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 CITY COUNCIL AGENDA ITEM NO. 20 



Meeting Date: November 26, 2002

Subject/Title: Consider a sales strategy for property located at the Sunset Industrial Complex and adopt criteria for the selection of successful candidates to purchase the subject property.

Submitted by: Howard Sword, Economic Development Director

Approved by: John Stevenson, City Manager


RECOMMENDATION 
Consider a sales strategy for property located at the Sunset Industrial Complex and adopt criteria for the selection of successful candidates to purchase the subject property.

PREVIOUS ACTION

 City Council authorized the purchase of approximately 40 acres of property located at the northeast corner the Tresch and Sunset Roads.

 City Council authorized various consultant contracts to master-plan and prepare environmental documents for approximately 132 acres of city owned land northeast of Tresch and Sunset Roads to include a 49.2 acre Wastewater Treatment Plant, 2.7 acre Solid Waste Plant, 37.7 Sports Park, 13.3 acre Corporation Yard and a 28.4 acre Industrial Complex.

 City Council authorized a consultant contract with McGill Martin Self to prepare infrastructure improvement plan for the Sunset Industrial Complex.

 City Council authorized a contract with Tiechert Construction to build the infrastructure improvements at the Sunset Industrial Complex.

BACKGROUND

Staff is ready to begin the property disposition process for the Sunset Industrial Complex. The property available for sale is distributed in the following categories.

4.7 acres reserved for the Corporation Yard.
6.5 acres reserved for relocations from blighted sites in the Redevelopment Project Areas.
17.2 acres available for sale to the general public. 
28.4 total acres

Staff needs direction from City Council on two issues regarding the disposition of property to the general public. This direction is important because demand for the property appears to be very high. Over 20 parties expressing interest in purchasing property in the Complex have contacted us. This interest has been generated with no public advertisement of the availability of the property. It is very likely that there will be more potential buyers interested than there is property available to sell.

The first issue is structuring the price of the property. The cost to the City of the improved property is approximately $3.50 per square foot. This includes the purchase, soft costs of planning / processing and construction improvements of the property. It does not include the currently unknown costs of mitigating the burrowing owl habitat found onsite. 

It is extremely difficult to determine the fair market value of the property due to the lack of comparable sales of improved medium industrial land in the area. Conversations with various developers lead Staff to believe that a reasonable expectation of the property value on the open market is approximately $6.00 per square foot. 

One approach to establishing a price for the property would be to ascertain a floor price under which we would not sell, for example, $5.00 per square foot, and then sell the property to the parties that submit the highest bid. This approach would probably maximize the profit that the City would realize from the property disposition. It would not, however, achieve other goals that the City wants to accomplish with this project.

To encourage the buildout of the project and to discourage landbanking of parcels, the City wishes to establish covenants on the property title that would require the purchaser of property to obtain a building permit within eighteen months and prohibit further subdivision of the property for a period of ten years. The City also has goals that relate to the existing business location, business type, business operation, employment and fiscal impact of potential purchasers. Staff recommends that these factors be considered in establishing the asking price of the property.

Therefore, rather than establishing a floor price of $5.00 for example, another possible sales approach that would accomplish the City’s goals, as described above, would be to set a fixed price of $5.50 per square foot for the property and determine the successful purchasing candidates through the evaluation of criteria that achieves the City’s qualitative goals. Both Staff and the Economic Development Subcommittee recommend the attached Sales Criteria for use in this approach.

Staff requests direction from the City Council regarding establishing a sales strategy, including establishing either a floor price with competitive bidding or a fixed price using the proposed Sales Criteria to determine selection of successful candidates.

FISCAL IMPACT
The City will realize a profit from the sale of these properties. The amount of profit will be determined by the sales strategy approved by the Council. In accordance with the Reimbursement Agreement between the City and the Redevelopment Agency wherein the Agency loaned $3,000,000 to the City for infrastructure improvements, profit from the sale of properties shall be shared 22% to the City and 78% to the Agency. This is necessary to reimburse the Agency for its loan.


Attachment: Sunset Industrial Complex Sales Criteria

Sunset Industrial Complex Sales Criteria
36 Possible Points

Timing (Requirement)

 A Building Permit must be obtained within eighteen months of the purchase of property. City of Brentwood will retain a right to repurchase the property if there is failure to comply with this requirement.

No Future Subdivision (Requirement)

 A covenant will be placed on the title to the property prohibiting any further subdivision of the site within ten years.

Existing Business Location Priorities (8 Possible Points)

 Relocation from Brentwood Redevelopment Agency’s Project Areas through the Agency’s Voluntary Business Relocation Program. (8 Points)

 Relocation from the City of Brentwood. (3 Points)

 Relocation from unincorporated areas surrounding the City of Brentwood (3 Points)

 Relocation from Far East Contra Costa County as defined as lands to the south and east of Somersville Road. (1 Point)

Business Types (5 Possible Points)

 Industrial business operations not conducive or desirable in business or high tech parks. (5 Points)

 Business with limited permitted locations in Brentwood. (4 Points)

 Business providing support services not available to local businesses. (3 Points)

Business Operation (8 Possible Points)

 Owner-occupied business that will conduct primary operation from the property. (8 Points)

 Business with long term pre-lease that accomplishes other criteria objectives. (5 Points)

 Business that will conduct satellite operation from the Site. (3 Points)

Employment Impact (5 Possible Points)

 Number of jobs that are reported to the State Franchise Tax Board as located in the City of Brentwood. (0 - 5 Points Possible)


Fiscal Impact (10 Possible Points)

 Sales tax generated by business. (0 - 5 Points Possible)

 Property tax increment generated by improvements to the property. (0 - 5 Points Possible)





November 2002



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