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BURBANK REDEVELOPMENT AGENCYTuesday, June 17, 2003Agenda Item - 1 |
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BURBANK REDEVELOPMENT AGENCYTuesday, June 17, 2003Agenda Item - 1 |
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PURPOSE
The purpose of this memorandum is to provide the City Council and the Redevelopment Agency Board with information necessary to consider the proposed acquisition of property at 10 West Magnolia Boulevard and a related property lease.
BACKGROUND
The subject property (Exhibit A) is a 105,850 square foot rectangular site (2.43 acres) located at 10 West Magnolia Boulevard. The property is improved with a 68,256 square foot cold storage building. Approximately 61,616 square feet of the building has interior cooling capability. The building is a poured in place concrete building on a concrete slab with concrete columns supporting a poured in place concrete roof.
The property is owned by AmeriCold Logistics, a national warehouse facilities company. They are the largest provider of temperature controlled food distribution services in the country with eleven facilities in California including facilities in Burbank, Los Angeles, Wilmington and Fullerton in Southern California. AmeriCold intends to consolidate the Burbank facility with other locations in Southern California (most likely with their Fullerton facility) and consequently, the property was offered to the City for $3,800,000 in a letter dated January 13, 2003 (Exhibit B). Staff obtained an appraisal from Norris Realty advisors dated February 13, 2003 which indicated the offer amount of $3,800,000 to be the fair market value of the property.
The property is northerly and westerly adjacent to the Downtown Burbank Station (�DBS�, formerly known as the Regional Intermodal Transportation Center or RITC) and is immediately east of the Burbank Water and Power (�BWP�) electrical generating facilities, separated only by the Burbank Western Channel.
The proposed property acquisition is being recommended for three primary reasons: 1) the Southern California Public Power Authority (�SCPPA�) has an immediate need for construction staging and the close proximity of the AmeriCold site is ideal for this use; 2) as Burbank�s transportation programs expand the site would meet the needs of providing a facility for the local transit vehicles as well as a bike station (which will enhance the linkage between the Downtown Station and the Chandler access way); and 3) the Redevelopment Agency has identified this site as a prime redevelopment site (Opportunity Site No. 7, Burbank Center Plan) for a transit-oriented, mixed-use project.
ANALYSIS
The acquisition is being considered at this time because the property owner, AmeriCold Logistics, has indicated a desire to consolidate their Burbank facility with other facilities in Southern California and has offered the property to the City for $3.8 million. The City considered acquiring the AmeriCold property back in 1998 (the last time AmeriCold was offered to the City, at a price of $2.0 million) to be used in conjunction with the Downtown Burbank Station. However, funding issues prohibited the transaction from taking place at that time.
As mentioned, in addition to the proposed use of the site for transportation and redevelopment purposes, the Burbank Water and Power (BWP) has an immediate interim (roughly two years) need for the property in conjunction with the construction of the Magnolia Power Plant Project The Engineering Procurement and Construction (EPC) contract with Kvaerner requires that the Project provide nine acres of laydown area during the construction phase. The EPC contract also requires that approximately 10,000 square feet of warehouse space be provided during the construction phase.
The BWP Magnolia site provides four acres of laydown area, leaving the requirement for the Project to provide five acres of offsite laydown area. However, the Magnolia site provides no warehouse space. The AmeriCold facility provides 2.5 acres of offsite laydown area and satisfies the warehouse space requirements of the EPC contract. In addition to the Americold site, additional offsite laydown space will be acquired through other arrangements to meet the Project�s needs under the EPC contract.
The proximity of the AmeriCold facility provides benefits for the Project as the facility is located on a rail spur adjacent to the Magnolia site, allowing for unloading equipment directly from rail for storage in the warehouse or for transport to the site.
The essential points of the Lease Agreement are as follows:
The present value of these lease payments at a discount rate of 5% is $1,089,070. The discount rate of 5% was selected because it represents the cost of funds currently paid by SCPPA and is slightly greater than the current rate earned by City and Agency funds on deposit.
The Magnolia Power Plant Coordinating Committee has reviewed and approved the proposed lease on behalf of SCPPA. If the proposed lease is approved by the City Council, the net acquisition cost to the City/Agency would be approximately $2,710,930.00. After adding $8,000 for the estimated closing costs the total cost to the City/Agency would be approximately $2,718,930.00. The total cost in escrow, including title and closing costs, would be approximately $3,808,000.00.
In evaluating this offer staff considered two important initial considerations: 1) should the City or Agency purchase this property for a desired public use assuming funds are available for the purchase; and, 2) should the City/Agency purchase the property now or at some future date.
Proposed Public Uses
In response to the first consideration of whether the City/Agency has a valid public purpose that would justify acquiring the property staff believes that both the interim use of the property by SCPPA and the long-term potential use of the property to expand the DBS as well as create an opportunity for a transit-oriented, mixed-use development are significant short and long-term, public-benefit activities justifying the acquisition.
Again, SCPPA has an immediate need for property for staging purposes for the construction of the Magnolia Power Plant Project for a period of 24 months beginning in September 2003. This project will break ground in the beginning of June 2003. The AmeriCold property is conveniently located near the construction site across the Burbank Western Channel to the east of the Magnolia Power Plant site. The close proximity of the 10 West Magnolia Boulevard property will result in benefits to the power plant construction by allowing the delivery and storage of materials close to the construction site. The close proximity could also limit the impact of construction activities, deliveries and traffic impacts on the community by confining some of the construction activities to an area within close proximity to the construction site. In addition, there are very few sites available big enough to meet the project demands for staging purposes. SCPPA will take the responsibility to abate and demolish those portions of the site they will occupy, as necessary.
At the end of the lease term, SCPPA will vacate the premises and the City/Agency will have the opportunity to use the property for the previously mentioned purposes. At that time, the City/Agency will have to bear the cost of demolition estimated at approximately $680,000. Staff anticipates transportation grant funds may be available to help defray the cost of demolition and transit facility construction.
Acquisition Timing
In response to the second consideration as to when would be the most advantageous time to buy the property, staff believes that the best time to buy the property is now for a number of reasons. The property has been offered to the City at a price of $3,800,000. The City�s outside appraiser has determined this amount is the Fair Market Value of the property. From the standpoint of availability, the current owner/operator is anticipating leaving Burbank and would likely vacate the property whether or not the City/Agency buys the property. If the City/Agency decides not to acquire the property AmeriCold would likely sell the property to another user. If the City/Agency decided to acquire the property in the future, the cost to acquire would presumably increase, depending on the future uses, modifications made to the property and other activities on the part of a new owner that could increase the value and possible upward movement in the market. As previously mentioned the Fair Market Value of the property has increased by $1.8 million just in the past five years. In addition, since the current owner is consolidating this use into other existing operations at other locations, the relocation of the current use should be relatively quick, which will allow staff to deliver the property to SCPPA by September 2003.
The City conducted Phase I (a search of all historical uses) and Phase II (onsite borings) soils investigations and SCPPA has conducted a Phase I investigation. Both the City and SCPPA consultants have determined that the site will not require remediation. It is conceivable that if another industrial user could pollute the soils which could be hazardous to surrounding uses and which would require remediation if the property were to be purchased at a later date by the City/Agency.
The Purchase
Staff is recommending that the property be purchased in the name of the City and Redevelopment Agency jointly and that the property be leased to SCPPA permitting the cost to acquire the property to be offset by the amount of the SCPPA pre-paid lease payment. The SCPPA lease is contingent upon the City/Agency buying the property either at the beginning of the lease term or at the end of the lease term. If SCPPA were to purchase the property, the City/Agency would have to pay the total purchase price at the end of the lease term and would lose the option of offsetting costs by the amount of the pre-paid lease payment. SCPPA is amenable to leasing the property and making the lease payment.
Staff is recommending that the City and the Agency equally share the cost of purchasing the property and that title to the property be held jointly. Joint ownership would allow the future, proposed, transit facilities to be consolidated with the existing City-owned DSB and would also allow the Agency to contribute funds towards blight elimination in the South San Fernando Redevelopment Project Area, in consistency with the South San Fernando Redevelopment Plan.
Funding Plan
The recommended funding sources are detailed in the Fiscal Impact section below. However; in concept, the City and Agency funding obligation would be the purchase price of $3,800,000.00, less the SCPPA lease payment of $1,089,070.00 leaving a balance of $2,710,930.00 plus closing costs estimated at $8,000. The total outstanding balance would be $2,178,930.00.
Staff is recommending that the acquisition be accomplished with a combination of proposed funding sources as follows:
The proposed funding plan allows an equal contribution of funds from both the City and the Agency from available and appropriate funding sources, and provides an opportunity to mitigate the impact on City/Agency funds which is not expected to be available in the future once the Magnolia Power Plant Project is completed.
Demolition and Reuse
SCPPA will be able to use the current property with minor modification and possibly some demolition of a portion of the structure. SCPPA would take responsibility for the costs to modify the site for its own use. At the end of the proposed lease to SCPPA, the City anticipates demolishing the improvements for the construction of additional transit facilities. Demolition is estimated at approximately $10 per square foot of building area which would be approximately $680,000 plus the cost to construct parking and transit facilities.
The proposed acquisition meets the goals of the Redevelopment Agency as specifically outlined in the South San Fernando Redevelopment Plan (�Plan�). In addition to the Agency�s primary goal of eliminating blight, the Plan specifically identifies as a major goal, �to encourage the development and/or redevelopment of properties that incorporate or support the use of integrated intermodal, city-wide transportation�. In addition, the approved Burbank Center Plan highlights the AmeriCold site as part of Opportunity Site No. 7 and calls for a mix of land use options to be developed in conjunction with the existing Downtown Station. The Burbank Center Plan highlights the potential for an additional freeway crossing to connect with Palm Avenue, transit-oriented retail; potential for child care facilities, and office uses (as market demand exists). The objectives of redeveloping the site include: creating a stronger pedestrian connection between the Station and Downtown; provide the opportunity for employment-intensive activities, which can take advantage of the transit connections; and create visual excitement at the freeway-visible site.
The proposed acquisition of the AmeriCold property sets the stage for eliminating existing industrial blight and creates the opportunity to expand the City�s transit facilities and provide for future transit-oriented redevelopment.
HEALTH AND SAFETY CODE FINDINGS
The portion of the funding plan in which the Golden State Project Area provides a grant to the City for unfunded transit purposes requires that, after a public hearing, the Agency make findings consistent with Health and Safety Code Section 33445 and 33679. Findings are required when Agency funds are used to pay for City facilities if they are located outside the Redevelopment Project Area. The Summary Report is attached as Exhibit C.
The necessary findings in HS 33445 include:
In addition, the Agency must provide information required by Health and Safety Code Section 33679. Before a Redevelopment Agency commits to pay for publicly owned buildings, the agency must hold a public hearing and make available a summary of the proposal. The summary is required to include the following:
The Health and Safety Code Section 33445 and 33679 findings and information are attached as Exhibit C.
HS 33445 Findings
The HS 33445 findings are based upon the findings summarized as follows:
HS 33679 Findings
The findings required by HS 33679 are summarized as follows:
A. Estimates of the amount of taxes proposed to be used to pay for land and construction of publicly owned building, including interest payments (Health and Safety Code Section 33679(a)).
The following is a projection of how the Capital Facilities Funds would be spent to acquire the 2.43 acre site :
LAND COST CONTRIBUTION Agency contribution to land $679,732.50 (Golden State Redevelopment Project Fund)
The total contributions to acquire the property are summarized as follows:
PROPERTY PURCHASE PRICE $3,808,000.00 (Including $8,000 in closing costs included in the City and Agency contributions)
CITY CONTRIBUTION $1,359,465.00 SCPPA PRE-PAID LEASE $1,089,070.00 AGENCY LOAN PAYMENT $ 679,732.50 SUB-TOTAL $3,128,267.50
DEFICIT/AGENCY GRANT TO THE CITY $ 679,732.50 TOTAL OF ALL CONTRIBUTIONS $3,808,000.00
The City of Burbank will provide approximately $1,359,465 from Fund 127 Development Impact Fees to be used for transportation purposes. The SCPPA will contribute a pre-paid lease payment in the amount of $1,089, 070 according to the terms of a lease agreement to be entered into between the City and the Agency. The Agency will be contributing $679,732.50 towards the land cost directly from Redevelopment Agency funds from the South San Fernando Redevelopment Project Area. The sum of the available funding is $3,128,267.50 leaving an unfunded deficit of $679,732.50.
B. Facts supporting the required finding that the publicly owned buildings are of benefit to a project area or the immediate neighborhood of a project area, and that no other reasonable means of financing the buildings is available to the community (Health and Safety Code Section 33679 (b)).
The City of Burbank constructed the Burbank Downtown Station as a response to a regional need to create a central multi-modal transportation facility. The DBS opened in 1992 with a subsequent expansion project completed in 1998. The DBS is currently served by City-owned parking lots providing approximately 450 parking spaces. The DBS is also identified as Opportunity Site #7 in the Burbank Center Plan adopted by the City of Burbank on June 10, 1997. The Burbank Center Plan is a strategic plan that addresses long range land use and transportation planning of the City Centre and South San Fernando Redevelopment Project Areas. The plan identifies �opportunity sites� for future development designed to encourage mixed-use development and minimize vehicular traffic by encouraging the use of public transit and carpooling, and pedestrian traffic within the Plan area. The plan capitalizes on transportation opportunities including the DBS in order to minimize traffic volumes and meet Southern California Air Quality Management District (AQMD) standards.
Opportunity Site #7 is identified as the subject property and the DBS which collectively total roughly 7.2 acres located west of the I-5 and Front Street, between Magnolia Boulevard and Olive Avenue. The transportation improvements are defined as necessary in the BCP in order to accommodate the present and future needs within the Burbank Center Plan area to improve, regional and local intermodal transportation facilities.
The acquisition of the property at 10 West Magnolia Boulevard cannot be funded from any one available source of funds and must be funded from a variety of sources including Agency tax increment funds, City Fund 127 Development Impact Fees, SCPPA pre-paid lease funds and a contribution of additional Agency funds to the City. The only source of funds available to fund the deficit is a contribution from the Golden State Redevelopment Project Area to the City of Burbank which is the funding option considered by this report..
C. The redevelopment purpose of the expenditure (Health and Safety Code Section 33679 (c)).
As stated herein, the capital facilities are of benefit to the Golden State and South San Fernando Redevelopment Project Areas and are consistent with the intent, purpose and requirements of the California Community Redevelopment Law, Redevelopment Plans and the Agency�s adopted Implementation Plan. The City does not have sufficient revenues to support the estimated total amount required to acquire the property at 10 West Magnolia Boulevard for future transportation uses anticipated in the Burbank Center Plan.
The proposed agreement would permit the acquisition of the 2.43 acre property for the eventual construction of transportation-related and redevelopment uses anticipated in the Burbank Center Plan directly benefiting the South San Fernando and Golden State Redevelopment Project Areas by providing new transit and parking.
The agreement conforms to the intent and purpose of the Redevelopment Plans and the purpose, the declaration of state policy, and the requirements of the California Community Redevelopment Law, as has been substantiated herein. The redevelopment purpose served is the alleviation of blight caused by existing land uses and infrastructure deficiencies. In addition the proposed acquisition and future uses will help relieve congestion on local streets in the Golden State and South San Fernando Project Areas, as well as major corridors in the City.
CALIFORNIA ENVIRONMENTAL QUALITY ACT (�CEQA�) REVIEW
As required by the California Environmental Quality Act (�CEQA�), the proposed acquisition, interim use and preliminary proposed ultimate use have been considered. From a historical standpoint, in 1997, when the Burbank Center and South San Fernando Redevelopment Plans were approved by the City Council, an Environmental Impact Report (�EIR�) was also prepared and approved. At that time the EIR considered the ultimate development of this property as part of �Opportunity Site No. 7�. The EIR analyzed two specific scenarios for the long-term development of this Opportunity Site. The more intensive use projected for Opportunity Site No. 7 (which again, includes the subject AmeriCold property) included a mid or high-rise, 750,000sf office development with up to 20,000sf of retail use and a 3,000-space parking structure to serve the Downtown Burbank Station and the proposed office/retail development. While this contemplated use may not be the actual future use of the Site, it is important to note that all of the environmental impacts for such a use were considered and taken into account when the Burbank Center Plan mitigation measures were developed and incorporated into the EIR. In accordance with CEQA, Article 19, Section 15301, since the interim use (the two-year lease to SCPPA for warehousing/storage) has a similar classification as that of the previous industrial use, the interim project is categorically exempt from the CEQA review process.
As for the future use of the property, additional CEQA review will be given once final plans for the property are specifically developed. The current vision for long-term use is, as previously stated, additional transit-oriented facilities combined with a mixed-use redevelopment project. It is possible that future CEQA analysis could be tiered off of the existing EIR. However, that determination can only be made in the future when the ultimate use and a specific project for the site are clearly identified.
FISCAL IMPACT
The total amount of Agency funds needed to be contributed for the acquisition will be $1,359,465.00. Of this amount, $679,732.50 will be contributed directly from a loan from the Golden State Redevelopment Project Area to the City and then to the South San Fernando Redevelopment Project Area (SSF).
Staff is recommending that the acquisition be funded from three sources; 1) City Fund 127 Development Impact Fees; 2) Redevelopment Agency funds; and 3) a pre-paid lease payment from SCPPA. The total acquisition price is $3,800,000, plus $8,000 in anticipated closing costs, for a total of $3,808,000. SCPPA will contribute $1,089,070 as a pre-paid lease payment. The remaining balance of approximately $2,718,930.00 is divided equally between City contribution of $1,359,465.00 from Fund 127, Development Impact Fees, a contribution of $679,732.50 from a loan from the Golden State Redevelopment Project Area to the City to the South San Fernando Redevelopment Project Area and a contribution of $679,732.50 from the Golden State Redevelopment Project Area to the City.
The flow of appropriations to accomplish the funding plan is summarized as follows:
Resolutions have been prepared to approve the necessary Cooperation Agreements, budget amendments, and appropriations to accomplish the transaction outlined above and approving the Land Sale Agreement and Escrow Instructions to acquire the property at 10 West Magnolia Boulevard from AmeriCold Corporation.
RECOMMENDATION
Staff recommends that the City Council and Redevelopment Agency adopt the proposed resolutions:
LIST OF EXHIBITS
Exhibit A � Parcel Map Exhibit B - AmeriCold Offer letter Exhibit C - HS 33445 and 33679 Summary Report
H:\BWP\AmeriCold Acq SR.07-17-03
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