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CITY COUNCIL AGENDA ITEM NO. 3

Meeting Date: July 11, 2006

Subject/Title: Approve the selection of Kevin Vornhagen’s purchase proposal for 2010 Elkins Way at Sunset Industrial Complex based on Council-approved Sales Strategy Ranking

Prepared by: Gina Rozenski, Redevelopment Manager

Submitted by: Howard Sword, Community Development Director

RECOMMENDATION
Approve the selection of Kevin Vornhagen’s purchase proposal for 2010 Elkins Way at Sunset Industrial Complex based on Council-approved Sales Strategy Ranking.

PREVIOUS ACTION

• City Council authorized the purchase of approximately 40 acres of property located at the northeast corner the Tresch and Sunset Roads to master-plan an expansion of the Sunset Sports Park and to create the Sunset Industrial Complex.

• On June 4, 2002, the Planning Commission certified the Environment Impact Report for the Sunset Industrial Complex, and on June 6 the Notice of Determination was filed with the County.

• On July 23, 2002 the City Council adopted Ordinance 710 approving the Planned Development 56 Zoning for Sunset Industrial Complex, and also awarded the construction contract for the Sunset Industrial Complex Improvements Project (CIP No. 336-3128) to Teichert Construction.

• On November 26, 2002 the City Council approved a sales strategy for property located at the Sunset Industrial Complex and adopted criteria for the selection of successful candidates to purchase the subject property.

• On October 28, 2003, the City Council selected the successful buyers based on the approved ranking system and approved the preliminary lot layout which included the cul-de-sac site plan.

• On January 27, 2004, the City Council amended Planned Development Zone 56 to allow for an increase in the square footage designated for retail uses within Subareas A and B, and to allow smaller lot sizes in Subarea C, in the Sunset Industrial Complex.

• On April 13, 2004, the City Council approved the Purchase Agreements for the first phase of sales.

• On September 28, 2004, the City Council approved selection of a purchase proposal for 385 Carrol Court at Sunset Industrial Complex (this lot was available due to its original buyer choosing to drop out).

• Since April 2004, fifteen escrows have closed.

• On December 13, 2005, the City Council authorized staff to exercise the City’s option to repurchase 2010 Elkins Way owned by Pottery World following the expiration of the building permit issuance deadline.

• On December 13, 2005, the City Council adopted Ordinance 819 amending Planned Development Zone 56 to allow for indoor recreational uses in SubArea A.

• In March 2006, the City closed escrow for 2010 Elkins Way and is currently the owner.

• On April 25, 2006, the Council approved the sales price, the method to select the buyer and adopted a sales strategy to sell 2010 Elkins Way, located in SubArea A.

• On June 20, 2006, the Economic Development/Redevelopment Subcommittee met to review the purchase proposal rankings.

BACKGROUND
The Sunset Industrial Complex was an economic development strategy envisioned by the City and Redevelopment Agency to voluntarily relocate members of the redevelopment project areas, our business community and surrounding areas to a more appropriate location zoned for light and medium industrial employers.

The qualifications and identities of the buyers are of particular concern to the City. For that reason, the City adopted a sales strategy ranking system to fairly and objectively select qualified buyers that meet the economic development objectives of Sunset Industrial Complex.

In December 2005, the City Council authorized staff to re-purchase 2010 Elkins Way, a 2.0 acre site, from Pottery World (map is attached). This escrow closed in March 2006. In April 2006, the City Council approved the sales price of $7.50/square foot for 2010 Elkins Way, approved the method of selecting a buyer, and adopted a sales strategy to rank the purchase proposals.

Staff prepared and mailed 51 sales offerings, and advertised the availability of the parcel twice in the local newspaper. Three purchase proposals were received, scored and ranked in accordance with the sales strategy criteria approved by City Council that considered business location, type, job generation and economic impacts. The evaluation of the three proposals is reflected in the following table.

Rank
Business 0-38
Possible Points
1 Vornhagen Body and Paint 36 points
2 Kendall Auto Repair 33 points
3 RGM & Associates 23 points

The Economic Development/Redevelopment Subcommittee met on June 20 to review the rankings of the purchase proposals. During the meeting, the scoring of employment impacts was questioned by an applicant. Two of the three proposals indicated the primary businesses would occupy only a portion of the building and lease the remaining portions. SubArea A allows for many uses with varying degrees of employee counts, ranging from light industrial uses to indoor recreational uses. Industrial uses have a higher employee count than indoor recreational uses such as a batting cage facility. Staff has learned that several industrial spaces at Sunset Industrial Complex are vacant, and owners are worried about their lack of rental revenues. It is likely that if industrial leases are not secured for the remaining portions of a building in SubArea A, then indoor recreational uses would be secured as a contingency. Therefore, the scores in this category were based on the employees generated from the primary business only. Staff felt the certainty of the primary business rather than the uncertainty of future leases and uses was an objective and fair method to score this category.

An applicant inquired whether the scoring system could be revised by the City Council to award higher points for the Downtown Core rather than the entire Redevelopment Project Area. The Subcommittee advised the applicant that revising the scoring system, approved by the City Council prior to the commencement of the application process, in mid-stream in the proposal process was unlikely. However, if the scoring system were revised to eliminate points for those outside the Downtown Core, the rankings would not change.

The Economic Development/Redevelopment Subcommittee recommends the selection of Vornhagen Body & Paint as the successful candidate. Mr. Vornhagen agrees with the terms and conditions of the proposed purchase agreement. The purchase agreement for Mr. Vornhagen will be brought to the Council for approval at a later date, if selected.

If selected, Mr. Vornhagen agrees to cancel his escrow for 385 Carrol Court and open a new escrow for the purchase of 2010 Elkins Way. The availability of 385 Carrol Court will be a sales opportunity brought to the Council at a later date to approve a sales price and method to select a buyer.

FISCAL IMPACT
The fiscal impact associated with selecting Mr. Vornhagen’s proposal is the dissolution of his 2004 escrow for 385 Carrol Court for $5.50/sf. Most likely that parcel will be sold at a sales price more reflective of the 2006 fair market value.

The sale proceeds of 2010 Elkins Way at $653,400, less escrow fees, will first be distributed to the Redevelopment Agency to reimburse it for the repurchase of 2010 Elkins Way from Pottery World, including but not limited to the purchase price, appraisal, and escrow fees. The remaining proceeds will then be shared between the City and Agency in accordance with their Reimbursement Agreement.

Attachments:
1) Sales Strategy Criteria
2) Ranking Chart dated June 13, 2006
3) Map identifying 2010 Elkins Way

SUNSET INDUSTRIAL COMPLEX
SALES STRATEGY CRITERIA
(38 possible points)
April 2006

Existing Business Location Priorities (10 Possible Points)

 Relocation from Brentwood Redevelopment Agency’s Project Areas. (10 Points)

 Relocation from the City of Brentwood not within the Redevelopment Agency’s Project Areas (5 Points)

 Relocation of businesses that have moved out of Brentwood within the past four years due to the lack of a suitable building site in the City. (5 Points)

 Relocation from unincorporated areas surrounding the City of Brentwood as defined by the attached map listed as Figure 2 and titled Brentwood Planning Area in the Brentwood General Plan, 2001 – 2021. (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)

SUNSET INDUSTRIAL COMPLEX
SALES STRATEGY CRITERIA
(38 possible points)
April 2006

Existing Business Location
(0-10) Business Types

(0-5) Business Operation

(0-8) Employment Impact

(0-5) Fiscal Impact

(0-10)
Total Points

(0-38)
Kendall Automotive

Proposing 21,000 sf bldg.; primary business to occupy 25% of bldg.

Expects 200% growth. 10 5 8 2

6 current employees;
10 future employees from primary business 8

33
Sales tax:
$4,746
3 points

Tax Increment on $4.0M = $40,000
5 points

Vornhagen Body & Paint

Proposing 26,000 sf bldg.; primary business to occupy 100% of bldg.

Expects 100% growth.
10 5 8 5

15 current employees; 30 future employees from primary business 8

36
Sales Tax: $7,930
4 points

Tax Increment on $3.5M = $35,000
4 points
RGM & Associates

Proposing 20,000 sf bldg.; primary business to occupy a portion of bldg.

Moving corporate offices and construction yard from Concord.
1 5 8 4

20 employees from primary business 5

23
No Sales Tax
0 points
Tax Increment on $3.6M = $36,000
5 points

Rank Business 0-38 Possible Points
1 Vornhagen Body & Paint 36 points
2 Kendall Automotive 33 points
3 RGM & Associates 23 points

• Sales tax is based on 12.12% of sales tax paid.
o 1 $2,000
o 2 $4,000
o 3 $6,000
o 4 $8,000
o 5 $10,000

• Tax increment is based on 1% of land, construction cost, fees and permits.
o 1 $20,000
o 2 $25,000
o 3 $30,000
o 4 $35,000
o 5 $40,000

• Employment impact is based on future employee count for primary business.
o 1 6 employees
o 2 12 employees
o 3 18 employees
o 4 24 employees
o 5 30 employee
 

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