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sr-092810-8a~;,yo, City Council Report Santa MonHoa City Council Meeting: September 28, 2010 Agenda Item: ~ To: Mayor and City Council From: Eileen Fogarty, Director, Planning and Community Development Subject: Status of Development Agreement Compliance Review Recommended Action Staff recommends that the City Council: 1) Review the status of staff follow-up on Development Agreement compliance. 2) Determine good faith compliance for those properties that required staff follow-up and are now incompliance. Executive Summary This report serves as follow up to Council's May 11t" review of the status of Development Agreement compliance for each of the City's twelve projects built pursuant to a Development Agreement. Following Council's May 11, 2010 review, four of the 12 Development Agreements that have been constructed were determined to be in good faith compliance (Rand, Santa Monica College, Lantana East, and Lantana South). Staff also identified five Agreements that were in substantial compliance with limited staff follow-up required and three projects that would require more significant staff follow-up to ensure compliance with Agreement terms. Council's May 11t" review was preceded by a City Council Information Item prepared by staff in February regarding existing Development Agreements' compliance with specific fee obligations; this review found that all Development Agreements were in compliance with all fee obligations. This report addresses those Agreements where follow-up was required. As a result of staffs ongoing review, three additional properties are now in full compliance with Agreement terms: Water Garden, Arboretum, and NME (MTV7. This report also addresses each of the compliance schedules established by the City for the remaining five Agreements where full compliance has not yet been achieved (Saint John's Health Center, Yahoo Center, Maguire Thomas, Paseo Del Mar, and Bayview CA Unlimited Partnership). Finally, this report highlights the limited areas where future Council action may be warranted to adopt alternative Agreement requirements. Staff will continue its ongoing and annual review of compliance reports for each Agreement submitted by the developers, or successors in interest, to demonstrate good faith compliance; the next annual report to Council is scheduled for January 2011. Background Chapter 9.48 of the Municipal Code establishes the processes and requirements for the City to enter into a Development Agreement. One of the provisions is annual review by the City Council of each approved Development Agreement to determine good faith compliance with the terms of the development agreement. Since the passage of this ordinance in 1982, 15 Development Agreements with private developers and one Development Agreement with a public entity have been enacted. Each Development Agreement contains a unique time frame, obligations, and requirements. The obligations can be one-time or ongoing; some. are fees, some are actual physical improvements, and some are ongoing services. The 15 Development Agreements monitored by the Planning and Community Development Department are listed below and include three Agreements where construction has not yet commenced. Full Compliance Determined on May 11, 2010 • Rand Corporation • Lantana East • Lantana South • Santa Monica College Parking Structure/Pool Recommend Finding in Full Compliance • Water Garden (Phases I and II) • Arboretum (Previously Colorado Place III) • NME (MTV) Working with the City to Bring into Compliance • Saint John's Health Center (Development AgreementAmendmentveview pending] Yahoo Center (Previously MGM, Colorado Place I and II) • Maguire Thomas • Paseo Del Mar • Bayview CA Unlimited Partnership (Sheraton Delphina) Not Yet Constructed • The Village • Hill Street Partners III (Ocean Avenue Hotel) • Saint Monica's Catholic Community 2 As explained in the compliance report submitted to Council on May 11, 2010, there are also five, very early Development Agreements: • Lincoln Property/Phase II of the Ocean Park Redevelopment Area • 1426 California Avenue • 2823-2825 Santa Monica Boulevard • 1040 4th Street (Dorchester) • 701 Santa Monica Boulevard In general, these early Development Agreements required certain street improvements and, in some cases, the payment of fees. For example, the Agreement for 701 Santa Monica Boulevard required the payment of an Arts and Social Service Fee and an In- Lieu Housing Fee. Such fee obligations were satisfied when the projects were completed. Thus, compliance and -monitoring have not, in general, been an issue. However, in one case, the Dorchester, ongoing affordability obligations were imposed by contract and recorded against the property. Last year, the City received a complaint that those obligations were being ignored. Accordingly, the Housing Division undertook monitoring efforts. Those. are ongoing, and a lawsuit has been filed to enforce the affordability requirement. Discussion As noted above, .following Council's May 11, 2010 review and discussion of Development Agreement compliance, four Agreements were determined to be in good faith compliance. Below is a summary of the status of each of the issues identified in May for further follow up by staff or action by City Council. As detailed more fully below, three of the 12 Agreements are now presented with a recommendation to find each in full compliance; the remaining five Agreements have compliance schedules that identify corrective actions and the timing for establishment of full compliance with Agreement terms. Staff has also noted the limited instances where. future Council action may be desired to modify Agreement terms for specific items where compliance is infeasible and an Agreement amendment to adopt an equivalent substitute requirement may be warranted. 3 Water Garden (Phases I & ID 1620 26t" Street & 2425 Olympic Boulevard Agreement Effective 3/23/1988 Expires 3/23/2043 In Full Compliance Qo ~q ~~ 4o ,~ P h A k The project was constructed in two phases and consists of four, six-story buildings, totaling approximately 1,259,577 SF. The development contains commercial office, medical office, retail space, restaurants, health club, child care facility, and subterranean parking for 4,035 vehicles. The development also includes an open space area and man-made lake. Public Benefits Summary • $3,811,307 Housing-and Parks Mitigation Fee payment • On-site child care facility for 54 children • Transportation Demand Management Program submitted annually to the City • $6,408,486 Traffic Improvement Fee payment • Annual preferential Parking District fee payment to cover permit and district administration costs • $150,000 fee payment to the Santa Monica Arts Foundation • $300,000 fee payment to the City for homeless services Status of Compliance After reviewing the Agreement terms, all of the supporting documentation provided to the City, and conducting a site visit, staff has determined that the Water Garden is in good faith compliance with all Development Agreement fee payments, public benefits, and operational requirements. Staff followed up on several minor issues and confirmed that the on-site child care facility is operating in compliance with the terms of the Agreement which specify place of residence and income eligibility for scholarship recipients attending the facility. Planning staff also confirmed, in consultation with the City's Cultural Affairs Division, that the process by which the Water Garden is selecting and placing artwork on display in the lobby is consistent with Agreement terms. Finally, 4 the City has confirmed that required off-site improvements were completed in accordance with Agreement terms. Arboretum (Previously Colorado Place III 2000 Colorado Avenue Agreement Effective 12/16/1987 Amended 12/88; 2/95 Expires 1/1/2042 In Full Compliance f ~4 ce G4 ~ r ~~ ~"P a ~° ~ ~. a,; This Development Agreement involves the construction of Phase III of Colorado Place, a 12.7 acre parcel located on Colorado Avenue. The Agreement initially allowed for the construction of 1,040,490 square feet of floor area, with a Floor Area Ratio of 1.85; and specifically allowed 25,000 square feet of restaurant space, 10,000 square feet of retail, 35,000 square feet medical office,- 20,000 square feet for banks, up to 720,490 square feet for commercial office space, a 270,000 square foot hotel, and a 60,000 square feet for a health club. However; subsequent modifications to the Development Agreement removed the hotel as a permitted use, and allowed for a general market/grocery use (not to exceed 50,000 square feet), and multi-family residential development with some affordable units. The Agreement indicates that no building may exceed a height 84 feet at specified locations. Public Benefits Summary • Transportation Demand Management Programlfraffic Emission Abatement Program • $721,318 Housing Parks Mitigation Fee ® $5,000,000 Traffic Improvement Fee • On-site art installation • $250,000 child care contribution Status of Compliance The. City filed litigation to enforce the property owner's compliance with the Development Agreement's affordable housing requirements. A settlement has been 5 reached on this matter and will be finalized pending second reading of the Development Agreement Amendment Ordinance. After reviewing the remaining Agreement terms, all of the supporting documentation provided to the City, and conducting a site visit to confirm that alcohol display at grocery store is less than 950 linear feet per their floor plan, staff has determined that the Arboretum is in full compliance with Development Agreement fee payments, remaining public benefits, and operational requirements. Saint John's Health Center 1328 22"d Street Agreement Effective 6/9/1998 First Amendment Pending Expires 6/9/2053 Working with City to come into full compliance. Full compliance requires a ®evelopment Agreement Amendment. The original Development Agreement grants approval for construction of new hospital facilities that would occur in two phases. Phase I consists of vested rights fora 10-year term, subject to extension, for the construction of a new 475,000 square foot hospital with a total of 468 parking spaces that includes: Below-grade central plant Inpatient Center (205,000 SF & maximum height of 75 feet) • Outpatient and Diagnostic & Treatment Center (265,000 SF & maximum height of 58 feet) with ambulance entrance and North Lawn ® 442-space North Subterranean Parking Garage and Entry Plaza • 26 parking spaces located in various areas on site Phase 11 has a 17-year vested rights term, subject to extension, to implement a health center master plan with sufficient floor area for health care-related uses and parking as outlined in the Agreement; the City retains broad discretion to review future applications for Phase II buildings. Key components include:. 6 • Permit construction of up to 799,000 square feet of hospital and hospital-related development with maximum building heights ranging from 70-95 feet • Requires City approval of a South Campus Master Plan prior to approval of any Phase II buildings • Development Review Application required prior to approval of any Phase II buildings • CEQA determination/review required for Phase II buildings Public Benefits Summary • Community Benefit Program and Annual Plan: program to support the health and well-being of Santa Monica residents and community; annual plan summarizes benefits provided and economic valuation (Fiscal Year 2008: equal- to $31,025,732 for the value of benefit activities, cash support, and unreimbursed Medicare costs). • Santa Monica Community Access Plan: included in the Annual Community Benefit Plan, delineating recipient agencies; dollar value; level of service provided to non-profits, the Santa Monica-Malibu School District; charitable medical and mental health service provided; free health education; and preventive health service provided (minimum $732,000 dollar value subject to 1'/z% compounded annual adjustment). • Child Care Program: providing a minimum of 49 full-day child care for employees and the community; 21 of these spaces must be infant/toddler care. • North Lawn: 41,000 SF of public open space, including landscaping, benches and walkways. • Off-site traffic mitigation improvements: payment of a minimum of $332,000 in fees to the City to construct improvements. • Off-site public works improvements: payment of $641,000 in fees to the. City to construct sidewalks, curbs, streetlights,. and street paving in the project area. Status of Compliance The required annual compliance report was received on November 6, 2009. After reviewing the Saint John's Development Agreement, all of the supporting documentation provided to the City, and conducting an extensive site visit, staff confirms that Saint John's is working to achieve compliance with the terms and conditions of its Development Agreement, with review of a Development Agreement Amendment pending. The following addresses the two items that required staff follow- up: • Emergency Department screening - An enhancement to the existing screening in front of the emergency department parking area consisting of additional dense, 7 mature foliage (Escallonia shrubs) will be planted by the applicant behind the existing landscape buffer located in front of parking spaces along Arizona Avenue in order to address vehicle headlight spill-over. This improved landscaping is an aesthetically superior solution that is more compatible with the neighborhood context and will be implemented in lieu of constructing athree-foot grey block wall behind the existing landscape buffer in the parking area. The new landscape buffer will be installed no later than September 24, 2010. ® Submittal of report file copies -The City has confirmed receipt of several file copies of various previously-prepared reports/calculations that were requested to ensure that the City's project files are complete. The Saint John's Health Center Development Agreement specifies construction of a 442 space subterranean parking garage and new entry plaza following completion of demolition of existing improvements, including south wing buildings, as part of the final stage of Phase I development. In 2007, Saint John's Health Center filed an application to amend its Development Agreement to defer for ten years construction of the subterranean parking garage and entry plaza accessed off of Santa Monica Boulevard. The applicant proposes to lease off-site parking spaces to satisfy the majority of its parking requirement, construct an interim entry plaza, and operate a full service parking valet at the main entrance to the facility for use during the period of deferment. This request will be considered by City Council later this year. NME (MTV) 2700 Colorado Avenue Agreement Effective 4/16/1982 Amended 1/87; 4/87; 5/88 Expires 4/16/2037 In Full Compliance s The project consists of a 5-story, 312,000 square foot building with creative offices known as MTV Networks. The site also contains an 800 square foot day care center, a 7,200 square foot public park, and a 1,000 space subterranean parking garage. Public Benefits Summary ® Provision of 30 affordable rental units, later amended to require the payment of a $1,500,000 in lieu fee ® On-site child care center ® Payment of $25,000 to Santa Monica Arts Foundation ® Park of approximately 7,200 square feet to be open to the public during reasonable hours Status of Compliance The required annual compliance report was received on October 1, 2009. Staff has continued to work with the property owners to collect more data regarding how the child care needs of project site tenants' employees are met in a manner consistent with the terms of the Agreement. Staff has also verified that current enrollment meets the requirements of the Agreement: with first priority given to children of project site employees and second priority given to Santa Monica residents. In addition, the City has requested that the child care facility revise its application and enhance its outreach efforts to ensure that, going forward, the facility continues to provide child care programming that meets the needs of priority children. Accordingly, staffs final review of the Agreement indicates that the project is now in full compliance. Yahoo Center 2600-2800 Colorado Avenue Agreement Effective 10/27/1981 Amended 4/84; 7/84; 5/85; 12/87 Expires 9/15/2036 Working with City to come into full compliance. Full compliance requires a Development Agreement Amendment. 9 The project was approved for approximately 900,000 SF of office uses along with a daycare center, park, health club, food services and community rooms. Building heights range from 65' to 80'. On-site parking structures currently contain 3,085 parking spaces. Public Benefits Summary • Child care center (Hill 'N Dale) • Public park with tennis courts, children's play structure, basketball court, and public gathering space • 51 units of affordable housing which per an agreement between the City Housing Authority and the County, are monitored by the County and a contribution of $2,652,909 to the City's Affordable Housing fund Community rooms open to the public and available free of charge for community & neighborhood groups • Nearly $3 million worth of art and social service benefits through Park & Community room maintenance • Transportation Demand Management Program • Off-site traffic signal, street lighting, and turn lane improvements Status of Compliance The required annual compliance report was received on April 27, 2009. The property owner is in full compliance with all Development Agreement fee payments and public benefits. As noted in staffs earlier report, follow-up was necessary to ensure that parking utilization is consistent with the Agreement. Staff has confirmed that the number of parking spaces on site is consistent with the number of spaces required by the Agreement. However, based on a review of the site's existing parking utilization with consideration given to on-site office vacancies, it appears that approximately 100 required parking spaces are being leased to off-site parties. Although shared parking is supported by the newly-adopted Land Use and Circulation Element (LUCE) and parking garage usage data suggests -that these leased spaces are currently not used by the site's tenants, leasing of required parking spaces is not consistent with the Development Agreement which specifies that parking spaces are required for the actual mix of uses on the site. Accordingly, the applicant is working with the City regarding the filing of an amendment to its Agreement to permit shared parking.. The amendment needs to be filed in 30 days and would ensure that the Agreement is consistent with the principles of the newly- 10 adopted LUCE and that appropriate parking utilization/demand studies are provided to clearly demonstrate that there are sufficient spaces available to meet the needs of onsite users and to permit leasing to off-site parties. If this amendment is not filed within 30 days of the date of this report, enforcement action will proceed. Bawiew CA Unlimited Partnership (Sheraton Delphina) 530 Pico Boulevard Agreement Effective 6/29/1983 Expires 12/1/2022 Working with City to come into full compliance. ~, ;~ ~ ~ ,o ~ o eg '' .,~ o ~ry This Agreement allowed for the 72,400 square foot expansion of an existing Holiday Inn hotel.. The development included the addition of 134 hotel rooms and 282 parking spaces. The hotel is currently operated by the Sheraton Delfina. Public Benefits Summary Hiring priority to Ocean Park and Pico neighborhood residents, and then to other City residents ® Job Training Program, with priority given to Santa Monica High School Students and City residents (this requirement expires in 2011) • Hotel Room Voucher Program (this requirement expired in 1996) • Free Hotel Parking with sign denoting this in parking area • Valet parking tipping prohibition with sign denoting this in parking area ® Relocation of on-site, rent-controlled apartment buildings (five of these units were subsequently converted through the TORCA process) ® $50,000 annual contribution to the Big Blue Bus for the Tide Shuttle operation (this requirement expires in 2011) • Six rent controlled units added to the existing building at 1920 6th Street ® Installation of public art piece approved by the Arts Commission AA Status of Compliance The required annual compliance report was received on February 11, 2010 and several follow-up reports have been provided by the applicant since Council's initial review in May. The City has been working closely with the hotel operator to ensure on-going compliance with the following provisions: • Installation of public art piece -the Sheraton Delphina ownership has approved $25,000 for art to be displayed in ground floor or other central public areas within or outside the hotel. The art selection must be approved by the City's Arts Commission. The ownership has selected and hired an art consultant and it is anticipated that the Arts Commission will review the art work proposal at its October 2010 meeting: • Hotel room balcony landscaping -the applicant has filed its Architectural Review Board (ARB) application for required balcony landscaping and is working with the City's Urban Designer to refine the proposal for an October 4, 2010 public hearing. The applicant will be required to install the balcony landscaping within 60 days following final ARB approval. • Parking for overnight hotel guests -There is currently signage indicating the availability of limited, free self-parking at the hotel. However, in order to make clearer to guests that the hotel offers complimentary self-parking, complimentary day-use parking, as well as optional valet parking for overnight guest for a fee, the applicant is required to install revised on-site signage. The applicant has worked closely with the-City to clarify its. current parking program operations; revised signage will be installed to indicate that unlimited complimentary self-parking and complimentary day-use parking is available, and that an optional valet service is also available for a fee for overnight hotel guests upon request. The applicant will be required to install revised, permanent signage to clarify its parking program within 30 days of the date of this report; temporary signage will be installed by September 22, 2010 and remain posted while new, permanent, signs are fabricated. • Job training program -The City requested supplemental information to verify compliance with the Agreement's provisions regarding the implementation of a paid job training program for four trainees with first priority given to Santa Monica High School students and then to other City residents, and then to others. The hotel 12 continues to implement its Santa Monica High School Internship Program in accordance with Agreement terms and has also begun additional outreach to Santa Monica College. Specifically, the hotel's General Manager and its Regional Human Resources Director are now members of the Santa Monica College General Advisory Committee and will be speaking at the Students Business Club to promote Internships and careers within the Hospitality Industry. Local .job recruitment and hiring priority -The City requested supplemental information to verify compliance with the Agreement's hiring program provisions. The Development Agreement specifies a number of outreach and advertising requirements to assist in the recruitment of local residents for available jobs at the hotel. The hotel provided information about its 2010 Recruitment Initiative that is designed to encourage recruitment of Santa Monica residents for employment. The hotel maintains a list of community groups/organizations and has contacted the following entities regarding its 2010 recruitment efforts: Santa Monica High School, Santa Monica College, Art Institute of California -Culinary School, Ocean Park Association, Pico Neighborhood Association, and Santa Monica Chamber of Commerce. The hotel has also participated in several job fairs hosted by its community contacts. The Agreement states that "the Project Owners' goal shall be to have City residents (particularly Neighborhood Residents) constitute not less than 80% of the Sheraton Delfina's employees...." 2010 data from the hotel indicates that 36 of 161 applicants have been City residents and nine city residents have been hired in 2010. The current percentage of employees who are also City residents is 7% (11 of 169). The Agreement does not mandate that 80% percent of the hotel workforce be City residents; rather this percentage is identified as the property owners' goal with respect to hiring of new employees. Consequently, the City will continue to work with the applicant over the next reporting cycle to assess whether substantially better compliance with the intent of meeting this hiring goal can be feasibly achieved through more targeted local recruitment efforts, building upon the hotel's local 13 recruitment program outlined above. It may be appropriate at that time to amend the Development Agreement to incorporate an enforceable alternative requirement that is consistent with the intent of the original hiring program provisions. Maguire Thomas 1733 Ocean Avenue Agreement Effective 10/18/1990 Amended/Reinstated 12/95 Expires 10/18/2045 Working with the City to come into full compliance. This Agreement authorizes construction of a 4-story, 56 foot tall mixed-use commercial development. It allows fora 68,040 square foot building, including a maximum 5,983 square foot/250 seat restaurant and a maximum of 8,040 square feet of retail space. Three levels of subterranean parking provide 267 parking spaces. Public Benefits Summary • $250,000 contribution to the Civic Center/Oceanfront Improvement Special Fund • $403,399 Housing and Parks Impact Mitigation Fee • $820,854 Affordable Lodging Mitigation Fee Status off Compliance The required annual compliance report was received on January 14, 2010. All of the public benefit fees have been -paid in full. As previously noted, a Compliance Report review and site inspection has determined that the development is in substantial compliance, with a few outstanding issues related to the property's public parking rates, parking availability on weekends. and holidays, its emissions reduction plan, and affirmative action practices. The following is the status of these items: • Public parking rates and weekend/holiday parking availability -the property owner is required to make parking available to the public on weekends and 14 holidays and its parking rates cannot exceed the rates for the public beach, Pier, or Civic Center parking lots/structures. As discussed more fully below, these items remain unresolved. • Emissions reduction plan -The property owner is required to submit an emissions reduction plan to City staff; this plan was received on September 16, 2010 and has subsequently been reviewed and approved by the City. • Valet parking attendant -The property owner is required to provide a valet parking attendant when tandem parking spaces are utilized on site. These tandem spaces are not in use; therefore no valet parking attendant is required. • Affirmative Action requirements - In accordance with Agreement terms, the property owner operates with a non-discrimination policy in effect. The Agreement also required that an affirmative action plan for hiring of labor and acquisition of materials for construction be submitted to the City prior to commencement. of construction. This obligation was a construction period requirement and neither the Developer nor the City has retained documentation on file. City staff exchanged six letters and held numerous telephone conversations with the applicant regarding Development Agreement monitoring since January 2010 to follow up on compliance items, including those identified above pertaining to public parking availability and rates, and submittal of an emissions reduction plan. Until September 16, 2010, the applicant had not been responsive to staff's repeated attempts to work collaboratively to ensure full compliance with the remaining Agreement terms outlined herein. On September 16th, the applicant sent corresporidence agreeing to amend its parking rates and make its parking garage available to the public, per its Development Agreement. The applicant is required to install temporary signage advertising the revised rates and availability of parking on weekends and holidays no later than September 24, 2010 and permanent signage is required to be installed by September 30, 2010. If resolution to this matter is not achieved within this timeframe, the issue will be referred to the Code Compliance Division for immediate enforcement action. i:`! Paseo Del Mar 1541 Ocean Avenue Agreement Effective 1/26/1982 Expires 10/1/2031 Working with the City to come into full compliance. n:o .~„ 4 5p . ~ q ,. ` ~ 1s51 P O~ ° " s ; The project consists of approximately 54,000 SF in two buildings ranging in height from 28 to 36 feet. Uses include restaurant, office, retail, and 10 units of low, median, and moderate income housing. The subterranean parking garage contains 72 spaces. Public Benefits Summary • 10 deed-restricted affordable housing units at a prime oceanfront location • $75,000-Art and Social Service fee or in-kind provision of art on-site • Parking, Carpool, and Transit Incentive Program Status of Compliance The required annual compliance report. was received on September 18, 2009. The following is a status of the items where staff follow-up was required: • Affordable housing income verification -Staff has received additional income verification from the City's Housing and Economic Development Department for two tenants which demonstrates compliance with resident income requirements. • Public art contribution -City records indicate that approximately 50% of the applicant's $75,000 public art contribution has been paid. The property owner believes that the remainder has been satisfied with on-site art. The City's Cultural Affairs Division staff will complete a valuation assessment of the previously-installed on-site artwork by October 31, 2010. Upon completion of the artwork assessment; the City will work with the property owner to identify the final action necessary should it be determined that a remaining obligation exists. This could include a cash payment for any remaining obligation, the provision of additional on-site- art work approved by the Cultural Affairs Division, hosting of an activity or gallery space approved by the Cultural Affairs Division, or any 16 .combination of the aforementioned options. Option(s) to fulfill any remaining balance must be completed by the property owner by December 31, 2010. ® Parking, Carpool, and Transit Incentive Program -The City has received documentation that identifies the components of the property owner's parking, carpool, and transit incentive program. There are currently racks provided to secure 16 bicycles; parking for nine additional bicycles will be provided by the property owner on the site as required by the Agreement within 30 days of the date of this report. Public Outreach The Code requires that that the City provide at (east ten days' notice to the Applicant or Successor of the City Council's scheduled meeting to review the Agreements. This notice has been provided. Next Steps Staff will continue its ongoing Development Agreement compliance review; reports will be made to Council annually, beginning in January 2011. Financial Impacts & Budget Actions All fees associated with Development Agreements have been paid to date. The recommendations presented in this report do not have any direct budget or fiscal impact. Prepared by: Amanda Schachter, Planning Manager Approved: Director, Planning~lCo unity Development Forwarded to Council: \~~--•~~ Rod Gould City Manager 17