PREPARED BY: CHARLES CHING DATE OF MEETING: 06/19/17
SUBJECT:
TITLE
PUBLIC HEARING ON RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN PABLO APPROVING AN AGREEMENT BETWEEN THE CITY AND CAPITAL PARTNERS DEVELOPMENT COMPANY, LLC (“CAPITAL PARTNERS”), PROVIDING FOR: (1) THE SALE BY THE CITY AND THE PURCHASE AND REDEVELOPMENT BY CAPITAL PARTNERS OF THAT CERTAIN PROPERTY LOCATED AT 13831 SAN PABLO AVENUE FOR THE SALE PRICE OF $2,500,000; AND (2) THE DESIGN AND CONSTRUCTION BY CAPITAL PARTNERS OF A NEW CITY HALL ON CERTAIN REAL PROPERTY OWNED BY THE CITY, LOCATED ON GATEWAY AVENUE, COMPRISED OF APPROXIMATELY 2.50 ACRES AND CONSTITUTING A PORTION OF THAT PARCEL IDENTIFIED BY ASSESSOR’S PARCEL NUMBER 417-310-005, FOR A PRICE TO THE CITY OF $14,950,000
Label
CITY MANAGER RECOMMENDATION
Recommendation
Conduct public hearing; adopt Resolution
Body
Compliance statements
The FY 2015-17 City Council Adopted Workplan effective October 1, 2016 includes the top priorities of Economic Development Zones/Districts, Transit-Oriented Development Policies and Strategies, and the New City Hall Project at Plaza San Pablo. These top priorities are further delineated as Policy Area: Economic Development 3.1 “Affordable Higher Quality & Market Rate Rental Housing Projects;” Economic Development 3.3., “Existing City Civic Center Development;” Economic Development 3.5 “New City Hall Project - Plaza San Pablo - Lot 6;” Economic Development 3.6 “Targeted Industries Study Program Implementation;” and Strategic Planning/Special Projects 4.14 “Historic Preservation Park for City-Owned Buildings.”
CEQA Compliance Statement
The City engaged Michael Baker International to evaluate the potential environmental effects from the design and construction of the New City Hall on the Gateway Avenue Property in accordance with the requirements of the California Environmental Quality Act (“CEQA”) and its implementing regulations (the “CEQA Guidelines”). Based on the attached evaluation dated June 7, 2017, the City has determined that: 1) construction of the proposed New City Hall on Lot 6 would be consistent with the development assumptions for Lot 6 as presented in the City’s current General Plan and the San Pablo Avenue Specific Plan; 2) the project would not result in any new significant impacts or increase the severity of any significant impacts identified in the General Plan EIR, the San Pablo Avenue Specific Plan EIR, and the Mixed Use Center South Mitigated Negative Declaration; 3) the circumstances under which the New City Hall project would be undertaken have not substantially changed such that new or more severe impacts would occur; and 4) therefore no further environmental analysis for construction of the New City Hall on Lot 6 is required by Section 21166 of CEQA and Sections 15162 and 15183 of the CEQA Guidelines;
Further, the approval and execution of the Purchase and Sale Agreement with Capital Partners and the sale by the City of the Civic Center Site (current City Hall site) and corresponding purchase by Capital Partners is exempt from environmental review under the California Environmental Quality Act (“CEQA”) and its implementing regulations (the “CEQA Guidelines”) under Sections 15061(b)(2), 15061(b)(3), 15312, 15316, 15325(e) and 15331 of the CEQA Guidelines. However, any development of the Civic Center Site referenced in the Purchase and Sale Agreement (“PSA”) requires further land use entitlements, including CEQA review.
BACKGROUND
Current Civic Center Site
In March of 2014, the City of San Pablo received a grant through the Contra Costa Transportation Authority to conduct a Targeted Industries Study (“Study” which is attached). The Study evaluated the City’s residential, retail, and office markets and identified four opportunity sites within the City that had high potential for development / redevelopment, one of which was the property on which current City Hall buildings are located (“Civic Center Site”). The Study recommended that the current Civic Center Site be redeveloped with commercial and residential uses to better conform to the existing surrounding uses and to accommodate the City’s increasing need for commercial and residential uses on San Pablo Avenue, a major transportation corridor within the West County region. Additional residential uses would also assist the City in meeting its residential allocations from the regional planning agency (RHNA allocations), as well as the goals in the City’s Housing Element of the General Plan.
The current City Hall was opened in November of 1978. The structures were originally built in the late 1950’s as a motel and were relocated to the Civic Center Site in 1976. Through the years, the City has made minor repairs and improvements to the aging City Hall buildings; however, due to a growing work force, increased technological and infrastructure needs, and the need to comply with Americans with Disabilities Act (ADA) and Uniform Building Code (UBC) requirements, the current City Hall buildings have become inefficient, inadequate for current needs, and in need of substantial repair. Moreover, the City has growing concerns about potential liability due to deferred repairs and compliance issues. In response, the City began exploring the cost of upgrading the current City Hall to meet current needs, and ADA and UBC requirements, but quickly determined that the required renovations would be too costly.
In 2014, it was estimated that the repairs needed for Buildings 2 and 5 alone would be more than $2 million just to meet minimum code requirements. Projected estimated costs for repairs needed for all six (6) buildings would be cost-prohibitive and would not make economic sense given the age, condition and designs of the existing buildings. Further, City operations could not stop during any renovation, and moving to temporary facilities would further increase costs, impair productivity, and impact the community negatively with service disruptions.
Based on the high cost of basic, code-compliant repairs, and the recommendations of the Study, it has been determined that redeveloping the Civic Center Site and constructing a new City Hall in a different location is the most logical direction, the best choice from a cost-benefit analysis, and would best serve the public interest. Among other things, the sale of the Civic Center Site would generate funds to support the construction of New City Hall facilities. Staff explored possible locations and determined that building on the City-owned Gateway Avenue Property, on an undeveloped portion of Lot 5 or Lot 6 in Plaza San Pablo, would be an ideal location.
In-Fill Development Ad-Hoc Subcommittee Review
On November 10, 2015, the FY 2014/15 In-Fill Ad Hoc Subcommittee (Kinney/Chao Rothberg) convened and gave staff direction to proceed with implementation of the New City Hall Project (defined below) which action was approved by City Council on November 18, 2015, by Resolution 2015-201. The Ad-Hoc Subcommittee and staff also recommended that Lot 6 would be a better and more suitable site for a New City Hall development given the potential for new economic development on Lot 5.
Structure of the Proposed Project
To allow redevelopment of the Civic Center Site with residential or mixed-uses as envisioned by the Study, the current City Hall would need to be relocated. Thus, the project for redeveloping the Civic Center Site and relocating City government operations to a New City Hall facility would require the following sequence of events: (i) the sale of the Civic Center Site, subject to allowing existing City Hall operations to continue on the Site until New City Hall facilities could be completed; (ii) the design and construction of New City Hall facilities on Lot 6; (iii) the relocation of City Hall operations from the Civic Center Site to the New City Hall facilities on Lot 6; and (iv) the redevelopment of the Civic Center Site consistent with the Study and in accordance with the Development Agreement process set forth in Section 17.22.020 of the San Pablo Municipal Code (Zoning Ordinance) (collectively, the “New City Hall Project”). This would allow for the continued and uninterrupted operation of City government during the City Hall relocation process. From a fiscal standpoint, this structure and sequencing allows the proceeds of the sale of the Civic Center Site to be used to support the construction of the New City Hall.
Competitive Solicitation Process
On June 14, 2016, the City released a Request for Qualifications/Request for Proposals for the New City Hall Project. The City received four proposals. Based on the proposals, presentations, interviews and references, staff determined that Capital Partners best demonstrated the experience, expertise and qualifications necessary to carry out the New City Hall Project. Capital Partners has developed over 7,000,000 square feet of public facilities, including buildings for the City of Citrus Heights, the County of Riverside, and the University of California at Davis.
City Staff also determined that Capital Partners’ proposal offered the City the best opportunity to realize substantial savings on the construction of the New City Hall facilities, based on the proposals received, and in conjunction with the sale of the Civic Center Site and the financing options available to the City. Such savings are reflected in the fact that the price offered by Capital Partners for construction of the New City Hall was determined by the City to be approximately $356 per square foot for delivery of a 42,000 square foot, turn-key City Hall facility. By comparison, the cost to the City of the proposed Women, Infants & Children (WIC) facility, negotiated in 2016 and approved by the City in February of 2017 pursuant to a public bidding procedure, is approximately $495 per square foot. By further comparison, a third party construction management firm, Mack 5, with knowledge and expertise in estimating design and construction costs for public facilities in the local market, estimated that the cost to the City of constructing the New City Hall facilities pursuant to a public bidding process would be between $450 and $500 per square foot, in 2015 dollars. Since then, costs have only increased.
The purpose of requiring competitive bidding in letting public contracts is to guard against favoritism, improvidence, extravagance, fraud and corruption; to prevent waste of public funds; and to obtain the best economic result for the public. Accordingly, competitive bidding requirements provided for by statute may be dispensed with if the public interest is better served by doing so, as where competitive bidding would not produce an advantage. (Graydon v. Pasadena Redevelopment Agency (1980) 104 Cal.App.3d 631; Los Angeles Dredging Co. v. Long Beach (1930) 210 Cal.348.) The courts have held that the competitive bidding statutes must not be extended beyond their reasonable purpose, and are not to be applied in a way which denies public agencies the authority to deal with problems ”in a sensible, practical way.” (Damar Electric, Inc. v. City of Los Angeles (1994) 9 Cal.4th 161, 173).
Staff and outside counsel believe that the June 2016 solicitation of proposals substantially complies with the competitive bidding/design-build procedures and, more fundamentally, that the solicitation of proposals obtained the best economic result for the City of San Pablo, while still guarding against favoritism, extravagance, fraud and corruption.
Negotiation and Development of Purchase & Sale Agreement and City Hall Construction Contract
Based on Staff’s determinations and recommendations, the City Council authorized the City Manager to negotiate an agreement with Capital Partners providing for Capital Partners to (i) purchase the Civic Center Site, (ii) design and construct a New City Hall on Lot 6, and (iii) following completion of the New City Hall and relocation of City Hall operations thereto, redevelop or facilitate the redevelopment of the Civic Center Site. This authorization to the City Manager was set forth in Resolution 2016-290, adopted by the City Council on September 19, 2016.
Since then, the City and Capital Partners have negotiated diligently and in good faith to prepare two agreements to implement the New City Hall Project: (1) an agreement for the purchase and sale of the Civic Center Site (the “PSA”); and (2) an agreement for Capital Partners to design and construct a New City Hall on Lot 6 consistent with the terms of the Capital Partners’ June 2016 Proposal (the “City Hall Contract”). To allow for completion of the New City Hall Project in a manner that would not interrupt or substantially interfere with on-going City Hall operations, the City Manager and Capital Partners agreed to make the completion of the New City Hall building a condition precedent to the City’s transfer of the Civic Center Site to Capital Partners under the PSA, thereby allowing the City to continue to occupy the existing City Hall buildings until the New City Hall buildings were ready for occupancy. To ensure this smooth and uninterrupted transition of City Hall operations from the Civic Center Site to the Lot 6 location of the New City Hall, the City and Capital Partners agreed that Capital Partners’ execution and performance of its obligations under the City Hall Contract would be a condition to the City’s closing on the sale of the Civic Center Site. To implement this approach, the City Hall Construction Contract was made an exhibit to the PSA, which PSA is attached hereto as Exhibit A.
The City Hall Contract requires the Developer to pay prevailing wages for the construction of the New City Hall. In addition, the Developer shall sponsor and employ at least two San Pablo residents as new apprentices. The Developer will work with the San Pablo Economic Development Corporation (EDC) to identify such individuals. Although the architect, prime contractor and some major subcontractors have already been engaged by the Developer, the Developer is also required to work with the EDC to identify San Pablo subcontractors and service providers to give them the opportunity to bid on subcontracts or service contracts during the construction phase (e.g. fencing, security, trucking, etc.).
In the event the City is not able to fulfill all of its obligations under the PSA and decides to terminate the City Hall Contract, the City will reimburse Capital Partners for all design costs it has incurred.
Development of Civic Center Site
A form of a Development Agreement for the Civic Center Site is also attached as an exhibit to the PSA; however, further environmental review of any proposed project on the Civic Center Site must be completed in compliance with CEQA. In addition, the City must consider and approve a General Plan and Specific Plan amendment for the Civic Center site before a Development Agreement can be brought to the Planning Commission and City Council for further consideration under the state development agreement statutes and local ordinances. At that point, the Planning Commission will have the opportunity to consider whether the disposition of the Civic Center Site conforms to the General Plan as required by State law.
The PSA provides for alternatives should the General Plan amendment, Specific Plan amendment, or Development Agreement not be approved by the City, as the City retains its discretion to process CEQA and land use entitlements applicable to the Civic Center Site.
Nonetheless, the PSA and form of Development Agreement both reference the Developer’s responsibility to preserve the historic buildings on the Civic Center Site (Adobe, Blume House, Texeira House and Bunkhouse) and the City Manager’s Office and San Pablo Historical Society are in negotiations about the operations of those historical buildings. It is expected that the historic buildings will be preserved on a separate parcel to be retained by the City.
Agreement Forms
Although the documents are in substantially final form, the proposed resolution allows the City Manager to make such changes or additions with the concurrence of the City Attorney as are necessary or appropriate and which do not substantially alter the rights or obligations of the City.
Further business points have been negotiated from the time the latest version of the documents were attached to the staff report as follows:
1. If the Developer fails to achieve Final Completion within the Contract Time, City will assess liquidated damages in the amount of $1,000 per day for each day of unexcused delay in achieving Final Completion, and the Contract Price will be reduced by that amount. (Section 5.2 of City Hall Contract). The liquidated damages up to Substantial Completion are $1,500 per day.
2. Upon Final Completion, Contractor is required to provide a warranty bond, in a form approved by the City Attorney, in the amount of twenty-five percent (25%) of the Construction Contract price, as a full guarantee for the one (1) year warranty requirement. (Section 4.2 of General Conditions of City Hall Contract).
3. An allowance of $125,000 will be added for a City Hall fountain.
Although not mandated by state law or local ordinance, the City did publish and post a public hearing notice for these actions.
FISCAL IMPACT
The proposed resolution approving the Purchase and Sale Agreement provides for $2.5 million from the sale of the Civic Center Site at 13831 San Pablo Avenue assuming the CEQA and land use conditions are met as discussed above. Should those conditions, or any other of Buyer’s closing conditions not be met or waived, then the City would need to find a replacement funding source for the $2.5 million.
In the event the City is not able to fulfill all of its obligations under the PSA and decides to terminate the City Hall Contract, the City will reimburse Capital Partners for all design costs it has incurred.
The proposed resolution also authorizes the execution of the City Hall Contract in the amount of $14,950,000 which will be paid out of sale proceeds ($2.5 million as discussed above), bond proceeds ($11 million) and General Fund Designated Reserves ($1.5 million). No appropriation of funds is associated with the proposed resolution.