Item 7.1, June 29, 2004 ACQUISITION OF THE GLOBAL PHOTON PROPERTY FOR THE GUADALUPE RIVER PARK

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1 Item 7.1, June 29, 2004 SUBJECT: ACQUISITION OF THE GLOBAL PHOTON PROPERTY FOR THE GUADALUPE RIVER PARK RECOMMENDATION (a) (b) It is recommended that the City Council and Redevelopment Agency Board approve a Cooperation Agreement providing for the Agency s acquisition and the subsequent transfer of title from the Agency to the City of the Global Photon property located at 466 Vendome Street, with acquisition costs not to exceed $815,000 and renovation costs not to exceed $100,000, with funding in the amount of $500,000 from the City and $415,000 from the Agency. It is recommended that the Redevelopment Agency Board: (1) Adopt a resolution making certain findings required by Redevelopment Law related to the project primarily benefiting the Julian Stockton Redevelopment Area. (2) Approve a purchase agreement with Global West Network, Inc., in an amount not to exceed $815,000, for the purchase of the property located at 466 Vendome Street. (3) Adopt a resolution approving the addition of $500,000 in revenue, funds transferred from the City to fund the acquisition of the Global Photon property for the Guadalupe River Park to the FY Adopted Budget, and approving the addition of funds in the amount of $500,000 to the Adopted FY Capital Budget, Guadalupe River Park & Garden Flood Control project line tin the Merged Redevelopment Area, and amending the FY Agency appropriations resolution, as detailed at Attachment C. (c) It is recommended that the City Council: (1) Adopt a resolution making certain determinations regarding the expenditure of Redevelopment Agency funds for the acquisition of property that will be publicly owned. (2) Adopt Appropriation Ordinance amendments in the Council District 3 Construction and Conveyance Tax Fund:

2 a. Decreasing the Global Photon Property Acquisition by $100,000; and, b. Establishing a transfer to the Redevelopment Agency in the amount of $100,000. (3) Adopt Appropriation Ordinance amendments in the Council District 6 Construction and Conveyance Tax Fund: a. Decreasing the Global Photon Property Acquisition by $100,000; and, b. Establishing a transfer to the Redevelopment Agency in the amount of $100,000. (4) Adopt Appropriation Ordinance amendments in the Citywide Parks Construction and Conveyance Tax Fund: a. Decreasing the Global Photon Property Acquisition by $300,000; and, b. Establishing a transfer to the Redevelopment Agency in the amount of $300,000. (5) Adopt a resolution authorizing the City Manager to negotiate and execute an agreement with the Friends of the Guadalupe River Park and Gardens (Friends) for the operation and maintenance of the property for a term not to exceed 20 years. BACKGROUND In December 2002, the City Council formally approved the Guadalupe Gardens Master Plan (Plan). This Plan, under development for several years, specified that a resource center should be located at the perimeter of the Guadalupe Gardens area. This resource center could provide both office spaces for staff, meeting rooms for park visitors as well as library and research facilities. While no specific site was identified, the property known as the Global Photon building has for many years been considered a desirable candidate. Its highly visible location at 466 Vendome Street adjacent to the Guadalupe River and Coleman Avenue represents a unique opportunity to develop a site that is easily identifiable, and that could be used for educational programs, public exhibits on the river that will benefit both the Guadalupe River Park and the Gardens area. Its primary purpose will be for the headquarters for the Friends of the Guadalupe River Park and Gardens, public restrooms, and housing PRNS staff offices. REPORT IN BRIEF

3 The project involves a complex use of City and Agency funds as well as the required findings required to use the funds for the acquisition and renovation of a building to serve the Guadalupe River Park and Gardens. The details are described in greater detail under the Analysis section of the report. Here is a summary of the source and use of funds. Source of Funds $300,000 Citywide Construction and Conveyance Tax $100,000 Council District 3 Construction and Conveyance Tax $100,000 Council District 6 Construction and Conveyance Tax $415,000 Redevelopment Agency $915,000 Total Source of Funds Use of Funds $815,000 Acquisition of the Global Photon Property $100,000 Building Improvements $915,000 Total Use of Funds ANALYSIS The site is a 13,068 square foot parcel with a single story industrial building of 6,322 square feet. Most of the interior space is in large, undeveloped clear span spaces. The parking lot is small and needs repaving. A preliminary review by a structural engineer (Biggs Cardosa, under a master agreement with the Agency) indicates the building has no apparent structural defects. Renovation of the building is planned in three phases consisting of certain capital improvements. The first set of improvements will make minimal building upgrades so that the Friends and PRNS staff can use it for office space. These improvements would consist of installation of a ceiling, fire safety equipment, cubicle partitions, and other improvements necessary to occupy the building as office space. These improvements are expected to cost less than $100,000. The office partitions would be secured from surplus office furniture owned by the City. The office layout is shown on Attachment A. The second phase would consist of finishing the remaining interior spaces, building publicly accessible restrooms for park users, and adding windows and a new entrance. The final phase would consist of facade, landscape and parking lot improvements as shown on Attachment B. The total cost for the Phase 2 and 3 work has not been finalized, but is expected to be in the $250, ,000 range. The funds for

4 Phase 2 and 3 are not budgeted by the City or the Agency, but Agency staff recommends that funds be programmed in a future Agency Capital Improvement Program, if and when funds are available. PURCHASE AGREEMENT: The acquisition cost is $815,000, plus minor miscellaneous closing costs. Prior to negotiations, Agency staff obtained an appraisal on October 9, 2002, and updated on April 2, 2004, from CSE Appraisal Services, an independent real estate appraiser. That appraisal indicated a value of $710,000 to $790,000. The property owner had an appraisal prepared on June 14, 2004 by Hulberg and Associates, a local appraisal firm, with an appraised value of $960,000. The Agency staff agreed to a negotiated price of $815,000 with the seller after the Agency reviewed the assumptions in the Hulberg appraisal and the seller considered the value of not having to put the property on the open market, paying brokers fees, title costs and temporary storage for the company s telecommunications equipment, which is currently stored on site. The present owner, Global West Network purchased the property for the sole purpose of liquidating the assets of the previous owner. The previous owner, Global Photon, developed the site in 2001 as an Internet communications switching station and subsequently encountered severe economic problems. Given the short tenure of the current management, the seller was unwilling to make representations with regard to the environmental condition of the property and the purchase is an As-Is purchase. Accordingly, Agency staff has completed a Phase 1 toxics evaluation with no serious problems identified. Additionally, a Phase 2 is underway and will have to be completed with no serious problems identified. If any problems are encountered, the Agency will not execute the purchase agreement. The property still contains Internet switching equipment. The agreement allows Global West Network to keep this equipment on site until December 31, 2004 without paying any rent or utilities. These provisions and the value of the terms were built into the purchase price. The property owners have waived any rights to relocation expenses. USE OF THE BUILDING: The Friends of the Guadalupe (Friends) and PRNS staff will be using this facility as office space. Ultimately, when the building is fully renovated, the site will accommodate a reception area, public restrooms, classrooms, and library. The space is also being designed to ultimately house a working model of the

5 Guadalupe River flood control system if the Army Corps of Engineers can secure funding for this model. AGREEMENT WITH THE FRIENDS OF THE GUADALUPE RIVER PARK AND GARDENS: Negotiations are ongoing between the Friends and the PRNS staff to have the Friends operate and maintain the property with the provision that the Friends would not be responsible for capital expenditures. The goal is to have this property operated at the sole expense of the Friends without using the General Fund. In return, no rent will be charged to the Friends. The Council is being asked to authorize the City Manager to negotiate and execute an agreement with the Friends for the property. PUBLIC PROPERTY DETERMINATIONS: The Agency will appropriate $415,000 for the acquisition and renovation of this property. The property is not within a redevelopment area, but is located adjacent to the Julian Stockton Redevelopment Area, which contains portions of the Guadalupe River Park. California Redevelopment law requires that the City Council and the Redevelopment Agency Board make certain determinations in conjunction with approval of the Agency s funding of the purchase of property to by owned by the City. The City Council and Agency Board must determine that: The property will be of benefit to the Julian Stockton Redevelopment Area or to the immediate neighborhood in which the project is located. This property developed as a community resource for the Guadalupe River will benefit the Julian Stockton Redevelopment Area by providing a source for community activities, a resource center to study the Guadalupe River, classroom space for community education and staffing space for community volunteers and park ranger staff. Other than the City and Agency contribution, there are no reasonable means of funding the purchase of the property. The Agency will be initially contributing $415,000 and the City $500,000 of the total project cost. No other funding is presently available from any other funding sources. The property will assist the elimination of one or more blighting conditions adjacent to the Project Area

6 The property has been vacant for over two years and the proposed use will eliminate blight by replacing the vacant space with a vibrant use. Additionally, the center will address the need for increased recreational opportunities for the community as a whole. Enabling park ranger staff to use the center will strengthen crime control and thereby reduce blight. This recommended property purchase and use will make the area more attractive for the nearby developing residential areas and increase the incentive for private investment along the Guadalupe River. The payment of Agency funds for the acquisition of the property is consistent with the Implementation Plan for the adjacent Project Area because the development of this resource center is a key component to the success of the Guadalupe River Park and will encourage its ongoing use by surrounding property owners and the general public. The acquisition and proposed use of the property is consistent with the Project Area s Implementation Plan because the resource center will eliminate conditions of physical and social blight, as described above, and it will provide infrastructure that encourages the ongoing use and preservation of the River Park. PRIMARY BENEFIT: The property is located outside of the Julian Stockton Redevelopment Project Area. To use Agency funds, the Board must make certain findings related to the determination of primary benefit. The basis for that determination is as follows: This property is located directly adjacent to the Julian Stockton Redevelopment Project Area. The property will become a part of the Guadalupe River Park and Gardens. The Julian Stockton Redevelopment Plan has as one of its primary goals the preservation of the Guadalupe River as an open space element. This property acquisition will guarantee that the property will remain in open space as part of the Guadalupe River Park and Gardens. Renovation of the property will eliminate blight. The building has been vacant for over two years and its location adjacent to the Redevelopment Area contributes to the area s cumulative blight. Renovation and use of the building will eliminate this blight and will encourage redevelopment in the adjacent Julian Stockton Redevelopment Area. The use of the building by City staff including park rangers will establish a law enforcement presence on the Redevelopment area s boundary that will have the effect of reducing crime within the area. This will have the

7 secondary benefit of protecting the Agency s substantial investment in the portion of the park within this Redevelopment Area. The proposed use of the building will provide services directly to the users of the adjacent portions of the park within the redevelopment area. These services include public bathrooms. COOPERATION AGREEMENT: The Cooperation Agreement provides for the Agency to contribute $315,000 and the City $500,000 for the purchase of the property. Additionally, the Agency at its sole direction can spend up to $100,000 for property improvements to make the space usable for office purposes after the City acquisition of title to the property. This makes the total Agency commitment $415,000. Under the Cooperation Agreement, the Agency will transfer title, indemnifying the City against claims, damages, liabilities or costs arising from the Agency s actions or omissions associated with the purchase of the property. PUBLIC OUTREACH This acquisition has been discussed on several occasions with the Guadalupe River Park Task Force and the Friends. All Task Force members present when this item was discussed were supportive of the acquisition. The acquisition furthers the Master Plans for the Guadalupe River Park and Gardens by providing a staff and community facility to serve the Park. COORDINATION This report has been coordinated with the following departments: City Attorney; General Counsel; City Manager s Budget Office; and Parks, Recreation, and Neighborhood Services. FISCAL IMPACT During the development of the City s Proposed Capital Budget, Council Offices 3 and 6 agreed to support $100,000 each from their Construction and Conveyance Tax Funds. Bridge funding of $300,000 is being proposed from the City-wide Parks Construction and Conveyance Tax Fund until the City submits and receives approval of its Proposition 40 application for this amount. Proposition 40 funding for the acquisition of the Global Photon building was approved by the City Council on January 27, 2004.

8 All operation and maintenance expenses would be the responsibility of the Friends and funded by it. Redevelopment Agency funding is provided by the addition of $500,000 in funds transferred from the City to the FY Adopted Budget to fund the acquisition of the Global Photon property, and the addition of those funds to the Adopted FY Capital Budget, Guadalupe River Park & Garden Flood Control project line tin the Merged Redevelopment Area, as detailed at Attachment C CEQA CEQA Exempt, PP // ss // // ss // DEL BORGSDORF HARRY S. MAVROGENES City Manager Interim Executive Director Attachments (Available at the Agency s offices)