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Current Council Agenda and Past Meeting Information

 

CITY COUNCIL AGENDA ITEM NO. 3

Meeting Date: December 13, 2005

Subject/Title: Authorize staff to exercise the City’s option to repurchase a parcel at Sunset Industrial Complex owned by Pottery World following the expiration of the building permit issuance deadline, and direct staff to take actions and authorize the City Manager to draft and execute documents and grant deeds necessary for the repurchase transaction.

Prepared by: Gina Rozenski, Redevelopment Manager

Submitted by: Howard Sword, Community Development Director

RECOMMENDATION
Authorize staff to exercise the City’s option to repurchase a parcel at Sunset Industrial Complex owned by Pottery World following the expiration of the building permit issuance deadline, and direct staff to take actions and authorize the City Manager to draft and execute documents and grant deeds necessary for the repurchase transaction.

PREVIOUS ACTION
 City Council authorized the purchase of approximately 40 acres of property located at the northeast corner of 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.

 On April 13, 2004, the City Council approved the form of Purchase Agreements and Grant Deeds for the first phase of 12 sales, and authorized the City Manager to execute documents necessary to close the transactions.

 The escrow with Pottery World for 2.0 acres at Sunset Industrial Complex closed on July 28 2004, for $479,160.

BACKGROUND
The Sunset Industrial Complex was an economic development strategy envisioned by the City and Redevelopment Agency to voluntarily relocate members of our business community and surrounding areas to a more appropriate location zoned for light industrial employers. Pottery World proposed to open its third store at Sunset Industrial Complex specializing in retail/wholesale statuaries, fountains, pots and home furnishings. Pottery World would employ 10 to 15 employees and generate sales tax for the City. Pottery World scored 15 out of 36 points during the Council’s selection process.

The Purchase Agreements between the City and buyers at Sunset Industrial Complex includes a provision (Section 3.01) that allows the City the right, at its option, to repurchase the site if the purchaser fails to obtain building permits for construction of the proposed business operation within eighteen (18) months after the escrow closing date. The Purchase Agreement further provides the City the right, at its option, to repurchase the site if the purchaser fails to obtain a certificate of completion eighteen (18) months after issuance of building permits.

The qualifications and identity of the purchaser are of unique and particular concern to the City, and it is because of such qualifications and identity that the City entered into purchase agreements with the selected purchasers. For that reason, and to encourage timely development while discouraging pure speculation of the properties, the City intentionally added the provision to repurchase the properties should a buyer not perform its obligations outlined by the Purchase Agreement.

The City has sent three letters to Pottery World over the course of the past year reminding them of the repurchase deadlines and outlining the estimated time frames for design review and plan review approvals. Pottery World has not submitted a design review application to the City as of this date. It is highly unlikely that building permits will be issued for this development prior to January 28, 2006, the deadline for pulling building permits in accordance with Section 3.01 of the Purchase Agreement (July 28, 2004 + 18 months).

Staff recommends the Council approve exercising its option to repurchase the parcel owned by Pottery World following the expiration of the building permit issuance deadline of January 28, 2006, and direct staff to take actions and authorize the City Manager to draft and execute documents and grant deeds necessary for this transaction. To exercise its right to repurchase the Pottery World parcel, the City shall pay the original purchase price of the site less any liens and unpaid assessments on the site, in accordance with the Purchase Agreement’s terms and conditions.

FISCAL IMPACT
The purchase price to buy back this property is $479,160, less liens and unpaid assessments, plus miscellaneous legal, escrow and title costs, approximately $510,000.

It is anticipated that the parcel will be resold, using the original solicitation and ranking system, at a price higher than the initial $5.50 per square foot. An appraisal of the property, at a cost of approximately $4,000, will be performed to determine fair market value, and shall be funded by the Redevelopment Agency. It is anticipated that the sale of the parcel will not only recoup the repurchase and appraisal costs, but will add another $250,000 to $350,000 in sale proceeds for the project.

The total cost of the repurchase and future appraisal is estimated at $514,000 ($510,000 + $4,000), and shall be funded by the Redevelopment Agency. A companion staff report for Agency consideration and approval to fund the repurchase and appraisal costs is on tonight’s Agency agenda.
 

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