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HomeMy WebLinkAboutBella Terra Associates, LLC - 2007-09-17S,�y� �t mil✓ / l 2" Council/Agency Meeting Held: !211 7— Deferred/Continued to: gAppr ved ❑ nditi n II Appr ved ❑ Denied City W Signat r Council Meeting Date: 9/17/2007 Department ID Number: ED-07-01 CITY OF HUNTINGTON BEACH REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION SUBMITTED TO: HONORABLE MAYOR/CHAIRMAN AND CITY COUNCIL/ REDEVELOPMENT AGENCY ERS SUBMITTED BY: PENE PE C . LBRE H-G FT, C TY AMINISTRATOR/EXECUTIVE DIREC OR PREPARED BY: STANLEY SMALEWITZ, DIRECTOR OF ECONOMIC DEVELOPMENT/DEPUTY EXECUTIVE DIRECTOR SUBJECT: APPROVE SECOND IMPLEMENTATION AGREEMENT WITH BELLA TERRA ASSOCIATES, LLC Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s) Statement of Issue: The Agency is being asked to approve the Second Implementation Agreement to the Owner Participation Agreement (OPA) by and between the Redevelopment Agency of the City of Huntington Beach and Bella Terra Associates, LLC. The Second Implementation Agreement amends the OPA regarding the payment of the Agency's obligation to Bella Terra Associates of $15,000,000 in Feasibility Gap Payments for the construction, rehabilitation and renovation of the Huntington Center (Bella Terra). Funding Source: Funds are available in the Redevelopment Debt Services account number 40740101.88030. Recommended Action: City Council/Redevelopment Agency Motion to: 1. Open and conduct the Public Hearing. 2. Close the Public Hearing. J -1 REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION MEETING DATE: 9/17/2007 DEPARTMENT ID NUMBER: ED-07-01 Redevelopment Agency Motion to Adopt Resolution No. 368 A resolution of the Redevelopment Agency of the City of Huntington Beach, California, approving and making certain findings pursuant to the Health and Safety Code Section 33433 for a Second Implementation Agreement to the Owner Participation Agreement between the Redevelopment Agency of the City of Huntington Beach and Bella Terra Associates, LLC (Attachment No. 2). 2. Approve the Second Implementation Agreement (Attachment No. 1) by and between the Redevelopment Agency and Huntington Center Associates, LLC and Bella Terra Associates, LLC and authorize the Agency Chairman and Agency Clerk to execute the agreement. City Council Motion to: Adopt Resolution No. 2007-37 A Resolution of the City Council of the City of Huntington Beach, California, approving and making certain findings pursuant to the Health and Safety Code Section 33433 for a Second Implementation Agreement to the Owner Participation Agreement between the Redevelopment Agency of the City of Huntington Beach and Bella Terra Associates, LLC (Attachment No. 3). Alternative Action(s): Do not approve the recommended motions and refer back to staff for changes. Analysis: In 2000, the Redevelopment Agency of the City of Huntington Beach (Agency) executed an Owner Participation Agreement (OPA) with Huntington Center Associates, LLC. This OPA was subsequently amended to extend the Schedule of Performance. The OPA and the First Implementation Agreement to the OPA (collectively known as the OPA) require Huntington Center Associates to redevelop the Huntington Center property with a mixed -use commercial project. The property was conveyed to Bella Terra Associates, LLC (Participant); this entity is responsible for completing the scope of development required by the OPA. The terms of the OPA required the Agency to provide financial assistance to fill the $15 million feasibility gap associated with the scope of development identified in the OPA. The assistance was directly tied to demolition, clearance, site preparation, public improvements, utilities, facilities, acquisition of land and easements, and all other legally permissible items. The assistance was to be treated as a loan from the Participant to the Agency. The Agency and Bella Terra Associates have clarified certain financial terms of the OPA, and are proposing to modify the Agency loan repayment structure through the Second Implementation Agreement to the OPA. The terms being proposed are: -2- 8/13/2007 3:50 PM REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION MEETING DATE: 9/17/2007 DEPARTMENT ID NUMBER: ED-07-01 1. November 1, 2005 is established as the date on which interest began accruing on the loan. 2. The loan bears interest at 6.9357% per annum. This is the same interest rate as would be applied under the OPA. 3. The Agency will make a $629,447 prepayment to the Participant on the September 30th that follows the completion date. 4. Debt Service Payment a. The first scheduled debt service payment on the loan is due on the September 30th that follows the completion date. This is the same debt service commencement date as was imposed by the OPA. b. No sales tax revenues are pledged to the repayment of the loan. Comparatively, the OPA required the Agency to allocate 60% of the sales tax revenue received by the City from the project, above $750,000, to debt service. C. The debt service payment on the loan will be drawn exclusively from the net property tax increment generated by the project. However, the definition of the "net property tax increment" has been changed by the Second Implementation Agreement: The OPA defines net property tax as the property tax increment received by the Agency after deduction of Housing Set Aside funds, County Administrative costs, and ERAF payments. ii. The Second Implementation Agreement definition does not permit the Agency to deduct any amount for ERAF obligations that may be imposed in the future in determining the amount of tax increment that is available to pay the debt service. d. One -hundred percent (100%) of the net property tax increment revenue will be committed annually to the debt service payments until the principal and interest balances are fully repaid, or the end of 20 years, whichever occurs first. 5. Any outstanding principal and interest balance remaining at the end of 20 years must be forgiven by the Participant. The forgiveness date remains unchanged from the terms imposed by the OPA. Under the terms imposed by both the OPA and the proposed Second Implementation Agreement, the project will generate more property tax increment revenues than will be -3- 8/13/2007 3:50 PM REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION MEETING DATE: 9/17/2007 DEPARTMENT ID NUMBER: ED-07-01 required to fully amortize the $15 million loan. When the OPA was executed, the projected value of the Project was $111 million. The assessed value of the project is currently set at $203 million. During the loan repayment term, the Agency revenues will be limited to the housing set -aside portion of the property tax increment. After the loan term expires, the Agency will receive 100% of the property tax increment net of pass -through payments to other governmental entities. The Second Implementation Agreement allows the City to receive 100% of the sales tax revenues generated by the project. Under the OPA, the City was to receive the first $750,000 in sales tax revenues, and then was required to commit 60% of the remaining sales taxes to debt service over the 20-year loan term. The proposed modifications to the loan terms results in the City being projected to receive $18.49 million, $7.93 million present value, more in sales tax revenues than were projected to be received under the OPA. Staff recommends the approval of the Second Implementation Agreement as the terms of the Agreement clarify the date on which interest began accruing on the loan and the date on which payments will begin. The Agreement does not alter the principal balance or interest rate applied to the loan, but will modify the source of repayment. Under this Agreement, the loan will be repaid exclusively from property tax increment and sales tax will no longer be used to repay the loan. A detailed analysis may be found in Attachment No. 4 Summary Report. Strategic Plan Goal: F-1 Create long-term financial strategies for funding the backlog of capital projects and maintenance requirements, and ensuring sufficient reserves to withstand major revenue fluctuations in order to ensure continuation of city services during economic downturns. The terms of the Second Implementation Agreement shift the loan payment source from General Fund sales tax revenues to Redevelopment property tax increment generated by the development; therefore, the new agreement furthers the above -stated goal of ensuring sufficient reserves are available to fund City services and capital projects by eliminating debt service to be taken from the General Fund. Environmental Status: Not Applicable. -4- 9/6/2007 4:43 PM REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION MEETING DATE: 9/17/2007 DEPARTMENT ID NUMBER: ED-07-01 Attachment(s): 1 Second Implementation Agreement To Owner Participation Agreement 2 Adopt Resolution No. 368 A resolution of the Redevelopment Agency of the City of Huntington Beach, California, approving and making certain findings pursuant to the Health and Safety Code Section 33433 for a Second Implementation Agreement to the Owner Participation Agreement between the Redevelopment Agency of the City of Huntington Beach and Bella Terra Associates, LLC 3. Resolution No. 2007-37 A Resolution of the City Council of the City of Huntington Beach, California, approving and making certain findings pursuant to the Health and Safety Code Section 33433 for a Second Implementation Agreement to the Owner Participation Agreement between the Redevelopment Agency of the City of Huntington Beach and Bella Terra Associates, LLC 4. Summary Report Pursuant to Section 33433 of the California Health and Safetv Code -5- 8/13/2007 3:50 PM ATTACHMENT #1 SECOND IMPLEMENTATION AGREEMENT TO OWNER PARTICIPATION AGREEMENT by and between THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH and BELLA TERRA ASSOCIATES, LLC CA\Documents and Settings\cstipp\Local Settings\Temporary Internet Files\OLK21\2nd Impl Agmt-BEC-041007.doc SECOND IMPLEMENTATION AGREEMENT TO OWNER PARTICIPATION AGREEMENT This SECOND IMPLEMENTATION AGREEMENT ("Agreement") is dated as of September 17, , 2007 for reference purposes only, and is entered into by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Agency"), and BELLA TERRA ASSOCIATES, LLC a Delaware limited liability company ("Participant"), with reference to the following facts: RECITALS A. The Agency and Participant's predecessor in interest, Huntington Center Associates, LLC, a Delaware limited liability company, entered into that certain Owner Participation Agreement dated October 2, 2000, as implemented by that certain First Implementation Agreement dated as of August 1, 2005, (collectively, the "OPA"). The OPA is hereby incorporated by this reference. Reference herein to the OPA shall include any and all attachments thereto. Any capitalized term not defined herein shall have the meaning ascribed to it in the OPA. The OPA was subsequently assigned to Participant pursuant to that certain Assignment and Assumption Agreement dated as of August 4, 2005. B. The OPA pertains to the construction, development, operation and management of the "Site," as defined in the OPA, generally comprised of a retail shopping center formerly known as Huntington Center and currently known as Bella Terra (the "Project"). C. Subject to and in accordance with the terms and conditions of the OPA and the Schedule of Feasibility Gap Payments attached thereto, the Agency is obligated to reimburse the Participant as set forth in Part 2 of the Schedule of Feasibility Gap Payments ("Feasibility Gap Obligation"). D. The Agency and Participant desire to enter into this Agreement to clarify and amend the OPA to provide: (i) a commencement date for interest accrual on the Feasibility Gap Obligation; (ii) a required one time only prepayment of the Feasibility Gap Obligation in the amount of $629,447; (iii) that interest on the Feasibility Gap Obligation shall be fixed at 6.9357% per year; (iv); that, except for the prepayment described in clause (ii) above, all principal and interest Feasibility Gap Obligation payments to Participant shall be made solely from Available Site -Generated Property Tax Increment; and (v) a further limitation on appeals, challenges and/or contests of property tax assessments on the Site. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Agency and Participant hereby agree as follows: 1 1. Feasibility Gap Obligation. a. Schedule of Feasibility Gap Payments. Part 2 of the Schedule of Feasibility Gap Payments, Attachment No. 7 to the DDA, is hereby amended as'follows: (1) Section (c) entitled "Interest Rate" is hereby deleted in its entirety and replaced with the following new Section (c): "(c) Interest Rate. The principal amount of this Part 2 shall bear interest at the rate of 6.9357% per annum from November 1, 2005 until paid." (2) Section (d) entitled "Obligation to Make Payments" is hereby deleted in its entirety and replaced with the following new Section (d): "(d) Obligation to Make Pam. The obligations of the Agency under this Part 2 shall be a special and limited obligation payable to Participant solely from the source of funds expressly identified in this Part 2. The Agency shall have no obligation to pay any amounts to Participant pursuant to this Part 2 except as follows: (1) Conditions Precedent. The following conditions precedent to each payment hereunder shall be satisfied: A. The Completion Date, as defined in paragraph (k) below, shall have occurred; B. The Operating Commencement Date, as defined in paragraph (k) below, shall have occurred; C. Participant shall be not be in default of any of its material obligations under the OPA; and D. The amendment(s) described in Section 2.b. of the Second Implementation Agreement to the OPA have been duly executed in recordable form and recorded against the Site in accordance with Section 2.b. of the Second Implementation Agreement to the OPA. (2) Available Site -Generated Property Tax Increment. On or prior to September 30 of each year, beginning with the first September 30 which follows the satisfaction of all conditions precedent specified in paragraph (d)(1) above, and continuing until the principal amount specified in paragraph (b) above (and any accrued interest thereon) has been paid in full or until the day after the nineteenth (19th) anniversary of 2 the first Agency payment under this Part 2; whichever first occurs, the Agency shall calculate and pay to Participant all Available Site -Generated Property Tax Increment received by the Agency during the prior Fiscal Year.. For illustrative purposes only, assuming the first Agency payment under this Part 2 occurs on September 30, 2007 and all funds owed by Agency to Participant pursuant to this Attachment No. 7 have not yet been paid, the last Agency payment hereunder shall be due September 30, 2026, and any balance remaining in Agency's payment obligations under this Part 2 after such date shall automatically be deemed forgiven. "Available Site -Generated Property Tax Increment" means the total ad valorem property tax increment revenue allocated to and received by Agency in any fiscal year pursuant to Section 33670(b) of the California Health and Safety Code, as said statute may be amended from time to time, by application of the one percent (I %) tax levied against real property as permitted by Article XIIIA of the California Constitution, in an amount equal to any increase in the assessed value of the. Site over and above an assessed value of Forty Three Million Two Hundred and Twenty Eight Thousand Dollars ($43,228,000), but specifically excluding therefrom all of the following: (A) a portion of such tax increment revenues equal to the twenty percent (20%) of tax increment revenue from the redevelopment project area as a whole that is set aside pursuant to Sections 33334.2 et seq. of the California Health and Safety Code or any successor law for low- and moderate -income housing purposes; and (B) a portion of such tax increment revenues equal to the percentage of tax increment revenues from the redevelopment project area as a whole that the Agency is required to pay to any and all governmental entities pursuant to any provision of law, as amended from time to time, or pursuant to tax sharing/pass-through agreements entered into prior to the OPA by the Agency and such governmental entities implementing the tax sharing/pass-through agreements; and (C) the amount of any revenues received by the Agency which are attributable to any special taxes or assessments or voter -approved indebtedness; and (D) charges for County administrative charges, fees or costs equal to the percentage of such charges in the Project Area as a whole. (3) Required One Time Prepayment. Without limiting in any way paragraph (e), below, the Agency shall be required to make a one time only prepayment to Participant towards the amount owed by the Agency under this Part 2 in the amount of Six Hundred Twenty -Nine Thousand Four Hundred Forty -Seven Dollars ($629,447) on the first September 30 which follows the satisfaction of all conditions precedent specified in paragraph (d)(1) above. Payment shall not be made from or reduce the Available Site -Generated Property Tax Increment. The 3 payment shall be treated, for accounting purposes, as if it had been made on September 30 of the year preceding the first payment under Section (d)(2) hereof, and shall be applied first to accrued interest and thereafter to .principal. (3) The second paragraph of Section (g) entitled "Subordination" is hereby deleted in its entirety. (4) Section 0) entitled "Payment Obligations Forgiven" is hereby deleted in its entirety and replaced with the following new Section 0): "o) Payment Obligations Forgiven. Any balance remaining in Agency's payment obligations under this Part 2 after the Reimbursement Term shall automatically be deemed forgiven." (5) Section (k) entitled "Definitions" is hereby deleted in its entirety and replaced with the following new Section (k): "(k) Definitions. The following definitions shall apply to this Part 2: (1) "City" as used herein shall mean the City of Huntington Beach. (2) "Completion Date" as used herein shall mean the date on which the Release of Construction Covenants to be issued by Agency pursuant to the Agreement with respect to the redeveloped Site and improvements is recorded in the Official Records of Orange County. (3) "Fiscal Year," as used herein, means each twelve-month period beginning on July l and ending on June 30. (4) ".Operating Commencement Date" as used herein means November 1, 2005 only for purposes of calculating the commencement of interest accrual on the Agency's payment obligation and for all other purposes under the OPA, including the commencement of the Agency's payment obligations and the Agency Participation Payments, it shall mean the Completion Date. (5) "Reimbursement Term" as used herein means the period commencing on the first September 30 which follows the satisfaction of all conditions precedent specified in paragraph (d)(1) above, and continuing until the principal amount specified in paragraph (b) above (and any accrued interest thereon) has been paid in full or until the nineteenth (19th) year following the first Agency payment under this Part C! 2, whichever first occurs, during which Agency is obligated to make reimbursement payments to Participant pursuant to this Attachment No. 7. (6) "Site" as used herein means that certain real property (excluding the Ward Parcel) in the City of Huntington Beach, more particularly described in the legal description attached hereto as Exhibit A and incorporated herein by this reference, and any improvements constructed or to be constructed thereon in accordance with the OPA. b. Reimbursement Term. All references to "Reimbursement Term" in the OPA, including all attachments thereto, shall be deemed to refer to the Reimbursement Term described in Part 2 of the Schedule of Feasibility Gap Payments as revised pursuant to this Agreement. 2. Assessments. a. Participant hereby covenants and agrees on behalf of itself and any successors and assigns in the Site or any portion thereof or any improvements thereon or any interest therein that Participant, such successors and assigns shall pay when due all real estate taxes and assessments assessed and levied on the Site and any improvements thereon and, except as may be requested by tenants of the Project whose leases predate August 1, 2005, refrain from appealing, challenging or contesting in any manner the validity or amount of any tax assessment, encumbrance or lien on the Site; provided, however, that such prohibition shall not apply to an appeal, challenge or contesting of an erroneous initial assessment for property tax purposes of the Site in the fiscal year of the completion of the improvements to be constructed and/or renovated pursuant to this Agreement provided, however, that that no such appeal, challenge or contest shall be permitted to attempt to obtain or result in an assessed value of the Site, including land and improvements, which is lower than Two Hundred Three Million Three Hundred Seventeen Thousand Dollars ($203,317,000). b. Participant agrees to execute in recordable form amendment(s) to the Covenant Agreement and any other document (including, without limitation, any other attachment to the OPA) reasonably deemed necessary by the Agency Executive Director to implement the purposes of this Section, which amendment(s) shall be in form and content reasonably approved by the Agency Executive Director. The parties agree that the Agency shall record any such amendment(s) against the Site. 5 3. Example. As an example of the payments to be made hereunder, assuming that (i) the Completion Date occurs prior to September 30, 2007 and (ii) the Available Site -Generated Property Tax Increment for the July 1, 2006 - June 30, 2007 fiscal year is $1,534,651, the payment to be made to Participant on September 30, 2007 would be $2,164,018 ($629,447 + $1,534,571 = $2,164,018) applied as follows: $15,000,000 Principal amount + 979,014 Interest from 11/01/05 - 9/30/06 $15,979,014 Principal and interest as of 9/30/06 - 629,447 Prepayment deemed made as of 9/30/06 $15;349,567 Balance as of 10/01/06 + 1,083,059 Accrued interest from 10/1/06 - 9/30/07 $16,432,626 Balance as of 9/30/07 -1,534,571 Assumed payment as of 9/30/07 $14,898,055 Balance as of 10/1/07 4. Binding on Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the successors, assignees, personal representatives, heirs and legatees of the parties hereto. 5. OPA in Full Force and Effect. Except as otherwise modified herein, the terms and conditions of the OPA shall remain unmodified and in full force and effect, including, without limitation, the conditions precedent to Agency's obligation to commence payment of the Feasibility Gap Obligation. In the event of any conflict between the terms of this Agreement and the OPA, the terms of this Agreement shall control. 6. Further Assurances. The parties agree to execute such other documents and to take such other action as may be reasonably necessary to further the purposes of this Agreement. 7. Date of this Agreement. The "Effective Date" of this Agreement shall be the date this Agreement is executed by the Agency. 8. Counterparts. This Agreement may be executed by each party on a separate signature page, and when the executed signature pages are combined with the balance of this Agreement, it shall constitute one single instrument. [signatures on following pages] G "AGENCY" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Dated: 2007 Chai an ATTEST: APPROVED AS TO FORM: Agency General Counsel 'YY1' APPROVED AS TO FORM: KANE, BALLMER & BERKMAN Agency Special Counsel INITIATED AND APPROVED: Director of Economic Development REVIEWED AND APPROVED: Executive Director [Signatures continue on following page] 7 "PARTICIPANT" BELLA TERRA ASSOCIATES, LLC By: Bella Terra Borrower, LLC, a Delaware z abi ' any, its member Dated: �/o , 2007 . John Miller, President Dated: i0 , 2007 By: N 4, , a�� Verlin Nmmckslts_12dependent Director ATTACHMENT #2 RESOLUTION NO. 368 A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, CALIFORNIA, APPROVING AND MAKING CERTAIN FINDINGS PURSUANT TO HEALTH AND SAFETY CODE SECTION 33433 FOR A SECOND IMPLEMENTATION AGREEMENT TO OWNER PARTICIPATION AGREEMENT BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH AND BELLA TERRA ASSOCIATES WHEREAS, the Redevelopment Agency of the City of Huntington Beach ("Agency") is engaged in activities necessary to execute and implement the redevelopment plan ('Redevelopment Plan") for the Merged Redevelopment Project Areas of Huntington Beach (collectively, the "Merged Project Area"); and WHEREAS, Agency proposes to enter into a Second Implementation Agreement ("Second Implementation Agreement") with Participant, which supplements, modifies or incorporates by reference the terms of that certain Owner Participation Agreement by and between Agency and Huntington Center Associates, LLC (the "Original Participant") dated as of October 2, 2000 (the "OPA"), as previously supplemented by that certain First Implementation Agreement dated as of August 4, 2005 (the OPA, the First Implementation Agreement and the Second Implementation Agreement shall be collectively referred to herein as the "Agreement"); and WHEREAS, That certain real property within the boundaries of the Merged Project Area set forth with particularity in the Agreement (the "Property") was recently conveyed by the Original Participant to Bella Terra Associates, LLC (the "Participant") pursuant to an Assignment and Assumption Agreement approved by the Agency; and WHEREAS, pursuant to the California Community Redevelopment Law (California Health and Safety Code, Section 33000 et seq.) the Agency and the City Council held a joint public hearing on the Second Implementation Agreement, having duly published notice of such public hearing and having made copies of the proposed Second Implementation Agreement and other reports and documents (including the summary referred to in Section 33433) available for public inspection and copying; and WHEREAS, the Agency has duly considered all terms and conditions of the proposed transaction, and believes that it is in the best interests of the Merged Project Area and the City and the health, safety, morals and welfare of its residents, and in accord with the public purposes and provisions of applicable State and local law and requirements; 06-1.31/1.0581 Agency Resolution No. 368 NOW, THEREFORE, IT IS RESOLVED by the Redevelopment Agency of the City of Huntington Beach, California, as follows: 1. All recitals set forth in this resolution are true and correct. 2. The consideration from Participant under the Agreement is not less than the fair reuse value at the use and with the covenants and conditions and development costs authorized by the Second Implementation Agreement for, among other reasons, the reasons set forth in the 33433 Summary. 3. The implementation of the Agreement, as amended by the Second Implementation Agreement, will assist in the elimination of blight in the Merged Project Area. 4. The implementation of the Agreement, as amended by the Second Implementation Agreement, is consistent with the implementation plan adopted by the Agency pursuant to Section 33490 of the Health and Safety Code. The proposed Second Implementation Agreement is hereby approved in substantially the form presented at this meeting, with such minor changes as may be approved by the Executive Director of the Agency with the approval as to form by the Agency General Counsel. 6. The Chairman of the Agency and the Executive Director of the Agency are hereby authorized to execute the Second Implementation Agreement on behalf of the Agency. A copy of the Second Implementation Agreement when executed by the Agency shall be placed in the file of the office of the Agency Clerk. 7. The Executive Director of the Agency (or his designee) is hereby authorized, on behalf of the Agency, to sign all documents (including but not limited to grant deeds) necessary and appropriate to carry out and implement the Second Implementation Agreement, and to administer the Agency's obligations, responsibilities and duties to be performed thereunder. Rest of Page Not Used 2. 06-1.31/10581. Agency Resolution No. 368 PASSED AND ADOPTED by the Redevelopment Agency of the City of Huntington Beach at a regular meeting held thereof on the 17th day of September , 200_7. s Id 'I oelpft my a to is Chairma REVIEWED AND APPROVED: APPROVED AS TO FORM: 9r cutive irector 4eral Cou sel , + , v� KANE, BALLMER & BERKMAN Agency Special Counsel Murray O. Kane INITIATED AND APPROVED: Director of Eco evelopment 1-2 06-131/10581 Res. No. 368 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss CITY OF HUNTINGTON BEACH ) 1, JOAN FLYNN, Clerk of the Redevelopment Agency of the City of Huntington Beach, California, DO HEREBY CERTIFY that the foregoing resolution was duly adopted by the Redevelopment Agency of the City of Huntington Beach at a regular meeting of said Redevelopment Agency held on the 17th day of September, 2007 and that it was so adopted by the following vote: AYES: Bohr, Carchio, Coerper, Green, Hansen, Hardy NOES: None ABSENT: Cook ABSTAIN: None Cle4lof the Redevelopme gency of the City of Huntington Beach, CA ATTACHMENT #3 RESOLUTION NO. 2007-37 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH, CALIFORNIA, APPROVING AND MAKING CERTAIN FINDINGS PURSUANT TO HEALTH AND SAFETY CODE SECTION 33433 FOR A SECOND IMPLEMENTATION AGREEMENT TO OWNER PARTICIPATION AGREEMENT BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH AND BELLA TERRA ASSOCIATES WHEREAS, the Redevelopment Agency of the City of Huntington Beach ("Agency") is engaged in activities necessary to execute and implement the redevelopment plan ("Redevelopment Plan") for the Merged Redevelopment Project Areas of Huntington Beach (collectively the "Merged Project Area"); and WHEREAS, Agency proposes to enter into a Second Implementation Agreement ("Second Implementation Agreement") with Participant, which supplements, modifies or incorporates by reference the terms of that certain Owner Participation Agreement by and between Agency and Huntington Center Associates, LLC, (the "Original Participant") dated as of October 2, 2000 (the "OPA"), as previously supplemented by that certain First Implementation Agreement dated as of August 4, 2005 (the OPA, the First Implementation Agreement and the Second Implementation Agreement shall be collectively referred to herein as the "Agreement"); and WHEREAS, That certain real property within the boundaries of the Merged Project Area set forth with particularity in the Agreement (the "Property") was recently conveyed by the Original Participant to Bella Terra Associates, LLC (the " Participant") pursuant to an Assignment and Assumption Agreement approved by the Agency; and WHEREAS, pursuant to the California Community Redevelopment Law (California Health and Safety Code, Section 33000 et seq.) the Agency and the City Council held a joint public hearing on the Second Implementation Agreement, having duly published notice of such public hearing and having made copies of the proposed Second Implementation Agreement and other reports and documents (including the summary referred to in Section 33433) available for public inspection and copying; and WHEREAS, the City Council has duly considered all terms and conditions of the proposed transaction, and believes that it is in the best interests of the Merged Project Area and the City and the health, safety, morals and welfare of its residents, and in accord with the public purposes and provisions of applicable State and local law and requirements; I; 06-1.31/10584 Resolution No. 2007-37 NOW, THEREFORE, IT IS RESOLVED by the City Council of the City of Huntington Beach, California, as follows: 1. All recitals set forth in this resolution are true and correct. 2. The consideration from Participant under the Agreement is not less than the fair reuse value at the use and with the covenants and conditions and development costs authorized by the Second Implementation Agreement for, among other reasons, the reasons set forth in the 33433 Summary. 3. The implementation of the Agreement, as amended by the Second Implementation Agreement, will assist in the elimination of blight in the Merged Project Area. 4. The implementation of the Agreement, as amended by the Second Implementation Agreement, is consistent with the implementation plan adopted by the Agency pursuant to Section 33490 of the Health and Safety Code. The proposed Second Implementation Agreement is hereby approved in substantially the form presented at this meeting, with such minor changes as may be approved by the Executive Director of the Agency with the approval as to form by the Agency General Counsel. 6. The City Council hereby authorizes the City Clerk to deliver a copy of this Resolution to the Executive Director and members of the Agency. A copy of the Second Implementation Agreement when executed by the Agency shall be placed on file in the office of the City Clerk. Rest of Page Not Used 2. 06-131/10584 Resolution No. 2007-37 PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting held thereof on the 17th day of September , 2007. Mayor REVIEWED AND APPROVED APPROVED AS TO FORM: ity Adiginistrator ty Attorn KANE, BALLMER & BERKMAN Special Counsel '9 Murray O. Kane INITIATED AND APPROVED: Director of Eco k Development 2. 06-131/10584 Res. No. 2007-37 STATE OF CALIFORNIA COUNTY OF ORANGE ) ss: CITY OF HUNTINGTON BEACH ) I, JOAN L. FLYNN the duly elected, qualified City Clerk of the City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby certify that the whole number of members of the City Council of the City of Huntington Beach is seven; that the foregoing resolution was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council at a regular meeting thereof held on the 17th day of September, 2007 by the following vote: AYES: Bohr, Carchio, Coerper, Green, Hansen, Hardy NOES: None ABSENT: Cook ABSTAIN: None City erk and ex-officio rk of the City Council of the City of Huntington Beach, California ATTACHMENT #4 SUMMARY REPORT PURSUANT TO SECTION 33433 OF THE CALIFORNIA HEALTH AND SAFETY CODE ON THE SECOND IMPLEMENTATION AGREEMENT TO THE OWNER PARTICIPATION AGREEMENT BY AND BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH AND BELLA TERRA ASSOCIATES BACKGROUND STATEMENT In 2000, the Redevelopment Agency of the City of Huntington Beach (Agency) executed an Owner Participation Agreement (OPA) with Huntington Center Associates, LLC (Original Participant); this OPA was subsequently amended to extend the Schedule of Performance. The OPA and the First Implementation Agreement to the OPA required the Original Participant to redevelop the Huntington Center property with a mixed -use commercial project including a multiplex theater, retail anchor tenants, retail shops and restaurants (Project). The Site is located in the Merged Redevelopment Project Area (Project Area), and the purpose of the OPA is to effectuate the Merged Redevelopment Project Area Redevelopment Plan (Redevelopment Plan). Prior to executing the OPA, the Agency prepared a report summarizing the financial terms of the transactions in accordance with the reporting requirements imposed by California Health and Safety Code Section 33433 (Section 33433). The 2000 Summary Report is attached for reference purposes. The property was recently conveyed to Bella Terra Associates (Current Participant); this entity is responsible for completing the scope of development required by the Original OPA and the First Implementation Agreement to the OPA. The Agency and the Current Participant have clarified certain financial terms of the executed OPA, and are proposing to modify the Agency loan repayment structure. The proposed clarifications and modifications are detailed in a Second Implementation Agreement to the OPA (Second Implementation Agreement). The Second Implementation Agreement materially alters the OPA terms, and thus, the Agency is required by Section 33433 to prepare a new summary report for the transaction. SECTION 33433 REPORT MODIFICATIONS The Section 33433 report prepared in support of the OPA includes the following sections: 0701002.doc. HTB: KHH: gbd 14066.004/013 2/19107 I. Summary of the Proposed Agreement: This section summarizes the major responsibilities imposed on the Original Participant and the Agency by the OPA. Cost of the Agreement to the Agency: This section projects the net cost to the Agency associated with implementing the OPA. III. Benefits to the City: This section summarizes the sales tax revenue projected to be received by the City of Huntington Beach ( City) under the OPA. IV. Estimated Value of the Interests to be Conveyed: This section estimates the value of the interests to be conveyed to the Original Participant. V. Consideration to be Received and Comparison with the Established Value: This section describes the compensation to be received by the Agency, and explains any difference between the compensation and the established value of the Site. VI. Blight Elimination: This section describes the existing blighting conditions on the Site, and explains how the transaction will assist in alleviating the blighting influence. VII. Conformance with the AB1290 Implementation Plan: This section describes how the transaction will achieve goals identified in the Agency's adopted AB1290 Implementation Plan. As discussed previously, a summary report was prepared in support of the OPA. As such, the following summary report focuses solely on the sections of the report that are impacted by the Second Implementation Agreement. The report sections that do not require modification are: The estimated value of the interests to be conveyed; 2. Blight elimination; and Conformance with the AB1290 Implementation Plan. The sections that are re-evaluated in this summary report are: Summary of the proposed Second Implementation Agreement; 2. The net cost of the Second Implementation Agreement to the Agency; 3. The benefits received by the City under the Second Implementation Agreement; and 4. The consideration to be received, and comparison with the established value. 2 0701002.doc. HTB: KHH: gbd 14066.004/013 2119/07 SUMMARY OF THE AGREEMENT Executed OPA Terms The OPA requires the Agency to provide $15 million in assistance to the Project. The assistance was directly tied to demolition; clearance; site preparation; public improvements; utilities and facilities; acquisition of land and easements; and all other legally permissible items reimbursable to the Original Participant. The assistance was to be treated as a loan from the Original Participant to the Agency. The OPA imposes the following repayment terms on the loan: The loan bears interest at 6.9357%. In accordance with the OPA, this rate is equal to 8% minus Y2 the difference between 8% and the True Interest Cost as defined in the OPA. 2. Interest begins accruing on the loan upon the "Operating Commencement Date". 3. The Agency's debt service payment obligation commences on September 30th of the year following both the "Completion Date" and the Operating Commencement Date. 4. The debt service payments on the loan are drawn solely from 60% of the net property tax increment revenue generated by the Project plus an amount equal to 60% of the sales tax revenue generated by the Project above $750,000 per year. 5. The loan is to be amortized over a 20-year period. Any outstanding principal and interest balance at the end of the amortization period must be forgiven. The OPA defines the Operating Com mencement Date as the latter of the date that the City of Huntington Beach (City) issues a Certificate of Occupancy, or the opening of the Project for business to the general public. Due to standard City practices, the City will never issue a Certificate of Occupancy for the entire Project as contemplated by the OPA. The partially completed Project opened for business on November 1, 2005. The Agency and the Current Participant disagree when the Operating Com mencement Date, as defined by the OPA, occurred. As a compromise settlement to this disagreement, the Second Implementation Agreement calls for interest to begin accruing on the Agency's payment obligation on November 1, 2005. For all other purposes under the OPA, including the commencement of the Agency's payment obligations and the Agency Participation Payments, the Completion Date will be applied. The Completion Date is defined in the OPA as the date on which the Release of Constr uction Covenants is issued and recorded in the Official Records of Orange County. 0701002.doc. HTB: KHH: gbd 14066.004/013 2119/07 Comparison of the Second Implementation Agreement to the OPA To resolve the disagreement, the proposed Second Implementation Agreement modifies the loan terms detailed in the OPA. The terms being proposed in the Second Implementation Agreement are: November 1, 2005 is established as the date on which interest began accruing on the loan. 2. The loan bears interest at 6.9357%. This is the same interest rate as would be applied under the OPA. 3. The Agency will make a $629,447 prepayment to the Current Participant on the September 30th that follows the Completion Date. 4. Debt Service Payments a. The first scheduled debt service payment on the loan is due on the September 30th that follows the Completion Date. This is the same debt service commencement date as was im posed by the OPA. b. No sales tax revenues are pledged to the repayment of the loan. Comparatively, the OPA required the Agency to allocate 60% of the sales tax revenue received by the City from the Project, above $750,000, to the debt service payments. C. The debt service payments on the loan will be drawn exclusively from the net property tax increment generated by the Project. However, the definition of "net property tax increment" has been changed in the Second Implementation Agreement: The OPA defined net property tax increment as the property tax increment received by the Agency after deduction of Housing Set -Aside funds, County Administrative costs and ERA payments. The Second Implementation Agreement definition does not permit the Agency to deduct any amount for ERAF obligations that may be imposed in the future in determining the amount of net tax increment that is available to pay the debt service. d. One -hundred percent (100%) of the net property tax increment revenue will be committed to the debt service annually until the principal and interest balances are fully repaid, or the end of 20 years, w hichever occurs first. 4 0701002.doc. HTB: KHH: gbd 14066.004/013 2/19107 5. Any outstanding principal and interest balance remaining at the end of 20 years must be forgiven by the Current Participant. The forgiveness date remains unchanged from the terms imposed by the OPA. The benefits associated with the proposed modifications are: Setting November 1, 2005 as the date on which interest began accruing on the loan resolves the disagreement between the Participant and the Agency. 2. The OPA provided for the debt service on the loan to be calculated based on the net property tax increment and net new sales tax generated by the Project. The proposed modification eliminates the sales tax contribution, which means that the General Fund revenues will be greater under the proposed Second Implementation Agreement than they would be under the OP A terms. The upfront prepayment of $629,447 creates benefits for both the Agency and the Participant. These benefits are: a. The Agency's current investment returns are significantly less than the 6.9357% interest rate applied to the loan. The proposed prepayment reduces the principal balance, which in turn reduces the interest payments to be made by the Agency over the loan repayment term. This creates a net financial benefit for the Agency. b. The debt service structure proposed in the Second Implementation Agreement produces lower debt service payments during the first 10 years than would have been generated under the OPA. The provision of the proposed prepayment mitigates the impact created by the reduction in the annual payments. COST OF THE AGREEMENT TO THE AGENCY Under the terms imposed by both the OPA and the proposed Second Implementation Agreement, the Agency wil I receive more property tax increment revenues than will be required to fund the $15 million in assistance plus interest. During the loan repayment term, the Agency revenues will be limited to the housing set -aside portion of the property tax increment. After the loan term expires, the Agency will receive 100% of the property tax increment net of pass- throughs to other governmental entities. The Agency will receive property tax increment through the end of fiscal year 2033/34. The net Agency revenue projected to be received under the OPA is compared with the projected net Agency revenue under the proposed Second Implementation Agreement in the following table: 5 0701002.doc. HTB: KHH: gbd 14066.004/013 2/19/07 Second Implementation Net Revenue OPA Agreement Difference Nominal Dollars $23,919,000 $29,662,000 $5,743,000 Net Present Value $8,419,000 $7,513,000 ($906,000) As can be seen in the preceding table, in nom inal dollars, the net Agency revenue is projected to be higher under the Second Implementation Agreement than under the OPA. However, the revenues are lower when considered on a present value basis. The reasons for this are: The Project value was projected at $111 million when the OPA was executed. The assessed value of the Project is currently set at $203 million. Thus, the Project will generate substantially more property tax increment over time than was originally projected. 2. The increases in gross property tax increment are offset by the fact that the Second Implementation Agreement calls for interest to begin accruing on the Agency obligation on November 1, 2005. Comparatively, the earliest possible debt service commencement date is September 30, 2007. This lag time was not anticipated when the OPA was executed. Benefits to the City Sales taxes represent the primary revenue source that the City will receive from the Project. The net sales tax revenues projected to be received by the City over the original 20-year loan term are compared in the following table: Second Implementation Net Revenue OPA Agreement Difference Nominal $26,838,000 $45,328,000 $18,490,000 Net Present Value $13,191,000 $21,119,000 $7,928,000 The Second Implementation Agreement allows the City to receive 100% of the sales tax revenues generated by the Project from the commencement of operations forward. Under the OPA, the City was to receive the first $750,000 in sales tax revenues, and then was required to commit 60% of the remaining sales taxes to debt service over the 20-year loan term. The proposed modifications to the loan terms results in the City being projected to receive $18.49 million more in sales tax revenues than were projected to be received under the OPA. This translates to $7.93 million in present value terms. 0701002.doc. HTB: KHH: gbd 14066.004/013 2/19/07 CONSIDERATION TO BE RECEIVED, AND COMPARISON WITH THE ESTABLISHED VALUE The OPA did not require the Original Participant to acquire any land from the Agency. However, the OPA stated that if the Agency ultimately acquired any portion of the Site, the Original Participant would be required to purchase the property from the Agency at the property's value at the highest use permitted under the Redevelopment Plan. Ultimately the Original Participant was not required to purchase any property form the Agency, and therefore this provision is no longer pertinent to the transaction. The OPA requires the Agency to provide assistance to the Project for infrastructure improvements; the assistance amount is set at a principal amount of $15 million. The OPA further requires the Original Participant to pay for the improvements, and then to treat the expenditure as a loan to be repaid by the Agency over time. The 2000 Summary Report determined that the Project demonstrated the need for $18.1 million in upfront assistance. It was therefore concluded that the assistance package did not reduce the Original Participant's land purchase price to less than the Site's fair reuse value. The Second Implementation Agreement does not alter the principal balance or the interest rate applied to the assistance being provided to the Current Participant. However, it does clarify and modify the loan terms included in the OPA. The results of these changes are: The net revenues to be received by the Agency are projected to increase by $5.74 million in nominal dollars, but they are projected to decrease by $906,000 in present value terms. 2. The revenue to be received by the City is projected to increase by a total of $18.49 million, and a net present value of $7.93 mi Ilion. 3. The total Agency and City revenues are projected to increase above the amounts projected to be received under the OPA. The net revenue to be received by the Agency and the City is projected to increase by a total of $24.23 million in nominal terms, and by a net present value of $7.02 million. 7 0701002.doc. HTB: KHH: gbd 14066.004/013 2/19/07 RCA ROUTING SHEET INITIATING DEPARTMENT: Economic Development SUBJECT: APPROVE SECOND IMPLEMENTATION AGREEMENT WITH BELLA TERRA ASSOCIATES, LLC COUNCIL MEETING DATE: September 17, 2007 RCA ATTACHMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Attached ❑ Not Applicable Resolution (w/exhibits & legislative draft if applicable) Attached Not Applicable ❑ Tract Map, Location Map and/or other Exhibits Attached ❑ Not Applicable Contract/Agreement (w/exhibits if applicable) Attached Signed in full by the City Attorney) Not Applicable ❑ Subleases, Third Party Agreements, etc. Attached ❑ Approved as to form by City Attorney Not Applicable Certificates of Insurance (Approved by the City Attorney) Attached ❑ Not Applicable Fiscal Impact Statement (Unbudgeted, over $5,000) Attached ❑ Not Applicable Bonds (If applicable) Attached ❑ Not Applicable Staff Report (If applicable) Attached Not Applicable ❑ Commission, Board or Committee Report (If applicable) Attached ❑ Not Applicable Findings/Conditions for Approval and/or Denial Attached Not Applicable ❑ EXPLANATION' FOR MISSING ATTACHMENTS RCA Author: Doris Powell NOTICE OF JOINT PUBLIC HEARING The City Council of the City of Huntington Beach ("City") and the Redevelopment Agency of the City of Huntington Beach ("Agency") will conduct a joint public hearing on September 17, 2007 at 6:00 p.m., or as soon thereafter as the matter may be heard, in the Council Chambers, 2000 Main Street Huntington Beach, California 92648, pursuant to the California Community Redevelopment Law (Health and Safety Code Section 33000 et seq.), for the purpose of considering the modification to the executed Owner Participation Agreement for the Bella Terra retail center formerly known as Huntington Center. The proposed Second Implementation Amendment to the Owner Participation Agreement modifies the repayment structure for certain public improvements that were installed and constructed by the developer of the project. A summary containing the following information is available for public inspection and copying during regular office hours at the offices of the City Clerk at 2000 Main Street Huntington Beach, California 92648: An identification of the proposed modifications to the executed Owner Participation Agreement; 2. Estimates of the amount of tax increment proposed to be used to pay for the installation and construction of the identified public improvements; and 3. The redevelopment purpose for which tax increment is being used to pay for the installation and construction. ALL INTERESTED PERSONS are invited to attend said hearing and express opinions or submit to the City Clerk written evidence for or against the application as outlined above. If you challenge the City Council/Agency's action in court, you may be limited to raising only those issues that you or someone else raised at the public hearing described in this notice or in written correspondence delivered to the City at, or prior to, the public hearing. If there are any further questions, please call Stanley Smalewitz, Director of Economic Development, at (714) 536-5542. Direct your written communication to: JOAN L. FLYNN, CITY CLERK CITY OF HUNTINGTON BEACH 2000 MAIN STREET — 2ND FLOOR HUNTINGTON BEACH, CALIFORNIA 92648 (714) 536-5227 /=74}C -- � A,3 - CITY COUNCIL/REDEVELOPMENT AGENCY``" PUBLIC HEARING REQUEST FORM MEETING DATE: September 17, 2007 SUBJECT: 33433 Summary Report for Second Implementation Agreement, Bella Terra DEPARTMENT: Economic Development CONTACT NAME: Doris Powell PHONE: X 5457 N/A YES NO ( ) (X) ( ) Is the notice attached? ( ) (X) ( ) Do the heading and closing of the notice reflect a hearing before the City Council and/or Redevelopment Agency? ( ) (X) ( ) Are the date, day and time of the public hearing correct? (X) ( ) ( ) If an appeal, is the appellant's name included in the notice? (X) ( ) ( ) Coastal Development Permit, does the notice include appeal language? (X) ( ) ( ) Is there an Environmental Status to be approved by Council? (X) ( ) ( ) Is a map attached for publication? ( ) ( ) (X) Is a larger ad required? Size (X) ( ) ( ) Is the verification statement attached indicating the source and accuracy of the mailing list? (X) ( ) ( ) Are the applicant's name and address part of the mailing labels? (X) ( ) ( ) Are the appellant's name and address part of the mailing labels? (X) ( ) ( ) If Coastal Development Permit, is the Coastal Commission part of the mailing labels? (X) ( ) ( ) If Coastal Development Permit, are the resident labels attached? ( ) (X) ( ) Is Summary Report 33433 attached? (Redevelopment Agency items only) What is the minimum number of days from publication to hearing date? What is the minimum number of times to be published? What is the specified number of days between publications? FOR ADMINISTRATION AND CITY CLERK USE ONLY Approved for public hearing Date published Date noticed to newspaper Date notices mailed 14 2 consecutive weeks Huntington Beach Independent has been adjudged a newspaper of general circulation in Huntington Beach and Orange County by Decree of the Superior Court of Orange County, State of California, under date of Aug. 24, 1994, case A50479. PROOF OF PUBLICATION STATE OF CALIFORNIA) ) SS. COUNTY OF ORANGE ) I am the Citizen of the United States and a resident of the County aforesaid; I am over the age of eighteen years, and not a party to or interested in the below entitled matter. I am a principal clerk of the HUNTINGTON BEACH INDEPENDENT, a newspaper of general circulation, printed and published in the City of Huntington Beach, County of Orange, State of California, and the attached Notice is a true and complete copy as was printed and published on the following date(s): AUGUST 30,2007 SEPT. 06,2007 I declare, under penalty of perjury, that the foregoing is true and correct. Executed on SEPTEMBER 0 6, 2 0 0 7 at Huntington Beach, California Signature . _NOTICE Of j JOINT PUBLIC NEARING The City Council of the, City of Huntington! Beach ("City") and the. Redevelopment Agency of the City of Huntington. Beach ("Agency") will' conduct a joint public` hearing on September 17„2007 at 6:00 p.m., or as soon thereafter as the matter may be heard, in the Council Chambers, 2000 Main Street Huntington ;Beach, California 92648,1 !pursuant to the Califor- nia Community Redevel- opment Law (Health and Safety Code Section 33000 et seq.), for the purposeof considering the modification to the executed Owner Partici- pation Agreement for the Bella Terra ' retail center formerly known as Huntington Center. The proposed Second Implementation Amendment to the Own- er Participation Agreement modifies the repayment structure for certain public im provements that : were installed and con- structed by the develop-, er of the project. A summary containing the following informa- tion is available for pub- lic inspection and copy- ing during regular office hours at the offices of the City Clerk at 2000 Main Street Huntington Beach, California 92648:" 1. An identification of, the proposed modifica- tions to the . executed Owner Participation Agreement; 2. Estimates of the amount of tax increment !proposed to be used to pay for the installation and construction of the identified publicim- provements; and 3. The redevelopment purpose for which tax increment is being used` to pay for the installa- tion and construction. ALL INTERESTED PER- SONS are invited to at- tend said hearing and express opinions or sub- mit to the City Clerk written evidence for or against the application as outlined above. If you i challenge the City l Council/Agency's action in court, you may be, limited -to raising only those issues that You or someone else raised at the public hearing ,de- scribed in this notice or in written corre- spondence delivered to the City at, or prior to, the public hearing. If there are any further questions, please call Stanley Smalewitz, . Di- rector of Economic De velopment, at. (714) Huntington Beach Independent has been adjudged a newspaper of general circulation in Huntington Beach and Orange County by Decree of the Superior Court of Orange County, State of California, under date of Aug. 24, 1994, case A50479. PROOF OF PUBLICATION STATE OF CALIFORNIA) SS. COUNTY OF ORANGE ) I am the Citizen of the United States and a resident of the County aforesaid; I am over the age of eighteen years, and not a party to or interested in the below entitled matter. I am a principal clerk of the HUNTINGTON BEACH INDEPENDENT, a newspaper of general circulation, printed and published in the City of Huntington Beach, County of Orange, State of California, and the attached Notice is a true and complete copy as was printed and published on the following date(s): AUGUST 30,2007 SEPT. 06,2007 I declare, under penalty of perjury, that the foregoing is true and correct. Executed on SEPTEMBER 0 6, 2 0 0 7 at Huntington Beach, California R/ Signature NOTICE OF JOINT PUBLIC HEARING The City Council of the City of Huntington Beach ("City") and the; Redevelopment Agency; of the City of Huntington) Beach _ ("Agency") will. conduct a joint, public' _Bearing on September, 17, 2007 at '6:00 p.m., or, as soon thereafter as the matter may be heard, in the Council Chambers, 2000 r Main Street Huntington Beach, California. 92648, pursuant to the Califor- nia- Community Redevel- opment Law (Health and Safety Code Section 33000 et seq.), for the purpose of considering' the • modification to the executed Owner Partici- pation Agreement for the Bella Terra retail center formerly .known as Huntington_ Center. The proposed Second Implementation Amendment to the Own- er; .Particip"ation Agreement. modifies the repayment structure for certain public im- provements that were installed and , con- structed by the develop- er of the project. A summary containing the following informa- tion is available for pub- lic inspection and copy- ing during regular .office hours at the offices of the City Clerk at 2000 Main Street Huntington Beach, California 92648: 1. An identification of the proposed modifica-. tions to the. executed Owner -Participation Agreement; 2-. Estimates of the amount of tax increment proposed to be used to pay for the installation and constr;uction,of the identified'. public "im- purpose for which tax, increment is being used to pay for the installa; tion and construction. ALL INTERESTED PER- SONS are invited to at- tend said hearing and express opinions or sub- mit to the City Clerk written evidence for or against the application as outlined above.-Ifyou� challenge the City ; Council/Agency's action in court, you may be limited to raising only I those issues that you or someone else raised at , the public hearing de- I scribed in this notice or ; i n written corre- spondence delivered to the City at, or prior to, the public. hearing. If. there are any further questions, please call Stanley Smalewitz, Di- rector of Economic De- velopment, at; (714) 536-5542: Direct your written " communication to: JOAN L. FLYNN, CITY CLERK CITY OF HUNTINGTON BEACH. — 2000 MAIN STREET - 2ND FLOOR HUNTINGTON BEACH, CALIFORNIA 92648 (714) 536-5227 Published Huntington' Beach Independent Au- gust' 30, September 6,1 2007 085-787j CITY OF HUNTINGTON BEACH INTER -DEPARTMENT COMMUNICATION Economic Development Department TO Honorable Mayor/Chairman and City Council/ Redevelopment Agency Members VIA Penelope Culbreth-Graft, DPA, City Administrator/Executive Director FROM Stanley Smalewitz, Director of Economic Development Deputy Executive Director DATE July 2, 2007 SUBJECT LATE COMMUNICATION - ITEM D-1 SECOND IMPLEMENTATION AGREEMENT WITH BELLA TERRA ASSOCIATES, LLC With this communication, staff is requesting that the Agency/City Council remove Item D-1, the Public Hearing and approval of the Second Implementation Agreement with Bella Terra Associates, LLC until a date uncertain at this time. 00 /4 44 6t"d / CX-1 Council/Agency Meeting Held: ,�,,// _ Deferred/Continued to: ��d✓d,DO is .¢ ❑ Approved ❑ Conditionally Approved ❑ Denied &&ZGPCiiy rk's Agnat r Council Meeting Date: 6/18/07 Department ID Number: ED-07-01 CITY OF HUNTINGTON BEACH REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION SUBMITTED TO: HONORABLE MAYOR/CHAIRMAN AND CITY COUNCIL/ REDtVEL; NT AGENCY M BERS SUBMITTED BY: P ELOPULBRETH- RAFT I Y AMINISTRATOR/EXECUTIVE D RECTOR PREPARED BY: STANLEY SMALEWITZ, DIRECTOR OF ECONOMIC DEVELOPMENT/DEPUTY EXECUTIVE DIRECTOR SUBJECT: APPROVE SECOND IMPLEMENTATION AGREEMENT WITH BELLA TERRA ASSOCIATES, LLC Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s) Statement of Issue: The Agency is being asked to approve the Second Implementation Agreement to the Owner Participation Agreement (OPA) by and between the Redevelopment Agency of the City of Huntington Beach and Bella Terra Associates, LLC. The Second Implementation Agreement amends the OPA regarding the payment of the Agency's obligation to Bella Terra Associates of $15,000,000 in Feasibility Gap Payments for the construction, rehabilitation and renovation of the Huntington Center (Bella Terra). Funding Source: Funds are available in the Redevelopment Debt Services account number 40740101.88030. Recommended Action: City Council/Redevelopment Agency Motion to: 1. Open and conduct the Public Hearing. 2. Close the Public Hearing. REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION MEETING DATE: 6/18/07 DEPARTMENT ID NUMBER: ED-07-01 Redevelopment Agency Motion to Adopt Resolution No. 368 A resolution of the Redevelopment Agency of the City of Huntington Beach, California, approving and making certain findings pursuant to the Health and Safety Code Section 33433 for a Second Implementation Agreement to the Owner Participation Agreement between the Redevelopment Agency of the City of Huntington Beach and Bella Terra Associates, LLC (Attachment No. 2). 2. Approve the Second Implementation Agreement (Attachment No. 1) by and between the Redevelopment Agency and Huntington Center Associates, LLC and Bella Terra Associates, LLC and authorize the Agency Chairman and Agency Clerk to execute the agreement. City Council Motion to: Adopt Resolution No. 2007-37 A Resolution of the City Council of the City of Huntington Beach, California, approving and making certain findings pursuant to the Health and Safety Code Section 33433 for a Second Implementation Agreement to the Owner Participation Agreement between the Redevelopment Agency of the City of Huntington Beach and Bella Terra Associates, LLC (Attachment No. 3). Alternative Action(s): 140 Do not approve the recommended motions and refer back to staff for changes. Analysis: TAKEN In 2000, the Redevelopment Agency of the City of Huntington Beach (Agency) executed an Owner Participation Agreement (OPA) with Huntington Center Associates, LLC. This OPA was subsequently amended to extend the Schedule of Performance. The OPA and the First Implementation Agreement to the OPA (collectively known as the OPA) require Huntington Center Associates to redevelop the Huntington Center property with a mixed -use commercial project. The property was conveyed to Bella Terra Associates, LLC (Participant); this entity is responsible for completing the scope of development required by the OPA. The terms of the OPA required the Agency to provide financial assistance to fill the $15 million feasibility gap associated with the scope of development identified in the OPA. The assistance was directly tied to demolition, clearance, site preparation, public improvements, utilities, facilities, acquisition of land and easements, and all other legally permissible items. The assistance was to be treated as a loan from the Participant to the Agency. The Agency and Bella Terra Associates have clarified certain financial terms of the OPA, and are proposing to modify the Agency loan repayment structure through the Second Implementation Agreement to the OPA. The terms being proposed are: -2- 6/4/2007 3:09 PM REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION MEETING DATE: 6/18/07 DEPARTMENT ID NUMBER: ED-07-01 1. November 1, 2005 is established as the date on which interest began accruing on the loan. 2. The loan bears interest at 6.9357% per annum. This is the same interest rate as would be applied under the OPA. 3. The Agency will make a $629,447 prepayment to the Participant on the September 30th that follows the completion date. 4. Debt Service Payment a. The first scheduled debt service payment on the loan is due on the September 30th that follows the completion date. This is the same debt service commencement date as was imposed by the OPA. b. No sales tax revenues are pledged to the repayment of the loan. Comparatively, the OPA required the Agency to allocate 60% of the sales tax revenue received by the City from the project, above $750,000, to debt service. C. The debt service payment on the loan will be drawn exclusively from the net property tax increment generated by the project. However, the definition of the "net property tax increment" has been changed by the Second Implementation Agreement: i. The OPA defines net property tax as the property tax increment Au"'YMN received by the Agency after deduction of Housing Set Aside NOfunds, County Administrative costs and ERAF payments. ii. The Second Implementation Agreement definition does not permit P.L—. AU �J the Agency to deduct any amount for ERAF obligations that may KE:� be imposed in the future in determining the amount of tax increment that is available to pay the debt service. d. One -hundred percent (100%) of the net property tax increment revenue will be committed annually to the debt service payments until the principal and interest balances are fully repaid, or the end of 20 years, whichever occurs first. 5. Any outstanding principal and interest balance remaining at the end of 20 years must be forgiven by the Participant. The forgiveness date remains unchanged from the terms imposed by the OPA. Under the terms imposed by both the OPA and the proposed Second Implementation Agreement, the project will generate more property tax increment revenues than will be required to fully amortize the $15 million loan. When the OPA was executed, the projected -3- 6/4/2007 3:09 PM REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION MEETING DATE: 6/18/07 DEPARTMENT ID NUMBER: ED-07-01 value of the Project was $111 million. The assessed value of the project is currently set at $203 million. During the loan repayment term, the Agency revenues will be limited to the housing set -aside portion of the property tax increment. After the loan term expires, the Agency will receive 100% of the property tax increment net of pass -through payments to other governmental entities. The Second Implementation Agreement allows the City to receive 100% of the sales tax revenues generated by the project. Under the OPA, the City was to receive the first $750,000 in sales tax revenues, and then was required to commit 60% of the remaining sales taxes to debt service over the 20-year loan term. The proposed modifications to the loan terms results in the City being projected to receive $18.49 million, $7.93 present value, more in sales tax revenues than were projected to be received under the OPA. Staff recommends the approval of the Second Implementation Agreement as the terms of the Agreement clarifies the date on which interest began accruing on the loan and the date on which payments will begin. The Agreement does not alter the principal balance or interest rate applied to the loan, but will modify the source of repayment. Under this Agreement, the loan will be repaid exclusively from property tax increment and sales tax will no longer be used to repay the loan. A detailed analysis may be found in Attachment No. 4 Summary Report. Strategic Plan Goal: F-1 Create long-term financial strategies for funding the backlog of capital projects and maintenance requirements, and ensuring sufficient reserves to withstand major revenue fluctuations in order to ensure continuation of city services during economic downturns. The terms of the Second Implementation Agreement shift the loan payment source from General Fund sales tax revenues to Redevelopment property tax increment generated by the development; therefore, the new agreement furthers the above -stated goal of ensuring sufficient reserves are available to fund City services and capital projects by eliminating debt service to be taken from the General Fund. Environmental Status: Not Applicable. -4- 6/4/2007 3:09 PM REQUEST FOR COUNCIL/REDEVELOPMENT AGENCY ACTION MEETING DATE: 6/18/07 DEPARTMENT ID NUMBER: ED-07-01 Attachment(s): 1 Second Implementation Agreement To Owner Participation Agreement 2 Adopt Resolution No. 368 A resolution of the Redevelopment Agency of the City of Huntington Beach, California, approving and making certain findings pursuant to the Health and Safety Code Section 33433 for a Second Implementation Agreement to the Owner Participation Agreement between the Redevelopment Agency of the City of Huntington Beach and Bella Terra Associates, LLC 3. Resolution No. 2007-37 A Resolution of the City Council of the City of Huntington Beach, California, approving and making certain findings pursuant to the Health and Safety Code Section 33433 for a Second Implementation Agreement to the Owner Participation Agreement between the Redevelopment Agency of the City of Huntington Beach and Bella Terra Associates, LLC 4. Summary Report Pursuant to Section 33433 of the California Health and Safetv Code -5- 6/4/2007 3:09 PM Nil ATTACHMENT #1 EcJLTl7` O 52//;;z- A -;z— SECOND IMPLEMENTATION AGREEMENT TO OWNER PARTICIPATION AGREEMENT by and between THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH and BELLA TERRA ASSOCIATES, LLC CA\Documents and Settings\cstipp\Local Settings\Temporary Internet Files\OLK21\2nd Impl Agmt-BEC-041007.doc SECOND IMPLEMENTATION AGREEMENT TO OWNER PARTICIPATION AGREEMENT This SECOND IMPLEMENTATION AGREEMENT ("Agreement") is dated as of , 2007 for reference purposes only, and is entered into by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("Agency"), and BELLA TERRA ASSOCIATES, LLC a Delaware limited liability company ("Participant"), with reference to the following facts: RECITALS A. The Agency and Participant's predecessor in interest, Huntington Center Associates, LLC, a Delaware limited liability company, entered into that certain Owner Participation Agreement dated October 2, 2000, as implemented by that certain First Implementation Agreement dated as of August 1, 2005, (collectively, the "OPA"). The OPA is hereby incorporated by this reference. Reference herein to the OPA shall include any and all attachments thereto. Any capitalized term not defined herein shall have the meaning ascribed to it in the OPA. The OPA was subsequently assigned to Participant pursuant to that certain Assignment and Assumption Agreement dated as of August 4, 2005. B. The OPA pertains to the construction, development, operation and management of the "Site," as defined in the OPA, generally comprised of a retail shopping center formerly known as Huntington Center and currently known as Bella Terra (the "Project"). C. Subject to and in accordance with the terms and conditions of the OPA and the Schedule of Feasibility Gap Payments attached thereto, the Agency is obligated to reimburse the Participant as set forth in Part 2 of the Schedule of Feasibility Gap Payments ("Feasibility Gap Obligation"). D. The Agency and Participant desire to enter into this Agreement to clarify and amend the OPA to provide: (i) a commencement date for interest accrual on the Feasibility Gap Obligation; (ii) a required one time only prepayment of the Feasibility Gap Obligation in the amount of $629,447; (iii) that interest on the Feasibility Gap Obligation shall be fixed at 6.9357% per year; (iv); that, except for the prepayment described in clause (ii) above, all principal and interest Feasibility Gap Obligation payments to Participant shall be made solely from Available Site -Generated Property Tax Increment; and (v) a further limitation on appeals, challenges and/or contests of property tax assessments on the Site. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Agency and Participant hereby agree as follows: 0 AO%TION TAK125. i� N Q 1. Feasibility Gap Obligation. a. Schedule of Feasibility Gap Pants. Part 2 of the Schedule of Feasibility Gap Payments, Attachment No. 7 to the DDA, is hereby amended as follows: (1) Section (c) entitled "Interest Rate" is hereby deleted in its entirety and replaced with the following new Section (c): "(c) Interest Rate. The principal amount of this Part 2 shall bear interest at the rate of 6.9357% per annum from November 1, 2005 until paid." (2) Section (d) entitled "Obligation to Make Pam" is hereby deleted in its entirety and replaced with the following new Section (d): "(d) Obligation to Make Payments. The obligations of the Agency under this Part 2 shall be a special and limited obligation payable to Participant solely from the source of funds expressly identified in this Part 2. The Agency shall have no obligation to pay any amounts to Participant pursuant to this Part 2 except as follows: (1) Conditions Precedent. The following conditions precedent to each payment hereunder shall be satisfied: A. The Completion Date, as defined in paragraph (k) below, shall have occurred; B. The Operating Commencement Date, as defined in paragraph (k) below, shall have occurred; C. Participant shall be not be in default of any of its material obligations under the OPA; and D. The amendment(s) described in Section 2.b. of the Second Implementation Agreement to the OPA have been duly executed in recordable form and recorded against the Site in accordance with Section 2.b. of the Second Implementation Agreement to the OPA. (2) Available Site -Generated Property Tax Increment. On or prior to September 30 of each year, beginning with the first September 30 which follows the satisfaction of all conditions precedent specified in paragraph (d)(1) above, and continuing until the principal amount specified in paragraph (b) above (and any accrued interest thereon) has been paid in full or until the day after the nineteenth (19th) anniversary of 7 the first Agency payment under this Part 2, whichever first occurs, the Agency shall calculate and pay to Participant all Available Site -Generated Property Tax Increment received by the Agency during the prior Fiscal Year. For illustrative purposes only, assuming the first Agency payment under this Part 2 occurs on September 30, 2007 and all funds owed by Agency to Participant pursuant to this Attachment No. 7 have not yet been paid, the last Agency payment hereunder shall be due September 30, 2026, and any balance remaining in Agency's payment obligations under this Part 2 after such date shall automatically be deemed forgiven. "Available Site -Generated Property Tax Increment" means the total ad valorem property tax increment revenue allocated to and received by Agency in any fiscal year pursuant to Section 33670(b) of the California Health and Safety Code, as said statute may be amended from time to time, by application of the one percent (1%) tax levied against real property as permitted by Article XIIIA of the California Constitution, in an amount equal to any increase in the assessed value of the. Site over and above an assessed value of Forty Three Million Two Hundred and Twenty Eight Thousand Dollars ($43,228,000), but specifically excluding therefrom all of the following: (A) a portion of such tax increment revenues equal to the twenty percent (20%) of tax increment revenue from the redevelopment project area as a whole that is set aside pursuant to Sections 33334.2 et seq. of the California Health and Safety Code or any successor law for low- and moderate -income housing purposes; and (B) a portion of such tax increment revenues equal to the percentage of tax increment revenues from the redevelopment project area as a whole that the Agency is required to pay to any and all governmental entities pursuant to any provision of law, as amended from time to time, or pursuant to tax sharing/pass-through agreements entered into prior to the OPA by the Agency and such governmental entities implementing the tax sharing/pass-through agreements; and (C) the amount of any revenues received by the Agency which are attributable to any special taxes or assessments or voter -approved indebtedness; and (D) charges for County administrative charges, fees or costs equal to the percentage of such charges in the Project Area as a whole. (3) Required One Time Prepayment. Without limiting in any way paragraph (e), below, the Agency shall be required to make a one time only prepayment to Participant towards the amount owed by the Agency under this Part 2 in the amount of Six Hundred Twenty -Nine Thousand Four Hundred Forty -Seven Dollars ($629 447) on the first September 30 which follows the satisfaction of all conditions precedent specified in paragraph (d)(1) above. Payment shall not be made from or reduce the Available Site -Generated Property Tax Increment. The YlOrt y✓ NCTIOra payment shall be treated, for accounting purposes, as if it had been made on September 30 of the year preceding the first payment under Section (d)(2) hereof, and shall be applied first to accrued interest and thereafter to principal. (3) The second paragraph of Section (g) entitled "Subordination" is hereby deleted in its entirety. (4) Section 0) entitled "Payment Obligations For iven' is hereby deleted in its entirety and replaced with the following new Section 0): "o) Payment Obligations Forgiven. Any balance remaining in Agency's payment obligations under this Part 2 after the Reimbursement Term shall automatically be deemed forgiven." (5) Section (k) entitled "Definitions" is hereby deleted in its entirety and replaced with the following new Section (k): "(k) Definitions. The following definitions shall apply to this Part 2: (1) "City" as used herein shall mean the City of Huntington Beach. (2) "Completion Date" as used herein shall mean the date on which the Release of Construction Covenants to be issued by Agency pursuant to the Agreement with respect to the redeveloped Site and improvements is recorded in the Official Records of Orange County. (3) "Fiscal Year," as used herein, means each twelve-month period beginning on July 1 and ending on June 30. (4) "Operating Commencement Date" as used herein means November 1, 2005 only for purposes of calculating the commencement of interest accrual on the Agency's payment obligation and for all other purposes under the OPA, including the commencement of the Agency's payment obligations and the Agency Participation Payments, it shall mean the Completion Date. (5) "Reimbursement Term" as used herein means the period commencing on the first September 30 which follows the satisfaction of all conditions precedent specified in paragraph (d)(1) above, and continuing until the principal amount specified in paragraph (b) above (and any accrued interest thereon) has been paid in full or until the nineteenth (19th) year following the first Agency payment under this Part 4 NO ACIP1014 TAKEN 2, whichever first occurs, during which Agency is obligated to make reimbursement payments to Participant pursuant to this Attachment No. 7. (6) "Site" as used herein means that certain real property (excluding the Ward Parcel) in the City of Huntington Beach, more particularly described in the legal description attached hereto as Exhibit A and incorporated herein by this reference, and any improvements constructed or to be constructed thereon in accordance with the OPA. b. Reimbursement Term. All references to "Reimbursement Term" in the OPA, including all attachments thereto, shall be deemed to refer to the Reimbursement Term described in Part 2 of the Schedule of Feasibility Gap Payments as revised pursuant to this Agreement. 2. Assessments. a. Participant hereby covenants and agrees on behalf of itself and any successors and assigns in the Site or any portion thereof or any improvements thereon or any interest therein that Participant, such successors and assigns shall pay when due all real estate taxes and assessments assessed and levied on the Site and any improvements thereon and, except as may be requested by tenants of the Project whose leases predate August 1, 2005, refrain from appealing, challenging or contesting in any manner the validity or amount of any tax assessment, encumbrance or lien on the Site; provided, however, that such prohibition shall not apply to an appeal, challenge or contesting of an erroneous initial assessment for property tax purposes of the Site in the fiscal year of the completion of the improvements to be constructed and/or renovated pursuant to this Agreement provided, however, that that no such appeal, challenge or contest shall be permitted to attempt to obtain or result in an assessed value of the Site, including land and improvements, which is lower than Two Hundred Three Million Three Hundred Seventeen Thousand Dollars ($203,317,000). b. Participant agrees to execute in recordable form amendment(s) to the Covenant Agreement and any other document (including, without limitation, any other attachment to the OPA) reasonably deemed necessary by the Agency Executive Director to implement the purposes of this Section, which amendment(s) shall be in form and content reasonably approved by the Agency Executive Director. The parties agree that the Agency shall record any such amendment(s) against the Site. if 3. Example. As an example of the payments to be made hereunder, assuming that (i) the Completion Date occurs prior to September 30, 2007 and (ii) the Available Site -Generated Property Tax Increment for the July 1, 2006 - June 30, 2007 fiscal year is $1,534,651, the payment to be made to Participant on September 30, 2007 would be $2,164,018 ($629,447 + $1,534,571 = $2,164,018) applied as follows: $15,000,000 Principal amount + 979,014 Interest from 11/01/05 - 9/30/06 $15,979,014 Principal and interest as of 9/30/06 - 629,447 Prepayment deemed made as of 9/30/06 $15,349,567 Balance as of 10/01/06 + 1,083,059 Accrued interest from 10/1/06 - 9/30/07 $16,432,626 Balance as of 9/30/07 -1,534,571 Assumed payment as of 9/30/07 $14,898,055 Balance as of 10/1/07 4. Binding on Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the successors, assignees, personal representatives, heirs and legatees of the parties hereto. 5. OPA in Full Force and Effect. Except as otherwise modified herein, the terms and conditions of the OPA shall remain unmodified and in full force and effect, including, without limitation, the conditions precedent to Agency's obligation to commence payment of the Feasibility Gap Obligation. In the event of any conflict between the terms of this Agreement and the OPA, the terms of this Agreement shall control. 6. Further Assurances. The parties agree to execute such other documents and to take such other action as may be reasonably necessary to further the purposes of this Agreement. 7. Date of this Agreement. The "Effective Date" of this Agreement shall be the date this Agreement is executed by the Agency. 8. Counterparts. This Agreement may be executed by each party on a separate signature page, and when the executed signature pages are combined with the balance of this Agreement, it shall constitute one single instrument. [signatures on following pages] "AGENCY" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH Dated: .2007 Chairman ATTEST: Agency Clerk APPROVED AS TO FORM: Agency General Counsel APPROVED AS TO FORM: KANE, BALLMER & BERKMAN Agency Special Counsel INITIATED AND APPROVED: Director of Economic Development REVIEWED AND APPROVED: Executive Director [Signatures continue on following page] 5! H S x *� 3 s 7 "PARTICIPANT" BELLA TERRA ASSOCIATES, LLC By: Bella Terra Borrower, LLC, a Delaware limited liabi any, its member Dated: �-//'o , 2007 4B John Miller, President NDated: ip , 2007 By: .-t, v , a�� Verlin 'mm s Its 12dependent Director ATTACHMENT #2 RESOLUTION NO. 368 A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, CALIFORNIA, APPROVING AND MAKING CERTAIN FINDINGS PURSUANT TO HEALTH AND SAFETY CODE SECTION 33433 FOR A SECOND IMPLEMENTATION AGREEMENT TO OWNER PARTICIPATION AGREEMENT BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH AND BELLA TERRA ASSOCIATES or- WHEREAS, the Redevelopment Agency of the City of Huntington Beach ("Agency") is engaged in activities necessary to execute and implement the redevelopment plan ('Redevelopment Plan") for the Merged Redevelopment Project Areas ofHuntington Beach (collectively, the "Merged Project Area"); and WHEREAS, Agency proposes to enter into a Second Implementation Agreement ("Second Implementation Agreement") with Participant, which supplements, modifies or incorporates by reference the terms of that certain Owner Participation Agreement by and between Agency and Huntington Center Associates, LLC (the "Original Participant") dated as of October 2, 2000 (the "OPA"), as previously supplemented by that certain First Implementation Agreement dated as of August 4, 2005 (the OPA, the First Implementation Agreement and the Second Implementation Agreement shall be collectively referred to herein as the "Agreement"); and WHEREAS, That certain real property within the boundaries of the Merged Project Area set forth with particularity in the Agreement (the 'Property") was recently conveyed by the Original Participant to Bella Terra Associates, LLC (the "Participant") pursuant to an Assignment and Assumption Agreement approved by the Agency; and WHEREAS, pursuant to the California Community Redevelopment Law (California Health and Safety Code, Section 33000.et seq.) the Agency and the City Council held a joint public hearing on the Second Implementation Agreement, having duly published notice of such public hearing and having made copies of the proposed Second Implementation Agreement and other reports and documents (including the summary referred to in Section 33433) available for public inspection and copying; and WHEREAS, the Agency has duly considered all terms and conditions of the proposed transaction, and believes that it is in the best interests of the Merged Project Area and the City and the health, safety, morals and welfare of its residents, and in accord with the public purposes and provisions of applicable State and local law and requirements; l: 06-1.31 /1.0581 NO ACT0N 131 111'! Q k Agency Resolution No. 368 NOW, THEREFORE, IT IS RESOLVED by the Redevelopment Agency of the City of Huntington Beach, California, as follows: All recitals set forth in this resolution are true and correct. The consideration from Participant under the Agreement is not less than the fair reuse value at the use and with the covenants and conditions and development costs authorized by the Second Implementation Agreement for, among other reasons, the reasons set forth in the 33433 Summary. 3. The implementation of the Agreement, as amended by the Second Implementation Agreement, will assist in the elimination of blight in the Merged Project Area. 4. The implementation of the Agreement, as amended by the Second Implementation Agreement, is consistent with the implementation plan adopted by the Agency pursuant to Section 33490 of the Health and Safety Code. 5. The proposed Second Implementation Agreement is hereby approved in substantially the form presented at this meeting, with such minor changes as may be approved by the Executive Director of the Agency with the approval as to form by the Agency General Counsel. 6. The Chairman of the Agency and the Executive Director of the Agency are hereby authorized to execute the Second Implementation Agreement on behalf of the Agency. A copy of the Second Implementation Agreement when executed by the Agency shall be placed in the file of the office of the Agency Clerk. The Executive Director of the Agency (or his designee) is hereby authorized, on behalf of the Agency, to sign all documents (including but not limited to grant deeds) necessary and appropriate to carry out and implement the Second Implementation Agreement, and to administer the Agency's obligations, responsibilities and duties to be performed thereunder. w Rest of Page Not Used TA KEN W 06-1.31/10581 Agency Resolution No. 368 PASSED AND ADOPTED by the Redevelopment Agency of the City of Huntington Beach at a regular meeting held thereof on the day of 3200. _ Chairman REVIEWED AND APPROVED: APPROVED AS TO FORM: C-"e� " Frxecutive irector G eral Cou sel v� KANE, BALLMER & BERKMAN Agency Special Counsel Murray O. Kane INITIATED AND APPROVED: Director of Eco evelopment 3. 06-131./10581 Iffliffflm S. - N, flffiiWN9Wlm'.',21i �O'Mlrq ATTACHMENT #3 ----------------- RESOLUTION NO. 2007-37 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH, CALIFORNIA, APPROVING AND MAKING CERTAIN FINDINGS PURSUANT TO HEALTH AND SAFETY CODE SECTION 33433 FOR A SECOND IMPLEMENTATION AGREEMENT TO OWNER PARTICIPATION AGREEMENT BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH AND BELLA TERRA ASSOCIATES WHEREAS, the Redevelopment Agency of the City of Huntington Beach ("Agency") is engaged in activities necessary to execute and implement the redevelopment plan ("Redevelopment Plan") for the Merged Redevelopment Project Areas of Huntington Beach (collectively the "Merged Project Area"); and WHEREAS, Agency proposes to enter into a Second Implementation Agreement ("Second Implementation Agreement") with Participant, which supplements, modifies or incorporates by reference the terms of that certain Owner Participation Agreement by and between Agency and Huntington Center Associates, LLC, (the "Original Participant") dated as of October 2, 2000 (the "OPA"), as previously supplemented by that certain First Implementation Agreement dated as of August 4, 2005 (the OPA, the First Implementation Agreement and the Second Implementation Agreement shall be collectively referred to herein as the "Agreement"); and WHEREAS, That certain real property within the boundaries of the Merged Project Area set forth with particularity in the Agreement (the 'Property") was recently conveyed by the Original Participant to Bella Terra Associates, LLC (the " Participant") pursuant to an Assignment and Assumption Agreement approved by the Agency; and WHEREAS, pursuant to the California Community Redevelopment Law (California Health and Safety Code, Section 33000 et seq.) the Agency and the City Council held a joint public hearing on the Second Implementation Agreement, having duly published notice of such public hearing and having made copies of the proposed Second Implementation Agreement and other reports and documents (including the summary referred to in Section 33433) available for public inspection and copying; and WHEREAS, the City Council has duly considered all terms and conditions of the proposed transaction, and believes that it is in the best interests of the Merged Project Area and the City and the health, safety, morals and welfare of its residents, and in accord with the public purposes and provisions of applicable State and local law and requirements; Resolution No. 2007-37 NOW, THEREFORE, IT IS RESOLVED by the City Council of the City of Huntington Beach, California, as follows: 1. All recitals set forth in this resolution are true and correct. 2. The consideration from Participant under the Agreement is not less than the fair reuse value at the use and with the covenants and conditions and development costs authorized by the Second Implementation Agreement for, among other reasons, the reasons set forth in the 33433 Summary. 3. The implementation of the Agreement, as amended by the Second Implementation Agreement, will assist in the elimination of blight in the Merged Project Area. 4. The implementation of the Agreement, as amended by the Second Implementation Agreement, is consistent with the implementation plan adopted by the Agency pursuant to Section 33490 of the Health and Safety Code. 5. The proposed Second Implementation Agreement is hereby approved in substantially the form presented at this meeting, with such minor changes as may be approved by the Executive Director of the Agency with the approval as to form by the Agency General Counsel. 6. The City Council hereby authorizes the City Clerk to deliver a copy of this Resolution to the Executive Director and members of the Agency. A copy of the Second Implementation Agreement when executed by the Agency shall be placed on file in the office of the City Clerk. Rest of Page Not Used 00 06-131/10584 Resolution No. 2007-37 PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting held thereof on the day of , 200_. Mayor REVIEWED AND APPROVED APPROVED AS TO FORM: ity Adiginistrator 4tyttorn Ca L .vim KANE, BALLMER & BERKMAN Special Counsel Murray O. Kane INITIATED AND APPROVED: Director of Eco Development 2. 06-131/10584 SUMMARY REPORT PURSUANT TO SECTION 33433 OF THE CALIFORNIA HEALTH AND SAFETY CODE ON THE SECOND IMPLEMENTATION AGREEMENT TO THE OWNER PARTICIPATION AGREEMENT BY AND BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH AND BELLA TERRA ASSOCIATES BACKGROUND STATEMENT In 2000, the Redevelopment Agency of the City of Huntington Beach (Agency) executed an Owner Participation Agreement (OPA) with Huntington Center Associates, LLC (Original Participant); this OPA was subsequently amended to extend the Schedule of Performance. The OPA and the First Implementation Agreement to the OPA required the Original Participant to redevelop the Huntington Center property with a mixed -use commercial project including a multiplex theater, retail anchor tenants, retail shops and restaurants (Project). The Site is located in the Merged Redevelopment Project Area (Project Area), and the purpose of the OPA is to effectuate the Merged Redevelopment Project Area Redevelopment Plan (Redevelopment Plan). Prior to executing the OPA, the Agency prepared a report summarizing the financial terms of the transactions in accordance with the reporting requirements imposed by California Health and Safety Code Section 33433 (Section 33433). The 2000 Summary Report is attached for reference purposes. The property was recently conveyed to Bella Terra Associates (Current Participant); this entity is responsible for completing the scope of development required by the Original OPA and the First Implementation Agreement to the OPA. The Agency and the Current Participant have clarified certain financial terms of the executed OPA, and are proposing to modify the Agency loan repayment structure. The proposed clarifications and modifications are detailed in a Second Implementation Agreement to the OPA (Second Implementation Agreement). The Second Implementation Agreement materially alters the OPA terms, and thus, the Agency is required by Section 33433 to prepare a new summary report for the transaction. SECTION 33433 REPORT MODIFICATIONS The Section 33433 report prepared in support of the OPA includes the following sections: 0701002.doc. HTB: KHH: gbd 14066.004/013 2/19/07 `1"AKEN I. Summary of the Proposed Agreement: This section summarizes the major responsibilities imposed on the Original Participant and the Agency by the OPA. II. Cost of the Agreement to the Agency: This section projects the net cost to the Agency associated with implementing the OPA. Ill. Benefits to the City: This section summarizes the sales tax revenue projected to be received by the City of Huntington Beach ( City) under the OPA. 1V. Estimated Value of the Interests to be Conveyed: This section estimates the value of the interests to be conveyed to the Original Participant. V. Consideration to be Received and Comparison with the Established Value: This section describes the compensation to be received by the Agency, and explains any difference between the compensation and the established value of the Site. VI. Blight Elimination: This section describes the existing blighting conditions on the Site, and explains how the transaction will assist in alleviating the blighting influence. VII. Conformance with the AB1290 Implementation Plan: This section describes how the transaction will achieve goals identified in the Agency's adopted AB1290 Implementation Plan. As discussed previously, a summary report was prepared in support of the OPA. As such, the following summary report focuses solely on the sections of the report that are impacted by the Second Implementation Agreement. The report sections that do not require modification are: The estimated value of the interests to be conveyed; 2. Blight elimination; and Conformance with the AB 1290 Implementation Plan. The sections that are re-evaluated in this summary report are: Summary of the proposed Second Implementation Agreement; 2. The net cost of the Second Implementation Agreement to the Agency; 3. The benefits received by the City under the Second Implementation Agreement; and 4. The consideration to be received, and comparison with the established value. ION 2 0701002.doc. HTB: KHH: gbd 14066.0041013 2/19/07 SUMMARY OF THE AGREEMENT Executed OPA Terms The OPA requires the Agency to provide $15 million in assistance to the Project. The assistance was directly tied to demolition; clearance; site preparation; public improvements; utilities and facilities; acquisition of land and easements; and all other legally permissible items reimbursable to the Original Participant. The assistance was to be treated as a loan from the Original Participant to the Agency. The OPA imposes the following repayment terms on the loan: 1. The loan bears interest at 6.9357%. In accordance with the OPA, this rate is equal to 8% minus '/2 the difference between 8% and the True Interest Cost as defined in the OPA. 2. Interest begins accruing on the loan upon the "Operating Commencement Date". 3. The Agency's debt service payment obligation commences on September 30th of the year following both the "Completion Date" and the Operating Commencement Date. 4. The debt service payments on the loan are drawn solely from 60% of the net property tax increment revenue generated by the Project plus an amount equal to 60% of the sales tax revenue generated by the Project above $750,000 per year. 5. The loan is to be amortized over a 20-year period. Any outstanding principal and interest balance at the end of the amortization period must be forgiven. The OPA defines the Operating Corn mencement Date as the latter of the date that the City of Huntington Beach (City) issues a Certificate of Occupancy, or the opening of the Project for business to the general public. Due to standard City practices, the City will never issue a Certificate of Occupancy for the entire Project as contemplated by the OPA. The partially completed Project opened for business on November 1, 2005. The Agency and the Current Participant disagree when the Operating Commencement Date, as defined by the OPA, occurred. As a compromise settlement to this disagreement, the Second Implementation Agreement calls for interest to begin accruing on the Agency's payment obligation on November 1, 2005. For all other purposes under the OPA, including the commencement of the Agency's payment obligations and the Agency Participation Payments, the Completion Date will be applied. The Completion Date is defined in the OPA as the date on which the Release of Constr uction Covenants is issued and recorded in the Official Records of Orange County. A K ti 0701002.doc. HTB: KHH: gbd 3 14066-0041013 2/19/07 IIIJJJ Comparison of the Second Implementation Agreement to the OPA To resolve the disagreement, the proposed Second Implementation Agreement modifies the loan terms detailed in the OPA. The terms being proposed in the Second Implementation Agreement are: November 1, 2005 is established as the date on which interest began accruing on the loan. 2. The loan bears interest at 6.9357%. This is the same interest rate as would be applied under the OPA. The Agency wil I make a $629,447 prepaym ent to the Current Participant on the September 30th that follows the Completion Date. 4. Debt Service Payments a. The first scheduled debt service payment on the loan is due on the September 301h that follows the Completion Date. This is the same debt service commencement date as was imposed by the OPA. b. No sales tax revenues are pledged to the repayment of the loan. Comparatively, the OPA required the Agency to allocate 60% of the sales tax revenue received by the City from the Project, above $750,000, to the debt service payments. C. The debt service payments on the loan will be drawn exclusively from the net property tax increment generated by the Project. However, the definition of "net property tax increment" has been changed in the Second Implementation Agreement: The OPA defined net property tax increment as the property tax increment received by the Agency after deduction of Housing Set -Aside funds, County Administrative costs and ERAF payments. ii. The Second Implementation Agreement definition does not permit the Agency to deduct any amount for ERAF obligations that may be imposed in the future in determining the amount of net tax increment that is available to pay the debt service. d. One -hundred percent (100%) of the net property tax increment revenue will be committed to the debt service annually until the principal and interest balances are fully repaid, or the end of 20 years, whichever occurs first. IN 0701002.doc. HTB: KHH: gbd 14066.004/013 2/19107 5. Any outstanding principal and interest balance remaining at the end of 20 years must be forgiven by the Current Participant. The forgiveness date remains unchanged from the terms imposed by the OPA. The benefits associated with the proposed modifications are: Setting November 1, 2005 as the date on which interest began accruing on the loan resolves the disagreement between the Participant and the Agency. 2. The OPA provided for the debt service on the loan to be calculated based on the net property tax increment and net new sales tax generated by the Project. The proposed modification eliminates the sales tax contribution, which means that the General Fund revenues will be greater under the proposed Second Implementation Agreement than they would be under the OP A terms. 3. The upfront prepayment of $629,447 creates benefits for both the Agency and the Participant. These benefits are: a. The Agency's current investment returns are significantly less than the 6.9357% interest rate applied to the loan. The proposed prepayment reduces the principal balance, which in turn reduces the interest payments to be made by the Agency over the loan repayment term. This creates a net financial benefit for the Agency. b. The debt service structure proposed in the Second Implementation Agreement produces lower debt service payments during the first 10 years than would have been generated under the OPA. The provision of the proposed prepayment mitigates the impact created by the reduction in the annual payments. COST OF THE AGREEMENT TO THE AGENCY Under the terms imposed by both the OPA and the proposed Second Implementation Agreement, the Agency will receive more property tax increment revenues than will be required to fund the $15 million in assistance plus interest. During the loan repayment term, the Agency revenues will be limited to the housing set -aside portion of the property tax increment. After the loan term expires, the Agency will receive 100% of the property tax increment net of pass- throughs to other governmental entities. The Agency will receive property tax increment through the end of fiscal year 2033/34. The net Agency revenue projected to be received under the OPA is compared with the projected net Agency revenue under the proposed Second Implementation Agreement in the following table: HO ACTION 5 0701002.doc. HTB: KHH: gbd TAKEN 14066.004/013 2/19/07 Second Implementation Net Revenue OPA Agreement Difference Nominal Dollars $23,919,000 $29,662,000 $5,743,000 Net Present Value $8,419,000 $7,513,000 ($906,000) As can be seen in the preceding table, in nom inal dollars, the net Agency revenue is projected to be higher under the Second Implementation Agreement than under the OPA. However, the revenues are lower when considered on a present value basis. The reasons for this are: 1. The Project value was projected at $111 million when the OPA was executed. The assessed value of the Project is currently set at $203 million. Thus, the Project will generate substantially more property tax increment over time than was originally projected. 2. The increases in gross property tax increment are offset by the fact that the Second Implementation Agreement calls for interest to begin accruing on the Agency obligation on November 1, 2005. Comparatively, the earliest possible debt service commencement date is September 30, 2007. This lag time was not anticipated when the OPA was executed. Benefits to the City Sales taxes represent the primary revenue source that the City will receive from the Project. The net sales tax revenues projected to be received by the City over the original 20-year loan term are compared in the following table: Second Implementation Net Revenue OPA Agreement Difference Nominal $26,838,000 $45,328,000 $18,490,000 Net Present Value $13,191,000 $21,119,000 $7,928,000 The Second Implementation Agreement allows the City to receive 100% of the sales tax revenues generated by the Project from the commencement of operations forward. Under the OPA, the City was to receive the first $750,000 in sales tax revenues, and then was required to commit 60% of the remaining sales taxes to debt service over the 20-year loan term. The proposed modifications to the loan terms results in the City being projected to receive $18.49 million more in sales tax revenues than were projected to be received under the OPA. This translates to $7.93 million in present value terms. 6 0701002.doc. HTB: KHH: gbd 14066.004/013 2/19/07 TAKEN CONSIDERATION TO BE RECEIVED, AND COMPARISON WITH THE ESTABLISHED VALUE The OPA did not require the Original Participant to acquire any land from the Agency. However, the OPA stated that if the Agency ultimately acquired any portion of the Site, the Original Participant would be required to purchase the property from the Agency at the property's value at the highest use permitted under the Redevelopment Plan. Ultimately the Original Participant was not required to purchase any property form the Agency, and therefore this provision is no longer pertinent to the transaction. The OPA requires the Agency to provide assistance to the Project for infrastructure improvements; the assistance amount is set at a principal amount of $15 million. The OPA further requires the Original Participant to pay for the improvements, and then to treat the expenditure as a loan to be repaid by the Agency over time. The 2000 Summary Report determined that the Project demonstrated the need for $18.1 million in upfront assistance. It was therefore concluded that the assistance package did not reduce the Original Participant's land purchase price to less than the Site's fair reuse value. The Second Implementation Agreement does not alter the principal balance or the interest rate applied to the assistance being provided to the Current Participant. However, it does clarify and modify the loan terms included in the OPA. The results of these changes are: The net revenues to be received by the Agency are projected to increase by $5.74 million in nominal dollars, but they are projected to decrease by $906,000 in present value terms. 2. The revenue to be received by the City is projected to increase by a total of $18.49 million, and a net present value of $7.93 mi Ilion. The total Agency and City revenues are projected to increase above the amounts projected to be received under the OPA. The net revenue to be received by the Agency and the City is projected to increase by a total of $24.23 million in nominal terms, and by a net present value of $7.02 million. 0701002.doc. HTB: KHH: gbd 14066.004/013 2/19/07 IN RCA ROUTING SHEET INITIATING DEPARTMENT: Economic Development SUBJECT: APPROVE SECOND IMPLEMENTATION AGREEMENT WITH BELLA TERRA ASSOCIATES, LLC COUNCIL MEETING DATE: .rune 18, 2007 RCA ATTACHMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Attached ❑ Not Applicable Resolution (w/exhibits & legislative draft if applicable) Attached Not Applicable ❑ Tract Map, Location Map and/or other Exhibits Attached ❑ Not Applicable Contract/Agreement (w/exhibits if applicable Attached (Signed in full by the City Attorney) Not Applicable ❑ Subleases, Third Party Agreements, etc. U Attached ❑ (Approved as to form by City Attorney) Not Applicable Certificates of Insurance (Approved by the City Attorney) Attached ❑ Not Applicable Fiscal Impact Statement (Unbudgeted, over $5,000) Attached ❑ Not A plicable Bonds (If applicable) Attached ❑ Not Applicable Staff Report (If applicable) Attached Not Applicable ❑ Commission, Board or Committee Report (If applicable) Attached ❑ Not Applicable Findings/Conditions for Approval and/or Denial Attached Not Applicable ❑ Nil F-111011 NOTICE OF JOINT PUBLIC HEARING The City Council of the City of Huntington Beach ("City") and the Redevelopment Agency of the City of Huntington Beach ("Agency") will conduct a joint public hearing on June 18, 2007 at 6:00 p.m., or as soon thereafter as the matter may be heard, in the Council Chambers, 2000 Main Street Huntington Beach, California 92648, pursuant to the California Community Redevelopment Law (Health and Safety Code Section 33000 et seq.), for the purpose of considering the modification to the executed Owner Participation Agreement for the Bella Terra retail center formerly known as Huntington Center. The proposed Second Implementation Amendment to the Owner Participation Agreement modifies the repayment structure for certain public improvements that were installed and constructed by the developer of the project. A summary containing the following information is available for public inspection and copying during regular office hours at the offices of the City Clerk at 2000 Main Street Huntington Beach, California 92648: An identification of the proposed modifications to the executed Owner Participation Agreement; 2. Estimates of the amount of tax increment proposed to be used to pay for, the installation and construction of the identified public improvements; and 3. The redevelopment purpose for which tax increment is being used to pay for the installation and construction. ALL INTERESTED PERSONS are invited to attend said hearing and express opinions or submit to the City Clerk written evidence for or against the application as outlined above. If you challenge the City Council/Agency's action in court, you may be limited to raising only those issues that you or someone else raised at the public hearing described in this notice or in written correspondence delivered to the City at, or prior to, the public hearing. If there are any further questions, please call Stanley Smalewitz, Director of Economic Development, at (714) 536-5542. Direct your written communication to: JOAN L. FLYNN, CITY CLERK CITY OF HUNTINGTON BEACH 2000 MAIN STREET — 2ND FLOOR HUNTINGTON BEACH, CALIFORNIA 92648 '(714) 536-5227 NOTICE OF JOINT PUBLIC HEARING The City Council of the City of Huntington Beach ("City") and the Redevelopment Agency of the City of Huntington Beach ("Agency") will conduct a joint public hearing on June 18, 2007 at 6:00 p.m., or as soon thereafter as the matter may be heard, in the Council Chambers, 2000 Main Street Huntington Beach, California 92648, pursuant to the California Community Redevelopment Law (Health and Safety Code Section 33000 et seq.), for the purpose of considering the modification to the executed Owner Participation Agreement for the Bella Terra retail center formerly known as Huntington Center. The proposed Second Implementation Amendment to the Owner Participation Agreement modifies the repayment structure for certain public improvements that were installed and constructed by the developer of the project. A summary containing the following information is available for public inspection and copying during regular office hours at the offices of the City Clerk at 2000 Main Street Huntington Beach, California 92648: 1. An identification of the proposed modifications to the executed Owner Participation Agreement; 2. Estimates of the amount of tax increment proposed to be used to pay for the installation and construction of the identified public improvements; and 3. The redevelopment purpose for which tax increment is being used to pay for the installation and construction. ALL INTERESTED PERSONS are invited to attend said hearing and express opinions or submit to the City Clerk written evidence for or against the application as outlined above. If you challenge the City Council/Agency's action in court, you may be limited to raising only those issues that you or someone else raised at the public hearing described in this notice or in written correspondence delivered to the City at, or prior to, the public hearing. If there are any further questions, please call Stanley Smalewitz, Director of Economic Development, at (714) 536-5542. Direct your written communication to: JOAN L. FLYNN, CITY CLERK CITY OF HUNTINGTON BEACH 2000 MAIN STREET — 2ND FLOOR HUNTINGTON BEACH, CALIFORNIA 92648 (714) 536-5227 PROOF OF PUBLICATION STATE OF CALIFORNIA) ) ss. COUNTY OF ORANGE ) 1 am a Citizen of the United States and a" resident of the County aforesaid; I am over the age of eighteen years, and not a party to or interested in the below entitled matter. I am a principal clerk of the HUNTINGTON BEACH INDEPENDENT, a newspaper of general circulation, printed and published in the City of Huntington Beach, County of Orange, State of California, and that attached Notice 'is a true and complete copy; as was printed and published in the Huntington Beach issue of said newspaper to wit the Issue(s) of: MAY 24,31,2007 I declare, under penalty of perjury, that the foregoing is true and correct. Executed on MAY 31, 2 0 0 7 at Costa Mesa, California. s .✓� Signature NOTICE OF JOINT PUBUIC HEARING The City Council of the City ' of Huntington Beach ("City") and thell Redevelopment Agency i of the City of Huntington Beach ,("Agency") wills conduit a joint public) hearing on June 18, 2007 at 6:00 p.m., or as soon) thereafter, as the matter may be heard, in ,the; I Council Chambers, 2000 ,Main Street Huntinggton Beach, California 92648, pursuant to the Califor- nia, Community Redevel- opment Law (Health and Safety Code Section 33000 et seq.), for :the purpose of considering the modification to.the executed Owner Partici- pation Agreement for the Bella 'Terra retail center .,formerly; known as Muntington - Center. They`:proposed 'Second' I/mple;mentation Amendment to the Own er P'articipation Agreement modifies the repayment structure for j certain public im- provementsthat were ,installed and con structed by the develop- er of the project. A summary -containing the following, informa- tion is available#or pub- lic inspection and copy- ing during regular office hours at the offices of the City Clerk at 2000 Main Street Huntington Beach, California 92648: 1. An. identification of the proposed modifica- j tions 'to the, executed OwnerParticipation Agreement; 2. Estimates ' of the; (I amount of tax increment) proposed to be used to' pay for the 'installatign and construction, of the identified public im- provements; and 3. The redevelopment purpose for which tax increment is being used to pay for the ,installs- tion and construction. ALL INTERESTED PER;) iSONS are invited to at- tend said hearing and iexpress opinions or sub- mit to the City Clerk l i written evidence for or !against the application ,as outlined above. If youj Ichallenge.-the City., !Council/Agency's action 'in court,, you, may bej limited to_ raising only) those issues that ,you or Isomeone else raised at' the public hearing 'de -' scribed in'this.notice or, jin w-ritten ,corre spondence delivered to 1 fthe City at' or prior to,� the public hearing.. If 1 there are any further questions, questions, please call ) Stanley Smalewit; ,Di- �rector of Economic De- Ivelopment 'at :(714). I536-5542: .f)irect your Iwntten communication 4o: t JOAN L. FLYNN, CITY CLERK CITY OF HUNTINGTON BEACH I Ij • 2000 MAIN STREET I 2NDFLOOR HUNTINGTON BEACH; CALIFORNIA 92648 (714) 536 5227 - Published Huntington Beach Independent May 24,'31, 2007 052-478 "f T UI PROOF OF PUBLICATION STATE OF CALIFORNIA) )Ss. COUNTY OF ORANGE ) I am a Citizen of the United States and a resident of the County aforesaid; I am over the age of eighteen years, and not a party to or interested in the below entitled matter. I am ..a principal clerk of the HUNTINGTON BEACH INDEPENDENT, a newspaper of general circulation, printed and published in the City of Huntington Beach, County of Orange, State of California, and that attached Notice is a true and complete copy,, as was printed and published in the Huntington Beach issue of said newspaper to wit the Issue(s) of: MAY 24,31,2007 I declare, under penalty of perjury, that the foregoing is true and correct. Executed on MAY 31, 2 0 0 7 at Costa Mesa, California. 11WEP.02M._ / Signature �� i I NOTICE OF JOINT PUBLIC. HEARING' The City Council of the City ,of Huntington Beach , ("City") and the Redevelopment: Agency of the City of Huntington Beach ("Agency"). Will, conduct a joint ,public hearing on June 19,,_2007 at 6:00 p.m:;. or as soon thereafter as the matter may be heard, in the Council 06ambers, '2000 J Main Street.`,Huntington II Beach, Cal'ifioynia 92648, pursuant to the Califon; nia Community Redevel-,I' opment Law (Health and 1 Safety Code Section, 33000'et seq.), for the purpose of 'considering the modification to the executed Owner Partici- pation.' Agreement for the Bella Terra retail center formerly known 1 as Huntington Center:, The -proposed"`Second, Implementation 'Amendment to the Own-. er Participation, Agreement 'modifies the repayment structure for icertain public im- provements ' that were installed :and con structed by the develop- er of the project. A summary containing the following informa- tion is available for pub. lic inspection and copy- ing during ,mgular office hours at the offices of ;the City ;Clerk at 2000 I• Main Street Huntington) Beach, California 92648: 1. An identification of, { the proposed modifica- tions to the executed j Owner Participations .Agreement; { 2. Estimates of the j amount of tax increment' proposed to be used to� pay for, the installation ,and construction of the+ identified public , im- provements; and 3. The redevelopment, purpose for which" :tax increment is being used to pay- for the installa- tion and construction. I ALL INTERESTED PER- SONS are invited to at-1 !tend said hearing and express opinions or sub- mit to the City Clerk written, evidence for or j against the application'; as outlined above. If you 1 challenge the' City Council/Agency's action; in court, you may be limited to raising only! ;those issues that youprj someone else raised art !the public hearing de-R 'scribed in this notice. on 'in written' corre-i rspondence delivered toi ,,the :City at, or prior to, 1, the public hearing. If: ithere are any further] questions,. please " call' Stanley :Smalewitz,: Di- rector of Economic.. De - I; velopment, at (714)j 536-5542. Direct your] written communication) �to: I JOAN L. FLYNN; CITY CLERK" f CITY OF .2NDFLOOR ', HUNTINGTON BEACH; (714) 5 Published Beachlndef 24, 31, 2007 SUMMARY REPORT PURSUANT TO SECTION 33433 OF THE CALIFORNIA HEALTH AND SAFETY CODE ON THE SECOND IMPLEMENTATION AGREEMENT TO THE OWNER PARTICIPATION AGREEMENT BY AND BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH AND BELLA TERRA ASSOCIATES BACKGROUND STATEMENT In 2000, the Redevelopment Agency of the City of Huntington Beach (Agency) executed an Owner Participation Agreement (OPA) with Huntington Center Associates, LLC (Original Participant); this OPA was subsequently amended to extend the Schedule of Performance. The OPA and the First Implementation Agreement to the OPA required the Original Participant to redevelop the Huntington Center property with a mixed -use commercial project including a multiplex theater, retail anchor tenants, retail shops and restaurants (Project). The Site is located in the Merged Redevelopment Project Area (Project Area), and the purpose of the OPA is to effectuate the Merged Redevelopment Project Area Redevelopment Plan (Redevelopment Plan). Prior to executing the OPA, the Agency prepared a report summarizing the financial terms of the transactions in accordance with the reporting requirements imposed by California Health and Safety Code Section 33433 (Section 33433). The 2000 Summary Report is attached for reference purposes. The property was recently conveyed to Bella Terra Associates (Current Participant); this entity is responsible for completing the scope of development required by the Original OPA and the First Implementation Agreement to the OPA. The Agency and the Current Participant have clarified certain financial terms of the executed OPA, and are proposing to modify the Agency loan repayment structure. The proposed clarifications and modifications are detailed in a Second Implementation Agreement to the OPA (Second Implementation Agreement). The Second Implementation Agreement materially alters the OPA terms, and thus, the Agency is required by Section 33433 to prepare a new summary report for the transaction. SECTION 33433 REPORT MODIFICATIONS The Section 33433 report prepared in support of the OPA includes the following sections: 0701002.doc. HTB: KHH: gbd 14066.0041013 2/13/07 hL I. Summary of the Proposed Agreement: This section summarizes the major responsibilities imposed on the Original Participant and the Agency by the OPA. II. Cost of the Agreement to the Agency: This section projects the net cost to the Agency associated with implementing the OPA. III. Benefits to the City: This section summarizes the sales tax revenue projected to be received by the City of Huntington Beach ( City) under the OPA. IV. Estimated Value of the Interests to be Conveyed: This section estimates the value of the interests to be conveyed to the Original Participant. V. Consideration to be Received and Comparison with the Established Value: This section describes the compensation to be received by the Agency, and explains any difference between the compensation and the established value of the Site. VI. Blight Elimination: This section describes the existing blighting conditions on the Site, and explains how the transaction will assist in alleviating the blighting influence. VII. Conformance with the AB1290 Implementation Plan: This section describes how the transaction will achieve goals identified in the Agency's adopted AB1290 Implementation Plan. As discussed previously, a summary report was prepared in support of the OPA. As such, the following summary report focuses solely on the sections of the report that are impacted by the Second Implementation Agreement. The report sections that do not require modification are: 1. The estimated value of the interests to be conveyed; 2. Blight elimination; and 3. Conformance with the AB 1290 Implementation Plan. The sections that are re-evaluated in this summary report are: Summary of the proposed Second Implementation Agreement; 2. The net cost of the Second Implementation Agreement to the Agency; 3. The benefits received by the City under the Second Implementation Agreement; and 4. The consideration to be received, and comparison with the established value. 2 0701002.doc. HTB: KHH: gbd 14066.004/013 2/13/07 SUMMARY OF THE AGREEMENT Executed OPA Terms The OPA requires the Agency to provide $15 million in assistance to the Project. The assistance was directly tied to demolition; clearance; site preparation; public improvements; utilities and facilities; acquisition of land and easements; and all other legally permissible items reimbursable to the Original Participant. The assistance was to be treated as a loan from the Original Participant to the Agency. The OPA imposes the following repayment terms on the loan: The loan bears interest at 6.9357%. In accordance with the OPA, this rate is equal to 8% minus %2 the difference between 8% and the True Interest Cost as defined in the OPA. 2. Interest begins accruing on the loan upon the "Operating Commencement Date". 3. The Agency's debt service payment obligation commences on September 30th of the year following both the "Completion Date" and the Operating Commencement Date. 4. The debt service payments on the loan are drawn solely from 60% of the net property tax increment revenue generated by the Project plus an amount equal to 60% of the sales tax revenue generated by the Project above $750,000 per year. 5. The loan is to be amortized over a 20-year period. Any outstanding principal and interest balance at the end of the amortization period must be forgiven. The OPA defines the Operating Com mencement Date as the latter of the date that the City of Huntington Beach (City) issues a Certificate of Occupancy, or the opening of the Project for business to the general public. Due to standard City practices, the City will never issue a Certificate of Occupancy for the entire Project as contemplated by the OPA. The partially completed Project opened for business on November 1, 2005. The Agency and the Current Participant disagree when the Operating Com mencement Date, as defined by the OPA, occurred. As a compromise settlement to this disagreement, the Second Implementation Agreement calls for interest to begin accruing on the Agency's payment obligation on November 1, 2005. For all other purposes under the OPA, including the commencement of the Agency's payment obligations and the Agency Participation Payments, the Completion Date will be applied. The Completion Date is defined in the OPA as the date on which the Release of Constr uction Covenants is issued and recorded in the Official Records of Orange County. 0701002.doc. HTB: KHH: gbd 14066.004/013 2/13/07 Comparison of the Second Implementation Agreement to the OPA To resolve the disagreement, the proposed Second Implementation Agreement modifies the loan terms detailed in the OPA. The terms being proposed in the Second Implementation Agreement are: November 1, 2005 is established as the date on which interest began accruing on the loan. 2. The loan bears interest at 6.9357%. This is the same interest rate as would be applied under the OPA. 3. The Agency wil I make a $629,447 prepaym ent to the Current Participant on the September 30th that follows the Completion Date. 4. Debt Service Payments a. The first scheduled debt service payment on the loan is due on the September 30th that follows the Completion Date. This is the same debt service commencement date as was imposed by the OPA. b. No sales tax revenues are pledged to the repayment of the loan. Comparatively, the OPA required the Agency to allocate 60% of the sales tax revenue received by the City from the Project, above $750,000, to the debt service payments. C. The debt service payments on the loan will be drawn exclusively from the net property tax increment generated by the Project. However, the definition of "net property tax increment' has been changed in the Second Implementation Agreement: The OPA defined net property tax increment as the property tax increment received by the Agency after deduction of Housing Set -Aside funds, County Administrative costs and ERA payments. The Second Amendment definition does not allow the Agency to use any of the property tax increment generated by the Project to pay ERAF obligations that may be imposed in the future. d. One -hundred percent (100%) of the net property tax increment revenue will be committed to the debt service annually until the principal and interest balances are fully repaid, or the end of 20 years, w hichever occurs first. 5. Any outstanding principal and interest balance remaining at the end of 20 years must be forgiven by the Current Participant. The forgiveness date remains unchanged from the terms imposed by the OPA. 4 0701002.doc. HTB: KHH: gbd 14066.004/013 2/13/07 The benefits associated with the proposed modifications are: Setting November 1, 2005 as the date on which interest began accruing on the loan resolves the disagreement between the Participant and the Agency. 2. The OPA provided for the debt service on the loan to be calculated based on the net property tax increment and net new sales tax generated by the Project. The proposed modification eliminates the sales tax contribution, which means that the General Fund revenues will be greater under the proposed Second Implementation Agreement than they would be under the OP A terms. 3. The upfront prepayment of $629,447 creates benefits for both the Agency and the Participant. These benefits are: The Agency's current investment returns are significantly less than the 6.9357% interest rate applied to the loan. The proposed prepayment reduces the principal balance, which in turn reduces the interest payments to be made by the Agency over the loan repayment term. This creates a net financial benefit for the Agency. b. The debt service structure proposed in the Second Implementation Agreement produces lower debt service payments during the first 10 years than would have been generated under the OPA. The provision of the proposed prepayment mitigates the impact created by the reduction in the annual payments. COST OF THE AGREEMENT TO THE AGENCY Under the terms imposed by both the OPA and the proposed Second Implementation Agreement, the Project will generate more property tax increment revenues than will be required to fund the $15 million in assistance plus interest. During the loan repayment term, the Agency revenues will be limited to the housing set -aside portion of the property tax increment. After the loan term expires, the Agency will receive 100% of the property tax increment net of pass- throughs to other governmental entities. The Agency will receive property tax increment through the end of fiscal year 2033/34. The net Agency revenue projected to be received under the OPA is compared with the projected net Agency revenue under the proposed Second Implementation Agreement in the following table: Second Implementation Net Revenue OPA Agreement Difference Nominal Dollars $23,919,000 $29,662,000 $5,743,000 Net Present Value $8,419,000 $7,513,000 ($906,000) 0701002.doc. HTB: KHH: gbd 14066.004/013 2/13/07 As can be seen in the preceding table, in nom inal dollars, the net Agency revenue is projected to be higher under the Second Implementation Agreement than under the OPA. However, the revenues are lower when considered on a present value basis. The reasons for this are: The Project value was projected at $111 million when the OPA was executed. The assessed value of the Project is currently set at $203 million. Thus, the Project will generate substantially more property tax increment overtime than was originally projected. 2. The increases in gross property tax increment are offset by the fact that the Second Implementation Agreement calls for interest to begin accruing on the Agency obligation on November 1, 2005. Comparatively, the earliest possible debt service commencement date is September 30, 2007. This lag time was not anticipated when the OPA was executed. Benefits to the City Sales taxes represent the primary revenue source that the City will receive from the Project. The net sales tax revenues projected to be received by the City over the original 20-year loan term are compared in the following table: Second Implementation Net Revenue OPA Agreement Difference Nominal $26,838,000 $45,328,000 $18,490,000 Net Present Value $13,191,000 $21,119,000 $7,928,000 The Second Implementation Agreement allows the City to receive 100% of the sales tax revenues generated by the Project from the commencement of operations forward. Under the OPA, the City was to receive the first $750,000 in sales tax revenues, and then was required to commit 60% of the remaining sales taxes to debt service over the 20-year loan term. The proposed modifications to the loan terms results in the City being projected to receive $18.49 million more in sales tax revenues than were projected to be received under the OPA. This translates to $7.93 million in present value terms. 6 0701002.doc. HTB: KHH: gbd 14066.004/013 2/13/07 CONSIDERATION TO BE RECEIVED, AND COMPARISON WITH THE ESTABLISHED VALUE The OPA did not require the Original Participant to acquire any land from the Agency. However, the OPA stated that if the Agency ultimately acquired any portion of the Site, the Original Participant would be required to purchase the property from the Agency at the property's value at the highest use permitted under the Redevelopment Plan. The Agency ultimately did not acquire any property, and therefore this provision is no longer pertinent to the transaction. The OPA requires the Agency to provide assistance to the Project for infrastructure improvements; the assistance amount is set at a principal amount of $15 million. The OPA further requires the Original Participant to pay for the improvements, and then to treat the expenditure as a loan to be repaid by the Agency over time. The 2000 Summary Report determined that the Project demonstrated the need for $18.1 million in upfront assistance. It was therefore concluded that the assistance package did not reduce the Original Participant's land purchase price to less than the Site's fair reuse value. The Second Implementation Agreement does not alter the principal balance or the interest rate applied to the assistance being provided to the Current Participant. However, it does clarify and modify the loan terms included in the OPA. The results of these changes are: The net revenues to be received by the Agency are projected to increase by $5.74 million in nominal dollars, but they are projected to decrease by $906,000 in present value terms. 2. The revenue to be received by the City is projected to increase by a total of $18.49 million, and a net present value of $7.93 mi Ilion. The total Agency and City revenues are projected to increase above the amounts projected to be received under the OPA. The net revenue to be received by the Agency and the City is projected to increase by a total of $24.23 m illion in nominal terms, and by a net present value of $7.02 million. 0701002.doc. HTB: KHH: gbd 14066.004/013 2/13/07 CITY COUNCIL/REDEVELOPMENT AGENCY PUBLIC HEARING REQUEST FORM MEETING DATE: June 18, 2007 SUBJECT: 33433 Summary Report for Second Implementation Agreement, Bella Terra DEPARTMENT: Economic Development CONTACT NAME: N/A YES NO ( ) (X) ( ) ( ) (X) ( ) ( ) (X) ( ) (X) ( ) ( ) (X) ( ) ( ) (X) ( ) ( ) ( ) (X) ( ) Doris Powell Is the notice attached? PHONE: X 5457 Do the heading and closing of the notice reflect a hearing before the City Council and/or Redevelopment Agency? Are the date, day and time of the public hearing correct? If an appeal, is the appellant's name included in the notice? Coastal Development Permit, does the notice include appeal language? Is there an Environmental Status to be approved by Council? Is a map attached for publication? Is a larger ad required? Size Is the verification statement attached indicating the source and accuracy of the mailing list? Are the applicant's name and address part of the mailing labels? Are the appellant's name and address part of the mailing labels? If Coastal Development Permit, is the Coastal Commission part of the mailing labels? If Coastal Development Permit, are the resident labels attached? Is Summary Report 33433 attached? (Redevelopment Agency items only) What is the minimum number of days from publication to hearing date? 14 What is the minimum number of times to be published? ✓--2 consecutive weeks What is the specified number of days between publications? 5 FOR ADMINISTRATION AND CITY CLERK USE ONLY Approved for public hearing Date ticed to newspaper Date published Da a notices mailed 7 V,5—/4/-7- CITY OF HUNTINGTON BEACH INTER -DEPARTMENT COMMUNICATION Economic Development Department TO Honorable Mayor/Chairman and City Council/ Redevelopment Agency Members VIA Penelope Culbreth-Graft, DPA, City Administrator/Executive Director FROM Stanley Smalewitz, Director of Economic Development / Deputy Executive Director DATE June 18, 2007 SUBJECT LATE COMMUNICATION - ITEM D-2 SECOND IMPLEMENTATION AGREEMENT WITH BELLA TERRA ASSOCIATES, LLC With this communication, staff recommends that the Agency/City Council continue Item D-2, the Public Hearing and approval of the Second Implementation Agreement with Bella Terra Associates, LLC until the meeting of July 2, 2007. d.J