title
APPROVE OPTION AGREEMENT WITH STAND
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution:
1. Authorizing an Option Agreement with Stocktonians Taking Action to Neutralize Drugs for City-owned property at 2222 and 2244 South Airport Way; and
2. Authorizing the City Manager to take necessary and appropriate actions to carry out the purpose and intent of the resolution.
body
Summary
In October 2016, the City Council authorized an Exclusive Negotiating Rights Agreement (ENRA) between the City and Stocktonians Taking Action to Neutralize Drugs (STAND), to allow staff to negotiate specific terms associated with a purchase Option Agreement for City-owned properties located at 2222 and 2244 South Airport Way (Attachment A and B - Vicinity and Aerial Maps). The developer, STAND, intends to construct a health clinic, as well as a combination of office space, public gathering space, affordable housing and/or retail services.
The terms of a two-year Option Agreement with a one-year renewal option have been agreed upon, including a $1.00 purchase price for the two subject parcels. In return for a below market rate purchase price, STAND will develop services beneficial to the surrounding community as identified in the above paragraph. Should STAND fail to develop the property as stated, the City will have the right to repurchase the parcels at the original $1.00 sales price.
DISCUSSION
Background
Through the dissolution of Redevelopment in 2012, the former Redevelopment Agency was required to implement a Long Range Property Management Plan, with a detailed description of each property that is owned, and the plan to develop the existing properties for disposition or how they would be held for future development. The plan was approved by the State of California in December 2015.
In addition, the 2015 Council adopted City of Stockton Economic Development Strategic Plan calls out a Neighborhood Revitalization Program as part of the implementation plan. It focuses on utilizing existing City resources (e.g., publicly-owned development sites) as one way to bring much-needed revitalization to the South Stockton neighborhood.
In May 2016, a Request for Interest seeking proposals from parties interested in developing City-owned properties located at 2222 South Airport Way (APN 169-163-01) and 2244 South Airport Way (APN 169-151-01) was issued by the City. After review by a selection committee and recommendation of City staff, the City Council approved an ENRA between the City and STAND on October 18, 2016, to allow staff to negotiate specific terms associated with a purchase Option Agreement for the above-mentioned parcels. During the term of the ENRA, the City is required to refrain from consideration of proposals from other developers for the subject parcels and agrees not to solicit proposals from others regarding the acquisition and/or development of the subject properties. The term of the ENRA was for 180 days, with an option to extend an additional 180 days, from the date of execution which was on November 7, 2016.
Present Situation
STAND is proposing to develop the site for the economic and social benefit of the surrounding neighborhood, which will include a health clinic, as well as a combination of non-profit and/or social services office space, community meeting and public gathering space, affordable housing, and/or retail that serves the nearby community. The neighborhood surrounding the Airport Way corridor has been underserved for many years. The development of a health clinic with complimentary social/community services will fill a void currently existing in this neighborhood. The community space also provides an opportunity to bring in local fresh produce that is not readily available in the immediate area and help to address food insecurity by hosting farmer’s markets and/or produce stands.
The terms of an Option Agreement for the purchase of City-owned property located at 2222 and 2244 South Airport Way have been negotiated and agreed upon by STAND, subject to City Council approval. Below are the major deal points of the Option Agreement, which is attached as Exhibit 1 to the Resolution:
• Purchase Price $1.00 for both parcels
• Lot Size (both parcels) 1.6 acres
• Purchase Option Term Two years, with a one-year renewal option
• Closing Costs Paid 100% by STAND
• Environmental Reimbursement Up to $47,000 paid to City at the close of escrow
Since STAND intends to develop the subject properties for the economic and social benefit of the surrounding neighborhood, which will also help to revitalize the area, staff is recommending that the property be sold for $1.00. The project, particularly the health clinic and community space, would not come to fruition due to funding shortfalls should the City sell the property at market value, which is approximately $175,000-$200,000 based on similar properties in the general area. Further, since the property formerly housed a dry cleaner, there is the potential for contamination that will require remediation. Soil testing is currently underway, and it is unknown at this time the extent of any potential clean-up costs.
Should STAND fail to obtain building permits for construction of the project as described within five years of the City conveying the property, the City shall have the right to repurchase the property for the original $1.00 purchase price. The City shall also have the right to repurchase the property for $1.00 should STAND fail to commence construction of said project within six months of building permit issuance. The City’s right to repurchase the subject parcels at the original purchase price shall not be subject to or limited by any mortgage or debt recorded against said parcels unless agreed upon by the City to allow STAND to encumber costs associated with any potential environmental remediation against the subject parcels.
In addition, STAND will reimburse the City $46,978 upon the close of escrow for costs it incurred to commission a Phase II environmental study for the subject parcels.
Notification
As required, a “Notice of Intent to Grant or Sell Real Property Interest” in accordance with the provisions of Article V, Section 510, of the Charter of the City of Stockton, was advertised in the legal notice section of The Record on April 5, 2018.
Environmental Clearance
The Community Development Department has determined that the action/project is exempt from the requirements of the California Environmental Quality Act (CEQA) as the project has been granted a “Statutory Exemption” under Article 19, specifically Section 15332, Class 32 of the State CEQA Guidelines. In accordance with Section 65402 of the Government Code, the Community Development Department further determined that the project or actions of the City conforms to the City’s General Plan designation for the site and with the General Plan Policy Document, as amended.
FINANCIAL SUMMARY
Net proceeds from the sale of the subject City-owned parcels must be remitted to the San Joaquin County Auditor-Controller for disbursement to the taxing entities in accordance with the Long Range Property Management Plan. The proceeds will be deposited into the Liability Fund Account No 680-0000-239 and remitted to the San Joaquin County Auditor-Controller.
Reimbursement for the Phase II environmental study will be deposited into the General Fund Reimbursements Account No. 010-1760-371.
Attachment A - Vicinity Map
Attachment B - Aerial Map