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HomeMy WebLinkAboutAgenda Statement 1987/03/17 Item 12 COUNCIL AGENDA STATEMENT Item 12 Meeting Date 3/17/87 ITEM TITLE: PUBLIC HEARING: Consider the vacation of Fifth Avenue between "H" and "I" Streets Resolution /?4Y/ Certifying the Final Environmental Impact Report for the Chula Vista Town Centre II Project and ordering the vacation of Fifth Avenue between "H" and "I" Streets SUBMITTED BY: Director of Public Works/City gineer try■ Community Development Directo A: REVIEWED BY: City Manager (4/5ths Vote: Yes No X ) The Final Environmental Impact Report (EIR) for the renovation of the Chula Vista Shopping Center has been completed by PRC Engineering and was accepted by the Planning Commission on February 25, 1987. It has been found to be in compliance with CEQA guidelines and is now ready for certification by Council resolution. Subsequent to the certification of the EIR, the Council may hold a public hearing to consider the vacation of Fifth Avenue from "H" to "I" Streets. By Resolution No. 12911 , the Council set March 17, 1987, as the date for this public hearing. RECOMMENDATION: That Council hold the public hearing and adopt the resolution certifying the Final Environmental Impact Report for the Chula Vista Town Centre II Project and ordering the vacation of Fifth Avenue between "H" and "I" Streets. BOARDS/COMMISSIONS RECOMMENDATION: The Planning Commission on February 25, 1987, approved the subject EIR and recommended certification by the City Council. The Town Centre Project Area Committee on March 3, 1987, recommended that the Shopping Center be expanded per the Homart proposal . They support closing of the street if "no other feasible means" are acceptable to Homart. The Planning Commission on March 11 , 1987, in workshop session, considered the Homart proposal . The four Commissioners present all commented that the importance of a healthy, viable shopping center took precedence over the need to keep Fifth Avenue open. The Commissioners concurred that the renovation of the Center, as proposed by Homart, should proceed even though some hardship would be created by closing Fifth Avenue. Page 2, Item 12 Meeting Date 3/17/87 DISCUSSION: Background The Town Centre II Redevelopment Project was approved as a State Act Redevelopment Project in 1978. The project area encompasses the Sears and Broadway portions (Exhibit A) of the Chula Vista Shopping Center that opened in the early 1960' s. Since 1978, several attempts have been made to redevelop the Center. These efforts failed because: a. The opening of Plaza Bonita cut into the Center's market share. b. General economic conditions of high interest rates and peso devaluation caused investors to delay plans. c. The three major ownerships could not agree upon cost sharing and development plans. The Homart Development Company is now ready to take on these issues. They have secured an option to purchase a major portion of the Center and have agreement in principle from Sears and Carter Hawley Hale. Furthermore, their studies indicate that with a quality expansion and upgrading of the Center they can compete with Plaza Bonita using the knowledge and experience gained from successful shopping center development and redevelopment throughout the country over the past several decades. The City's interest in attempting to encourage redevelopment an expansion of the Shopping Center stems from several factors, namely: a. Competition with other jurisdictions for sales tax revenue. Sales tax is our primary revenue for support of general operations such as police and fire services. It is one of the few major City revenues which is not "flat," but keeps pace with the economy. An increasing flow of sales tax revenue is essential if the City is to continue to provide quality service to City residents. Compared to other cities in the County with populations of 50,000 or more, Chula Vista currently draws the second smallest amount of sales tax per resident. b. The Shopping Center is on the decline as evidenced by the decreasing sales and lack of amenities that are present in healthy centers. A continued decline is a blighting influence to the entire community, but particularly to the neighborhood near the Center. The current trend in shopping center development locally and nationally is to redevelop and expand older centers constructed in the 1960's in order to improve their competitiveness. Grossmont Center and Mission Valley are regional examples of this trend. c. A regional shopping center is a vital asset to any community. The present socio-economic trend is that regional centers become an important focal point for a wide variety of community activities and functions including Page 3, Item 12 Meeting Date 3/17/87 entertainment, recreation and education. Discussions have been initiated for the inclusion of a multi-function theatre/meeting facilities to be included in the plans for the Center. Conversely, a declining center can impact surrounding neighborhood businesses and residential areas. Decreasing visitations and sales will foster lower sales and general business decline in adjacent areas. This often results in increased vacancies, slower maintenance and spread of blight which will spill over into residential areas. Police, Fire, and City Code enforcement needs generally increase with neighborhood decline. The Proposal The Homart Development Company, a subsidiary of Sears Roebuck and Company of Chicago, proposes to expand and redevelop the Chula Vista Shopping Center to include approximately 140,000 new square feet of leasable space and, eventually, a fourth major department store. Homart plans to commit approximately $36 million in improvements to the Center in conjunction with the Redevelopment Agency contribution of approximately $6.5 million. They have engaged the Jerde Partnership, planning and architectural firm, to design the center. This firm is nationally known and possesses many awards for quality design. The firm was the designer for Horton Plaza, North County Fair and the 1984 Los Angeles Olympics. Homart has indicated that they will not proceed with acquisition of the Center and redevelopment if Fifth Avenue is not closed. Their position is predicated on sales and operating costs• forecasts for different alternatives for renovation of the Center which included full and partial tunneling as well as the extension of the Center over Fifth Avenue. The alternatives have been rejected on the basis of higher costs and diminished consumer appeal . Cost projections have been verified independently by PRC as stated in the final EIR for the project. Essential to Homart' s requirements is the inclusion of a ring road around the Center to provide efficient vehicular access. This cannot be accomplished if Fifth Avenue remains open on grade or depressed. In an effort to verify the contentions by Homart that the ring road is essential to the operation of the Center, and to verify Homart' s sales projections following renovation of the Center, the Agency consulted with Mr. Richard Roti of International Parking Design, Inc. and Dr. and Ms. Nina Gruen of Gruen + Gruen Associates. Their reports, which verify the importance of the ring road and confirm the sales projections, are attached as Exhibit B. As a result of the expressed concerns of the Council and staff, and discussion with Mr. Roti , Homart has agreed to explore alternative alignment of the ring road and limiting access from parking aisles in order to provide more efficient traffic movement through the Center. Staff recommends that this change in the ring road be a requirement of approving the closure of Fifth Avenue. Page 4, Item 12 Meeting Date 3/17/87 At the onset of negotiations with the Homart Development Company, the Agency entered into a Memorandum of Understanding concerning the major issues involved in expansion of the shopping center including the closure of Fifth Avenue, disposition of the Boys Club, and a cost sharing formula to be determined on the basis of a pro forma for development of the Center. A copy of the Memorandum of Understanding is attached as Exhibit C. Subsequent to approval of the Memorandum of Understanding last summer, a financial pro forma was submitted by Homart which projected costs for redevelopment of the Center and sales increases following redevelopment. The chart attached as Exhibit D compares projected sales volumes after redevelopment of the Center to projected sales with no redevelopment occurring. Based on projected costs for development and projected revenues from the Center, a financial pro forma was developed in order to estimate the relative financial contribution by Homart and the City for three alternatives for carrying out the project: closure of Fifth Avenue, partial depression of Fifth Avenue, and tunneling of Fifth Avenue under the Center. A chart depicting the relative costs projected in the pro forma is attached as Exhibit E. The financial pro forma projections for the closure of Fifth Avenue conclude that the total cost of development is at $41.6 million. Of this amount, Homart is to provide $35.2 million while the City is to provide $6.4 million. These figures are preliminary estimates as part of the Statement of Intention and are subject to refinement and adjustment as well as approval by the City for development of the financing plan and DDA. The Statement of Intention describes the sharing of costs by Homart and the City. A formula is being prepared on the premise of Homart targeting a 13% return on their equity. This return will be computed by projecting the net operating income (NOI) for the third operating year after opening the project. This NOI will represent the 13% return from which Homart' s total investment can be determined. The estimated NOI will be reviewed and approved by the City. Regarding capital construction and land acquisition, the City will be responsible for estimated costs which exceed the amount to be covered by Homart. Once this formula is established, and the financing plan approved, the City will not be required to provide additional funding to guarantee a 13% profit to Homart. In other words, if projected NOI is too high and Homart does not receive their anticipated return in any year, their profit will be less. Conversely, if their estimates are conservative, their profits will increase. The City' s return is predicated upon property tax increment, and additional sales tax revenues. Homart has estimated gross sales for the renovated center which appear in Exhibit D. Estimated annual debt service on the City' s share of redevelopment costs cannot be covered by the projected $.4 million in tax increments accruing from the project alone. It would be necessary to apply a portion of the sales tax increments accruing from the project, estimated at $.6 million per year, in Page 5, Item 12 Meeting Date 3/17/87 order to cover the projected annual debt service of approximately $750,000. These figures are provided for information and apply only if the DDA is eventually based upon the original pro forma assumptions. The sales forecasts provided by Homart indicate that, following redevelopment, sales at the Center should increase substantially, reaching approximately $160 million in 1991 . Although this sales projection seems optimistic, Homart contends that their estimates are conservative for the purpose of cost estimating. Their estimates have been verified by Gruen + Gruen Associates as being reasonable. By contrast, the sales projection for the no-project scenario (appearing on Exhibit D) shows considerable decline through 1989 and a growth rate, assuming some improvements to the Center in 1990, less than the rate of inflation. Although it is conjecture as to what would happen if the shopping center did not redevelop, at the present time no other developers have expressed interest in unifying and upgrading the Center. It is also known that free-standing Sears stores have been closed recently in other parts of the Country as part of a corporate policy to review all such stores. The Carter, Hawley, Hale Company which operates the Broadway Department Store has indicated that they may not remain in the shopping center if the Center is not upgraded and expanded. In addition, the future of the other mall shops including Penney' s remains uncertain. The Penney's lease expires in the fall of 1988. The gross sales at the Chula Vista Shopping Center from 1980 through 1986 appear on the chart attached as Exhibit F. It is clear from this chart that sales and, subsequently, sales tax revenues to the City have been decreasing from the Center in recent years. The decrease in sales is partly attributable to the decline of the peso as well as opening of Plaza Bonita which is anticipated to continually take additional sales away from the Center unless a major effort is made to renovate the Center. The Chula Vista Citizen' s Survey of 1980 indicated that 55% of the respondents preferred to shop at the Chula Vista Shopping Center. This percentage decreased to 24% in 1986. That same year 51% of the respondents preferred to shop at Plaza Bonita. A recent Council agenda statement on the importance of sales tax to the City indicated that the sales tax is the largest source of revenue to the City, comprising over 27% of the City' s general operating revenue. Although the relative portion of these taxes accruing from the Chula Vista Shopping Center has been declining, in 1986 the Center sales tax provided 14. 7% of the City' s total sales tax and thereby represents a very significant source of revenue for the City. If the projections by Homart are accurate, the sales tax accruing to the City from the Chula Vista Shopping Center today would double by 1994 if the Center is renovated. Closure of Fifth Avenue An application for the vacation of Fifth Avenue between "H" and "I" Streets was made on February 11 , 1987, by Latham and Watkins, Attorneys at Law, on behalf of the owner, Homart Development Co. At its meeting on February 24, the Council approved the Resolution of Intention No. 12911 naming March 17, 1987, as the date for holding the required public hearing to consider the subject vacation. Page 6, Item 12 Meeting Date 3/17/87 A traffic study was completed by Donald Frischer and Associates to discuss the impact on 16 intersections in the area. PRC Engineering also analyzed the street segment between the intersections. Exhibit G lists the intersections studied and the impact of expanding the Center and closing the street without mitigation. Exhibit H shows the intersections that are helped by mitigation measures. As can be seen, Broadway and "H" Street is at a level of Service E during afternoon peak hours, even after mitigation. However, the mitigation measures improve the level of service to a higher level than is experienced today. All the other intersections in the area have a level of service of "D" or better. Level of Service "D" is normally considered acceptable (during short periods of time) in urban areas. Mitigation measures recommended are: 1. Broadway/"H" Street - Widen the "H" Street eastbound approach on the north side by three feet and restripe for two left-turn lanes, two straight-movement lanes, and one right-turn lane. - Widen the Broadway southbound approach on the east side by two feet to accommodate two left-turn lanes, two straight-movement lanes, and a right-turn lane. - Restripe the westbound approach on "H" Street to two left-turn lanes, one straight-movement lane, and one optional straight-movement or right-turn lane. - Restripe the Broadway northbound approach to two left-turn lanes, two straight-movement lanes, and a right-turn lane. 2. Fourth Avenue/"H" Street - Widen the eastbound and westbound approaches on "H" Street by two feet on the north side to accommodate two left-turn lanes, one straight-movement lane, and one-optional straight or right-turn lane for both approaches. - Widen the Fourth Avenue southbound approach by three feet on each side of the street and restripe to one left-turn lane, two straight-movement lanes, and one right-turn lane. - Restripe the northbound approach on Fourth Avenue to one left-turn lane, one straight-movement lane, and one optional straight or right-turn lane. In addition, the traffic study proposes the following mitigation measures to improve left turning movements at two intersections with "I" Street. Currently, the intersections of Fourth Avenue/"I" Street and Fifth Avenue/"I" Street have several one-lane approaches (the east and west legs Page 7, Item 12 Meeting Date 3/17/87 of "I" Street at Fourth Avenue, the south leg of Fifth avenue at "I" Street). Considering the estimated volumes of the future left-turning movements, it would be appropriate to have two lanes on each approach to the traffic signal to separate left-turning movements from straight and right-turning movements. 3. Fourth Avenue/"I" Street - Restripe the eastbound and westbound approaches to one left-turn lane and one optional straight or right-turn lane. - Prohibit parking on the eastbound and westbound approaches. 4. Fifth Avenue/"I" Street - Restripe the northbound approach on Fifth Avenue to one left-turn lane and optional straight or right-turn lane. - Prohibit parking on the northbound approach. Additionally, to discourage motorists from driving on Fig Avenue as a bypass after the vacation of Fifth Avenue, the traffic consultant recommends that Fig Avenue be closed just north of Shasta Street, and northbound motorists should be diverted eastward onto Shasta Street. The portion of Fig Avenue north of Shasta Street would then act like a private driveway for the developments located at the southeastern and southwestern corners of the intersection of Fig Avenue and "H" Street. The closure of Fig Avenue to through traffic is considered to have a beneficial effect on this quiet residential street. With that change, the integrity of the residential neighborhood would be preserved. Engineering staff agrees that through traffic should be discouraged on Fig and Guava. There are other alternatives for this objective. Therefore, staff recommends that the final decision as to the exact method to be used not be determined until the Council/Agency decides to close Fifth Avenue and meetings have been held with the neighborhood. The City is in the process of upgrading the central computerized traffic signal control system. The current system cannot control intersections that have protected left-turn phasing. The new system will better serve the downtown area by being able to control all intersections, and having the ability to implement several timing systems that will more closely respond to the differing traffic patterns throughout the day. With the implementation of these mitigation measures, even with the closure of Fifth Avenue and expansion of the Center, congestion is expected to decrease to a lower level than presently exists. Based on the information contained in the EIR and previous traffic studies, the subject portion of Fifth Avenue is not necessary and may be closed without much disruption to those now using the street. Trips originating and ending within 1/8 mile to the east or west of Fifth Avenue will be inconvenienced and may choose to use the ring road. Trips originating or ending near Broadway or Page 8, Item 12 Meeting Date 3/17/87 Fourth Avenue will be able to use those streets without any significant delay. It is recommended that the ring road be designed to handle these through trips. According to Subsection 8324(b) of the California Streets and Highways Code if the City Council finds, "from all the evidence submitted, that the street described in the resolution of intention or petition is unnecessary for present or prospective use, it may adopt a resolution vacating the street. Such a resolution should include the reservation of easements for facilities belonging to the Sweetwater Authority, Pacific Bell and SDG&E." The Planning Department staff has researched its records and found that Fifth Avenue has never been included in the General Plan as a "collector road" or "secondary thoroughfare." Therefore a General Plan Amendment is not necessary for the vacation. Finally, Fifth Avenue, north and south of the Center, serves predominantly low density residential neighborhoods. There is benefit to and some support from these areas for the closure of Fifth Avenue as proposed which will limit through traffic and help preserve residential character and safety. Conclusion It is recommended that the Council adopt the resolution to close Fifth Avenue between "H" and "I" Streets subject to approval of the DDA with Homart including the provision of mitigation measures which the developer will implement to improve traffic flow in the area. If the DDA is not approved, then the street will not be closed. The Disposition and Development Agreement, among other issues, will address : a. A guarantee that the City' s portion of the funding can be underwritten from its share (including Redevelopment Agency) of the tax increment and from new sales taxes generated from the expanded Center. b. An assurance that the redevelopment and construction of the mall and all buildings associated with the project will be accomplished in a first class manner. First class is intended to mean a contemporary designed, well lighted and landscaped center comparable to University Town Center in. San Diego. The Center will be designed so as to unify the Sears and Shopping Center sites into a comprehensive development that can be perceived as a singular development. c. A provision for a fourth "anchor" department store will be made and that Homart and the City/Agency will use their best efforts to seek such a facility. d. Homart will implement the traffic mitigation measures as provided in the certified EIR. ; Page 9, Item 12 Meeting Date 3/17/87 e. At a minimum, 75% of the Center's new tenants will be new to the City. In addition, a tenant mix and quality will be commensurate with a "first class" defined center. f. The loop road will be constructed to City specifications to enhance its ability to serve through traffic. FISCAL IMPACT: Exhibit D provides a projection of sales for the Chula Vista Shopping Center with and without renovation as compared to the rate of inflation. It is apparent from this chart that sales, and consequently sales tax revenues to the City, will increase substantially with renovation and continue to increase at a rate slightly greater than inflation. If renovation does not take place, sales at the Center are projected to decline to the end of this decade when it assumed that some activity would take place to partially renovate the Center or bring in new uses which would prevent further decline. The projected growth rate after improvement is relatively flat and lower than the rate of inflation. The costs of renovating the Center for the three primary alternatives and the relative cost sharing for Homart and the City appear on Exhibit E. The alternative including the closure of Fifth Avenue is the only alternative which can be financed through property tax and sales tax increments and provide the City with a positive return on its investment. WPC 2755H by tip^ CiRy Cu!rJ of Chula Vista, Califo;niz Dated __2 — + %/ Jr