HomeMy WebLinkAboutPoseidon Resources Corporation - 2006-01-09 January 9, 2006—Council/Agency Minutes Page 4 of 9
Councilmember Bohr asked the applicant if the PowerPoint report pertaining to the
proposed pipeline is available for distribution to the public. Billy Owens, Poseidon
Resources, agreed to submit the report to the City Clerk for public access.
Mayor Pro Tern Coerper asked if Poseidon would be returning to request an extension to
the deadline. Mr. Owens stated no letter would be submitted requesting an extension
unless one is requested by Council. He clamed that his intent is to return to Council
with the property owner's signature on the applications. Attorney McGrath explained
that the deadline is applicable to the CUP and not the OPA.
A motion was made by Bohr, second Hansen to continue the public hearing to consider
the Conditional Use Permit(CUP) No. 02-04, Coastal Development Permit(CDP) No.
02-05 for Seawater Desalination Project (Poseidon), CEQA Statement of Findings of
Facts with a Statement of Overriding Considerations, and Mitigation Monitoring and
Reporting Program until February 27th. The motion carried by the following roll call
vote:
AYES: Bohr, Green, Sullivan, Hardy, Hansen, and Cook
NOES: None
ABSTAIN: Coerper
(Redevelopment Agency/City Council) Public Hearing Continued to February 27,
2006 -Consideration of an Owner Participation Agreement(OPA) By and Between
the Redevelopment Agency of the City of[Huntington Beach and Poseidon
Resources Corporation Regarding Development of a Seawater Desalination Plant.
-Continued from November 21, 2005 (600.30)
A motion was made by Bohr, second Green to continue the public hearing for
consideration of an Owner Participation Agreement(OPA) by and between the
Redevelopment Agency of the City of Huntington Beach and Poseidon Resources
Corporation regarding development of a Seawater Desalination Plant to February 27,
2006 at 6 pm. The motion carried by the following roll call vote:
AYES: Bohr, Green, Sullivan, Hardy, Hansen, and Cook
NOES: Coerper
Mayor Sullivan requested that when the two agenda items pertaining to Poseidon
Resources return to Council, they return as one public hearing item. He also explained
that the public hearing would not be opened at this meeting, nor would any decisions be
made on the matter.
Mayor Sullivan clarified that Public Comments made at this meeting would not be a part
of the public hearing record since the public hearing would not be opened.
Public Comments
Fred Speaker, resident since 1969, voiced his support for the Poseidon project, stating
that a recent visit to the Hoover Dam showed him that the water levels were down 26
feet. He asked Council to vote to approve the project.
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Council Meeting Date: 1/9/2006 !7d Department ID Number: ED 05-30
CITY OF HUNTINGTON BEACH
REQUEST FOR REDEVELOPMENT AGENCY ACTION
SUBMITTED TO: HONORABLE CHAIRMAN AND REDEVELOPMENT AGENCY
MEMBERS
SUBMITTED BY: PENELOPE CULBRETH-GRAFT, EXECUTIVE DIRE TO;//-
PREPARED BY: PAUL EMERY, DEPUTY CITY ADMINISTRATOR/
SUBJECT: OWNER PARTICIPATION AGREEMENT BY AND BETWE N THE
REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON
BEACH AND POSEIDON.RESOURCES'CORPORATION
Statement of Issue, Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachment(s)
Statement of Issue: Poseidon Resources Corporation (Poseidon) proposes to construct
and operate a seawater desalination plant at a site in the Southeast Coastal Redevelopment
Area. The Redevelopment Agency of the City of Huntington Beach would like to ensure
projected revenues are protected to the greatest extent possible.
Fundinq Source: Not applicable
Recommended Action: Motion to:
Upon continuance of Conditional Use Permit No. 02-04 and Coastal Development Permit No.
02-05 by the City of Huntington Beach to permit the Seawater Desalination Project, direct
staff to return to the City Council by February 21, 2006,. with an executed Owner Participation
Agreement (OPA) by and between the Redevelopment Agency of the City of Huntington
Beach and Poseidon Resources Corporation including the consent of the site owner.
Alternative Action(s):
Upon approval of Conditional Use Permit No. 02-04 and Coastal Development Permit No.
02-05 by the City of Huntington Beach to permit the Seawater Desalination Project, approve
and authorize the execution by the Chairman, Executive Director and Agency Clerk an
Owner Participation Agreement (OPA) by and between the Redevelopment Agency of the
City of Huntington Beach and Poseidon Resources Corporation and any documents in
furtherance thereof pending all appropriate document execution by the applicant and subject
site owner.
REQUEST FOR ACTION
MEETING DATE: 1/9/2006 DEPARTMENT ID NUMBER:ED 05-30
Analysis:
Poseidon Resources Corporation proposes to construct and operate a seawater desalination
plant at a site in Huntington Beach, located in the Southeast Coastal Redevelopment Project
Area. Improvements in redevelopment project areas result in an increased property values
within those areas. As such, tax increment generated by the increase in property value
would be revenue to the City Redevelopment Agency, after accounting for state-mandated
pass-through revenue to other entities as well as the base year revenue that would continue
to be received by the City of Huntington Beach. A description of the property tax revenue
and additional deal points included in the OPA (Attachment 1) are delineated below:
Property Tax/Property Tax In Lieu
The agreement would commit the project developer and any future property owner,
public or private, to pay property taxes or an equivalent property tax in-lieu fee to the
Redevelopment Agency for 30 years from the issuance of a Certificate of
Occupancy.
This tax or in-lieu fee, assuming the assessed valuation is consistent with the
minimum amount outlined in the terms of the OPA, $186,500,000 (construction cost
estimate), would equate to 1% of valuation ($1,865,000). Of this $1,865,000, 20%
would be allocated to the Housing Set Aside fund and a portion of the balance would
then be passed through to other local tax entities. In this scenario, just over $1.1
million annually would go to the Redevelopment Agency.
Should the assessed valuation be higher than the estimated construction costs the
higher assessment would be applied to the property. In the event that the property
for any reason is removed from the tax rolls (including the sale to a public agency)
then the participant shall pay the agency an amount equal to the term left in the
agreement or pay an in lieu amount for the duration of the agreement.
City Improvement Funds
Poseidon has agreed to pay the City $2,000,000. These funds may be used at the
sole discretion of the City Council for projects that will improve the quality of life in
the City of Huntington Beach. These funds will be payable prior to the Certificate of
Occupancy.
Right of Way Improvement Funds
Included in the conditions of approval and the OPA is the requirement that Poseidon
pay $1,900,000 for improvements adjacent to the subject property and along the
pipeline route, including tree-damaged sidewalk repair/replacement, vacant tree well
planting, median planting restoration/enhancement and frontage road landscaping
replacement enhancement. Payment of these funds is required within five days
after the closing of the Participant's construction financing for the project.
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REQUEST FOR ACTION
MEETING DATE: 1/9/2006 DEPARTMENT ID NUMBER:ED 05-30
Utility Users Tax
The Agency stipulates that Poseidon and any successor's use of electricity in
connection with operation of the project and site would be subject to terms and
payments to the City under the City's Utility Users Tax. The Utility Users Tax,
Section 3.36.060 of the Municipal Code, was adopted in 1970, when the only known
technology for "pumping" water was raising water from the groundwater basin with
electrical pumps. Poseidon is treating water, or manufacturing water, by pushing
water through reverse osmosis membranes, which is uniquely different from
transporting water by pumping.
Poseidon has identified $16.8 million in electricity purchases for the plant. They
have further opined that 6% of that electricity is for "non-pumping purposes". Under
Poseidon's definition of pumping the City would receive approximately $50,000
annually in Utility Tax revenue from electricity purchases.
If it was determined that 100% of the electricity purchased is for the treating or
manufacture of water (not pumping) then the City would realize approximately
$840,000 annually in Utility Tax revenue from electricity purchases. Resolution of
this tax issue has not been resolved through negotiation of the OPA and could be
subject to litigation.
Staff has determined that an OPA is the most effective vehicle to guarantee these
revenues should a sale of the project to a public entity occur. The OPA could be subject to
challenge should the successor-in-interest to the project be a public entity. However, the
City has a greater likelihood of success in defending terms of the OPA based on state law
and the assignment provisions of an OPA.
A review of all of the financial benefits of the proposed project is summarized in the
attached matrixes (Attachment 2). Identified within the matrixes are the condition/deal
point, the financial benefit of the condition/deal point and the identification of the point of
accrual of that benefit, i.e. the general fund, the water fund etc. One matrix reflects the
revenue accrued with the application of the utility tax to all of the electricity purchased at
the site and the second matrix reflects the revenues accrued with the application of the
utility tax to electricity purchased at the site for non-pumping activities as defined by
Poseidon.
One of the requirements of the OPA is for execution of an agreement containing covenants
affecting real property; this requirement includes obtaining the consent of the Site Owner.
As of January 4, 2006, the Site Owner has not provided that consent. The signed consent
by the site owner is a necessary requirement for the agreement to be effective.
If the City Council continues the CUP/CDP and the OPA until all components are executed,
then staff will return to the City Council with the CUP/CDP and the OPA. Under
Government Code Section 65950 entitlements must have action within 180 days of
Environmental Impact Report (EIR) certification. The EIR for this project was certified by
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REQUEST FOR ACTION
MEETING DATE: 1/9/2006 DEPARTMENT ID NUMBER:ED 05-30
the City Council on September 6, 2005. Without the applicant's request to extend the
entitlement action period beyond 180 days, the Council must take action on the CUP/CDP
by the regularly scheduled February 21, 2006, City Council meeting or a designated special
meeting date.
Should the OPA not be fully executed by February 21, 2006, and the applicant has not
requested a continuance of the CUP/CDP, staff will return to the City Council with a
recommended action on the CUP/CDP at that time.
Environmental Status: Not applicable.
Attachment(s):
City Clerk's
Page Number No. Description
1. Draft Owner Participation Agreement by and between the
Redevelopment Agency of the City of Huntington Beach and Poseidon
Resources Corporation
2. 1 Financial Benefit Matrix
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ATTACHMENT # 1
OWNER PARTICIPATION AGREEMENT
by and between
REDEVELOPMENT AGENCY OF THE
CITY OF HUNTINGTO A
en y,
and
DPOSEION RES URCES CORPORATION
Participant.
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TABLE OF CONTENTS
Page
PART 1. SUBJECT OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 101 Purpose of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 102 The Redevelopment Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 103 The Redevelopment Project Area . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 104 The Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 105 The Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 106 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 107 Prohibition against Change in Ownership, Management and Control of the
Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 108 Effect of City Entitlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PART 2. DEVELOPMENT OF THE SITE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 201 Scope of Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 202 Construction Drawings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 203 Construction Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 204 Cost of Construction . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . 6
Section 205 Construction Pursuant to Plans and Laws . . . . . . : . . . . . . . . . . . . . 6
Section 206 Equal Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 207 Condition of the Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 208 Construction Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 209 Zoning and Land Use Requirements. . . . . . . . . . . . . . . . . . . . . . . . 8
Section 210 Indemnification; BodilyIInjury and Property Damage Insurance. . . . . . 8
Section 211 Local, State and Federal Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 212 Permits and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 213 Rights of Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 214 Disclaimer of Responsibility by the Agency . . . . . . . . . . . . . . . . . 12
Section 215 CEQA Review; Compliance with Environmental Laws . . . . . . . . . . 12
Section 216 Environmental Indemnification by the Participant. . . . . . . . . . . . . . 13
Section 217 Rights of Obligees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PART 3. USE OF THE SITE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 301 Uses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 302 Maintenance of Site and Environs; Payment of Taxes and Assessments 15
Section 303 Obligation to Refrain from Discrimination . . . . . . . . . . . . . . . . . . 17
Section 304 Form of Nondiscrimination and Nonse regation Clauses . . . . . . . . . 17
Section 305 Effect and Duration of Covenants . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 306 Agreement Containing Covenants Affecting Real Property; Deed of Trust
18
Section 307 Relationship of the Agency and the Participant . . . . . . . . . . . . . . . 19
Section 308 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 19
PART 4. DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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Section 401 Defaults - General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 402 Defaults -Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
PART 5. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 501 Notices. Demands and Communications between the Parties . . . . . 22
Section 502 Conflict of Interest . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . 22
Section 503 Nonliability of Agency Officials and Employees . . . . . . . . . . . . . . 22
Section 504 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 505 Time of Essence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 506 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 507 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 508 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 509 Authority to Sign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 510 Incorporation by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 511 Counterparts . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . . . . . . 24
Section 512 No Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 512 Enforced Delay; Extension of Times of Performance. . . . . . . . . . . . 24
PART 6. ENTIRE AGREEMENT, WAIVERS AND AMENDMENTS . . . . . . . . . . 24
PART 7. TIME FOR ACCEPTANCE OF AGREEMENT BY THE AGENCY . . . . . 25
ATTACHMENTS
ATTACHMENT NO. 1 - SITE MAP
ATTACHMENT NO. 2 - LEGAL DESCRIPTION
ATTACHMENT NO. 3 - SCOPE OF DEVELOPMENT
ATTACHMENT NO. 4 - AGREEMENT CONTAINING COVENANTS
AFFECTING REAL PROPERTY
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OWNER PARTICIPATION AGREEMENT
THIS OWNER PARTICIPATION AGREEMENT(the"Agreement")is entered into by and
between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH (the
"Agency") and. POSEIDON RESOURCES CORPORATION, a Delaware corporation (the
"Participant"). The Agency and the Participant agree as follows:
PART 1. SUBJECT OF AGREEMENT
Section 101 Purpose of the Agreement
The purpose of this Agreement is to effectuate the Redevelopment Plan for the Southeast
Coastal Redevelopment Project by providing for the development of a seawater desalination facility
(the"Facility")on that certain real property described as the"Site"in Section 104 of this Agreement,
below,as well as a water transmission line from the Site to an existing regional transmission system
(the "Pipeline," collectively with the Facility, the "Project"). This Agreement does not grant any
easement or permit or approve any development of the Project and does not contemplate or authorize
any development of the Project beyond those entitlements and approvals listed in and subject to the
conditions of Sections 108, 202, 207, 209, 212, and 215 of this Agreement. All approvals,.
easements or permits necessary to construct and operate the Project must be granted independently of
this Agreement by the entities with jurisdiction thereof. This Agreement is solely a finance
mechanism to ensure the benefits of the Project accrue to the Agency and the City of Huntington
Beach ("City"), and does not provide any entitlement to construct or operate the Project. The
development of the Site and the Project pursuant to this Agreement,and the fulfillment generally of
this Agreement are in the vital and best interests of the City and the health, safety and welfare of its
residents,and in accord with the public purposes and provisions of applicable federal,state and local
laws and requirements.
Section 102 The Redevelopment Plan
This Agreement is subject to the provisions of the Redevelopment Plan for the Southeast
Coastal Redevelopment Project, which was approved and adopted on June 17, 2002, by the City
Council of the City of Huntington Beach by Ordinance No. 3561 (the"Redevelopment Plan"). The.
Redevelopment Plan is incorporated herein by reference and made a part hereof as though fully set
forth herein.
Section 103 The Redevelopment Project Area
The Southeast Coastal Redevelopment Project area is located in the City of Huntington
Beach, California. The exact boundaries of the Redevelopment Project area are specifically and
legally described in the Redevelopment Plan.
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Section 104 The Site
a. The"Site"is that certain real property comprised of approximately 10.96 acres
located in the City of Huntington Beach, illustrated and designated as the Site on the "Site Map"
(attached hereto and incorporated herein as Attachment No. 1) and as described in the "Legal
Description of the Site" (attached hereto and incorporated herein as Attachment No. 2).
b. The Participant hereby represents that it owns an equitable interest in the Site
by way of a written option with the fee owner of the Site,AES Huntington Beach Development,LLC
(the "Site Owner"), to lease or buy the Site (the "Participant's Interest"). The Site Owner has
consented to the Participant entering into this Agreement and to the recordation of the documents
required hereby against the fee ownership interest of the Site Owner in the Site,if Poseidon is not the
fee owner at the time such recordation must occur.
Section 105 The Agency
a. The Agency is a public body,corporate and politic,exercising governmental
functions and powers, and organized and existing under Chapter 2 of the Community
Redevelopment Law of the State of California.
b. The address of the Agency for purposes of receiving notices pursuant to this
Agreement is as follows:
Redevelopment Agency of the City of Huntington Beach
2000 Main Street
Huntington Beach, California 92648
Attn: Executive Director
C. "Agency"as used in this Agreement includes the Redevelopment Agency of
the City of Huntington Beach, California and any assignee or successor to its rights, powers and
responsibilities. All of the terms,covenants.and conditions of this Agreement shall be binding upon
and shall inure to the benefit of the Agency and any assignee or successor of the Agency.
Section 106 Participant
a. The Participant is Poseidon Resources Corporation,a Delaware corporation.
The Project will be developed, owned and managed by the Participant.
b. The address of the Participant for purposes of receiving notices pursuant to
this Agreement is as follows:
Poseidon Resources Corporation
1760 Kilroy Airport Way, Suite 260
Long Beach, CA 90806.
Attn: Chief Executive Officer
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With a copy to:
Poseidon Resources Corporation
1055 Washington Boulevard
Stamford, CT 06901
Attn: Chief Executive Officer
C. "Participant" as used in this Agreement includes Poseidon Resources
Corporation and any assignee or successor to its rights, powers and responsibilities which is
permitted as such under the terms of this Agreement or which acquires any interest in the Site or the
Project under the power of eminent domain or by a voluntary conveyance in lieu of or under threat of
eminent domain. All of the terms,covenants and conditions of this Agreement shall be binding upon
and shall inure to the benefit of the Participant and any such assignee or successor of the Participant.
Section 107 Transfer of Project and Assignment of Agreement
The qualifications and identity of the Participant are of particular concern to the City and the
Agency. The Participant recognizes that it is because of such qualifications and identity that the
Agency is entering into this Agreement with the Participant. Therefore,no voluntary or involuntary
transferee of the Project or the Participant's Interest in the Site shall acquire any rights or powers
under this Agreement except as expressly set forth herein. Except as provided in paragraph (a)
below, prior to Completion, the Participant shall not assign all or any part of this Agreement nor
make any total or partial sale or transfer of Participant's Interest the Site or the.Project without the
prior written approval of the Agency pursuant to paragraph (b)below. Such approval shall not be
unreasonably withheld, conditioned or delayed, provided that the proposed transferee has
demonstrated to the Agency that it has the experience and financial capability to complete the
Project,pursuant to paragraph(b),below. "Completion"for purposes of this Agreement shall mean
the point in time when: (i)the Participant has completed construction of the Project as set forth in
this Agreement(including without limitation the Scope of Development)and in accordance with all
laws, rules, regulations, standards, guidelines and other requirements issued by any federal, state,
county,municipal(including the City)or other governmental authority having jurisdiction over the
Site and/or the Pipeline route, and all land use, development and building approvals, entitlements,
and/or permits as may be required by the City and any other governmental body having jurisdiction
over the Site for the development of and construction of the Facility on the Site or as may be required
by the City and any other governmental body having jurisdiction over the Pipeline route for the
development of and construction of the Pipeline, and (ii) a final certificate of occupancy, or
equivalent document,has been issued by the City for the Facility(the"Certificate of Occupancy"),
and by the City and any other government body having jurisdiction over the Pipeline route for the
Pipeline, and (iii) the Participant has received all governmental permits required to operate a
seawater desalination plant and to distribute the water produced therein for public consumption.
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(a) Permitted Transfers
Notwithstanding any other provision of this Agreement to the contrary, Agency
approval of an assignment of this Agreement or conveyance of the Participant's Interest in the Site or
the Project or any portion thereof shall not be required in connection with any of the following(each
a"Permitted Transfer"):
(i) the conveyance or dedication of any portion of the Site to the City or the granting of
easements or permits to facilitate construction of the Project;
(ii) any assignment of this Agreement or the Project for financing purposes related to this
Agreement, including, without limitation, the grant of a deed of trust to secure the
funds necessary for land acquisition,construction and/or permanent financing of the
Project;
(iii) contracts for the management of the development upon the Site or the Pipeline route,
or providing services necessary or incidental for its management;
(iv) any transfer of the Project to (i) any holding company, corporation, association or
entity which is or becomes a parent, subsidiary or affiliate of the Participant or(ii)
any successor of the Participant by reason of merger,consolidation,public offering,,
reorganization, dissolution, or sale of stock or assets (any such entity described in
clause(i)or(ii)is a"Related Company"),provided that not less than thirty(30)days
prior to the effective date of any such proposed transfer,the Agency is provided with
(1) documentation sufficient in the reasonable judgment of the' Agency to
demonstrate that the transferee is a Related Company, and (2) an instrument of
assignment and novation reasonably acceptable to the Agency's legal counsel
containing the express assumption by the proposed transferee of the rights and
obligations of the Participant under this Agreement;
(v) any transfer of the Project to the City or other public agency (other than under the
power of eminent domain or a voluntary conveyance in lieu of or under threat of
eminent domain)provided that not less than thirty(30)days prior to the effective date
of any such proposed transfer, the Agency is provided with an instrument of
assignment and novation reasonably acceptable to the Agency's legal counsel
containing the express assumption by the proposed transferee of the rights and
obligation of the Participant under this Agreement.
(b) Agency Consideration of Requested Transfer or Assignment
If a request is made for an assignment of this Agreement or a conveyance of the
Participant's Interest in the Site or the Project or any portion thereof other than a Permitted Transfer
during the period in which this Section 107 applies,the Agency agrees that it will not unreasonably
withhold approval of such a request,provided the Participant delivers written notice to the Agency
requesting such approval, together with the following documentation: (1) sufficient evidence, as
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reasonably determined by the Agency, regarding the proposed transferee's development
qualifications and experience, qualifications and experience in operating the applicable type and
respective portion of the Project proposed for transfer,and its financial resources,in sufficient detail
to enable the Agency to evaluate the proposed transferee pursuant to the criteria set forth in this
paragraph(b); and(2)an instrument of assignment and novation in a form reasonably acceptable to
the Agency's legal counsel containing the express assumption by the proposed transferee of the
rights and obligations of the Participant under this Agreement. Within thirty(30)days after receipt
of such a written notice,the Agency shall respond in writing by stating that the request is complete or
by describing such further information as the Agency requires in order to determine the request is
complete. Such additional information shall be provided within thirty (30) days of the Agency's
response,or the request shall be deemed withdrawn. Within thirty(30)days of the Agency obtaining
a completed request, the Agency shall either approve, conditionally approve, or disapprove the
proposed transfer,pursuant to the criteria set forth in this paragraph(b). The Agency shall evaluate
each proposed transferee on the basis of its operational qualifications and experience and its financial
commitments and resources,and may disapprove any proposed transferee which Agency determines,
in its reasonable judgment, does not possess qualifications that enable the proposed transferee to
meet the obligations of the Participant under this.Agreement, or may condition approval of a
proposed transfer upon such conditions as the Agency determines are necessary to assure that the
proposed transferee will meet the obligations of the Participant under this Agreement. The
provisions of this paragraph(b) shall not apply to any Permitted Transfer set forth in paragraph(a),
above.
Section 108 Effect of City Entitlements
The Project which is the subject of this Agreement is the subject of Conditional Use Permit
No. 2-03 and Coastal Development Permit No. 02-05, approved by the City on
(collectively,the"City Entitlements"). Nothing in this Agreement shall be deemed to vary,waive or
affect in any way any term or condition of either City Entitlement.
PART 2. DEVELOPMENT OF THE SITE
Section 201 Scope of Development
The Participant agrees to diligently pursue the necessary permits and entitlements required for
development of the Project in addition to the City Entitlements, and to commence and complete
construction of the Project in a timely manner upon obtaining such permits and entitlements,and in
conformance with the provisions of the Scope of Development (attached hereto and incorporated
herein as Attachment No. 3).
Section 202 Construction Drawings
a. The Participant shall cause its architect or engineer to prepare the plans and
drawings necessary to obtain a building permit ("Construction Drawings") for the Project.
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b. The Participant shall have no obligation to submit Construction Drawings to
the Agency for review and approval,but shall submit plans and Construction Drawings to the City in
compliance with all applicable City rules and procedures, and shall develop the Site and Pipeline
route in accordance with any Construction Drawings approved and permits and entitlements issued
and approved by the City, and no further filing by the Participant, or approval by the Agency,as to
Construction Drawings, shall be required except as provided in subsection c.,below.
C. Following issuance of a building permit for the Project,the Participant shall
submit to the Agency's Executive Director (the "Executive Director") for review and reasonable
approval any proposed material changes to the Construction Drawings that do not conform to the
Scope of Development. Approval of such changes by the Executive Director shall not be deemed to
relieve the Participant from the requirement to obtain approval of such changes from any other
governmental entity which has jurisdiction over the portion of the Project to be so changed.
Section 203 Construction Schedule; Bond
Prior to issuance of any building permit for the Facility, the Participant shall provide the
Agency with the anticipated date for completion of construction of the Facility (the "Projected
Completion Date"). The Participant shall commence construction of the Project and shall diligently
prosecute construction of the Project to completion. If the Project is not completed within two (2)
years after the Projected Completion Date,the Participant shall be required to demolish and remove
all construction on the Site and to return the Site to the state it was in prior to the start of
construction. The Projected Completion Date shall be extended for the time of any enforced delay
pursuant to Section 513,and may also be extended upon request of the Participant for reasons which
do not constitute an enforced delay upon the reasonable determination of the Executive Director that
the Participant has been proceeding with reasonable diligence in light of then present circumstances.
Prior to the commencement of construction of the Project,the Participant shall obtain,and thereafter
shall maintain at all times prior to the issuance of the Certificate of Occupancy a bond or other form
of security reasonably acceptable to the Agency in such amount reasonably as is reasonably
necessary to pay for the costs of demolition and removal and renovation of the Site required by this
Section, as determined by the City's Director of Public Works.
Section 204 Cost of Construction
It is the responsibility of the Participant,at the Participant's sole cost and expense,to pay(or
cause to be paid) all Development Costs, without any cost or liability to the Agency or the City.!
"Development Costs"shall collectively mean: development,construction,operational,maintenance
and management costs in connection with the Project and the Site,including,without limitation,all
off-site improvements and on-site improvements required by the City in connection therewith,and
including,without limitation all hard costs, soft costs,the cost of services,wages required to be paid
to any person employed by the Participant, any contractor or subcontractor, and any cost overruns.
Section 205 Construction Pursuant to Plans and Laws
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a. The Participant shall construct the Project in conformance with the
Construction Drawings approved by the City in issuing a building permit for the Project, all
conditions of approval imposed upon the Project by any governmental entity with jurisdiction over
the Project or any portion thereof, and any modifications thereof pursuant to any change order(s)
permitted or approved by the Agency,the City,or such other governmental entities(the"Approved
Plans").
b. The Participant shall cause all work performed in connection with the Project
to be performed in compliance with the Approved Plans and(1)all applicable laws,ordinances,rules
and regulations of federal, state, county or municipal governments or agencies now in force or that
may be enacted hereafter, and (2) all directions, rules and regulations of any fire marshal, health
officer, building inspector, or other officer of every governmental agency now having or hereafter .
acquiring jurisdiction. The work shall proceed only after procurement of each permit, license, or
other authorization that may be required by any governmental agency having jurisdiction, and the
Participant shall be responsible for the procurement and maintenance thereof,as may be required of
the Participant and all entities engaged in work on the Project.
C. All construction work and professional services shall be performed by persons
or entities licensed or otherwise authorized to perform the applicable construction work or service in
the State of California.
Section 206 Equal Opportunity
During the construction of the Project there shall be no discrimination on the basis of race,
color, creed,religion, age, disability, sex, marital status,national origin,or ancestry, in the hiring,
firing, promoting, or demoting of any person engaged in the construction work.
Section 207 Condition of the Site
As to all portions of the Site and Project,the Site and Project and any portion thereof shall be
held by the Participant with no warranty,express or implied,by the Agency as to the condition of the
soil or water,its geology,or the presence of known or unknown faults or the condition of the Project.
It shall be the sole responsibility of the Participant, at the Participant's expense, to investigate and
determine the soil and water conditions of the Site and the suitability of the Site and the Project for
the development to be constructed by the Participant. If the soil or water conditions of the Site, or
any part thereof,or the condition of the Project,are not in all respects entirely suitable for the use or
uses to which the Site and Project will be put pursuant to the Scope of Development(Attachment
No. 3), and the Participant determines to proceed with the development of the Project,then it is the
sole responsibility and obligation of the Participant to take such action as may be necessary to place
the Site and the soil and water conditions thereof, and the Project, in all respects in a condition
entirely suitable for such development of the Site. The provisions of this Section 207 shall not be
deemed to imply or create any warranty of the Agency or the City regarding the Pipeline route or any
portion thereof,which may be utilized by the Participant only in accordance with a franchise granted
by the City or such other governmental entity as has jurisdiction thereof.
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Section 208 Construction Responsibilities
a. It shall be the responsibility of the Participant to coordinate and schedule the
work to be performed so that commencement and completion of construction will take place in
accordance with this Agreement. The cost of developing the Project shall be the sole responsibility
of the Participant. The Participant shall be responsible for obtaining and complying with any
condition relating to any and all permits which may be required by any governmental agency having
jurisdiction over the work to be performed.
b. The Participant shall be solely responsible for all aspects.of the Participant's
conduct in connection with the development of the Project,including(but not limited to)the quality
and suitability of the Construction Drawings, the supervision of construction work, and the
qualifications, financial condition, and performance of all architects, engineers, contractors,
subcontractors, suppliers, consultants, and property managers.
Section 209 Zoning and Land Use Requirements
It is the responsibility of the Participant,without cost to the Agency,to ensure that zoning of
the Site and all applicable City land use requirements and franchises will be such as to permit the
development of the Project in accordance with the provisions of this Agreement. The Participant
acknowledges that this Agreement is not a Development Agreement pursuant to Government.Code
Section 65865 et seq..
Section 210 Indemnification; BodilyIInjury and Property Damage Insurance
a. In the event of any legal action instituted by a third party or any governmental
entity or official (other than the Agency, the City or an official of the Agency or the City),
challenging the validity of any provision of this Agreement or the City Entitlements, the parties
hereby agree to cooperate in defending said action; provided, however the Participant shall
indemnify and hold harmless the Agency, the City, and their respective officers; employees,
contractors and agents from all litigation expenses, including reasonable attorneys' fees and costs
arising out of any legal action instituted by such third party,or other governmental entity or official
(other than the Agency,the City or an official of the Agency or the City)challenging the validity of
any provision of this Agreement, or the City Entitlements. The Agency shall promptly notify the
Participant of any such action and shall cooperate in the defense thereof.
b. The Participant agrees to and shall defend, indemnify and hold the Agency,
the City,and their respective officers,employees,contractors and agents harmless from and against
all liability,loss,damage,costs,or expenses(including attorneys' fees and court costs)arising from
or as a result of the death of any person or any accident, injury,loss and damage whatsoever caused
to any person or to the property of any person which shall occur on or adjacent to the Site or on or
adjacent to the Pipeline route and which shall be directly or indirectly caused by or result from any
acts done thereon or any errors or omissions of the Participant or its officers,employees,contractors
or agents.
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C. Indemnification Procedure. In any situation in which the Participant is
required to indemnify a party(the "Indemnified Party")pursuant to this Agreement, as a condition
thereto the Indemnified Party shall give the Participant reasonably prompt notice of any matter for
which indemnification is sought hereunder. The Indemnified Party shall cooperate in the defense of
such claim(and pending assumption of defense, the Indemnified Party,in its good faith judgment,
may take such steps to defend itself against such claim as it deems appropriate to protect its
interests). The Participant shall pay the Indemnified Party's reasonable out-of-pocket expenses
incurred in connection with such cooperation and such steps taken to defend itself pending the
Participant's assumption of defense. The Participant shall keep the Indemnified Party reasonably
- - informed as to the status of the defense of such claim. After notice from the Participant to the
Indemnified Party of the assumption and the defense of a claim,the Participant shall not be liable to
the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party
in connection with the defense thereof other than those expresses referred to above and expenses of
Separate Counsel referred to below. The Participant,at its own expense and through counsel chosen
by it(which counsel shall be reasonably acceptable to the Indemnified Party), shall defend any such
claim;provided,however,that if,in the Indemnified Party's reasonable judgment at anytime,either
a conflict of interest arises between the Participant and the Indemnified Party or if there are defenses
which are different from or in addition to those available to the Participant and/or the Indemnified
Party and the representation of both parties by the same counsel would be inappropriate,then in each
such case the Indemnified Party shall have the right to employ a separate law firm in each applicable
jurisdiction(if necessary) ("Separate Counsel"), to represent the Indemnified Party in any action or
group of related actions (which firm or firms shall be reasonably acceptable to the Participant),and
in that event: (a) the reasonable fees and expenses of such Separate Counsel shall be paid by the
Participant; and(b)the Participant shall have the right to conduct its own defense in respect of such
claim. If the Participant does not defend against a claim, the Indemnified Party may defend,
compromise and settle such claim and shall be entitled to indemnification hereunder(to the extent
permitted by this Agreement). Notwithstanding the foregoing,the Participant shall not,without the
Indemnified Party's prior written consent(which shall not be unreasonably withheld,conditioned or
delayed), settle or compromise any claim or consent to the entry of any judgment unless: (x)there is
no finding or admission of any violation of law or any violation of the rights of any person and no
effect on any other claims that may be made against the Indemnified Party; and (y) the sole relief.
provided is monetary damages that are paid in full by the Participant.
d. Prior to commencing construction on the Site and continuing until
Completion,the Participant shall furnish or cause to be furnished to the Agency duplicate originals
or appropriate certificates (countersigned by an authorized agent of the insurer) of insurance as
follows:
I. Comprehensive general liability(bodily injury and property damage),
automobile liability (including owned, hired, and non-owned
vehicles), blanket contractual liability, and personal injury liability,
all with limits not less than $5,000,000 combined single limit per
occurrence. All such policies shall contain a waiver of subrogation
for the benefit of the Agency and the City.
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2. All such insurance policies shall contain the following three
endorsement provisions:
(i) Additional Insureds:
"The City of Huntington Beach and the Redevelopment Agency of
the City of Huntington Beach (the "Agency"), their elective and
appointive boards, officers, and employees are added as additional
insureds with respect to this subject project and contract with the
Agency."
(ii) Notice:
"Said policy shall not terminate, be canceled, nor the coverage
reduced until after thirty (30) days written notice is given to the
Redevelopment Agency of the City of Huntington Beach."
(iii) Primary Coverage: -
"Said policy and coverage as is afforded to the City of Huntington
Beach and the Redevelopment Agency of the City of Huntington
Beach, their elective and appointed boards, officers and employees
shall be primary insurance and not contributing with any other
insurance maintained by the City of Huntington Beach or the
Redevelopment Agency of the City of Huntington Beach."
e. All such insurance policies shall be provided by insurers admitted and
authorized to do business in the State of California with a minimum rating of A:VIII. The
Participant must deliver proof of the insurance required under this Section 210 to the Agency prior to
the Agency's execution of this Agreement.
f. The insurance coverage and limits required herein shall not be construed as a
limit of the Participant's liability. The Participant agrees to respond for any losses subject to
indemnification under this Agreement incurred by the Agency or the City and not covered by the
Participant's insurance, whether by reason of coverage being inapplicable or by the Participant's
failure to obtain coverage. The Participant agrees to provide immediate notice to the Agency and the
City of any claim or loss against the Participant that includes the Agency or the City as a defendant.
The Agency and the City assume no obligation by the receipt of such notice,but have the right(but
not the duty) to monitor the handling of any such claim or claims if they are likely to involve the
Agency or the City.
Section 211 Local, State and Federal Laws
The Agency acknowledges that it is not providing any financial assistance with respect to
acquisition of the Site by the Participant or with respect to the Project in any other way and that this
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Agreement is entered into solely for the purpose of complying with the Redevelopment Plan.
Notwithstanding the foregoing, the Participant hereby agrees to carry out development and
construction(as defined by applicable law)of the Project,including,without limitation,any and all
public works(as defined by applicable law),in conformity with all applicable local,state and federal
laws, including, without limitation, all applicable federal and state labor laws (including, without
limitation, any requirement to pay state prevailing wages). The Participant hereby expressly
acknowledges and agrees that neither the City nor the Agency has ever previously affirmatively
represented to the Participant or its contractor(s)for the Project in writing or otherwise,in a call for
bids or otherwise, that the work to be covered by such bid or contract is,or is not, a"public work,"
as defined in Section 1720 of the Labor Code. Should the Project or any portion thereof be
determined to be a"public work"as defined in the Labor Code,the Participant hereby agrees that the
- Participant shall have the obligation to provide any and all disclosures,representations,statements,
rebidding,and/or identifications which may be required by Labor Code Sections 1726 and 1781,as
the same maybe enacted,adopted or amended from time to time,or any other provision of law. The
Participant hereby further agrees that the Participant shall have the obligation to maintain any and all
bonds to secure the payment of contractors(including the payment of wages to workersperforming
any public work)which may be required by the Civil Code, Labor Code Section 1781, as the same
may be enacted, adopted or amended from time to time, or any other provision of law. ° The
Participant hereby further agrees that the Participant shall have the obligation, at the Participant's
sole cost, risk and expense, to obligate any party as may be required by Labor Code Sections 1726
and 1781,as the same may be enacted,adopted or amended from time to time,or any other provision
of law. The Participant shall indemnify,protect,defend and hold harmless the Agency,the City and
their respective officers, employees, contractors and agents, with counsel reasonably acceptable to
the Agency and the City, from and against any and all loss, liability, damage, claim, cost, expense,
and/or "increased costs" (including labor costs, penalties, reasonable attorneys fees, court and
litigation costs, and fees of expert witnesses) which, in connection with the development,
construction (as defined by applicable law) and/or operation of the Project, including, without
limitation,any and all public works(as defined by applicable law),results or arises in any way from
any of the following: (1)the noncompliance by the Participant of any applicable local, state and/or
federal law, including,without limitation,any applicable federal and/or state labor laws(including,
without limitation, if applicable, the requirement to pay state prevailing wages); (2) the
implementation of Sections 1726 and 1781 of the Labor Code,as the same maybe enacted,adopted
or amended from time to time,or any other similar law; (3)failure by the Participant to provide any
required disclosure,representation,statement,rebidding and/or identification which may be required
by Labor Code Sections 1726 and 1781,as the same maybe enacted,adopted or amended from time
to time,or any other provision of law; (4)failure by the Participant to provide and maintain any and
all bonds to secure the payment of contractors (including the payment of wages to workers
performing any public work)which may be required by the Civil Code,Labor Code Section 1781,as
the same may be enacted, adopted or amended from time to time, or any other provision of law;
and/or(5)failure by the Participant to obligate any,party as may be required by Labor Code Sections
1726 and 1781, as the same may be enacted, adopted or amended from time to time, or any other
provision of law. It is agreed by the parties that, in connection with the development, construction
(as defined by applicable law)and operation of the Project,including,without limitation,any public
work(as defined by applicable law),the Participant shall bear all risks of payment or non-payment of
state prevailing wages and/or Labor Code Sections 1726 and 1781, as the same may be enacted,
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adopted or amended from time to time,and/or any other provision of law: "Increased costs"as used
in this Section shall have the meaning ascribed to it in Labor Code Section 1781,as the same maybe
enacted,adopted or amended from time to time. The foregoing indemnity shall survive termination
of this Agreement and shall continue after Completion.
Section 212 . Permits and Approvals
Before commencement of construction, the Participant, without cost or expense to the
Agency, shall obtain any and all permits which may be required by the City. or any other
governmental agency having jurisdiction over the work to be performed. As applicable,the Agency
shall provide appropriate assistance to the Participant in obtaining these permits and other City
approvals, provided such assistance imposes no cost or expense on the Agency.
Section 213 Rights of Access
Representatives of the Agency shall have the reasonable right of access to the Site and Project
without charges or fees,at normal construction hours during the period of construction and without
interfering with business operations on the Site for the purpose of inspecting the Site to determine
the Participant's compliance with this Agreement. Such representatives of the Agency shall be those
who are so identified in writing by the Executive Director.
Section 214 Disclaimer of Responsibility by the Agency
The Agency neither undertakes nor assumes nor will have any responsibility or duty to the
Participant or to any third party to review, inspect, supervise, pass judgment upon or inform the
Participant or any third party of any matter in connection with the development or construction of the
Project or Site,whether regarding the quality,adequacy or suitability of the plans,any labor,service,
equipment or material furnished to the Site or in connection with the Project,any person furnishing
the same,or otherwise. The Participant and all third parties shall rely upon its or their own judgment
regarding such matters,and any review,inspection,supervision,exercise of judgment or information
supplied to the Participant or to any third party by the Agency in connection with such matter is for
the public purpose of redeveloping the Site, and neither the Participant(except for the purposes set
forth in this Agreement) nor any third party is entitled to rely thereon. The Agency shall not be
responsible for any of the work of construction, improvement or development of the Site.
Section 215 CEQA Review; Compliance with Environmental Laws
In connection with its adoption in 2002 of the Redevelopment Plan, the Agency caused an
environmental impact report(State Clearinghouse No. 2001-091144),to be prepared in accordance
with the requirements of the California Environmental Quality Act(Public Resources Code§21000
et seq.; "CEQA"), the Guidelines for Implementation of CEQA (Title 14, California Code of
Regulations § 15000 et seq.; "CEQA Guidelines"), and local regulations enacted pursuant thereto.
Pursuant to Public Resources Code § 21090 and CEQA Guidelines§ 151.80,development of the Site
with the Project constitutes private activities and undertakings pursuant to and in furtherance of the
Redevelopment Plan.
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In connection with its approval of the City Entitlements,the City Council of the City certified
Environmental Impact Report No 00-02 (the "Project EIR") and adopted a mitigation monitoring
plan(the"Mitigation Monitoring Plan"). The Participant agrees to comply with all conditions in the .
Project EIR and the Mitigation Monitoring Plan at its sole cost and expense.
The Participant shall also comply with all environmental laws and environmental permits
applicable to the operations of the Participant and the ownership or use of the Site and the Project,
shall immediately pay or cause to be paid all costs and expenses incurred by reason of such
compliance, shall keep the Site and Project free and clear of any environmental claims or liens
imposed pursuant to any environmental law as a result of the Participant's development or use of the
Project(subject to the Participant having a reasonable time to contest any such claims or remove any
such liens), and shall obtain and renew all environmental permits required for ownership or use of
the Project or the Site.
Section 216 Environmental Indemnification by the Participant
The Participant agrees to defend,indemnify and hold harmless the Agency,the City,and their
respective officers, employees, contractors and agents (collectively the "Indemnitees") from and
against any and all obligations (including removal and remedial actions), losses, claims (including
third party claims), suits,judgments, liabilities, penalties, damages (including consequential and
punitive damages),costs and expenses(including consultants' and attorneys' fees.and expenses)of
whatever kind or nature whatsoever that may at any time be incurred by, imposed on, or asserted
against the Indemnitees directly or indirectly based on,or arising or resulting from: (a)the actual or
alleged presence of Hazardous Substances on the Site as a result of development or operation of the
Project, including, without limitation, Hazardous Substances presently on the Site required to be
removed upon development of the Project, or (b) any environmental claim with respect to the
Project. "Hazardous Substances"as used herein shall mean any substance regulated by applicable
law as hazardous or toxic and shall include, without limitation, the following:
a. a"Hazardous Substance"as defined by Section 9601 of the Comprehensive
Environmental Response,Compensation and Liability Act of 1980,42 U.S.C. §§ 9601,et seq.,or as
"Hazardous Waste"as defined by Section 6903 of the Resource Conservation and Recovery Act,42
U.S.C. §§ 6901, et seq.;
b. an "Extremely Hazardous Waste," a "Hazardous Waste," or a "Restricted
Hazardous Waste," as defined by The Hazardous Waste Control Law under §§ 25115, 25117 or
25122.7 of the California Health and Safety Code, or as listed or identified pursuant to § 25140 of
the California Health and Safety Code;.
C. a "Hazardous Material," "Hazardous Substance," "Hazardous Waste," or
"Toxic Air Contaminant," as defined by the California Hazardous Substance Account Act, law
pertaining to the underground storage of hazardous substances,hazardous materials release response
plans, or the California Clean Air Act under §§ 25316, 25281, 25501, 25501.1 or 39655 of the
California Health and Safety Code;
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d. "Oil"or a"Hazardous Substance"listed or identified pursuant to §311 of the
Federal Water Pollution Control Act, 33 U.S.C. §1321;
e. "Hazardous Waste," "Extremely Hazardous Waste," or an "Acutely
Hazardous Waste" listed or defined pursuant to Chapter 11 of Title 22 of the California Code of
Regulations Sections 66261.1-66261.126;
f. any chemical listed by the State of California under Proposition 65 Safe
Drinking Water and Toxic Enforcement Act of 1986 as a chemical known by the State to cause
cancer or reproductive toxicity pursuant to § 25249.8 of the California Health and Safety Code;
g. a material that,due to its characteristics or interaction with one or more other
substances,chemical compounds,or mixtures,materially damages or threatens to materially damage,
health, safety, or the environment, or is required by any law or public agency to be remediated,
including remediation which such law or government agency requires in order for the property to be
put to any lawful purpose;
h. any material whose presence would require remediation pursuant to the
guidelines set forth in the State of California Leaking Underground Fuel Tank Field Manual,whether
or not the presence of such material resulted from a leaking underground fuel tank;
i. pesticides regulated under the Federal Insecticide,Fungicide and Rodenticide
Act, 7 U.S.C. §§ 136 et seq.;
j. asbestos, PCBs, and other substances regulated under the Toxic Substances
Control Act, 15 U.S.C. §§ 2601 et seq.;
k. any radioactive material including,without limitation,any"source material,"
"special nuclear material," "by-product material," "low-level wastes," "high-level radioactive
waste," "spent nuclear fuel" or "transuranic waste," and any other radioactive materials or
radioactive wastes,however produced,regulated under the Atomic Energy Act,42 U.S.C: §§2011 et
seq., the Nuclear Waste Policy Act, 42 U.S.C. §§ 10101 et seq., or pursuant to the California
Radiation Control Law, California Health and Safety Code §§ 114960 et seq.;
1. hazardous substances regulated under the Occupational Safety and Health Act,
29 U.S.C. §§ 651 et seq., or the California Occupational Safety and Health Act, California Labor
Code §§ 6300 et seq.; and/or
in. materials,substances and wastes regulated under the Clean Air Act,42 U.S.C.
§§ 7401 et seq.or pursuant to The California Clean Air Act, §§ 3900 et seq.of the California Health
and Safety Code.
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Section 217 Rights of Obligees
The provisions of this Agreement do not limit the right of any mortgagee or other obligee to
foreclose or otherwise enforce any mortgage, deed of trust or other encumbrance upon the Site and
Project, or the right of any obligee to pursue any remedies for the enforcement of any pledge or lien
upon the Site and Project,provided,however,the foregoing shall not be deemed to vary, waive, or
otherwise affect the order of priority of any documents recorded in connection with this Agreement.
PART 3. USE OF THE SITE
Section 301 Uses
The Participant covenants and agrees for itself,its successors,its assigns and every successor
in interest to the Site or any part thereof, that during the period referred to in Section 305, the
Participant, such successors and such assignees shall devote the Participant's Interest in the Site to
the uses specified in the Scope of Development(Attachment No. 3)and the Agreement Containing
Covenants Affecting Real Property(Attachment No. 4).
Section 302 Maintenance of Site and Pipeline Area; Payment of Taxes and Assessments
a. The Participant covenants and agrees for itself,its successors and assigns,and
every successor in interest to the Site or any part thereof that it shall maintain the Site and, to the
extent required pursuant to the franchise agreement referred to below,the area of the Pipeline route,
or cause the Site and, to the extent required pursuant to the franchise agreement referred to below,
such Pipeline area to be maintained, in accord with the following criteria and conditions:
1. The Site and the Project shall be operated and maintained in
conformity with all applicable laws,rules,regulations and ordinances,
including without limitation, all applicable federal and state labor
standards.
2. The Site and all improvements thereon shall be maintained and kept
free from any accumulation of debris or waste materials.
3. All landscaping on the Site shall be maintained in a healthy condition.
4. The Pipeline shall be maintained as specified in the franchise
agreement to be approved by the City for use of City rights-of-way,
and any other franchise agreement or other entitlement approved by
any governmental entity with jurisdiction thereof.
5. The Participant shall help assure that construction of the Project,
including but not limited to the Pipeline,has no impact on the quality
of life in the City by paying the City, within five (5) days after the
closing of the Participant's construction financing for the Project,the
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sum of One Million Nine Hundred Thousand Dollars ($1,900,000),
which may be used by the City in its sole discretion for improvements
adjacent to the Site or along the route of the Pipeline.
6. The Participant shall pay to the City the sum of Two Million Dollars
($2,000,000)which may be used by the City in its sole discretion for
such improvements as the City Council determines will improve the
quality of life in the City of Huntington Beach. These funds shall be
paid prior to Completion.
b. As a material part of the consideration for this Agreement, the Participant
covenants and agrees for itself,its successors and assigns,and every successor in interest to the Site
or any part thereof,that for each year of the term of this Agreement that real property taxes are levied
on the Site or any portion thereof.
l. the Participant shall pay when due all real estate or possessory interest
taxes and assessments assessed and levied on the Site or any portion
thereof or any improvements thereon or any interest therein,and shall
waive and refrain from making any appeal,challenge or contest of the
validity of any tax assessment, encumbrance or lien on the Site, in
part or in full, whether by property tax assessment appeal or
otherwise; and
2. if the real estate or possessory interest taxes on the Participant's
Interest in the Site in any fiscal year(July 1 through June 30)after the
Certificate of Occupancy has been issued are less than One Million
Eight Hundred Sixty Five Thousand Dollars ($1,865,000), then on
July 1 of the next fiscal year,the Participant shall pay to the City the
difference between(i)the total real estate or possessory interest taxes
paid by the Participant in such fiscal year and(ii) One Million Eight
Hundred Sixty Five Thousand Dollars ($1,865,000).
C. In the event that by reason of any property tax exemption or otherwise the Site
is not carried on the County Assessment Roll and/or real property taxes are not levied and collected
on the Site for any reason,the Participant covenants for itself,its successors and assigns,and every
successor in interest to the Site or any part thereof or any interest therein that the Participant shall pay
to the Agency an amount equal to the Site Tax Increment Revenue(as hereafter defined)payable to
the Agency for the fiscal year immediately preceding the cessation of the levy or collection of taxes
on the Site (the"Base Year Revenue Amount")multiplied by the number of years remaining in the
term of this Agreement. At the option of the Participant,such payment shall be payable either(i)by
a lump sum which shall be due within thirty(30) days after the occurrence of the event which has.
caused or will cause the Site not to be carried on the County Assessment Roll and/or.real property
taxes not to be levied and collected on the Site, or(ii) by annual payments made on July 1 of each
year, in which case the first such payment shall be made on the July 1 after the occurrence of such
event and shall be in the amount of the Base Year Revenue Amount, and each subsequent annual
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payment shall be increased by the permitted statutory rate(presently two percent(2%)per year). The
"Site Tax Increment Revenues" from the Site shall include that portion of the ad valorem property
tax increment revenues attributable to the Site and payable to the Agency pursuant to Section
33670(b) of the California Health and Safety Code (as said statute may be amended from time to
time), including without limitation the twenty percent (20%) of said revenues that the Agency is
required to set aside for affordable housing purposes pursuant to California Health and Safety Code
Section 33334.2. In the event that the payment required by this subsection 302 c. is due at a time .
when the Agency is no longer legally entitled to receive Site Tax Increment Revenues from the Site,
the Base Year Revenue Amount shall be deemed to be the amount of Site Tax Increment Revenues
which the Agency was entitled to receive in the last full fiscal year preceding termination of its right
to receive such Site Tax Increment Revenues. Notwithstanding the foregoing, in determining the
Site Tax Increment Revenues for purposes of this subsection 302 c., the ad valorem property taxes
attributable to the Site shall be calculated at the greater of(i)the actual amount of such taxes prior to
the obtaining of the property tax exemption or removal of the Site from the County Assessment Roll
or (ii) the ad valorem property taxes due at the then-applicable rate for property with an assessed
valuation of One Hundred Eighty Six Million Five Hundred Thousand Dollars($186,500,000). This
subsection 302 c. shall apply regardless of whether a public entity acquires an interest in or title to
the Site and/or the Project.
Section 303 Obligation to Refrain from Discrimination
The Participant covenants and agrees for itself,its successors and assigns and every successor
in interest to the Participant's Interest in the Site or any part thereof.that there shall be no
discrimination against or segregation of any person, or group of persons,on account of race,color,
creed, religion, sex, marital status, national origin or ancestry in the sale, lease, sublease, transfer,
use,occupancy,tenure or enjoyment of the Participant's Interest in the Site nor shall the Participant
itself or any person claiming under or through it establish or permit any such practice or practices of
discrimination or segregation with reference to the selection,location,number,use or occupancy of
tenants, lessees, subtenants, sublessees, or vendees of the Site.
Section 304 Form of Nondiscrimination and Nonsegregation Clauses
The Participant shall refrain from restricting the rental, sale, or lease of the Site on the basis
of race, color, creed, religion, sex, marital status, ancestry or national origin of any person. All
deeds, leases or contracts with respect to the rental, sale or lease of the Participant's Interest in the .
Site shall contain or be subject to substantially the following nondiscrimination or nonsegregation
clauses:
a. In deeds: "The grantee herein covenants by and for itself,its successors and
assigns,and all persons claiming under or through them,that there shall be no discrimination against
or segregation of, any person or group of persons on account of race, color, creed, religion, sex,
marital status,national origin or ancestry in the sale,lease,sublease,transfer,use,occupancy,tenure
or enjoyment of the land herein conveyed,nor shall the grantee itself or any person claiming under or
through it, establish or permit any such practice or practices of discrimination or segregation with
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reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants,
sublessees or vendees in the land herein conveyed. The foregoing covenants shall run with the land."
b. In leases: "The lessee herein covenants by and for itself, its successors and
assigns, and all persons claiming under or through them, and this lease is made and accepted upon
and subject to the following conditions: That there shall be no discrimination against or segregation
of any person or group of persons on account of race, color, creed, religion, sex, marital status,
national origin or ancestry in the leasing,subleasing,transferring,use or enj oyment of the land herein
leased nor shall the lease itself, or any person claiming under or through it, establish or permit any
such practice or practices of discrimination or segregation with reference to the selection,location,
number, use or occupancy of tenants, lessees, subtenants or vendees in the land herein leased."
C. In contracts: "There shall be no discrimination against or segregation of,any
person, or group of persons on account of race, color, creed, religion, sex, marital status, national
origin or ancestry in the sale, lease, sublease, transfer, use, occupancy,tenure or enjoyment of the
land,nor shall the transferee itself or any person claiming under or through it,establish or permit any
such practice or practices of discrimination or segregation with reference to the selection,location,
number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the land."
Section 305 Effect and Duration of Covenants
The covenants established in this Agreement shall,without regard to technical classification
and designation, be binding for the benefit and in favor of the Agency and the City and their
successors and assigns. Such covenants as are to survive Completion shall be as contained in the
Agreement Containing Covenants Affecting Real Property(Attachment No.4)and shall remain in
effect for the periods specified therein.
Section 306 Agreement Containing Covenants Affecting Real Property
a. Concurrent with the execution of this Agreement, the Participant and the
Agency shall enter into and cause the recordation of an Agreement Containing Covenants Affecting
Real Property substantially in the form attached hereto and incorporated herein as Attachment No.4.
Such Agreement Containing Covenants Affecting Real Property shall establish the covenants,
conditions and restrictions pertaining to the Site, as set forth in Section 300 to 305 of this
Agreement, for the period of time set forth in the Agreement Containing Covenants Affecting Real
Property, and shall run in favor of the City as well as the Agency.
b. The Agreement Containing Covenants Affecting Real Property shall be
recorded against both the Participant's Interest in the Site and the Site Owner's fee interest in the Site
(should the Participant not be the fee owner of the Site at the time recordation is required pursuant to
subsection a.,above)and shall not be subordinated to any liens and encumbrances applicable to the
Site except those applicable to the Site Owner's fee interest which have been recorded prior to the
Effective Date of this Agreement. The Site Owner has consented to the recordation of the
Agreement Containing Covenants Affecting Real Property,as set forth at the end of this Agreement.
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Section 307 Relationship of the Agency and the Participant
Nothing contained in this Agreement or in any other document or instrument made in
connection with this Agreement shall be deemed or construed to create a partnership, tenancy in
common,joint tenancy,joint venture or co-ownership by or between the Agency and the Participant.
The Agency shall not be in any way responsible or liable for the debts,losses,obligations or duties
of the Participant with respect to the Site or otherwise.
Section 308 Representations and Warranties
a. As an inducement to the Agency to enter into this Agreement,the Participant
hereby represents and warrants to the Agency, which representations and warranties are true and
correct as of the date of this Agreement:
1. The Participant has the legal power, right and authority to enter into
this Agreement and the instruments referenced herein,and to satisfy all obligations of the Participant
in this Agreement or in any instrument or document referred to herein(referred to collectively as the
"Participant's Obligations");
2. This Agreement and all documents required hereby to be executed by
the Participant are, and shall be, valid, legally binding obligations of and enforceable against the
Participant in accordance with their terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium laws or similar laws or equitable principles affecting or limiting the
rights of contracting parties generally;
3. There is no provision of any indenture, instrument, or agreement,
written or oral, to which the Participant is a party or which governs the actions of the Participant or
which is otherwise binding upon the Participant or the Participant's property,nor is there any statute,
rule or regulation, or any judgment, decree, or order of any court or the Agency binding on the
Participant or the Participant's property which would be contravened by the execution, delivery or
performance of any of the Participant's Obligations;
4. There is no action, suit, or proceeding at law or in equity or by or
before any governmental instrumentality or other agency now pending, or,to the knowledge of the
Participant, threatened against or affecting the Participant, or any properties or rights of the
Participant, which, if adversely determined, would materially impair the right of the Participant to
execute or perforni any of the Participant's Obligations, or would materially adversely affect the
financial condition of the Participant;
5. Neither the execution and delivery of this Agreement and documents
referenced herein,nor the incurrence of the Participant's Obligations,nor the consummation of the
transactions herein contemplated, nor compliance with the terms of this Agreement and the
documents referenced herein conflict with or result in the material breach of any terms,conditions or
provisions of,or constitute a default under,any bond,note or other evidence of indebtedness or any
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contract,indenture,mortgage, deed of trust,loan,partnership agreement,lease or other agreements
or instruments to which the Participant is a party;
6. To the best of the Participant's knowledge, there are no pending,
threatened or contemplated actions, suits, arbitrations, claims or proceedings, at law-or in equity,
affecting the Participant's Interest in the Site or in which the Participant is, or to the best of the
Participant's knowledge will be,a party by reason of the Participant's Obligations,including,but not
limited to,judicial,municipal or administrative proceedings in eminent domain,unlawful detainer or
tenant evictions, collections, alleged building code, health and safety or zoning violations,
employment discrimination or unfair labor practices,or workers' compensation,personal injuries or .
property damages;
7. No attachments,execution proceedings,assignments for the benefit of
creditors, insolvency, bankruptcy, reorganization or other proceedings are pending or threatened
against the Participant, nor are any of such proceedings contemplated by the Participant;
8. All reports, documents, instruments, information and forms of.
evidence delivered to the Agency concerning or required by this Agreement were accurate and
correct at the time of delivery in all material respects;
9. No representation, warranty or statement of the Participant in this
Agreement contains or will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements or facts contained therein not misleading.
b. As an inducement to the Participant to enter into this Agreement and develop
the Site as provided herein, the Agency hereby represents and warrants to the Participant,which
representations and warranties are true and correct as of the date of this Agreement:
l. The Agency has the legal power,right and authority to enter into this
Agreement and the instruments referenced herein,and to consummate the transactions contemplated
hereby;
2. This Agreement and all documents required hereby to be executed by
the Agency are,and shall be,valid,legally binding obligations of and enforceable against the Agency,
in accordance with their terms, subject only to applicable bankruptcy, insolvency, reorganization,
moratorium laws or similar laws or equitable principles affecting or limiting the rights of contracting
parties generally;
3. No attachments,execution proceedings,assignments for the benefit of
creditors, insolvency, bankruptcy, reorganization or other proceedings are pending or threatened
against the Agency, nor are any of such proceedings contemplated by the Agency;
c. The truth and accuracy of each party's representations and warranties made
herein shall constitute a condition for the benefit of the other party to the performance of such other.
party's obligations hereunder.
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PART 4. DEFAULTS AND REMEDIES
Section 401 Defaults - General
Failure or delay by either party to perform any term or provision of this Agreement
constitutes a default under this Agreement. The party who fails or delays must immediately
commence to cure, correct or remedy such failure or delay and shall complete such cure,correction
or remedy with reasonable diligence,and during any period of curing shall not be in default,so long
as it endeavors to complete such cure,correction or remedy with reasonable diligence,and provided
such cure,correction or remedy is completed within the applicable time period set forth herein after
receipt of written notice (or such additional time as may be deemed by the complaining party in its
reasonable discretion to be reasonably necessary to correct the default).
Section 402 Defaults -Notice
a. The injured party shall give written notice of default to the party in default,
specifying the default complained of by the injured party. Failure or delay in giving such written
notice shall not constitute a waiver of any default,nor shall it change the time of default. Except as
otherwise expressly provided in this Agreement, any failures or delays by either party in asserting
any of its rights and remedies as to any default shall not operate as awaiver of any default or of any
such rights or remedies. Delays by either party in asserting any of its rights and remedies shall not
deprive either party of its right to institute and maintain any actions or proceedings which it may
deem necessary to protect, assert or enforce any such rights or remedies.
b. If a monetary event of default occurs, prior to exercising any remedies
hereunder,the injured party shall give the party in default written notice of such default. The party in
default shall have a period of thirty(30)calendar days after such written notice is received or deemed
received within which to cure the default prior to exercise of remedies by the injured party.
C. If a non-monetary event of default occurs, prior to exercising any remedies
hereunder, the injured party shall give the party in default written notice of such default. If the
default is reasonably capable of being cured within thirty(30)calendar days after such written notice
is received or deemed received, the party in default shall have such period to effect a cure prior to
exercise of remedies by the injured party. If the default is such that it is not reasonably capable of
being cured within thirty(30)days,and the party in default(i)initiates corrective action within said
period, and(ii) diligently, continually, and in good faith works to effect a cure as soon as possible,
then the party in default shall have such additional time as is reasonably necessary to cure the default
prior to exercise of any remedies by the injured party, not to exceed ninety(90)days after the first
written notice of default is given.
d. Any notice of default that is transmitted by electronic facsimile transmission
followed by delivery of a"hard"copy,shall be deemed delivered upon its transmission;any notice of
default that is personally delivered(including by means of professional messenger service, courier
service such as United Parcel Service or Federal Express,or by U.S.Postal Service),shall be deemed
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received on the documented date of receipt; and any notice of default that is sent by registered or
certified mail,postage prepaid,return receipt required shall be deemed received on the date of receipt
thereof.
PART 5. GENERAL PROVISIONS
Section 501 Notices, Demands and Communications between the Parties
Formal notices,demands and communications between the Agency and the Participant shall
be deemed sufficiently given if dispatched by registered or certified mail, postage prepaid,return
receipt requested,to the respective addresses of the Agency and the Participant set forth in Sections
105 and 106 hereof. Such written notices, demands and communications may be sent in the same
manner to such other addresses as either party may from time to time designate by mail.
Section 502 Conflict of Interest
a. No member, official, or employee of the Agency shall have any personal
interest, direct or indirect, in this Agreement, nor shall any such member, official, or employee
participate in any decision relating to the Agreement which affects his personal interests or the
interests of any corporation, partnership, or association in which he is, directly or indirectly,
interested.
b. The Participant warrants that it has not paid or given,and will not pay or give,
any third person any money or other consideration for obtaining this Agreement.
Section 503 Nonliability of Officials and Employees
No member,official or employee of the Agency shall be personally liable to the Participant,
or any successor in interest in the event of any default or breach by the Agency or for any amount
which may become due to the Participant or successor or on any obligation under the terms of this
Agreement.
No member, official or employee of the Participant shall be personally liable to the Agency,
or any successor in interest in the event of any default or breach by the Participant or for any amount
which may become due to the Agency or successor or on any obligation under the terms of this
Agreement.
Section 504 Approvals
a. Except as otherwise expressly provided in this Agreement,approvals required
of the Agency or the Participant in this Agreement, including the attachments hereto, shall not be
unreasonably withheld, conditioned or delayed. All approvals shall be in writing. Except as
otherwise expressly provided in this Agreement,failure by either party to approve a matter within the
time provided for approval of the matter shall not be deemed a disapproval, and failure by either
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party to disapprove a matter within the time provided for approval of the matter shall not be deemed
an approval.
b. Except as otherwise expressly provided in this Agreement,approvals required
of the Agency shall be deemed granted by the written approval of the Executive Director or his/her
designee. The Agency agrees to provide notice to the Participant of the name of the Executive
Director's designee on a timely basis,and to provide updates from time to time. Notwithstanding the
foregoing, the Executive Director or designee may, in his or her sole discretion, refer to the
governing body of the Agency any item requiring the Agency's approval; otherwise, "Agency
approval" shall mean and refer to approval by the Executive Director or designee.
Section 505 Time of Essence
Time is of the essence with respect to the performance of each of the covenants and
agreements contained in this Agreement.
Section 506 No Partnership
Nothing contained in this Agreement shall be deemed or construed to create a partnership,
joint venture,or any other similar relationship between the parties hereto or cause the Agency to be
responsible in any way for the debts or obligations of the Participant or any other Person.
Section 507 Compliance with Law
The Participant agrees to comply with all the requirements now in force, or which may
hereafter be in force, of all municipal, county, state and federal authorities, pertaining to the
development of the Site and the Project. The judgment of any court of competent jurisdiction,or the
admission of the Participant or any lessee or permittee in any action or proceeding against them, or
any of them, whether the Agency be a party thereto or not, that the Participant, lessee or permittee
has violated any such ordinance or statute in the development and use of the Site shall be conclusive
of that fact as between the Agency and the Participant.
Section 508 No Third Party Beneficiaries
The parties to this Agreement acknowledge and agree that the provisions of this Agreement
are for the sole benefit of the Agency and the Participant, and not for the benefit, directly or
indirectly, of any other person or entity, provided, however, that the City shall be deemed a third
party beneficiary of each term or condition except as otherwise expressly provided herein.
Section 509 Authority to Sign
The Participant hereby represents that the persons executing this Agreement on behalf of the
Participant have full authority to do so and to bind the Participant to perform pursuant to the terms
and conditions of this Agreement. Concurrently with the Participant's submission of this Agreement
to the Agency for execution, the Participant will submit to the Agency a copy of documents
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evidencing the due formation and nature of the Participant and the signatory's authority to sign on
behalf of the Participant.
Section 510 Incorporation by Reference
Each of the attachments and exhibits attached hereto is incorporated herein by this reference.
Section 511 Counterparts
This Agreement may be executed by each party on a separate signature page, and when the
executed signature pages are combined, shall constitute one single instrument.
Section 512 No Merger
There shall be no merger of this Agreement or the Agreement Containing Covenants
Affecting Real Property.
Section 513 Enforced Delay; Extension of Times of Performance
In addition to specific provisions of this Agreement,performance by either party hereunder
shall not be deemed to be in default where delays or defaults are due to causes beyond the control
and without the fault of the party claiming an extension of time to perform, including war,
insurrection, strikes, lock-outs, riots, floods, earthquakes, fires, casualties, acts of God, acts of the
public enemy, epidemics, quarantine restrictions, freight embargoes, lack of transportation,
governmental restrictions or priority,unusually severe weather,inability to secure necessary labor,
materials or tools,delays of any contractor,subcontractor or suppliers,acts of the other party,.or acts
or failure to act of City or any other public or governmental agency or entity(except that an act or
failure to act of Agency shall not excuse performance by Agency). An extension of time for any
such cause shall be for the period of the enforced delay and shall commence to run from the time of
the commencement of the cause, if notice by the party claiming such extension is sent to the other
party within thirty (30) days of knowledge of the commencement of the cause. Times of
performance under this Agreement may also be extended in writing by the mutual agreement of the
Participant and the Agency.
PART 6. ENTIRE AGREEMENT, WAIVERS AND AMENDMENTS
This Agreement is executed in five(5)duplicate originals,each of which is deemed to be an
original. This Agreement includes twenty six(26)pages and four(4)attachments,which constitute
the entire understanding and agreement of the parties.
This Agreement integrates.all of the terms and conditions mentioned herein or incidental
hereto,and supersedes all negotiations or previous agreements between the parties with respect to all
or any part of the subject matter hereof.
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All waivers of the provisions of this Agreement must be in writing and signed by the
appropriate authorities of the Agency or the Participant, and all amendments hereto must be in
writing and signed by the appropriate authorities of the Agency and the Participant.
PART 7. TIME FOR ACCEPTANCE OF AGREEMENT BY THE AGENCY; TERM
Section 701 Time for Acceptance of Agreement
This Agreement, when executed by the Participant and delivered to the Agency, must be
authorized,executed and delivered by the Agency within sixty(60)days after date of approval of this
Agreement by the Site Owner or this Agreement may be terminated by the Participant upon written
notice to the Agency. The effective date of this Agreement(the`Effective Date") shall be the date
when this Agreement has been executed by the Agency.
Section 702 Term
Except as set forth below,this Agreement shall be effective for a period of thirty(30)years
from the issuance of the Certificate of Occupancy.
Notwithstanding the foregoing, this Agreement and the Agreement Containing Covenants
Affecting Real Property described in Section 306 shall be deemed terminated and of no further force
or effect upon the happening of either of the following:
(a) if prior to the commencement of any construction on the Site,either City Entitlement
terminates or expires for any reason including but not limited to a determination by
any court or governmental entity with jurisdiction thereof that such Entitlement is
void or of no force or effect, in which event thereafter neither the Agency nor the
Participant shall have any rights against, or obligations to, the other hereunder; or
(b) if prior to the issuance of the Certificate of Occupancy, the Participant provides
written notice to the Agency that it is abandoning the development of the Project and
operation of the Facility;provided,however,that termination of this Agreement and
the Agreement Containing Covenants Affecting Real Property under this paragraph
(b) shall not.be deemed to affect any obligation of the Participant to complete the
demolition, removal, and restoration work required by Section 203 of this
Agreement nor to maintain the bond required therein until such work is completed.
IN WITNESS WHEREOF,the Agency and the Participant have signed this Agreement as of
the dates set opposite their signatures.
[Signatures on following page]
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REDEVELOPMENT AGENCY OF THE CITY OF
HUNTINGTON BEACH
Dated:
Name:
Its:
APPROVED AS TO FORM:
Agency General Counsel
APPROVED AS TO FORM-
Special City/Agency Cou sel
Kane, Ballmer& Berkman
POSEIDON RESOURCES CORPORATION,
a Delaware corporation
Dated: By:
Its:
Dated: By:
Its:
CONSENT TO AGREEMENT AND RECORDATION OF DOCUMENTS
AES Huntington Beach Development,LLC("Site Owner")as owner of the Site which is the
subject of this Agreement hereby consents to this Agreement and to the recordation of the Agreement
Containing Covenants Affecting Real Property(Attachment No. 4) against its fee ownership in the
Site. Site Owner further agrees to execute such other and further documents as the Agency
determines in its reasonable discretion are necessary to effectuate the terms and conditions of this
Agreement.
Dated: By:
Its:
Dated: By:
Its:
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ATTACHMENT NO. I
SITE MAP
[TO BE ADDED]
ATTACHMENT NO. 2
LEGAL DESCRIPTION
[TO BE ADDED]
ATTACHMENT NO. 3
SCOPE OF DEVELOPMENT
The Project shall consist of a seawater desalination plant and water transmission line as
approved by the City of Huntington Beach in Conditional Use Permit No. 02-04 and Coastal
Development Permit No. 02-05.
ATTACHMENT NO. 4
AGREEMENT CONTAINING COVENANTS AFFECTING REAL PROPERTY
[behind this page]
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ATTACHMENT #2
Financial Benefits to the City of Huntington Beach
Poseidon Project
One Time Annual Ongoing Cumulative
Description of Benefit Revenue/Cost Revenue Total Agency Revenue Revenue/Benefit 30 Years
Avoidance
Water Enterprise Funds
Water Purchase $100,000 $3,000,000
Booster Station $2,650,000 $56,000 $4,330,000
OC 44 Interconnect JPA $1,000,000 $1,000,000
Infrastructure Funds
Right of Way Improvements $1,900,000 $1,900,000
Agency Funds
Property Tax (In-Lieu) $1,119,000 $33,570,000 $33,570,000
Housing Set Aside $373,000 $11,190,000 $11,190,000
General Fund
Pipeline Franchise Fee $100,000 $3,000,000
Utility Tax (100% application) $840,000 $25,200,000
City Improvement Funds $2,000,000 $2,000,000
Pass through from Agency $68,000 $2,040,000
Total $7,550,000 $2,656,000 $44,760,000 $8712300000
1/6/2006 1
FinancW Benefits to the City of Huntington Beach
Poseidon Project
One Time Annual Ongoing Cumulative
Description of Benefit Revenue/Cost Revenue Total Agency Revenue Revenue/Benefit 30 Years
Avoidance
Water Enterprise Funds
Water Purchase $100,000 $3,000,000
Booster Station $2,650,000 $56,000 $4,330,000
OC 44 Interconnect JPA $1,000,000 $1,000,000
Infrastructure Funds
Right of Way Improvements $1,900,000 $1,900,000
Agency Funds
Property Tax (In-Lieu) $1,119,000 $33,570,000 $33,570,000
Housing Set Aside $373,000 $11,190,000 $11,190,000
General Fund
Pipeline Franchise Fee $100,000 $3,000,000
Utility Tax(Poseidon Definition) $50,000 $1,500,000
City Improvement Funds $2,000,000 $2,000,000
Pass through from Agency $68,000 $2,040,000
Total $7,550,000 $1,866,000 $44,760,000 $63,530,000
1/6/2006 1
RCA ROUTING SHEET
INITIATING DEPARTMENT: Administration
SUBJECT: Owner Participation Agreement by and between the
Redevelopment Agency of the City of Huntington Beach
and Poseidon Resources Corporation
COUNCIL MEETING DATE: January 9, 2006
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
Attached ❑
Contract/Agreement (w/exhibits if applicable) Not Applicable
(Signed in full by the City Attorney)
Attached ❑
Subleases, Third Party Agreements, etc. Not Applicable
(Approved as to form by City Attorney)
Certificates of Insurance (Approved b the City Attorne Attached ❑
( pP Y Y Y) Not Applicable
Attached ❑
Fiscal Impact Statement (Unbudget, over $5,000) Not Applicable
Attached ❑
Bonds (If applicable) Not Applicable
Attached ❑
Staff Report (If applicable) Not Applicable
Commission, Board or Committee Re ort If applicable Attached ❑
p ( pp ) Not Applicable
s/Conditions for Approval and/or Denial Attached ElFindin
g pp Not Applicable
EXPLANATION FOR MISSING ATTACHMENTS
REVIEWED RETURNED FORWARDED
Administrative Staff
Assistant City Administrator Initial
City Administrator (Initial) ( ) ( )
City Clerk
EXPLANATION FOR RETURN OF ITEM:
RCA Author: Emery
PROOF OF PUBLICATION
STATE OF CALIFORNIA)
) SS.
Notice of Public Hearing on
COUNTY OF ORANGE ) Owner Participation Agree-
ment(OpA)with
Poseidon Resources
I am a Citizen of the United States and a Corporation and the
Redevelopment Agency of
resident of the County aforesaid; I am the(ityof Huntington Beach
Notice is hereby givenl
over the age of eighteen years, and not a that a public hearing will
be held by the,. City —
party to or interested in the below entitled Council/Redevelopment
ofl
matter. I am a principal clerk of the Agency of the city Huntington Beach,in the
Council Chambers of the
HUNTINGTON BEACH INDEPENDENT, Civic gton
Beach,elocat duat�n2000
a newspaper of general circulation, ofain 6:00rPM, o the
s000nl
printed and published in the City of M possible thereafter on
9
• onday, January ,
appr i
Huntington Beach, County of Orange, for the purpose of)
approving an Owner
State of California, and that attached (OPA)ipatwn Agreement
(O regarding devel-
opment of a seawawater
Notice is a true and complete copy as desalination plant, with
Poseidon Resources
Corporation.
was printed and published in the Draft copies of the'
Huntington Beach issue of said oPA will be 'madel
available for public!
newspaper to wit the Issue(s) of. 3, 200 ,beginningat Office
ry
of
3, 20A6, at the Office All,
the Agency Clerk. AII�
interested persons are
invited to attend the
hearing on the Owner.
Participation Agreement
(OPA) with Poseidon
Resources Corporation
to express their opinions)
DECEMBER 29,2005 for, or against, with
written or oral com-I
ments. Written commu-i
nications to the Rede-
velopment Agency also
may be mailed to the
Agency Clerk,2000 Main
Street, Huntington,
Beach,CA 92648, Phone
714 536-5227.
declare under penalty of perjury, that The City Huntington.
> > •,Beach/ Red Huntington,
the foregoing is true and correct. Agency of the City of,
Huntington - Beach en-
deavors to accommo-I
date persons of hand'-
capped status in the
Executed on DECEMBER 29,2005 admission or access ,
or treatment or em-m-I
at Costa Mesa, California. Agency nt in, City
Agency programs orrl
activities. The City 'of
Huntington Beach is an
equal opportunity em-
ployer. I .
Redevelopment Agency
of the City of
Huntington Beach
Signature By:Joan Flynn,Agency
! Clerk
2000 Main Street
Huntington Beach,CA
92648
Telephone:714536-5227 ,
Published Huntington
Beach Independent-De-
cember 29,2005 125-734
PROOF OF PUBLICATION
STATE OF CALIFORNIA)
) ss.
COUNTY OF ORANGE ) Notice of Public Hearing on
[-Owner Participation Agree-
i ment(Op4witb
I am a Citizen of the United States and a Poseicloriltd6lrces
resident of the Count aforesaid; I am levelo menung the
)/ fiedevelopmel>t Agency of.
over the age of eighteen years, and not a the City of.HuntingtonReach
Notice is hereby given _
party to or interested in the below entitled that,a public hearing City
be held by the City
Council/Redevelopment
matter. I am a principal clerk of the Agency of the City of
Hunngton Beach,in the
HUNTINGTON BEACH INDEPENDENT, Council Chambers of the
Civic Center, Huntington
a newspaper of general circulation, Beach, located at 20001
printed and published in the City of Main Street, at the hour 2
of 6;00 PM, or as soon.'
as possible thereafter on
Huntin ton Beach Count of Oran a Monday, January oil
(�
y , y g , 2006,for the purpose ofj
State of California, and that attached approving an Owner!
', Participation Ag reement!
(OFANotice is a true and complete copy as opme regarding Bevel-I
pment of a seawater�
was printed and published in the desalination plant with,
Poseidon Resources
Corporation. l
Huntington Beach issue of said Draft copies of the!
OPA will be made)
newspaper to wit the Issue(s) of. available for,January
review beginning January 1
3, 2006, at the Office of
the Agency Clerk:- Ali'
interested persons are
invited to ,attend the
hearing oq, the Owner
Participation Agreement
(OPA) with' Poseidon
DECEMBER 29,2005 Resources Corporation
to express their opinions
for, or against, with'
written or oral com-
ments. Written commu-
nications to the Rede-,
velopment Agency also
may be mailed to the
Agency Clerk,2000 Main
Street, Huntington
declare, under penalty of perjury, that Bea 714 536-5ch, 92648, Phone
227:
the foregoing is true and correct. The R Huntington
Beach// Redevelopment
j Agency of the City' of
Huntington Beach en-
deavo rs to accommo-
Executed on date persons of ha he
DECEPIBER 29�2UU5 t
' capped status in the
f admission or access to,
at Costa Mesa California. or treatment or em-
ployment in, City/
Agency programs or
activities. The City of
j Huntington Beach is an
equal opportunity em-
ployer.
Redevelopment Agency
Signature ` .of theCityeof
a
Huntington•Beach
By:Joan Flynn,Agency i
Clerk
2000 Main Street' -
Huntington Beach,CA
92648
Telephone:714 536-5227
.Published Huntington
Beach Independent
De-cember 29,2005 125-734
CITY OF HUNTINGTON BEACH
OLD
TO: Honorable Mayor and Members of the City Council
VIA Penelope Culbreth-Graft, DPA, City Administr r
FROM: Paul Emery, Deputy City Administrator
DATE: January 9, 2006
SUBJECT: Late Communication Item D-2,January 9, 2006, PowerPoint and
Amendment to Attachment 2
Attachment 1 is a PowerPoint provided as a late communication for item D-2 "Owner
Participation Agreement (OPA)Poseidon Resources Corporation and City of Huntington Beach
Redevelopment Agency."
In addition, Attachment 2 will amend pages D-2.40 and D-2.41.
PE/dwb
I-A
J
L x
- / c t�:
ATTACHMENT # 1
Owner Participation Agreement (OPT)
Poseidon Resources Corporation
and
City of Huntington Beach
Redevelopment Agency
City of Huntington Beach
January 9, 2006
Owner Participation Agreement
Property Tax Benefits
City Improvement Funds
Right of Way Improvement Funds
Utility Users Tax
Recommended Action
Owner Participation Agreement
Tax Benefits
- Tax Increment estimated @ $ 1 , 119,000 annually
$33,570,000 over 30 years
- Housing Set-Aside estimated @ $3739000
annually - $11 , 190,000 over 30 years
- Benefit to the Agency accrues over 30 years
from issuance of Certificate of Occupancy
t .
Owner Participation Agreement
City Improvement Funds
- $2,000,000 payable at Certificate of Occupancy
- Utilized at the discretion of the City Council
Owner Participation Agreement
Right-of-Wav Improvement Funds
- $ 1 .9 million to be utilized at the city's discretion
along the pipeline route
- Included in CUP/CDP - Payable upon closing
of Poseidon's construction financing for the
project
Owner Participation Agreement
Utility Users Tax
- Not addressed in OPA
- Difference in definition
City's perspective $8403000
Poseidon's perspective $ 503000
- Resolution may be litigated
Owner Participation Agreement
Recommended Action
- OPA is the most effective tool available to
guarantee the revenues
- Continuance of OPA until Consent to
Agreement by the "site owner" AES
Huntington Beach Development, LLC
Financial Benefits to the
city of Huntington Beach
Description of Benefit One Time Annual Ongoing Total Agency Cumulative
Revenue/Cost Revenue Revenue Revenue/Benefit 30
Avoidance Years
Water Enterprise Funds
Water Purchase $100,000 $3,000,000
Booster Station $2,650,000 $56,000 $4,330,000
OC 44 Interconnect JPA $1,000,000 $1,000,000
Infrastructure Funds
Right of Way $1,900,000 $1,900,000
Improvements
Agency Funds
Property Tax (In-Lieu) $1,119,000 $33,570,000 $33,570,000
Housing Set Aside $373,000 $11,190,000 $11,190,000
General Fund
Pipeline Franchise Fee $100,000 $3,000,000
Utility Tax (100% $840,000 $25,200,000
application)
City Improvement Funds $2,000,000 $2,000,000
Pass through from Agency $68,000 $2,040,000
Total $7,5501000 $2,656,000 $44,760,000 $87,230,000
Financial Benefits to the
City of Huntington Beach
Description of Benefit One Time Annual Ongoing Total Agency Cumulative
Revenue/Cost Revenue Revenue Revenue/Benefit
Avoidance 30 Years
Water Enterprise Funds
Water Purchase $100,000 $3,000,000
Booster Station $2,650,000 $56,000 $4,330,000
OC 44 Interconnect JPA $1,000,000 $1,000,000
Infrastructure Funds
Right of Way Improvements $1,900,000 $1,900,000
Agency Funds
Property Tax (In-Lieu) $1,119,000 $33,570,000 $33,570,000
Housing Set Aside $373,000 $11,190,000 $11,190,000
General Fund
Pipeline Franchise Fee $100,000 $3,000,000
Utility Tax (Poseidon Definition) $50,000 $1,500,000
City Improvement Funds $2,000,000 $2,000,000
Pass through from Agency $68,000 $2,040,000
Total $7,550,000 $1,866,000 $44,760,000 $63,530,000
The End
ATTACHMENT #2
Financial Benefits to the City of Huntington Beach
Poseidon Project
One Time Annual Ongoing Cumulative
Description of Benefit Revenue/Cost Revenue Total Agency Revenue Revenue/Benefit 30 Years
Avoidance
Water Enterprise Funds
Water Purch� $100,000 $3,000,000
Booster Station $2,650,000 $56,000 $4,330,000
OC 44 Interconnect JPA $1,000,000 $1,000,000
Infrastructure Funds
Right of Way Improvements $1,900,000 $1,900,000
Agency Funds
Property Tax (In-Lieu) $1,119,000 $25,737,000 $25,300,000
Housing Set Aside $373,000 $8,579,000 $4,600,000
General Fund
Pipeline Franchise Fee $100,000 $3,000,000
Utility Tax (Poseidon Definition) $50,000 $1,500,000
City Improvement Funds $2,000,000 $2,000,000
Pass through from Agency $68,060, $2,040,000
Total $7,550,000 $1,866,000 $34,316,000 $48,670,000
12/23/2005 1
Financial Benefits to the City of Huntington Beach
Poseidon Project
One Time Annual Ongoing Cumulative
Description of Benefit Revenue/Cost Revenue Total Agency Revenue Revenue/Benefit Cumulative
30 Years
Avoidance
Water Ente rise Funds
Water Purchase $100,000 $3,000,000
Booster Station $2,650,000 $56,000 $4,330,000
OC 44 Interconnect JPA $1,000,000 $1,000,000
Infrastructure Funds
Right of Way Improvements $1,900.000 $1,900,000
Agency Funds
Property Tax (In-Lieu) $1,119,000 $25,737,000 $25,300,000
Housing Set Aside 373,000 $8,579,000 $4,600,000
General Fund
Pipeline Franchise Fee $100,000 $3,000,000
Utility Tax (100% application) $840,000 $25,200,000
City Improvement Funds $2,000,000 $2,000,000
Pass through from Agency $68,000 $2,040,000
Total $7,550,000 $2,656,000 $34,316,000 $72,370,000
12/23/2005 1
J
L
Council/Agency Meeting Held: lcF6
Deferred Continued to 1Z ZA I OS`
❑ Approved ❑ Conditionally Approved ❑ Denied C ler Sign re
Council Meeting Date: 10/17/2005 Department ID Number: ED 05-30
CITY OF HUNTINGTON BEACH
REQUEST FOR REDEVELOPMENT AGENCY ACTION
SUBMITTED TO: HONORABLE CHAIRMAN AND REDEVELOPMENT AGENCY
MEMBERS
SUBMITTED BY: PENELO E CUT -G��XE`CUTIVE DIRECTOR
PREPARED BY: PAUL EMERY, ACTING DEPUTY EXECUTIVE DIRECTO
SUBJECT: AUTHORIZATION TO ENTER INTO NEGOTIATIONS WITH
POSEIDON RESOURCES CORPORATION
Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachment(s)
Statement of Issue: Poseidon Resources Corporation (Poseidon) proposes to construct
and operate a seawater desalination plant at a site in the Southeast Coastal Redevelopment
Area. The Redevelopment Agency of the City of Huntington Beach would like to ensure
projected revenues are protected to the greatest extent possible.
Funding Source: Not applicable
Recommended Action: Motion to
Upon approval or continuance of Conditional Use Permit No. 02-04 and Coastal
Development Permit No. 02-05 to permit the Seawater Desalination Project authorize the
Executive Director and staff to enter into negotiations with Poseidon Resources Corporation
with the intent of preparing an Owner Participation Agreement (OPA) regarding development
of a seawater desalination plant.
Alternative Action(s):
Do not authorize negotiations with Poseidon and advise staff how to proceed.
to �.
ao a
lam€ w
i=u-m
C
LLJ
O C3 Z
LM
REQUEST FOR ACTION
MEETING DATE: 10/17/2005 DEPARTMENT ID NUMBER:ED 05-30
Analysis:
Poseidon Resources Corporation proposes to construct and operate a seawater desalination
plant at a site in Huntington Beach, located in the Southeast Coastal Redevelopment Project
Area. Improvements in redevelopment project areas result in an increased property values
within those areas. As such, tax increment generated by the increase in property value would
be revenue to the City Redevelopment Agency.
The Executive Director proposes that she and/or designated staff negotiate with Poseidon to
prepare an Owner Participation Agreement, which would be brought to the Agency for
approval and execution, to protect certain expected revenue projections. Three specific
revenue provisions to be negotiated include, but are not limited to:
In Lieu Property Tax
The Agency would propose an agreement that would commit the project developer
and any future property owner, public or private, to pay property taxes or an
equivalent property tax in-lieu fee to the Redevelopment Agency for the duration of
the Redevelopment Plan.
This tax or in-lieu fee, assuming the assessed valuation of this property increases by
the $186,500,000 construction cost estimate, would equate to 1% of valuation
($1,865,000). Of this $1,865,000, 20% would be allocated to the Housing Set Aside
fund and a portion of the balance would then be passed through to other local tax
entities. In a best-case scenario just over $1.1 million annually would go to the
Redevelopment Agency.
The City (as opposed to the Agency) will continue to receive the base year property
tax revenue based on existing formulas of this revenue source.
Utility Users Tax
The Agency stipulates that Poseidon and any successors use of electricity in
connection with operation of the project and site would be subject to terms and
payments to the City under the City's Utility Users Tax. The Utility Users Tax,
Section 3.36.060 of the Municipal Code, was adopted on 1970, when the only
known technology for "pumping" water was raising water from the groundwater basin
with electrical pumps. Poseidon is treating water, or manufacturing water, by
pushing water through reverse osmosis membranes, which is uniquely different from
transporting water by pumping. Resolution of this tax issue will need to be resolved
through the negotiation of the OPA or through litigation.
Poseidon has identified $16.8 million in electricity purchases for the plant. They
have further opined that 6% of that electricity is for "non-pumping purposes". Under
Poseidon's definition of pumping the City would receive approximately $50,000
annually in Utility Tax revenue from electricity purchases.
GAEmery\RCA-Poseidon Oct 17 2005.doc -2- 10/10/2005 3:22 PM
REQUEST FOR ACTION
MEETING DATE: 10/17/2005 DEPARTMENT ID NUMBER:ED 05-30
If it was determined that 100% of the electricity purchased is for the treating or
manufacture of water (not pumping) than the City would realize approximately
$840,000 annually in Utility Tax revenue from electricity purchases.
Additional clarification through the OPA will delineate the sale or use of water by
Poseidon and the appropriate application of the 5% tax for the sale of water to any
entity that is neither a municipal water department, public utility, county nor
municipal water district.
Water Quality Funding
The Agency would propose Poseidon agree to fund up to $200,000 (current
tentative offer) per year in Water Quality programs as decided by the City. The
funding could go towards wetlands restoration, bioremediation filtration basins, water
quality education and demonstration programs and urban runoff diversion expenses.
The City, at its discretion, would be allowed to accumulate funds year-to-year to
"bank" future expenditures toward a major project or projects.
Staff has determined that an OPA is the most effective vehicle to guarantee these
revenues should a sale of the project to a public entity occur. The OPA could be subject to
challenge should the successor-in-interest to the project be a public entity. However, the
City has a greater likelihood of success in defending terms of the OPA based on state law
and the assignment provisions of an OPA.
Given the sensitive nature of the negotiation process, the Agency Board is requested to
authorize the Executive Director, Deputy Executive Director, and other staff members to
confidentially negotiate terms and methodology to ensure the revenues for this project. As
with other similar negotiations, staff will provide updates and deal points to the Agency
Board.
Environmental Status: Not applicable.
Attach ment(s):
NumberCity Clerk's
Page . Description
1. Letter dated October 10, 2005 from Poseidon Resources Inc.
G:\Emery\RCA-Poseidon Oct 17 2005.doc -3- 10/10/2005 3:22 PM
ATTACHMENT # 1
P O S E D O N R E S O R C E S
Via Messenger
October 7, 2005
RECEIVED
Dr. Penny Culbreth-Graft
City Administrator ou 10 2005
City of Huntington Beach CITY OF HUNTINGTON BEACH
2000 Main Street ADMINISTRATION OFFICE
Huntington Beach, California 92648
Re: Letter of Intent Regarding Water Purchase Agreement and Owner's Participation
Agreement
Dear Dr.Culbreth-Graft:
The purpose of this letter (the "Letter of Intent") is to set forth the commitment of
Poseidon Resources Corporation and its subsidiaries ("Poseidon") to provide to the City of
Huntington Beach ("City") with the following in connection with the approval by the City of a
proposed Water Purchase Agreement and subsequent Owner Participation Agreement to be
negotiated and entered into with the Redevelopment Agency:
i) the City's right to purchase 3 million gallons per day (3,060 acre-feet/year) of
product water from the Huntington Beach seawater desalination facility to be
constructed by Poseidon following all regulatory and permit approvals , in
accordance with the terms and conditions set forth in this Letter of Intent and
as agreed by the parties in a Water Purchase Agreement,
an emergency water supply of up to 10 million gallons per day for up to
seven days, and
iii) a commitment by Poseidon to enter into an Owner Participation Agreement
(an "OPA") with the Redevelopment Agency to provide long term assurance
of property tax and other economic benefits, as well as other rights and
obligations to be negotiated by the parties.
1. Water Purchase Agreement. Upon direction and approval by the City Council,
the Citv a-rid Poseidon (collectively, the "Parties") intend to negotiate in good faith the defintive
terms and conditions of a "Water Purchase Agreement" as generally described in Exhibit A,
which is attached hereto and made a part hereof for all purposes (the "Term Sheet"). The
Parties intend to complete such negotiations and execute the Water Purchase Agreement by
January 31,2006.
2. Owner Participation Agreement. Poseidon and the Redevelopment Agency of
the City intend to commence good faith negotiation of an Owner Participation Agreement
Poseidon Resources Corporation
3760 Kilroy Airport Way,Suite 260,Long Beach,CA 90806,USA
562-490-2003 Fax:562-490-2403
Executive Office: 1055 Washington Boulevard,Stamford,CT 06901
October 7, 2005
Page 2
("OPA") on terms and conditions mutually agreed to by the Agency and Poseidon and intend
to complete such negotiations and execute the OPA by January 31, 2006.
3. Liability. This Letter of Intent is binding upon Poseidon to i) enter into a Water
Purchase Agreement on the terms detailed in the attached Term Sheet, and ii) enter into an OPA
with the Agency of the City on mutually agreed upon terms. However, this Letter of Intent
does not constitute and will not give rise to any legally binding obligation on the part of the
City to enter into such Water Purchase Agreement or OPA. Nothing contained in this Letter of
Intent (including the Term Sheet) shall be deemed or construed to be an agreement or
obligation of the City to conclude negotiations by the execution of the Water Purchase
Agreement or an OPA. The provisions of this Letter of Intent(including the Term Sheet) do not
create any rights on the part of either Party.
4. Costs. Each of the Parties shall be responsible for its own costs and expenses
relating to the documentation and completion of the Water Purchase Agreement and OPA.
5. Governing Law. This Letter of Intent shall be governed by and construed in
accordance with the laws of the State of. California without reference to the principles of
conflicts of laws.
6. Counterparts. This Letter of Intent may be executed in one or more counterparts,
each of which, when executed and delivered, shall be an original,but all of which together shall
constitute but one and the same instrument.
This Letter of Intent reflects Poseidon's commitment and obligation to enter into the
referenced agreements to the benefit of the City of Huntington Beach.
Sincerely,
On behalf of Walter J.Winrow
President&Chief Operating Officer
Billy Owens
Sr.Vice President
Enclosure—Exhibit A
Exhibit A
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
TO BE INCORPORATED INTO A WATER PURCHASE AGREEMENT
PROJECT Reverse osmosis seawater desalination plant capable of
delivering up to 56,000 acre-feet/year of desalinated water
to be located in the City of Huntington Beach.
SELLER Poseidon Resources Corporation, or its affiliate or
subsidiary.
BUYER The city of Huntington Beach.
TERM 30 years from the Project commencing commercial
operations.
WATER QUANTITY 3 million gallons per day (3,360 acre-feet/year)
WATER QUALITY Water to meet all drinking water quality standards under
applicable law.
DELIVERY POINT As mutually agreed by the Parties within 12 months after
execution of the Water Purchase Agreement.
DELIVERY SCHEDULE As mutually agreed by the Parties within 24 months after
execution of the Water Purchase Agreement and
consistent with the Seller's other obligations to sell water
from the Project.
PRICE Pricing shall be equal to the sum of(A)95% of Buyer's
cost of water supplied by the Municipal Water District of
Orange County ("MWDOC") and (B) any subsidy
received by Buyer from the Metropolitan Water District of
Southern California ("MWD")or any other third party for
the purchase of water from the Project.
Emergency Water Supply Seller shall deliver up to ten(10)million gallons per day
("MGD") of additional water from the Project, at cost, for
up to seven (7) consecutive days in the event of a declared
water emergency.
RELIABILITY Seller shall deliver water to the Buyer at all times that the
Project is operating.
1
OPERATION/MAINTENANCE Seller shall operate and maintain the Project in accordance
with prudent industry practices and applicable laws and
regulations.
CONDITIONS PRECEDENT Obligations of Buyer and Seller to be subject to mutually-
acceptable conditions precedent, including:
• Seller having obtained all permits and approvals
for the Project
• The Project shall have been completed in
accordance with applicable law and prudent
industry practice
FORCE MAJEURE Each party shall be excused from the performance of its
obligations to the extent such performance is prevented by
an event of force majeure.
EVENTS OF DEFAULT The Water Purchase Agreement will include customary
events of default.
Upon the occurrence of an event of default, the non-
defaulting party may pursue any remedies available at
law or in equity.
REPRESENTATIONS AND The Water Purchase Agreement will include customary
WARRANTIES representations and warranties from both Parties.
INSURANCE Seller will maintain customary insurance coverage with
respect to the Project.
RECORDS/INSPECTION Seller to maintain records pertaining to its performance
under the Water Purchase Agreement, and Buyer to have
right to inspect such records during regular business
hours,upon request,to verify quantity, quality and
completion of delivery of desalinated water to the
Delivery Point.
Buyer to have right to inspect Seller's measurement
devices periodically during regular business hours to
verify that calibration is accurate.
ASSIGNMENT The Water Purchase Agreement will contain mutually
acceptable assignment provisions, limiting Seller's ability
to assign the Agreement only to parties with the capability
to perform the obligations under the Water Purchase
Agreement and as security for the financing of the Project.
GOVERNING LAW California.
2
R A ROUTING SH T
INITIATING DEPARTMENT: Economic Development
SUBJECT: Authorization to Enter Into Negotiaitons
with Poseidon Resources Corporation
COUNCIL MEETING DATE: October 17, 2005
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
Attached ❑
Contract/Agreement (w/exhibits if applicable) Not Applicable
Signed in full by the City Attorney)
Attached ❑
Subleases, Third Party Agreements, etc. Not Applicable
Approved as to form by City Attome )
Certificates of Insurance (Approved b the City Attome Attached ❑
Pp Y Y Y) Not Applicable
Attached ❑
Fiscal Impact Statement (Unbudget, over $5,000) Not Applicable
Attached ❑
Bonds (If applicable) Not Applicable
Attached ❑
Staff Report (If applicable) Not Applicable
Commission, Board or Committee Report If applicable) Attached ❑
P ( pp ) Not Applicable
s/Conditions for Approval and/or Denial Attached
Find ings/Cond ❑
g Pp Not Applicable
EXPLANATION FOR MISSING ATTACHMENTS
REVIEWED RETURNED FORWARDED
Administrative Staff
Assistant City Administrator Initial pL
City Administrator Initial
City Clerk ( )
EXPLANATION FOR RETURN OF ITEM:
Only)(Below Space For City Clerk's Use
RCA Author: