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HomeMy WebLinkAboutRDA Packet 1995/02/28 .- Notice is hereby given that the Chairman/Mayor of the Redevelopment Agency/City Council of the City of Chula Vista has called and will convene a special joint meeting of the Redevelopment Agency/City Council on Tuesday, February 28, 1995 at 6:00 p.m., immediately fOllowing the regular City Council meeting, in Council Chambers, located in the Public Services Building, 276 Fourth Avenue, Chula Vista, California to consider, deliberate and act upon the following: Æ' ~ Tuesday, February 28, 1995 Council Chambers 6:00 p.m. Public Services Building (immediately following the City Council meeting) Special Joint Meeting of the RedeveloDment Agencv/Citv Council of the Citv of Chula Vista CALL TO ORDER I. ROLL CALL: Members/Councilmembers Fox -, Moot -, Padilla -, Rindone_, and Chainnan/Mayor Horton - :~:;~~~~:~ :~:o:;:~ ;' ~:.:';;\';:r:::h~\~l:m 2. APPROVAL OF MINUTES: February 21,1995 Communty'ëc'":"",,, c' ,,' ,';, ',;.;:"""oj that I posted this Aoonu-!'-'-'co' ~ ' .. ! " ,bC, .,."..v",,",.," '" '~,:J.:~ Cc.rdat he Public Services Sui:'; W "n.: ai City Hall òn ~H~ ',~/ /c'G ( // /"" ' CONSENTCALE :~SI'N D,,:.'" 'c' /" /',"-;i. (Items 3 through 5) " .. 0 '/' The stoff recOl1UlU!ru/otions regarding the following items listed lIIUkr the Consent CølerulJJr will be elUlded by the Agency by 01U! motion without discussion rmless ØII Agency Member, ø member of the pub1ü: or City stoff requests that the item be pulkd for discussiDn. If you wish to speak 011 01U! of theSl! items, pleØSl! fiH out ø "Request to Speak Form" tß'IlÜoble ill the lobby and submit it to the Secretory of the Redevelopment Agency or the City Cleric prior to the meeting. (Compkte the greell form to speak ill fØfOr of the stoff reCOl1UlU!ru/otion; complete the pink form to speak Ì1I opposiJioll to the stoff recommeru/otion.) lJems pulkd from the Consent CølerulJJr will be discussed after AetioIl Items. Items pulktI by the pub1ü: will be the first items of business. 3. WRITTEN COMMUNICATIONS: 4, AGENCY RESOLUTION 1446 PROPOSING TERMINATION OF THE AMENDED PAWMAR TROLLEY CENTER DISPOSITION AND DEVELOPMENT AGREEMENT AS A RESULT OF EXCESSIVE PHASE U PROPERTY ACQUISITION COSTS, AND DIRECTING STAFF TO MEET AND CONFER WITH THE PALOMAR TROLLEY CENTER DEVELOPER REGARDING THAT PROPOSITION--The approved Disposition and Development Agreement (DDA) called for the Agency to participate in the excess costs of property acquisition and public improvements in order to make the project financially feasible for the developer. As a risk containment measure, either party has the right to "walk away" after conferring with the other party, if the costs exceeded established maximum thresholds. Staff recommends approval of the resolution, (Community Development Director) Agenda -2- February 28, 1995 5. AGENCY REPORT REQUEST FROM AUTO PARK DEALERS FOR ADDITIONAL FINANCIAL ASSISTANCE--On 1/17/95 Council approved a conditional payout of $1.3 million to the Auto Park Developers for construction of public streets within the Auto Park under Assessment District 92-2. On 1/19/95 staff met with the Auto Park developers and their attorney to discuss financial problems associated with a lower Assessment District payout than anticipated. (Continued from the meeting of February 14, 1995) Staff reQuests the item be continued to the meetin!! of March 7. 1995. (Commuuity Development Director) * * END OF CONSENT CALENDAR * * PUBLIC HEARINGS AND RELATED RESOLUTIONS AND ORDINANCES The following items have been advertised and/or posted as public hearings as required bylaw. If you wish to speak to any item, please fill out the "Request to Speak Form" available in the lobby and submit it to the Secretary of the Redevelopment Agency or the City Clerk prior to the meeting. (Complete the green form to speak in favor of the staff recommendation; complete the pÌ1lk form to speak in opposiJion to the staff recommendation.) Comments are limited to five minutes per individual. None Submitted. ORAL COMMUNICATIONS This is an opportunliy for the general public to address ,the Redevelopment Agency on any subject matter within the Agency's jurisdiction that is not all item on this agenda. (State law, however, generally prohibits the Redevelopment Age1lCY from taking actioll 011 allY issues lIOt Ì1Icluded 011 the posted agenda.) If you wish to address the Council 011 such a subject, please complete the yellow "Request to Speak Under Oral Communications Form" available in the lobby and submit it to the Secretary to the Redevelopment Agency or City Cleric prior to the meeting. Those who wish to speak, please give your name and address for record purposes and follow up action. Your time is limited to three mÌ1lutes per speaker. ACTION ITEMS The items listed in this section of the agenda are expected to elicit substantial discussions and deliberations by the Agency, staff, or members of the general public. The items will be considered individually by the Agency and staff recommendations may Ì1I certain cases be presented Ì1I the alternative. Those who wish to speak, please fill out a "Request to Speak" form available Ì1I the lobby and submit it to the Secretary to the Redevelopment Agency or the City Clerk prior to the meetillg. Public comments are limited to five minutes. 6. AGENCY/COUNCIL REPORT CONCERNING A REQUEST FROM McMILLIN COMPANIES FOR FEDERAL HOME FUNDS AND REDEVEWPMENT AGENCY LOW AND MODERATE INCOME HOUSING FUNDS FOR A PROPOSED AFFORDABLE HOUSING PROJECT IN RANCHO DEL REY SPA ill-- McMillin Company is negotiating with a private non-profit joint venture to develop a 40 unit affordable housing project in SPA III of Rancho del Rey. The joint venture has requested federal HOME mouies and Low and Moderate Income Housing Funds for the project. Staff recommends the Agency/Council provide direction to staff. (Commuuity Development Director) -, -, -- Agenda -3- February 28, 1995 ITEMS PULLED FROM THE CONSENT CALENDAR This is the time the Redevelopment Agency will discuss items which have been removed from the Consent Calendar. Agenda items pulled at the request of the public will be considered prior to those pulled by Agency Members. Public comments are limited to five minutes per individual. OTHER BUSINESS 7. DIRECTOR/CITY MANAGER'S REPORTIS) 8. CHAIRMAN/MA YOR'S REPORTIS) 9. MEMBER/COUNCILMEMBER COMMENTS ADJOURNMENT The meeting will adjourn to the Regular Redevelopment Agency Meeting on March 7, 1995 at 4:00 p.m., immediately following the City Council meeting, in the City Council Chambers. ****** COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT The City of Chula Vista, in complying with the Americans With Disabilities Act (ADA), request individuals who require special accommodations to access, attend, audlor participate in a City meeting, activity, or service request such accommodation at least forty-eight hours in advance for meetings and five days for scheduled services and activities. Please contact the Secretary to the Redevelopment Agency for specific information at 619.691.5047 or Telecommunications Devices for the Deaf (TDD) at 619.585.5647. California Relay Service is also available for the hearing impaired. [C:I WP51 IAGENCYIAGENDASIO2-28-95.AGDJ C1I'u~ þa;J~ Clank! MINUTES OF A REGULAR MEETING OF THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA Tuesday, February 21, 1995 Council Chambers 6:38 p.m. Public Services Building CALL TO ORDER 1. ROLL CALL: PRESENT: Members Fox, Padilla, Rindone, and Chair Horton ABSENT: Moot (excused) ALSO PRESENT: Sid W. Morris, Assistant City Manager; Bruce M. Boogaard, Agency Attorney; and Beverly A. Authelet, City Clerk 2. APPROVAL OF MINUTES: February 14, 1995 MSC (FoxlHorton) to approve the minutes of February 14, 1995 as presented. Approved 4-0-1 with Moot absent. CONSENT CALENDAR None submitted. PUBLIC HEARING AND RELATED RESOLUTIONS AND ORDINANCES 3. PUBLIC HEARING EXTENSION OF SUBLEASE FOR PROPERTY LOCATED AT 818 BROADWAY TO SOUTH BAY CHEVROLET COMPANY, INC., AND MR. EDUARDO MARTORELL, WITHOUT PUBLIC BIDDING PURSUANT TO SECTION 33431 OF THE COMMUNITY DEVELOPMENT LAW - The Agency acquired the leasehold interest in the property as part of the acquisition of the dealership's properties for the Auto Park project. South Bay Chevrolet has decided to continue to sell used cars at the site and requests reconveyance of the lease and leasehold interests. Staff recommends approval of the resolution. Continued from the meeting of February 7, 1995. (Community Development Director) RESOLUTION 1445 AUTHORIZING THE EXTENSION OF SUBLEASE FOR PROPERTY LOCATED AT 818 BROADWAY TO SOUTH BAY CHEVROLET COMPANY, INC., AND MR. EDUARDO MARTORELL, AND AUTHORIZING THE CHAIR TO EXECUTE SAME Chris Salomone, Director of Community Development, stated the site was across the street from the existing Southbay Chevrolet dealership. This being the time and place as advertised, the public hearing was declared open. There being no public testimony, the public hearing was closed. RESOLUTION 1445 OFFERED BY MEMBER PADll.LA, reading of the text was waived, passed and approved 4.0-1 with Moot absent. ORAL COMMUNICATIONS None c2-1 Minutes February 21, 1995 Page 2 ACTION ITEMS 4. REPORT RESULT OF REQUEST FOR PROPOSALS FOR SOUTH BAY CHEVROLET SITE - Two proposals were received in response to the Request for Proposals. Proponents will further describe their proposals. Staff reconuuends the Agency direct staff to continue to investigate alternatives for the reuse of this site. (Conuuunity Development Director) Chris Salomone, Director of Conuuunity Development, stated the proponents would not be at the meeting as staff had discussed their reconuuendation with them. The reconuuendation was not to preclude further negotiations with the proponents should staff deem it worthwhile, but to close the RFP process and allow staff to look at all options including new marketing efforts. Member Fox referred to the projects listed on page 4-3 and questioned if they all had designated sites. Mr. Salomone replied that was correct. One of the goals of the General Plan was to develop affordable housing east of 1-805. Fortunately, EastLake and McMillin were east of 805 and parcels were located for those projects. They were not seeking mitigation in the western part of the City, Member Fox questioned if either of the proposals were being rejected. Mr. Salomone responded that staff wanted to look at all options. They wanted to have the option to revisit the proposals and negotiate with the proponents if they chose to do that. At the current time that was not an option. The Agency needed to either accept a proposal or discontinue the process. Member Fox questioned what would happen to the property if the Agency did not accept either of the proposals. Mr. Salomone replied that the subject property was in the same condition it was when South bay Chevrolet vacated it. The Agency currently allowed tenants there on an interim basis, i,e. month-to-month. Staff would invite proposals for conuuercial use of the property or, at the Agency's direction, try to meet with the proponents to make their proposals better. Member Fox stated he was concerned that areas of blight not be created as the autopark was being developed. He was confident that the Agency's decision would not contribute to that and he hoped the Agency would move diligently to find a suitable owner/occupant tenant for the property. Member Rindone stated he supported the staff reconuuendation. The Agency needed to be revenue conscious but the reconuuendation was appropriate. In the first proposal the Agency did not received revenue from the laud and no sales tax revenues would be generated. He felt that was not acceptable. The second proposal included a price that was less than 1/3 of the acquisition price. MSC (RindonelHorton) to accept the staff recommendation. Approved 4-0-1 with Moot absent. ITEMS PULLED FROM THE CONSENT CALENDAR Items pulled: none. The minutes will reflect the published agenda order. OTHER BUSINESS 5. DIRECTOR'S REPORT IS) - None 6. CHAIR REPORT Is) - None 02.-2- Minutes February 21, 1995 Page 3 7. MEMBERS COMMENTS Member Rindnne a. Redevelopment Agency CIP Funds Report. Member Rindone stated he had become aware since the budget review on 2/14/95 that there were two significant areas that needed to be included when the report was brought back to the Agency. The City Mauager had concurred with some of the concerns he had expressed and requested that the item be continued for one week so he would be present for the discussion. The object the Agency was trying to achieve was to recoguize the problem and develop a fiscal plan to address it. He requested that when the report was brought back that it include last week's staff report as backup. Data from the meeting of 8/23/94 regarding expenditures of the CIP projects was not included in the report. On page 3-17 it was difficult to detertuine the amount of the CIP projects. There was a discrepancy between the 8/23/94 report and the 2/14/95 report regarding the shortfall. He wanted to know the amount of the CIP projects, how that would be amortized, and the annual shortfall. Chair Horton requested that Member Rindone meet with staff to share his concerns on the individual items. The report was a six month update and staff was not prepared to present the Agency with detailed information. That would be presented during the regular budget process which would begin in 3-4 months. She felt all Members of the Agency shared his concerns. Member Rindone felt staff needed to address whether there were any monies in the revenue area that were restricted or if they were available to pay for operations and debt service. If they were restricted he wanted to know if they exceeded the expenses for which they were restricted for. Member Fox stated he was expecting to get copies of the two reports and a written response to Member Rindone's comments. Mr. Morris stated the Manager was absent from the City and requested a two week continuance to allow him to review the issue before it was returned to the Agency. Member Rindone agreed to a two week continuance. He felt it was important to get closure on the issue. ADJOURNMENT ADJOURNMENT AT 7:02 P.M. to a Special Redevelopment Agency Meeting on February 28, 1995 at 6:00 p.m., immediately following the City Council meeting, in the City Council Chambers, Respectfully submitted, BEVERLY A. AUTHELET, CMC, City Clerk by: ~~~ .~ 02-3 ,_.. ClI'ú~ F9£ Ctmk! ~-¿I REDEVELOPMENT AGENCY AGENDA STATEMENT Item~ /11? Meeting Date 2-28- 5 ITEM TITLE: Resolution Proposing Termination of the Amended Palomar Trolley Center Disposition and Development Agreement as a Result of Excessive Phase II Property Acquisition Costs, and Directing Staff to Meet and Confer with the Palomar Trolley Center Developer Regarding that Proposition SUBMITTED BY: Community Development Director¿ ~. REVIEWED BY: Executive Director &~ -<" (4/5ths Vote: Yes - No..2L..) Council Referral Number: - BACKGROUND: On July 27,1993, the Agency executed the Amended Disposition and Development Agreement for the Palomar Trolley Center (DDA). The DDA divides the Palomar Trolley Center project into two phases (see map, Attachment 1). Phase I is the fifteen acres that have already been developed, with the shopping center up and running for the holiday shopping season. Phase II is approximately 3 acres that extends from the eastern edge of Phase I to Broadway. The project was phased so that the bulk of the center (Phase I), which involved easier property acquisitions, could be developed in time for the 1994 holiday shopping season. The DDA called for the Agency to participate in the excess development costs in the areas of property acquisition and public improvements in order to make the project financially feasible for the developer. As a risk containment measure for both parties, the DDA established maximum thresholds for those costs. If the costs exceeded those thresholds, either party had the right to "walk away," after conferring with the other party. Phase I property acquisition costs and the project-wide public improvement costs did not come close to exceeding the thresholds. On the other hand, Phase II property acquisition costs will significantly exceed the threshold, and the Agency is being asked by the developer to proceed rather than exercise its "walk-away" right. It is recommended that the excess site acquisition cost not be approved, that staff be directed to meet and confer with the developer to discuss the Agency's position and to explore possible modification of the developer's request, and that staff return to the Agency with a modified request or with formal action to terminate the DDA. RECOMMENDATION: That the Agency adopt the resolution disapproving excess site acquisition costs for Phase II of the Palomar Trolley Center and directing staff to meet and confer with the project developer regarding possible termination of the Amended Palomar Trolley Center Disposition and Development Agreement. BOARDS/COMMISSIONS RECOMMENDATION: Not Applicable 1--1 ,_. -, Page 2, Item ~ Meeting Date 01/17/94 DISCUSSION: This report will discuss the status of the shopping center, the status of Phase II property acquisition, the DDA terms for cost sharing and "walk-away" rights, and an analysis of the decision to approve Phase II costs or not. The staff reports that accompanied the April 27, 1993, and July 27, 1993, Agency agenda actions to approve and to execute the DDA are provided for information (Attachments 2 and 3). Status of ShoDDina Center: The Palomar Trolley Center is an approximately 190,000 square foot high- volume retail shopping center valued at $18 million on Palomar Street between Industrial Boulevard and Broadway. Phase I, which is approximately 165,000 square feet, began opening stores as scheduled in September and is currently substantially occupied; four pads remain to be developed and one 1,100 square foot shop is leased but is not yet occupied. Current occupants include the following: - Ralph's supermarket: This store is approximately 50,000 square feet. It opened in September with the highest first-weekend gross sales of any Ralph's store in the entire Ralph's chain. It is currently running approximately 125% of pre- opening sales projections. - Ross Dress for Less: Since opening in October, Ross has become the highest grossing Ross store in San Diego County. - Office Depot, Famous Footwear, Dress Barn, Party City, Eagleson's, Pretty and Plump, Subway, Frame 'N Lens. Phase II, which is to be approximately 25,000 square feet, will extend the shopping center eastward to the intersection of Palomar Street and Broadway. It is scheduled to open in September of 1995. Phase II ProDertv Acauisitions: Phase II is comprised of five parcels as follows: DDA Parcel #11: This parcel is a small vacant sliver of 8.712 square feet that was owned by the Iwashita family and was voluntarily acquired by the developer for $74.428. DDA Parcel #12: This parcel is 32,670 square feet and was occupied by a structure that was leased to Agustin Reyes for use as the Mi Cabana night club. The property was owned by the Japanese American Citizens League. It was acquired by the Agency through condemnation, Mi Cabana was relocated, and the total court settlement cost for acquisition and relocation was $595,000, paid from developer deposits. The structure is about to be demolished. DDA Parcel #13: This parcel is 22,651 square feet. It was owned by the Japanese American Citizens League and occupied by a 7-11 convenience store and by MLV Coin Laundry. The Agency filed a condemnation suit, and a settlement was arrived t-j,.'þ 4 Page 3, Item - Meeting Date 01/17/94 at in court which satisfied all property value and relocation claims for $1,36D,000, paid for with developer funds. The structures have been vacated. DDA Parcels #14 & #15: These two parcels total 47.480 square feet, are owned by James Williams, and are the site of Williams' business, Sam's Trailer Repair. The Agency filed a condemnation suit, but did not yet seek possession. A settlement has been crafted which would satisfy all property value and relocation claims for $750,000. The settlement would allow Mr. Williams to retain possession of the property until March of 1995. With the completion of the settlements indicated above, all of the property necessary for Phase II of the Palomar Trolley Center would be in the possession of either the Agency or the developer, clearance and construction could commence, and the center could be completed by September of 1995 for the holiday season. Total acquisition cost, including appraisal costs and legal fees paid to the Agency's outside condemnation counsel ($117,500), are estimated to date at $2,896,928, or $25.98 per square foot. The acquisition settlement costs have all been approved by staff as to the appropriateness of the costs, which does not imply that the Redevelopment Agency approved the aggregate acquisition costs exceeding $26.00 per square foot. It should be noted that the Agency has been very successful in containing the Phase II acquisition costs through the courts, prevailing in every significant legal dispute. The settlement costs reflected above are judged to be quite favorable to the Agency, and the Agency's counsel, Daley & Heft, has done an excellent job of representing the Agency's interests in the legal process. DDA Cost Sharina and "Walk-Awav" Terms: The DDA was negotiated in recognition that the shopping center project had proven infeasible as pursued by the previous developer, Pacific Scene, Inc., and that Agency financial participation was the only way to effect the development of the center. As a result, the DDA provides for Agency and developer cost-sharing of Phase I and Phase II property acquisition costs and project public improvement costs. Additionally, both parties are protected from participating in extreme costs by having the right to "walk away" at certain cost thresholds. Additionally, the DDA protects the developer from certain levels of loss that might result from the inability to acquire properties through eminent domain or from the decision not to proceed due to costs exceeding the thresholds ("walk-away"). The cost-sharing provisions and the thresholds, as well as actual project experience, are as follows; . Phase I Prooertv Acquisition: The developer pays the first $8.50 per square foot of the aggregate acquisition cost for Phase I properties. The Agency and the developer share equally in any costs over $8.50 per square foot. If the aggregate cost per foot exceeds $12.00, either party can terminate the DDA, after meeting and conferring on the proposition to walk away. Phase I property acquisition has been completed, and a final calculation of the aggregate acquisition cost is being made; however, the working calculation of +,.3 - -- ,-- Page 4, Item ~ Meeting Date 01/17/94 the Agency's share of the acquisition costs is approximately $51,ODO (meaning that the total aggregate acquisition cost per square foot for Phase I exceeded $8.50 by a small amount) . Phase II ProDertv Acquisition: The developer pays the first $10.00 per square foot of the aggregate acquisition cost for Phase II properties. The Agency pays any amount between $10.00 and $12.00 per square foot. The Agency and the developer share equally in any costs over $12.00 per square foot. If the aggregate cost per foot exceeds $20.00, either party can terminate the DDA, after meeting and conferring on the proposition to walk away. Phase II property acquisition is estimated above at $2,896,928, or slightly less than $26.00 per square foot. At $26.00 per foot, this would result in a cost to the Agency of $1,003,617 (all of the cost per foot between $10.00 and $12.00 and one half of the cost per foot between $12.00 and $26.00). Because the cost per foot exceeds $20.00, either the Agency or the developer can choose to terminate the DDA and "walk away" from Phase II, after conferring with the other party. The developer asks for approval of an aggregate cost per square foot of $26.00 to accommodate minor changes in the litigation costs. . Public ImDrovements: The developer pays the first $1.2 million in public improvement costs. The Agency pays any cost over $1.2 million. The Agency can terminate the DDA if the public improvements costs exceed $1.4 million. Additionally, the complete public improvements required for the entire center are to be installed at one time, with the development of Phase I. If Phase II is not constructed for any reason short of developer breach, the Agency is to reimburse the developer for the cost of the public improvements attributable to Phase II (17% of the total actual cost). The public improvements for the entire center were installed with Phase I construction and are complete. The cost was $1.1 million, and as a result, there was no cost to the City/ Agency. If Phase II is not built, the Agency would have to reimburse the developer $187,000 for the cost of the public improvements attributable to Phase II. . DeveloDer Loss Protection: If the project cannot be built due to the Agency's inability to acquire parcels through eminent domain or because the Agency exercises any of its walk-away rights, the developer can sell any of the parcels it owns at fair market value (the Agency having marketing participation rights and first right of refusal). If the developer receives less than the original purchase costs (including acquisition costs, legal costs, goodwill, and relocation). the difference is the "Developer Loss." The Agency is required to reimburse the developer for one half of the Developer Loss, up to a maximum of $250,000 of Agency cost. The reimbursement arrangement is through annual rebate not to exceed 30% of the annual sales tax generated by the portion of the center that is built. All payments for property acquisition costs have been paid from developer deposits or directly by the developer. Payment of the Agency's share of costs to the developer will be tfrt( -- Page 5, Item -i- Meeting Date 01/17/94 made over time in the form of sales tax rebate from the sales tax generated by the shopping center, at the rate of 30% of the annual sales tax from the center, until the DDA debt to the developer is retired. The City and the Agency would subsequently enter into a Cooperation Agreement regarding the payment of the debt created by the DDA through the booking of a loan to the Agency from the sales tax proceeds from the project that flow to the General Fund. Analysis of Decision to ADDrOye Phase II Costs or Not: The decision on whether to approve the excessive Phase II property acquisition costs should be based on an analysis which considers the following elements: the concept of one center, regardless of the phasing of development; land use and "redevelopment gateway" benefits from a completed center; benefit to center from completion and linkage to Broadway; financial analysis of the primary cost scenarios; and, consideration of possible responses by the developer. One Center: The Palomar Trolley Center was conceived as one 18-acre shopping center that would extend from the MTDB Trolley Station on the west to Broadway on the east. The concept of a single 1 8-acre center was initiated by the City and the Redevelopment Agency in response to a proposal from the original developer, Pacific Scene Inc., to develop an 11-acre center on the bulk of what is now Phase I of the center. Pacific Scene Inc. asked the City to rezone the 11-acre site for retail commercial use, and the City and the Agency required the developer to enter into an "Expanded Plan Agreement" which called for the center to be expanded to incorporate the land-locked parcels on the south of the site and the uses on the corner of Palomar and Broadway. The City and the Agency took this action in order to avoid the perpetuation of a mix of substandard uses in the landlocked area to the south and the corner properties. All of the financial analyses and the deal points negotiations were originally done with an 18-acre single-phase project in mind. Later in the process, the project was split into two phases when it was recognized that the 3-acre corner area now known as Phase II presented complex, time-consuming, and potentially expensive property acquisition problems. The Phase II properties were occupied by significant, viable businesses which would be difficult and expensive to relocate, involved complicated ownership, lease, and franchise arrangements that entailed numerous parties of interest, and promised to require condemnation action rather than negotiated purchases. Because there was a need to complete the bulk of the center in time to deliver it to tenants for the 1994 holiday season, the project was separated into two phases, with Phase II slated for completion in September of 1995. It was also recognized that Phase II could prove to be so expensive due to acquisition and relocation costs that it might have to be abandoned. If Phase II is analyzed as an independent project it could not be recommended to proceed. The bulk of the sales tax revenue will come from Phase I, which contains the great majority of the sales floor space and the anchor tenant, the two major tenants, and the pads; the bulk of the excess property acquisition cost will come from Phase II. In other words, 95% of the cost to the Agency to complete the center would result from Phase II, and a likely maximum of 17% of the tax increment and sales tax revenue from the center tf~5 -- Page 6, Item L Meeting Date 01/17/94 would derive from Phase II. As a result, the Agency subsidy to Phase II standing alone could not be supported. land Use and "Redevelopment Gateway" Benefits: Completing the Palomar Trolley Center through to Broadway is physically, visually desirable from a land use and redevelopment perspective. The uses currently existing on the site of Phase II are not of the same quality or compatibility as the fully-completed center offers. Parcel 12 has an unattractive 50- to 70-year old wood frame structure that was used as a nightclub and that will soon be demolished. Parcel 13 is occupied by an older, single-story commercial building that contains a convenience store with self-serve gas pumps and a coin laundry. Parcels 14 and 15, Sam's Trailer Repair, contain a residential dwelling and a variety of other structures used for the repair business and surrounded by recreational vehicles under repatr. The completed center would replace these uses with more aesthetically-pleasing development. Palomar Street is one of the main accesses into the Southwest Project Area, and the completion of the center to Broadway would provide an attractive gateway or entry statement to the project area. Connection to Broadway: The completion of Phase II will provide a vehicular and visual connection of the center to Broadway, which is desirable for traffic circulation and attraction of customers. The existing uses on the site prevent such circulation and block views of the center from Broadway. Cost Scenarios: The four cost scenarios analyzed are as follows: 1. The maximum cost exposure to the Agency under the DDA provisions ("DDA Limits"); 2. The financial projections used when the DDA was executed by the Agency on July 27, 1993 ("DDA Approval"); 3. The current, "near-final" projections ("Current"); and, 4. The cost of the walk-away option ("Walk-Away") . Please refer to the attached table, "Palomar Trolley Center City/Agency Costs Scenarios" (Attachment 4), for a side-by-side comparison of the four scenarios. The costs categories have been discussed above (Phase I Acquisition Costs, Phase II Acquisition Costs, Public Improvements, and Developer Loss). 1. DDA Limits: This scenario illustrates the maximum exposure the Agency could have had under the cost-sharing provisions and the walk-away thresholds of the DDA. It really represents a worst-case scenario for the Agency. The total cost is $1,334,808. 2. DDA ADDrOval: This scenario was provided to the Agency in the staff report and presentation at the July 27, 1993, meeting at which the Agency executed the Amended Palomar Trolley Center Disposition and Development Agreement. It was a "best guess" at the time. It was based on the expectation that Phase I would cost $10.55 per foot, with t-f~~ Page 7, Item ~ Meeting Date 01/17/94 credit given to the Agency for waiving the Jehovah's Witnesses Church development fees as part of the relocation obligation (the church "deal" was restructured and the formal relocation did not occur). This scenario was also based on the expectation that Phase II would cost $21.00 per foot and that the Agency would have to pay $200,000 for the public improvements. The total cost was projected to be $1,021,760. Attachment 5 is a spread sheet which illustrates the Agency debt service obligations and revenues from the total project under this scenario, and which indicates a cumulative net revenue gain to the City and the Agency of $4,836,026 in Year 12, the year in which the debt would be fully- retired. 3. Current: This scenario illustrates a near-final projection for the whole center which differs as follows from Number 2, "DDA Approval": Phase I costs are approximately $15,000 less; Phase II costs are approximately $279,000 more, based on a cost of $26.00 per foot; and there are no public improvements costs. The total projected costs are $1,054,617, which is $32,857 more than the total projected costs in Number 2 above, which was the basis for the Agency deciding to proceed with the DDA. The cost is distributed more heavily to Phase II (95% under Current scenario versus 74% under DDA Approval scenario), but the difference in the total project costs is small, and the net cumulative revenues over 12 years is $4,762,025 versus $4,836,026 in the DDA Approval scenario, making a negative impact on the long-term net revenues to the City and Agency over that period of time of $74,001 (see spread sheet, Attachment 6). It should be recognized that the debt-service payments and revenue generation are identical for both the DDA Approval and Current scenarios until the debt is paid off, which in both cases occurs in Year 12 (the DDA requires repayment of the debt at the level of 30% of the annual project sales tax generation until the debt is paid off, regardless of the level of debt). The loss ($74,001) under the Current scenario would not be experienced until the twelfth year of the project (2006). However it is appropriate to analyze the financial implications of the Agency's ability to walk-away. 4. Walk-Awav: This scenario evaluates the financial implications of the Agency exercising its right to walk away from Phase II due to the high cost of property acquisition. The analysis is based on looking at the phases of the center as separate projects and analyzing the costs and returns of each separately. It considers both the possibility that the developer will abandon Phase II and sell the propertiers and the possibility that the Developer will proceed with Phase II. As the cost scenario table (Attachment 4) illustrates, the Agency would have to pay the Phase I share of costs, would avoid the Phase II share of costs, and would incur two other costs: the $187,000 in public improvement costs associated with Phase II, and one half of any loss the developer experienced if Phase II was abandoned and the developer sold off the parcels, to a Agency maximum of $250,000 (see further discussion of developer loss expectation below). The total Agency cost in this scenario would be $488,000. It should be noted that the Phase II properties acquired to date through condemnation are under the fee ownership of the Agency, but they were purchased with the developer's funds and would be construed under the walk-away provision of the DDA as being owned by the developer. ~,1 Page 8. Item ~ Meeting Date 01/17/94 Additionally there could be a loss of sales tax revenue if Phase II is not completed by the developer. That sales tax generation is hard to accurately forecast. however, because the tenants of Phase II have not been identified. Regarding developer loss, it could reasonably be assumed that the developer would experience a substantial loss in selling off the Phase II acquired properties, if the developer did not proceed with development. This would mean that the Agency would have to pay to the $250,000 maximum required in the DDA. Regarding possible developer responses to an Agency decision not to approve Phase II costs, it is uncertain what the developer might do. Given the deep financial commitment made by the developer to acquire the properties, and the fact that the developer has proceeded to close the property acquisitions at the settlement levels with the developer's own money without assurance that the Agency would participate in the costs over $20.00 per foot, it seems that the developer would proceed without the Agency participation in preference to incurring potentially deeper losses through abandonment and disposal. The developer has indicated informally to staff that the settlement payments were being made by the developer absent Agency participation approval because the acquisitions needed to be made in a timely fashion in order to stay on schedule for the construction of Phase II and because it was "too late to turn back." If this were to happen, the total subsidy cost to the Agency would be approximately $51,000. Attachment 7 is a spread sheet that shows the financial implications of that outcome. It indicates that the net cumulative revenues to the City/ Agency over twelve years would be approximately $6.3 million, Another alternative is that the developer might "subsidize" the cost of Phase II acquisition over $20.00 per foot, asking the Agency to participate up to the $20.00 per foot level, and covering the additional costs to $26.00 per foot. Either of these potential outcomes would preserve the Agency revenue yield from Phase II while variously lowering the Agency cost and resultant debt service. The developer has not formally indicated what course of action would be pursued if the Phase II costs are not approved. However, it is clear that the developer feels that the "good faith" action for the Agency would be to approve the Phase II costs and proceed together with Phase II. Conclusion: In the current recessionary times that have negatively impacted the City and the Agency, it is necessary to make some difficult decisions to preserve the financial viability of the City and the Agency. Every reasonable opportunity to preserve or enhance tax revenues most be given serious consideration. The benefits of a fully-completed center are clear. However, the cost to the Agency of proceeding with excessive Phase II site acquisition costs must be considered carefully. Although that cost is not an up-front, out-of-pocket expense, it does translate into lost future revenues. As indicated by staff, there is the significant possibility that the developer will proceed with Phase II without Agency participation. In that case, the twelve-year revenue production would be substantially enhanced. In light of the magnitude of this potential increase in revenues, and in light of the financial challenges facing the City and the Agency, it is recommended that the Agency propose not going forward with participation in Phase II. ~--F -, -. Page 9. Item ~ Meeting Date 01/17/94 FISCAL IMPACT: Approval of the resolution would not result in a final decision on the level of financial participation in the Palomar Ttolley Center. It would, however, be the first step toward a decision that could require Agency investment in the Palomar Trolley Center at a range of $51,000 to $488,000, with a twelve-year net revenue return at a range of $4.5 million to $6.3 million. The deal has been structured so that the developer is paying the total costs of acquisition, including the Agency's contribution. and the Agency's contribution is treated as a loan to the Agency from the developer. That loan would be paid back to the developer over time at an interest rate of 7% per anum, with annual payments in an amount not to exceed 30% of the sales tax generated by the center. A Cooperation Agreement will be brought forward to the Agency and the Council when the exact loan amount is known which would memorialize the "pass-through" of the City funds to the Agency to pay the debt service on the developer's loan. Note: It is too early in the performance of the center to obtain hard information on sales volumes, but anecdotal information indicates that volumes are significantly higher than the projections used in the DDA negotiations. If that trend continues, net revenues to the City from sales tax could be even more significant than projected. Also, not included in the sales tax projections are the as yet uncalculated but clearly substantial increased sales taxes resulting from the backfilling of the vacated Ralph's store by a Target expansion and a potential tenant that is a high volume national retailer. However, counterbalancing the optimistic information on the sales tax performance are current, as yet unmeasurable, potential negative impacts from the peso devaluation and the possibility of a "border tax" which could reduce retail traffic. Also, there is some evidence that sales tax gained in one project, such as the Palomar Trolley Center. may take sales away from other Chula Vista merchants, so the net sales tax to the City is less than one might otherwise anticipate. The table and the spread sheets referenced above throughout the text should be referred to for specific financial data. IBB:C:\WP51 \AGENCY\RA4S\PTCPHSII,RA4J lOG :DIS K#6\ WPWIN\PTCPHSII,RA4J ~--~ 'Jhü fa9 ~ Clank! 4,,10 ( "ATTACHMENT 1" f ) w en <1: :I: a. -:0 'W en 0 a. 0 a: a. - - .. -- l - i .. (, . ' . . . . - -" W . ~ = (J) - <1:' :I: ~ . n - ¡ i- '" ," "- 1 I . : I; !. fJhu þa;¡~ Clank! ~,}Y "ATTACHMENT 2" REPORT ON PALOMAR TROLLEY CENTER April 13, 1993 This report addresses the step-by-step actions needed to be taken by the Redevelopment Agency 'and the City Council in,order to move forward with the Palomar Trolley çenter_project. The report provides general information about the project and itemizes the specific' actions to be undertaken at the April 13, 1993, Council and Agency meetings. The Agency and City Council may follow the steps recommended to insure proper sequencing of a number of interrelated actions. Those steps include the following: I . Agency will approve a First Amendment to the Palomar Trolley Center Disposition and Development Agreement which will make modifications to the original agreement on a 15-acre center which are acceptable and not considered major. All environmental documents will be reaffirmed at the same time. . Agency will adopt Resolutions of N.ecessity for Condemnation on three (3) . properties needed for development of the 15-acre center which could not be acquired through negotiation. . Agency will execute the Disposition and Development Agreement on the I5-acre center, which was approved on November 10, 1992, and can be executed now that the necessary preparatory events have occurred. " Agency and Council will hold joint public hearings on selling the three parcels . acquired above through condemnation to the developer pursuant to the Disposition and Development Agreement terms without public bid and at fair market value. Resolutions will approve this action. . Agency will approve, but not execute at this time, a new document, theÄmended Disposition and Development Agreement, which will add three acres at the comer of Palomar Street and Broadway to the center. This addition was evaluated in the project EIR and anticipated by the Agency asa desirable possibility. The report also analyzes the fiscal implications of the Agency's participation in the larger, 18- acre center. 1. DEVELOPER AND PROPOSED DEVELOPMENT The proposed DDA is with a limited partnership named Cypress Creek Company, L.P.; however, the Developer pursuing the project, and the authorized managing agent for Cypress Creek Company L.P., is Sunbelt Management Company. Sunbelt is a Florida Corporation +~/3 -. ._. Page 2 Report on Palomar Trolley Center April 13, 1993 controlled by a German family. Sunbelt bought the Fed-Mart stores from Saul Price in the 1970's and, although Fed-Mart stores no longer exist, Sunbelt owns approximately 34 ex- Fed-Mart shopping centers which are now Target and Ralph's anchored centers. Sunbelt develops new shopping centers with cash. The proposed center contemplated in the amended DDA will be approximately 180,000 to 190,000 sq. ft. The entire center will be anchored by one large user such as a grocery store and two major high volume tenants of approximately 25,000 to 28,000 sq. ft. each. Other smaller users will be predominantly national promotional tenants. The site is bounded by Palomar Street to the north, Broadway to the east, the San Diego Gas & Electric right-of-way to the south, and the MTDB Trolley Center to the west. (See map as Attachment 1.) All parcels comprising the site are within the Southwest Redevelopment Project Area and are zoned as Central Commercial. All property owners and tenants of the affected properties have been notified of their Owner Participation Rights to propose an alternative project. None has responded affirmatively, and Owne( .Participation Rights are determined to be exhausted. 2. rAGENCYl APPROVE FIRST AMENDMENT TO PALOMAR TROLLEY CENTER DDA (RESOLUTION A) The Trolley Center DDA was executed by the Developer on November 10, 1992, and approved by the Redevelopment Agency on that date (attached to Resolution E). The DDA governs participation by the Developer and the Agency in the development of an approximately 160,000 sq. ft. shopping center on approximately 15 acres (phase 1 of the FEIR). The DDA- calls for the Redevelopment Agency to execute the agreement within 75 days (January 24, 1993) after certain .conditions precedent. have been met. Much progress has been made to date to accomplish the events necessary to allow Agency execution of the document, but all conditions have not yet been met. The proposed First Amendment to the Disposition and Development Agreement" (attached to Resolution A) is intended to treat the expiration of the 75-day period (determining that the DDA is in full force and effect), to modify some conditions, to clarify other provisions of the DDA, and to address additional concerns that have arisen after review of the document by Sunbelt's parent company subsequent to the November 10, 1992, approval. Table 1 indicates the conditions precedent from the DDA and the status of each condition, with any modifications requested by the Developer in the First Amendment. 1-1 tf . - . -.. Page 3 Report on Palomar Trolley Center April 13, 1993 TABLE I ~ ACTION SfATUS 1. Developer's good faith negotiations Of the seven non-Developer controlled parcels identified in the DDA, three to acquire properties are under contract to or now owned by the Developer. The Jehovah's Witnesses Church (JWC) acquisition can be completed with this agenda's action, as can be the remaining parcels which are subject to eminent domain proceedings. 2. Developer executes DDA Done 3. Developer makes good faith deposit Done 4. Owner Participation Rights Done exhausted 5. Notice to Agency of acquisition of Modification. , Not done. Developer has paid $95<1,000 to date to acquire Pacific Scene, Inc. parcels by rights to the underlying interest. Developer requests right to defer final Developer acquisition to after approval of First Amendment and Amended DDA on April 13, 1993. (paragraph 4a. of First Amendment:) Staff feels Developer has demonstrated very substantial commitment to acquiring these parcels and to the development of the center and supports the proposed modification, with " the understanding from the Developer that by April 20, 1993, as indicated in the schedule of completion, the Developer will close escrow and acquire the subject parcels. 6. Cooperative effort to develop Day Community Developme.,1. Planning staff, and Developer are meeting with Care Center property owner of potential site (Industrial and Ada) and Head Start representatives. There appears to be mudt promise for a multi-use facility on that site. Conceptual plans have been developed. Thcrefore,.staff feels Developer continues to satisfy the rioquirement for this cooperative effort. 7. AgeDq, Developer, and DRC DRC approval on 3/'12193. Scope of Development_and Schedule of approval of site plans, elevations, Completion attached to and incorporated in Resolution E. scope of development, and schedule of completion 8. Any further CEQA actions Not necessary as project is cum:ntly conceived. Resolutions find CEQA documents adequate 9. 33431 Hearing by Agency to Subject of public hearing included in this action. dispose of acquired properties without public bidding t/ - /5 -. -- Page 4' Report on Palomar Trolley Center April 13, 1993 . ACTION STATUS 10. 33433 Hearing and resolution by Subject of public hearing included in this action. City Council approving of sale of ~ :- property acquired with tax increment funds 11. Resolutions of Necessity to acquire Three (3) Resolutions of Necessity considered as part of this item. Agency properties through eminent domain 12. Developer acquisition of Lots 4 See numbers one (1) and eleven (11). through 10 or Agency eminent domain 13. Approval of land use, zoning, Done development standards, and determination of General Plan conformity 14. Approval by both parties of written DDA calls for Developer's off-site costs to be capped at $1.2 million. estimates of off-site improvement Agency pays full cost beyond that, with ñght to cancel participation if costs estimates exceed $1.4 million. City Engineer feels.Deveioper's engineer's estimates of off-site costs at $1.1 million are generally reasonable given the amount of information available. With addition of Agency costs for acquisition of non-Developer-<>wned ñght-<>f-way (McDonalds and MTDB) and reconfiguration of trolley crossing apparatus, total off-sites should not exceed $1.4 million. Community Development Director is prepared to issue approvallettèc. " IS. Environmental assessment: Done.. Developer has accepted environmental site conditions in writing. determination by Developer of costs of removing contamination from non-Developer owned sites Additional modifications or clarifications included in the First Amendment are not ~sidered substantive and are not, therefore highlighted in this agenda statement., Therefore, staff recommends the adoption of Resolution A approving the First Amendment to the Palomar Trolley Center DDA. Resolution A also affinns the Project EIR and associated CEQA documents. The Final Environmental Impact Report (FEIR) for the Palomar Trolley Center (February 19, 1992)t includes a First Addendum, which evaluates the project under a two-phase schedule rather than the previously analyzed one-phase schedule, and.a Second Addendum, which deals with project impact on schools. Phases 1 and 2 were described as: ¡The FEIR and associated documents were provided to the Agency members acting as the City Council at the February 25, 1992, meeting: Toavoid costly duplication those documents have not been redistributed to Agency members, but are available at Community Development Department. 1-11:> --. -- Page 5 Report on Palomar Trolley Center April 13, 1993 . Phase I: 166,300 sq. ft. over 15 acres with 832 parking spaces; and . Phase 2: 31,500 sq. ft. over 3 acres with 157 parking spaces. The proposed actions are to allow a shopping center substantially consistent i-ith thè total project described in the FEIR which would include approximately 180,000 to 190,000 sq. ft~ over approximately 18 acres. The slightly lower amount of square footage in each phase of the proposed project as compared to FEIR 91-02 does not change the conclusions of the FEIR and First and Second Addendums and does not require any additional analysis. No additional addendum is thus necessary. The analysis contained in the FEIR and First and Seoond Addendums certified by the City Council on February 25, 1992, is adequate under CEQA. This FEIR and addendums are now before the Redevelopment Agency to be found adequate under CEQA in conjunction with the approval of the First Amendment to the DDA and the Amended DDA. Additionally, if the Redevelopment Agency approves those documents, the Agency must concuITently make Findings Of Fact and adopt the Mitigation Monitoring Program. With certification of the FEIR and addendums, adoption of the Mitigation Monitoring Program, and making Findings Of Fact, the Agency will complete ,its responsibilities under CEQA. 3. rAGENCYl ADOPT RESOLUTIONS OF NECESSITY' REGARDING CONDEl\1NATIONS OF REAL PROPERTY. (RESOLUTIONS B. C. m The Developer was unable to successfully complete negotiations to purchase three properties included in the existing DDA area. Agency staff "sat-in" on most negotiations between the Developer and the Property owners. Subsequently, after no progress was made by the Developer;' staff was also unable to negotiate successfully. This was a multi-step process in which all offers were rejected. Property owners were properly noticed; follow-up notices were sent; telephone contact was made; and some direct meetings resulted. All property owners were offered fair market values as determined by Agency-contracted appraisals by the Lee Johnson Company, made December 4, 1992. In all cases, the Developer had offered significantly higher purchase prices which were rejected by the property owners. The Agency has 11&. existing contract with Pacific Relocation Consultants to assist all property owners in relocating and to determine for the Agency the amount of relocation benefits required, and Pacific Relocation Consultants is providing that service for the subject parcels. The Developer has deposited 125 % of the value of the s\lbject parcels to be \lsed by the Agency for acquisition of those parcels through condemnation and for provision of relocation benefits. A. DDA Parcel 116 Mora. Nicholas APN 11622-030-23 This is a 9,560 sq. ft. gross parcel with a single-family residence comprised of a single- story old frame structure of 1 ,250 sq. ft. The house is occupied by tenants on a month- to-month rental. The property was appraised at $90,000 for land and improvementS., Relocation costs are preliminarily estimated at $15,000. 1-/7 . -- Page 6 Report on Palomar Trolley Center April 13, 1993 NichoIas Mora was offered $90,000 for this property. His daughter, representing him, indicated that he would only sell for $150,000. The Developer had unsuccessfully offered $110,000 plus assuming tenant relocations responsibility. The owner's representative was going to have further discussions wit the Developer and staff, but has not done so to date. ~ ß. DDA Parcel #7 Henderson, Rodney L. & Daniel E. APN #622-030-22 This is a 26,270 sq. ft. gross parcel with a converted one-story wood frame stúcco residence of approximately 1,260 sq. ft. reconfigured as office space. It operates as a business site and storage yard for the owners' stucco contracting business and one of the offices is occupied by a landscape contractor who owns DDA Parcel #9. The property was appraised at $120,000 for land and improvements. Relocation costs are preliminarily estimated at $20,000. The Hendersons were offered $120,000 for thi.s property. Rodney Henderson responded that the purchase price was too low for the Hendersons to replace their existing facility. He would not name an acceptable price. The Developer had previously and unsuccessfully offered $193,000, to include relocation expenses. The Developer and the owner have not located replacement properties which are comparable and which will : allow open storage. It is not felt that further negotiations would be fruitful. C. DDA Parcei H9 " Uribe. Daniel APN #622-030-15 This is a 21,414 sq, ft. gross parcel with no structural improvements. It is used as an open storage yard for the owner's landscaping business. The property was appraised at $117,500. Relocation costs are preliminarily estimated at $20,000. .- Daniel Uribe was offered $117,500 for this property. He responded that his property, with improvements not determined to have value by the Agency appraiser, is worth $225,000. The Developer un~uccessfuny offered $185,000 including relocation responsibilities. 1\vo meetings with the property owner occurred which made no progress in bringing his price down: The distance between the fair market value and the property owner's position makes further negotiations unprocluctivè. In order to further the goals of the Southwest Redevelopment Project Area plan to eliminate blight by redeveloping these dilapidated and under utilized properties as a retail shopping center, it is necessary to the public goad to carry out these cOndemnations. Fair market value has been offered in goad faith negotiations. The project for which the land is necessary has been planned and located, in a manner that will be most compatible with the greatest public good and the least private injury. The affected property owners have received all notiCe required by law. Therefore, it is recommended that the Agency adopt the resolutions of necessity to move forward with the condemnation process. The law firm of Daley & Heft has been employed by the . '1--1'/ -. -. Page 7 Report on Palomar Trolley Center April 13, 1993 Agency and paid for by the Developer to process the necessary condemnation actions. 4. fAGENCYl Approve Execution of Palomar Trollev Center Disposition and Development A!!reement bv A!!encv (Resolution E) ~ It is recommended that the Redevelopment Agency execute the original 15-acre Palomar Trolley Center DDA as amended by the First Amendment (Resolution A). With the completion of the above recommended actions, as well as the events indicated in Table 1 above, the conditions precedent to the execution of this document by the Agency will have been accomplished. 0 In approving this resolution, the Agency will be taking the following actions: . Acknowledging the conditions precedent have been satisfied. . Approving the design of the 15-acre project, subject to Design Review committee . conditions. . Approving the Scope of Development . Approving the Schedule of Completion Section. 2 of the report discusses the conditions precedent. This section of the report discusses the other actions and the concept ofIeasing the City-owned Ridgeback road site to the Jehovah's Witnesses Church. " The project design for the Palomar Trolley Center project has been approved by the Design Review Committee on March 22, 1992, after collsidering the project at its March 8 and March 22 meetings. . Conditions of that approval are attached and incoIpOrated in ResolutionE. Those conditions generaI1y address signage issues. ,- Design highlights include the following: . The project entails 155,800 sq. ft. of commercial shopping space, which includes one anchor tenant (45,000 sq. ft.), two major tenants (25,000 and 28,000 sq~ ft.), in-line retail shops, and five pad buildings, one of which will have a drive-thro. . Three driveways link the center to Palomar Street. . The architectural design projects a contemporary image which is compatible with the architecture of the industrial area to the south and the CòmmerciaI developments to the north. . The main ~uiIding mass is staggered. horizontally and vertically to create a segmented building appearance which enhances the "vi1Iage center" design concept and reinforces , the image and individuality of each tenant. 1~/9 Page 8 Report on Palomar Trolley Center April 13, 1993 . Predominant building materials are stucco and standing seam metal panels, the wall color palette consists of fouf earth tone colors, and the roof metal sections are forest green. , At the meeting of April 13, staff will provide a graphic overview of the p?ojecC The DDA, in Section A.1.g requires as preparatory events, the Agency approval of a "Scope of Development" and a "Schedule of Completion". Those documents are attached to Resolution E and incorporated therein. The "Scope of Development" is consistent with the project approved by the DRC. The "Schedule of Completion" is consistent with the terms of the DDA. '. An issue has arisen which could have a significant impact on both the design and the economics of the project. That issue is the potential creation of a .Price Club" access from Palomar Street north to the Price Club Store. Such an access would require a signalized intersection at Palomar and necessitate the relocation of the signalized MTDB trolley station access to go through the Palomar Trolley Center project and align with the proposed north access street. The Agency should be aware that staff, Sunbelt, Price Club, and MTDB are meeting to assess the implications. ' As indicated in Table I above, a condition precedent to the execution of the DDA by the Agency is the acquisition of all necessary parcels for the development by the Developer or by the Agen~y (parcels 1 thru 10). As further indicated, those acquisitions that remained incomplete were the three parcels which were subject to the above recommended resolutions of necessity (parcels 6,7, and 9) and Parcel 10. Further discussion is necessary regarding the Developer's acquisitiOlY of Parcel 10. ' DDA Parcel 10 (APN #622-030-25) has a gross area of 1.05 acres and a net usable square footage of 35,108. It is owned by the Chula Vista Congregation of Jehovah Witnesses. It is improved with a church of 3,660 sq. ft. The property and improvements were appraised by the Lee Johnson Company on December 4, 1992, at $360,000. Relocation benefits to .~e church have been preliminarily estimated at $25,000. Staff has participated with the Developer and the Jehovah Witness Church in extensive negotiations to effect the purchase and relocation of the church. It is the desire of the church to be relçcated to the 1.51 acre site owned by the City at East H Street and Ridgeback Road (see map, Attachment 2). That site, originally acquired by the City for a. fire station, which was subsequently located in Ranch5> del Rey, was appraised by the Lee Johnson Company on December 8, 1992, at a fair market value of $500,000 based on a highest and best use of office commercial. The following purchase and relocation an-angement has been negotiated between. the Developer, the church and the Agency and is offered to the City/Agency for consideration: A. The Developer, would buy the Jehovah Witness church property for $400,000 including ,relocation benefits. t/ _;2.0 ,.-. -, Page 9 Report on Palomar Trolley Center April 13, 1993 B. The City would lease the Ridgeback site to the church for 15 years, with an option to purchase, under the following terms: . Years 1 thru 5 ~ . Monthly lease payment of $2,000.00, of which $1,500.00 would apply to purchase price if option exercised. 8 Purchase price of $375,000. 8 Years 6 thru 10 8 Monthly lease payment of $3,000.00, of which $2,000.00 would apply to purchase price if option exercised. 8 Purchase price of $500,000. 8 Years 11 thru 15 8 Montlùy lease payment of $4,000.00, of which $3,000.00 would apply to purchase price if option exercised. , , 8 Purchase price at appraised market value. C." In addition, the City would waive processing and development fees for a church building of approximately 5,000 sq. ft., estimated at approximately $60,000. Tlûs fee waiver would be credited as part of any Agency contribution to the sharing of costs between the Agency and the Developer for total acquisition costs of parcels 4 thru 10 which exceed $8.50 per sq. ft. D. The Developer would pay the City $125,000 cash to offset potential loss on the Ridgeback sale during the first five years of lease ($500,000 appraised value; church buys property for $375,000; Developer has paid City $125,000). Tlûs payment would be included in the total acquisition cost calculation that detennines the Agency's and Developer's cost sharing over $8.50 per sq. ft. in the aggregate for parcels 4 thru 10. E. This arrangement would be conditioned on the church obtaining a General Plan Amendment, a Spa Plan Amendment, and a Conditional Use Permit which would allow the church use on the Ridgeback site. . Staff supports the conditions of the Ridgeback lease purchase arrangement with the.church to effectuate the sale and relocation of the existing Jehovah Witness Church. . The church appears to be an appropriate use of the site, subject to subsequent environmental and land Use analysis. In the current development market, i~ is !lot expected that other more financially favorable uses of the property exist. Through a combination of Developer payment to the City, lease payment, , 1-:2-1 -.. -, Page 10 Report on Palomar Trolley Center April 13, 1993 and expected exercise of the purchase option by the church, the City would receive full value for the site, and the resultant relocation would clear the way for development of a strong revenue-producing Palomar Trolley Center. If the Agency feels that, subsequently, acting as the City Council, they would be unlikely to approve a lease purchase agreçment structured as described above, then it would be inappropriate at this time to execute the Dísposition and Development Agreement. 5. fCOUNCIUAGENCY JOINT MEETINGl Conduct Section 33431 and 33433 HeariO!!s. Council adoot Resolution F. A!!encv adoot Resolution G. I The California Health and Safety Code requires that public hearings be conducted by the Legislative body (Council) when Agency property is being disposed of without public bidding (Section 33431) and when the property was purchased with tax increment funds (Section 33433). Parcels 6,7,9, which are the subjects of the above resolutions of necessity, are the properties to be conveyed to the Developer under the tenDs of the DDA and subject to the public hearing requirement. These public hearings were noticed in the Star News for two weeks prior to this meeting and the attached reports (Attachments 3,4,and 5), as required by law, were made available to the public. ' . The Section 3343,1 hearing should establish that the subject properties were purchased by the Agency solely to convey to the Developer under the terms of the DDA to eliminate existing blight:a,nd allow the development of the shopping center. Therefore, there is no benefit or practicality to disposing of the properties through public bidding. The Section 33433 hearing should establish that the subject properties would be conveyed to the Developer at fair market value. Although the acquisition of the properties through eminent domain will actually be paid for by the Developer's deposit, the 33433 hearing is being conducted in case excess costs arise which need to be shafed between the Developer and the Agency, the Agency portion of which might come from Agency tax increment funds. Subsequent to the 33433 public hearing, both the City Council and the Agency need to adopt resolutions which approve the sales of these properties and establish that those sales are at fair market value. 6. fAGENCYl APPROVE AMENDED DDA FOR THE PAWMAR TROLLEY CENTER ffiE,C;;OLUTION ID. All of the previous actions have pertained to the 15-acre, approximately 160,000 square foot center, addressed in the original DDA approved on November 10, 1992. However, this action addresses a proposed AMENDED DDA which will accomplish the following: . It would add.an approximately 3-acre area, the corner of Broadway ànd Palomar. TIús addition was always contemplated by the Developer for inclusion in the Project and was included as Phase IT in the Project EIR (FEIR 91"{)2). It was discussed with the Agency at the November 10, 1993 meeting. It would entail approximately 23,000 additional square feet.of retail space. '-f - ;¡:Þ- _. -- Page 11 Report on Palomar Trolley Center April 13, 1993 . It would eliminate the previous DDA and First Amendment to the DDA by incorporating all of their, conditions into this one document at the point of execution of this Amended DDA, which will be after satisfaction of the conditions precedent and before July 31, 1993. The Amended DDfI. will control the development of the approximately 18-acre Palomar Trollèy CèÍ1.ter. If the Amended DDA is not executed by the Agency, the original DDA and First Amendment will stand. The following analyses will principally consider the components of the Amended DDA that treat the 3-acre addition: A. Site Characteristics: The site is bounded by Palomar Street to the north, Broadway to the east, the San Diego Gas & Electric right-i>f-way to the south, and the site of the previously approved Trolley Center Project to the west. This addition will extend the proposed shopping center to the intersection of Broadway and Palomar Street. All parcels comprising the site are within the Southwest Redevelopment Project Area and are zoned as Central Commercial. B. Existing Land Uses: The parcels included in the additional area of the project have the following existing uses. I.>DA PARCEL NO. APN PARCEL NO. USAGE 11 622411-17 Vacant " 12 622411-20 Mi Cabana La Mision Restaurant and Night Club 13 622411-21 7"11 Convenience Store and Coin Laundry 14 622411-22 Sam's Trailer Repair 15 622411-23 Sam's Trailer Repair .- C. Final Environmental ImDact Report and CEOA Documents: FEIR 91.{)2 a.¡¡d the related CEQA documents are adequate for the proposed 3-acre addition. Please see Section 2 of this report for further details. D. DiS!)Osition and Develo,pment Agreement: The DDA terms for the addition differ somewhat from the original project DDA due to the greater complexities and higher cost of acquiring the additional properties. The business terms of the proposed DDA are as follows: 1. Sunbe1t will attempt to buy all required properties. Sunbe1t to date has purcþased parœlll (622-Q41-17) and has made purchase otters on parcels 14 (622-Q41..22) and 15 (622-Q41-23).. 2. Agency will attempt to buy all properties not ultimately secured by Sunbe1t. If voluntary negotiations fail, the Agency will consider eminent domain. tf- ")3 .- -- Page 12 Report on Palomar Trolley Center April 13, 1993 3. SunbeIt will acquire all Agency owned properties in "as is" condition, being responsible for demolition and clean up. If exorbitant clean up costs that will make the project uneconomic are discovered in the initial acquisition stage, SunbeIt will be able to walk away. Agency must delive~ prop~rties free of easements which curtail development. 4. SunbeIt will pay the first $10.00 per square foot of the aggregate cost of property acquisition and relocation for all properties subject to the DDA acquired through either negotiation or condemnation. .Any acquisition and relocation coses in excess of $10.00 per square foot will be shared as follows: The Agency will pay all costs between $10.01 and $12.00 per square foot. Cost over $12.00 per square foot will be shared equally by Sunbelt and the Agency, to a cap of $20.00 per square foot. If costs will exceed $20.00 per square foot, either party could walk away. 5. Enùnent domain litigation costs will be shared equally to a maximum of $200,000, ($100,000 each). At the poÏlit at which potential litigation costs could be forecast to exceed that threshold, either party could walk away or could mutually agree to continue. 6. If any properties ,could not be acquired through eminent domain,. Sunb'elt will " have the choice of proceeding without such parcels. If Sunbelt elects not to proceed, the Agency will refund to Sunbelt their eminent domain deposit (125% of fair market value). Additionally" the Developer will receive protection from the Agency on loss due to market value slide on remarketing the properties already acquired by the Developer. The Developer would remarket its parcels at highest and best use. Any loss, as defined by the difference between the purchase price and the sale price, will be calculated. The Agency will pay the Developer 50% of the loss, the Agency's portion not to exceed $250,000. The Agency will have the right to participate in remarketing the parcels and will have the right of first refusal on the parcels. Note that an identical provision also applies separately to the original DDA properties, so the Agency.s total exposure could be $500,000. 7. Under the terms of the DDA approved on November 10, 1992, Sunbelt will pay a maximum of $1.2 million for off-site improvements and the Agency will pay for costs exceeding that amount to a cap of$l.4 million. The Agency could walk away if estimates, bids, or actual costs for off site improvements exceeded $1.4 million. Those off-site improvements are the mitigation required in the IS-acre center evaluated in the FEIR. Sunbelt will put those improvements in at the time they construct the IS-acre center of the November 10, 1992 DDA. The November 10, DDA requires the Agency to reimburse Sunbelt for the costs of the off-sites which will be proportionally attributable to the property identified as Phase 2 in the FEIR (17%, or $204,000 at an off-site cost of $1.2 million). The ¥- 'J-rf '. Page 13 Report on Palomar Trolley Center April 13, 1993 subject Amended DDA forgives the Agency obligations for that reimbursement proportionally as additional properties are ac~uired by the Developer. In other words, if the Developer acquires 50% of the additional land area, the Agency's remaining obligation will be $102,000. With acquisition of a!1 the .properties, all reimbursement obligations go away. 8. Any cost to the Agency deriving from sharing an acquisition cost will be loaned to the Agency by Sunbelt at 7% fixed interest. The loan will be paid back from project-generated sales tax at a maximum of 30% of the annual project-generated sales taxes. I 7. PROTECT BENEFITS As has been previously indicated, the Palomar Trolley Center addition involves substantially greater cost and complexities of acquisition and relocation than the I5-acres center approved on November 10. Taken separately, the addition will not. yield City and Agency revenues sufficient to recommend the potential financial participation required to the Agency. However, as the addition will result in a substantially more desirable land use and a more appealing and functional, as well as successful, shopping center which can better attract higher quality tenants, it is appropriate to evaluate this addition as part of the expanded I8-acre center. Therefore,the costs àn,d benefits presented below are for the larger shopping center which will result from the subject Amended DDA. The project is valued at $18.35 million. Therefore, the project will generate approximately $66,000 in net tax increment to the Agency on completion. Sales tax projections from the project begin at$384,OOO annually to the General Fund. The project is anticipated to generate approximately 200 temporary construction jobs and 585 . pennanent commercial jobs. .- 8. FISCAL IMPACT This fiscal impact analysis looks at the costs and revenues for the I8-acre shopping center created by the Amended Palomar Trolley Center DDA. Costs shown on the REVENUFJCOST ANALYSES SHEET (Attachment 6) fall into two categories: those costs which will be fÏIianced by the Developer at 7% interest and paid back to the Developer through an annual sales tax rebate, not to exceed 30% of the annual sales tax yield from the project; and, those costs which are out-of-pocket expenses for the Agency and the City. Only the financed costs appear on the REVENUFJDEBT RETIREMENT SCHEDULE SHEET (AttachmeI)t 7). Revenues for both analysis sheets are comprised of tax increment to the Redevelopment Agency and sales tax to the City. 1-;).'3 -. ._, Page 14 Report on Palomar Trolley Center April 13, 1993 The REVENUE/COST ANAL YSrS spread sheet is based on the following: . A reasonable expectation that acquisition and relocation costs for the I5-acre Trolley Center will be about $10.55 per square foot, which will requires the Agency to share the $2.05 per square excess over $8.50 per square foot with the Developer on a fifty/fifty basis. This results in a Agency contribution of $126,356 ($1.025 times $123,274 square feet). Deducted from this is the estimated $60,000 in fees waived for the Jehovah Witness development on the Ridgeback Road site, which yields a net Agency contribution to the land acquisition of $66,356. . An estimation that the 3-acre addition to the Trolley Center will have acquisition and relocation costs at the level of $20.00 per square foot, which requires the Agency to share $6.00 of the excess cost, for a total of $700,000 ($6.00 times 111,513 square feet). . An estimate that off-site costs will exceed the Developer's $1.2 million obligation by $200,000. . The forgiveness of the Agency obligation to reimburse the Deve1oper for the 17% of the off-site improvements attributed to the additional 3-,!-cres (estimated at $238,000), since the expanded Trolley Center will require those improvements. As can be seen from the REVENUE/DEBT RETIREMENT SCHEDULE SHEET, for a fmanced irtVestment of $966,000 at 7% and an out-of-pocket cost of $310,000, the City/Agency will realized an after-debt-service cumulative revenue production over ten years of approximately $3.7 million. This revenue production is considered to be an excellent return on the Agency/City investment and risk exposure. Regarding risk exposure, the following is a listing of the downside exposure for th~Agency, pursuant to the DDA terms, as well as staff's best assessment of likely risk: .- , TERM MAXIMUM AGENCY Sf AFF ASSESSMENT EXPOSURE Condemnation $200,000 No guarantees, but Special. Counsel for condemnation feels Agency is well positioned. Market Value Slide $250,000 Unlikely, due to: . Developer's commitment to the project . Agency right to acquire . Current low real estate prices TOTAL $4S0ßOO (SS/M'lSCIDisk#2frroUey.RPt) ;/_;2-10 ATTACHMENT 3 REPORT ON PALOMAR TROLLEY CENTER July 27, 1993 On April 27, 1993, the Redevelopment Agency executed the Palomar Trolley Center Disposition and Development Agreement and its First Amendment. At the same time, the Agency approved the Amended Palomar Trolley Center Disposition and Development Agreement, which incorporated the 3-acre Phase 2 addition to the proposed center. The Amended Agreement set forth certain conditions precedent which were to be completed prior to the Agency's execution of the Amended Agreement, which was to occur on or before July 30, 1993. Those conditions precedent will all have been accomplished if the Agency and the City Council take the actions recommended by staff on the July 27, 1993 agendas of the Agency and the Council. With those actions, the Amended Palomar Trolley Center Disposition and Development Agreement will become the governing document for the proposed development, and the two previous documents (Palomar Trolley Center Disposition and Development Agreement and its First Amendment) will be replaced and superseded by it. This report addresses the step-by-step actions needed to be taken by the Redevelopment Agency and the City Council in order to execute the Amended Palomar Trolley Center Disposition and Development Agreement. The report provides information about the project and itemizes the specific actions to be undertaken at the July 27, 1993, Council and Agency joint meeting. The Agency and City Council should follow the steps recommended to insure proper sequencing of a number of interrelated actions. Those steps include the following: . Agency will consider the adequacy under CEQA of the environmental documents, fIDdings, and actions. . Agency will adopt Resolutions of Necessity for Condemnation on four (4) properties needed for development of the IS-acre center which could not be acquired through negotiation. . Agency will execute the Amended Palomar Trolley Center Disposition and Development Agreement on the IS-acre center, which was approved on April 27, 1993, and can be executed now that the necessary preparatory events have occurred. . Agency and Council will hold joint public hearings on selling the four parcels acquired above through condemnation to the developer pursuant to the Amended Disposition and Development Agreement terms without public bid and at fair market value. Resolutions will approve this action. 1. DEVELOPER AND PROPOSED DEVELOPMENT The Amended Disposition and Development Agreement is with a limited partnership named Cypress Creek Company, LP.; however, the Developer pursuing the project, and the authorized managing agent for Cypress Creek Company L.P., is Sunbelt Management Company. Sunbelt is a Florida Corporation controlled by a German family. Sunbelt bought the Fed-Mart stores - 1-/- Þ} Page 2 Report on Palomar Trolley Center July 27, 1993 from Saul Price in the 1970's and, although Fed-Mart stores no longer exist, Sunbelt owns approximately 34 ex-Fed-Mart shopping centers which are now Target and Ralph's anchored centers. Sunbelt develops new shopping centers with cash. The proposed center contemplated in the Amended DDA as approved on April 27, 11993, will be approximately 180,000 to 190,000 sq. ft. The entire center will be anchored by one large user such as a grocery store and two major high volume tenants of approximately 25,000 to 28,000 sq. ft. each. Other smaller users will be predominantly national promotional tenants. The site is bounded by Palomar Street to the north, Broadway to the east, the San Diego Gas & Electric right-of-way to the south, and the MTDB Trolley Center to the west. (See map as Attachment 1.) All parcels comprising the site are within the Southwest Redevelopment Project Area and are zoned as Central Commercial. All property owners and tenants of the affected properties have been notified of their Owner Participation Rights to propose an alternative project. None has responded affirmatively, and Owner Participation Rights are determined to be exhausted. 2. FINAL ENVIRONMENTAL IMPACT REPORT AND CEOA DOCUMENTS The Final Environmental Impact Report (FEIR) for the Palomar Trolley Center (February 1992), available in the Community Development Department, includes a First Addendum, which evaluates the project under a two-phase schedule, rather than the previously-analyzed single- phase schedule, and a Second Addendum, which deals with project impact on schools. Phases 1 and 2 were described as: Phase 1 --166,300 square feet over 15 acres with 832 parking spaces Phase 2 --31,500 square feet over 3 acres with 157 parking spaces The proposed project in the Amended DDA is for a shopping center substantially consistent with the two phases analyzed in the FEIR. The analysis contained in the FEIR and First and Second Addendums was certified by the City Council on February 25, 1992, and at every subsequent significant City Council and Redevelopment Agency discretionary action relating to the project. With the adoption of the resolution approving the execution of the Amended DDA, which includes the environmental actions, the Agency will continue to satisfy its responsibilities under CEQA. 1. ~).g -,. Page 3 Report on Palomar Trolley Center July 27, 1993 3. fAGENCY1: ADOPT RESOLUTIONS OF NECESSITY REGARDING CONDEMNATIONS OF REAL PROPERTY (RESOLUTIONS 1341. 1342 AND 1343) The Developer was unable to successfully complete negotiations to purchase four of the five Phase 2 properties. After no progress was made by the Developer, staff was also unable to negotiate successfully. This was a multi-step process in which all offers were rejected. Property owners were properly noticed. Negotiation meetings were held with the affected property owners. All property owners were offered fair market values as determined by Agency- contracted current appraisals by the Lee Johnson Company. In all cases, the property owners' estimations of value were much greater than the appraised values obtained by the Agency staff, and it proved impossible to negotiate mutually-acceptable values. It became a consensus position that further negotiation would not likely be fruitful, and therefore eminent domain actions are recommended. The Agency has an existing contract with Pacific Relocation Consultants to assist all property owners in relocating and to determine for the Agency the amount of relocation benefits required, and Pacific Relocation Consultants is providing that service for the subject parcels. The Amended Disposition and Development Agreement requires the developer to deposit with the Agency 125 % of the value of each property prior to the Agency seeking possession. The Developer has deposited $336,875.00 with the Agency, which is 125% of the value of Parcel 12, to be used by the Agency for acquisition of that parcel through condemnation and for provision of relocation benefits. Parcel 12 will be taken through immediate possession action, while the other parcels subject to these resolutions of necessity will be taken at a later time. Parcel numbers are referenced on the map attached as Attachment 1. A. DDA Parcel #12 (Resolution 1341) San Diel!o Chanter of Jananese American Citizens Leal!Ue APN #622-041-20 This is a 32,670 sq. ft. gross parcel with a 4600 sq. ft. commercial structure which is a 50 to 70 year old woodframe building being used as a restaurant and nightclub (Mi Cabana La Mision). The property was appraised at $269,500.00 for land and improvements. The property is leased to Mr. Augustin Reyes, the operator of the restaurant and nightclub. The Japanese American Citizens League was offered $269,500.00 for this property. The League has indicated that they do not wish to sell the property and they have declined to make a counter-offer. ¡lJ.1 Page 4 Report on Palomar Trolley Center July 27, 1993 B. DDA Parcel #13 (Resolution 1342) San Die!!:o Chanter of Jananese American Citizens Lea!!:ue APN #622-041-21 This is a 22,651 sq. ft. gross parcel with a single-story commercial building of approximately 5040 sq. ft. and a self-service gas station island. The structure houses a 7- Eleven convenience store and a coin laundry. The property was appraised at $505,500.00 for land and improvements. The Japanese American Citizens League was offered $505,500.00 for this property. The League has indicated that they do not wish to sell the property, and they have declined to make a counter-offer. C" DDA Parcels #14 and #15 (Resolution 1343) Williams. James and Sandra APN#622-O30-22 and APN#622-O41-23 These two parcels are 47,480 sq. ft. gross, with a variety of structures housing the owner's residence and his business, Sam's Trailer Repair. Structural improvements total approximately 6500 sq. f1.. Sam's Trailer Repair includes both repair and bodywork facilities and a retail parts store, The property was appraised at a value of $415,000.00. Mr. and Mrs. Williams were offered $415,000.00 for their property. They responded that the property was worth in excess of double that amount, according to appraisals they had obtained and their counter-proposal was not specific, but was in the vicinity of $1 million. After a negotiating meeting, it was the opinion of the Williams and their attorney that the value calculations of the Agency and the owners were too far apart to successfully negotiate a voluntary sale. It is recommended that the Agency adopt the three resolutiofls of necessity and move forward with condemnation of these four properties in order to allow the development of the Palomar Trolley Center and effect the goals of the Southwest Redevelopment Project Area. The condemnations are appropriate and necessary for the following reasons: 1. The Agency staff engaged in good faith negotiations with the affected property owners, and, in that process, offered Fair Market Value for the properties. Subsequent to those negotiations, the property owners remain either disinterested in selling their properties or having much higher calculations of the values of their properties. 2. The proposed Palomar Trolley Center will provide a high level of public good by: a. Providing a highly desirable level and quality of retail commercial development on a commercially-zoned project site which is currently substantially characterized by ,1-30 Page 5 Report on Palomar Trolley Center July 27, 1993 an incompatible mix of uses, underutilization in land use and tax-generation, and deterioration. b. Enhancing a gateway to the Southwest Redevelopment Project with quality development compatible with the existing land use designations. c. Generating employment opportunities for the community. d. Providing tax revenues at a level commensurate with the location and the land use designation. 3. The proposed Palomar Trolley Center has been designed to cause the least private injury. The project site narrows at the intersection of Palomar Street and Broadway. Access to the site from Broadway, both vehicular and visual, which is critical to the commercial success and the internal círculation of the project, is not available without the taking of the subject parcels. Additionally, the lack of depth from Palomar at the east end of the site does not allow for practical development of commercial structures without inclusion of the subject parcels in the development. Again, it is recommended that the Agency adopt the resolutions of necessity to move forward with the condemnation process. The law firm of Daley & Heft has been employed by the Agency and paid for by the Develop~r to process the necessary condemnation actions. 4. rAGENCY/COUNCIL JOINT MEETING1: CONDUCT SECTION 33431 AND 33433 HEARINGS. COUNCIL ADOPT RESOLUTION 17178. AGENCY ADOPT RESOLUTION 1344 The California Health and Safety Code requires that public hearings be conducted by the Legislative body (Council) when Agency property is being disposed of without public bidding (Section 33431) and when the property was purchased with tax increment funds (Section 33433). Parcels 12, 13, 14, and 15, which are the subjects of the above resolutions of necessity, are the properties to be conveyed to the Developer under the terms of the DDA and subject to the public hearing requirement. Additionally, the Jehovah's Witnesses Church parcel (APN 622-030-25), which is DDA Parcel 10, is included in the public hearing in anticipation of it being condemned and conveyed to the developer. On June 22, 1993, the Redevelopment Agency adopted Resolution 1332, which was a resolution of necessity on Parcel 10. These public hearings were noticed in the Star News for two weeks prior to this meeting. The Section 33431 hearing should establish that the subject properties were purchased by the Agency solely to convey to the Developer under the terms of the DDA to eliminate existing blight and allow the development of the shopping œnter. Therefore, there is no benefit or practicality to disposing of the properties through public bidding. 1- ðl Page 6 Report on Palomar Trolley Center July 27, 1993 The Section 33433 hearing should establish that the subject properties would be conveyed to the Developer at fair market value. Although the acquisition of the properties through eminent domain will actually be paid for by the Developer's deposit, the 33433 hearing is being conducted with the expectation that excess costs will arise which need to be shared between the Developer and the Agency, the Agency portion of which might come in part from Agency tax increment funds. Subsequent to the public hearings, both the City Council and the Agency need to adopt resolutions which approve the sales of these properties and establish that those sales are appropriately made without public bidding and at fair market value. 5. rAGENCY1: APPROVE EXECUTION OF AMENDED PALOMAR TROLLEY CENTER DISPOSITION AND DEVELOPMENT AGREEMENT (RESOLUTION 1345) It is recommended that the Redevelopment Agency execute the Amended Palomar Trolley Center Disposition and Development Agreement(Resolution F). With the completion of the above recommended actions, as well as the events indicated in Table 1 below, the conditions precedent to the execution of this document by the Agency will have been accomplished. TABLE 1 ACTION STATUS I. Developer's good faith negotiations to The ten Phase I parcels are all either under contract acquire properties to the developer or under eminent domain proceedings. Four of the five Phase 2 parcels could not be acquired by the developer and require condemnation action at this time. 2. Developer executes DDA Done 3. Developer makes good faith deposit Done 4. Owner Participation Rights exhausted Done 5. Notice to Agency of acquisition of Done Pacific Scene, Inc. parcels by Developer 6. Cooperative effort to develop Day Care Ongoing satisfaction of obligation. See Dav Care Center below. Center 7. Any further CEQA actions Not necessary as project is currendy conceived. Resolutions find CEQA documents adequate 8. 33431 Hearing by Agency to dispose Hearings for Phase I parcels held April 27, 1993. Hearings for Phase 2 of acquired properties without public parcels subject of this agenda action. bidding t.J-3Þ- Page 7 Report on Palomar Trolley Center July 27, 1993 ACTION STATUS , 9, 33433 Hearing and resolution by City Hearings for Phase I parcels held April 27, 1993. Hearings for Phase 2 Council approving of sale of property parcels subject of this agenda action. acquired with tax increment funds 10. Resolutions of Necessity to acquire Three (3) Resolutions of Necessity considered as part of this Agenda item. properties through eminent domain II. Developer acquisition of Lots II Parcels 12 through 15 subject to Resolutions of Necessity considered as part through 15 or Agency eminent of this agenda action. domain Parcel 11 acquired by developer. 12. Approval of land use, zoning, Done development standards, and determination of General Piau conformity 13. Approval by both parties of written DDA calls for Developer's off-site costs to be capped at $1.2 million. estimates of off-site improvement costs Agency pays full cost beyond that, with right to cancel participation if estimates exceed $1.4 million. City Engineer feels Developer's engineer's estimates of off-site costs at $1.1 million are generally reasonable given the amount of information available. With addition of Agency costs for acquisition of non-Developer-owned right-of-way (McDonalds and MTDB) and reconfiguration of trolley crossing apparatns, total off-sites should not exceed $1.4 million. Commuuity Development Director is prepared to issue approval letter. 14. Environmental assessment: Done. Developer has accepted environmental site conditions in writing for determination by Developer of costs of Phase 1 parcels undergoing eminent domain acquisition by the Agency and for removing contamination from non- Parcel 12 of Phase 2. Developer will accept condition of other Phase 2 Developer owned sites parcels prior to Agency seeking possession. Dav Care Center: The developer is required to make a good-faith effort to assist with the provision of a day care center near the project to serve the community and the employees of the center. Staff and the developer have been concentrating on a property near the project site, on the northwest corner of the intersection of Industrial Boulevard and Ada Street (see map as Attachment 2). Discussions have been held with Episcopal Community Services (ECS) regarding developing a Head Start facility on the site, which would also provide all-day child care. The facility would likely accommodate approximately 100 children. ECS and staff are holding discussions with Habitat for Humanity and other non-profit low-income housing developers regarding the possibility of developing a portion of the available site with affordable housing. 'I - 33 -,. Page 8 Report on Palomar Trolley Center July 27, 1993 The developer has negotiated a 30-month option on the property with the property owner, the cost of which would be borne by the developer for 24 months and initially reimbursed to the developer by the City from sales tax proceeds. This arrangement would allow'the City, the Agency, ECS, and possibly a non-profit housing agency to control the property while concepts were more fully defined and funding sources were explored. Possible sources of funding at this point would appear to include Community Development Block Grant, HOME funds, Head Start funds, Community Foundation funds, and other public social service funds. The developer has secured the option in their favor and has made the first option payment. However, the option is conditioned on the Agency's approval of a reimbursement agreement, through a subsequent amendment to the ADDA. Staff intends to return to the Council and the Agency shortly with a consideration of such an amendment, an analysis of the feasibility and the funding potential of the project, and an agreement with Episcopal Community Services regarding their potential rights and obligations concerning developing the subject site. Summary of Terms: The terms for the Amended Disposition and Development Agreement are as follows: 1. Sunbelt will attempt to buy all required properties. 2. Agency will attempt to buy all properties not ultimately secured by Sunbelt. If voluntary negotiations fail, the Agency will consider eminent domain. 3. Sunbelt will acquire all Agency owned properties in "as is" condition, being responsible for demolition and clean up. If exorbitant clean up costs that will make the project uneconomic are discovered in the initial acquisition stage, Sunbelt will be able to walk away. Agency must deliver properties free of easements which curtail development. 4. Phase I: Sunbelt will pay the first $8.50 per square foot of the aggregate cost of property acquisition and relocation for all properties subject to the DDA acquired through negotiation or condemnation. Aggregate cost in excess of $8.50 per square foot will be shared equally by Agency and developer. Either party may elect to walk away if aggregate cost exceeds $12.00 per square foot. Phase 2: Sunbelt will pay the first $10.00 per square foot of the aggregate cost of property acquisition and relocation for all properties subject to the DDA acquired through negotiation or condemnation. Any acquisition and relocation costs in excess of $10.00 per square foot will be shareC as follows: (I) the Agency will pay all costs between $10.01 and $12.00 per square foot; (2) cost over $12.00 per square foot will be shared equally by Sunbelt and the Agency, to a cap of $20.00 per square foot; (3) if costs will exceed $20.00 per square foot, either party could walk away. 1-31 Page 9 Report on Palomar Trolley Center July 27, 1993 5. Eminent domain litigation costs will be shared equally to a maximum of $200,000, ($100,000 each) for each phase. At the point at which potential litigation costs could be forecast to exceed that threshold, either party could walk away or both could mutually agree to continue. 6. If any Phase I or Phase 2 properties could not be acquired through eminent domain, Sunbelt will have the choice of proceeding without such parcels. If Sunbelt elects not to proceed, the Agency will refund to Sunbelt their eminent domain deposit (125% of fair market value). Additionally, the Developer will receive protection from the Agency on loss due to market value slide on remarketing the properties already acquired by the Developer. The Developer would remarket its parcels at highest and best use. Any loss, as defined by the difference between the purchase price and the sale price, will be calculated. The Agency will pay the Developer 50% of the loss, the Agency's portion not to exceed $250,000. The Agency will have the right to participate in remarketing the parcels and will have the right of first refusal on the parcels. 7. Under the terms of the DDA approved on November 10, 1992, Sunbelt will pay a maximum of $1.2 million for off-site improvements and the Agency will pay for costs exceeding that amount to a cap of $1.4 million. The Agency could walk away if estimates, bids, or actual costs for off site improvements exceeded $1.4 million. Those off-site improvements are the mitigation required in the 18-acre center evaluated in the FEIR. Sunbelt will put those improvements in at the time they construct the IS-acre center of the November 10, 1992 DDA. The November 10, DDA requires the Agency to reimburse Sunbelt for the costs of the off-sites which will be proportionally attributable to the property identified as Phase 2 in the FEIR (17%, or $204,000 at an off-site cost of $1.2 million). The subject Amended DDA forgives the Agency obligations for that reimbursement proportionally as additional properties are acquired by the Developer. In other words, if the Developer acquires 50% of the additional land area, the Agency's remaining obligation will be $102,000. With acquisition of all the properties, all reimbursement obligations go away. 8. Any cost to the Agency deriving from sharing in acquisition costs will be loaned to the Agency by Sunbelt at 7 % fixed interest. The loan will be paid back from project- generated sales tax at a maximum of 30% of the annual project-generated sales taxes. 7. PROJECT BENEFITS As has been previously indicated, the Palomar Trolley Center addition involves substantially greater cost and complexities of acquisition and relocation than the IS-acres center approved on November 10. Taken separately, the addition will not yield City and Agency revenues sufficient to recommend the potential financial participation required to the Agency. However, as the addition will result in a substantially more desirable land use and a more appealing and functional, as well as successful, shopping center which can better attract higher quality tenants, 1-35 Page 10 Report on Palomar Trolley Center July 27, 1993 it is appropriate to evaluate this addition as part of the expanded 18-acre center. Therefore, the costs and benefits presented below are for the larger shopping center which will result from the subject Amended DDA. The project is valued at $18.35 million. Therefore, the project will generate approximately $66,000 in net tax increment to the Agency on completion. Sales tax projections from the project begin at $384,000 annually to the General Fund. The project is anticipated to generate approximately 200 temporary construction jobs and 585 permanent commercial jobs. 8. FISCAL IMPACT This fiscal impact analysis looks at the costs and revenues for the 18-acre shopping center created by the Amended Palomar Trolley Center DDA. Costs shown on the REVENUE/COST ANALYSES SHEET (Attachment 3) fall into two categories: those costs which will be financed by the Developer at 7% interest and paid back to the Developer through an annual sales tax rebate, not to exceed 30% of the annual sales tax yield from the project; and, those costs which are out-of-pocket expenses for the Agency and the City. Only the financed costs appear on the REVENUE/DEBT RETIREMENT SCHEDULE SHEET (Attachment 4). Revenues for both analysis sheets are comprised of tax increment to the Redevelopment Agency and sales tax to the City. The REVENUE/COST ANALYSIS spread sheet is based on the following, which reflects the latest actual costs and estimates (updated since April 27, 1993, approval of Amended DDA): . A reasonable expectation that acquisition and relocation costs for the 15-acre Trolley Center will be about $10.55 per square foot, which will requires the Agency to share the $2.05 per square excess over $8.50 per square foot with the Developer on a fifty/fifty basis. This results in a Agency contribution of $126,356.00 ($1.025 times $123,274 square feet). Deducted from this is the estimated $60,000 in fees waived for the Jehovah Witness development on the Ridgeback Road site, which yields a net Agency contribution to the land acquisition of $66,356. . A conservative estimate that Phase 2 of the Trolley Center will have acquisition and relocation costs at the level of $21.00 per square foot, which requires the Agency to share $6.50 of the excess cost, for a total of $725,000.00 ($6.50 times 111,513 square feet). This estimated cost-sharing obligation by the Agency has increased by $55,760.00 over the April 27, 1993, estimate, due to refmement of available information on potential relocation costs . NOTE: The estimated ag:grel!ate cost per square foot for the Phase 2 properties exceeds the $20.00 per square foot 'walk-awav' threshold established in the Amended DDA. However the estimate is just that an Lf- 310 Page 11 Report on Palomar Trolley Center July 27, 1993 estimate. and it is felt a conservative one. Actual costs mav not exceed the $20.00 threshold. Even if they do at this level of magnitude the project remains a ¡¡:ood investment for the A¡¡:encv and the City. Staff does not recommend considerilllr the "walk-awav. unless and until future estimates of a more definite nature indicate per square foot costs substantially over the threshold. . An estimate that off-site costs will exceed the Developer's $1.2 million obligation by $200,000. . The forgiveness of the Agency obligation to reimburse the Developer for the 17 % of the off-site improvements attributed to the additional 3-acres (estimated at $238,000), since the expanded Trolley Center will require those improvements. As can be seen from the REVENUE/DEBT RETIREMENT SCHEDULE SHEET, for a financed investment of $1,021,760.00 at 7% and an out-of-pocket cost of $310,000, the City/Agency will realize an after-debt-service cumulative revenue production over ten years of approximately $3.65 million. This revenue production is considered to be an excellent return on the Agency/City investment and risk exposure. Regarding risk exposure, the following is a listing of the downside exposure for the Agency, pursuant to the Amended DDA terms, as well as staffs best assessment of likely risk: TERM MAXIMUM AGENCY STAFF ASSESSMENT EXPOSURE Condemnation $200,000 No guarantees, but Special Counsel for condemnation feels Agency is well positioned. Market Value Slide $250,000 Unlikely, due to: . Developer's commitment to the project . Agency right to acquire . Current low real estate prices TOTAL $450,000 [C:\WP51 IAGENCY\RA4S\1ROU.EY 4,RI'f ,tj- 37 fJh¡~ fa7JE. blank! ,,(38 '<It f- Zoo 0 0 0 w . 0 0 ~ ¡C;;~ C? C? [3 i ~ g ;;; '" « : ~Q) è: <I> <I> f- , en f- >! 0 Q) « ~¡:=£3 11 ., ~ -cgoggg c;; æ C? C? C? 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Þ/ .-t/ & RESOLUTION / 1'f{;; RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA PROPOSING TERMINATION OF THE AMENDED PALOMAR TROLLEY CENTER DISPOSITION AND DEVELOPMENT AGREEMENT AS A RESULT OF EXCESSIVE PHASE II PROPERTY ACQUISITION COSTS, AND DIRECTING STAFF TO MEET AND CONFER WITH THE PALOMAR TROLLEY CENTER DEVELOPER REGARDING THAT PROPOSITION WHEREAS, on July 27, 1993, the Redevelopment Agency of the City of Chula Vista ("Agency") entered into an Amended Disposition and Development Agreement ("DDA") with Cypress Creek Company L.P. ("Cypress Creek") for the development of an approximately 190,000 square foot retail commercial shopping center called the Palomar Trolley Center ("Center"); and, WHEREAS, the DDA calls for financial participation by the Redevelopment Agency in certain costs associated with the development of the Center, with Paragraph 8.4. Phase II Site Acauisition Costs ("Paragraph 8.4"), providing either party with the right to terminate the DDA after meeting and conferring with the other party if the total site acquisition costs for Phase II of the Center are reasonably estimated to exceed $20.00 per square foot; and, WHEREAS, Cypress Creek has informed the Agency that the total site acquisition costs for Phase II of the Center are estimated to be $26.00 per square foot; and, WHEREAS, Cypress Creek has informed the Agency that it wishes to proceed with the acquisition of the Phase II properties, that it does not intend to exercise its right to terminate the DDA due to the Phase II site acquisition costs being estimated to exceed $20.00 per square foot, pursuant to Paragraph 8.4, and that it requests that the Agency adopt a resolution approving Agency participation in Phase II site acquisition costs in a total amount not-to-exceed $26.00 per square foot; and, WHEREAS, the Agency judges that it would not benefit the Agency and the City of Chula Vista to continue to participate in the DDA to effectuate the development of Phase II of the Center in light of the excessive acquisition costs for Phase II. NOW, THEREFORE, THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA does hereby find, order, determine and resolve that it proposes to terminate the Amended Palomar Trolley Center Disposition and Development Agreement pursuant to Paragraph 8.4. Phase II Site Acauisition Costs and directs staff to meet and confer with the Palomar Trolley Center developer on that proposition. PRESENTED BY: APPROVED AS TO FORM BY: ~ ~ ~~' .- '-..c/_,-c ~ Chris Salomone, Executive Secretary and ruc~-M ß~~J Community Development Director Agency Counse - [BB:C:\WP51 \AGENCY\RESOS\PTCPHSII.RES] tJ-t/7 [OGIOIS K5\ WPWI N\A :PTCPH SII, RES I ~~ þ~t: Clank! ~-~; RESOLUTIONNO.1Lt't-iP l.eVìÇ.~ ~Â~t RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF CHULA VISTA PROPOSING DElJBERATIOIDN TERMINATIOIDF THE AMENDEDI' ALOMARTROLLEY CENTERDISPOSmON ANDDEVELOPMENTAGREEMENTAS ARESULTOF EXCESSIVE PHASE II PROPERTY ACQUlSmON COSTS, AND DIRECfING STAFF TO MEET AND CONFER WITII THE PALOMAR TROlLEY CENTER DEVELOPER REGARDING THAT PROPOSmON WHEREAS, on July 27, 1993, the Redevelopment Agency of the City of Chula Vista ("Agency") entered into an Amended Disposition and Development Agreement ("DDA "~ith Cypress Creek Company L.P. ("Cypress Creek") for the development of an approximately 190,000 square foot retail commercial shopping center called the Palomar Trolley Center ("Center"); and, "..vì?l/6 WHEREAS, the DDAeaHs forfillaucial participation by the Redevelopment Agency incertain costs associated with the development of the Center, with Paragraph 8.4. Phase II Site Acauisition Costs ("Paragraph 8.4"),providing either party with the right to tenninate the DDAafter meeting and conferring with the other pal ;f' '~ ~?:~ a°'l,,;o:t:gR wóo, fln fh- II ef IhG C~..I\.. Ate Ic:a:;unilbl) ~t;.....tOO -to ellS' J $~e.e ..c. B I r ; and, WHEREAS, Cypress Creek has informed the Agency that the total site acquisition costs for Phase II of the Center are estimated to be $26.00 per square foot; and, WHEREAS, Cypress Creek has informed the Agency that it wishes to proceed with the acquisition of the Phase II properties, that it dpes not intend to exercise its right to terminate the DDAdue to the"Phase II site acquisition costs being estimated to exceed $20.00 per square foot, pursuant to Paragraph 8.4, and that it requests that the Agency adopt a resolution approving Agency participation in Phase II site acquisition costs in a total amount not-to-exceed $26.00 per square foot; and, WHEREAS, in light of Cypress Creek's estimate that Phase IIacquisitions costs will be in excess of $20 per square foot, the Agency is proposing to deliberate on terminating the DDA pursuant to Section 8.4 thereof. NOW, THEREFORE, THE REDEVELOPMENTAGENCY OF THE CITY OF CHULA VISTA does hereby find, order, determine and resolves that it propose to deliberate an terminating the DDA pursuant to Paragraph 8.4. thereof. However, pursuant to said agreement and said provision, a party proposing to tenninate shall offer to meet and confer with the other party for the purpose of solicit~e other party's agreement to increase the limit on Agency's duty of reimubrsement above $12.00 per e foot shared equally. Therefore, in order to deliberate on exercising its right to tenninate, and to bè in a position to exercise its right to terminate the agreement, the Agency hereby offers to meet and confer with the other party for the purpose of soliciting the other pa~'s agreement to increase the limit on Agency's duty of reimbursement above $12.00 per square foot shar equally. Therefore, the staff is hereby instructed to meet and confer with Cypress Creek for said purpose. Be it further resolved that, except as expressly provided here, no rights ~ in Cypress Creek or any third party are conveyed or created by this resolution. PRESENTED BY: APPROVED AS TO FORMBY: Chris Salomone, Executive Secretary and Bruce M. Boogaard Commuuity Development Director Agency Counsel .,-.,.. [DGIDISK5\ WPWIN\A: PfCPHSil ,RES] f{DA McDoNALD, HECHT & SOLBERG =#1 ACEX C MoDONACO' M'CHAEC" MAHE" A "OMN HECM" A PA"T".SH'P "ceUO"G P"O'<SSOONAe CO.PO"AT'ONS "'CHA"D A SCHUeMAN OA."'e o SOLBE"G' ATTORNEYS AT LAW LAU"' C"OCE ""£<TE" "E.OLD H GDeDBE.G' 600 WEST B.OADWAV, «GMTM FLOO. DAV>D. B emeE PAue E "OB>NSON' SAN DIEGO, CALIFORN'A 92W> PETE".. soeEC'" THOMAS C ",eSON' SUSAN e£< DAev "OBE"TAS "OB"SON' TELEPMONE 16'91 239-0.44 . MA.T" BOHe DAVOD w eAGLn. '" nLECOe"R 16"" 232-6626 CHARLES" G"L' THOMAS e BEH" O' COUN"e '. .,O'US'O"Ae co."o."'o.. February 28, 1995 r~~"- .~.-~ . . fEd 2 8 ""5.;"1 I ,... PERSONAL DELIVERY I L ,."J ~~'.~:; The Honorable Shirley Horton and Members of the Redevelopment Agency p City of Chula Vista 276 Fourth Avenue Chula Vista, California 91910 Re: Amended Palomar Trollev Center DisDosition and DeveloDment Al!reement Dear Chairperson Horton and Agency Members, This firm represents Sunbelt Management Company and Cypress Creek Company (collectively, "Company") the developer of the project commonly referred to as the Palomar Trolley Center. The purpose of this correspondence is to express our concern with certain statements in the staff report relating to the Amended Palomar Trolley Center Disposition and Development Agreement ("Agreement"). In general, the staff report factually describes the obligations created by the Agreement and the current financial status, however, we believe that an assumption implicit in staff's recommendation is in error. We respectfully suggest that the Agency is estopped from taking any action to terminate the Agreement pursuant to Section 8.4 due to the Agency's knowledge, for more than ten (10) months, that the Phase II acquisition costs were in excess of $20.00 per square foot. J'TotwitlJstanding our opinion that tl1e Agency is estopped from terminating the Agreemem, we also believe that the action proposed by staff is contrary to the express provisions of the Agreement relating to the "right" to terminate created by Section 8,4. (Section 8.4 provides that "[p]rior to exercising the right to terminate under this Section, a party proposing to terminate shall offer to meet and confer with the other party for the purpose of soliciting the other party's agreement to increase the limit on Agency's duty of reimbursement... "). We suggest that the proposed Agency resolution expressly shows that the decision to terminate has already been made and that compliance with the "meet and confer" provisions of the Agreement will not be in good faith. Furthermore, we caution the Agency that such lack of good faith, evidenced in the staff report as the benefits received by the Agency because of the Phase I tax increment, raise serious issues regarding the Agency's potential breach of the covenants of good faith, fair dealing and cooperation. - The Honorable Shirley Horton and Members of the Redevelopment Agency City of Chula Vista February 28, 1995 Page 2 We ask that your Agency reaffirm the obligation of the Agreement to share the costs of acquiring Phase II of the Palomar Trolley Center. In the event that you decide to accept staffs recommendation, we intend to participate in the discussions with staff, however, such participation should not be construed to be a waiver of any of the arguments which may be asserted by our client relating to the Agency's authority or compliance with the terms of the Agreement. Should you or any member of your staff have any questions, please do not hesitate to call. þ Sincerely yours, ~ /? 6;!é Charles R. Gill McDonald, Hecht & Solberg CRG/mq cc: Bruce M. Boogaard, City Attorney Christopher Salomone, Community Development Director David Gustafson, Assistant Development Director Glen Googins, Deputy City Attorney Shepherd D. Johnston, Sunbelt Management Company Michael W. Holmes, Sunbelt Management Company James Moxham AGENDA ITEM #5 MEMORANDUM February 23, 1995 TO: The Honorable Chairman and Agency Members VIA: John D. Goss, Executive Director IPt..1'l. . FROM: Chris Salomone, Community Development Director ¿v~ . SUBJECT: Auto Park: Request for Additional Financial Assistance On February 7, 1995 the Agency received a request for additional financial assistance from the Auto Park developers. Staff requested additional information from the developers (see attached letter) and requested two weeks to analyze the information and report back to the Agency. As of this date, staff has not received any information from the developers but has been advised by their attorney, John Abbene, that the information will be forthcoming by Wednesday, March 1. Staff will need time to receive and analyze the information and requests the Agency continue the item to the meeting of March 7, 1995. Attachment FK/CS/bb IBB:C:\WP51\AGENCY\MEMOS\INF09501,MEMJ 5-1 fJhi~ þClf}E- blank! S..~ ~~f?. -.- . -------- I ~~ 1 OlY OF I CHUlA VISTA i OFFICE OF THE CITY ATTORNEY February 13, 1995 John J. Abbene Haskins, Nugent & Newharnn 1010 Second Avenue, Suite 2200 San Diego, Ca. 92101 Re: Chu1a Vista Auto Park Dear John: As we discussed in our telephone conversation on February 8th, in order for City staff to fully analyze your proposal regarding the Chula Vista Auto Park as set forth in your letter to Sid Morris dated January 30,1995, the City will need to receive and review financial information regarding your clients current operations of the Auto Park. Accordingly, the City requests that you provide the following information as soon as possible: 1. Independently verified, monthly operating statements for the Ordway and Fuller dealerships reflecting all revenues, expenses and net operating income, if any. 2. Loan documents with General Motors and Ford financing companies and any and all other lenders which have loaned monies with respect to the dealerships, reflecting the terms of such loans. This would include any and all loan information with respect to the undeveloped parcel owned by Mr. Ordway, commonly referred to as "Parcell". 3. An accounting of all proceeds disbursed to the owners of the dealerships at the time of the closing of the original Auto Park land transaction and in connection with any subsequent financing or refinancing of those properties, including Mr. Ordway's Parcell. 4. Any and all other documents or information which would assist the City in evaluating and quantifying the current and projected economic condition of the dealerships at the Auto Park. You should forward such information to the attention of Fred Kassman. Please call me with any questions or comments you may have with respect to this request. Very truly yours, cc: Bruce M. Boogaard Sid Morris Chris Salomone Fred Kassman Doug Fuller David Ordway Travis Reneau C'll"o..o.e S,..3 276 FOURTH AVE/CHULA VISTA, CALIFORNIA 91910/(6191691'5037 Clhü þa:¡£ Clank! S-'I JOINT REDEVELOPMENT AGENCY/CITY COUNCIL AGENDA STATEMENT Item ~ - Meeting Date 2/28/95 ITEM TITLE: REPORT: Concerning a Request from McMillin Companies for Federal HOME Funds and Redevelopment Agency Low and Moderate Income Housing Funds for a Proposed Affordable Housing Project in Rancho del Rey SPA III. SUBMITTED BY: Community Development Director L_S, "j REVIEWED BY: City Manager/Executive Directot?j& (4/5ths Vote: Yes - No .XJ ~ BACKGROUND: McMillin Companies is required to enter into an Affordable Housing Agreement with the City prior to the first Final Map approval within Rancho del Rey SPA III that delineates the time frame and specific details concerning their Affordable Housing Program requirement to provide a minimum of 23 affordable housing units. As part of this negotiation, McMillin proposes to provide land to a for profit/nonprofit joint venture development team who propose to build 40 affordable family units within SPA III. To help make the project affordable, the joint venture is requesting financial assistance from the City/Agency as discussed below. RECOMMENDATION: That the Council/Agency discuss the project concept, provide staff with any comments or questions on the proposal, and direct staff to return the issue to the Agency/Council at the March 7, 1995 meeting. BOARDS/COMMISSIONS RECOMMENDATION: The Housing Advisory Commission will discuss this item at their February 22 meeting and their comments will be presented verbally to the Council/Agency by staff. DISCUSSION: McMillin Companies proposes to satisfy their affordable housing requirement for SPA III by inviting a joint venture development team consisting of Sares-Regis as the for profit developer/contractor, Orange Housing Development Corporation (nonprofit) and South Bay Community Services to build a 40 unit affordable family housing project within SPA III. The joint venture plans to apply for State and Federal Tax Credits and the next application deadline is March 10. They are seeking Council/Agency funding approval prior to this submittal because in order to be complete, the application must include a commitment for funding from all sources including local government participation. They first proposed the project to staff on February 3, and still do not have complete details on project financing, expenses, or site/unit data due to the short amount of time they have had to develop a project plan. However, to accommodate their deadline for tax credit submittal, staff is requesting that the Council/Agency review the information available to offer an initial response. A more detailed project description and analysis are scheduled to be brought back to Council/Agency on March 7. The Tax Credit program has two application cycles, one in March and one in July. Given the short City review period the project would ideally be submitted in July; however approximately two thirds of the funds are allocated during the March application round so the July application {; - / _. - .-- Page 2, Item ~ Meeting Date 02/28/95 would be more competitive. Thus, the project has the best chance of being funded during this first cycle. The Federal Tax Credit program was authorized by Congress in 1986 to encourage the development of affordable housing. It replaces traditional tax: incentives, such as accelerated depreciation, that were eliminated at the same time. Since 1987, the tax: credit program has been the largest affordable housing production program funded by the federal government and has assisted in the provision of roughly 90 % of all affordable housing produced in recent years. Federal and State Tax Credits are used to finance affordable housing and generally finance half the development costs. Investors buy tax: credits that are then purchased by affordable housing developers. Funds are very competitive and are awarded on a point scale. Projects earn points for features such as affordability, population served, location (urban/rural), and amenities. To be competitive, all projects must show at least 20 % of development costs coming from the local jurisdiction or from the developer applying for funds. To receive bonus points, applicants must obtain either more than a 20% local match (for every percent higher local funding the applicant earns one point) or must show that they can receive a higher than average net contribution from the tax: credit syndication. The California Tax Credit Allocation Committee (TCAC) , the reviewing entity, requires that investors contribute a minimum of 54 cents for every dollar of tax: credit allowed. If the developer can find investors willing to pay higher rates, then they earn a point for every penny on the dollar that is over the 54 cent minimum requirement. Applicants can only chose one method for earning bonus points and most seek additional local contributions because of the difficulty in securing firm commitments from syndicators for high returns. Syndicators do not sell the credits until the project begins construction, so market conditions may change during the period between when a project receives credits and the start of construction (generally one year) thus affecting the rate the credits can be sold for. Last year, projects earning over 105 points were awarded tax credits with a few projects at 105 points being funded after being placed on a waiting list. Competition is expected to be as competitive or more so this cycle although it is impossible to accurately predict. THE PROPOSED PROJECT The joint venture proposes to build 40 affordable family units in SPA III south of J Street (site map attached). Rents will be affordable to families at or below 60% of the median income. They tentatively propose to provide - . 24 two bedroom units (750 square feet) for rents ranging from $435 to $486, . 12 three bedroom units (1,140 square feet) renting from $553 to $671, and . four, four bedroom units (1,262 square feet) renting between $609 - $741. The joint venture is examining project costs and income as well as requirements from other lenders and investors. Further changes to the proposed project rents and development costs are expected and will be presented to Council/Agency at the March 7 meeting. The two bedroom units would be stacked flats and the three and four bedroom units would be in a townhome configuration. A preliminary site plan, unit plan, and elevations are attached. ~ -2- _.. _. .-., ,-- Page 3, Item ~ Meeting Date 02/28/95 Proposed amenities include a 2,000 square foot club house with a kitchen, restrooms, meeting room and individual rooms for counseling, a library, or other services. The project will also have a tot lot, half court basketball court, carports, a picnic area with tables and gas barbecues, a gazebo, and open area hardscape and landscaped area. Units will have individual patios. The proposed site plan will not be submitted to the Planning Department for review until after the project receives a tax credit allocation (if successful). REOUESTED ASSISTANCE The current estimate of the total project cost is $4,849,198 or $121,230 per unit. Tax credit financing would cover roughly half the cost. The balance will be funded through a conventional loan (roughly 23%) and local contributions (approximately 27%). The proforma is being updated by the joint venture, and any changes will be reported at the March 7 Council/Agency meeting. Staff has requested that the developers look for cost savings to reduce costs; however the joint venture has been unable to identify significant cost savings. The costs for this project include the following: . $20,000 per unit for land in ready to build condition, . tax credit financing requirements generally add eight to nine percent to development costs, . buying out Mello Roos Assessment Districts at approximately $130,000 ($3,250 per unit) so that the nonprofit developers do not need to pay this fee as a yearly project expense, . construction and landscaping costs sufficient to build a quality project that will blend in with the other developments being built by McMillin. Another cost consideration is the relatively small project size. Fixed development and financing costs are spread over only 40 units. The joint venture has requested a local contribution of $1 ,311,775 (27.1 % of project costs). Of this McMillin Companies would contribute the land currently valued at $800,000 ($20,000 per unit) on the proforma. McMillin estimates the value of the land (2.97 net acres with approximately 2.2 buildable acres) between $900,000 and $1,000,000. Staff has requested from McMillin evidence supporting that range of value. As part of the local contribution, they are requesting that the City grant $160,000 in Federal HOME Funds and loan $351,775 from Agency Low and Moderate Income Housing Funds at 3 % interest paid back through residual receipts, if any are generated from the project. The total City request is $511,775 or $12,794 per unit. The general terms and conditions of the grant and loan are currently being discussed and will be presented at the March 7 meeting. Detailed terms and conditions of the grant and loan would be contained in a disposition and development agreement that would be negotiated with the joint venture prior to any release of funds. The per unit City contribution of $12,775 is higher than could typically be supported given the ¿r3 "-, - Page 4, Item ~ Meeting Date 02/28/95 limited amount of funds available and the amount of funds being requested by other nonprofit developers for similar multifamily projects funded in part with tax credits. It seems appropriate that the City's contribution not exceed $10,000 per unit for this project, which is a benchmark level that the City has typically used over time in negotiations with developers of various types of assisted housing projects. It may be possible to bring the City's net contribution down to $10,000 through the sale of a portion of the affordable housing credits that could be generated from the project, and staff is currently negotiating this issue with McMillin representatives. Affordable housing credits could be created based on the concept that McMillin is required to provide a minimum of 23 units but is contributing towards a 40 unit affordable housing project leaving 17 "extra" units that they would otherwise not be required to provide. They are asking for the right to sell all or some of these credits to other developers. Other localities have adopted the practice of selling affordable housing credits. For example, the City of Carlsbad has housing credits that they believe are worth approximately $25,000 per credit. City staff and McMillin companies are discussing the relative split of housing credits. If the City retains a portion of the credits this can reduce our net contribution to the project to a range staff can support. Many factors concerning the project, the level of City assistance, and an agreement with McMillin concerning the relative City/McMillin contribution requires further information and analysis. We intend to return to the Council/Agency on March 7 with further details and necessary legal documents. It should be noted that the proposed project would be an ideal way to accomplish the remaining Rancho Del Rey affordable housing obligation. A low income family apartment project on site, built in the near term, completely meets the goals of the Housing Element, and the Mcmillin Company is to be commended for bringing the project forward. Additionally, it should be noted that completion of this project would clear McMillin to file subdivision maps for SPA III of Rancho Del Rey, which would otherwise be held up pending satisfaction of the affordable housing requirement. We ask that the Council review this status report and provide staff with comments on the proposal and any requests for information. FISCAL IMPACT: The fiscal impact will vary depending upon the level of requested contribution and will be discussed at the March 7 meeting along with specifics on the project. ss:REYA,113 t-lf U) Q NS- . U N'" JI" t() ~ ð i~~ « . '..c . ..,. .- ~ " 5-~ Cl. :f~Ä-:':'F~ Z".!",.""::,, 0 f~ ~7: c... r- ';:.' ,', \ \. EJ r-.- ,',:.::., Ie:( '.> 1 N ",~'", I :J ' , 5 w ~ I- U w ..." a a:: c- t! :z VI => a :r: w -' "" « CI a:: a u.. u.. « CI w VI a c- o a:: c- - -. -¡ ~ i f 0 - . 0 .1. . " . " "I" I i . - ¡¡ ; . ~ :~ilJII!1 I ¡iG000G00 ï ,-S 11-5 ClI'u~ F9E blank! ¿,--~ « > 0 ~ 0 ~ 0 U 1-,.... 5'11: lJ.j CS ~-7 ~~ .-.r:::i Clhi~ þa:JE ¡;lank! t~¡ ~í .I . ~ \ti ~ .f1.'~ ~U /, . ~ ~ t:~\ ~ "c" " ~í ! ~ ~ ~~ . ~ ~ \)~"" 4.. .~ . ~ ~~ ~ . ~'O « 1-,... ~~ tt ~ ~ ~~1-!~ ~ > Q'It lU ~ ~ ~'" '<". ~ ~ ~~ ~ ~ !~~ ~~~ ~~~ 0 ~lU C ex: ~ ~~ ~.~ ~~~~ft ~~ _..J .- fJhü þafj£ Clank! &-/¿) <~ ~" 1/ Pi ¡i'z; _. t ~ ~~ -.. ~ ~~ " ,,~ ~~ '~@!]~f- ~ ~~ ~-: t(t « > ~~ 0 ~~ £:) .. c¿ ,'\I t1 0 tf) ~~ ~ U ~'>G ~~ ~ ----L- .. d ~ ~ " t " !O- t: \ij !i ~ ~. 1-,.. 1/ t:7-,= "&-11 15"" !:! ::::: . l.(j ~~l ~~ ~~~ ~f~ ~ ~LiJ ~f Ii* -~ ~ f2a9¡;; ¡;tmk! ~ ~/2--- MEMORANDUM February 8, 1995 TO: The Honorable Mayor Shirley Horton~ VIA: John D. Goss, City Manager l' 1G FROM: C ~, Chris Salomone, Community Development Director. SUBJECT: Request for Special Agency Meeting - February 28, 1995 Staff requests your consideration to call and convene a Special Meeting of the Redevelopment Agency on Tuesday, February 28, 1995 immediately following the City Council meeting. The only item on the Agenda will be: . Resolution Approving Agency Participation in Property Acquisition Costs for Phase II of the Palomar Trolley Center in Excess of Thresholds Identified in the Amended Palomar Trolley Center Disposition and Development Agreement .Q! Resolution Proposing Termination of the Amended Palomar Trolley Center Disposition and Development Agreement as a Result of Excessive Phase II Property Acquisition Costs, and Directing Staff to meet and Confer with the Palomar Trolley Center Developer Regarding that Proposition By signing below you will authorize the calling of the meeting and a copy of the memorandum will then be forwarded to Agency Members. APPROVED: Copies to: Agency Member Bob Fox Agency Member John Moot Agency Member Steve Padilla Agency Member Jerry Rindone City Clerk IC:\WP51 \AGENCY\MEMOS\MA YOR-2.MEMI ~{f? î'~':; CllY OF CHUlA VISTA COMMUNITY DEVELOPMENT DEPARTMENT February 24, 1995 Dear Recipient: ~ ~ Attached is the staff report for Agenda Item 4: Proposing termination of the Anrended Palo11Ulr Trolley Center Disposition and Developnrent Agreenrent as a result of excessive Phase II property acquisition costs, and directing staff to nreet and confer with the Palo11Ulr Trolley Center developer regarding that proposition that will be before the Redevelopment Agency at its meeting on Tuesday, February 28, 1995. The meeting will follow the City Council meeting which begins at 6:00 p,m. The Redevelopment Agency will meet in the Council Chambers, Public Services Building, 276 Fourth Avenue, at the northwest comer of Fourth Avenue and F Street. If you have any questions about this agenda item, please contact Dave Gustafson at 691-5047 via: FEDEX [C:\ WPS l\AGENCY\LETIERS\NOnCE-12.LlR] 276 FOURTH AVE/CHULA VISTA, CALIFORNIA 91910/(619) 691-5047