HomeMy WebLinkAbout1998-06-23 - AGENDA REPORTS - MOU WITH LOCKHEED MARTIN AND L (2)I
AGENDA REPORT
City Manager
Item to be pre;
NEW BUSINESS
DATE: June 23, 1998
Jeffrey Lambert
SUBJECT: MEMORANDUM OF UNDERSTANDING WITH LOCKHEED
MARTIN CORPORATION AND LINCOLN PROPERTY
COMPANY REGARDING BRIDGE AND THOROUGHFARE
OBLIGATIONS FOR THE RYE CANYON BUSINESS PARK
DEPARTMENT: PLANNING AND BUILDING SERVICES
RECOMMENDED ACTION
Receive and file the attached Memorandum of Understanding between Lockheed
Martin Corporation, Lincoln Property Company, and the City of Santa Clarita.
BACKGROUND
The City and Lockheed are parties to a "Pre -Annexation and Development
Agreement dated July 30, 1996. This "Development Agreement" contains various
provisions relating to payment of fees and exactions, including Bridge and
Thoroughfare District fees payable in connection with the development of the Rye
Canyon Business Park.
The approved project would allow the construction of 4 million additional square feet
of business park uses on this 377.1 acre property located just northwest of the
existing Valencia Industrial Park.
Lockheed has entered into an agreement with the Lincoln Property Company to
purchase the project, including the Development Agreement for the construction of
the business park. During the City's discussions with Lincoln, it has been
discovered that the parties disagree on the interpretation of provisions of the
Development Agreement as they relate to Bridge and Thoroughfare obligations.
Based upon Lincoln's proposed development of approximately 181 acres of new
development, the City's interpretation of the Development Agreement would result
in the payment of approximately $5,760,000 in B&T Fees in connection with the
development of the property. Lockheed's and Lincoln's interpretation based on such
acreage would result in the payment of approximately $3,126,000. Therefore, there
is a difference of approximately $2,640,000 in B&T obligation. Should either party
Agenda ItemAr
attempt to resolve this disagreement in court, it is unclear whose interpretation
would be accepted.
ANALYSIS
The City and the developers have attempted at length to resolve this disagreement
and have executed the attached Memorandum of Understanding. This MOU
attempts to close the "gap" between the two interpretations.
This MOU contains certain terms and conditions which may form the basis for
negotiation of a compromise settlement of the dispute between the City and
Lockheed regarding the B&T Fees. This MOU, however, is not a contract binding
either party. This agreement contains elements. of a compromise to settle the
disagreement. Lockheed and Lincoln together will pay one half of the difference in
B&T Fee obligations, an amount totally approximately $1,318,000. The City will
make approximately $1,318,000 in value to Lincoln in concessions, including the
following elements, among others:
• Application of Federal Funds,
• Acquisition of a Parcel of the Property,
• Construction of other roadway improvements,
• Accelerated permitting, or
• Other fee reductions or deferrals.
ALTERNATIVE ACTIONS
Require Lockheed and/or Lincoln to pay the City's interpreted B&T Fee obligation,
understanding that this action could result in a legal challenge to the City's position.
No other alternative. actions have been identified.
FISCAL IMPACT
The fiscal impact to the City is not yet known. However, it could be up to $1,318,000
in value as described in the MOU, depending upon the selected element(s) of
compromise.
ATTACHMENT
Memorandum of Understanding
Vicinity Map
MEMORANDUM OF UNDERSTANDING
THIS MEMORANDUM OF UNDERSTANDING, dated as of May 4, 1998, is
among THE CITY OF SANTA CLARITA, CALIFORNIA, a body corporate and politic (the
"City"), LOCKHEED MARTIN CORPORATION, a.Maryland corporation ("Lockheed"), and
LINCOLN PROPERTY COMPANY, N.C., INC., a Texas corporation ("Lincoln").
RECITALS
A. Lockheed owns certain land located in the City of Santa Clarita commonly
known as the Rye Canyon Test Facility (the "Property."), which is subject to Vesting Tentative
Tract Map no. 51828 (the "Map"). Lincoln has agreed to acquire the Property from Lockheed,
and thereafter Lincoln intends to develop the Property as a commercial and industrial
development.
B. The City and Lockheed are parties to a "Pre -Annexation and Development
Agreement, No. 96-001," dated as of July 30, 1996 (the "Development Agreement"). The
Development Agreement contains various provisions relating to payment of fees and exactions,
including Bridge & Thoroughfare District fees ("B&T Fees") payable in connection with the
development of the Property.
C. • The City and Lockheed disagree as to the effect of the provisions of the
Development Agreement relating to B&T Fees. Lockheed believes that those provisions limit
the B&T Fees to $9,000 per newly developable acre. TheCitybelieves that the B&T Fees are to
be payable to the Bridge & Thoroughfare District (the "B&T District") for such development
when the district is actually formed, at the lower of the rates then prevailing in the City or the
County of Los Angeles.
D. In addition to the B&T Fees, Lockheed agreed.in the Development
Agreement to pay additional amounts for "Non-B&T Improvements," i.e., traffic infrastructure
improvements which were not expected to be performed by the B&T District. However, nearly
all of those improvements are now included within the scope of the B&T District.
E. Based upon Lincoln's proposed development of approximately 181 acres
of new development (as described on Attachment 1 hereto), the City's interpretation of the
Development Agreement would result in the payment of approximately $5,760,000 in B&T Fees
in connection with the development of the Property.
F. Because nearly all of the Non-B&T Improvements are now included
within the B&T District, the City's B&T Fee calculation includes the cost of nearly all of the
"Non-B&T Improvements."
G. Lockheed's and Lincoln's interpretation based on such acreage would
result in the payment of aggregate fees for both the B&T District and the Non-B&T
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Improvements of approximately $3,126,000. The basis for such calculations is shown on
Attachment 1 hereto.
H. Therefore, there is a difference of approximately $2,640,000 between the
parties' positions (the "Difference").
I. Lockheed has contemplated resolution of the dispute through litigation.
However, before incurring the very substantial risks, expenses and inconvenience of litigation, as
well as Lockheed's possible loss of the sale of the Property to Lincoln, the City, Lockheed and
Lincoln desire to attempt to settle the dispute through a negotiated compromise.
J. In order to facilitate further negotiations toward such a compromise, the
parties now desire to memorialize the results of their discussions to date.
POINTS OF UNDERSTANDING
1. Nature and Intent of this Memorandum. This Memorandum contains
certain terms and conditions which may form the basis for negotiation of a compromise
settlement of the dispute between the City and Lockheed regarding the B&T Fees. This
Memorandum is not, however, a contract binding either party. Lockheed acknowledges that
(i) the City cannot be bound by this Memorandum of Understanding; (ii) the City Council of the
City has not yet considered or approved any of the matters described herein; and (iii) the City can
be bound only by a written agreement signed by its duly authorized representatives after
appropriate legally -required action by its City Council. The City acknowledges that (i) neither
Lockheed nor Lincoln can be bound by this Memorandum of Understanding; (ii) the respective
Boards of Directors of Lockheed and Lincoln have not yet considered or approved any of the
matters described herein; and (iii) Lockheed and Lincoln can be bound only by a written
agreement signed by their duly authorized representatives after appropriate legally -required
corporate action.
2. Deferral of Commencement of Liti ag tion. Lockheed has informed the
City that in order to afford the parties an opportunity to resolve their dispute through a negotiated
compromise, it does not intend to commence litigation to resolve such dispute prior to July 1,
1998.
3. Settlement Negotiations. Section 1152 of the California Evidence Code
(dealing with inadmissibility of evidence of offers to compromise and of conduct or statements in
negotiation of those offers) shall apply to this memorandum and any settlement discussions and
negotiations occurring pursuant to this memorandum. This provision, however, shall not make
inadmissible evidence of statements that may be independently admissible, simply because those
statements are repeated during the discussions and negotiations conducted pursuant to this
memorandum.
4. Elements of Compromise. The parties have discussed, and hope to reach,
832851.4 2 5M8
an agreement to resolve their dispute through a negotiated compromise. In that spirit, Lockheed
and Lincoln have together agreed to bear one half of the Difference, and the City has agreed to
bear the other half. It is contemplated that Lockheed and Lincoln would then pay B&T Fees in
the amount set by the B&T District, but not exceeding approximately $4,444,000, in return for
the City making approximately $1,318,000 in value to Lincoln in concessions, including the
following elements, among others:
a. Application of Federal Funds. The City has applied for
approximately $13 million in federal funding for various traffic and transit improvements,
some of which may be included within the boundary of the B&T District. The City's
application has not yet received all required federal approvals, but the City hopes to
receive such approvals during the summer or fall of 1998. If the City's application is
approved, the City will consider applying a portion of such funds to (i) the disputed
amount of the B&T Fees, or (ii) construction of improvements included within the B&T
District which would be credited against the B&T Fee obligation for development of the
Property, or (iii) acquisition of land from Lockheed or Lincoln for needed traffic and
transit facilities.
b. Acquisition of a Parcel of the Property. The City requires new
facilities for storage and maintenance of public buses. The City has identified certain
sites as appropriate for such a facility, and one of such sites is located on the Property.
The City will consider acquiring such site, or possibly acquiring from Lincoln a partially -
or fully -developed facility, at a price which would economically benefit Lincoln.
C. Construction of Other Roadway Improvements. In addition to
acquisition of the public bus facility, the City will consider building other roadway
improvements that might otherwise be required of the developer of the Property (either
within or outside of the purview of the B&T District) from other funds now or in the
future available to it.
d. Accelerated Permitting. The City will consider establishing a
highly accelerated development permit application process (to the extent possible and
consistent with the City's municipal code) to substantially reduce the time required for
developers to obtain permits for development of the Property, thereby accelerating
realization of cash flows from such development.
e. Other Fee Reductions or Deferrals. The City will consider
eliminating, reducing and deferring various of the other fees and exactions required for
development of the Property.
5. Increase in B&T Fees. It is possible that the parties' anticipation of the B&T
Fee levels will be incorrect. If the B&T Fee level increases above the currently -anticipated
$10,629 per unit, the parties will consider sharing the increase on a 50/50, basis provided that
Lockheed/Lincoln shall not be obligated to pay more than a total fee of $11,000 per unit ($33,000
832851.4 3 _ 514NS
1 MAY -04-1996 16:11 EURKt.WILLIRMS LA. 213 236 2700 P.02i02
per acre).
6. Clarification of Method of Calculating Feec.. The parties have discussed the
method of calculation of the B&T Fees in accordance with Sections 7.b(3) and 7.b(5) of the
Development Agreement. In accordance with Section 7.b(3), the calculation of the fee would be
as set forth on Exhibit A hereto.
IN WITNESS WHEREOF, the parties hereto have executed this memorandum as
of the date first set forth above, to indicate that the foregoing accurately expresses their
discussions with respect to the subject matter hereof, subject, however, to the limitations set forth
in Section 1 hereof.
SM51 a
THE CITY Oy�rANTA CLARITA, CALIFORNIA
By:
LOCKHEED MARTIN CORPORATION
By: LMC Properties, Inc., its attomey-in-fact
Kendl P. Philbrick, U
Executive Vice President
LINCOLN PROPERTY COMPANY N.C., INC.
4
51"A
TOTAL P.02
METHOD OF CALCULATION
I. ACREAGE AND MAXIMUM AMOUNT OF FEES
Gross Acres of Land
377.1
Open space, not a part, etc.
-143.0
Existing Building Acreage
-53.4
Net Acres
180.7
Thus, Total B&T Fees payable = 180.7 acres, times 3 factor, times the fee. Under the City's
understanding, the maximum possible total amount of B&T Fees if the project were fully built
out, then, would be $5,761,980.90, and under Lockheed's understanding the total amount would
be $1,626,300. In addition, Lockheed/Lincoln would be obligated to pay an additional
$1,500,000 (approximately) on account of non-B&T improvements
11. METHOD OF CALCULATING FEE PAYABLE.ON A NEW BUILDING
D -
Under Section 7.b(5) of the Development Agreement, B&T Fees are payable at the time a
building permit is pulled, "and then only in proportion to such building's area compared to the
Project's total building area at buildout." The Project's total building area at,buildout is
4,000,000 square feet.
Thus, for a new 250,000 square foot building, the fee would be calculated as follows:
Total Project B&T Fee (using City's view
$5,761,981
[without prejudice to Lockheed's argument])
New building area, divided by total project
250,000/4,000,000 = 0.0625
entitled building area
B&T Fee for this building
$5,761;981 x 0.0625 = $360,124
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Source: U.S.G.S Newhall Quadrangle, LOCAL LOCATION MAP
Research 7952 (Photo Revised 1988) Vesting Tentative Tract No. 51828
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