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SR-11-23-2010-8ACity Council Meeting: November 23, 2010 Agenda Item: ~ " fl To: Mayor and City Council From: Rod Gould, City Manager Subject: Exposition Light Rail Phase 2 Maintenance Facility Buffer Zone Real Estate Agreements for Expo Construction Authority Hybrid Site Utilizing the Verizon Site and Santa Monica College parking lot within the City of Santa Monica Recommended Action Staff recommends that the City Council authorize the City Manager to negotiate and execute real estate agreements with Santa Monica College (SMC) and the Exposition Metro Line Construction Authority (Expo) for the purchase and exchange of real estate interests in land located at 2909 Exposition Boulevard, 2900 Exposition Boulevard and 3400/3500 Airport Avenue, to create a buffer area adjacent to the proposed Phase 2 Exposition Light Rail Maintenance Facility (Maintenance Facility). Executive Summary The proposed property exchange-among SMC, Expo, and the City would allow for the creation of a buffer area next to the proposed Expo Maintenance Facility. Under the proposed property exchange, SMC would trade its 2.35-acre site at Stewart Street and Exposition Boulevard (SMC Parking Lot) to the City in exchange for along-term lease with purchase option of comparable City-owned non-aviation property at 3400/3500 Airport Avenue (Airport Non-Aviation Land). Following Expo/MTA's acquisition of the property at 2900 Exposition Boulevard, Expo/MTA would trade with the City land which is approximately 100 to 110 feet wide by 1,000 feet long along Exposition Boulevard in exchange for the SMC Parking Lot owned by the City. The land acquired by the City from Expo/MTA would create a buffer area between the proposed Maintenance Facility and the adjoining neighborhood. The parties will make every effort to implement a tri- party exchange of properties through simultaneous closings. The. Buffer Land would enhance the separation between the Maintenance Facility and the adjacent neighborhood. The Buffer Land could be used for open space, housing, and/or community uses that would be defined through a separate City-run community process. Expo/MTA, SMC, and the. City would enter into various separate agreements to effectuate the property exchange. Appraisals have been completed, including a third- 1 party review appraisal, to determine the market value of the SMC Parking Lot and the Airport Non-Aviation Land. SMC has expressed an interest in acquiring the remainder of the 3400 Airport Avenue parcel, which could provide the City with additional funds. Both the City and Expo/MTA will continue to work with the community and SMC to ensure that remaining concerns are addressed and that any impacts are mitigated in accordance with CEQA requirements and in accordance with other commitments to the City and the community. Further, Expo will hold a workshop and meet with the community in early 2011 to receive additional design input for the Maintenance Facility. Background Council gave direction on November 24, 2009 for staff to work to realize the buffer contained in the so-called hybrid alterative, which utilizes the Verizon site and the SMC Parking Lot for the Maintenance Facility. Expo/MTA agreed to design the Maintenance Facility to the maximum extent possible to address a number of mitigatioris, including providing a 100 to 110-foot wide buffer for most of the frontage facing residents on Exposition Boulevard. The design also includes reducing or eliminating track loops, as well as the mitigation of other operational concerns in response to residents and City Council direction. The hybrid alternative includes a number of additional design and operational provisions to further alleviate community concerns. Among other things, the hybrid alternative does not include a light rail vehicle paint shop. Buffering noise, minimizing light intrusion, and achieving Metro's LEED rating are all items actively being pursued by the agencies. The City, SMC, and Expo/MTA have been cooperating to pursue the goal of minimizing the potential impacts of the Maintenance Facility on Santa Monica's neighborhoods and community, including the creation of the buffer area adjacent to the Maintenance Facility. SMC's Board of Trustees is willing to relinquish SMC's ownership of the SMC Parking Lot facility on the condition that SMC will be made whole with a replacement site acceptable to SMC. SMC will be made "whole" for the exchange of the SMC Parking Lot by being able to secure control of the comparable Airport Non-Aviation Land through a lease with an option to purchase. To this end, it is recommended that the City provide 2 SMC with the Airport Non-Aviation Land adjacent to SMC's Airport Bundy Campus to be used as replacement parking. SMC would lease the Airport Non-Aviation Land from the City. with an option to purchase. In return, the City would acquire the SMC Parking Lot. At a later date the City and Expo/MTA would then enter into an agreement under which Expo would obtain from the City the SMC Parking Lot in exchange for the City acquiring from Expo/MTA the Buffer Land. Approvals related to this land swap are being considered by the SMC Board, similar to this request for authorization from the Santa Monica City Council, under mutually agreeable terms and conditions and in accordance with applicable state and federal law, including CEQA and any Federal Aviation Administration (FAA) rules and regulations. The City, SMC, and Expo agree to cooperate with respect to the presence on the respective properties of any contaminants or hazardous substances that require environmental remediation under applicable law. Each party will assume responsibility for assuring that all legally responsible parties for any contamination on its respective property remain legally responsible for any required cleanup or remediation. Discussion SMC/City Land Exchange The purpose of the proposed SMC/City Agreement is to provide an understanding of the terms and conditions under which SMC and the City agree to cooperate on the acquisition, transfer, and exchange of land necessary for the development, design, and construction of the Maintenance Facility, including land necessary for the creation of a Buffer area adjacent to the Maintenance Facility, and for SMC to secure control over land comparable to the SMC Parking Lot for its use for educational purposes. Fair market appraisals govern the value and amount of the land exchanged. The SMC Parking Lot is approximately 2.35 acres (102,410 square feet) in size. City and SMC appraisers have determined the SMC Parking Lot's current value to be $150 per square foot. However, the Airport Non-Aviation Land is valued at $130 per square foot. In order to create equivalency between the two sites given the different land values, SMC 3 would need to lease approximately 2.71 acres (118,165 square feet) of Airport Non- Aviation Land or the City would have to compensate SMC for the difference. The equivalency in appraised value is: A. SMC site = 102,410sf @ $150/sf = $15,361,500 B. Airport site = 118,165sf @ $130/sf = $15,361,500 After the land exchange, the City would own what is now SMC's Parking Lot site. SMC would lease comparable non-aviation related property at the Airport with an option to purchase. The initial lease term would be for 25 years with extensions up to no-more than 99 years. The lease and any purchase are subject to applicable state and federal law, including any Federal Aviation Administration regulations that may apply. The Airport Non-Aviation Land has several existing tenants with leases that extend to June 30, 2015. SMC's lease of the Airport Non-Aviation Land will not commence until after all the leases expire. Until June 30, 2015, the City will continue to collect and retain rent from the existing tenants: If Expo's Maintenance Facility activities require SMC to vacate the SMC Parking Lot site before SMC has access to the Airport Residual Land site in 2015, the City will provide interim replacement parking. Additional non- aviation related property at the Airport could be made available to SMC as approved by City. The lease agreement will provide for a mutually agreeable landscape buffer if SMC develops the Airport Non-Aviation Land site. The agreement does not alter existing traffic restrictions. The City agrees that the buildings can be demolished by SMC at its expense. If SMC is unable to exercise its option to purchase the Airport Non- Aviation Land site, then at the expiration of the lease, the site will return to the City under terms as yet to be determined. Expo/City Land Swa The Final Environmental Impact Report for the Expo Project included a buffer design option for the Maintenance Facility (Buffer Design Option). Expo's board has adopted 4 the Buffer Design Option as part of the recommended preferred alternative for the Expo Project. An agreement between the City and Expo/MTA will provide the framework for how the City and Expo will work together concerning the development, design, and construction of the proposed Maintenance Facility, including the location and size of the Buffer Land. Next steps with Expo/Metro will involve finalizing the terms of the land exchange between the City and Expo/Metro and specifically creating an approximate 100 to 110 foot wide by 1000 foot long space for the Buffer Area between the Maintenance Facility and residential area on the south side of Exposition Blvd. The exact delineation of the size of the buffer will be determined once the design of the Maintenance Facility and its physical layout are finalized. Metro has assigned a manager to oversee the maintenance facility project. Expo will be issuing an RFP to hire adesign/builder in early 2011. City staff, Expo, and Metro have made progress on a number of the mitigations and good neighbor provisions. Expo/Metro are currently planning a community outreach meeting for early 2011 to engage neighbors in the planning process. Financial Impacts and Budget Actions Staff believes that the land. swap with SMC will be accomplished without additional investment of City funds initially. The SMC Parking Lot and the Non-Aviation Airport Land are equivalent in value of $15,361,500. Lease revenue from the 38 tenants, who would be displaced from the Non-Aviation Airport Land when SMC begins its lease, will be collected by the City through June 30, 2015. Lease payments in fiscal year 2014- 2015 will be $565,651 annually. Beginning July 1, 2015 the City will no longer collect the lease payments, but the City will own the SMC Parking Lot or the. Buffer Land. However at that time, FAA grant restrictions expire and restrictions on all other Airport 5 leaseholds will be lifted allowing lease rental rates on other Airport properties to be to increased significantly, therefore offsetting the lease revenue from this land. Staff will negotiate with SMC if it is interested in acquiring additional adjacent Airport Non Aviation Land since the portion of the building that would remain in all likelihood would not be a viable property. Staff will program funds up to $2 million through the regular budget process for FY 2011-12 for improvements to the Buffer Land. A land swap for the buffer site and SMC Parking Lot site will take place between Expo and the City. Prepared by: Kathryn Vernez, Assistant to the City Manager, Community and Government Relations Andy Agle, Director of Housing and Economic Development Joseph Lawrence, Assistant City Attorney Approved: / /°''~ ~~ d`1 ~2T~' ==/Kathryn Vcrnez Assistant to the City Manager for Community and Government Relations Forwarded to Council: ~~~ Rod Gould City Manager Attachment A: Conceptual Plan: Hybrid Verizon-SMC-City Yards Alternative for Expo Maintenance Yard Facility Attachment B: Proposed Expo/City/SMC Land Swap Maps 6 Attachment A 2909 EXp®sitic est ±2.~5 ac S C »> City »> EX~ CA EXPO /CITY / SMC LAND SWAP Attachment B 3400® 3500 Air®rt ~4venue ±2.?1 ac City »> s c (I®ng-term lease With purchase ®pti®n) 2909 EXp~siti~n South ±®2 ac Expo CA ~>~ City Reference Contract Nos. 9299 (CCS) & 9300 (ccs).