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HomeMy WebLinkAbout14 C41030A-C41550 and Res 2021-27 - Surplus Land ActCONTRACT NO. C41550 CHANGED THE CONTRACT NUMBER TO COINCIDE WITH THE ORGINAL ENA THAT AN EXTENSION WAS UNABLE TO EFFECTUATE AND IN TURN GENERATED A NEW ENA APPROVED 05/272021 -1- P6401-0001\2537487v2.doc STAFF REPORT CITY OF PALM DESERT Development Services Department MEETING DATE: May 27, 2021 PREPARED BY: Jessica Gonzales, Senior Management Analyst jg REQUEST: Consideration for approval of actions in connection with the parcel identified as APN 694-120-028 related to compliance with the Surplus Land Act and an Exclusive Negotiation Agreement with Palm Communities. Recommendation That the City Council, I. Waive further reading and adopt City Resolution No. 2021-27, a resolution: (i) declaring the City-owned property located on the north side of Gerald Ford Drive between Cook Street and Portola Avenue and identified as APN 694-120-028 as “exempt surplus land” pursuant to Government Code Section 54221(f)(1)(A); (ii) authorizing the City Manager, with the consent of the City Attorney, to execute an Exclusive Negotiation Agreement (“ENA”) with Palm Communities for the purpose of negotiating the terms and conditions of an agreement for the sale of the property to Palm Communities and the construction of a housing development on the Property that complies with Government Code Section 37364; and (iii) authorizing the staff and officers of the City to take such actions as they deem necessary or proper to effectuate the purposes of the Resolution. Strategic Plan Priority 2 of the City’s Envision Palm Desert Strategic Plan, as part of Land, Use, Housing and Open Space envision, is to facilitate development of high quality housing for people of all income levels. This request meets that objective by diversifying the City’s housing stock for very low and lower income households. Executive Summary The California Surplus Land Act (Government Code 54220 et seq.) (“SLA” or the “Act”) governs the sale of surplus land and requires local agencies to prioritize opportunities for certain uses of surplus land, including affordable housing development. Land may be declared either “surplus land” or “exempt surplus land” by the legislative body of the local agency as supported by written findings. -2- P6401-0001\2537487v2.doc The City owns the property located on the north side of Gerald Ford Drive between Cook Street and Portola Avenue and identified as APN 694-120-028 (“Property”). Before the City Council takes any further action to dispose of the Property, the City must comply with the SLA. The California Department of Housing and Community Development (“HCD”) has recommended that the City Council declare the Property “exempt surplus land” pursuant to Government Code Section 54221(f)(1)(A). HCD is the entity with oversight over local agencies’ compliance with the SLA. Because the City plans to sell the Property for the development of a 100% affordable housing project, the proposed sale meets the criteria for “exempt surplus land” under Government Code Section 54221(f)(1)(A). Staff recommends that the Council adopt a resolution (Exhibit A) declaring the Property “exempt surplus land” pursuant to Government Code Section 54221(f)(1)(A). Such declaration is consistent with the Council’s action on October 29, 2020, authorizing an ENA with respect to the proposed sale of the Property to Palm Communities and the Council’s direction under the City’s Housing Element identification of properties for potential consideration for affordable housing development. Background Analysis Effective January 1, 2020, Assembly Bill (AB) No. 1486 amended the SLA to require local agencies to formally declare publicly owned property which is not necessary for the local agency’s use as surplus land or exempt surplus land before beginning the disposition process. Surplus land must be offered for sale or lease by following a statutory noticing and negotiation period with certain designated entities, including eligible housing sponsors identified by HCD (“Eligible Entities”). The sale or lease of exempt surplus land is not subject to these requirements. The City must provide a Notice of Availability (“NOA”) of surplus land to the Eligible Entities for specified uses, including affordable housing, parks and recreation, and schools. An Eligible Entity desiring to purchase or lease the surplus land must notify the City in writing of its intent to purchase or lease the land within 60 days after receipt of the City’s NOA. The City sent out the attached NOA for the Property (Exhibit B) on July 23, 2020, and received back notices of interest from multiple parties. On October 29, 2020, the Council authorized the City Manager to enter into a 90-day ENA with Palm Communities as the entity that responded to the NOA proposing the development of an affordable housing community with the greatest number of units and deepest affordability. The City undertook the NOA process and selected a developer for the development of an affordable housing project on the Property before HCD issued its draft Surplus Land Act Guidelines in November, 2020 (“Guidelines”). The final Guidelines were released in April, 2021, and both the draft and the final Guidelines provide that a NOA for a property cannot be issued before the governing body has declared the property surplus land. City staff conferred with HCD regarding the timing issue created by the Guidelines because the City issued its NOA for the Property without first declaring the Property surplus land. HCD has -3- P6401-0001\2537487v2.doc taken the position that a NOA must be issued for a property after the governing body has declared the property surplus, even if the NOA was issued before the Guidelines were available. HCD has recommended that in order to avoid the City having to complete a new NOA process for the Property, the Council instead declare the property “exempt surplus land” pursuant to Government Code Section 54221(f)(1)(A). Government Code Section 54221(f)(1)(A) defines “exempt surplus land” to include surplus land that is transferred by a local agency pursuant to Government Code Section 37364. Government Code Section 37364 authorizes a city to sell land to provide housing affordable to persons and families of low or moderate income if certain conditions are met, including that not less than 40 percent of the total number of those housing units developed on the parcel shall be affordable to households whose incomes are equal to, or less than, 75 percent of the maximum income of lower income households, and at least half of which shall be affordable to very low income households. Palm Communities has proposed a project that complies with Government Code Section 37364 because 100 percent of the units will be restricted for rental to very low and low income households. The City’s ENA with Palm Communities expired on March 5, 2021. In addition to recommending that the Council declare the Property “exempt surplus land”, staff is requesting authorization for the City Manager to enter into a new ENA with Palm Communities (Exhibit C). This ENA consists of the same business terms as the prior ENA, and, in addition, specifies that the terms and conditions pursuant to which the City will sell the Property to Palm Communities that include the housing development will comply with Government Code Section 36364. The ENA generally provides that: • The ENA will expire on December 31, 2021. • The City Manager may, in his or her discretion, extend the December 31, 2021 termination date for a period of sixty (60) days to allow for continuing negotiations. • The City Manager may terminate the ENA on ten (10) days’ notice if Palm Communities fails to commence or continue good faith negotiations. • Not later than sixty (60) days following the execution of the ENA, Palm Communities must: (i) perform due diligence on the property; (ii) submit a conceptual design plan for an affordable multi-family development on the property, which is integrated with a 27-acre regional park; (iii) submit a preliminary schedule of a proposed closing and construction timeline; (iv) submit a preliminary pro forma, including funding sources; (v) (vi) reimburse the City for any amount by which the cost of the City's appraisal of the property exceeds Two Thousand Five Hundred Dollars ($2,500.00); and the ENA will be superseded upon the approval of a disposition and development agreement with respect to the property by the City and Palm Communities. Staff recommends that the City Council approve this recommendation and related actions. Environmental Review Sales of surplus government property are exempt from the California Environmental Act (CEQA) pursuant to Title 14 Section 15312 of the California Code of Regulations. Fiscal Analvsis There is no immediate financial impact or budget action necessary as a result of the recommended actions. When staff returns to Council with the future approval of the DDA, the specific financial impactions will be provided. LEGAL REVIEW ;, DEPT. REVIEW FINANCIAL REVIEW ASSISTANT CITY MANAGER �'u'c ecj'a �a-.�.r��?'�9. ?'�7oome .''�T1L�f f1YP5lf11P Jessica Gonzales 6a, Eric Ceja RWG, City Special Interim Director of Janet M. Moore Andy Firestine Legal Counsel Development Services Director of Finance Assistant City Manager Department Todd Hileman, City Manager. L. Todd Fti.LCvuGtv� DEVELOPER: PALM COMMUNITIES 100 Pacifica, Suite 205 Irvine, CA 92618 ATTACHMENTS: City Resolution, 2021-27, Exhibit A Notice of Availability issued July 23, 2020, Exhibit B ENA with Palm Communities, Exhibit C(Contract No. C41550) P6401-0001\2537487v2.doc CiTY COiT1VCii/ACTTCIN APPROVED �� DF,NiF,i) R �� GEIVEP� OT[1F,F f�m� Kc�.c ,�3/-a7 AiF,ET G D � �"a7'v�Ov�-1 AYI:S: �� P Cl��' 1 il g -4- NOCS: . ABSF,N'I5 �%%� A13STAIN• �1� _ _ VIiRIFIED BY• �l'�,S Original on File with City Clerk's Oflice RESOLUTION NO. 2021-27 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM DESERT DECLARING A CITY-OWNED PARCEL LOCATED ON THE NORTH SIDE OF GERALD FORD DRIVE BETWEEN COOK STREET AND PORTOLA AVENUE TO BE EXEMPT SURPLUS LAND PURSUANT TO GOVERNMENT CODE SECTION 54221(f)(1)(A) AND AUTHORIZING THE CITY MANAGER TO ENTER INTO AN EXCLUSIVE NEGOTIATION AGREEMENT WITH PALM COMMUNITIES WITH RESPECT TO THE PROPOSED SALE OF THE PARCEL TO PALM COMMUNITIES AND THE DEVELOPMENT OF AN AFFORDABLE HOUSING PROJECT THEREON RECITALS: WHEREAS, the City of Palm Desert (“City”) is the owner in fee simple of that certain real property in the City located on the north side of Gerald Ford Drive between Cook Street and Portola Avenue and described on Exhibit “A” and depicted on Exhibit “B”, which are attached hereto and incorporated herein by reference (“Property”). The Property is currently vacant and is approximately 10 acres in size; and WHEREAS, the City desires to sell the Property for the development of an affordable housing project thereon to meet the objective of Land Use Housing and Open Space, Priority 2, which is to facilitate development of high quality housing for people of all income levels; and WHEREAS, pursuant to Section 54221(b)(1) of the Surplus Land Act (Government Code Sections 54220-54234), the City Council must declare the Property to be “surplus land” or “exempt surplus land” before the City Council takes action to dispose of the Property; and WHEREAS, Government Code Section 54221(f)(1)(A) defines “exempt surplus land” to include surplus land that is transferred pursuant to Government Code Section 37364; and WHEREAS, Government Code Section 37364 authorizes a city to sell, lease, exchange, quitclaim, convey, or otherwise dispose of real property to provide housing affordable to persons and families of low or moderate income provided that the following conditions are met: (a) Not less than 80 percent of the area of the parcel will be used for the development of housing; and (b) Not less than 40 percent of the total number of those housing units developed on the parcel shall be affordable to households whose incomes are equal to, or less than, 75 percent of the maximum income of lower income households, and at least half of which shall be affordable to very low income households; and RESOLUTION NO. 2021-27 -2- P6401-0001\2533730v2.doc (c) Dwelling units produced for persons and families of low or moderate income under Government Code Section 37364 shall be restricted by regulatory agreement to remain continually affordable to those persons and families for the longest feasible time, but not less than 30 years, with such regulatory agreement recorded in the office of the county recorder in which the housing development is located; and WHEREAS, Palm Communities previously submitted a proposal to the City to purchase the Property for the purpose of developing an affordable housing project on the Property consisting of 240 multi-family units, with 100 percent of the units restricted for rental to very low and low income households at affordable rents (“Proposal”); and WHEREAS, the City and Palm Communities previously entered into an Exclusive Negotiation Agreement for the purpose of negotiating on an exclusive basis to establish the terms and conditions of an agreement for the sale of the Property to Palm Communities and the construction of a housing development on Property by Palm Communities in accordance with the Proposal; and WHEREAS, the Exclusive Negotiation Agreement expired on March 5, 2021; and WHEREAS, staff has recommended that the City enter into a new Exclusive Negotiation Agreement with Palm Communities for the purpose of negotiating on an exclusive basis the terms and conditions of an agreement for the sale of the Property to Palm Communities and the construction of a housing development on the Property by Palm Communities that complies with the Proposal and Government Code Section 37364; and WHEREAS, because the proposed housing development will meet the requirements of Government Code Section 37364, staff has also recommended that the City Council declare the Property to be exempt surplus land pursuant to Government Code Section 542321(f)(1)(A); NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PALM DESERT DOES HEREBY RESOLVE, FIND, DECLARE AND ORDER AS FOLLOWS: SECTION 1. The above recitals are true and correct and are a substantive part of this Resolution. SECTION 2. The City Council hereby declares pursuant to Government Code Sections 54221(b) and 54221(f)(1)(A) that the Property is exempt surplus land because the City intends to sell the Property pursuant to Government Code Section 37364 for the development of an affordable housing project on the Property that complies with the requirements of Section 37364. SECTION 3. The ENA attached hereto as Exhibit “C” is hereby approved. The City Manager. with the consent of the City Attorney, is hereby authorized to execute and deliver, for and in the name of the City, the ENA substantially in the form attached as Exhibit “C”. RESOLUTION NO. 2021-27 -3- P6401-0001\2533730v2.doc SECTION 4. Staff is hereby authorized and directed to provide a copy of this Resolution to the Department of Housing and Community Development (“HCD”) in the manner required by HCD. SECTION 5. The staff and officers of the City are hereby authorized, jointly and severally, to take such actions as they deem necessary or proper to effectuate the purposes of this Resolution and all actions previously taken are hereby ratified. SECTION 6. The City Clerk shall certify as to the adoption of this resolution. PASSED, APPROVED and ADOPTED by the City Council of the City of Palm Desert, California, on this 27th day of May, 2021, by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: ________________________________ Kathleen Kelly, Mayor ATTEST: ________________________________ M. Gloria Sanchez, Acting City Clerk City of Palm Desert, California [This page has intentionally been left blank.] CITY OF PALM DESERT 73-510 FRED WARING DRIVE PALM DESERT, CALIFORNIA 92260-2578 TEL: 760 346-0611 FAX: 760-341-7098 INFO@CITYOFPALMDESERT.ORG July 23, 2020 TO: State Department of Housing and Community Development, PublicLands@hcd.ca.gov Interested housing developers (per State Department of Housing and Community Development AB1486DeveloperInterestList (2) dated 7-21-20 for all Counties & Riverside) (Via Electronic Mail) RE: Notice of Availability of Surplus Land in the City of Palm Desert Pursuant to California Government Code Section 54220 et seq. (the “Act”) To whom it may concern: Pursuant to the provisions of California Government Code Section 54220 et seq. (the “Act”), the City of Palm Desert (the “City”) hereby notifies those entities designated in Section 54222 of the Act of the availability for lease or purchase of the following City-owned land (the “development site”), described in the table below, for the purposes authorized in the Act, which land the City intends to declare surplus before the City takes action to dispose of it consistent with the Act and the City’s policies or procedures. Ideally, the City desires to establish a sale based on a fair market value (as determined by an appraisal) of the development site for an affordable housing multi-family community. However, the City is willing to consider alternatives that result in an overall superior project. In the event of the sale of the development site, the site must integrate with a proposed regional park as provided in the Millennium Specific Plan, https://www.cityofpalmdesert.org/departments/planning, on the adjoining land (APN 694-120-029 and 694-120-031) and must be accessible to the public. APN Size Zoning Property Description General Plan Designation Minimum Sales Price 694-120-028 Not Assigned 10 acres P.R. – 22 Vacant/undeveloped Town Center Neighborhood If interested in purchasing the City-owned land for an authorized purpose under the Act, you must notify the City in writing of your interest in purchasing or leasing the land within 60 days of the date this Notice of Availability has been sent (5 PM on September 21, 2020). Written notices must be sent, if at all, to, and must be received by, Jessica Gonzales, Senior Management Analyst, within said 60-day period at the following address. The receipt of an email or notice by regular mail by way of the United States Postal Service is acceptable. If by regular mail, we suggest that you send it via certified mail with return receipt requested. Please send written notices of interest to: Jessica Gonzales, Senior Management Analyst 73-510 Fred Waring Drive, Palm Desert, CA 92600 Ph: 760.346.0611 Direct: 760.776.6410 jgonzales@cityofpalmdesert.org ATTACHMENTS: 1. Aerial map of above-listed property (Exhibit A) 2. Assessor’s Parcel Map of above-listed property (Exhibit B) Exhibit A Aerial Map Assessor’s Parcel Number: 694-120-028 Exhibit B Assessor’s Parcel Map Assessor’s Parcel Number: 694-120-028 [This page has intentionally been left blank.] CONTRACT NO. C41550 EXCLUSIVE NEGOTIATION AGREEMENT THIS EXCLUSIVE NEGOTIATION AGREEMENT (the “Agreement”) is entered into ______________, 2021, by and between the City of Palm Desert, a municipal corporation (the “City”) and Palm Communities, a California corporation (the “Developer”), on the terms and provisions set forth below. THE CITY AND THE DEVELOPER HEREBY AGREE AS FOLLOWS: I. [§100] Negotiations A. [§101] Good Faith Negotiations The City and the Developer, acknowledging that time is of the essence, agree for the Negotiation Period (as defined below) to negotiate diligently and in good faith the terms and conditions pursuant to which the City may dispose of and the Developer may develop a certain +/- 10 acre of real property (the "Site"). The Site is more particularly described in Exhibit A, “Legal Description,” attached hereto and incorporated herein by reference, and is shown on the “Map of the Site,” attached hereto as Exhibit B and incorporated herein by reference. Except as otherwise provided below, the City agrees, that during the Negotiation Period it will not negotiate with any other person or entity regarding development of the Site or any portion thereof. Among the issues to be addressed during the Negotiation Period are: (1) the terms and conditions of conveyance of the Site to Developer (2) sale price for the Site; (3) Developer’s program to develop the Site; (4) design and aesthetic considerations of the development of the Site, including but not limited to configuration of the development, site density, site circulation and access to surrounding properties including a draft specific plan; (5) all planning and land entitlement processes and requirements, including preparation of a master plan and a specific plan approval process; (6) all permitting and environmental reviews and processes; and (7) other City and Palm Desert Housing Authority requirements pertaining to the development and use of the Site including affordability restrictions. B. [§102] Duration of this Agreement; Effective Date 1. This Agreement (the “Negotiation Period”) shall expire on December 31, 2021. 2. The City Manager may, in his or her sole discretion, agree to extend the Negotiation Period for up to sixty (60) days to allow additional time for the parties to come to an agreement on the issues described in Section 101, as well as any other relevant issues. 3. In the event the Developer has not continued to negotiate diligently and in good faith, the City shall give written notice thereof to the Developer who shall then ENA for APN 694-120-028 - Palm Communities Page 2 of 7 P6401-0001\2535632v3.doc have ten (10) working days to commence negotiating in good faith. Following the receipt of such notice and the failure of the Developer to thereafter commence negotiating in good faith within such ten (10) working days, this Agreement may be terminated by the City Manager. 4. This Agreement will be superseded upon approval by the City and the Developer of a Disposition and Development Agreement (“DDA”). C. [§103] Deposit The City and Developer acknowledge that the Developer has deposited with the City a deposit (the “Deposit”) in the amount of two thousand five hundred dollars ($2,500.00) which shall be used by the City to pay for the cost of an appraisal of the Site. II. [§200] Development Concept A. [§201] Scope of Development The negotiations undertaken pursuant hereto shall be based on a development concept that shall include the development on the Site as an affordable multi-family residential subdivision which complies with Government Code Section 37364. Not later than 60 days of the date of execution, the Developer shall do the following: • Perform due diligence on the Site. • Submit a high-level conceptual design plan for an affordable housing multi- family development on the Site that is integrated with the 27-acre regional park site depicted on Exhibit B hereto (APNs 694-12-0031 and 694-12- 0029), and which shall include at a minimum a site design with parking layout, landscape, open space, building locations, and street network and pedestrian connections. • Submit a preliminary schedule of a proposed closing and construction timeline. • Submit a preliminary pro forma, including funding sources. • Reimburse the City for any amount by which the cost of the appraisal exceeds $2,500.00. B. [§202] Developer's Findings, Determinations Studies and Reports Upon reasonable notice, and as from time-to-time requested by the City, the Developer agrees to make oral and written progress reports advising the City on all matters and all studies being made by the Developer. In the event the City and the Developer do not enter into a DDA, the City may request that the Developer submit to the City copies of all studies and reports prepared for the proposed development of the Site by or for the Developer, to the extent the Developer is legally able to do so, and the City may request the right to the use and benefit from all such studies and ENA for APN 694-120-028 - Palm Communities Page 3 of 7 P6401-0001\2535632v3.doc reports. The Developer shall not unreasonably withhold or delay its consent to the City’s access and use of such studies and reports. III. [§300] Sale of the Site The sale price and/or other consideration to be paid by the Developer for the Site under the DDA will be equal to at least the appraised fair market value of the Site, and will be subject to approval by the City Council after a public meeting(s) or public hearing(s) as required by law. IV. [§400] The Developer A. [§401] Office of the Developer The Principal office of the Developer is: Danavon L. Horn, President Palm Communities 100 Pacifica, Suite 205 Irvine, CA 92618 Attn: Danavon Horn, President B. [§402] Members of the Developer The managing member of the Developer is: Danavon Horn, President C. [§403] Full Disclosure The Developer has made full disclosure to the City of its principals, officers, major stockholders, major partners, joint venturers, key managerial employees and other associates, and all other material information concerning the Developer and its associates. The Developer shall promptly notify the City Manager in writing of any significant change in the principals, associates, partners, joint venturers, negotiators, development manager, consultants, professional and directly-involved managerial employees of the Developer. Notwithstanding the foregoing, the Developer reserves the right at its discretion to join and associate with other entities in joint ventures, partnerships or otherwise for the purpose of developing the Site, provided that the Developer retains management and control of such entities and remains fully responsible to the City hereunder. V. [§500] Full Disclosure The Developer will be required to make and maintain full disclosure to the City of its methods of financing to be used in the acquisition and development of the Site. ENA for APN 694-120-028 - Palm Communities Page 4 of 7 P6401-0001\2535632v3.doc VI. [§600] City’s Responsibilities A. [§601] City Assistance and Cooperation The City shall cooperate fully in providing the Developer with appropriate information and assistance for development of the Site, including, but not limited to the following: • Appraisal of the Site, as funded by the Developer as herein provided. • Provide a copy of existing Title Report. • Provide a right of access to the Site for due diligence investigations, pursuant to a right of entry agreement. B. [§602] City and City Council's Public Meeting(s) or Public Hearing(s) A DDA resulting from the negotiations hereunder shall become effective only after and if the DDA has been considered and approved by the City Council at a public meeting(s) or public hearing(s), as applicable, called for such purpose. VII. [§700] Real Estate Commissions The CITY shall not be liable for any real estate commissions or brokerage fees which may result from this Agreement or a DDA. VIII. [§800] Limitations of this Agreement By its execution of this Agreement, the City is not committing itself to or agreeing to undertake: (1) the sale of land; or (2) any other acts or activities requiring the subsequent independent exercise of discretion by the City or any department thereof. This Agreement does not constitute a disposition of property or exercise of control over property by the City. Execution of this Agreement by the City is merely an agreement to enter into a period of exclusive negotiations according to the terms hereof, reserving final discretion and approval by the City as to any DDA and all land decisions in connection therewith. [SIGNATURES ON FOLLOWING PAGE] ENA for APN 694-120-028 - Palm Communities Page 5 of 7 P6401-0001\2535632v3.doc IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on the day and year first above written. Reviewed by: ____________________________________ Andy Firestine Assistant City Manager Eric Ceja Interim Director of Development Services Department CITY OF PALM DESERT, a municipal corporation By: L. Todd Hileman City Manager PALM COMMUNITIES, a California corporation By: Danavon L. Horn President Attest: M. Gloria Sanchez Acting City Clerk APPROVED AS TO FORM: By: Best Best & Krieger LLP City Counsel EXHIBIT A DESCRIPTION OF THE SITE Total site of +/- 10-acres of the following parcel: APN: Size APN 694-120-028 10 acres Master Planned with the following parcels: APN: Size APN 694-120-029 and APN 694-120-031 27 acres EXHIBIT B Map of Site