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1998-0407_BLUE SKY PROPERTIES, LTD_H1b_Agenda Reportr] U AGENDA ITEM April 7, 1998 TO: George Scarborough, City Manager FROM: Douglas D. Dumhart, Senior Management Analyst II SUBJECT: Resolution approving the Purchase and Sale Agreement between the City of San Juan Capistrano and Blue Sky Properties for the purchase of excess right- of-way :(APN 121-254-42) Southern YMR parcel. RECOMMENDATION: By motion, adopt the resolution approving the Purchase and Sale Agreement between the City of San Juan Capistrano and Blue Sky Properties for the purchase of excess right-of-way: (APN 121-254-42) Southern YMR parcel, and authorize the City Manager to execute the Agreement on the City's behalf. SUMMARY: In April, 1990, the City of San Juan Capistrano entered into an Agreement with the County of Orange for the construction of Stonehill Drive. The construction of Stonehill Drive required the purchase of land known as the "YMR" property for the Stonehill right -of- way. Portion of this right -of- way were purchased with Federal Highway Administration funds which require reimbursement. The extension of Stonehill Drive was completed in 1992 and the County transferred all property and debt obligation of the YMR parcel to the City via quitclaim action. On August 6, 1996, the City Council acknowledged the transfer of right-of-way, excess right- of-way and debt obligation for excess right-of-way from the Stonehill Drive project and authorized staff to negotiate an agreement for the disposition of the excess right -of- way parcels. The disposition of surplus properties on federally aided transportation projects must conform to the Uniform Relocation and Real Property Acquisition Policies Act ( "Uniform Act"). The City retained the services of Overland Resources, Inc., " Overland" to administer this disposition. Overland has completed the requisite appraisals; conducted the mandated noticing and advertisements, and transmitted request for proposals to prospective developers. Overland received three proposals as a result of these efforts. After review and staff analysis the City Council directed staff to further negotiations with Blue Sky Properties. Staff has prepared a Purchase and Sale Agreement with Blue Sky Properties for the City Council consideration and is recommending the adoption of a resolution approving the agreement. FOR CITY COU,,CiL F C_: f /h AGENDA ITEM -2- April 7, 1998 BACKGROUND: In April 1990, the City of San Juan Capistrano, by Resolution no. 90-04-17-8, declared Stonehill Drive within the City limits to be a County highway for the period of construction and entered into Agreement No. D89-343 with the County of Orange to define financing and areas of responsibility for the Stonehill Drive extension project. The County of Orange was the lead agency for design, right -of- way acquisition, construction management and inspections for the Stonehill Drive project. Project construction started April 1, 1991, with project completion on February 7, 1992. In acquiring right-of-way for the Stonehill Drive project, a decision was made to acquire the entire parcel of land known as the YMR property. The right -of- way for the road and slope easements cut through the middle of the property, which resulted in residual properties on both the north and south side of Stonehill Drive. These properties are classified as excess in that they are not necessary to support the roadway. The Federal Highway Administration (FHA) funded 87% of the acquisition price, for the YMR excess property, with the condition that when the property is sold or two years after project completion whichever is first, the FHA will be reimbursed 87% of what the City sells the remaining parcels for up to the maximum $1.2 million. Federal regulations (23 DAR, Section 710.203) dictates that the State Highway Department (Caltrans) has the overall responsibility for acquisition and disposition of right-of-way on federally aided transportation projects. In the past, Caltrans staff has been available to assist cities with these processes. However, State staff reductions make this no longer possible and they have opted to have the local authority make the appropriate arrangements for this oversight. The state has provided staff with the qualification criteria to hire a private agency in order to affect the sale in a manner acceptable to the State and federal guidelines. The City retained Overland resources to administer the disposition of these surplus parcels. Proposal Submitted: The results of public notification and marketing process has yielded three proposals for the City's consideration. The three submittals are from: Blue Sky Properties Ltd. (the Paul family partnership owner of Capistrano Ford); John Collins and Associates (owner of the Von's Center); and Jack Tarr Development (currently representing the Home Depot offer on Lower Rosan Ranch). It is staffs understanding that Collins and Associates has the adjoining parcels Mushett and Lui in escrow. Blue Sky Properties has indicated that Collins will assign his position to them if they are the selected proposal. Jack Tarr Development has an accepted backup offer with Mushett and Lui but is not in escrow to purchase. AGENDA ITEM -3- April 7, '1998 Blue Sky's intentions are to assemble the adjacent parcels and grade the entire site to Stonehill Drive street level. Blue Sky proposes to develop a truck specialty store as an extension of their existing Capistrano Ford operations. They plan on developing a 1500 square foot sales office and restroom facilities with the balance of land area for inventory display. The Collins proposal is to also assemble the adjacent parcels and grade the entire site to Stonehill Drive street level. Their proposal consists of mixed uses that includes two fast food restaurants, a tire store, a lube shop, and a fueling station. They have provided a site plan with a conceptual layout of their uses which can be found in their proposal. The Tarr Development proposal intends to purchase and develop the City parcel with a fueling station. To accomplish this development a portion of the hill would remain behind the fueling station. It is Tarr's expectation that once selected he will be able to assemble the remaining parcel at which time he would also proposed leveling the site to street grade and adding a strong national brand name user to anchor the project. A Breakdown of each of the proposals as follows: Blue Sky Properties Ltd. Offer Price $ 735,000 Est. Annual Tax Generation $ 108,000 Collins and Associates Offer Price $ 660,000 Est. Annual Tax Generation 79,680 Jack Tarr Development Offer Price $ 750,000 Est. Annual Tax Generation 70,000 Blue Sky Properties proposal is not the highest purchase price but, does bring the overall economic benefit over the long term. Staff presented the three proposals for City Council consideration at their closed session on October 7, 1997. City Council directed staff to negotiate a purchase and sale agreement with Blue Sky Properties and return with an agreement for their consideration. PURCHASE AND SALE AGREEMENT The Blue Sky Properties proposal is an expansion of the Capistrano Ford store located at the Price/Costco Plaza. Their proposal claims the additional visibility of the Stonehill site will increase overall store sales and have guaranteed that a base of $8 million dollars in taxable sales will come from the Stonehill site. AGENDA ITEM -4- April 7, 1998 In recognition of their guarantee of $8 million in taxable sales Blue Sky requests the City reimburse them for their offsite development costs. These costs include street, sewer, water and utilities improvements. The estimated costs for these off-site improvements is approximately $224,881. Under the proposed agreement Blue Sky Properties would finance and provide all the necessary off-site improvements. Final costs would be determined by actual invoices. The City would be responsible for reimbursing costs of improvements from sales tax proceeds generated from the expansion of the Capistrano Ford store. Any taxable sales identified over the $8 million guarantee base plus future years performance modifier would be reimbursed at 70% until off -sites are paid in full. FINANCIAL CONSIDERATIONS: According to CFR section 713.307 (c) which states, "When a credit to federal funds is required, the cost of disposition may be deducted from the sales price." Costs associated to market this project such as appraisals, title reports, brokerage fees, and listing services will be paid from proceeds of the sale. On a purchase price of $735,000, the Federal Highway Administration would receive approximately $172,651. and the City will net sale proceeds of $488,849. Net new property tax increment is expected to capture $40,000 annually and the guaranteed $8 million taxable sales will yield $80,000 annually for a total tax benefit of nearly $120,000. NOTIFICATION: AI Mockus, Federal Highway Administration Teresa Cota-Arias, Caltrans Ray Armstrong, Overland Resources, Inc. Steve Paul, Blue Sky Properties, Ltd. ALTERNATE ACTIONS: 1. Adopt the resolution approving the Purchase and Sale Agreement between the City of San Juan Capistrano and Blue Sky Properties for the purchase of excess right-of- way :(APN 121-254-42) Southern YMR parcel, and authorize the City Manager to execute the Agreement on the City's behalf. 2. Select alternate proposal direct staff to prepare and execute appropriate documents. 3. Do not approve any bidders and direct staff to re -issue request for proposals. 4. Refer to staff for additional information. AGENDA ITEM -5- April 7, 1998 RECOMMENDATION: By motion, adopt the resolution approving the Purchase and Sale Agreement between the City of San Juan Capistrano and Blue Sky Properties for the purchase of excess right-of-way: (APN 121-254-42) Southern YMR parcel, and authorize the City Manager to execute the Agreement on the City's behalf. Respectfully submitted, Douglas D. Dumhart Senior Management Analyst II Attachment 1: Resolution approving Purchase and Sale Agreement. 2: Purchase and Sale Agreement C AA G E N DAS \ 1998\4-7 BS KY. AG I .r RESOLUTION NO. 98-4-7-6 /i'�►`Cel111:�: i :31_D10 I DICK A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN JUAN CAPISTRANO, CALIFORNIA, APPROVING THE PURCHASE AND SALE AGREEMENT BETWEEN THE CITY OF SAN JUAN CAPISTRANO AND BLUE SKY PROPERTIES, LTD., FOR THE SALE OF EXCESS RIGHT-OF-WAY OF 1.53 ACRES KNOWN AS ASSESSOR PARCEL NO. 121-25442 AND FORMERLY KNOWN AS YMR SOUTHERN PARCEL WHEREAS, the City of San Juan Capistrano ("City") has approved the disposition of excess right-of-way of 1.53 acres formerly known as the YMR southern parcels; and, WHEREAS, Blue Sky Properties, Ltd., has submitted an offer to purchase said excess right-of-way and assemble it with adjacent parcels to provide the highest and best use of the land; and, WHEREAS, the City has duly considered all terms and conditions of the proposal to purchase made by Blue Sky Properties, Ltd. NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of San Juan Capistrano as follows: L The sale of the YMR southern parcel, Assessor Parcel No. 121-254-42 and the proposed Agreement, which establishes the terms and conditions and escrow instructions thereof, are hereby approved. 2. The City Manager of the City of San Juan Capistrano is hereby authorized to sign all documents necessary to complete the sales transaction at close of escrow. PASSED, APPROVED, AND ADOPTED this 7th day of April 1998, GIL J YOR ATTEST: — CITY CLERK -1- STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss CITY OF SAN JUAN CAPISTRANO ) I, CHERYL JOHNSON, City Clerk of the City of San Juan Capistrano, California, DO HEREBY CERTIFY that the foregoing is a true and correct copy of Resolution No. 98-4-7-6 adopted by the City Council of the City of San Juan Capistrano, California, at a regular meeting thereof held on the 7th day of _ pri t 1998, by the following vote: AYES: Council Member Swerdlin, Hart, Campbell and Mayor Jones NOES: None ABSTAIN: None ABSENT: Council Member Greiner (SEAL) CHERYL J010Sft, CITY CLERK -2-