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SR-080983-RA1C,M:JJ:mmm Santa Monica, California City Council Meeting: August 9, 1983 TO: City Council/Redevelopment Agency FROM: City Staff SUBJECT: Recommendation to Accept Coastal Commission Conditions Regarding Ocean Park Redevelopment Project and to Approve Amendments to Settlement Documents; and Request for Authorization to Proceed with Project Implementation Introduction This report transmits the California Coastal Commission's staff report and the Commission' s subsequent letter of clarification concerning conditions of the amended Coastal Permit recently approved for completion of the Ocean Park Redevelopment Project. These documents are attached as Exhibit 1. Because there is some variance between the approved Coastal Permit and the Agency's permit application, this report recommends that the Council/Agency accept the Commission's conditions and modify First Supplemental: Stipulation for Judgement, Revised Judgement, and the Amended Sales Agreement with the Redeveloper to coincide with Coastal Commission conditions. The revised Land Sale Agreement recommended for Council/Agency approval is attached. In addition to recommending actions necessary to proceed with the implementation of the redevelopment project, this report provides the Council/Agency with an opportunity to review and compare the impacts of proceeding with either the Settlement Plan or the Alternate Plan. While the Council/Agency has approximately one year in which to formally select one plan, there are costs and benefits associated with conducting necessary planning and 1 predevelopment activities for both options or either option during this year long period. As staff seeks direction for project implementation, the ramifications of the two planning options are presented to Council/Agency for evaluation. Background On December 7, 1982 the Council/Agency approved a Settlement Agreement with Pacific Dominion Property Company resolving the litigation between the Council/Agency and the Redeveloper and authorized the staff to file for an amended Coastal Permit. The Settlement Agreement provided for two separate development plans, the Settlement Plan, and, in the alternative, the Alternate Plan. The Settlement Plan provided for the development of 150 condominiums, 55 to 70 affordable housing units, on-site, and a total of 10.4 acres of public park area. The plan also included major improvements to the beach involving redesign of beach parking lots, beachfront recreational areas serving all age groups and a parking and traffic improvement plan. The settlement documents with Pacific Dominion provided for an alternate, a "fall-back" plan to be utilized in the event that the Settlement Plan is blocked by litigation. The Alternate Plan provided for the development of 153 condominiums, rehabilitation of 80 units and construction of 55 units of affordable housing within the Ocean Park Community. The construction of new affordable housing o£f-site is not a 2 condition of the amended Coastal Permit, but is referenced in the Settlement Agreement between the Agency and the Redeveloper. The Beach Improvement component of the Alternate Plan provides for landscaping of the beach parking lots, although it would allow the Redevelopment Agency, at its discretion to implement any level of beach improvement. The major components of the Settlement Plan, the Alternate plan, and the original plan, known as the Contract Plan, are compared in the following table. A COMPARISON OF THE SETTLEMENT ALTERNATE AND CONTRACT PLANS Market-Rate Housing --Density --Height --Set-backs Affordable Housing --Onsite/Offsite --New/Existing --Years --Units Park Area Beach Improvement Cost Settlement Alternate Contract 150 75 18' On-site New Perpetuity 68 10.40 ac. $4,500,000 153 83' 10' 158 92' 10' Off-site Off-site Existing & New Existing Perpetuity 20 135* 80 5.89 ac. 5.89 ac. $2,000,000 - $1,200,000 4,500,000 * 55 of the 135 units are not required by the Coastal Commission. 3 Amended Coastal Permit The Agency and the Redeveloper jointly applied to the California Coastal Commission for an amended Coastal Permit on December 10, 1982. On May 26, 1983, the Commission approved the amended Coastal Permit application with conditions governing the public improvements for both the Settlement Development Plan and the Alternate Development Plan. Although the scope of development approved by the Commission conforms with the Agency's permit application, the Commission's conditions substantially modify the timing of the commencement of construction of public improvements and require letters of credit to be posted to ensure that public improvements are started and completed by dates certain. The Commission also required that the on-site Affordable Housing Plan and the Settlement Beach Improvement Plan be formally approved by the Commission. A mechanism to ensure the rehabilitation of 175 Ocean Park Boulevard involving grant of co-equal rights to the Coastal Commission to enforce the Cooperation Agreement with the County has also been required. These provisions were not anticipated in the approved Settlement Agreement between the Agency and the Redeveloper or in the permit application. The following table displays the differences between the development schedule for public works projects contained in the Agency's application and the timetable approved in the amended Coastal Permit. Exhibit II, attached, displays the schedule of 4 performance on the part o£ the Agency and the Redeveloper in considerable detail. This schedule reflects the timing o£ activities in conformance with the approved Coastal Permit. 5 COMPARISON OF' APPLICA'fTON TIP1E'1'ABLE AND APPROVED TIR1ETAftL,13 APPLICA'T'ION APPROVED PB2MI1 Commence Letter of Special Commence Letter of Special Constructi<n Credit Required Coastal Permit Construction Credit Reau~red Coastal Permit ET'I'LF:MGNT PLAN Park C + H Mo. 0 None C + 6 Mo. $ 500,000 !None Beach C + 16 Mo. 0 None C + 6 Mo. $4,500,000 ' Yes Ilousi.ng C + 16 Mo. 0 None C + 12 P1o, $3 500,000 Yes LTERNATE PLAN Park C + SMo. 0 None C + G ^10, 0. 500,000 None Beach C+ 8 D1o. 0 Nona C+ 6 P1o, $1,000,000 'None (lousing Not obligation of City Not obligation of City C =Commencement of Condominium Construction rn Proposed Amendment To Land Sale Agreement The conditions to the current permit concerning timing and necessary approvals require modification of the Land Sales Agreement. In addition to revising the development schedule, the recommended modifications include a provision to the effect that the Agency must secure necessary coastal permits and post required letters of credit before it can elect to proceed with the Settlement Plan. The amendment also provides that the Redeveloper has the option to post the letters of credit in the event that the Agency fails to do so. Implementation Issues While the actions recommended above will bring the Agency's approved plan into conformance with the Coastal Permit, the Council/Agency's direction to staff for implementation of the project involves consideration of the costs and revenues generated by the Settlement and Alternate Plans. In addition, the Agency must be appraised of potential unrecoverable planning and predevelopment expenses arising from pending litigation. Costs and Revenues The costs of design and construction pursuant to the Settlement Plan are projected to be $10,417,000. Comparable costs under the Alternate Plan range from $3,000,000 to $5,920,000, depending upon the scope of the beach improvements approved by the Council/Agency. 7 In addition to development costs, the Agency must discharge its indebtedness to the General Fund and the CDBG program. The cumulative cost of repayment is $3,373,439 regardless of the plan selected. The total revenues resulting from implementation of the Settlement and Alternate Plans are $16,100,000 and $10,600,000 respectively. Net proceeds to the City/Agency are projected to be $2,309,561 under the Settlement Plan and from $1,306,561 to $3,863,561 for the Alternate Plan. Inasmuch as the Coastal Commission has not required construction of new housing off-site as a condition of the Alternate Plan, associated costs are not reflected in these financial projections. The Council/Agency should be aware that the California Housing Finance Agency has ranked the proposed affordable housing site relative to sites available in other cities and has indicated that there is strong potential to obtain partial Section 8 funding for the on-site project. Should this funding be available, the costs of providing on-site housing would be halved. Alternatively, it is conceivable that Section 8 funding might be reserved for another site in conformance with the Settlement Agreement if control of a highly ranked site can be obtained within the next month. Exhibit III details the costs and revenues projected for the Settlement Plan and Exhibit IV provides comparable information on the Alternate Plan. 8 Status of Pending Litigation Three lawsuits have been filed involving the Ocean Park Redevelopment Project. 1. Marshall & Baskauskas v. Redevelopment Agency, Case No. C 420636 was filed on August 5, 1982. The Complaint seeks an Injunction prohibiting the implementation of the proposed settlement of the Lincoln Property case and compelling the Redevelopment Agency to perform the conditions of the original Coastal Permit. The complaint also seeks substantial civil penalties. 2. Littler & Blais v. Pacific Dominion Property Company, Case No. CA 000773 was filed April 26, 1983. This is a class action suit brought on behalf of owners of condominiums in the Sea Colony II. It seeks to require the Agency and the Redeveloper to construct a 5.89 acre public park as described in the Subdivision Map for the project in a manner which would not interfere with ocean views from the Sea Colony II subdivision. The Complaint also seeks damages of $8 Million dollars. 3. Marshall & Baskauskas v. Coastal Commission, Case No. C461805 filed approximately July 26, 1983, and has not yet been served on the Agency. The suit seeks to overturn the decision of the Coastal Commission granting a new Coastal Permit for the project. 9 Potential Impacts of Litigation upon Planning and Predevelopment Costs Pursuant to Council/Agency direction, staff will begin to expend funds for architectural and engineering services necessary to construct the public improvements required by both the Settlement and Alternate plans. To meet the development schedule, such activities will commence within a month. As the following Exhibit V, indicates, the total cost of predevelopment activities for the Settlement Plan could approximate $870,000. These costs accrue at a rate in excess of $100,000 per quarter. If implementation of the Settlement Plan is blocked, funds expended will not be recoverable. In directing staff to proceed with predevelopment activities, the Agency should be aware of the potential risk of significant unrecoverable costs. 10 LXIlI13IT S: ARCHI'PHC'1'URAL AND L'NGINFiBRTNG COSTS FOR PUBLIC IMPROVGA9F.N'1'S July - Sept . Oct. - Dec. Jan. - *.1arch April -June July -Sept. Oct. - Dec. 198.5. Total. '83 '8.3 '84 '84 '84 '84 SE1"1'LEPIEN'1' PLAN Beach 370,000 40,000 60,000 60,000 60,000. 60,000 60,000 .30,000 Park 50,000 7.0,000 10,000 10,000 10,000 10,000 APF012DA[3LE HOUSING 200,000 10,000 30,000 30,000 30,000 30 000 30,000 40,000 P7ARKET RA'I'F HOl1SINGx 250,000 50,000 50,000 50,000 50,000 50,000 `I'0`t'AL COSTS PIiR ' QUARTI';R 100,000 140,000 150,000 150,000 150.000 100,000 80,000 CUMULATIVP COSTS 870,000 100,000 240,000 390 000 540,000 690,000 790,000 ~ 870,000 "1'he Settlement Agreement with the Redeveloper provides that the City/Agency will be obligated to reimburse the Re~le.-eloper for architectural costs associated with the Settlement Plan up to $250,000, in the event that the Settlement Plan i='not implemented, r-' Staff recommends that the Council/Agency: 1. Accept the conditions of the amended Coastal Permit; 2. Approve the First Supplemental Stipulation for Judgement, Revised Judgement and the Amended Sales Agreement; and 3. Direct staff to proceed with implementation of the project as follows: a. Undertake planning and design activities for both the Settlement and Alternate Plans; or b. Proceed with implementation of the Alternate Plan. Prepared By: John Jalili Assistant City Manager 12 . ~%~~' Staff recommends that the Council.{~Ygen~p: ~- /~'e"~`~- ' 1. Accept the conditions of the amended Coastal P 2. Approve the First Supplemental Stipulation for Judgement, Revised Judgement and the Amended Sales Agreements and 3. Direct Staff to proceed with the implementation of the on-site portion of the Alternate Plan. 4. Direct Staff to prepare .within 6 months a specific housing plan and implementation strategy, including involvement of a non-profit corporation in the development of off-site affordable housing and HARP. 5. Direct Staff to prepare plans and applicable cost: estimates for various levels of beach improvement for consideration by the Council/Agency within 6 months. Staff recormlends that the Council./Aaenpy: 1. Accept the conditions of the amended Coastal Permit; 2. Approve the First Supplemental Stipulation for Judgement, Revised Judgement and the Amended Sales Agreement; and 3. Direct Staff to proceed with the implementation of the on-site portion of the Alternate Plan. 4. Direct Staff to prepare within 6 months a specific housing plan and implementation strategy including involvement of a non-profit corporation in the development of off-site affordable housing and HARP. 5. Direct Staff to prepare plans and applicable cost estimates for various levels o£ beach improvement for consideration by the Council/Agency within 6 months.