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HomeMy WebLinkAboutItem 7a - Appropriate Funding From the Infrastructure Investment Fund for the Real Property Acquisition of 1106 Walnut Street Item 7a Department: Police Cost Center: 8001 For Agenda of: 5/16/2023 Placement: Business Estimated Time: 15 minutes FROM: Shelly Stanwyck, Assistant City Manager Prepared By: Melissa Ellsworth, Senior Administrative Analyst SUBJECT: APPROPRIATE FUNDING FROM THE INFRASTRUCTURE INVESTMENT FUND FOR THE REAL PROPERTY ACQUISITION OF 1106 WALNUT STREET, SAN LUIS OBISPO, CALIFORNIA RECOMMENDATION 1. Approve the purchase of 1106 Walnut Street; and 2. Appropriate funding in the amount of $5,770,000 from the Infrastructure Investment Fund and transfer to the Capital Outlay Fund for the real property acquisition of 1106 Walnut Street and the creation of a Capital Improvement Program Project to fund a project to address security, IT and other costs associated with the City’s use and occupation of the building; and 3. Adopt a Draft Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, approving an amendment to the 2022-23 Budget Allocation for Fiscal Year 2022-23 for purchase and use of the office building located at 1106 Walnut Street.” POLICY CONTEXT The City’s Financial Management Manual, Section 475, was adopted by Council on May 18, 2010 (Resolution No.10175) and guides real property acquisitions (Section 475 - Real Property Acquisition & Disposal Policy.) Because of their infrequent nature, real property acquisitions are managed on a case-by-case basis by a team of staff from various departments designated by the City Manager (rather than by a centralized real property management team) and may include third-party experts as needed. The City Council’s role under council policy is to authorize and approve the acquisition of real property (Section 475-B.) The Planning Commission’s role is to review the same for general plan consistency per the City’s policy and California Government Code Section 65402. DISCUSSION Background Authorized by Council on November 14, 2022, City staff has been engaged in real property negotiations for the acquisition of a single office building (11,000 square feet) Page 809 of 1165 Item 7a across Santa Rosa Street from the Police Department and referred to as 1106 Walnut Street. The location is in the proximity of partner and City-owned fiber optic lines for direct connectivity to the City’s network. The inspections of the building found it to be in relatively good shape, inside and out, and it has the potential for a myriad of uses (short and long term). A purchase agreement for the property has been executed, and escrow is expected to close on approximately July 15, 2023. The City has a documented unmet need for expanded office space for its staff as well as an identified need to update the aged (and past its useful life) Police facility to a public safety center that meets emergency safety standards for Public Safety. The link to the November 2, 2021 Staff report which provides an overview of the status of the public safety center project as of fall 2021 and related studies dating back to the 1990s is found here. The property is within the Office (O) zone. The City’s Land Use Element (LUE) identified government offices as one of the permissible uses of land zoned for Office use. The potential uses of the property for the City are considerable, including administrative offices, meeting spaces, and accessory uses. If the property is rezoned, it could be used as a temporary Police Station if the City pursues a single site location for the Public Safety Center or could serve as a split site to meet the overall projected “program” or operational needs of the department and also remodeling the current Police Station. Related, there is an existing CIP for the study, design, and public outreach of the public safety facility. That project has approximately $233,000 remaining in existing purchase orders that will be used for further study and design work evaluating longer-term improvements to the existing Police Station and the Walnut Building. The studies to ultimately answer these design and operational questions are funded through ongoing 1106 Walnut St. Page 810 of 1165 Item 7a consultant purchase orders. Staff anticipates that additional funding will be recommended for appropriation in the amount of $350,000 in Fiscal Year 2024-25 of the CIP. Additionally, $600,000 has been programmed in the CIP in Fiscal Year 2026-27 as the current Police Department facility will need some investment to simply address immediate deferred maintenance items such as carpet, paint, minor plumbing, and electrical issues. Results of Due Diligence Process In January, Public Works staff worked with contractors to complete inspections of the property during the City’s due diligence review. The final reports concluded that several items require repair which include roof replacement, wood siding repair, electrical system corrections, exterior painting, and server room HVAC repair. The identified building repairs were shared with the seller and after negotiations, the seller agreed to complete repairs prior to the close of escrow for the negotiated purchase price of $4,400,000. The repairs will occur when the current tenant vacates the premises (this month). Given the current real estate market in the City of San Luis Obispo and savings to the City in costs and staffing time to coordinate building repairs, staff determined that the purchase price is fair and commensurate with the required work, the condition of the building, and the significant benefit of the off-street parking provided to the rear of the office. Technology & Security In addition to building inspections, City IT staff worked with contractors to assess the technology requirements needed to transform the building into a City work site (as office space for public safety and other future City needs) with full connectivity and security. To accomplish this would require the installation of various systems such as building access controls, outdoor cameras, Mitel phones, cabling, CCTV, audio and visual components, and switches. Fiber connectivity to the City’s network already exists near the location. The installation of these systems will be required for any City use of the building, including the currently permissible use as government office space. Other security requirements for the building include perimeter fencing which would need to be aesthetically consistent with other City office buildings but also secure enough to control access to public safety vehicles, evidence, and emergency resources in the parking lot area as it is anticipated PD will make use of this building as administrative/office space and potentially a public safety facility, if and when Council authorizes a zoning change allowing such use. Controlled access automatic gate controls would be needed as well to restrict unauthorized vehicles from entering the premises and expedite police response (when used as a public safety center facility). Dispatch would need to be able to open and close gates. Additional outside lighting is required in the parking lot and at exit and entry points of the building. Proper building signage along with a public access point would need to be created as well. Page 811 of 1165 Item 7a Staff is requesting that the technology and security projects be approved as part of the new Capital Improvement Project. The costs associated with each aspect are described in the Fiscal Impact section below but the total for technology and security is estimated at $1,350,000. Next Steps The seller has agreed to conduct the building repairs once the current tenant vacates, which is May 9th. The estimated time of completion for repairs is mid-July. As noted in the Purchase Agreement, escrow is tentatively set to close on July 15, 2023 (after building repairs have been completed). Once the City is the owner of the building, the new CIP for the purchase, security and technology can begin. Previous Council or Advisory Body Action The Planning Commission met on April 12, 2023, and adopted a Resolution determining General Plan Conformance (Attachment B) for the acquisition of the property located at 1106 Walnut Street. On May 2, 2023, staff met with the City Council in a Closed Session to discuss the project purchase terms and funding strategy. There was no formal action taken at this meeting. Public Engagement The project was reviewed by the Planning Commission on April 12, 2023. The community will also have an opportunity to engage in public comment at the Council meeting on May 16, 2023. CONCURRENCE The Public Works Department, Community Development, Finance and Police all concur with staff’s recommendations. ENVIRONMENTAL REVIEW The California Environmental Quality Act does not apply to recommended actions in this report, because the actions do not constitute a “Project” under CEQA Guidelines Sec. 15378. FISCAL IMPACT Budgeted: No Budget Year: 2022-23 Funding Identified: Yes The agreed upon purchase price is $4,400,000. Staff recommends using funding appropriated from the Infrastructure Investment Fund to the Capital Outlay Fund for the purchase of the building and all related costs associated with the implementation of a City government IT network and security for the building. Page 812 of 1165 Item 7a The IIF has a fund balance of about $13 million which can be used to purchase the building; however, reimbursement of the IIF over time will be critical as it is intended to help fund the Prado Road Bridge construction in future years. The 2023 -25 Financial Plan has programmed $2.2 million of unassigned Debt Service fund balance and $3 million of General Fund budget to be transferred into IIF in FY 2023 -24, totaling $5.2 million. Funding for repayment of the remaining gap of $500,000 will need to be identified in future years. In addition, staff will be requesting to “pay back” the Ventures & Contingencies account in the amount of $50,000 for funds used for the first deposit. Fiscal Impact Summary Costs By Type Item Current Proposed Change Purchase Price of Building 4,400,000 Escrow Deposits - Credits (145,000) Fence & Auto Gate Estimate 900,000 Technology Estimate 450,000 Repairs Not Covered by Seller Est.40,000 Exterior Signage Estimate 15,000 Reserve for unexpected costs 60,000 "Payback" Ventures & Contingencies 50,000 Total 5,770,000$ -$ -$ Funding By Source Item Current Proposed Change Infrastructure Investment Fund 5,770,000 Total 5,770,000$ -$ -$ Fiscal Analysis: Funding Sources Total Budget Available Current Funding Request Remaining Balance Annual Ongoing Cost Investment Infrastructure Fund $ $5,770,000 $ $ Total $ $5,770,000 $ $ ALTERNATIVE 1. Apply a phased approach with the installation of technology and security needs. Staff does not recommend this alternative as these improvements are necessary for city staff to use the building and to safely serve the community. Moreover, once Page 813 of 1165 Item 7a acquired, absent security measures and phased utilization of the property, staff has concerns about unauthorized uses and access that could otherwise jeopardize the safety and security of the property. ATTACHMENTS A - Final Purchase Agreement (Amendment #5) B - Resolution No. PC-1072-2023 C - Draft Resolution approving an amendment to the 2022-23 Budget Allocation Page 814 of 1165 ________________ ________________ INITIALS INITIALS ©2020 AIR CRE.All Rights Reserved.Last Edited:3/22/2023 2:17 PM ATPA-1.00,Revised 10-22-2020 Page 1 of 2 Fifth AMENDMENT TO PURCHASE AND SALE AGREEMENT THIS AMENDMENT TO PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS ("Amendment")is made and entered into as of March 16,2023 ,by and between The City of San Luis Obispo ("Buyer")and M4L Walnut Land and Property LLC ("Seller") (collectively,the "Parties"or individually,a "Party"). WHEREAS,Buyer and Seller are parties to that certain Standard Offer,Agreement and Escrow Instructions for Purchase of Real Estate dated November 17, 2022 ("Agreement")with respect to the property commonly known as (street address,city,state,zip):1106-1120 Walnut Street,San Luis Obispo,CA 93401 ("Property"); WHEREAS,the Agreement has not been previously amended except (if there are no exceptions write "NONE"):First Amendment dated February 16,2023,Second Amendment dated March 1,2023,Third Amendment dated March 8, 2023,Fourth Amendment dated March 16,2023 . WHEREAS,the Parties have opened an escrow with First American Title Company ("Escrow Holder"); WHEREAS,the Parties now desire to amend the Agreement and their instructions to Escrow Holder ("Escrow Instructions"); NOW,THEREFORE,for Buyer's payment of ten dollars ($10)to Seller and other good and valuable consideration,the receipt and sufficiency of which is hereby acknowledged,the Parties hereby amend the Agreement and the Escrow Instructions as follows (list changes below): The purchase price shall be $4,400,000 Buyer hereby removes all contingencies to closing. Buyer shall deposit an additional deposit of $95,000 into escrow within two days of mutual execution of this document. Buyer's existing deposit of $50,000 as well as the additional deposit of $95,000 shall be passed through to the Seller as non-refundable but applicable to the purchase price. Buyer and Seller agree to sign a document prepared by escrow which authorizes the release of the aforementioned deposit funds to the Seller. Seller shall be responsible for the cost and logistics to implement the repairs outlined in the attached letter and cost estimate from Pacific Builders dated March 15,2023. The estimated completion date of the repairs is June 30,2023.Seller shall inform Buyer in writing once the repairs have been completed and escrow shall close 14 days later,or approximately July 15,2023. The defined terms of the Agreement shall have the same meaning in this Amendment.Signatures to this Amendment accomplished by means of electronic signature or similar technology shall be legal and binding.This Amendment may be executed in counterparts,each of which shall be deemed an original,and all of which together shall constitute one and the same instrument.This Amendment shall not be construed as if prepared by one of the Parties,but according to its fair meaning as a whole,as if both Parties had prepared it.Except as specifically amended by this Amendment,the Agreement and the Escrow Instructions shall remain unchanged and continue in full force and effect. ATTENTION:NO REPRESENTATION OR RECOMMENDATION IS MADE BY AIR CRE OR BY ANY BROKERS AS TO THE LEGAL SUFFICIENCY,LEGAL EFFECT,OR TAX CONSEQUENCES OF THIS AMENDMENT.THE PARTIES ARE URGED TO SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS AMENDMENT. EXECUTED as of the date first written above. By Seller: M4L Walnut Land and Property LLC By: Name Printed:James Glinn,Manager Title: Phone: By Buyer: The City of San Luis Obispo By: Name Printed: Title: Phone: Fax: Email: Fax: Email: DocuSign Envelope ID: FDC762DC-E1F3-4C18-B93F-6A3994DC2015 Derek Johnson DocuSign Envelope ID: C8C5A48D-144C-4BB2-AEFA-BC3620DBF4C7 Page 815 of 1165 ________________ ________________ INITIALS INITIALS ©2020 AIR CRE.All Rights Reserved.Last Edited:3/22/2023 2:17 PM ATPA-1.00,Revised 10-22-2020 Page 2 of 2 By: Name Printed: Title: Phone: Fax: Email: Address: Federal ID No.: By: Name Printed: Title: Phone: Fax: Email: Address: Federal ID No.: AIR CRE *https://www.aircre.com *213-687-8777 *contracts@aircre.com NOTICE:No part of these works may be reproduced in any form without permission in writing. DocuSign Envelope ID: FDC762DC-E1F3-4C18-B93F-6A3994DC2015DocuSign Envelope ID: C8C5A48D-144C-4BB2-AEFA-BC3620DBF4C7 Page 816 of 1165 DocuSign Envelope ID: FDC762DC-E1F3-4C18-B93F-6A3994DC2015DocuSign Envelope ID: C8C5A48D-144C-4BB2-AEFA-BC3620DBF4C7 Page 817 of 1165 Modifications for Escrow Task Description Estimated Cost 1 REPLACEMENT OF DAMAGED SIDING $15,000.00 A. Replace approximately 2' x 40' at driveway side of building with material that matches existing B. Replace South and West sides of roof top equipment enclosure OPTION: To replace all 4 sides of roof top shroud ADD $15,000 2 PAINT $61,000.00 A. Pressure wash and paint exterior of building using Elastomeric paint for block walls and Super Deck solid stain for all wood 3 ROOFING $143,298.00 A. Supply & Install 80 mil single ply roofing to roof & parapet walls B. Includes a 20 year No Dollar Limit labor and materials manufacturer warranty 4 ASBESTOS ABATEMENT $7,900.00 A. Remove and dispose of Asbestos identified in the report dated March 2, 2023 by West Coast Safety Consultants 5 EQUIPMENT RENTAL $3,711.00 6 SAFETY $2,000.00 7 PROJECT COORDINATION/MISC. CARPENTRY TASKS $2,500.00 8 JOB-SITE CLEANUP $1,500.00 SUBTOTAL $236,909.00 OVERHEAD & PROFIT Overhead 10% of Subtotal $23,690.90 Profit 10% of Subtotal $23,690.90 Total Overhead and Profit $47,381.80 TOTAL $284,290.80 COST ESTIMATE M4L Walnut Land and Property LLC 1106 Walnut St, San Luis Obispo, CA 3/15/2023 PACIFIC BUILDERS Page 1 of 1 DocuSign Envelope ID: FDC762DC-E1F3-4C18-B93F-6A3994DC2015DocuSign Envelope ID: C8C5A48D-144C-4BB2-AEFA-BC3620DBF4C7 Page 818 of 1165 RESOLUTION NO. PC-1072-2023 A RESOLUTION OF THE SAN LUIS OBISPO PLANNING COMMISSION DETERMINING GENERAL PLAN CONFORMANCE FOR THE ACQUISITION OF PROPERTY LOCATED AT 1106 WALNUT FOR CITY GOVERNMENT OFFICES THAT IS EXEMPT FROM CEQA PER SECTION 15061(B)(3) THE GENERAL RULE AS REPRESENTED IN THE PLANNING COMMISSION AGENDA REPORT AND ATTACHMENTS DATED APRIL 12, 2023 (1106 WALNUT FILE #GENP-0144-2023) WHEREAS, the Planning Commission of the City of San Luis Obispo conducted a public meeting in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California, on April 12, 2023, for the purpose of reviewing the acquisition of property for City Government Offices for General Plan Conformity as required by California Government Code Section 65402 (GENP-0144-2023); and WHEREAS, notices of said public hearing were made at the time and in the manner required by law; and WHEREAS, the Planning Commission has duly considered all evidence and recommendations by staff, presented at said hearing. NOW, THEREFORE, BE IT RESOLVED by the Planning Commission of the City of San Luis Obispo as follows: Section 1. Findings. Based upon all the evidence, the Commission makes the following findings: 1. The acquisition of property for City Governmental Offices will not harm the general health, safety, and welfare of people living or working in the vicinity because the proposed project is consistent with the General Plan Land Use Element and the Zoning Regulations. Section 2. Environmental Review. Section 15061(b)(3) states a project is exempt from CEQA if the activity is covered by the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. The determination of general plan conformity for the acquisition of land for government office use by the City of San Luis Obispo is not subject to CEQA because the project will not have a significant effect on the environment since it is a policy review of whether acquiring land conforms with the General Plan. Any future development related to the proposed property will be subject to environmental review as required under CEQA. Page 819 of 1165 Planning Commission Resolution No. PC-1072-2023 GENP-0144-2023 (1106 Walnut) Page 2 Section 3. Action. The Planning Commission does find and report that GENP- 0144-2023 conforms to the City of San Luis Obispo’s General Plan pursuant to California Government Code Section 65402. On motion by Commissioner Kahn, seconded by Vice Chair Cooley, and on the following roll call vote: AYES: Commissioners Houghton, Jorgensen, Kahn, Ringer, Tolle, Vice Chair Cooley, and Chair Munoz-Morris NOES: None REFRAIN: None ABSENT: None The foregoing resolution was passed and adopted this day of April 12, 2023. Tyler Corey, Secretary Planning Commission Page 820 of 1165 R ______ RESOLUTION NO. _____ (2023 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, APPROVING AN AMENDMENT TO THE 2022- 23 BUDGET ALLOCATION FOR FISCAL YEAR 2022-23 FOR PURCHASE AND USE OF THE OFFICE BUILDING LOCATED AT 1106 WALNUT STREET WHEREAS, in accordance with the San Luis Obispo City Charter Section 802, the City Manager submitted the 2021-23 Financial Plan to Council for its review and consideration on June 1, 2021; and WHEREAS, on June 7, 2022, the Council approved and appropriated the 2022-23 budget allocation including operating expenditures, debt service, and capital improvement plan budget (Resolution No. 11332, 2022 Series); and WHEREAS, the City created an Infrastructure Investment Fund to set aside funding for future infrastructure projects that contribute to improved economic development and enhanced quality of life in the City of San Luis Obispo; and WHEREAS, the use of these funds is at the discretion of Council based on the guidelines established; and WHEREAS, acquisition of the property located at 1106 Walnut Street would serve the City’s interests by providing additional space for administrative, office, and accessory uses, and could appropriately be used as a public safety facility upon rezoning and issuance of a conditional use permit; and WHEREAS, technology and safety features need to be installed to facilitate the City’s use of this property, along with additional necessary building repairs; and WHEREAS, the Infrastructure Investment Fund balance is sufficient to cover costs associated with purchasing the building located at 1106Walnut Street; and WHEREAS, the City’s Infrastructure Investment Fund will be used to pay for acquisition and improvement costs and is forecasted to be refunded with the adoption of the 2023-2025 Financial Plan. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: Page 821 of 1165 Resolution No. _____ (2023 Series) Page 2 R ______ SECTION 1. The 2022-23 budget is hereby amended to appropriate $5,770,000 from the Infrastructure Investment Fund to cover costs associated with the purchase and use of the office building located at 1106 Walnut Street, San Luis Obispo CA. Upon motion of Council Member ___________, seconded by Counci l Member ___________, and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this _____ day of _______________ 20 23. ___________________________ Mayor Erica A. Stewart ATTEST: ______________________ Teresa Purrington City Clerk APPROVED AS TO FORM: ______________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on ______________________. ___________________________ Teresa Purrington City Clerk Page 822 of 1165 Approval of Walnut Street Property Acquisition and Funding Allocation Recommendation 1.Approve the purchase of 1106 Walnut Street and 2.Appropriate funding in the amount of $5,770,000 from the Infrastructure Investment Fund and transfer to the Capital Outlay Fund for the real property acquisition of 1106 Walnut Street and the creation of a Capital Improvement Project to address security, IT, and other costs associated with the City’s use and occupation of the building; and 3.Adopt a Draft Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, approving and amendment to the 2022-23 Budget Allocation for Fiscal Year 2022-23 for purchase and use of the office building located at 1106 Walnut Street”. Property Location –1106 Walnut Building Highlights and Potential Uses Prime location, near existing Police Department building 2-story office building, building is 11,000 SF and parcel is close to an acre Located near existing City owned fiber optic lines 34 parking spaces Can be used as City temporary “overflow” office space when needed The meeting space can be used by City staff (part of City campus) Could be used by other agencies if City staff is not utilizing the office space Ground floor can be used to serve the community or other emergency facilities during declared emergencies Policy Guidance Financial Management Manual Section 475 Planning Commission Role – review for General Plan Conformity Real Property Acquisitions Infrequent - City Manager Establishes a Team PC Found GP Conformity City Manager Establishes Team City Council Responsibilities Per Adopted Policy Council Approves Agreements Due Diligence Nov. 11, 2022 Council Authorized negotiations and entered into Purchase and Sale Agreement subject to due diligence. Winter 2023 Inspections and reports identify some "fix-its“. Winter/Spring 2023 Increased purchase price to have seller complete repairs. Work to be done upon tenants vacating in May. Spring 2023 Staff identify technology and security requirements of the building for staff to occupy. May 2, 2023 Council discuss final purchase agreement terms and conditions and financing to accomplish the acquisition. Deal Points and Funding Strategy Purchase Price and Deposit Credit $4,400,000 includes escrow credits and repairs to building Total Costs $5,770,000 includes security fencing, technology, unexpected costs, and payback to V & C. Funding Source: Infrastructure Investment Fund (IIF) in 2022-23 Fiscal Year Close of Escrow: Anticipated July 15th Next Steps and Questions Council 5/16 Business Item on this topic Council Action 5/16 Council Action 5/16 Existing CIP Close of Escrow Approve Purchase Agreement and Funding Strategy Approve new CIP for building purchase, technology and security needs For planning future public safety center exists and this will be used to assess and plan future uses of Walnut Building July 15th Recommendation 1.Approve the purchase of 1106 Walnut Street and 2.Appropriate funding in the amount of $5,770,000 from the Infrastructure Investment Fund and transfer to the Capital Outlay Fund for the real property acquisition of 1106 Walnut Street and the creation of a Capital Improvement Project to address security, IT, and other costs associated with the City’s use and occupation of the building and 3.Adopt a Draft Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, approving and amendment to the 2022-23 Budget Allocation for Fiscal Year 2022-23 for purchase and use of the office building located at 1106 Walnut Street”. Questions?