REPORT TO THE CITY COUNCIL
FROM: GEORGEANNE A. WHITE, City Manager
Office of the City Manager
BY: CLIFF LONG, Director
Economic Development Department
SUBJECT
Title
Actions pertaining to the sale of an approximate 14.58± acre property located at the southwest corner of West Herndon and North Brawley Avenues (Council District 2)
1. ***RESOLUTION - Finding good cause and clear and convincing benefit to the public pursuant to Fresno Municipal Code Section 4-204 relating to the disposition of real property identified as Assessor’s Parcel Number 507-030-48ST (Herndon & Brawley Avenue) (Property) (Subject to Mayor’s Veto)
2. Approve the First Amendment of the Purchase and Sale Agreement with Lakhjit S. Sandhu, MD, increasing the purchase price to $2,100,000, (a $250,000 increase over the initial agreement), with applicable title and escrow costs to be split 50/50 with the buyer, not to exceed $6,000, resulting in net proceeds of $247,000
Body
RECOMMENDATION
Staff recommends the City Council 1) adopt the resolution finding good cause and clear and convincing benefit to the public to vary from Fresno Municipal Code (FMC) 4-204 relating to the disposition of the Property, and 2) approve the First Amendment of the Purchase and Sale Agreement between the City of Fresno and Lakhjit S. Sandhu, MD (Buyer), for the property located at the southwest corner of West Herndon and North Brawley Avenues, and authorize the City Manager, or their designee, to execute all documents necessary to complete the subject transaction.
EXECUTIVE SUMMARY
The proposed action seeks City Council approval to amend the existing agreement for the sale of ±14.58 acres of vacant land located in North Fresno at the southwest corner of West Herndon and North Brawley Avenues (APN 507-030-48ST), which City Council approved on July 21, 2022, for a price of $1,850,000. The First Amendment proposes a new purchase price of $2,100,000 (an increase of $250,000). The amendment responds to changing market conditions and community needs by enabling the property’s development for a grocery store and related retail uses, rather than the previously intended medical office project. This adjustment is intended to address persistent challenges in attracting viable development to the site, which has been constrained by factors such as proximity to the Sierra Sky Park Airport and associated land use restrictions under the Fresno County Airport Land Use Compatibility Plan, which places development, density, and height restriction on the parcel.
The requested action is designed to advance the City’s goals of promoting economic development, eliminating blight, and increasing access to healthy food. If approved, the sale and subsequent development are expected to generate new tax revenue, improve neighborhood vitality, and provide substantial public benefit to the area.
The First Amendment incorporates safeguards to ensure timely development, including a reverter right in favor of the City should the buyer fail to meet specified construction milestones, as required by Fresno Municipal Code Section 4-204.
BACKGROUND
In March 2020, the City Council formally declared this parcel as surplus land in accordance with the Surplus Land Act (Government Code Sections 54220-54234), thereby initiating the required noticing and disposition process for surplus municipal property. This action directed staff to notify eligible entities and agencies of the property’s availability, as mandated by state law, and to report on any negotiations to the Department of Housing and Community Development if no agreement was reached with a qualified entity.
Following the surplus declaration, the City undertook additional steps to ensure compliance with both state and local requirements. Fresno Municipal Code (FMC) Section 4-204 governs the disposition of City-owned real property, requiring, among other provisions, that surplus land be sold through an open and competitive Request for Proposals (RFP) process unless the Council makes specific findings of good cause and public benefit to vary from this process. In this case, the Council determined that extraordinary circumstances-primarily longstanding development constraints related to the property’s proximity to Sierra Sky Park Airport and associated land use restrictions-warranted an expedited and modified RFP process. The Council authorized staff to bypass the formation of a formal evaluation committee and allowed the City Manager’s Office and Economic Development Department to issue the RFP directly, with a shortened response period and public disclosure of all proposals received.
The initial Purchase and Sale Agreement (PSA) for this property was approved by the City Council on July 21, 2022, following a competitive RFP process. The original PSA authorized development of a 50,000 square foot Class A medical office building, with a purchase price of $1,850,000 and terms justified by an independent appraisal and an economic impact analysis conducted during the RFP evaluation.
The buyer has been unsuccessful in developing the medical office building due to a decreased demand for this type of office space in the area. They have received a serious inquiry from a grocery store interested in locating on the property and the buyer and City now desire to amend the purchase and sale agreement to accommodate this modification.
Pursuant to FMC Section 4-204(d), the City shall not approve any purchase and sale agreement, disposition and development agreement or any other agreement that would cause or allow City owned real property to be conveyed, except upon specified terms and conditions. One of those terms requires that the agreement shall not be extended, except upon a showing of extraordinary good cause, and any extension may not exceed 180 days from the date of Council approval. In addition, FMC Section 4-204(d)(4) requires that purchase prices shall be at fair market appraised value, unless the Council makes findings there are substantial community benefits resulting from the sales agreement that justify a price less than market value. Lastly, FMC 4-204(d)(5) the Council may approve one or more extensions to complete not exceeding 12 months each upon a finding of good cause.
Staff recommends that the Council Adopt the Resolution to vary from FMC 4-204(d), approve the execution of the First Amendment to the Purchase and Sale of Real Property; and authorize the City Manager or designee to execute all documents related to the transfer of the parcels.
ENVIRONMENTAL FINDINGS
The City has determined that the approval of the First Amendment is not yet subject to environmental review under California Environmental Quality Act (CEQA) because the action does not at this time result in a direct or reasonably foreseeable indirect physical change in the environment.
While the First Amendment provides the Buyer with flexibility to explore alternative development options, the City has not received a formal entitlement application, specific site plan, or detailed project description for any new development on the property. In the absence of an identifiable project proposal, any analysis of potential environmental impacts would be premature and purely speculative and would not provide meaningful information to the public or decision-makers.
Pursuant to CEQA Guidelines Section 15004(b)(1), environmental review should be prepared as early as feasible, but not so early that it must be based on guesswork before a project’s configuration is known. Because no specific development is currently proposed, adopted, or funded by this action, environmental review is not yet required.
The City will conduct full and appropriate environmental review as required by CEQA once a specific project application is submitted and the nature of the development is sufficiently defined to allow for a meaningful evaluation of physical impacts.
LOCAL PREFERENCE
Local preference does not apply because the acquisition of the subject real property does not include a bid or award of a construction or services contract.
FISCAL IMPACT
There will be no immediate cost or revenue depletion to the City’s General Fund due to this sale. The amended sale and purchase amount of $2,100,000 will cause an additional $250,000 to be deposited into the General Fund. A portion of these funds will be used to pay applicable title and escrow fees to be split 50/50 with the Buyer, not to exceed $6,000, and result in net proceeds of $247,000.
Attachments:
Resolution
First Amendment of Purchase and Sale Agreement
Original Purchase and Sale Agreement