Discussion and possible action on any and all matters regarding Resolution No. 2352. A resolution of the Mayor and City Council of the City of San Luis, Arizona, authorizing the Acting City Manager to release the June 22, 2022, lien on land (approved by Resolution No. 2222) upon the adequate substitute assurances for Los Mezquites Subdivision.  (Kay Marion Macuil, City Attorney)

Background - Infrastructure to be Determined
On December 21, 2021, the City Council approved Resolution 2204 authorizing a Development Agreement with Riedel Holdings, LLC (the "Developer") for Los Mezquites Subdivision ("Mezquites").  Under Section 2.2 of that agreement, the Developer agreed to improvements and infrastructure needed as determined at the discretion of the city's Public Works Director ("Public Works"). Mezquites is being constructed in phases of 5 units ("Units").

Summary of Pledgehold Agreement - Land as Assurance for Infrastructure
On June 22, 2022, the City Council approved a Pledgehold Agreement through Resolution No. 2222. At the time of the Pledgehold Agreement, the Developer was finishing Unit 1. The Pledgehold Agreement allowed for construction to proceed to Unit 2.  In exchange, the city had land as collateral (Los Mezquites, Unit 4, about 74.8 acres) to construct and serve as an assurance for the following infrastructure under Section 9 of the Pledgehold. 

     Assurance for a Lift Station
Public Works determined that a wastewater lift station was necessary to serve all five Mezquites Units in addition to Von Verde private lands and state lands to the south. The lift station is known as the Los Mezquites/Von Verde Lift Station ("Lift Station"), located on Avenue D between County 23½ Street and County 24th Street.

     Assurance for a Lift Station Warranty
The developer installed the Lift Station. Under San Luis City Code Section 17.-5, Subdivision Regulations 6.5, there is a two-year warranty requirement for infrastructure dedicated to the city for maintenance. The Lift Station warranty expires on or about October 25, 2025. Under the San Luis City Code 17.5 Subdivision Regulations Section 6.2, 10% of the 100% assurance is retained for infrastructure warranty periods. The city requires 10% of the cost of the Lift Station when substituting assurances for the land.

     Lift Station Related Infrastructure - Odor Control with 10% of the cost retained for the Two-Year Warranty 
It is time for the Developer to install the odor control component of the Lift Station because recently built residences are near the Lift Station. The Odor Control is still pending. As of the writing of this agenda item, it has not been ordered. Once installed, a two-year warranty period will start. For the warranty period, the city retains 10% of the cost of the Odor Control component.

     Assurance for Los Mezquites Unit 2
The Pledgehold Agreement assures the city that the Developer will build Los Mezquites Unit 2.  Unit 1 is completed, and the warranty period has elapsed. All that remains is the warranty period for Unit 2, which will expire on or about October 25, 2025. A separate assurance in the form of a letter of credit was provided for Unit 2. Drafts were made on the letter of credit as the work was completed.  The city retains 10% of the letter of credit for the remainder of the warranty period. No substitution of assurance is required for this warranty.

      Assurance for Road and Intersection Improvements, including a Traffic Signal Light at Avenue E and County 24^th Street (with a two-year warranty on the equipment)
The Pledgehold Agreement assures the construction of the intersection improvements and a traffic signal light at the intersection of Avenue E and County 24th Street. This requirement was taken from the result of a traffic study for Mezquites that was in place at the time of the Pledgehold Agreement. Under the Pledgehold Agreement, the city obtained possession of the right-of-way needed for the road intersection improvements by condemnation on December 5, 2023 (after negotiations failed in the year 2022).

      Assurance for Road and Intersection Improvements, including a Traffic Signal Light at Avenue E and County 23^rd ½ Street (with a two-year warranty on the equipment)
The Pledgehold Agreement assures construction of the intersection improvements and a traffic signal light at the intersection of Avenue E and County 23^rd ½ Street. This requirement was taken from the same traffic study for Mezquites. Under the Pledgehold Agreement, the city obtained possession of the right-of-way needed for the road intersection improvements, which had been completed by condemnation on March 16, 2021, and December 5, 2023.  For the March 16, 2021, condemnation, the Developer has reimbursed the City. 

Release of Lien (Pledgehold) - This Agenda Item
The pledgehold, which is also a lien, on Unit 4 land may be released with substitute assurances for the above-listed items. The Developer recently provided a performance bond as a substitute. However, staff will be working with the bond company, so they clearly understand that the bond covers the above list. Resolution No. 2352, before the City Council in this agenda item, authorizes the Acting City Manager to release the hold on the land (Unit 4) once the understanding with the bond company is in hand.  The Public Works Director and the City Engineer are reviewing the Developer's Cost Estimates and that all items in the Pledgehold Agreement are covered. The San Luis City Code Section 17.05, Subdivision Regulation 6.2, requires that the City Attorney provide a final review of the performance bond in that it provides adequate assurance.