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CONSIDERATION OF THE SALE AND EXCHANGE OF A FORMER REDEVELOPMENT AGENCY PARKING LOT FOR A CITY OWNED PARKING LOT
A. SA RESOLUTION NO. 2016-001 OF THE SUCCESSOR AGENCY TO THE CHULA VISTA REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA APPROVING A PURCHASE AND SALE AGREEMENT WITH HC CAPITAL PARTNERS LLC, TO SELL ASSESSOR PARCEL NOS. 568-162-08 AND 568-162-09 FOR $350,000.00
B. RESOLUTION NO. 2016-052 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING A REAL PROPERTY EXCHANGE AGREEMENT BETWEEN HC CAPITAL PARTNERS LLC, AND THE CITY OF CHULA VISTA FOR CITY-OWNED PROPERTY LOCATED AT THE SOUTHWEST CORNER OF CHURCH AVENUE AND DAVIDSON STREET, ASSESSOR PARCEL NO. 568-161-25, IN EXCHANGE FOR PROPERTY LOCATED AT 281-287 CHURCH AVENUE, ASSESSOR PARCEL NOS. 568-162-08 AND 568-162-09
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RECOMMENDED ACTION
Recommended Action
Agency adopt resolution A and Council adopt resolution B.
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SUMMARY
Assembly Bills X1 26 and 1484 and Senate Bill 107 (“Dissolution Laws”) include many requirements for the dissolution of redevelopment agency activities, including the disposition of real property, other than housing assets. The Dissolution Laws generally require the Successor Agency to dispose of assets and property of the former redevelopment agency for either 1) limited public uses or 2) disposition into the private market. Disposition is to occur expeditiously and with a view toward maximizing value, with the disposition proceeds distributed to the affected taxing entities. The former redevelopment agency-owned property referred to in Resolution A (“Property A”) is recommended to be sold to HC Capital Partners (“HCCP”) for the appraised value of $350,000 as indicated by an MAI appraisal prepared in January 2016. SB 107 requires approval of the sale by the Oversight Board and the Successor Agency to the Redevelopment Agency. In addition, after the close of escrow by HCCP on Property A, staff recommends exchanging a city owned parking lot (Property B) with the lot purchased by HCCP (Property A). This action will preserve the larger and higher revenue producing parking lot (Property A). Therefore, concurrent with close of escrow for the sale Property A, HCCP will exchange Property A for the City-owned parking lot (Property B) located at the southwest corner of Church Avenue and Davidson Street Assessor Parcel No. 568-161-25.
ENVIRONMENTAL REVIEW
Environmental Notice
Environmental Notice
The proposed actions are not Projects pursuant to Section 15378 (“Project” Defined) of the California Environmental Quality Act State Guidelines because there is no potential for direct or indirect physical change in the environment.
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Environmental Determination
The Development Services Director has reviewed this item and has determined the following: Buyer seeks to purchase Property A, which is a parking lot, from the Successor Agency. The Buyer then seeks to swap Property A with the City in exchange for Property B, another parking lot. After the swap, both Property A and B will continue to be operated as parking lots, as they currently are. As such, the proposed actions amount to solely title transfers, with the parking lots continuing to be operated as parking lot. As a result, these actions are not “Projects” within the meaning of Section 15378 of the CEQA Guidelines because the proposed actions will not result in a direct or indirect physical change to the environment. Thus, no further environmental review is required. However, should the proposed use change from parking lots, additional environmental review/determination may be required at that time.
BOARD/COMMISSION RECOMMENDATION
The Purchase and Sale Agreements for Property A was recommended for approval by the Oversight Board of the Successor Agency to the Redevelopment Agency for the City of Chula Vista at the January 25, 2016 Board meeting. The resolution regarding the transfer of properties was not subject to the purview of the Oversight Board and therefore no recommendation was required.
DISCUSSION
The Dissolution Laws include many requirements for the dissolution of redevelopment agency activities, including the disposition of real property, other than housing assets. The Dissolution Laws generally require the Successor Agency to dispose of assets and property of the former redevelopment agency for either 1) limited public uses or 2) disposition into the private market. Disposition is to occur expeditiously and with a view toward maximizing value, with the disposition proceeds distributed to the affected taxing entities.
Health and Safety Code section 34191.5 requires Successor Agencies to prepare a Long-Range Property Management Plan (“LRPMP”) within six months of receiving the Finding of Completion from the Department of Finance. The Successor Agency received its Finding of Completion on May 7, 2013. The LRPMP was approved by DOF on July 15, 2014.
On September 22, 2015, the Governor signed SB 107, which gave Successor Agencies and Oversight Boards more discretion regarding the retention or disposition of parking facilities and lots dedicated solely to public parking. Under SB 107, the Successor Agency is allowed to amend its approved LRPMP once to allow for the retention of such parking facilities/lots. However, parking facilities and lots dedicated solely to public parking do not include properties that, as of the date of transfer pursuant to the amended long-range property management plan, generate revenues in excess of reasonable maintenance costs of the properties. Property A is currently used as a parking lot and the property generates revenue in excess of the annual maintenance costs. Staff has looked at the costs of maintainance of parking lots in the Downtown Parking District. Because the revenues for Property A exceed the maintenance costs, the property is not eligible to be retained per SB 107. The LRPMP called for the sale of Property A, and staff recommends that those sales now proceed without any amendment to the LRPMP for these properties.
In February 2015, the Successor Agency issued a request for proposal to select a realtor to assist in the sale of parcels identified in the LRPMP, including “Property A”. South Coast Commercial was selected as the most qualified respondent. In June 2015, South Coast Commercial commenced marketing the properties. This included listing the property on real estate websites and directly marketing the properties to over 20,000 local and national realtors and investors.
Property A
Property A is to be sold as fully described in a “REAL PROPERTY PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS” (“Agreement” or “PSA”) attached to this staff report as Attachment A. Property A is the westerly half of the parking lot located at 281-287 Church Avenue. The property is located in the Urban Core Specific Plan area. Further, the property is within the Third Avenue business district as well as adjacent to existing single and multi-family residential development (see “Attachment B - Site Map”).
For Property A, the Successor Agency received three offers to purchase. In reviewing the offers, staff looked at several factors, including the purchase price, buyer’s in-fill development experience and the consistency of their project proposal with the Urban Core Specific Plan. Of the three offers, HC Capital Partners (“HCCP”) was both the highest purchase price and the most qualified respondent. HCCP retained Integra Realty Resources (IRR), an MAI certified appraiser. In January 2016, IRR determined the value of the property to be $350,000. The purchase price of $350,000 equates to approximately $25 per square foot, which is comparable to recent sales activity in the area. Staff has reviewed the appraisal and concurs with the conclusions of the appraiser. Prior to the opening of escrow, the Buyer’s offer must be approved by the Successor Agency. Once the sale has been approved, escrow will be opened. Once the Buyer has completed their due diligence process, set forth in the PSA, the purchase will be completed within 60 days.
Property B
Property B is a City owned parking lot located at the southwest corner of Church Avenue and Davidson Street (Assessor Parcel No. 568-161-25). Property B is recommended to be exchanged with Property A so the City can maintain a large public parking lot which preserves the option to develop structured parking in the future. Staff recommends acquiring Property A through an exchange because it preserves the ability to provide future structured parking, generates a higher monthly income in parking revenue, can be acquired without impacting the fund balance of the parking district fund and provides HCCP the ability to provide parking to the first brewery to locate along Third Avenue, Thr3e Punk Ales Brewing.
DECISION-MAKER CONFLICT
Staff has reviewed the property holdings of the City Council and has found that Mayor Salas has real property holdings within 500 feet of the boundaries of the properties which are the subject of this action. Consequently, pursuant to California Code of Regulations Title 2, sections 18700 and 18702.2(a)(11), this item presents a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.) for the above-identified member.
Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City’s Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. The sale and ultimate development of the two sites supports the Economic Vitality goal as it seeks to foster opportunities for investment in Western Chula Vista.
CURRENT YEAR FISCAL IMPACT
Over the past year (the period for which data is available), Property A (Agency) has generated approximately $802 dollars in parking revenue per month. The Parking Meter Fund will continue to receive revenue until the close of escrow, which is anticipated to be no later than May 31, 2016.
Property B currently generates approximately $452 dollar per month in parking revenue. The Parking Meter Fund will continue to receive the revenue until the close of escrow, which is anticipated to be May 31, 2016. If the sale and transfer is approved, the City will acquire Property A and continue to receive the revenue.
ONGOING FISCAL IMPACT
If the sale and transfer is approved, the City will acquire, through an exchange, Property A and continue to receive the revenue of approximately $802 dollars in parking revenue per month. Property B will be returned to the property tax role and begin to generate a nominal amount of revenue to the City’s General Fund.
ATTACHMENTS
A. Purchase and Sale Agreement
B. Vicinity Map
C. Real Property Exchange Agreement
Staff Contact: Craig Ruiz, Principal Economic Development Specialist