Resolution No. 2023-022RESOLUTION NO. 2023-22
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON
AMENDING THE ESCROW AGREEMENT, ASSIGNMENT AND
ASSUMPTION OF PURCHASE AND SALE AGREEMENT, AND ADDED
FACILITIES AGREEMENT TO ALLOW FOR FINAL DISBURSEMENT
AND RELEASE OF FUNDING TO RPLANET EARTH LOS ANGELES, LLC
SECTION 1. Recitals.
A. rPlanet Earth Los Angeles, LLC (rPlanet) is a manufacturer of plastic goods from
recycled materials. It has built a 302,000 square foot one-of-a-kind plastic
recycling and manufacturing plant located at 5300 South Boyle Avenue in Vernon
(formerly 3200 Fruitland Avenue in Vernon). rPlanet has become an industry
leader in the production of low carbon footprint and recycled polyethylene
terephthalate-based packaging.
B. Due to rPlanet’s estimated power demand, on January 19, 2016, City Council
adopted Resolution No. 2016-04 approving an Added Facilities Agreement (AFA)
with rPlanet which covers additional equipment and services needed to serve
rPlanet’s electrical needs, pursuant to the requirements outlined in the Electric
Service Rate No. 2.
C. Under the AFA, the parties agreed that the City shall provide design, engineering,
procurement, construction, installation, ownership, and maintenance of the
electric facilities and rPlanet delivered $2,300,000 for deposit to an escrow
account established by the City to cover costs incurred with the Added Facilities
Installation.
D. On July 17, 2018, City Council approved the request for Disbursement No. 1 in
the amount of $723,155.58 for a portion of Phase 1 services and on December 4,
2018, the City Council approved the request for Disbursement No. 2 in the amount
of $391,610.93 for a portion of Phase 1 construction.
E. All Additional Facilities Installations have been completed at the rPlanet Earth
plant related to Phases 1 and 2 and staff has recommended approval to submit
Request for Disbursement No. 3 to the Escrow Agent in the amount of
$416,610.27.
F. Once this disbursement is made to the City, the remaining estimated balance in
the Added Facilities Agreement Escrow Account is $813,915.40, not including
accrued interest.
G. Based on the uncertain timing of any future added facilities or project expansion
that would draw upon the remaining Added Facilities Escrow funds, rPlanet has
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requested the City release to it the remaining balance in the Added Facilities
Agreement Escrow Account to rPlanet.
H. The City Council believes it is equitable to release the remaining funds rather than
continuing to hold them in escrow indefinitely with no additional work planned, and
the City Council therefore wishes to authorize the release of the remaining
balance in the Added Facilities Agreement Escrow Account to rPlanet.
I. On August 18, 2015, the City Council adopted Resolution No. 2015-57, approving
a transaction with Fruitland Owner, LLC (COX) regarding an Assignment and
Assumption of Purchase and Sale Agreement (Agreement) for property located
at 5300 South Boyle Avenue in Vernon (formerly 3200 Fruitland Avenue in
Vernon); which Agreement has been amended three times.
J. In accordance with Section 8 of the Agreement and as reiterated in Section B of
the Escrow Agreement dated February 2, 2016, rPlanet was expected to utilize at
the Property an average minimum, for a trailing 12-month period, of (a) 3.3
megawatts of electrical power on or before January 1, 2019, (b) 4.8 megawatts of
electrical power on or before January 1, 2021, and (c) 8 megawatts of electrical
power on or before January 1, 2023 (each (a) through (c) being a “Consumption
Hurdle”); rPlanet delivered to the Escrow Agent the amount of one million two
hundred fifty thousand dollars ($1,250,000) as security for anticipated electrical
power usage at the Property.
K. On April 19, 2022, City Council approved and authorized the City Administrator to
grant the request from rPlanet to consider that the second Consumption Hurdle
target has been achieved and approved and authorized the City Administrator to
grant the request from rPlanet to waive the third hurdle target of 8 megawatts
(MW) and to release the final deposit of $416,667 once the third electrical
consumption hurdle of 8MW is met.
L. The City has become aware that rPlanet has experienced continued timing
challenges regarding planned expansion and growth at its Vernon production
facility and the City and rPlanet recognize that the timeline for the remaining
electric consumption hurdle remains uncertain given rPlanet’s current operations
and setbacks due to the pandemic.
M. rPlanet has requested release of remaining funds from the Consumption Hurdle
Escrow Account to provide working capital so that rPlanet can continue to invest
in its existing Vernon operations.
N. For these reasons, the City Council wishes to waive the final consumption hurdle
of 8MW and authorize the release of remaining funds from the Consumption
Hurdle Escrow Account, currently estimated at $441,613.98 plus accrued interest.
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O. In order to effectuate the above-described releases and refunds of fundings from
escrow accounts, the City Council desires to amend the below described
agreements.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF VERNON AS FOLLOWS:
SECTION 2. The City Council of the City of Vernon finds and determines that the
above recitals are true and correct.
SECTION 3. Finds the action is categorically exempt from California
Environmental Quality Act (CEQA) review, in accordance with CEQA Guidelines section
15060(c)(3), because it constitutes government fiscal activities that do not involve any
commitment to any specific project that may result in a potentially significant physical
impact on the environment and organizational or administrative activities of a public
agency that will not result in direct or indirect physical changes in the environment.
Moreover, adoption of the Resolution does not qualify as a "project" because it does not
have the potential to result in either a direct, or reasonably foreseeable indirect, physical
change in the environment, in accordance with CEQA Guidelines section 15378(a).
SECTION 4. The City Council hereby approves the First Amendment to Escrow
Agreement, attached hereto and incorporated herein by this reference as Exhibit A.
SECTION 5. Pursuant to Section C – General Instructions – of the Escrow
Agreement, the Escrow Agreement shall be terminated at the time that Escrow Agent
releases the Funds on Deposit to Owner. The City Council therefore directs the
termination of the Escrow Agreement following release of Funds on Deposit to Owner
and instructs Escrow Agent to close and/or cancel escrow pursuant to the Escrow
Agreement.
SECTION 6. The City Council hereby approves the Fourth Amendment to that
certain agreement entitled “Agreement Regarding Assignment and Assumption of
Purchase and Sale Agreement” and dated August 4, 2015, attached hereto and
incorporated herein by this reference as Exhibit B.
SECTION 7. The City Council hereby approves the First Amendment to City of
Vernon Added Facilities Agreement, attached hereto and incorporated herein by this
reference as Exhibit C.
SECTION 8. The City Council hereby authorizes the Mayor to execute said
Amendments for, and on behalf of, the City of Vernon and the City Clerk is hereby
authorized to attest thereto.
SECTION 9. The City Council of the City of Vernon hereby instructs the City
Administrator, or designee, to take whatever actions are deemed necessary or desirable
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for the purpose of implementing and carrying out the purposes of this Resolution and the
transactions herein approved or authorized, including but not limited to, any non-
substantive changes to the Amendments attached herein.
SECTION 10. The City Clerk shall certify the passage and adoption of this
resolution and enter it into the book of original resolutions.
APPROVED AND ADOPTED October 3, 2023.
________________________
CRYSTAL LARIOS, Mayor
ATTEST:
LISA POPE, City Clerk
(seal)
APPROVED AS TO FORM:
ZAYNAH N. MOUSSA, City Attorney
I CERTIFY THAT RESOLUTION NO. 2023-22 was passed and adopted by the City
Council of the City of Vernon at the Regular Meeting on October 3, 2023, by the following
vote:
AYES: 5 Council Members: Lopez, Rivera, Ybarra, Merlo, Larios
NOES: 0
ABSENT: 0
ABSTAIN: 0
________________________________
LISA POPE, City Clerk
(seal)
Resolution No. 2023-22
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EXHIBIT A
First Amendment to Escrow Agreement
THIS FIRST AMENDMENT TO ESCROW AGREEMENT (this “Amendment”) is made
and entered into as of October 3, 2023 (the “Effective Date”) by and between the City of
Vernon (“City”), rPlanet Earth Los Angeles, LLC, a Delaware Limited Liability Company
(“Customer”) and Fruitland Owner, LLC, a Delaware Limited Liability Company
(“Owner”).
Recitals
WHEREAS, rPlanet Earth (“rPlanet”) is a manufacturer of plastic goods from
recycled materials. It has built a 302,000 square foot one-of-a-kind plastic recycling and
manufacturing plant located at 5300 South Boyle Avenue in Vernon (formerly 3200
Fruitland Avenue in Vernon). rPlanet has become an industry leader in the production of
low carbon footprint and recycled polyethylene terephthalate-based packaging; and
WHEREAS, on August 18, 2015, the City Council adopted Resolution No. 2015-
57, approving a transaction with Fruitland Owner, LLC (“COX”) regarding an Assignment
and Assumption of Purchase and Sale Agreement (“Agreement”) for property located at
5300 South Boyle Avenue in Vernon (formerly 3200 Fruitland Avenue in Vernon); which
Agreement has been amended three times; and
WHEREAS, on February 2, 2016, the City and COX executed an Escrow
Agreement setting forth escrow instructions for the Agreement; and
WHEREAS, in accordance with Section 8 of the Agreement and as reiterated in
Section B of the Escrow Agreement, rPlanet was expected to utilize at the Property an
average minimum, for a trailing 12-month period, of (a) 3.3 megawatts of electrical power
on or before January 1, 2019, (b) 4.8 megawatts of electrical power on or before January
1, 2021, and (c) 8 megawatts of electrical power on or before January 1, 2023 (each (a)
through (c) being a “Consumption Hurdle”); rPlanet delivered to the Escrow Agent the
amount of one million two hundred fifty thousand dollars ($1,250,000) as security for
anticipated electrical power usage at the Property; and
WHEREAS, on April 19, 2022, City Council approved and authorized the City
Administrator to grant the request from rPlanet to consider that the second Consumption
Hurdle target has been achieved and approved and authorized the City Administrator to
grant the request from rPlanet to waive the third hurdle target of 8 megawatts (“MW”) and
to release the final deposit of $416,667 once the third electrical consumption hurdle of
8MW is met.
WHEREAS, the City has become aware that rPlanet has experienced continued
timing challenges regarding planned expansion and growth at its Vernon production
facility and the City and rPlanet recognize that the timeline for the remaining electric
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consumption hurdle remains uncertain given rPlanet’s current operations and setbacks
due to the pandemic; and
WHEREAS, rPlanet has requested release of remaining funds from the
Consumption Hurdle Escrow Account to provide working capital so that rPlanet can
continue to invest in its existing Vernon operations.
Amendment
Section B – Assignment Agreement – of that certain agreement entitled “Escrow
Agreement” and dated February 2, 2016, (“Escrow Agreement”), is hereby amended to
read as follows (additions in underline, deletions in strikethrough):
B. Assignment Agreement
Pursuant to Section 8 of the Assignment Agreement, concurrently with the delivery of the
Purchase Price at Closing, Owner (or Customer on Owner's behalf) shall deliver to
Escrow Agent an amount equal to One Million Two Hundred Fifty Thousand Dollars
($1,250,000) together with any interest earned thereon, the "Financial Assurance
Funds") as security for Owner' s or Customer's anticipated electrical power usage at the
Property. Escrow Agent shall place the Financial Assurance Funds in an interest-bearing
account and hold the Financial Assurance Funds in escrow and deliver such Financial
Assurance Funds in accordance with these instructions. The investment shall be subject
to Escrow Holder's receipt of its executed Interest-Bearing Account Instructions and IRS
Form W-9. Within thirty (30) days following execution of this Amendment, Escrow Agent
shall disburse all Funds to Customer by electronic wire transfer. Upon a joint and written
instruction of City, Customer and Owner that Owner or Customer has achieved a
Consumption Hurdle by the specified date applicable thereto as set forth in the
Assignment Agreement, Escrow Agent shall disburse an amount equal to one- third (1/3)
of the Financial Assurance Funds (i.e., $416,666.25, plus a pro rata portion of the interest
accrued on the Financial Assurance Funds) to Customer within two (2) business days of
receipt of written notice jointly executed by Owner, Customer and City stating that
Customer is entitled to the requested amount pursuant to the Assignment Agreement. If
a Consumption Hurdle is not achieved by the applicable date as set forth in the
Assignment Agreement (i.e., January 1, 2019, January 1, 2021, and January 1, 2023, as
applicable), then Escrow Agent shall, without further authorization or approval from
anyone, disburse an amount equal to one-third (1/3) of the Financial Assurance Funds
(i.e., $416,666.25, plus a pro rata portion of the interest accrued on the Financial
Assurance Funds) to City within two (2) business days of receipt of written notice from
the City (with City providing Customer with a copy of such notice) stating that City is
entitled to the requested amount pursuant to the Assignment Agreement. Initially
capitalized terms used in this Section B without definition shall have the meaning set forth
in the Assignment Agreement.
Except as expressly modified by this Amendment, all provisions of the Escrow
Agreement shall remain in full force and effect.
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The provisions of this Amendment shall constitute the entire agreement of the
parties with respect to the subject matter included in this Amendment and shall supersede
any other agreement, understanding, or arrangement, whether written or oral, between
the parties with respect to the subject matter of this Amendment.
The person or persons executing this Amendment on behalf of each of the parties
warrants and represents that he or she has the authority to execute this Amendment on
behalf of that party and has the authority to bind that party to the performance of its
obligations hereunder.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date stated in the introductory clause.
CITY:
THE CITY OF VERNON
By: _____________________
Crystal Larios, Mayor
ATTEST:
Lisa Pope, City Clerk
APPROVED AS TO FORM
___________________________
Zaynah N. Moussa, City Attorney
CUSTOMER:
rPLANET EARTH LOS ANGELES, LLC
By: ___________________________
Name: ___________________________
Title: ___________________________
OWNER:
FRUITLAND OWNER, LLC
By: ___________________________
Name: ___________________________
Resolution No. 2023-22
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A-8
Title: ___________________________
ACKNOWLEDGED & AGREED:
COMMONWEALTH LAND TITLE COMPANY
By: ___________________________
Name: ___________________________
Title: ___________________________
Resolution No. 2023-22
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B-9
EXHIBIT B
Fourth Amendment to Agreement Regarding Assignment and
Assumption of Purchase and Sale Agreement
THIS FOURTH AMENDMENT TO AGREEMENT REGARDING ASSIGNMENT
AND ASSUMPTION OF PURCHASE AND SALE AGREEMENT (this “Amendment”) is
made and entered into as of October 3, 2023 (the “Effective Date”) by and between the
City of Vernon (“City”) and Fruitland Owner, LLC, a Delaware Limited Liability Company
(“Cox”).
Recitals
WHEREAS, rPlanet Earth (“rPlanet”) is a manufacturer of plastic goods from
recycled materials. It has built a 302,000 square foot one-of-a-kind plastic recycling and
manufacturing plant located at 5300 South Boyle Avenue in Vernon (formerly 3200
Fruitland Avenue in Vernon). rPlanet has become an industry leader in the production of
low carbon footprint and recycled polyethylene terephthalate-based packaging; and
WHEREAS, on August 18, 2015, the City Council adopted Resolution No. 2015-
57, approving a transaction with Fruitland Owner, LLC (“COX”) regarding an Assignment
and Assumption of Purchase and Sale Agreement (“Agreement”) for property located at
5300 South Boyle Avenue in Vernon (formerly 3200 Fruitland Avenue in Vernon); which
Agreement has been amended three times; and
WHEREAS, on February 2, 2016, the City and COX executed an Escrow
Agreement setting forth escrow instructions for the Agreement; and
WHEREAS, in accordance with Section 8 of the Agreement and as reiterated in
Section B of the Escrow Agreement, rPlanet was expected to utilize at the Property an
average minimum, for a trailing 12-month period, of (a) 3.3 megawatts of electrical power
on or before January 1, 2019, (b) 4.8 megawatts of electrical power on or before January
1, 2021, and (c) 8 megawatts of electrical power on or before January 1, 2023 (each (a)
through (c) being a “Consumption Hurdle”); rPlanet delivered to the Escrow Agent the
amount of one million two hundred fifty thousand dollars ($1,250,000) as security for
anticipated electrical power usage at the Property; and
WHEREAS, on April 19, 2022, City Council approved and authorized the City
Administrator to grant the request from rPlanet to consider that the second Consumption
Hurdle target has been achieved and approved and authorized the City Administrator to
grant the request from rPlanet to waive the third hurdle target of 8 megawatts (”MW”) and
to release the final deposit of $416,667 once the third electrical consumption hurdle of
8MW is met.
WHEREAS, the City has become aware that rPlanet has experienced continued
timing challenges regarding planned expansion and growth at its Vernon production
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B-10
facility and the City and rPlanet recognize that the timeline for the remaining electric
consumption hurdle remains uncertain given rPlanet’s current operations and setbacks
due to the pandemic; and
WHEREAS, rPlanet has requested release of remaining funds from the
Consumption Hurdle Escrow Account to provide working capital so that rPlanet can
continue to invest in its existing Vernon operations; and
WHEREAS, for these reasons, the City Council wishes to waive the final
consumption hurdle of 8 MW and authorize the release of remaining funds from the
Consumption Hurdle Escrow Account, currently estimated at $441,613.98 plus accrued
interest.
Amendment
Section 8 – Financial Assurance – of that certain agreement entitled “Agreement
Regarding Assignment and Assumption of Purchase and Sale Agreement” dated August
4, 2015, as amended by that certain Amendment to Agreement Regarding Assignment
and Assumption of Purchase and Sale Agreement dated August 21, 2015, and as
amended by that certain Second Amendment to Agreement Regarding Assignment and
Assumption of Purchase and Sale Agreement dated October 27, 2015, and as amended
by that certain Third Amendment to Agreement Regarding Assignment and Assumption
of Purchase and Sale Agreement dated January 19, 2016, is hereby amended to read as
follows (additions in underline, deletions in strikethrough):
8. Financial Assurance. Concurrently with the delivery of the Purchase Price, COX
shall deliver to Escrow Agent an amount equal to $1,250,000 (the "Financial
Assurance"). Within thirty (30) days following execution of this Amendment, Escrow
Agent shall disburse all Financial Assurance to Customer by electronic wire transfer
(“Final Disbursement”). The Financial Assurance is provided by COX in accordance
herewith pursuant to the expectation of the City that COX (and/or its tenant) will utilize at
the Property an average minimum, for a trailing 12-month period, of (a) 3.3 mega watts
of electrical power on or before January 1, 2019, and (b) 4.8 mega watts of electrical
power on or before January 1, 2021, and (c) 8 mega watts of electrical power on or before
January 1, 2023 (each of (a) through (c) being a "Consumption Hurdle"). If COX and/or
its tenant achieves the Consumption Hurdle by the specified date applicable thereto, and
City confirms the same in writing, then 1/3rd of the Financial Assurance (plus a pro rata
portion of interest accrued on the Financial Assurance) shall he disbursed by Escrow
Agent to COX pursuant to a written instruction mutually executed by COX and City. If a
Consumption Hurdle is not achieved by the applicable date, then 1/3rd of the Financial
Assurance (plus pro rata portion of the interest accrued on the Financial Assurance) shall
be deemed fully earned by, and due and payable to City, and disbursed by Escrow Agent
to City. On or prior to the Closing, COX and City shall execute and deliver to Escrow
Agent a mutually acceptable escrow agreement in connection with the Financial
Assurance. The parties shall split equally any costs charged by Escrow Agent in
connection with such escrow for the Financial Assurance. COX agrees to release and
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hold harmless City, its successors and assigns, from and against all claims, losses,
actions, demands, damages, costs and expenses related to and/or arising from the Final
Disbursement and the exercise of the rights, privileges and obligations of the parties
regarding all Financial Assurance and the Final Disbursement. This provision shall
survive the Closing.
Except as expressly modified by this Amendment, all provisions of the Agreement
Regarding Assignment and Assumption of Purchase and Sale Agreement shall remain in
full force and effect.
The provisions of this Amendment shall constitute the entire agreement of the
parties with respect to the subject matter included in this Amendment and shall supersede
any other agreement, understanding, or arrangement, whether written or oral, between
the parties with respect to the subject matter of this Amendment.
The person or persons executing this Amendment on behalf of each of the parties
warrants and represents that he or she has the authority to execute this Amendment on
behalf of that party and has the authority to bind that party to the performance of its
obligations hereunder.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date stated in the introductory clause.
CITY:
THE CITY OF VERNON
By: _____________________
Crystal Larios, Mayor
ATTEST:
Lisa Pope, City Clerk
APPROVED AS TO FORM
Zaynah N. Moussa, City Attorney
COX:
FRUITLAND OWNER, LLC
By: ___________________________
Name: ___________________________
Title: ___________________________
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EXHIBIT C
Amendment to
City of Vernon Added Facilities Agreement
THIS AMENDMENT TO CITY OF VERNON ADDED FACILITIES AGREEMENT
(this “Amendment”) is made and entered into as of October 3, 2023 (the “Effective
Date”) by and between the City of Vernon (“City”) and rPlanet Earth Los Angeles, LLC,
a Delaware Limited Liability Company (“Customer”).
Recitals
WHEREAS, rPlanet Earth (“rPlanet”) is a manufacturer of plastic goods from
recycled materials. It has built a 302,000 square foot one-of-a-kind plastic recycling and
manufacturing plant located at 5300 South Boyle Avenue in Vernon (formerly 3200
Fruitland Avenue in Vernon). rPlanet has become an industry leader in the production of
low carbon footprint and recycled polyethylene terephthalate-based packaging; and
WHEREAS, due to rPlanet’s estimated power demand, on January 19, 2016, City
Council adopted Resolution No. 2016-04 approving an Added Facilities Agreement
(“AFA”) with rPlanet which covers additional equipment and services needed to serve
rPlanet’s electrical needs, pursuant to the requirements outlined in the Electric Service
Rate No. 2; and
WHEREAS, under the AFA, the parties agreed that the City shall provide design,
engineering, procurement, construction, installation, ownership, and maintenance of the
electric facilities and rPlanet delivered $2,300,000 for deposit to an escrow account
established by the City to cover costs incurred with the Added Facilities Installation; and
WHEREAS, on July 17, 2018, City Council approved the request for Disbursement
No. 1 in the amount of $723,155.58 for a portion of Phase 1 services and on December
4, 2018, the City Council approved the request for Disbursement No. 2 in the amount of
$391,610.93 for a portion of Phase 1 construction; and
WHEREAS, all Additional Facilities Installations have been completed at the
rPlanet Earth plant related to Phases 1 and 2 and staff has recommended approval to
submit Request for Disbursement No. 3 to the Escrow Agent in the amount of
$416,610.27; and
WHEREAS, once this disbursement is made to the City, the remaining estimated
balance in the Added Facilities Agreement Escrow Account is $813,915.40, not including
accrued interest; and
WHEREAS, based on the uncertain timing of any future added facilities or project
expansion that would draw upon the remaining Added Facilities Escrow funds, rPlanet
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has requested the City release to it the remaining balance in the Added Facilities
Agreement Escrow Account to rPlanet.
Amendment
Section 19.1 of that certain agreement entitled “City of Vernon Added Facilities
Agreement”, dated February 2, 2016, is hereby amended to read as follows (additions in
underline, deletions in strikethrough):
19.1. Within three (3) business days after the Effective Date, Customer shall deliver to
Commonwealth Land Title Insurance Company, Attention: Mai Ly Marsh ("Escrow
Agent"), in immediately available funds an amount equal to the Reserve Amount (the
"Reserve Funds"). Within thirty (30) days following execution of this Amendment, Escrow
Agent shall release and refund the balance of Reserve Funds remaining with the Escrow
Agent to Customer by electronic wire transfer (“Final Release and Refund”). Customer
agrees to release and hold harmless City, its successors and assigns, from and against
all claims, losses, actions, demands, damages, costs and expenses related to and/or
arising from the Final Release and Refund and the exercise of the rights, privileges and
obligations of the parties regarding all Reserve Funds and the Final Release and Refund.
City will be entitled to use the Reserve Funds for purposes of paying the Added Facilities
Installation Costs and Line Extension Costs. From time to time, as the City progresses
with the Services regarding the Added Facilities and/ or Line Extension, the City may
request a disbursement from the Escrow Agent in order to pay Added Facilities
Installation Costs and/ or Line Extension Costs. Escrow Agent shall, without further
authorization or approval from anyone, disburse the requested amount to City. If City at
any time determines that the Reserve Funds are insufficient to pay the Added Facilities
Installation Costs and/ or Line Extension Costs the insufficient amount being the "
Deficiency"), Customer shall, within five (5) business days after notice thereof from City,
deliver to Escrow Agent an amount equal to 200% of such Deficiency. Upon completion
of the installation of the Added Facilities and Line Extension and payment of all Added
Facilities Installation Costs and Line Extension Costs, any balance of the Reserve Funds
remaining with the Escrow Agent shall be released and refunded to Customer upon a
joint written instruction of City and Customer.
Except as expressly modified by this Amendment, all provisions of the City of
Vernon Added Facilities Agreement shall remain in full force and effect.
The provisions of this Amendment shall constitute the entire agreement of the
parties with respect to the subject matter included in this Amendment and shall supersede
any other agreement, understanding, or arrangement, whether written or oral, between
the parties with respect to the subject matter of this Amendment.
The person or persons executing this Amendment on behalf of each of the parties
warrants and represents that he or she has the authority to execute this Amendment on
behalf of that party and has the authority to bind that party to the performance of its
obligations hereunder.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date stated in the introductory clause.
CITY:
THE CITY OF VERNON
By: ____________________
Crystal Larios, Mayor
ATTEST:
Lisa Pope, City Clerk
APPROVED AS TO FORM
___________________________
Zaynah N. Moussa, City Attorney
CUSTOMER:
rPLANET EARTH LOS ANGELES, LLC
By: ___________________________
Name: ___________________________
Title: ___________________________
City Council Agenda Report
Meeting Date:October 3, 2023
From:Todd Dusenberry, General Manager of Public Utilities
Department:Public Utilities
Submitted by:Adriana Ramos, Administrative Analyst
Subject
rPlanet Earth Los Angeles, LLC - Request to Consider Items Regarding Added Facilities for
Electric Service and Electric Consumption Hurdle Escrow Funds
Recommendation
A. Find the action is categorically exempt from California Environmental Quality Act (CEQA)
review, in accordance with CEQA Guidelines section 15060(c)(3), because it constitutes
government fiscal activities that do not involve any commitment to any specific project that may
result in a potentially significant physical impact on the environment and organizational or
administrative activities of a public agency that will not result in direct or indirect physical changes
in the environment. Moreover, adoption of the Resolution does not qualify as a "project" because
it does not have the potential to result in either a direct, or reasonably foreseeable indirect,
physical change in the environment, in accordance with CEQA Guidelines section 15378(a);
B. Authorize the proposed request for Disbursement No. 3 to the existing Added Facilities
Agreement with rPlanet Earth Los Angeles, LLC, in substantially the same form as submitted, for
electric service delivery in the amount of $416,610.27; and
C. Adopt Resolution No. 2023-22 amending the Escrow Agreement, agreement regarding
Assignment and Assumption of Purchase and Sale Agreement, and Added Facilities Agreement
to release remaining escrow funds for Added Facilities, in the estimated amount of $813,915.40
plus accrued interest, and to waive the final electric consumption hurdle of eight (8) megawatts
(MW) and release the final deposit of $441,613.98 plus accrued interest from the Consumption
Hurdle Escrow Account.
Background
rPlanet Earth (rPlanet) is a manufacturer of plastic goods from recycled materials. It has built a
302,000 square foot one-of-a-kind plastic recycling and manufacturing plant located at 5300
South Boyle Avenue in Vernon (formerly 3200 Fruitland Avenue in Vernon). rPlanet has become
an industry leader in the production of low carbon footprint and recycled polyethylene
terephthalate-based packaging.
Electric Consumption Hurdles and Escrow Funds
On August 18, 2015, City Council adopted Resolution No. 2015-57, approving a transaction with
Fruitland Owner, LLC (COX) regarding an Assignment and Assumption of Purchase and Sale
Agreement (Agreement) for property located at 5300 South Boyle Avenue in Vernon (formerly
3200 Fruitland Avenue in Vernon). After two previous amendments related to the terms and
conditions of the property sale, on January 19, 2016, City Council adopted Resolution No. 2016-
04, authorizing the execution of a third amendment to the Assignment and Assumption of
Purchase and Sale Agreement by and between the City and COX.
In accordance with Section 8 of the Agreement and as reiterated in Section B of the Escrow
Agreement dated February 2, 2016, rPlanet was expected to utilize at the Property an average
minimum, for a trailing 12-month period, of (a) 3.3 megawatts of electrical power on or before
January 1, 2019, (b) 4.8 megawatts of electrical power on or before January 1, 2021, and (c) 8
megawatts of electrical power on or before January 1, 2023 (each (a) through (c) being a
“Consumption Hurdle”).
On November 17, 2020, City Council authorized the City Administrator to approve rPlanet’s
request to adjust the established Electric Consumption Hurdle date from January 1, 2021 to
January 1, 2022, due to challenges and delays caused by the global pandemic. The proposed
extension was granted to allow rPlanet time to recover and re-strategize to meet the second
Consumption Hurdle.
On January 27, 2022, rPlanet made two additional requests regarding the electric Consumption
Hurdles:
•The first request asked that the City consider that rPlanet achieved the January 2022
Consumption Hurdle target. For the 12-month period associated with the January 2022
Consumption Hurdle, rPlanet averaged 4.74 MW (.06 less than the target of 4.8 MW).
rPlanet started 2021 with a consumption average of 4 MW but ended the 12-month period
with a consumption of 5.36 MW.
•The second request asked that the third electrical consumption hurdle of 8 MW be waived;
or, that a date no longer be associated with the hurdle, so that upon attainment of the
targeted 8 MW the City releases the final deposit of $416,667. rPlanet stated that it had
experienced a delay in the commencement of a project that would double their production
volume and electricity consumption. rPlanet believed that once the project was completed
it would exceed 8 MW of electric consumption.
On April 19, 2022, City Council approved and authorized the City Administrator to grant the
request from rPlanet to consider that the second Consumption Hurdle target had been achieved
and approved a waiver of the third hurdle target of 8 megawatts (MW) such that the final deposit
of $416,667 would be released once the third electrical consumption hurdle of 8MW is met.
Since late 2022, there have been subsequent discussions and meetings with rPlanet regarding
the company’s ongoing timing challenges with planned expansion and growth at its Vernon
production facility. Both City staff and rPlanet recognize that, although the parties believe
rPlanet’s load will continue to grow, the original timeframes for the electric consumption hurdles
are no longer realistic given rPlanet’s current operations and setbacks due to the pandemic.
Based on these discussions, staff recommends that the City waive the final consumption hurdle
of 8 MW and authorize the release of remaining funds from the Consumption Hurdle Escrow
Account, currently estimated at $441,613.98 plus accrued interest. The initial deposit of
$1,250,000.00 was delivered to the Escrow Agent to meet the Consumption Hurdle requirement.
rPlanet has requested release of these funds to provide working capital so that it can continue to
invest in and ultimately expand its Vernon operations.
Added Facilities Agreement and Escrow Funds
Due to rPlanet’s estimated power demand, on January 19, 2016, City Council adopted Resolution
No. 2016-04 approving an Added Facilities Agreement (AFA) with rPlanet. The AFA covers
additional equipment and services needed to serve rPlanet’s electrical needs, pursuant to the
requirements outlined in the Electric Service Rate No. 2.
Under the AFA, the parties agreed that the City shall provide design, engineering, procurement,
construction, installation, ownership, and maintenance of the electric facilities as fully described
in Exhibit A of the AFA (the cost of which shall be paid solely by rPlanet). rPlanet delivered
$2,300,000 for deposit to an escrow account established by the City and rPlanet to cover costs
incurred with the Added Facilities Installation. Commonwealth Land Title Company is the escrow
agent mutually agreed upon to whom rPlanet delivered the necessary funds.
The Added Facilities Installations for the rPlanet Earth plant consisted of two phases. The total
Added Facilities Installation Cost for Phase 1 was estimated at $800,000 and $350,000 was
estimated for line extension and related services to accommodate Phase 1 electric services. On
July 17, 2018, City Council approved the request for Disbursement No. 1 in the amount of
$723,155.58 for a portion of Phase 1 services. On December 4, 2018, City Council approved the
request for Disbursement No. 2 in the amount of $391,610.93 for a portion of Phase 1
construction. Phase 2 electric services were estimated at $450,000. All required Additional
Facilities Installations have been completed at the rPlanet Earth plant related to Phases 1 and 2.
Staff recommends approval to submit Request for Disbursement No. 3 to the Escrow Agent in
the amount of $416,610.27. Once this disbursement is made to the City, the remaining estimated
balance in the Added Facilities Agreement Escrow Account is $813,915.40, not including accrued
interest.
Because rPlanet has no immediate plans or timeframes for future added facilities, staff also
recommends that City Council authorize the release of the remaining balance in rPlanet’s Added
Facilities Agreement Escrow Account. rPlanet has requested release of these funds and staff
believes it is equitable to do so rather than hold the remaining funds in escrow on an indefinite
basis. Any future work requested by rPlanet would be paid for by rPlanet and adhere to VPU’s
operating and payment procedures regarding any required engineering, procurement,
construction, and installation of electric facilities.
The Request for Disbursement No. 3 and proposed resolution have been reviewed and approved
as to form by the City Attorney’s Office. If approved, the City will request a release of remaining
escrow funds through correspondence to the Escrow Agent.
Fiscal Impact
There is no VPU fiscal impact associated with the proposed actions as the funds are currently
held in escrow accounts and there is no financial impact on utility revenues and operating &
maintenance expenses or capital expenditures.
Attachments
1. Resolution No. 2023-22
2. Resolution No. 2015-57
3. Resolution No. 2016-04