REPORT TO THE CITY COUNCIL October 26, 2017 FROM: THOMAS C. ESQUEDA, Director Department of Public Utilities SUBJECT ..Title Approve Amendment No. 2 to the Copper River Ranch Water Supply Implementation Agreement approved by Fresno City Council on November 17, 2016 (Council District 6) ..Body RECOMMENDATION The Administration recommends the City Council approve Amendment No. 2 to the Copper River Ranch Water Supply Implementation Agreement (Agreement) to address defaults and failures to timely fulfill Agreement obligations by the Developers of the Copper River Ranch Development (Copper River or the Project Area) . EXECUTIVE SUMMARY The Fresno City Council approved the Agreement on November 17, 2016, whereby Developers are to provide 4,900 gallons per minute of firm water supply capacity within the Project Area in accordance with a mutually-agreed upon project completion schedule. The Agreement also includes a payment schedule for Developers' fair share contribution (Development Fee) related to the City's Northeast Surface Water Treatment Facility (NESWTF). On August 1, 2017, Developers defaulted again on their Agreement obligations and have requested and amendment to the Agreement for a second time extension. Developers have agreed to pay $700,000.00 of their remaining $1,267,623.50 Development Fee obligation, with the final $567,623.50 Development Fee payment due by December 1, 2018. The Administration recommends City Council approve Amendment No. 2 to the Agreement, which extends timelines to complete agreed upon water supply improvements and accelerates payment of Developers' proportionate share reimbursement. BACKGROUND On March 1, 2017, Developers defaulted on certain water supply construction obligations under the Agreement. In response to a notice of default, Developers requested an amendment to the Agreement for a one time extension in exchange for and accelerated Development Fee payment. On July 14, 2017, City staff met with Developers' representative to discuss the completion status for water supply projects required as a condition of the Agreement (as extended by the First Amendment), the City's right to cease issuance of certificates of occupancy within the Project Area due to a default condition, and the path forward options in the event a second default condition occurred. On August 1, 2017, Developers defaulted on Agreement obligations by failing to timely construct and to complete the required work for PS 330, PS 370, and the Manganese Disposal Line to be constructed under the Agreement. In light of their second default, Developers requested that the City provide a second extension of time to allow them to complete the required water supply projects. After negotiations, the City has agreed to accommodate Developers and provide an additional opportunity to cure defaults by modifying the completion schedule for projects and payments required by the Agreement as follows: Milestone Requirement Originally Agreed Upon Completion Date New Required Completion Date Increase Capacity of PS 330 from 1,200 gpm to 1,800 gpm March 1, 2017 December 1, 2017 New PS 370 (minimum capacity 500 gpm) June 30, 2017 December 1, 2017 New PS 371 (minimum capacity 500 gpm) December 1, 2018 December 1, 2018 Mn Discharge Pipeline for PS 330, 369, 370, and 371 March 1, 2017 December 1, 2017 3rd Payment (1st Installment) Developer Fee Obligation - $700,000.00 December 1, 2018 Within 10 days of approving Amendment No. 2 - Estimated Nov. 6, 2017 3rd Payment (2nd Installment) Developer Fee Obligation - $567,623.50 December 1, 2018 December 1, 2018 The City's Administration has authorized the continued issuance of certificates of occupancy for lots within the Project Area until such time that the Fresno City Council considers Amendment No. 2. Should the Fresno City Council not approve Amendment No. 2, the Administration will discontinue issuing certificates of occupancy in the Project Area effective 8:00 am on Friday, October 27, 2017. All other terms and conditions of the Agreement will remain in effect. However, by entering into Amendment No. 2, the Developers acknowledge and agree that if they fail to timely perform, the City may cease issuing building permits and certificates of occupancy for any lots within the Project Area - without notice and without further opportunity to cure. The attached Amendment No. 2 to the Agreement has been approved as to form by the City Attorney. ENVIRONMENTAL FINDINGS Pursuant to CEQA Guidelines section 15378(b)(5), this is not a project for the purpose of CEQA, as this is an organizational or administrative action of the government to enforce an existing obligation, and will not result in a direct or indirect physical change in the environment. LOCAL PREFERENCE Local preference was not considered because this Agreement regarding water supply infrastructure development does not include a bid or award of a construction or services contract. FISCAL IMPACT There is no financial obligation for the General Fund for this Agreement. The $700,000.00 Development Fee installment to be made by the Developers under Amendment No. 2 will be received into the Water Division Enterprise Fund to benefit the expansion and upgrade of the City's NESWTF, and to secure adequate water supply capacity, reliability, and redundancy for area served by the NESWTF. Attachment: Second Amendment to the Copper River Ranch Water Supply Implementation Agreement