1998-0407_BLUE SKY PROPERTIES, LTD_H1b_Agenda Reportr]
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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
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RESOLUTION NO. 98-4-7-6
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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
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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
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