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Home My WebLink About2021-03-09 - AGENDAS - SPECIAL (2).. ... . . . . . . . . 1�. ....!� �. "^u1 1�1� \q� I "ul .� � � "^u11T r� 1�1� . Access . ........ .. . ... p�� b16 iNry p��C Meeti] b16y ,. .. p,. � �� . � � v � ��dlNil u01 �, �� I�I�0. � u� . ��y .. �.� � n� o�.» ti x� � � � o�.. ti x � . inm� An �,,,� ... �.. Na�ti VA�� V��„ r�e,� An W,o ^ � � .� . Ilu wn�sm If using Google Chrome, please copy/paste the links in your web browser. To maximize public safety while still maintaining transparency and public access, members of the public can observe and participate in the meeting remotely CORONAVIRUS using Zoom. (COVID-19) For those wishing to provide written comments on an item as listed on the ADVISORY NOTICE agenda, please submit an electronic written comment form at https://www.santa-clarita.com/writtencomment at least 30 minutes before the start time. 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(COVID-19) For those wishing to provide written comments on an item as listed on the ADVISORY NOTICE agenda, please submit an electronic written comment form at https://www.santa-clarita.com/writtencomment at least 30 minutes before the start time. Comments will be made part of the meeting record, but not read into Consistent with Executive Orders No. N-29-20 and No. N-35-20 from the Executive Department of the State of California and the County of Los Angeles Department of Public Health Safer At Home Order, the Santa Clarita City Council meeting will be conducted remotely. the record. For those wishing to speak on an item as listed on the agenda, please submit an electronic speaker form at https://www.santa-ciarita.com/speakersianup at least 30 minutes before the start of the meeting with your name and the phone number you will be using to call into the meeting. 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To unmute: • For Windows & Linux - Alt+A • For Mac & iPad with a Keypad - Command($)+Shift+A • For Phone - *6 Q) CALL TO ORDER ROLL CALL CITY OF SANTA CLARITA CITY COUNCIL SPECIAL MEETING Tuesday, March 9, 2021 5:30 PM City Council Chambers 23920 Valencia Blvd. Santa Clarita, CA 91355 AGENDA PUBLIC PARTICIPATION FOR AGENDIZED ITEMS Pursuant to Government Code section 54954.3 members of the public are afforded one minute (with double the time allotted to non-English speakers using a translator) to address the legislative body concerning any item that has been described in the special meeting agenda. CLOSED SESSION CONFERENCE WITH LEGAL COUNSEL - PENDING LITIGATION Government Code Section 54956.9(d)(1) Case Name: The City of Santa Clarita v. Canyon View Limited, LP et al. LASC Case No. PC 058773 CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION Government Code Section 54956.9(d)(2) Significant Exposure to Litigation arising out of a notice of default dated 10/15/2020 (see attached). RECESS TO CLOSED SESSION - TO BE HELD IN THE CENTURY ROOM RECONVENE TO OPEN SESSION CITY ATTORNEY ANNOUNCEMENT ADJOURN NOTICE OF SPECIAL MEETING CITY OF SANTA CLARITA CITY COUNCIL A SPECIAL MEETING OF THE CITY COUNCIL OF SANTA CLARITA WILL BE HELD ON THE 9TH DAY OF MARCH AT 5:30 PM IN THE COUNCIL CHAMBER LOCATED ON THE FIRST FLOOR OF THE CITY HALL AT 23920 VALENCIA BLVD., SANTA CLARITA, CALIFORNIA, FOR THE PURPOSE OF HOLDING A CLOSED SESSION TO CONSIDER THOSE ITEM(S) LISTED ON THE ATTACHED AGENDA. Bill Miranda, MayorP, STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss CITY OF SANTA CLARITA ) I, Mary Cusick, City Clerk, do hereby certify that a copy of the Notice of Special Meeting of the City Council of the City of Santa Clarita, CA, to be held on the 9th day of March 2021, at the hour of 5:30 PM was delivered and posted pursuant to Government Code 54956. Dated: March 4, 2021 Mary Cusick City Clerk Page 2 October 15, 2020 VIA CERTIFIED MAIL Kenneth Striplin City Manager City of Santa Clarita 23920 Valencia Blvd, Ste 300 Santa Clarita, CA 91366 Re: NOTICE OF DEFAULT of Development Agreement By and Between The City of Santa Clarita and Santa Clarita, L.L.C. Dear Mr. Striplin: Please be advised that Santa Clarita, L.L.C. ("SCLLC"), Bermite Recovery, L.L.C. ("Bermite"), and Remediation Financial, Inc. ("RFI"), (collectively "RFI"), pursuant to Section 7(b) of the above referenced Development Agreement, hereby notify the City of Santa Clarita, ("City"), that it is in material default of its obligations under the Development Agreement. As you know, we previously reached out to you in an effort to resolve the issues below prior to declaring the City in default. It is our goal and desire to work together with the City to make BFI's property a solid revenue base for the City, to develop regional roads, create one or more sports complexes and parks along with a hiking trail system, and to build out the property. RFI has been in negotiations with a Fortune 20 company, movie studios, and with international residential and multifamily builders. We remain ready, willing, and able to partner with the City. A. The Development Agreement On or about March 28, 1996, the City and Whittaker Porto Bella Development, Inc., ("Whittaker" and "Developer"), executed the Development Agreement. Pursuant to the Development Agreement, the City and the general public derived numerous benefits through the Development Agreement. The Development Agreement also granted the Developer certain vested rights. Whittaker assigned its interest in the Development Agreement to SCLLC. Pursuant to Section 3(f) of the Development Agreement, "The City acknowledges Rr,,MEDIATION FINANCIAL, INC. 2055 South Collompood Drive, Tempe, Arizona 85282 480 315 6654 voice 480 5001360 fox Packet Pg. 3 Mr. Kenneth Striplin City of Santa Clarita October 15, 2020 that in investing money, and the planning effort of the Project, and in undertaking commencement of the Project, Developer will be acting in reliance upon the City's covenants contained in this Agreement and upon the enforceability of this Agreement, and the City agrees that it will be reasonable and justifiable for the Developer to so rely." Pursuant to Section 3(g), the City agreed and acknowledged that the Developer is entitled to develop the Project in Phases, notwithstanding anything contained in the Agreement or the Project Approvals.' Section G of the Recitals of the Development Agreement, which is material to the Agreement, sets forth the Developer's objectives. Included in Section G was Developer's desire to "develop the Project in accordance with the Project Approval and Applicable Rules." Section G also anticipated potential risks and downsides in the absence of the Development Agreement, and states, "the inability to anticipate these changes, as well as potential loss of anticipated revenue associated with these development risks and uncertainties would, in the absence of this Agreement, deter and discourage the Developer making a commitment to the implementation of the Project." Additionally, Section G provides: In addition, the burden of interest and other carrying costs, the difficulty of obtaining construction and/or permanent financing, the risk of losing financing commitments and the potential loss of anticipated revenue associated with these development risks and uncertainties would deter and discourage the Developer, in the absence of this Agreement, from making a long-term commitment to the implementation of the Project. These material objectives have been repeatedly frustrated by false representations made by the City representatives to BFI's prospective funding sources. We know now that the City has been deliberately attempting to ensure that RFI does not procure refinancing in order to help 33 North and Blue Ox, a debt holder, get ownership of the Property. Pursuant to Section 7(i), the term of the Development Agreement was twenty years with an extension to January 1, 2021, provided there is an actual delay resulting from any enactments or actions described in Paragraphs 3(c) or 6 or delays described in Paragraph 7(e). On November 4, 2019, the City confirmed that the Development Agreement remains in effect through January 2, 2021, and that there were no defaults under the Development Agreement. [Ex. B]. 1 The City first materially breached this term of the Development Agreement when it entered into a Settlement Agreement with PERC on April 25, 2002. See Ex. A. Pg, 2 Packet Pg. 4 Mr. Kenneth Striplin City of Santa Clarita October 15, 2020 Section 7(e) of the Development Agreement provides that "the Term of this Agreement shall be extended by a period of time equal to the number of days during which such party is prevented from, or is unreasonably interfered with, the doing or completion of such act, matter or thing because of causes beyond the reasonable control of the party to be excused...." Section 8(x) of the Development Agreement addresses each party's obligation to abide the covenant of good faith and fair dealing. The City has taken intentional, calculated steps to thwart the objectives of the Development Agreement. The City has intentionally conveyed false information to the public, and to RFFs prospective funding sources, regarding the status of the Proj ect's entitlements. Every contract, such as the Development Agreement, imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement. Pasadena Live, LLC v. City of Pasadena, 8 Cal.Rptr.3d 233, 115 Cal.App.4th 1089 (App. 2004). The covenant of good faith and fair dealing, "not only imposes upon each contracting party the duty to refrain from doing anything which would render performance of the contract impossible by any act of his own, but also the duty to do everything the contract presupposes that he will do to accomplish its purpose. Id. at 1039. B. Request for Time Extension Pursuant to Section 7(e) On July 23, 2020, RFI sent a Request for Time Extension to the City. A copy of that request, without exhibits B-D, is attached hereto as Exhibit C. On or about August 7, 2020, the City Manager's Office did not agree to grant the extension. Upon receiving Mr. Striplin's denial, RFI requested a conference call to discuss additional reasons out of RFFs control as to why the City was required to grant the extension. On August 17, 2020, a conference call was held between Mr. Striplin, Mr. Montes, Bart Shea, and me. During that call, I explained in detail several occasions when the City intentionally interfered with RFI's rights under the Development Agreement. After further consideration, Mr. Striplin's office stated that the City was standing by its denial of the Request for Time Extension. C. City's Unreasonable and Intentional Interference with RFI's Rights Under the Development Agreement, Preventing Performance As set forth above, the City is obligated to extend the term of the Development Agreement because, among other things, it unreasonably interfered with RFFs ability to satisfy the conditions of approval to permanently vest its rights. The City unreasonably, pg. 3 Packet Pg. 5 Mr. Kenneth Striplin City of Santa Clarita October 15, 2020 and intentionally, interfered with RFI's rights. For over three years now, RFI has been seeking funding to take out the current debt on the property, pay all property taxes, to complete the conditions of approval, and record an Amended Vesting Tract Map. RFI also met with potential lenders and joint venture partners during this process. In connection with applying for loans and talking with potential joint venture partners, RFI prepared a development package. That development package included budgets, proformas, employee studies, historical information about the contamination on the site and the remediation, along with researched and confirmed information regarding the existing entitlements. On several occasions, BFI's potential lenders or joint venture partners contacted the City as part of their due diligence to confirm RFI's representations regarding the property's entitlements. Despite the fact that the Developer (now RFI) has vested rights under the Development Agreement with the City, the City regularly and systematically told the potential lenders, joint venture parties, or their appraisers or agents, that the property was not entitled and the entitlement process had to start from scratch. Naturally this led to the potential lenders and joint venture partners questioning BFI's integrity, as RFI had consistently, and truthfully, been representing to those individuals and entities that the property is entitled. As the direct and proximate result of the City providing false information, time and time again the lenders and joint venture partners walked away from the Project. The window for RFI to complete the project approvals kept shrinking. After receiving a partial response to a public records request sent by RFI's counsel, it became clear why the City was providing false information to RFI's lenders and joint venture partners. The documents revealed that the City wants to divest RFI's interest in the property, and to instead have 33 North Development and Blue Ox (collectively "33 North") take over the property and be the owner/developer. As will be demonstrated herein, the City unreasonably and intentionally interfered with RFI's rights under the Development Agreement with the intent to harm RFI, and with the actual result of harming RFI for years. Tom Cole, the City's Director of Development Services, and likely other members of the City's planning department, have falsely represented to the public and RFI's prospective funding sources, that the Porta Bella plan is defunct and that the City needs a new development plan for the Porta Bella property, and that the "City fully anticipates a new environmental document." In addition to making these public comments, Tom Cole, and planning department employees, have represented to RFI's prospective lenders that pg. 4 Packet Pg. 6 Mr. Kenneth Striplin City of Santa Clarita October 15, 2020 the Porta Bella property is not entitled and that, prior to development, the developer will need to provide a new development plan and get a new EIR approved. In addition to this egregious conduct in violation of the City's obligations under the Development Agreement, Tom Cole and employees of the planning department have also been exploring a new development plan with Blue Ox Holdings — the self-proclaimed owner of the first and second deeds of trust (both the value of the deeds of trust and Blue Ox's claimed ownership of the Second Deed of Trust are disputed and subject to pending litigation in the Los Angeles Superior Court, Case No. 20STCV12017). Through public record requests and otherwise, RFI has received information affirmatively showing that the City and Blue Ox are conspiring to obstruct RFFs ability to develop the Property, and to ensure that Blue Ox obtains a fee interest in the property owned by Santa Clarita, L.L.C. ("SCLLC"), and Bermite Recovery, L.L.C. ("Bermite"), both entities owned by RFI. Tom Cole made a statement on or about November 13, 2019, to The Signal involving the Porta Bella Property. In that article, Tom Cole is quoted saying, "Porta Bella was a prior plan from way back when. The city fully anticipates a new plan coming forward. The city fully anticipates a new environmental document." Tom Cole made those statements even though he knows that the property is entitled, and that SCLLC and Bermite have enforceable rights under the Development Agreement. See Exhibit A hereto.2 This public statement, among others by Tom Cole, has significantly delayed BFI's ability to obtain financing to refinance the Property and fund the development costs. During the fourth quarter of 2018, RFI was in the process of obtaining a loan from Silver Arch. In connection with processing the loan commitment, Silver Arch hired Tony Petruccello to appraise the subject property. Silver Arch decided to not make the loan to RFI because of representations made by the City to Mr. Petruccello. As set forth in the Appraisal, the relevant portions are attached as Exhibit D hereto, Mr. Petruccello spoke with the City of Santa Clarita Planning Department in connection with preparing the appraisal. Based on those discussions, Mr. Petruccello reported that, "The site has an approved Specific Plan, but will need to be amended upon any new proposed development. It was stated that all new studies will likely be required including a new Environmental Impact Report." He went on to state that, "The entitlement timeline will likely be in excess of 5+ years upon environmental remediation (anticipated in 2019)." 2 On November 4, 2019 —just 9 days before Tom Cole was quoted in The Signal stating that the Porta Bella Plan was defunct, the City sent a letter to BFI's counsel confirming that the Development Agreement was in effect and that the Developer was not in default of that Agreement. pg. 5 Packet Pg. 7 Mr. Kenneth Striplin City of Santa Clarita October 15, 2020 Based on his discussion with the City, the appraiser went on to state: The subject property is a tract of vacant land. As stated, the property does have an approved Specific Plan, however, it is from the mid-1990's and will need to be updated prior to development. It is unknown how many reports will need to be completed prior to full entitlement (i.e. Environmental Impact, Traffic, etc.)., and, as such, will tape several years (at least) to complete. Also, at this time, a development budget is not yet available as it is too speculative. Overall, the sales comparison approach is viewed as most applicable and is the sole approach to value utilized in this appraisal. The exclusion of the other two approaches does not impact the reliability of the appraisal. For this analysis, we have valued the site on a per unit basis as this is typically how large residential sites are traded as master -planned communities typically have significant open space components and/or unusable hillside land that can skew the price per acre. As shown later, this is the case with the comparables used in this analysis as the price per unit indicator indicates a fairly tight range on an unadjusted basis, but varies significantly on a price per acre basis. Further, we have used the current number of units allowed under the Specific Plan for the subject, even though this number will be amended upon re -entitlement, as the overall density will likely be similar. The appraiser, pursuant to discussion with the City, further stated: Pursuant to the existing Development Agreement, development of the site will also require the construction of millions of dollars of public infrastructure (roads, parks, schools, etc.) at the developer's expense. While the Development Agreement will expire on January 1, 2021, the Specific Plan for the property will remain in place indefinitely until it is amended or replaced by another entitlement granted by the City Council in the future, which City staff believes is likely to be proposed prior to development of the site. Because RFI knew what entitlements it had on the Property, based on those entitlements, RFI created a development plan in accordance with the existing entitlements. After spending a considerable amount of time, effort, and money, RFI determined that Final City approvals for an amendment to the Development Agreement would take from 1 to 2 years — at the outside. However, the City again falsely refuted RFI's representations to Silver Arch as follows: pg. 6 Packet Pg. 8 Mr. Kenneth Striplin City of Santa Clarita October 15, 2020 Based on discussions with representatives from the City of Santa Clarita Planning Department, the developer's timeline appears aggressive. Specifically, it was stated due to the age of the original approvals, any new project will be considered a new development and will likely need all of the above reports, and also likely a new Environmental Impact Report. It was noted other new projects in Santa Clarita of scale (1,000+ units) typically take at least 3 to 4 years for final approvals, not counting any potential litigation from environmental groups which would cause further delays. It was also stated the subject property will be one of the most complex development projects the city has undertaken due to the environmental concerns, traffic impact, and planning of the future roadway extensions of Via Princessa, Magic Mountain Parkway, and Santa Clarita Parkway Overall, it is our estimate the entitlement timeline will be at least S years. Because RFI knew that the entitlements were in place and that it had an enforceable Development Agreement with the City, the City's representations were directly contrary to the information RFI provided to Silver Arch on the status of the entitlements. Silver Arch declined to fund the loan, relying on the City's false representations. This, of course, meant that RFI would have to seek new funding sources. RFI then began negotiations with several potential lenders and potential capital partners, including, but not limited to, Clarion Capital Partners, LLC. Clarion is a private equity fund. As part of Clarion's due diligence, a representative of Clarion called Tom Cole to confirm the entitlements on the Property. RFI had previously fully disclosed the status of the entitlements to Clarion, along with other development documentation. However, Tom Cole intentionally misstated the status of the entitlements (like he has done several times previously) and made slanderous attacks on Mr. Shea's and Mr. Lunn's character to the Clarion representative. Torn Cole represented that: • He met with Bart/David on numerous occasions • It's a "complete start -over" for entitlements • They continue to push the envelope and it will not work • Environmental report — totally archaic • Bart's cowboy approach does not work • David does not know what is up or down • They seem desperate • It's way too big of a property, too much hair, the City needs it done correctly • City is witnessing a slow death with this group pg. 7 Packet Pg. 9 Mr. Kenneth Striplin City of Santa Clarita October 15, 2020 See Exhibit E hereto at CLARION 0002. While Tom Cole intentionally interfered with RFI's prospective business relationship, Clarion, he then intentionally interfered with RFI's existing economic relationships. Clarion, without permission of RFI, sent proprietary confidential project information to Tom Cole (we are confident that Tom Cole forwarded that information to representatives of 33 North, our competitor and debt holder). (Ex. F). After receiving that information, Tom Cole advised Clarion that he intended to reach out to KB and Spirit Properties to see if the LOI's those entitles gave to RFI were legitimate. (Ex. F). As such, in addition to interfering with RFI's prospective relationship with Clarion, Tom Cole interfered with RFI's already existing business relationships with other entities. Of course, Clarion also declined to work with RFI based on Tom Cole's intentionally false and otherwise misleading statements. Because Tom Cole again successfully prevented RFI from getting financing, RFI continued its efforts to secure financing. One of BFI's prospective lenders hired CBRE to appraise the property. In late April 2020, CBRE appraiser Andrew D. Jones, MAI, spore with James Chow in the City's planning department. The City represented that the property was not entitled, it would have to go through a new entitlement process and the "new developer" (33 North, which was Tom Cole's preference) would be doing just that. The City knew that the Development Agreement was in full force and effect at the time it made the foregoing material misrepresentations. Those intentional false statements devastated BFI's ability to refinance the Project. The City is yet again in material breach of the Development Agreement. The City is, and has been, working with representatives of 33 North, to establish a new development plan for the Property. The City is doing so even though it knows SCLLC and Bermite own the Property and that neither have given the City permission to talk with 33 North. RFI knows that Blue Ox had been representing that it was the owner of the Property during quarterly meetings. Representatives of RFI specifically instructed Tom Cole that the City was to have no further communications with representatives of Blue Ox. The City ignored that request and began working with Blue Ox on a new plan for RFI's Property. The City produced documents containing the following information in connection with a public records request (see Exhibit G): 6/14/2017 Preston Brooks and Max Frank from 33 North met with Cole at Cole's office 6/20/2017 Cole met Frank at Cole's office PE. 4 Packet Pg. 10 Mr. Kenneth Striplin City of Santa Clarita October 15, 2020 7/13/2017 Cole met Frank at Solita - This was the same day that representatives of Blue Ox toured the site with DTSC. 8/23/2017 Cole met Frank at Cole's office 9/5/2017 Call with Cole and Frank 9/8/2017 Cole met Frank at Salt Creek 4/3/2019 There are several c-mails between Brooks and Cole on this date and around this time regarding the PPA and Blue Ox trying to get the City to tell DTSC that the PPA would provide community benefits. These e-mails continued through April 9. Tom Cole to go with 33 North to Berkeley to meet with DTSC to help 33 North secure PPA. 4/9/2019 "Prep Call for DTSC Meeting re: Whittaker-Bennite" ---- with Preston Brooks and Cole— this was to get the City to tell DTSC to say that the PPA would provide community benefits which was necessary to get the PPA. 4/9/2019 E-mail from Brooks to Cole: "Thanks for taking the time to discuss the upcoming DTSC meeting with us. Please see the attached draft PPA. The redevelopment section starts on page 4." The draft PPA is the one that says Blue Ox "Is working with the City on entitlements ..." 4/9/2019 Email from Brooks to Cole re: cancelling meeting with DTSC noting that Diaz" drafted an internal memo summarizing the community benefits as expressed in the application and PA and based on that information says that the community benefits issues has been satisfied. He is working on a way to confirm that in writing." 4/10/2019, Bart and I meet with Tom Cole and told him that he was not authorized to have any further contact with Blue Ox, 33 North or any of its representatives. Deceptively, Tom Cole claimed he understood yet he had no intention or terminating his ongoing dialogue with 33 North. 9/20/2019 Cole met with Jeff Warmoth and Max Frank at Marstons 9/22/2019 E-mail from Brooks to Diaz on status of PPA 1/14/2020 E-mail from Brooks to Diaz re: final version of PPA 1/17/2020 Cole met with Max Frank at "his office." Although our request for public records requested substantially more documents than were produced by the City', the documents that were produced leave no doubt that the 3 Ex, G, page 4 hereto Pg. 9 Packet Pg. 11 Mr. Kenneth Striplin City of Santa Clarita October 15, 2020 City has and continues to intentionally preclude RFI from realizing the benefits of its agreement with the City, so the City can ensure that 33 North will own and develop the property, not RFI. The City has caused an intentional taking of RFI's property rights. Under Section 7(e), the City has no discretion to deny an extension of time for performance when the City has unreasonably interfered with RFI's ability to complete the conditions of approval. The City's intentional, unreasonable, and wrongful conduct prevented RFI from obtaining the necessary funding to complete the conditions of approval. The City, conspiring with 33 North and Blue Ox, knowingly and intentionally engaged in that conduct over the course of years, in a blatant attempt to deprive RFI of its development and property rights, and inexplicably to help 33 North obtain title to the property. Pursuant to this Notice of Default, RFI seeks specific performance of Section 7(e) extending the term of the development by a minimum of three years. RFI will also seek to recover all damages incurred as the direct and proximate result of the City's ongoing material breach of the Development Agreement, which can be preliminarily calculated to be in excess of $250,000,000. Additionally, under Section 8(i), RFI will seek to recover its reasonable attorneys' fees and costs. Please let me kmw if you have any questions. a4 - David unn, CEO Remediation Financial, Inc. DWL/cf Enclosures Pg. 10 Packet Pg. 12 To view the full letter with attachments, please click on the link below. https://www.santa-clarita.com/Home/ShowDocument?id=l 8822 Packet Pg. 13