PREPARED BY: ELIZABETH LOPEZ DATE OF MEETING: 03/18/2024
SUBJECT:
TITLE
CONSIDER ADOPTING RESOLUTION APPROVING AND AUTHORIZING THE EXECUTION OF A FIRST AMENDMENT TO AMENDED AND RESTATED DISPOSITION AND DEVELOPMENT AGREEMENT WITH DANCO COMMUNITIES FOR THE SALE AND DEVELOPMENT OF A PORTION OF THE FORMER SAN PABLO CITY HALL LOCATED AT 13831 SAN PABLO AVENUE, SAN PABLO, CALIFORNIA
CEQA: The former City Hall property was the subject of a Historic Resources Assessment Report (www.sanpabloca.gov/DocumentCenter/View/13643/Old-City-Hall---Historic-Report <http://www.sanpabloca.gov/DocumentCenter/View/13643/Old-City-Hall---Historic-Report> ) and a Mitigated Negative Declaration (Attachment No. 4) prepared in connection with the approval of the Specific Plan Amendment/General Plan Amendment that designated the property as SP2-Mixed Use Center City Hall Site on February 20, 2018. As part of that approval, mitigation measures were adopted that must be complied with as part of the development of the project. Those mitigation measures have been incorporated as part of the agreement with the developer. There has been no change in circumstances that would warrant further environmental review at this time. Further, the Project meets the criteria established for the affordable housing exemption set forth in Section 15194 of the Guidelines for Implementation of the California Environmental Quality Act (the “CEQA Guidelines”).
Label
CITY MANAGER RECOMMENDATION
Recommendation
Adopt Resolution
Body
Compliance statements
“Expand Housing Options” is a major policy goal in the City Council’s Priority Workplan effective May 1, 2023. In addition, “Historic Preservation Park for City-owned Buildings” was a priority in the previous City Council’s Priority Workplan.
BACKGROUND
On February 1, 2021, the City Council declared a portion of the former City Hall property to be exempt surplus land under the California Surplus Land Act. The City Council also approved and authorized a Disposition and Development Agreement (the “DDA”) providing the purchase and development of all of the former City Hall property except three of the historical buildings located in the northwest portion of the property (the “Site”). The excluded buildings are the Blume House, the Bunk House and the Teixeira House, which will be retained by the City. The purchase price for the Site is $6,800,000 plus the amount needed to retire the outstanding loan for rooftop and carport photovoltaic systems installed at the Site (the “Solar Loan”) from the Energy Resources Conservation and Development Commission (approximately $579,083.18).
Under the DDA, the Developer is to purchase the Site and develop a mixed-use project containing not less than one hundred (100) units of affordable rental housing and not less than 7,500 square feet of new ground floor commercial space, not including the retention/reuse of the Alvarado Adobe Museum building, together with parking and associated amenities (the ‘Project”).
The DDA was subsequently amended several times as the Developer attempted to obtain tax credit funding for the Project. Then, on September 28, 2022, the Developer was awarded 9% tax credits from the California Tax Credit Allocation Committee (CTCAC). The 9% tax credits funded only half of the Project, requiring the Project to be developed in two phases. As a result, the DDA was fully amended by an Amended and Restated Disposition and Development Agreement dated March 23, 2023 (the “ARDDA”), and Phase 1 of the Project is now underway. Phase 1 is providing 50 residential dwelling units, 52 parking spaces and related amenities on the Phase 1 Parcel (as more particularly described in the ARDDA).
Since that date, the Developer has not been successful in obtaining tax credit funding for Phase 2. Phase 2 will provide the remaining 50 residential dwelling units, 83 parking spaces and related amenities. The Developer has now requested additional time to obtain funding for Phase 2 and, in order to increase the likelihood of obtaining tax credit funding for the Phase 2 Project, has requested that the City provide additional funding assistance. Specifically, the Developer has asked for a two-year extension in the time to close escrow for the Phase 2 Parcel and that the entire Phase 2 Parcel Purchase Price be made a loan to be repaid from the residual receipts of the Phase 2 Project. Currently only $500,000 of the $3,932,262 Phase 2 Parcel Purchase Price is a loan. In consideration for these changes, the Developer will be obligated to pay a Project Development Fee in the amount of $2,000,000 at the close of escrow for the Phase 2 Parcel. The Project Development Fee compensates the City for costs associated with the continued delay of the Phase 2 Project, including holding costs such as property maintenance and insurance, opportunity costs, delayed receipt of tax revenues from a completed project, inflationary effects, and similar factors. The Project Development Fee will also be treated as a loan and paid over time from the residual receipts of the Phase 2 Project.
A First Amendment to Amended and Restated Disposition and Development Agreement (the “ARDDA First Amendment”) has been prepared that details these changes for consideration by the City Council.
FISCAL IMPACT
Approval of the proposed ARDDA First Amendment would increase the City’s loan funding for the Phase 2 Project to a total of $5,932,262, all of which will be paid through residual receipts from the Phase 2 Project over a period of 55 years, and will mean that the City will not receive a cash payment of $3,432,262 for the Phase 2 Parcel at the close of escrow.
ATTACHMENTS:
Att A - Resolution Approving and Authorizing Execution of First Amendment to Disposition and Development Agreement
Att B - Draft First Amendment to Amended and Restated Disposition and Development Agreement
Att C - Amended and Restated Disposition and Development Agreement