TO: Honorable Mayor and Members of the City Council
FROM: Jarad Hildenbrand, City Manager
1. Subject
title
Third Amendment to Memorandum of Understanding with Milan REI X, LLC
body
2. Summary
On July 22, 2025, the City Council approved a Memorandum of Understanding (MOU) with Milan REI X, LLC (Milan), establishing a framework for processing certain development applications while preserving the parties' existing Builder's Remedy Tolling Agreements.
The First Amendment extended the applicable processing deadlines and authorized the City Manager to approve additional extensions in 30-day increments through January 22, 2027. The Second Amendment addressed potential litigation challenging the City's approval of the Residential Project and/or Open Space Project.
The proposed Third Amendment would extend the City Manager's authority to approve additional 30-day extensions of the Tolling Agreements and applicable processing deadlines through July 22, 2027. The additional time is necessary to continue addressing outstanding environmental and regulatory matters associated with the Sully-Miller Open Space Project, including coordination with the Orange County Local Enforcement Agency, CalRecycle, and the Santa Ana Regional Water Quality Control Board.
3. Recommended Action
recommendation
Approve the Third Amendment to the Memorandum of Understanding with Milan REI X, LLC; and authorize the Mayor and City Clerk to execute on behalf of the City.
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4. Fiscal Impact
None.
5. Strategic Plan Goals
Goal 2: Enhance Economic Development and Achieve Fiscal Sustainability
2.3: Sully Miller Site - Work with the appropriate stakeholders and identify a beneficial use and final resolution for the Sully Miller site
6. Discussion and Background
On July 22, 2025, the Orange City Council approved an MOU with Milan establishing a cooperative framework for processing development applications involving three properties:
• Mabury-22 Project (22 single-family homes north of Santiago Creek);
• Arena Residential Project (30 residential units at 6146 E. Santiago Canyon Road); and
• Sully-Miller Open Space Project.
The MOU was negotiated to facilitate the processing of these projects while preserving the opportunity to resolve Milan's previously submitted Builder's Remedy applications and advance the long-term preservation of the Sully-Miller property as public open space.
First and Second Amendments
In May 2026, the City Council approved the First Amendment, extending the Builder's Remedy Tolling Agreements and applicable approval deadlines through August 21, 2026. The amendment also authorized the City Manager to approve additional extensions in 30-day increments, for a period not exceeding six months from July 22, 2026.
Each extension requires a determination that the extension is in the City's best interests, a written status update from Milan regarding progress on the projects and regulatory clearances, and a determination that the extension does not materially impair the City's ability to enforce the MOU.
On July 28, 2026, the City Council approved the Second Amendment, allowing Milan to extend the applicable Tolling Agreements in the event of litigation challenging the Residential Project or Open Space Project, including appeals.
Proposed Third Amendment
While progress has been made toward implementing the MOU, significant regulatory coordination remains necessary for the Sully-Miller Open Space Project. The proposed restoration of the property involves ongoing review and coordination with the Orange County Local Enforcement Agency (LEA), CalRecycle, and the Santa Ana Regional Water Quality Control Board. These agencies have regulatory responsibilities related to existing site conditions, environmental compliance, and the proposed Inert Debris Engineered Fill Operation (IDEFO).
Additional time is needed to address outstanding regulatory requirements, resolve technical issues, and advance the restoration plan through the applicable review processes. Much of this work involves agencies outside the City's direct control, and the timing of regulatory determinations may affect the ability to move the project forward.
The proposed Third Amendment would extend the City Manager's existing authority to approve additional extensions of the Builder's Remedy Tolling Agreements and applicable approval deadlines through July 22, 2027.
Under the amendment, extensions would continue to be approved in 30-day increments, upon request by Milan and a determination by the City Manager that the extension is in the City's best interests. The procedural requirements established by the First Amendment would remain in effect.
The amendment does not automatically extend the agreements through July 22, 2027. Rather, it provides additional flexibility for the City and Milan to continue working through outstanding regulatory and project processing matters while preserving the negotiated framework established by the MOU.
The Third Amendment does not approve any development project, grant development entitlements, or modify the City's land use authority or obligations under applicable law. Except as expressly modified, all other provisions of the MOU and its prior amendments remain unchanged.
Public Benefit
The original MOU established a coordinated approach intended to advance several public objectives, including resolution of the pending Builder's Remedy applications, processing of the Arena Residential Project, completion of the Mabury-22 subdivision, and restoration and future public ownership of the Sully-Miller property.
Extending the City Manager's authority to approve additional 30-day extensions would provide flexibility to continue pursuing these objectives while maintaining the City's ability to evaluate Milan's progress and determine whether each additional extension remains appropriate.
Consequences of Not Approving the Amendment
Without the Third Amendment, the City Manager's existing authority to approve administrative extensions would expire no later than January 22, 2027. Any additional extensions beyond that date would require further City Council authorization.
Expiration of the Tolling Agreements could undermine the negotiated framework established by the MOU and potentially allow Milan to pursue its previously submitted Builder's Remedy applications, consistent with applicable law and the terms of the agreements.
Approval of the Third Amendment would preserve the existing process for considering extensions while allowing the City and Milan additional time to advance the projects.
7. ATTACHMENTS
Third Amendment to Memorandum of Understanding with Milan REI X, LLC