REPORT TO COUNCIL
SUBJECT
Title
Action on Landfill Post-Closure Operation and Management Agreement for Related Santa Clara project [Council Pillar: Promote and Enhance Economic and Housing Development]
Report
BACKGROUND
On April 8, 2020, City staff presented Council with the Landfill Post-Closure Operation and Management Agreement for the Related Santa Clara Project (Project). (RTC 20-464). Development of the Project generally located at 5155 Stars and Stripes Drive involves repurposing a closed municipal golf course located on a former municipal landfill property (the Landfill). The City will continue to own the subsurface portion of the Landfill and the Developer will ground lease “airspace parcels” for development of the Project. While the first phase of the Project (involving about 14 acres along Tasman Drive) is not above the Landfill, all other phases of the Project involve the Landfill area. California state laws and regulatory agencies impose long-term maintenance and monitoring obligations on the owner and operator of closed landfill facilities.
The Disposition and Development Agreement between the City of Santa Clara (City) and Developer dated as of August 12, 2016 (DDA) requires City and Developer to execute an agreement that is consistent with the term sheet attached to the DDA as Exhibit M and that contains other mutually acceptable provisions to allocate responsibility for Landfill operation and maintenance activities required by the landfill regulatory agency approvals and related risk mitigation measures during and after construction. Accordingly, City and Developer have prepared a Landfill Post-Closure Operation and Maintenance Agreement (Landfill O&M Agreement) that is consistent with Exhibit M of the DDA and reflects approvals and requirements issued by the Regional Water Quality Control Board after the DDA was executed. Specifically, the Landfill O&M Agreement:
(i) Allocates responsibility between City and Developer for ownership, operation, maintenance and management of the Landfill and the “Project Landfill Systems”, including the Landfill gas extraction system, leachate control system, the clay cap and the fill above it, groundwater monitoring wells, and perimeter air monitoring stations;
(ii) Allocates responsibility between City and Developer for the design and construction of certain Project Landfill Systems; and
(iii) Defines the minimum insurance programs and coverage terms to protect City’s interest in the Project and provide a primary framework for recovery of losses related to the Project development.
DISCUSSION
Subsequent to the April 8, 2020 Council approval of the Landfill Post-Closure Operation and Management Agreement (“O&M Agreement” or “Agreement”) for the Related Santa Clara Project (“Project”), the Developer requested additional changes to the Agreement before its execution. The City and Developer have negotiated and prepared revisions addressing the following:
• Protections for mortgagees (lenders) modeled after those in the Disposition and Development Agreement (“DDA”), except that the City has the right at Developer’s cost to step in and cure a Developer default without waiting for the mortgagee cure period to expire if needed to protect health or comply with environmental landfill laws and regulations.
• Developer may assign its responsibilities to design and construct landfill systems on Parcels 1 or 2 (expected to be Phases 5-7 of the Project) to a Phase Developer of such land.
• In each phase of development, the Developer’s obligation to design and construct landfill systems to be dedicated to the City will be secured by performance and payment bonds or a completion guaranty.
• Phase Developers and lenders may be added as named insureds to the joint pollution legal liability insurance policy upon Developer’s permitted assignment to such Phase Developer or a lender exercising its foreclosure rights under the DDA.
• Arbitration proceedings will be confidential unless disclosure is required by law.
The Landfill O&M Agreement is in final form and requires approval through Council action.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(a) as it has no potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.
In addition, the Related Santa Clara Project, including all work on and impacts to the Landfill, was analyzed in accordance with the requirements of the California Environmental Quality Act (CEQA) in the CityPlace Santa Clara EIR [SCH#2014072078] as certified and adopted by Council on June 28, 2016 by Resolution No. 16-8337.
FISCAL IMPACT
The City expects to pay up to $450,000 in fiscal year 2020/21 for its share of the CPL and PLL policy, which payment will be subject to reimbursement from Developer on an amortized basis over the term of such policies. Pending the finalized cost of the insurance premiums, staff will bring forward a budget amendment recommendation to the Council at a later date to appropriate funding to cover the City’s upfront share. As part of the FY 2019/20 and FY 2020/21 Adopted Operating Budget, approximately $450,000 and $550,000, respectively, were allocated in the General Fund Non-Departmental to cover the golf and tennis closure and transition costs. Staff anticipates using the majority of that allocation to fund the upfront cost of City’s contribution to the insurance premiums.
COORDINATION
This report has been coordinated with the Finance Department and City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov.
RECOMMENDATION
Recommendation
Approve and authorize the City Manager to execute the Landfill Post-Closure Operations and Management Agreement with Related Santa Clara, LLC for the Related Santa Clara development project and authorize the City Manager to obtain additional insurance programs to bolster the limits of liability available to City under the Project insurance programs.
Staff
Reviewed by: Ruth Mizobe Shikada, Assistant City Manager
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. RTC 20-464: Action on Landfill Post-Closure Operation and Management Agreement
2. Final form of Landfill Post-Closure Operations and Management Agreement