Council approves extension to Palo Verde Center agreement: Amended public benefit fee also OK'd

On Dec. 10, in reference to a proposed amendment for the Palo Verde Center, LLC, commercial cannabis cultivation project’s vested master development agreement, the Blythe City Council unanimously approved a six-month extension for the site to acquire building permits.

Following California Environmental Quality Act (CEQA) lawsuit settlements in July with the Irvine, Calif.,-based Better Neighborhoods Inc. (BNI) outfit and the Laborers International Union of North America (LIUNA), Local 1184, Palo Verde Center has eyed the second extension to the project’s receipts of building permit deadline, which lapsed this past June 27 after a previous six-month extension was granted in December 2018.

The specific terms of the July settlement agreement between BNI, LIUNA and Palo Verde Center were not publicly disclosed.

“The (six-month) extension granted (Palo Verde Center) for acquisition of building permits, set forth in Section 6.5(3), expired on June 27, 201(9). The developer has asked for another extension,” stated the agenda item’s staff report.

In addition to item’s proposed June 27, 2020, extension for the acquisition of building permits, discussion also noted negotiations between Palo Verde Center and the city with respect to a public benefit fee given some of the original 2017 agreement’s circumstances (i.e. June 2018’s Measure D cannabis tax) have changed.

“At the time the original Development Agreement was adopted, the city did not have a voter approved cannabis tax in place. Due to that, the agreement outlines a public benefit fee to be paid by the developer. The developer is required to pay $3 per square foot of cultivation space and 2.5 (percent) of gross receipts for all other cannabis businesses. If a tax were passed, the developer would receive credit for this amount. As the adopted tax is $3 for cultivation and 2 (percent) of gross receipts for all other cannabis businesses, per the terms of the Development Agreement, (the) developer is responsible to pay the difference in the gross receipts of .5 (percent). This is the only public benefit outlined in the Development Agreement,” states the staff report, which was presented by Blythe Interim City Manager Mallory Crecelius. “The developer requested to amend other items of the agreement, including the addition of acreage to the project site and the removal of the public benefit language. At the (Oct.) 8, 2019, council meeting, staff was directed to negotiate new terms of the Public Benefit Fee with the developer. After some back and forth, both the city and the developer have agreed on a new public benefit fee. The Public Benefit Fee will be a rate of .6667 cents per square feet for buildings 150,000 square feet or larger and a rate of $1 per square feet for buildings 149,999 or smaller. The public benefit fee will be paid prior to issuance of a Certificate of Occupancy for each (building.) The contract provides this fee will be paid on a cannabis related buildings/facilities only and does not apply to ancillary buildings/structures built on the property such as generator storage or a guard shack. The amendment also includes the additional acreage as requested by the developer.”

As outlined in the original 30-year development agreement’s terms, Section 6.5 states the contract may be terminated by mutual consent or in the event of any of the following:

1. Developer’s abandonment of the property;

2. Developer’s cessation of operations on the property for a period of no less than six months;

3. Developer’s failure to acquire building permits within one year of the effective date (now June 27, 2020);

4. Developer’s failure to commence construction within one year of the City of Blythe’s issuance of building permits for the project;

5. Developer’s failure to acquire and ensure no less than one tenant is operational and conducting business on the property within no more than four years following the effective date.

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