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Current Council Agenda and Past Meeting Information

 

CITY COUNCIL AGENDA ITEM NO. 18

Meeting Date: July 25, 2006

Subject/Title: Approve the sales price, method to select buyer, and sales strategy criteria for 385 Carrol Court at Sunset Industrial Complex; direct staff to proceed with approved method to select buyer

Prepared by: Gina Rozenski, Redevelopment Manager

Submitted by: Howard Sword, Community Development Director

RECOMMENDATION
Approve the sales price, method to select buyer, and sales strategy criteria for 385 Carrol Court at Sunset Industrial Complex; direct staff to proceed with approved method to select a buyer for 385 Carrol Court, a one-acre lot.

PREVIOUS ACTIONS

• 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 selected Mr. Vornhagen as the buyer of 385 Carrol Court at Sunset Industrial Complex based on the approved ranking system (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, and recommended Mr. Vornhagen as the buyer for 2010 Elkins Way based on the approved ranking system.

• On July 11, 2006, the Council selected Vornhagen Body & Paint as the buyer for 2010 Elkins Way.

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.

With the Council’s selection of Vornhagen Body & Paint as the buyer for 2010 Elkins Way, Vornhagen canceled his escrow for 385 Carrol Court. It is timely for the City Council to consider the sale of 385 Carrol Court including 1) the sales price, 2) the method of selecting a buyer, and 3) sales strategy criteria to rank the purchase proposals.

Approval of Sales Price
According to a recent professional appraisal, the real property valuation of 385 Carrol Court is $294,030 or $6.75 per square foot. Staff recommends that the City Council sell 385 Carrol Court for the appraised value of $6.75 per square foot for two reasons. The first reason is that the end of 2005 brought several court rulings filed by the State Department of Industrial Relations (DIR) involving government agencies and prevailing wages. The DIR is carefully reviewing cases where government agencies transfer property for less than fair market value to private parties and determined that when this occurs, prevailing wages for on-site improvements are mandated. After diligent judicial process, DIR has received several court rulings in favor of their position that prevailing wages are required. Payment of prevailing wages for on-site construction and improvements will, in all likelihood, make a development financially infeasible, and cause the City’s economic development strategy for Sunset Industrial Complex to collapse. It is recommended that the City avoid a review and legal challenge from the DIR by selling the property for its appraised fair market value. A second reason to sell 385 Carrol Court at the appraised value is to avoid any appearance of a gift of public funds.

Method of Selecting a Buyer
There are two options available to the Council for the selection of a buyer for 385 Carrol Court.

1. The first is to return to the list of 2004 where three candidates remain, and select the next highest ranking with the condition that the sales price is $6.75 per square foot and with the condition that the candidate re-affirm its proposal so that the original points can be validated a second time to assure their ranking has not changed. The ranking is shown below. If the first candidate does not accept the offer, then an offer will be made to the next candidate and so forth. The risk with this option is that if higher ranking candidates do not accept the sales offer, another candidate with low points may receive an offer to buy the 1 acre site. If the Council selects Option 1 above and none of the remaining businesses accept the sales offer or because reaffirmation of their original points results in disqualification, then Option 2 will automatically be implemented.

Rank
Business Acreage
Request 0-36
Possible Points
2 Kendall Auto Repair 1.0 35 points
3 ASAP Glass 1.0 28 points
4 Tidelands Construction 1.0 22 points

2. The second option is to advertise the availability of the one-acre site at 385 Carrol Court and send out fresh requests for purchase proposals at the appraised sales price, with intent to rank the proposals for Council selection. This process is similar to the first three offerings prepared by the City for Sunset Industrial Complex.

If option 2 is selected, upon receipt of the purchase proposals, the scoring and ranking will be prepared by staff, and brought to the Economic Development/Redevelopment Subcommittee for a recommendation to the Council. This is the same process used in the previous three rounds.

Sales Strategy Criteria
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. The purchase proposals are evaluated and scored to determine the successful candidates by assigning points based on several factors including existing business location, business type, business operation, job generation and economic impacts. If the Council selects Option 2 above or if Council selects Option 1 above and none of the remaining businesses accept the sales offer, then staff recommends the Council direct staff to use the sales strategy criteria it approved in April 2006, attached, for 385 Carrol Court.

Summary
Staff recommends the City Council:
1) Approve the sales price of $6.75 per square foot for 385 Carrol Court.
2) Direct staff to proceed with Option 1 or Option 2 to select the buyer of 385 Carrol Court.
3) Direct staff to use the approved April 2006 sales strategy criteria to evaluate and score the submitted purchase proposals.

FISCAL IMPACT
Setting the sales price for 385 Carrol Court at the appraised value of $6.75 per square foot will result in a sale of $294,030, less escrow fees. The estimated sales impact is approximately $1.25 per square foot more than the original sales offering in 2004.

Attachments:
1) Sales Strategy Criteria
2) Map identifying 385 Carrol Court

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)
 

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