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21-1102_R&H LAND PARTNERS_Agenda Report_D1City of San Juan Capistrano Agenda Report TO: Honorable Mayor and Members of the City Council FROM: Benjamin Siegel, City Manager SUBMITTED BY: Charlie View, Assistant City Manager PREPARED BY: Matisse Reischl, Senior Management Analyst DATE: November 2, 2021 SUBJECT: Purchase and Sale Agreement with R&H Land Partners, LLC for City-owned Property Located at Calle Arroyo and Rancho Viejo Road; and Hearing of Any Protests to the Disposition of the City- owned Property (Assessor Parcel Number: 666-232-08) RECOMMENDATION: Approve and authorize the City Manager to execute a Purchase and Sale Agreement for the sale of a 1.09-acre City-owned parcel located at Calle Arroyo and Rancho Viejo Road to R&H Land Partners, LLC. EXECUTIVE SUMMARY: On October 19, 2021, the City Council adopted a Resolution of Intention (Attachment 1) finding that public convenience and necessity require the sale of the City-owned Calle Arroyo property, an approximately 1-acre parcel located at Calle Arroyo and Rancho Viejo Road, to R&H Land Partners, LLC, represented by Mr. Robert Socci. In addition to the required public hearing notice, State law requires that the Resolution be published in the local newspaper and posted in three locations on the Calle Arroyo property. All publication and posting requirements have been complied with in support of the proposed sale of public land. Due to its location and unique parcel characteristics, including lack of legal access, a stand-alone public use on the City-owned Calle Arroyo property is generally infeasible. The proposed sale of the property to the adjacent landowner above fair market value is envisioned to facilitate improved options for long-term use of the site, while mitigating future risk and maintenance obligations associated with City ownership. 11/2/2021 D1 City Council Agenda Report November 2, 2021 Page 2 of 4 DISCUSSION/ANALYSIS: The City owns an approximately 1-acre parcel generally located at Calle Arroyo and Rancho Viejo Road (Calle Arroyo parcel). An aerial photo of the site is provided as Attachment 2. The parcel is situated between property owned by St. Margaret’s Episcopal School and the Ortega Cottages Business Park. The Calle Arroyo parcel is currently operated under a License Agreement by Ortega Equestrian Center and used for office space, support facilities and a riding ring, all in conjunction with a larger commercial equestrian and stable operation located on an adjacent property owned by St. Margaret’s. Importantly, the City-owned Calle Arroyo parcel is landlocked with no legal access. Currently, Ortega Equestrian Center accesses the Calle Arroyo parcel through an informal agreement with the Ortega Cottages business park property owner. Upon receipt of an informal purchase offer for the Calle Arroyo property from the Ortega Cottages owner, in October 2019 staff contacted St. Margaret’s and the operator of the Ortega Equestrian Center to gauge interest, if any, in potentially acquiring the property from the City. While discussions with St. Margaret’s and the Ortega Equestrian Center did not mature into a formal purchase offer from either, the owner of the Ortega Cottages business park, Mr. Socci, submitted an offer of $150,000. The parcel was appraised at $120,000. The property is zoned PC (CDP 78-1) Ortega Planned Community, Planning Sector C, which permits a range of open space recreation uses, including parks, playgrounds, riding and hiking trails, bicycle trails, golf courses, and agricultural uses. However, due to the restricted access and relatively small size, the site is not well-suited for a stand-alone public use. Additionally, the Calle Arroyo parcel is located within the floodway adjacent to San Juan Creek. Federal Emergency Management Administration (FEMA) regulations provide restrictions on types of development that can be undertaken in a floodway, including limitations on permanent structures. While R&H Land Partners has not identified a specific project or intended use of the Calle Arroyo parcel, Mr. Socci has expressed interest in working with staff on potential uses that could be allowed under the current zoning. Any future proposal would be subject to a separate entitlement and environmental review process. In 2019, the State took several actions to make public lands available for affordable housing development including modifications to the Surplus Land Act. The Surplus Land Act requires that prior to the sale of surplus land, unless an exemption applies, cities must provide notice to affordable housing developers that a property is potentially available for development. On June 15, 2021, the City Council adopted a resolution declaring the Calle Arroyo parcel non-exempt surplus land and approved issuance of a Notice of Availability to all required parties. After the required 60-day noticing period, no affordable housing entity expressed interest in purchasing the property, and the City subsequently received City Council Agenda Report November 2, 2021 Page 3 of 4 notice from the Department of Housing and Community Development that the City had complied with all noticing aspects of the Surplus Land Act and is free to move forward with the potential sale to R&H Land Partners. The Surplus Land Act also requires that concurrently with a potential future sale, a restrictive covenant must be recorded against the property stipulating that if ten or more residential units are constructed on the site at least 15% are to be rented or sold at affordable housing rates; however, due to the limited size of the parcel, land use restrictions, and FEMA regulations housing would likely be infeasible. As the City has received notification that all provisions of the Surplus Land Act have been met, staff recommends that the City Council approve the proposed Purchase and Sale Agreement for sale of the City-owned parcel to R&H Land Partners for the above fair market value sale price of $150,000 and authorize the City Manager to execute the agreement (Attachment 3). R&H Land Partners has agreed to engage in discussions with the current Licensee, Ortega Equestrian Center, to allow continued use of the Calle Arroyo parcel for a limited duration; however, any longer-term agreement between R&H Land Partners and the equestrian operator would likely be contingent on St. Margaret’s future plans for its adjacent property, given that the majority of the Ortega Equestrian Center operation is conducted on property owned by St. Margaret’s. Pending City Council approval of the Purchase and Sale Agreement and prior to disposition of the property, State law requires the Planning Commission determine the sale of the Calle Arroyo property is consistent with the City’s General Plan. Therefore, staff would bring a resolution before the Planning Commission later this month recommending the sale of the Calle Arroyo parcel is consistent with the City’s General Plan as Mr. Socci has expressed interest in working with staff to identify potential uses that could be allowed under the current zoning. FISCAL IMPACT: Approval of the recommended action would result in $150,000 in one-time sales proceeds and would be deposited to the City’s General Fund for future appropriation by the City Council. ENVIRONMENTAL REVIEW: In accordance with the California Environmental Quality Act (CEQA) the recommended action is exempt from CEQA per Section 15061(b)(3), the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. The approval of a Purchase and Sale Agreement will not have a significant effect on the environment and any future project proposed for the site would be subject to separate CEQA review. City Council Agenda Report November 2, 2021 Page 4 of 4 PRIOR CITY COUNCIL REVIEW: • On October 19, 2021, the City Council approved a resolution declaring the City’s intent to sell the Calle Arroyo parcel to R&H Land Partners. • On June 15, 2021, the City Council approved a resolution declaring the Calle Arroyo parcel non-exempt surplus land and approved the issuance of a Notice of Availability to all required parties. COMMISSION/COMMITTEE/BOARD REVIEW AND RECOMMENDATIONS: Not Applicable. NOTIFICATION: Robert Socci, R&H Land Partners OTRA, Inc. St. Margaret’s Episcopal School Interested Parties Notification List ATTACHMENTS: Attachment 1 – Resolution of Intention Attachment 2 – Aerial Photo Attachment 3 – Proposed Purchase and Sale Agreement ATTACHMENT 1 ATTACHMENT 2 Calle Arroyo Parcel – Aerial Photo ATTACHMENT 3 Attachment 3 will be distributed separately.