This memorandum provides information in connection with the Council�s consideration of a Resolution of Necessity for the acquisition of the real property located at 461 N. Varney Street.

In the Spring of 2001, the Council approved the City�s participation in the planning and development of a new electric power generating facility called the Magnolia Power Project ("MPP") to be located on the existing Burbank Water & Power ("BWP") plant site. Pursuant to that authorization, BWP joined with six other municipal utilities and filed an application for certification of the new facility with the California Energy Commission ("Energy Commission"). The application was filed by the Southern California Public Power Authority ("SCPPA"), a joint powers agency, on behalf of all the participants. SCPPA will own the facility, while BWP will manage its construction and operation. Construction of the project is scheduled to begin in June.

MPP will consist of a 242-megawatt (MW) natural gas-fired power plant with a peaking capacity of 310 MW. The project will occupy four acres in the northeast corner of the BWP facility made available by demolition of the existing Magnolia Units 1 and 2. It includes a combustion turbine generator, a heat recovery steam generator with a 150-foot exhaust stack, a steam turbine generator, switchyard upgrades, two underground 69 kV transmission circuits, a cooling tower, storage tanks, natural gas compressors, makeup water demineralizers, a zero liquid discharge wastewater treatment system, and other ancillary facilities.

The Energy Commission granted SCPPA�s application on March 5, 2003. The Energy Commission found that there are distinct benefits in locating the project at the existing BWP facility. Doing so minimizes the need for new off-site infrastructure development, such as natural gas lines (which already serve the site), transmission lines, transmission towers, water supply lines, wastewater facilities and sewer lines. Additionally, locating the new facility near the load centers of the participants utilizes the existing transmission system to increase local reliability and to reduce transmission congestion and line losses.

Under state law, the Energy Commission exercises broad authority in licensing new power plants with a capacity of 50 MW or more. In the case of the MPP, the Energy Commission�s approval comes with a multitude of conditions that must be met in the course of both construction and operation. One of these conditions requires that steps be taken to address noise impacts on two properties located in the industrial area on the north side of Magnolia Boulevard, across from the BWP plant site.

The industrial area in question is zoned M-2. Properties are mainly improved with small industrial buildings, though a few have 1930�s- and 1940�s-vintage residential structures on them. Virtually all the residential structures have been converted to industrial or commercial uses, but in the course of noise studies conducted by SCPPA in early 2001 it came to light that two of them � 421 N. Moss and 461 N. Varney -- were being used for residential purposes. Both properties are within a 1000� radius of the new power plant.

Acting out of concern about the potential noise impacts of the project on residential uses so close to the MPP, the Energy Commission has imposed a "condition of certification" that requires SCPPA or the City to provide evidence that these two properties are no longer being used for residential purposes. The evidence must be submitted not less than five working days prior to ground disturbance, and can be provided in any one of four ways:

• a letter from the City indicating whether 421 Moss Street and 461 North Varney Street are still being used as residences and describing any land use enforcement action taken to eliminate such residential use;
• agreements with the landowners to discontinue the residential use;
• copies of the title showing SCPPA or the City as the new owner of these parcels; or
• an Order for Immediate Possession issued by the court in a condemnation proceeding showing that SCPPA or the City is entitled to possession of the property.

In the case of 421 N. Moss, further investigation has revealed that the property was converted to a dog kennel in June 2002 and is no longer being used for residential purposes. A letter from the City setting forth this information is all that is needed to fulfill the Energy Commission�s condition for this property. No action by the Council is necessary.

In the case of 461 N. Varney, it appears the property continues to be used for residential purposes. The property consists of a 5,500-sq.ft. lot improved with a 992-sq.ft. dwelling constructed in 1940. The fair market value as of February 2002 was $230,000.00. The owners of record are Victor E. and Mary L. Estrada. It is staff�s understanding that the property is occupied by a tenant.

The Energy Commission has determined, in effect, that residential use of 461 N. Varney must cease before construction of the MPP ("ground disturbance") can begin. Although the Commission has given alternatives for meeting this condition, the only way to be certain that construction of the project will start on schedule is to authorize staff to proceed with the filing of a condemnation action and apply for an OIP. As it will take a minimum of 90 days to get possession of the property after the condemnation complaint is filed, there simply is no time to delay the filing of a condemnation proceeding while exploring the other alternatives, where each of them involves reaching an agreement of some kind with the owners. As is always the case, negotiations with the owners can continue after the action is filed. Adoption of a Resolution of Necessity is, of course, a prerequisite to filing a condemnation proceeding.

The fact that it is occupied as a residence will obligate the City to give appropriate notice and provide relocation assistance to the occupants, as required by state law.

Tonight's hearing serves to provide the owners with an opportunity to comment on the proposed action and constitutes the first step in the condemnation process. Earlier, a Notice of Intent was mailed to the owner indicating the City�s intent to acquire the Property and setting forth the hearing date. The owner is the only party that may be heard at the Resolution of Necessity hearing and discussion about the purchase price or a response by the City to demands for compensation is inappropriate. In fact, the Notice to the owner stated that the owner would be heard only on the following points:

1. That the public interest and necessity require the project.

2. That the project is planned or located in a manner that will be most compatible with the greatest public good and the least private injury.

3. That the property sought to be acquired is necessary for the project.

4. That an offer required by Government Code Section 7267.2 was made to the owner of record.

The City�s response to the above four points is as follows:

1. The MPP will serve the public interest and necessity by providing Burbank and the other participants with a reliable and efficient source of electric energy for many years to come.
2. As found by the Energy Commission in its decision approving the MPP, the proposed location of the new generating facility minimizes the need for new infrastructure development and utilizes the existing transmission system to increase local reliability and reduce transmission congestion and line losses.
3. The property is being acquired to fulfill a condition of certification imposed by the Energy Commission requiring that residential use of the property be discontinued at least five days prior to ground disturbance.
4. The City tendered the required offer to the owners by letter dated on February 20, 2003.

Environmental Review

The California Energy Commission is a "certified regulatory agency" under the California Environmental Quality Act ("CEQA") and has conducted an environmental analysis in conjunction with its certification of the MPP pursuant to CEQA. The Energy Commission has concluded that the MPP, as mitigated, will not result in significant adverse effects on the environment. Under sections 15250 through 15253 of the State CEQA Guidelines, the City may look to the Energy Commission�s decision as an "EIR substitute" for CEQA purposes. No additional CEQA review is required.

There will be no direct fiscal impact to the City General Fund. The City will advance the necessary funds, all of which will be reimbursed by SCPPA.

Staff recommends that the Council conduct the aforementioned hearing and thereafter adopt the proposed Resolution of Necessity (4/5ths vote required).

If the Council concurs, the appropriate action would be a motion adopting the resolution entitled, "A RESOLUTION OF THE COUNCIL OF THE CITY OF BURBANK FINDING, DETERMINING AND RESOLVING THAT THE PUBLIC INTEREST, CONVENIENCE, AND NECESSITY REQUIRE AND AUTHORIZE THE CONDEMNATION FOR PUBLIC PURPOSES OF CERTAIN REAL PROPERTY SITUATED WITHIN THE CITY (461 N. VARNEY STREET)"

cc: Mary J. Alvord, Acting City Manager

Richard J. Morillo, Assistant City Attorney

Gino Gaudio, Project & Real Estate Manager--CDD

K:\PROJECTS\Magnolia Power Project\memos\City Council - reso of necessity for 461 varney 3-11-03 rmm (rev-clean).doc

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