Item 12 - Agreement for Payment In-Lieu of Taxes

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Approval of Payment In-Lieu of Taxes Agreement — Cristo Rey Orange County High School (3601, 3611, 3621, and 3631 S. Harbor Blvd.) February 3, 2026 Page 2 property's rentable area to Cristo Rey County High School, Inc., a California nonprofit, to operate a professional school. On November 10, 2025, the Planning Commission approved Cristo Rey's CUP application to facilitate construction of a professional school use in two existing buildings at 3601 S. Harbor Boulevard, Unit 200, and 3611 S. Harbor Boulevard. Additional details on the project background, description, and analysis are available in Exhibit 2 of this staff report. Analysis The entire, integrated project site consists of 10 buildings on five separate parcels. Cristo Rey will occupy 3601 S. Harbor Boulevard, Unit 200, and 3611 S. Harbor Boulevard, which are situated on a single parcel (Assessor's Parcel Number 414-261-07). Cristo Rey qualifies for a tax exemption as a nonprofit educational institution. The Property Owner has voluntarily proposed a Payment In-Lieu of Taxes Agreement with the City of Santa Ana to offset the anticipated reduction in property tax revenue attributable to the school's occupancy, stemming from the occupancy of the entire building located at 3611 S. Harbor Boulevard (45,148 square feet) and the second floor of 3601 S. Harbor Boulevard (18,033 square feet), which amount to approximately 41.62% of the parcel's total rentable square footage. This agreement reflects the property owner's commitment to bridge the loss of property tax revenue to the City from that exempted portion (41.62%). The funds will support City services and community benefits, consistent with the General Plan's objective of fostering partnerships with educational institutions and promoting sustainable community development. The PILOT agreement outlines the payment terms, schedule, and annual amounts, with payments beginning on the first day of the month following issuance of the certificate of occupancy to the school. While initially proposed for a term of five (5) years, staff discussions with Cristo Rey resulted in a mutually agreed-upon term of twenty (20) years. Payments will continue annually on each anniversary for up to twenty (20) years, contingent on the school's continued operation at the site. The PILOT minimizes the fiscal and economic impacts to the City from the property's tax-exempt status. Over the life of the PILOT, the applicant is expected to make payments totaling approximately$412,000. City Council approval is necessary for this agreement, as there is no enabling ordinance authorizing staff to execute such agreements. The City Attorney has reviewed the agreement and found it to be satisfactory, subject to non-substantive changes approved by the City Manager and City Attorney. Approval of this item will allow the City Council to secure up to 20 years of property tax-equivalent payments through the agreement.