REPORT TO THE CITY COUNCIL
December 17, 2015
FROM: BRUCE RUDD, City Manager
BY: R. RENENA SMITH, Assistant City Manager
SUBJECT
Title
Approve Amended and Restated Agreement for Purchase Option and Right of Access between Cesar Chavez Foundation and the City of Fresno
Body
RECOMMENDATION
Staff recommends that City Council approve the Amended and Restated Agreement for Purchase Option and Right of Access (“Amended Agreement”) between Cesar Chavez Foundation (“Developer”) and the City of Fresno (“City”) for certain real property in the City of Fresno, California commonly known as the 5100 block of E. Kings Canyon Road, Fresno, CA 93727 (“Property”). Additionally, Staff recommends the City Council authorize the City Manager or his designee to complete negotiations and execute the contract subject to approval as to form by the City Attorney.
EXECUTIVE SUMMARY
The City desires an Amended Agreement between Developer and the City. The Developer proposes to acquire the Property from the City in an “as is” condition and develop it privately to serve as a residential development for low-income residents consisting of 89 multi-family units and 46 units for senior households (the "Project”). The value of the Property ($904,000) shall constitute the City’s financial assistance to the Developer for the Project to improve its competitive advantage for Low Income Housing Credit (LIHTC) equity investors, Greenhouse Gas Reduction (“Cap and Trade”) Fund or other available public and private mortgage/debt financing (collectively “Tax Credit Financing”). The City’s contribution of the Property is contingent upon Developer’s award of Cap and Trade funding or a nine percent (9%) LIHTC award. Upon Developer’s exercise of its option to acquire the Property and close escrow, Developer proposes to simultaneously convey a portion of the Property consisting of .89 acres, back to the City. Developer will develop and maintain the reconveyed property in perpetuity.
BACKGROUND
On March 5, 2015, the City Council adopted an addendum to Environmental Assessment No. C-14-044 and approved the Agreement for Purchase Option and Right of Access between Cesar Chavez Foundation and the City of Fresno for certain real property in the City of Fresno, California commonly known as the 5100 block of E. Kings Canyon Road, Fresno, CA 93727 (“Agreement”). Additionally, City Council authorized the City Manager or his designee to complete negotiations and execute the contract subject to approval as to form by the City Attorney.
The scope of the development and basic design is a 135 unit low-income housing development of which 89 units will be for multi-family residents and 46 units will be for senior households. In the Agreement, the Developer proposed to purchase the Property at fair market value for $904,000 in an “as is” condition and develop it privately to serve as a residential development for low income and senior residents. The Developer planned to finance the purchase of the Property and construction of the Project with financing, in part, from Tax Credit Financing. Subsequently, the Developer applied for Tax Credit Financing and received feedback that the proposed Project had merit, but required additional local contribution to be competitive. Site control and purchase conditions of the property as previously approved are not enough to improve the Project standings.
The City is willing to assist Developer’s construction of the Project by contributing the Property. Therefore, the City desires to enter into an Amended Agreement wherein the value of the Property shall constitute the City’s financial assistance to the Developer for the Project. Upon Developer’s exercise of its option and close escrow, Developer desires to simultaneously convey back to the City, a portion of the property consisting of .89 acres. The Developer will develop and maintain this property into perpetuity.
The Amended Agreement provides site control for the Developer through October 2016. Developer will have until September 30, 2016 to secure an award of either Cap and Trade funds or 9% LIHTC to exercise the option. The Property acquisition closing shall be no later than October 30, 2016. Furthermore, Construction of the Project will be in accordance with the amended schedule outlined in Exhibit C of the DDA.
If the Developer does not timely exercise this option, the City will retain the Property and the Developer’s rights will automatically terminate without notice. A summary of the deal point changes to the Agreement are as follows:
Purchase Option (including Exhibit A - legal description)
• Provides for option to acquire (not purchase) Property.
• City will retain $5,000 option payment.
• Developer will convey .89 acres of Property back to the City at the close of escrow.
• Option period is extended to September 30, 2016.
DDA - Exhibit “B”
• Developer has until September 30, 2016, to secure Cap and Trade funds or 9% LIHTC, and thereafter exercise option or City will terminate Amended Agreement.
• City’s contribution of Property is subject to Developer’s receipt of either Cap and trade funds or 9% LIHTC.
• Developer will convey .89 acres of Property back to the City at the close of escrow. The conveyance will be without cost or consideration to City and will be maintained by Developer’s sole cost and expense in perpetuity. Developer may utilize the parcel in conjunction with the Project. Developer will pay 100% of escrow fees.
Memorandum of Option - Exhibit C
• Minor changes to reflect Amended Agreement and new termination date.
ENVIRONMENTAL FINDINGS
On March 5, 2015, the City Council adopted the addendum to Environmental Assessment No. C-14-044. In addition,
1. No substantial changes are proposed in the project which will require major revisions of the previous Finding of Conformity due to the involvement of new significant environmental effects or a substantial increase in the severity of previously identified significant effects.
2. No substantial changes occur with respect to the circumstances under which the project was undertaken which will require major revisions of the previous Finding of Conformity due to the involvement of new significant environmental effects or a substantial increase in the severity of previously identified significant effects.
3. There is no new information, which was not known and could not have been known at the time of the previous Finding of Conformity that the project will have significant effect not discussed in the Finding of Conformity.
Furthermore, since a Finding of Conformity was previously adopted for this project, the considerations set forth in CEQA Guidelines § 15162(a)(3)(C) and (D), related to the adequacy and feasibility of previously adopted mitigation measures, are not applicable.
LOCAL PREFERENCE
Local preference was not considered because the Purchase Option does not include a bid or award of a construction services contract.
FISCAL IMPACT
The value of the Property ($904,000) shall constitute the City’s financial assistance to the Project. For the rights granted by the City, Developer will pay one hundred percent (100%) of the escrow fees, recording fees, and documentary stamp tax, if any, to convey the Property to the Developer. Upon exercise of its option, the Developer will convey back to the City, a portion of the property consisting of .89 acres, which the Developer will develop and maintain this property into perpetuity at no cost to the City.
Attachments:
Purchase Option Agreement (with Exhibit A to the Option attached)
DDA (Exhibit B to the Option)
Memorandum of Option (Exhibit C to the Option)