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City Council Meeting: February 10, 2015
Agenda Item:
To: Mayor and City Council
From: Andy Agle, Director of Housing and Economic Development
Subject: Modification to Agreement for Fire Station Land Exchange
Recommended Action
Staff recommends that the City Council authorize the City Manager to modify terms of the
proposed Purchase and Sale Agreement with 1337 7th Street LLC related to an exchange
of City -owned property located at 1338 -42 and 1323 5th Street for privately owned
property located at 1337 -47 7th Street.
Executive Summary
To facilitate the City's acquisition of a site for the replacement of Fire Station No. 1, staff
recommends that certain terms of the proposed Purchase and Sale Agreement be
modified in order to effectuate the exchange of City -owned property for private property
where the new fire station is proposed to be located. The proposed modifications would
remove the City's obligation to provide a parking license for parking passes at the Main
Library and instead require the private property owner to relocate the parking required by
the easement, on an interim and permanent basis, to other properties and to pursue
entitlements to effectuate the relocation so that the City takes ownership of the private
property without the parking easement encumbrance.
Background
On January 10, 2012, Council authorized staff to issue a Request for Proposals (RFP) to
exchange three City- owned, non - contiguous parcels located at 1338 -42 and 1323 5th
Street for a contiguous, three - parcel site in the area bounded by Santa Monica Boulevard
to the south, Washington Avenue to the north, 5th Court to the west, and 7th Court to the
east, to build a replacement facility for Fire Station No. 1. The solicitation was posted on
the City's website, and sent to local property owners and brokers in the Downtown.
The City received one response from NMS Properties, owner of 1337 -47 7th Street
( "Seller "). The property at 1337 -47 7th Street ( "Seller's Property ") is a 22,500- square -foot,
paved parking lot with 83 spaces that is subject to a third -party parking easement
( "Parking Easement ") in favor of the owner of commercial condominium units at
1314 7th Street ( "Verizon Building "). The City -owned properties ( "City's Property') consist
of a 7,500- square -foot surface parking lot at 1323 5th Street and a 15,000- square -foot
parcel at 1338 -42 5th Street consisting of a surface parking lot and a vacant, one -story
retail building.
The Parking Easement may be relocated within a specific radius of the Verizon Building
(generally the area bounded by the west side of Lincoln Blvd. and 4th Court, between
Broadway and Wilshire Blvd.), provided that 105 spaces are provided in a permanent
easement condition (see Attachment A.) Parking on the Seller's Property may also be
displaced on a temporary basis while construction is underway, provided that a minimum
of 83 spaces are provided within the allowed radius.
On August 14, 2012, Council approved the terms of a Purchase and Sale Agreement
( "Agreement ") to exchange City's Property for Seller's Property, which included removal
of the Parking Easement. In order to facilitate the removal of the Parking Easement, the
City agreed to provide the owner and tenants of the Verizon Building with a parking
license to purchase up to 100 monthly parking passes for up to 20 years at the
Main Library.
Discussion
During the course of drafting the Agreement and undertaking discussions among the
Seller, Verizon Building owner, and staff, the Verizon Building owner determined that the
specific requirements of the Parking Easement would not be satisfied by the proposed
parking license at the Main Library. In order to effectuate the land exchange and minimize
any schedule delays to the fire station project, staff recommends modifying the terms of
the Agreement.
The recommended revisions to the terms of the Agreement would (i) remove the City's
obligation to sell up to 100 monthly parking passes for parking at the Main Library and
(ii) require the Seller to provide both interim and permanent replacement parking in
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accordance with the relocation terms of the Parking Easement to accommodate the
parking needs of the Verizon Building
In order to effectuate interim and permanent replacement parking, the Seller would need
to obtain entitlements for properties it controls at 1325 6th Street and 1430 -1444 Lincoln
Boulevard. Staff recommends that an escrow period not to exceed 24 months be included
in the Purchase and Sale Agreement to give the Seller time to obtain entitlements,
relocate the Parking Easement, and effectuate the exchange. To help ensure that
entitlements can be achieved within the escrow period, Seller proposes to seek
entitlements for mixed -use residential developments that include additional parking to
serve the Verizon Building and which are expected to qualify for Tier II processing. As a
result, the proposed developments are expected to be of a lower height than could
otherwise be achieved through a Tier III application, allowing for a more direct entitlement
process. The Purchase and Sale Agreement would require that the Seller remove the
Parking Easement from title as a condition to closing of the exchange.
In order to use the City's Property as replacement interim parking after the exchange is
effectuated, the Seller would need to demolish the vacant, retail building at 1342 5th Street
and replace it with interim surface parking following close of the exchange.
Surface parking at 1342 5th Street is a permitted use under an existing Temporary Use
Permit. To expedite readiness for fire station construction, staff recommends that the City
undertake the demolition and interim property improvements in the near term. The Seller
has agreed to reimburse the City up to $200,000 towards the City's actual costs.
If Council approves the modified terms, staff would request funding in the proposed FY
15/16 Capital Improvement Program budget to demolish the retail building and prepare
the property for interim parking.
CEQA
Under CEQA Guidelines 15004(b), the City may enter into a purchase and sale
agreement with the Seller as long as the agreement provides that CEQA compliance shall
be completed prior to the close of escrow and City acquisition. This is consistent with the
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California Supreme Court's decision in Save Tara vs. City of West Hollywood, in which
the Court emphasized that a lead agency must not take any action that commits itself to
a project in a manner that forecloses alternatives or mitigation measures that would
ordinarily be part of the CEQA review of a project. On October 23, 2012, Council adopted
Resolution 10713, adopting the Mitigated Negative Declaration and Mitigation Monitoring
and Reporting Program for the Fire Station No. 1 Land Exchange. Appropriate CEQA
review would be completed as part of the entitlement process for any proposed
development or parking uses contemplated on the Seller's properties, in accordance with
the City's standard procedures for obtaining entitlements.
Financial Impacts & Budget Actions
The recommended transaction involves an exchange of properties of comparable value
with the difference in price of $175,000 to be paid by the Seller to the City as well as up
to $200,000 to be paid by the Seller towards the City's actual costs to improve the
1342 5th Street parcel. Revenues should be deposited into account
01224.404170 - Miscellaneous Revenue. Staff will apply for funds to complete the
necessary site improvement work through the FY 2015 -16 Capital Improvement Program
budget process, and that budget will be subject to Council approval.
Prepared by: Jason Harris, Economic Development Manager
Approved:
Andy Agle, Director ' --
Housing and Economic Development
Forwarded to Council:
Elaine Polachek
Interim City Manager
Attachments:
A. Site Map Identifying Subject Properties and Parking Easement Radius
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