications is submitted to the City of Carlsbad. The City of Carlsbad approved the Tentative Parcel Map and Palomar Forum initiated the preparation of rough grading plans, street improvement plans and other plans necessary to satisfy the Conditions on the Approved Tentative Map. Palomar Forum entered into an agreement with the City and issued a check for $25,000 in order to commence District Formation. Palomar Forum (Larry Nelson and Bill Hofman) met individually with members of the City Council for the purpose of informing the Council Members that we would be ready to pull grading permits and street improvement permits in August 2002. Although staff informed us that the timing of the formation of the District should not be a problem, we had extreme concerns as to whether the District would be formed in time to allow us to start in August 2002. If a delay was to occur, we were told by the City Council members to review the issue with Staff and provide alternatives. At the District meeting on July 22,2002, we were provided a schedule by Staff, prepared by the City’s consultant, indicating that the new date for District formation was November 15,2002. We voiced our concern about the delay in formation and were told that November 15, was an outside date and something serious would have to come up for us not to make that date. After our monthly meeting was canceled by the City two days prior to the scheduled date of September 27,2002, we requested a special meeting to find out what was occurring. Palomar Forum met with Staff to discuss this issue and was informed that the District Formation for Faraday and Melrose would not occur until mid-February 2003. Additional Facts Supporting the Request RBF, the City’s traffic consultant, does not show the necessity of the FaradayMelrose build out until 2005. Palomar Forum has provided a traffic study (which at the time included Raceway) that indicated that it would not create a failure in the Growth Management Plan if allowed to commence development of the entire Palomar Forum property (this Request is for development of the easterly portion only), as long as Melrose was not connected to Vista. 0 If Palomar Forum is allowed to proceed and Melrose is not constructed by Palomar Forum, the City has access to Bond Proceeds that would normally be used to reimburse ' the developer, so there is no financial risk to the City. Consequences to Palomar Forum of Delay in Formation of the District The delay from August 15,2002 to February 15,2003 has triggered a considerable hardship due the $150,000 a month carrying cost of the Palomar Forum project, totaling approximately $1,050,000 in unnecessary cost over the duration of the six month delay. Additionally, the delay has forced the project into technical default with its financing source. Review of Benefits to the City of Carlsbad The City of Carlsbad enjoys the following benefits as a result of immediately approving Palomar Forum's phasing plan: 1. An extra westbound lane on Palomar Airport Road from Business Center Drive to Melrose, to assist in minimizing existing traffic issues; 2. Prevention of any further circumstances akin to the Carlsbad Raceway. The Raceway property had to file for Bankruptcy protection largely due to the inordinate processing time of their parcel map; 3. Upfront dedication of the Melrose right-of-way; 4. Agreements with the developers to guarantee the completion of this necessary transportation element. Thank you for your prompt attention to this request. We look forward to getting started with Palomar Forum, a project that will improve traffic flow along Palomar Airport Road and assist in completing Melrose and Faraday. Please feel free to contact me or Bob Thiergartner at 949-752-2066. Page 1 of 1 Bill Hofman From: Larry Nelson [Larry.Nelson@Davis-Partners.com] Sent: Monday, March 31,2003 9: 17 AM AGENDA ITEM # 10 To: Bill Hofman (bhofman@hofmanplanning.com) C: Mayor Subject: City Memo re alt dtd 3-31-03 City Council City Manager City Attorney City Clerk March 3 1,2003 I To: City of Carlsbad Council Members From: Larry Nelson, Partner Re: Project Confidential Financial Information This confidential memorandum will provide the monthly costs for the Palomar Forum project and illustrate the severe financial strain this has put on the property owners. Our tentative map was approved in December 2001 and we estimated that the final map would take 9- 10 months to record. Our projected commencement date was August 2002 and the expenses to date have overrun our costs in excess of a $1,000,000 and put us in a technical default. We are extremely hopeful that this information will assist in your decision to allow us to record a final map and commence construction of our off-site work as soon as possible. Our out of pocket monthly expenses are $1 2 1,000 and are broken down as follows: * Debt Service lSt Tier $65,000 * Debt Service 2"d Tier 35,000 * Property Taxes and Maintenance $12,000 * Consulting costs(civi1, planning, environmental) $9,000 Thank you in advance for your assistance on this matter. 313 1 I2003 m B d a v) v)