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AGREEMENT FOR DEFERRAL OF
DEVELOPMENT IMPACT FEES
By and Between
CITY OF ATASCADERO
and
North County Hospitality Group, LLC
a limited liability corporation
DATED:-Sep1evykber 11, 2018
AGREEMENT FOR DEFERRAL OF DEVELOPMENT IMPACT FEES
This Agreement for Deferral of Development Impact Fees ("Agreement"), dated for
reference purposes as fust indicated on the cover page, is entered into by and between the CITY
OF ATASCADERO, a California municipal corporation ("City") and North County Hospitality
Group, LLC, a limited liability corporation ("Developer") on the following terms and conditions:
RECITALS
A. Developer is presently developing a Project on the Property located within the
City of Atascadero, California. The Developer will need to obtain permits and approvals for the
Project. A standard condition on the issuance of these permits will be the payment of City
imposed Permit and Processing Fees and Development Impact Fees. These Permit and
Processing Fees and Development Impact Fees are generally payable to the City at the time the
permit is issued or, if a standard deferral agreement is executed, when the project is completed
and a final inspection with the City is scheduled.
B. The City has established a regular program of imposing the payment of specified
Permit and Processing Fees on the construction of new development projects within the City
with respect to the connection of the Project to City utility services as well as inspection and
processing of permits by various City departments. These fees are typically payable to the City
at the time the project applicant submits an application to the City for these permits and
approvals or prior to issuance of the permit by the City.
C. The City has established a regular program of the payment of specified
Development Impact Fees to offset impacts on public services from new development within the
City. Once a standard deferral agreement is executed, these fees, listed below, are typically
payable to the City at the time the project is completed and a final inspection with the City is
scheduled.
D. In certain instances the City acknowledges that it may be to the public's benefit to
defer the payment of Permit and Processing Fees or Development Impact Fees until a specified
time after the issuance of the permit or approval, provided adequate security for the future
payment of the fees is provided. Generally where the project involves a significant capital
investment by the developer and will serve to either encourage further development of an area
where development has been stagnant or where the project will provide a needed service,
convenience, or accommodations to residents or visitors the City Council may find that the
project qualifies to have the payment of Permit and Processing Fees or Development Impact Fees
deferred.
F. Developer has requested that the Project be considered eligible for additional
deferral of Development Impact Fees. The City Council has found, based on the nature and
location of the Project and the convenience it will provide to residents of the City that the Project
qualifies for a deferral under the terms and conditions of this Agreement. Developer
acknowledges and agrees that absent this Agreement it would be required to pay all
Development Impact Fees at the time the project is completed and a final inspection from the
City is requested.
G Developer and City acknowledge that the California Prevailing Wage law
normally applies to projects where public funds are used for construction or for the payment of
fees that are mandatory conditions of construction. In this case, City is not paying fees but is
instead deferring payment of them. Developer is absolutely bound to pay all required fees, but
will be allowed to pay the Development Impact Fees over time, with interest. Developer and
City acknowledge that they have each and separately investigated California Prevailing Wage
Law and have each and separately determined that the City's deferral of the Development Impact
Fees does not constitute a contribution of public funds to the Project, as defined by California
Labor Code Section 1720 and described in non-binding decisions issued by the Department of
Industrial Relations interpreting that Section. Notwithstanding the analysis and determination of
the parties, Developer acknowledges that if the Department of Industrial Relations determines
that the deferral of Development Impact Fees is found to constitute payment of public funds for
the Project, then the construction and construction -related activities for the Project would be
subject to the California Prevailing Wage Law and Developer would be required to pay the
general prevailing wage rates of per diem wages and overtime and holiday wages determined by
the Director of the Department of Industrial Relations under Section 1720, et seq., of the
California Labor Code for all covered work performed on the Project.
"Action" shall mean any suit (whether legal, equitable, or declaratory in nature),
proceeding or hearing (where administrative or judicial), arbitration or mediation (whether
voluntary, court-ordered, binding, or non-binding), or other alternative dispute resolution
process, and the filing, recording, or service of any process, notice, claim, demand, lien, or other
instrument.
"City" shall mean the City of Atascadero, a municipal corporation formed and existing
under the laws of the State of California and any successor -in -interest to the rights, obligations,
and powers of the City.
"Developer" shall mean North County Hospitality Group, LLC, a limited liability
corporation. The term "Developer" shall also include all assignees, to the extent permitted under
this Agreement, of the rights and obligations of Developer under this Agreement, and any
successor -in -interest to Developer having a legal and/or equitable interest in the Property.
"Development Impact Fees" shall mean those development impact fees imposed and
levied by the City to recover the cost of planned public facilities and to mitigate impacts of
development on the City as are listed below. The Development Impact Fees include:
1. Law Enforcement Facilities
2. Fire Protection Facilities
3. Fire Aerial Response Vehicle
4. Circulation System
5. Storm Drainage Facilities
6. General Government Facilities
7. Open Space Acquisition
8. Library Expansion Facilities (Hotels exempt from this fee)
9. Public Meeting Facilities (Hotels exempt from this fee)
10. Parkland (Hotels exempt from this fee)
"Effective Date" shall mean the date the Agreement has been formally approved by the
City Council and executed by the appropriate authorities of the City and Developer.
"Interest Rate" shall mean a fixed rate equal to the quarterly investment yield for the
City's investment portfolio as of June 30, 2018, a rate of 1.88%.
"Litigation Expenses" shall mean all costs and expenses, to the extent such are
reasonable in amount, that are actually and necessarily incurred in good faith by the Prevailing
Party directly related to the Action, including, but not related to, court costs, filing, recording,
and service fees, copying costs, exhibit production costs, special media rental costs, attorneys'
fees, consultant fees, fees for investigators, witness fees (both lay and expert), travel expenses,
deposition and transcript costs, and any other cost or expense reasonably and necessarily
incurred by the prevailing party in good faith and directly related to the Action. Where
attorneys' fees are to be paid by Developer to the City's law firm on behalf of, or in defense of,
City, the rate to be paid shall be the full litigation rate charged by the City's law firm to the City
in accord with the City's contract with that law firm.
"Other Government Fees" shall mean any and all fees levied on the Project by any
government entity other than the City, including but not limited to the State of California and any
of its agencies, the County of San Luis Obispo, any local school district, or any local special
district.
"Payment Period" shall mean a period of Five (5) years from and after the Issuance
Date of the Certificate of Occupancy during which Developer will have to pay the amount of the
Development Impact Fees, plus accrued interest, to the City as provided in section 3 [Terms of
Payment].
"Permit and Processing Fees" shall mean those fees imposed and levied by the City
with respect to the connection to City utility services as well as inspection, processing and
granting of permits by various City departments.
"Project" shall mean the construction of a new building of approximately 73,833 square
foot, four-story, 120 -room hotel on the Property that would be operated by an internationally -
known and publicly traded company and that would be suitable for occupancy and use under
Chapter 9 [Planning and Zoning] of the City's Municipal Code.
"Property" shall mean those certain parcels of real property commonly known as
Assessor's Parcel Number 049-131-070 located at 1800 El Camino Real, City of Atascadero,
State of California, as more particularly described in the legal description attached hereto and
incorporated herein by reference as Attachment "A".
OPERATIVE PROVISIONS
NOW, THEREFORE, in consideration of the mutual promises and covenants made by
the parties and contained herein and other consideration, the value and adequacy of which are
hereby acknowledged, the parties agree as follows:
1. Deferral And Payment.
1.1 City's Deferral. The City agrees that Developer may defer payment of the
Development Impact Fees imposed on the Project by City for the Payment Period provided
Developer remains in compliance with the terms, conditions, and covenants of this Agreement.
The parties acknowledge that City normally requires the payment of all Permit and Processing
Fees and Development Impact Fees at the time the project applicant submits an application to the
City for these permits and approvals, receives an issued permit, or prior to issuance of a
Certificate of Occupancy by the City. In this case, by virtue of this Agreement, the City will
issue permits and approvals for the Project, and issue a final Certificate of Occupancy, provided
all other requirements for the issuance of such permits have been met, even though the
Developer will not have paid the Development Impact Fees.
1.2 Developer's Payment.
1.2.1 Permit and Processing Fees. Developer covenants and agrees to timely
pay at the time each Project application is submitted all Permit and Processing Fees imposed on
that application.
1.2.2 Development Impact Fees. Developer covenants and agrees to timely pay
during the Payment Period the Development Impact Fees, together with all interest accrued
thereon, as provided in this Agreement. Developer acknowledges that Developer's Property will
be encumbered by a lien created by the recording of a second Deed of Trust securing
Developer's payment of the Development Impact Fees.
1.3 Other Government Fees. Developer understands and agrees that the City is
required to collect Other Government Fees that may be imposed on the Project. Developer
agrees to timely pay the Other Government Fees as required by the City. The Other Government
Fees are not subject to deferral pursuant to this Agreement.
1.4 Prevailing Wage Law. California Prevailing Wage law applies to projects where
public funds are used for construction or for the payment of fees that are mandatory conditions of
construction. Pursuant to Section 1.1 [City's Deferral], City will defer payment of Development
Impact Fees, but will not itself pay any fees otherwise required to be paid by Developer.
Developer further agrees to pay interest on the deferred Development Impact Fees at the rate
equivalent to the rate that the City would receive if the City had the Development Impact Fees in
hand and had invested those moneys in the City's investment portfolio.
1.4.1 Deferral is not Payment of Public Funds. Developer is absolutely bound
to pay all required fees, but pursuant to Section 3 [Terms of Payment] will be allowed to pay
some of them over time, with interest pursuant to Section 3.2 [Payment Over Time]. The parties,
having each researched California Prevailing Wage Law, agree that this deferral is not a payment
of public funds pursuant to California Labor Code Section 1720(b). The deferral is instead a
market transaction with the Developer paying market rate interest for the opportunity to pay the
Development Impact Fees over time.
1.4.2 Developer's Agreement to Comply With Prevailing Wage Law.
Notwithstanding the foregoing, Developer acknowledges that if the Department of Industrial
Relations determines that the deferral of Development Impact Fees constitutes the payment of
public funds for the Project, then the construction and construction -related activities for the
Project would be subject to the Prevailing Wage Law and Developer would be required to pay
the general prevailing wage rates of per diem wages and overtime and holiday wages determined
by the Director of the Department of Industrial Relations under Section 1720, et seq., of the
California Labor Code for all covered work performed on the Project. Without limiting
Developer's obligation to comply with all of the Prevailing Wage Law under the foregoing
scenario, Developer shall at minimum (a) require its contractors and subcontractors to submit
certified copies of payroll records to Developer; (b) maintain complete copies of such certified
payroll records; and (c) make such records available to the City and its designees for inspection
and copying during regular business hours at the Property or at another location within the
City. Under such scenario, Developer shall also obligate Developer's contractors and agents to
comply with all such Prevailing Wage Laws.
1.4.3 Developer's Agreement to Indemnify and Defend City. If the Department
of Industrial Relations determines that the deferral of Development Impact Fees constitutes the
payment of public funds for the Project, Developer further agrees that it shall indemnify and
defend the City from and against any and all present and future liabilities, obligations, orders,
claims, damages, fines, penalties and expenses (including attorneys' fees and costs) arising out of
or in any way connected with Developer's obligation to comply with all Prevailing Wage Laws
with respect to the work of Public Improvements, including all claims that may be made by
contractors, subcontractors or other third party claimants pursuant to Labor Code Sections 1726
and/or 1781.
2. Permit and Processing Fees and Development Impact Fees
2.1 Estimated Permit and Processing Fees and Development Impact Fees. The
total estimated amount of Permit and Processing Fees and Development Impact Fees to be paid
for the Project is currently estimated to be $984,388.62. Of this amount, approximately
$262,949.89 represents Permit and Processing Fees, and $158,158.73 represents fair share
impact fees towards the Del Rio Interchange that the Developer agrees to pay at the time that the
Developer submits Project applications on which the Permit and Processing Fees are imposed or
upon issuance of the permit. Of the total amount, approximately $563,280.00 represents
Development Impact Fees which the Developer agrees to pay as provided in Section 3 [Terms of
Payment] the Permit and Processing Fees as provided in this Agreement.
2.2 Changes in Fee Amounts. The parties understand and agree that the amounts set
forth in Section 2.1 [Total Permit and Processing Fees and Development Impact Fees] are
approximations and that the actual amounts may change as the Project is fully designed and
brought to the City for review and approval. The parties agree that changes to the amounts of the
Permit and Processing Fees and/or Development Impact Fees shall not affect the terms of this
agreement, and in particular the payment amounts set forth in Sections 3.2.1 through 3.2.4,
though the final payment amount set forth in Section 3.2.5 may be adjusted to reflect any change
in Development Impact Fee amounts. Any change in the estimated amount of Permit and
Processing Fees or Development Impact Fees shall be communicated by City to Developer at the
time Project applications are submitted.
3. Terms of Payment of Development Impact Fees
3.1 Absolute Payment Obligation. Developer has the absolute obligation to pay the
entire outstanding balance of the Development Impact Fees. Notwithstanding the provisions of
this Agreement granting Developer permission to pay the Development Impact Fees over time,
such payment over time shall not be deemed to waive all or any portion of Developer's
obligation to pay the entire balance of the Development Impact Fees. Failure to fully pay the
Development Impact Fees as required shall be deemed a Default of this Agreement.
3.2 Payment Over Time. Developer shall pay the entire outstanding balance of the
Development Impact Fees, plus accrued interest, by no later than the last business day of the
Fifth (5h) year from and after the Issuance Date of the Certificate of Occupancy. Developer
shall make the following payments:
3.2.1 First Payment. On or before the one-year anniversary of the Issuance Date
of the Certificate of Occupancy, in the amount of $119,137.00.
3.2.2 Second Payment. On or before the two-year anniversary of the Issuance
Date of the Certificate of Occupancy, in the amount of $119,137.00.
3.2.3 Third Payment. On or before the three-year anniversary of the Issuance
Date of the Certificate of Occupancy, in the amount of $119,137.00.
3.2.4 Fourth Payment. On or before the four-year anniversary of the Issuance
Date of the Certificate of Occupancy, in the amount of $119,137.00.
3.2.5 Final Payment. On or before the five-year anniversary of the Issuance
Date of the Certificate of Occupancy, in an amount equal to the remaining outstanding principal
plus all interest accrued over the term of the Payment Period, an amount currently estimated to
be $119,135.09.
3.3 Pre -Payment Option. At any time during the Payment Period, Developer may
pay the entire outstanding principal balance of the Development Impact Fees. Pre -payment shall
include all principal amounts owed and all interest accrued as of that date. There shall be no
penalty for pre -payment.
3.4 Interest Accrual and Payment. From and after the Issuance Date of the
Certificate of Occupancy until the outstanding principal balance on the Note has been repaid in
full, the outstanding balance under this Agreement and the Promissory Note shall bear interest at
the Interest Rate. In no event shall the amount of interest paid or agreed to be paid to City
exceed the maximum amount permissible under applicable laws.
4. Security.
4.1 As further evidence of Developer's obligation to pay the Development Impact
Fees, Developer shall execute and provide to the City a Promissory Note that is the same in all
material respects to that attached hereto and incorporated herein by reference as Attachment `B".
Developer's payment obligation under the Promissory Note and this Agreement shall be secured
by a Deed of Trust recorded against the Property subordinate only to a deed of trust securing the
Developer's obligations to the Project's construction lender. The Deed of Trust shall be the same
in all material responses as that attached hereto and incorporated herein by reference as
Attachment "C". Upon request from Developer's construction lender, City will execute a
subordination agreement to subordinate the Deed of Trust to the construction lender's deed of
trust against the Property.
5. General Indemnity.
5.1 General Indemnity. Except as to the sole negligence, active negligence or
willful misconduct of the City, Developer expressly agrees to, and shall, indemnify, defend,
release, and hold the City, and its respective officials, officers, employees, agents, and
contractors harmless from and against any Action, liability, loss, damage, entry, judgment, order,
and lien, which arises out of, or are in any way related to, any act or omission of Developer, or
its officers, directors, employees, agents, or contractors, connected with the performance under
this Agreement, the construction, use, or operation of the Project, notwithstanding that the City
may have benefited therefrom, or any challenge to this Agreement. This Section shall apply to
any acts or omissions, willful misconduct or negligent conduct, whether active or passive, on the
part of Developer's officers, directors, employees, agents and contractors. The City shall not be
responsible for any acts, errors or omissions of any person or entity except the City and its
officers, agents, servants, employees or contractors. The Parties expressly agree that the
obligations of Developer under this Section shall survive the expiration or early termination of
the Agreement.
6. Default And Remedies.
6.1 Default. Either parry's failure or unreasonable delay to perform any term or
provision of this Agreement constitutes a Default of this Agreement. In the event of a Default,
the injured party shall give written "Notice of Default" to the defaulting party, specifying the
Default. Delay in giving such notice shall not constitute a waiver of the Default. If the
defaulting party fails to cure the Default within thirty (30) days after receipt of a notice
specifying the Default, or, if the Default is of a nature that cannot be cured within thirty (30)
days, the defaulting party fails to commence to cure the Default within said thirty (30) days and
thereafter diligently prosecute such cure to completion, then the defaulting party shall be liable to
the injured party for any and all damages caused by such Default, unless otherwise provided for
by this Agreement.
6.2 No Waiver. Failure to insist on any one occasion upon strict compliance with
any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of any rights or powers hereunder
at any one time or more times be deemed a waiver or relinquishment of such other right or power
at any other time or times.
6.3 Legal Actions. In addition to any other rights and remedies any party may
institute a legal action to require the cure of any default and to recover damages for any default,
or to obtain any other remedy consistent with the purpose of this Agreement. The following
provisions shall apply to any such legal action:
-L,
6.3.1 Jurisdiction and Venue. Legal actions must be instituted and maintained
in the Superior Court of the County of San Luis Obispo, State of California, Central Branch,
Civil Division, or if appropriate, in the United States District Court for the Central District of
California. Participant specifically waives any rights provided to it pursuant to California Code
of Civil Procedure §394 and any federal statue or rule of similar effect.
6.3.2 Applicable Law. The laws of the State of California shall govern the
interpretation and enforcement of this Agreement.
6.3.3 Attorney's Fees. In the event either party commences an Action against
the other party which arises out of a Default of, breach of, failure to perform, or that is otherwise
related to, this Agreement, then the Prevailing Party (as defined here) in the Action shall be
entitled to recover its Litigation Expenses from the other party in addition to whatever relief to
which the prevailing party may be entitled. For the purpose of this section, "Prevailing Party"
shall have the meaning ascribed in § 1032(a) (4) of the California Code of Civil Procedure.
6.4 Rights and Remedies are Cumulative. The rights and remedies of the Parties
are cumulative, and the exercise by a parry of one or more of its rights or remedies available
under law shall not preclude the exercise by it, at the same or different time, of any other rights
or remedies for the same Default or any other Default by another Party.
7. General Provisions.
7.1 No Third Party Beneficiaries. This Agreement is for the sole and exclusive
benefit of the City and Developer. No other parties or entities are intended to be, or shall be
considered, a beneficiary of the performance of any of the parties' obligations under this
Agreement.
7.2 Recitals and Definitions. The Recitals and Definitions set forth at the beginning
of this Agreement are a substantive and integral part of this Agreement and are incorporated by
reference in the Operative Provisions of this Agreement.
7.3 Titles and Captions. Titles and captions are for convenience of reference only
and do not define, describe or limit the scope or the intent of this Agreement or any of its terms.
Reference to section numbers are to sections in this Agreement unless expressly stated otherwise.
7.4 Interpretation. The City and Developer acknowledge that this Agreement is the
product of mutual arms -length negotiation and drafting and each represents and warrants to the
other that it has been represented by legal counsel in the negotiation and drafting of this
Agreement. Accordingly, the rule of construction which provides the ambiguities in a document
shall be construed against the drafter of that document shall have no application to the
interpretation and enforcement of this Agreement. In any action or proceeding to interpret or
enforce this Agreement, the finder of fact may refer to such extrinsic evidence not in direct
conflict with any specific provision of this Agreement to determine and give effect to the
intention of the parties hereto.
7.5 Severability. Each provision, term, condition, covenant, and/or restriction, in
whole and in part, in this Agreement shall be considered severable. In the event any provision,
term, condition, covenant, and/or restriction, in whole and/or in part, in this Agreement is
declared invalid, unconstitutional, or void for any reason, such provision or part thereof shall be
severed from this Agreement and shall not affect any other provision, term, condition, covenant,
and/or restriction, of this Agreement and the remainder of the Agreement shall continue in full
force and effect.
7.6 Amendments to Agreement. Any amendments to this Agreement must be in
writing and signed by the appropriate authorities of the City and Developer.
7.7 Administration. Following approval of this Agreement by the City's Council,
the City shall exercise its rights, perform its obligations, and otherwise administer this
Agreement through the City Manager. The City Manager shall have the authority to issue
interpretations and to make minor amendments to this Agreement on behalf of the City, provided
such actions do not materially increase the obligations of the City, make a commitment of
additional funds to by paid by, or costs to be incurred by, the City, or result in a discretionary
extension of time in excess of thirty (30) days. All other changes, modifications, and
amendments shall require the prior approval of the City Council.
7.8 Notices, Demands and Communications Between the Parties. Formal notices,
demands and communications between the parties shall be given in writing and personally
served or dispatched by registered or certified mail, postage prepaid, return receipt requested, to
the principal offices of the parties, as designated in this Section, or telefaxed to the facsimile
number listed below followed by dispatch as above described. 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 as provided in this Section. Any such notice shall be
deemed to have been received (i) upon the date personal service is effected, if given by personal
service, (ii) upon the expiration of one (1) business day, if telefaxed, or (iii) upon the expiration
of three (3) business days after mailing, if given by certified mail, return receipt requested,
postage prepaid.
If notice is to be made to the City:
City Manager
City of Atascadero
6500 Palma Ave
Atascadero, California 93422
If notice is to be made to Develooer:
North County Hospitality, LLC
Attn: Clint Pierce
284 Higuera St
San Luis Obispo, California 93401
7.9 Computation of Time. The time in which any act is to be done under this
Agreement is computed by excluding the first day and including the last day, unless the last day
is a holiday or Saturday or Sunday, and then that day is also excluded. The term "holiday" shall
mean all holidays as specified in Government Code § 6700 and § 6701. If any act is to be done
by a particular time during a day, that time shall be Pacific Standard Zone time.
7.10 Authority. The individuals executing this Agreement on behalf of Developer and
the instruments referenced on behalf of Developer represent and warrant that they have the legal
power, right and actual authority to bind Participant to the terms and conditions hereof and
thereof.
7.11 Counterpart Originals. This Agreement may be executed in duplicate originals,
each of which is deemed to be an original.
7.12 Effective date of Agreement. This Agreement shall not become effective until
the date it has been formally approved by the City Council and executed by the appropriate
authorities of the City and Developer.
7.13 Waiver of Actions. Developer, for itself and its contractors, hereby expressly
agrees that City has satisfied its obligations under the Prevailing Wage Laws to identify projects
as being subject to the Prevailing Wage Laws and any other obligations imposed upon the City
under Labor Code Sections 1726 and/or 1781 that are owed to or may be actionable by
Developer and its contractors. Furthermore, Developer, for itself and its contractors hereby
expressly waives any right of action against the City created under Labor Code Sections 1726
and/or 1781, whether known, or unknown, foreseen or unforeseen relating to the Project and/or
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day of Se—� 2018.
CITY:
CITY OF ATASCADERO
By.
Rachelle Rickard
". City Manager
ATTEST:
0
APPROVED AS TO FORM:
By: 2
Brian A. Pierik
City Attorney
t1r:ql4K-OU=1;;
North County Hospitality, LLC, a limited liability
corporation
By. 't X f.1 r'C4A6','--
Clint
Pierce
Owner Operator