REPORT TO COUNCIL
SUBJECT
Title
Authorize the City Manager to Execute a Purchase and Sale Agreement Between the City of Sunnyvale and Collins Exempt Holdings LLC and Collins Family Holdings LLC for the Purchase of 922 E. California Avenue, and Approve Budget Modification No. 21 in the Amount of $4,406,800
Report
BACKGROUND
The City of Sunnyvale, as an adjacent property owner, was advised by the listing real estate broker that the property at 922 E California is up for sale at an asking price of $4,356,800.
EXISTING POLICY
Council Policy 1.2.7 Acquisition, Leasing and Disposition of City-Owned Real Property
Section 1: Acquisition of Real Property for Municipal Purposes
Real property shall be acquired for current or future municipal purposes, and/or to benefit the community. The City shall acquire real property in accordance with Sunnyvale Municipal Code Chapter 2.07.
Council Policy 7.1B.1.6 - Revenue Base - One-time revenues should not be used for ongoing expenditures.
Pursuant to Sunnyvale Charter Section 1305, at any meeting after the adoption of the budget, the City Council may amend or supplement the budget by a motion adopted by affirmative votes of at least four members to authorize the transfer of unused balances appropriated for one purpose or another, or to appropriate available revenue included in the budget.
ENVIRONMENTAL REVIEW
Approving a Purchase and Sale Agreement for the purchase of real property does not require review under the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15004(b)(2)(A), which provides that an agency “may enter into land acquisition agreements when the agency has conditioned the agency's future use of the site on CEQA compliance.” The City’s immediate plans for the site will be consistent with the previous commercial uses. Any future construction or expansion will be subject to appropriate CEQA review.
DISCUSSION
The property at 922 E. California Avenue is located across E. California from the Sunnyvale Corporation Yard. Its close vicinity to the Corporation Yard allows the City a more flexible and efficient approach for the Corporation Yard master planning and construction. It also gives the City many options for interim uses such as relocating Parks staff currently occupying temporary trailers to this building.
The property at 922 E. California is a 7,780 square foot one story building situated on 0.5-acre site (21,780 square feet). It was built in 1966 but fully renovated, with the last of the renovations being done in April 2024. The building has a new HVAC system, conference room, restroom core, and kitchen, as well as a new exterior façade, roof, and resurfaced parking lot. The building has three at grade-level roll up doors, which allows flexibility in its use. There is ample parking around the building.
Fundamental Terms and Conditions:
• Purchase price: $4,356,800.
• Property sold in “as-is” condition.
• Initial deposit: $100,000 payable within 5 days of a fully executed agreement.
• Close of Escrow: 15 days after removal of contingencies.
The City completed an appraisal report and reviewed a phase I environmental review, and no concerns were identified. The City intends to complete indoor air sampling testing and order a preliminary title report during the due diligence period.
FISCAL IMPACT
The purchase price is $4,356,800 with closing costs estimated at $50,000. Staff is recommending Budget Modification No. 21 to create a new project to appropriate $4,406,800 to fund this acquisition. Funding is from the Infrastructure Reserve in the Infrastructure Fund.
For several years, the City has been receiving Excess Educational Revenue Augmentation Funds (ERAF) from the County and depositing them in the reserve in the Infrastructure Fund. This is done per Council Policy requiring the use of one-time revenue for one-time expenditures. Estimates on ERAF have been very conservative as the methodology for allocating this funding source is under review by the Office of the State Controller and legislative activity by the Governor that may also impact the calculation. The current budget has $7.2 million in estimated revenue, which was based on 70% of the potential revenue. The City has been notified that the disbursement will be $11.8 million; therefore, this appropriation of reserves will be replenished with current year actual revenue.
At close of transaction, the City will be responsible for the maintenance and utilities at the property. The estimated annual cost is around $50,000. This cost will be included in the FY 2025/26 budget.
Budget Modification No. 21
FY 2023/2024
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Current |
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Increase/ (Decrease) |
Revised |
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Infrastructure Fund |
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Expenditures |
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New Project - Acquisition of 922 E California Ave |
$0 |
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$4,406,800 |
$4,406,800 |
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Reserves |
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Infrastructure Reserve |
$41,311,168 |
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($4,406,800) |
$36,904,368 |
PUBLIC CONTACT
Public contact was made by posting the Council meeting agenda on the City's official-notice bulletin board at City Hall, at the Sunnyvale Public Library and in the Department of Public Safety Lobby. In addition, the agenda and this report are available at the NOVA Workforce Services reception desk located on the first floor of City Hall at 456 W. Olive Avenue (during normal business hours), and on the City's website.
ALTERNATIVES
1. Authorize the City Manager to execute the Purchase and Sale Agreement, in substantially the same form as Attachment 1 to the report, negotiate additional terms or timelines as necessary and sign all needed documents to close the transaction for the purchase of real property located at 922 E. California Avenue for $4,356,800, and approve Budget Modification No. 21 in the amount of $4,406,800
2. Direct staff to negotiate different terms as determined by Council.
3. Do not approve the Purchase and Sales Agreement between the City of Sunnyvale and Collins Exempt Holdings LLC and Collins Family Holdings LLC.
STAFF RECOMMENDATION
Recommendation
Alternative1: Authorize the City Manager to execute the Purchase and Sale Agreement, in substantially the same form as Attachment 1 to the report, negotiate additional terms or timelines as necessary and sign all needed documents to close the transaction for the purchase of real property located at 922 E. California Avenue for $4,356,800, and approve Budget Modification No. 21 in the amount of $4,406,800.
Staff
Prepared by: Sherine Nafie, Property Administrator
Reviewed by: Chip Taylor, Director, Public Works
Reviewed by: Sarah Johnson-Rios, Assistant City Manager
Approved by: Kent Steffens, City Manager
ATTACHMENTS
1. Draft Purchase and Sale Agreement