REPORT TO COUNCIL
SUBJECT
Title
Authorize the City Manager to Execute a Purchase and Sale Agreement for the Purchase of 295 Commercial Street and Approve Budget Modification No. 8 in the Amount of $4,650,000
Report
BACKGROUND
The City of Sunnyvale owns 221 Commercial Street, where the Sunnyvale Corporation Yard (Corp Yard) is currently operating, and 239 Commercial Street, where a future expansion of the Corp Yard is planned. 295 Commercial Street is a property in very close proximity and is listed for sale at $4,500,000.
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 the Purchase and Sale agreement for the city to acquire real property is not a project that requires 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 existing use. The City has not yet determined any detail for future construction or expansion; future use or development of the site will be subject to appropriate CEQA review once the City makes a definite plan.
DISCUSSION
The property at 295 Commercial Street is an interior parcel located along Commercial Street, on the same side of the street as the Corp Yard. It is one parcel over from 239 Commercial Street (owned by the City), with 247 Commercial Street (privately owned) in between. The property at 295 Commercial Street is a 0.75-acre site (32,670 square feet) that is improved with a 4,800 square feet metal warehouse building constructed in 1954, currently in below-average condition. The parcel is zoned M-S, industrial and service, which permits primarily manufacturing and commercial uses.
The site’s proximity to the Corp Yard will provide more options for flexibility and efficiency for the Corp Yard master planning and construction. The City will also have options for interim uses as that master planning progresses, such as leasing or licensing use of the property.
Fundamental Terms and Conditions of the Purchase and Sale Agreement:
• Purchase price: $4,500,000.
• Property sold in “as-is” condition.
• Initial deposit: $100,000 payable within 5 days of a fully executed agreement.
• Contingency Period: 30 days
• Close of Escrow: 30 days after removal of contingencies.
The City completed an appraisal report and is in the process of reviewing Phase I and Phase II environmental reports completed by the owner. The agreement will be contingent on the City accepting the environmental condition of the property, and other due diligence review (title, building, etc.) that will be completed during the contingency period.
FISCAL IMPACT
The purchase price is $4,500,000, plus closing costs and acquisition expenses estimated at $50,000, which include but are not limited to appraisal and environmental review costs, for a total expense up to $4,550,000.
Additionally, it is estimated that $50,000 annually will be needed for maintenance and security until the property is either leased or developed.
Staff has prepared Budget Modification No. 8 to create a new project to appropriate $4,550,000 from the Infrastructure Renovation & Replacement Fund to fund the acquisition of the property, and $100,000 from the General Fund for maintenance and security costs for two years after acquisition.
Budget Modification No. 8
FY 2024/2025
|
|
Current |
Increase/ (Decrease) |
Revised |
|
Infrastructure Renovation & Replacement Fund |
|
|
|
|
Use of Funds |
|
|
|
|
New Project - Acquisition of 295 Commercial Street |
$0 |
$4,550,000 |
$4,550,000 |
|
|
|
|
|
|
Source of Funds |
|
|
|
|
Infrastructure Reserve |
$31,219,068 |
($4,550,000) |
$26,669,068 |
|
General Fund |
|
|
|
|
Use of Funds |
|
|
|
|
New Project - 295 Commercial Street Property Maintenance ($50,000 in each FY 2024/25 and FY 2025/26) |
$0 |
$100,000 |
$100,000 |
|
|
|
|
|
|
Source of Funds |
|
|
|
|
Budget Stabilization Fund |
$88,688,373 |
($100,000) |
$88,588,373 |
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, conditions, and timelines as necessary to complete the purchase, and sign all documents required to close the transaction for the purchase of real property located at 295 Commercial Street for $4,500,000; and approve Budget Modification No. 8 in the amount of $4,650,000 for the purchase price, expenses for completing the purchase, and two years of maintenance and security costs for the property.
2. Direct staff to negotiate different terms as determined by Council.
3. Do not approve the Purchase and Sales Agreement and not acquire the property.
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, conditions, and timelines as necessary, and sign all documents required to close the transaction for the purchase of real property located at 295 Commercial Street for $4,500,000; and approve Budget Modification No. 8 in the amount of $4,650,000.
Levine Act
LEVINE ACT
The Levine Act (Gov. Code Section 84308) prohibits city officials from participating in certain decisions regarding licenses, permits, and other entitlements for use if the official has received a campaign contribution of more than $250 from a party, participant, or agent of a party or participant in the previous 12 months. The Levine Act is intended to prevent financial influence on decisions that affect specific, identifiable persons or participants. For more information see the Fair Political Practices Commission website: www.fppc.ca.gov/learn/pay-to-play-limits-and-prohibitions.html
A check or “Y” in the checklist below indicates that the action being considered falls under a Levine Act category or exemption:
SUBJECT TO THE LEVINE ACT
___ Land development entitlements
___ Other permit, license, or entitlement for use
_x_ Contract or franchise
EXEMPT FROM THE LEVINE ACT
__ Competitively bid contract
___ Labor or personal employment contract
___ General policy and legislative actions
Staff
Prepared by: Sherine Nafie, Property Administrator
Reviewed by: Chip Taylor, Director, Public Works
Reviewed by: Dennis Jaw, Interim Director of Finance
Reviewed by: Sarah Johnson-Rios, Assistant City Manager
Approved by: Tim Kirby, City Manager
ATTACHMENTS
1. Purchase and Sale Agreement