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04-10-2006 PLANNING COMMISSION Minutes 4' CITY OF CHINO HILLS PLANNING COMMISSION MEETING/PUBLIC HEARING MINUTES APRIL 10, 2006 • • CHINO HILLS COUNCIL CHAMBERS 2001 GRAND AVENUE CHINO HILLS, CALIFORNIA COMMISSIONERS PRESENT STAFF PRESENT Mike Braun James DeStefano Adam Eliason Douglas La Belle Abe Hovsepian Bradley E. Wohlenberg Art Bennett Winston Ward Karen Bristow Dawn Vierheilig COMMISSIONERS ABSENT None The Planning Commission Meeting of April 10, 2006, was called to order at 7:00 P.M. by Chairman Bristow, who then led the audience in the Pledge of Allegiance. ITEM #4 - PUBLIC COMMENTS None • ITEM #5 - CONSENT CALENDAR None ITEM #6 - ACTION ITEMS .a. CASE NO: General Plan Conformity Review pursuant to Government Code Section 65402 for Disposal of Public Property. OWNER/APPLICANT: City of Chino Hills PROPOSAL/LOCATION: The City is proposing to commence the process to dispose of approximately 9.4 acres of City-owned property located on the east side of Peyton Drive and approximately 6.8 acres of property located on the west side of Peyton Drive. Planning Commission Minutes—April 10, 2006 1 RECOMMENDATION: Staff recommends that the Planning Commission adopt a resolution finding the proposed disposal in conformance with the General Plan. • Community Development Director James DeStefano presented staff's report, which is on file in the Community Development Department. He explained that this step requires the Planning Commission to find that the proposed disposal is in conformance with the General Plan. Commissioner Eliason asked what issues the Commissioners should consider to reach the finding. Community Development Director DeStefano responded that the Planning Commission's previous actions have led to findings for steps the City Council may take in the future to formally dispose of these properties and the Planning Commission must first make a finding that this finding was in conformity with the City's General Plan. Vice Chairman Bennett stated that Item A, mixed used should be corrected to mixed use and asked if the agreement should indicate both the southwest and the northwest corners of Peyton Drive at Eucalyptus. Community Development Director DeStefano responded to Commissioner Braun that staff was not aware of any other special recorded entitlements. COMMISSION ACTION: The Planning Commission adopted a resolution finding the proposed disposal in conformance with the General Plan. MOTION: Eliason SECOND: Bennett AYES: Braun, Eliason, Hovsepian, Bennett, Bristow NOES: None ABSENT: None ITEM #7 - PUBLIC HEARING a. CASE NO: Approval of Development Agreement 06-01. OWNER/APPLICANT: City of Chino Hills and Opus West Corporation PROPOSAL: The project involves a Development Agreement prepared , pursuant to Government Code Section 65865 between the City of ,Chino Hills .and Opus ,West Corporation. The Development Agreement outlines terms relative to development of the Shoppes Retail project. Through the Agreement, the City would vest the right of Opus to develop the Shoppes Retail property in accordance with the project approvals, including Specific Plan 04- 01 provisions, conditions of approval and mitigation measures. LOCATION: Shoppes Retail Center Site: Generally located on the southeast corner of Grand Avenue and Peyton Drive. Planning Commission Minutes—April 10, 2006 2 RECOMMENDATION: Staff recommends that the Planning Commission adopt a resolution recommending to the City Council approval of Development Agreement 06-01. Community Development Director DeStefano presented staff's report, which is on file in the Community Development Department: Community Development Director DeStefano introduced City Manager, Douglas La Belle and Matt Landers of Opus West. Community Development Director DeStefano explained that this was a legal agreement. The Development Agreement gives Opus the right to develop the property in accordance with project approvals and details of the Development Agreement. There is a specific Tenant List which details the tenants the City has specified would be acceptable within the development to ensure upscale lifestyle tenants. This agreement provides long-term economic benefits, sales tax and property tax revenues, and employment as a result of the construction and retail aspects. There is a long list of public improvements providing for such items as street improvements and signalization. In addition to specified tenants, uses are capped on the amount square footage of retail, restaurant, service and fast food uses in this center because it is predominantly retail in nature. The term of this agreement is 15 years and will pay those that construct it at prevailing wages. There are a couple of additional issues for City Council consideration such as the Purchase and Exchange Agreement, lease for the freeway oriented sign, and a lease between the City and Opus development for the right to continue to use the park site for a little over a year. Assuming the Commission's adoption of the resolution this evening, the Development Agreement would go before the City Council for consideration tomorrow night. Community Development Director DeStefano pointed out the following changes within the Development Agreement: On Page 3 the definition for Barnes and Noble has been stricken. On Page 5 the term "kiosks" is more specifically defined to not only incorporate the area where they will be located, between the anchor tenant and City Center Drive those kiosks cannot exceed 325 square feet each. Later in the document the kiosks are capped at a maximum 20 kiosks and a maximum of 4,000 total square feet. Commissioner Eliason inquired whether the City loses money on building permits for kiosks and Community Development Director DeStefano responded that a push cart for example would require only a plug-in to an electrical outlet If the kiosk is a structure, it would require a permit like any other structure. Commissioner Hovsepian commented that he has friends'who have very successful kiosks in different shopping centers. Community Development Director DeStefano continued. Pages 6 and 7, section 3.2 refers to rights of assignment and, the City has the right to approve the assignment of this project to another developer and what has changed in that section is legalese. Commissioner Hovsepian felt change was more onerous to the City and that the City should have the right to approve any transfer of ownership within certain limits. One day after completion the owner can sell to whomever they wish and the City no longer has authority. Commissioner Eliason thought this was a valid concern and felt it could be addressed in the agreement. Vice Chairman Bennett interjected that it was not new language because it was deleted in one area and added in another. City Manager La Belle said that the 15-year development agreement controls operation of the center. Upon completion, Opus will most likely sell the center to another Planning Commission Minutes—April 10, 2006 3 financial investor who will then be obligated to take over the conditions set forth in the Development Agreement. There is a master tenant list that limits the number of given uses in a '� given area. The precise plan and the land use entitlement, which the Planning Commission has adopted will, for at least for 15 years assure who the tenants are. If a given tenant goes dark, --- they can only sublease to others on the list. He has visited three of the four "lifestyle" centers and feels comfortable that Chino Hills has adequately assured the city that what you see is what you get because there are adequate controls in the Development Agreement. Commissioner Braun asked the criteria for completion. City-Manager,La Belle responded that the exchange agreement, a separate document that will come before the Council, obligates the developer to complete the lifestyle improvements. There is -a performance guarantee for the exchange agreement. And if at the end the, project falls apart the land reverts to the City. Commissioner Hovsepian suggested that the mortgagor would have a voice in who would assume the mortgage, not-the City and, the City would have,no voice in who would-operate the center. If all parties are satisfied that Opus will.live,up to this agreement and operate the center with a transfer to an acceptable property why did Opus insist on including language that the City cannot object to any transfer made by Opus. City Manager LaBelle responded that legal counsel for the City and Opus added the language and the City Attorney is satisfied with the language. However, if the Commission feels the language should be strengthened in some manner staff will convey its wishes to the City Attorney for consideration. Commissioner Hovsepian said that if both parties were happy with the language it meant that City Manager LaBelle was assuming that the City would be happy with the transfer. If so, eliminate the sentence and not put the City in a box. Vice Chairman Bennett stated that the Exchange Agreement would transfer the title of the _ property to Opus. The transfer and assignment in the Development Agreement will be subject to a condition known as the Development Agreement. Any assignment or any subsequent transfer of the property would be subject to the assignment of the Development Agreement and the new property owner would be to all the conditions of the Development Agreement. City Manager La Belle read the next few sentences. Such transfer shall not affect or impair etc. and Vice Chairman Bennett said that those statements applied only until construction was finished. Assistant City Attorney Bradley Wohlenberg stated that during negotiations the City agreed it would limit its review of potential buyers to the period before the shells were completed and once the shells were completed the intent would be to enforce the terms of the agreement regardless of who holds the agreements. It was not what Commissioner Hovsepian was talking about, but staff could bring this matter to the City Council's attention to see if the Council would wish to extend the review period. As it stands there may be some ambiguity the way it is written. However, the Intent was to review only during pre-construction period. Community Development Director DeStefano continued with the document changes: On Page 8 section 4 was changed and reflected on Pages 8, 9, 10 and 11. The revised Development Agreement was put in place should all best efforts to attract Barnes and Noble not come to fruition. City Manager La Belle explained that this project had taken many twists and turns over the past three plus years. Initially, the center was to be anchored by Robinsons-May or Macy's. With the merger of the two companies they decided not to do no expansion and in fact, close some outlets. From that scenario came the concept of the mini anchors, like Barnes and Noble and REI or some use of at least 20,000 square feet. The City would like mini anchors Planning Commission Minutes—April 10, 2006 4 .� �. because they would add strength to the center. The City's economist says that it is desirable but not mandatory for success of a "lifestyle" center. The City has chosen to hold the developer's feet to the fire to make sure that they aggressively pursue mini anchors and if Barnes and Noble does not go in the center the City will capture all of the benefits of the tenants that would pay a higher rent. City Manager La Belle responded to Commissioner Braun that in affect, the deal got better when Robinson's May and Macy's went away because to capture Robinson's May or Macy's the developer was giving the land away for free, the City was subsidizing all of the impact fees and the developer was doing approximately$2 million worth of on-site work. Now the City has tenants who will pay for land, rent, and improvements. Commissioner Braun asked about feasibility of attracting other tenants with loss of the major anchors. Matt Landers, Opus West, told the Planning Commission that they did not lose a single tenant when they lost Rob May/Macy's. Many lifestyle centers do not have department store anchors. • Victoria Gardens is unique because it has department store anchors. Commissioner Hovsepian asked what would happen if one of the mini anchors was successful and wanted to leave and a department store wanted to come in why would the agreement include language (Item d) that "no individual retail stores shall be 40,000 square feet of floor area? City Manager La Belle interjected that the City always intended to create a lifestyle retail center with upper end tenants. The reason the mini anchors were capped at 40,000 square feet was because the City did not want to attract 60,000 or 70,000 square foot tenants that were not at the "lifestyle" end Of the spectrum. Without naming any particular tenants that would not work for the center the City used the 40,000 square feet as the magic number to control the tenant mix from a lifestyle perspective. City Manager La Belle responded to Commissioner Hovsepian that the developer wanted unrestricted ability and the City placed the ' requirements upon them with respect to square footage to ensure that the City would not end up with a 50,000 square foot grocery store or some other type of use the City felt would not fall within the "lifestyle" category. Commissioner Hovsepian suggested a change to the language of the agreement that would read "no individual retail store shall exceed 40,000 square feet without the mutual consent of the City and the developer." City Manager La Belle said that the proposed language might not be consistent with the way the precise plan was drafted. Commissioner Eliason opined that he and others would be more likely to walk through the entirety of a "lifestyle" center and avoid big box stores. City Manager La Belle stated that from day 1 the Council did not want to create another "big box" center such as the City already has with Costco and Lowe's or what is available with the centers across the freeway in Chino. The City was attempting to create a lifestyle retail center that was compatible with and did not conflict with the uses in other locations. Vice Chairman Bennett agreed. Community Development Director DeStefano continued. On Page 10, Section 4.2, kiosks are limited in quantity and square footage. The new Development Agreement reflects the 4,000 square foot maximum. City Manager La Belle responded to Commissioner Braun that Section 4.1. E was the formula he earlier reviewed for Barnes and Noble and REI. 111 Community Development Director DeStefano continued: On Page 17 Section 7.1'was changed only to the extent that the two attorneys agreed upon certain legalese. Commissioner Braun Planning Commission Minutes—April 10, 2006 5 asked for definition of "expedited." Commissioner Hovsepian said that there was no time limit and as long as Opus was proceeding with construction they could conceivably work on it forever. City Manager La Belle said that this was the timing that the City had imposed on itself. The City has 18 months from the close of escrow (mid May) to finish the new community park. , If the park could be completed sooner it would be turned over to Opus immediately so that Opus could proceed with the project forthwith. The City has given itself an additional two months for the corner site - the current Sheriff's Station site, because that location needs to remain the Sheriff's Station until the new government center project facility is completed for various reasons. Grading for the Sheriff's facility is expected to take place in August 2006 and the City will accelerate that portion. Commissioner Hovsepian felt that with respect to 7.6, Private streets, the enforcement issue should be in writing. Assistant City Attorney Wohlenberg responded that it was private property and under the Vehicle Code the City does not have to right to enforce parking until the landowner requests it and it was properly posted in accordance with state law. Once that happened Opus would never have any right to the revenue because it would be a standard citation issued by the Sheriff's Department with the revenues collected by the County and the State. This issue is already state law and there would be no need to put it into the agreement. Vice Chairman Bennett said in his opinion the City Council would not want to issue tickets to people they wanted to encourage to shop in the center. Community Development Director DeStefano continued: Page 23, Section 14.3 contains new legalese that is now located on Page 25 clarifies the section on Certificate of Performance. Community Development Director DeStefano referred the Commission back to Section 3.2 in order to finish the discussion. (See above under original discussion.) Vice Chairman Bennett asked if the Certificate of Performance was tied to the developer's bond and City Manager La Belle responded that he would get a clarification from the City Attorney. Community Development Director DeStefano talked about housekeeping and general changes and additions to exhibits, the inclusion' of maps, 'clarification regarding the improvement schedule within Exhibit H as well as changes to the Shoppes Tenant List. Vice Chairman Bennett asked if the list was all-inclusive and Community Development Director DeStefano responded that if the tenant was not on the list it could go into center if it was not in any of the other centers referenced in the agreement. City Manager La Belle said the list would be reviewed at the end of the fifth and tenth years. Community Development,Director DeStefaho concluded by indicating staff's recommendation for the Planning Commission to receive City Manager La Belle's report on the KMA report and upon conclusion receive testimony from the applicant, conduct the Public Hearing and approve the resolution recommending City Council adoption of the Development Agreement. City Manager La Belle summarized the KMA report as follows: Based on the assumptions of direct and indirect cost the developer agreed to purchase site from City for $7 million. Based upon the tenant mix the project should generate approximately $1.4 million to the City in its first year of stabilization and; $172,000 in annual property tax revenue. The total income stream during the first 15-year period of the agreement is slightly less than $30 million in value with an --- 8 percent income street of $15.9 million. In addition, the City will benefit from the sale of the surplus residential property upon Council approval. Based on a June 2005 projection the Planning Commission Minutes—April 10, 2006 • 6 estimated land value is $7.2 million for the Shoppes residential site (190 units) and $6.7 million for the 96 units at the park site for a total of slightly less than $14 million. Commissioner Eliason wanted to know the first year net cost of the new park. City Manager La Belle said the cost of park was approximately $17 million plus purchase price; the return to the City on the sale of the residential is slightly under $14 million; the first year of property and sales tax is $1.5 million and the payment to the City for the land is $7 million. City Manager La Belle pointed out that the City is not just duplicating an existing community park. The new park will be half again as large in terms of parking spaces; the new park will be 43 acres instead of 26 acres; fields will have artificial turf and the City's analysis is that there is basically a delta of 1 to 2 fields as result of the artificial turf being used. The cost for the turf is slightly under $4 million and will expand the use on a year-round basis. Currently the down times for maintenance are fairly significant. The City estimated that the real cost of park was about $10 million. . Commissioner Eliason asked if the City was spending money or making money. Once year one was completed the City would bear the cost to maintain park and that cost would be offset by revenue from retail, property taxes and so forth. City Manager La Belle said that assuming the total park cost of $25 million, the land sale of residential $14 million, the land sale of existing the existing Community Park is $7 million it totals to $21 million and the first year return is approximately $1.5 million, the City would be out-of-pocket $25 million with an approximate $22-23 million return in the first year. Obviously the payback does not accrue until a few years out and the maintenance cost has to be factored in. The maintenance costs will be significantly reduced as a result of the artificial turf, for example. Commissioner Eliason said that one of the concerns he had heard from the community was that the City was building parks and it would get expensive to maintain those sites. He said he would love to hear that all of the revenue the City would be getting from the Shoppes project would offset the cost to maintain the park. City Manager La Belle said it was a fair analysis to assume the revenues would more than pay for the park and said he could get exact numbers, but it would clearly not cost the City$1.5 million to maintain the new community park. Vice Chairman Bennett wanted to know what the absorption period was for the City to reach stabilization and the developer •said he hoped it would be fully leased when the project was completed. Commissioner Braun said sales tax depended on build-out and stabilization. The developer said that about 50 percent of the space was covered by Letters of Intent and that he expected 100 percent by the time the project neared completion. Vice Chairman Bennett asked if these would be straight leases and the developer responded that they would. Opus does not plan on selling any pads. City Manager La Belle responded to Commissioner Braun that the master tenant list precludes the developer from having any office building on the first floor except for a 5,000 square foot pad for a bank site. Retail uses and freestanding sit down restaurants are proposed for the first floor. Mix of uses in the agreements dictate how many fast food tenants are allowed and what the obligation is to lease certain square footage of restaurant uses on the perimeter. The desire is for the development to have as broad a use base as possible. Commissioner Hovsepian asked if Opus agreed with the KMA estimates of $95 per square foot for the shell and $73 per square foot for improvements and the developer said he would tend to agree. City Manager La Belle said that KMA used Opus' numbers for the evaluation and both parties mutually agreed on the numbers. Commissioner Hovsepian said he assumed that the Planning Commission Minutes—April 10, 2006 7 Board of Supervisors permitted the City to get extra revenue from real estate taxes and City Manager La Belle agreed that the City would get more for this project than it would have gotten the way it was original configured. Community Development Director DeStefano responded to Vice Chairman Bennett that there was a typographical error that referenced certain building numbers and not fees and the document was changed to read:buildings 3 through 6 on Page 2. ; In response to Commissioner Eliason, City Manager La Belle stated that the government center complex would be funded from two.sources: Impact.fees from new development since 1998 and through Community Facilities Districts such as Mello-Roos. There are a number of facilities provided for in CFDs and a bond issue will take place prior to construction being awarded. The CFDs and the impact fees will cover the entire cost of the government,center. .The City is not relying on any income from the Shoppes retail and any other residential land sale. Commissioner Hovsepian said he had stated a $9 million shortfall and the newspaper referred to an $11 million shortfall. City Manager La Belle said that the government center costs were consistent with the architect's estimate last July but increased since the work was originally commissioned. However, it was still within the available funding resources. What the newspaper article may have been referring to might be that the City would have a borrowing of about $10 million for completion of the community park improvements and will rely on the $7.5 million in the general fund. His point to the City Council was that it would be preferable not to dip into the City's General Fund to that extent and the City would be relying on the $7 million contribution (land payment) from Opus, the $7.5 million in the bank and the $9 million would be used to complete the park construction and pay back the park loan. When the residential property is sold the proceeds will retire the debt on the CFDs. City Manager La Belle responded to Commissioner Hovsepian that the sale of the current site may offset the cost of the new site but the City Council has not yet addressed or reviewed that possibility. Vice Chairman Bennett said there was mention of a purchase agreement between the Boys' Republic and the City for the Ring Road right-of-way and he understood there would be realignment that would create one of the major signalized entries for the center. City Manager La Belle pointed out the new Ring Road that would surround the site. The City has reached an agreement in concept with the Catholic Church to acquire a small portion of right-of-way for entry drives. He pointed out the new main entrance into Boy's Republic off of the signalized entrance. Commissioner Braun pointed out that Table 1.b. in the KMA report did not track with the Shoppes fee schedule and City Manager La Belle said staff would clean up the table. Community Development Director DeStefano stated that Exhibit Q refers to potential mini anchors as long as they exceed 20,000 square feet. There is the possibility of consideration of theatre operators being added to the list and the City Council is scheduled to talk about that land use tomorrow night. Should a theatre operator come into this center staff has concerns about whether the marketplace could support an additional theater operator. If it were to be a tenant that seemed appropriate, a variety of changes would have to be made to the Specific Plan, etc. and the Planning Commission would have significant opportunity to weigh in on the matter. Planning Commission Minutes—April 10, 2006 8 Vice Chairman Bennett asked if a theater would make sense with the theatre by Lowe's and Krikorian across the way. City Manager La Belle stated that at this time Boys' Republic has no interest in marketing or selling their property. He felt that the new project would be very successful and that accordingly, there would be increased interest by developers to purchase the property. At some point in the future the economics would bring a price that would make sense to the sale of the property. Matt Landers, Opus, thanked City Manager La Belle for his exhaustive work on this project. City Manager La Belle said that subject to the Council's action tomorrow evening and subject to the Boy's Republic agreement escrow should close with Opus on or about May 23 with award of contracts for the community park construction would be let on that same day. Chairman Bristow opened the Public Hearing. With no one present from the public who wished to speak, Chairman Bristow closed the Public Hearing. Commissioner Eliason said he felt very uncomfortable getting the agreement on Friday and coming to tonight's meeting. However, after receiving tonight's presentation he felt a lot more comfortable, especially about his concerns for the economic safety and well being of the City. Chairman Bristow said she agreed with Commission Eliason and felt much more comfortable after staff's presentation and response to concerns. She feels comfortable with the Commission's recommendation for approval and said she appreciated the Commissioner's efforts to establish the facts. Commissioner Braun thanked Opus West for their efforts in working with the City for a good project. Vice Chairman Bennett said he was very proud of the City and how it works with developers. Chino Hills is one of the few cities that has an excellent rapport with developers and anticipates, plans and prevents problems before projects are brought before the Planning Commission and City Council. COMMISSION ACTION: The Planning Commission adopted a resolution recommending City Council approval of Development Agreement 06-01 as amended. MOTION: Hovsepian SECOND: Braun AYES: Braun, Eliason, Hovsepian, Bennett, Bristow NOES: None ABSENT: None ITEM #8 - STAFF PRESENTATIONS None Planning Commission Minutes—April 10, 2006 9 ITEM #9 -'COMMISSION INFORMATION . , a. City Council Unofficial Action Agenda of March 28, 2006 ITEM #10 - COMMISSIONER COMMENTS None ITEM #11 - STAFF COMMENTS The Planning Commission Meeting of April 10, 2006 was adjourned at 8:59 P.M. to the next regularly scheduled meeting. L. phi\ VikLuirustAti Dawn vierheiiig • Planning Commission Secretary El ., ,, , , . _ . ... . . 1 ;.. , 4 APPROVED AT PLANNING COMMISSION - JUN fi 2006 CITY OF CHINO HILLS° Li Planning Commission Minutes—April 10, 2006 10