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HomeMy WebLinkAboutRES NO 73-96RESOLUTION RESOLUTION AUTHORIZING CONVEYANCE OF PROPERTY AT 2t20 "L" STREET WHEREAS, the City of Bakersfield and the Central District Development Agency (CDDA) desire to effectuate the purposes of the redevelopment plan within the redevelopment project area; and WHEREAS, the CDDA wishes to assist KGET-TV ("Developer") in the acquisition and rehabilitation of that real property located at 2120 "L" Street in the City of Bakersfield; and WHEREAS, said real property is within the redevelopment project area and is unoccupied; and WHEREAS, the Implementation Plan adopted by the CDDA in 1994 seeks to promote the preservation and enhancement of commercial areas within the project area, as well as promote the economic revitalization of the project area; and WHEREAS, currently, said real property contains a 27,000 square-foot, cinder block building and is zoned Commercial Center; and WHEREAS, to bring said real property to a standard where it can be occupied, Developer must remediate any hazardous or toxic materials, install a new heating and air conditioning system, install new insulation and bring the building into compliance with the Americans with Disabilities Act; and WHEREAS, the estimate of such rehabilitation exceeds One Million Dollars ($1,000,000.00); and WHEREAS, without such rehabilitation, said real property would not be competitively marketable in the downtown Bakersfield area; and WHEREAS, Developer intends to relocate its production studio to this location and could not do so without assistance from the CDDA; and WHEREAS, Developer will employ sixty-five people at this new location; and WHEREAS, Developer's planned use is consistent with the Redevelopment Plan and the Implementation Plan currently adopted; and WHEREAS, under Health and Safety Code Section 33433, as enacted by the State of California, the legislative body must make specific findings regarding property which will be conveyed by a redevelopment agency. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of Bakersfield that, based on the findings of this Council, it is found and determined that: 1. The above-recitals are true and correct. 2. The conveyance of real property located at 2120 "L" Street, in the City of Bakersfield by the CDDA to the developer will assist in the elimination of blight by rehabilitating the building as well as bringing a business with sixty-five employees into the redevelopment project area. 3, The conveyance of said real property is consistent with the Implementation Plan adopted by the Central District Development Agency. 4. In light of the cost of rehabilitating said property and the covenants placed upon it as the result of the Central District Development Agency's involvement, the consideration paid for the interest conveyed is not less than the fair reuse value of said property. 000 ....... I HEREBY CERTIFY that the foregoing Resolution was passed and adopted by the Council of the City of Bakersfield at a regular meeting thereof held on JUN /. $ 18~ , by the following vote: AYES: COUNCILMEMBER DeMOND, CAR~O~,,S?nffH, McDERMOTT, It~, SUM.IVAN, SALVAGGIO NOES: COUNCILMEMBER ABSTAIN: COUNCILMEMBER ABSENT; COUNCILMEMBER c~ing CiTY CLERK and Ex Officio ~l.e~Zk of the Council of the City of Bakersfield JUN 2 $ 1~ APPROVED MAYOR - 2 - APPROVED as to form: JUDY K. SKOUSEN CITY ATTORNEY ~D~" ~y Cit~ Attornoy SUMMARY REPORT PURSUANT TO SECTION 33433 of the CALIFORNIA HEALTH AND SAFETY CODE DISPOSITION AND DEVELOPMENT AGREEMENT by and between the CENTRAL DISTRICT DEVELOPMENT AGENCY of the CITY OF BAKERSFIELD and KGET-TV a division of ACKERLEY COMMUNICATIONS GROUP, INC. THE SUMMARY AS REQUIRED BY SECTION 33433 OF THE HEALTH AND SAFETY CODE REQUIRES A DESCRIPTION OF THE COST INCURRED BY THE CENTRAL DISTRICT DEVELOPMENT AGENCY IN IMPLEMENTING A DISPOSITION AND DEVELOPMENT AGREEMENT. THUS THIS SUMMARY IS LIMITED TO DESCRIBING ONLY THE COST TO BE INCURRED BY THE CENTRAL DISTRICT DEVELOPMENT AGENCY. (See Addendum 1 for changes to this report.) INTRODUCTION The California Health and Safety Code, Section 33433, requires that if a redevelopment agency wishes to sell or lease property to which it holds title and if that property was acquired in whole or in part, directly or indirectly, with property tax increment funds, the agency must first secure approval of a proposed sale or lease agreement from its local legislative body after a public hearing. A summary report that describes and contains specific elements of the proposed transaction shall be available for public inspection prior to the public hearing. As contained in the Code, the following information shall be included in the summary report: -~ The cost of an agreement to the redevelopment agency, including land acquisition costs, relocation costs, if any, the costs of any improvements to be provided by the agency, if any, plus the expected interest on any loans or bonds to f'mance an agreement; -* The estimated value of the interest to be conveyed or leased, determined at the highest and best use permitted under the redevelopment plan; and -~ The purchase price or sum of the lease payments which the lessor will be required to make during the term of the lease. If the sale price or total rental amount is less than the fair market value of the interest to be conveyed or leased, determined at the highest and best use consistent with the redevelopment plan, then the agency shall provide as part of the summary an explanation of the reasons for the difference. ~ An explanation of why the sale or lease of the property will assist in the elimination of blight, with reference to all supporting facts and materials relied upon in making this explanation. This report outlines the salient parts of a proposed Disposition and Development Agreement (Agreement) by and between the Central District Development Agency (Agency) and KGET-TV (Developer) under which the Developer will rehabilitate an existing building and operate an office development. The purpose of this analysis is to determine the cost of an Agreement to the Agency. This report is based upon information in the proposed Agreement and is organized into the following four sections: Summary of the Proposed Agreement - This section includes a description of the proposed office project and the major responsibilities of the Agency and the Developer. Cost of An Agreement to the Agency - This section outlines the total and net cost of an Agreement to the Agency. Estimated Value of the Interest to be Conveyed and Consideration Received and Reasons Therefore - This section summarizes the value of the site to be conveyed to the Developer. It also describes the consideration to be received by the Agency and reasons therefore. It also contains a comparison of the purchase price and the fair market value at the highest and best use consistera with the redevelopment plan for the interests conveyed. Elimination of Blight - This section explains why the sale or lease of the property will assist in the elimination of blight. 1. SUMMARY OF THE PROPOSED AGREEMENT a. Description of the Site and the Proposed Development The site is a .7 acre area of the Downtown Bakersfield Redevelopment Project Area, shown on the site map attached herewith as EXHIBIT A. The site has on it a 27,000 sq.f~. building. An agreement obligates the Developer to purchase, rehabilitate, complete and maintain an office development in the two-story, fi'ee- standing concrete block building with on-site parking for approximately 30 automobiles. The building and parking lot curremly occupy the northern one-half block between "L" and "M" streets with 22nd Street to the north. The two-story reinforced masonry building comains approximately 27,000 sq. ft. with additional expansion engineered for the second floor. The building was constructed in the mid-1960's and is now more than thirty years old. The entire Heating Ventilation and Air Conditioning (HVAC) system along with ducts and registers will be totally removed and replaced. All lights and related power circuits will be removed and replaced, the roof will be removed and replaced and the exterior walls will have insulation added on the interior side along with a new interior look. The building will be reconstructed in certain areas to achieve compliance with Americans with Disabilities Act (ADA). b. Agency Responsibilities The Agency will discount the sale price of the property to the Developer via tax increment rebates and pay to the Developer 75% of the tax increment generated by the property over a five year period. The actual dollar amount is dependent upon the Kern County Assessor's valuation of the property after rehabilitation. Following the completion of the project, commencing in 1998, the Agency will pay the Developer two (2) semi-annual payments. The amount to be paid will be based on the formula described above. c. Developer Responsibilities The Developer must complete the office project in accordance with approved design plans and specifications. ii. The Agency has the right to invoke all or any combination of the following penalties if the project does not generate tax increment: No further rebates of property tax increment will be granted by the Agency. If the site is removed from the real property tax rolls between 1/1/1998 and 12/31/2002, no further rebates of property tax increment will be granted to the Developer until the site is returned to the tax rolls. The Developer will owe the Agency a refund of all tax increment monies rebated up to the time the property is removed from the real property tax rolls. If the site is removed from the real property tax rolls between 1/1/2003 and 12/31/2007, Developer shall owe Agency a refund of the last annual rebated tax increment which was paid to Developer prior to the site being removed from the real property tax rolls. This will continue annually until the site is restored to the real property tax rolls, or the year 2008, which ever occurs first. iii. The Developer must remove, install or replace the obsolete HVAC system, abate asbestos, and achieve ADA accessibility compliance as a part of rehabilitating the building. 3 2. COST OF AN AGREEMENT TO THE AGENCY The Agency will discount the sale price of the property to the Developer via tax increment rebates and pay to the Developer 75% of the tax increment generated by the property. Such rebates will continue over a five year period. The actual dollar amount is dependent upon the Kern County Assessor's valuation of the property after rehabilitation. FolloWing the completion of the project, commencing in 1998, the Agency will pay the Developer two (2) semi-annual payments. The amount to be paid will be based on the formula described above. Miscellaneous staff assistance at an estimated cost of $10,000, based on experience with other projects. Based on a projected $600,000 assessed valuation (rounded purchase price) the Agency anticipates to contribute to the Developer a range estimated to start at $4,500 to $25,000 per year, equivalent to an estimated range of 5;22,500 to $125,000 over a five year period. The cost of the proposed agreement to the Agency is the combination of staff costs and tax increment rebates equivalent to an estimated range of $32,500 to $135,000. This cost is offset by the tax increment revenues to be generated by the completed project. Therefore, it is anticipated that Agency revenues will exceed costs to be incurred by the Agency. The Agency is not responsible for project improvements, relocation and any costs associated with financing. VALUE OF THE INTEREST TO BE CONVEYED AND CONSIDERATION RECEIVED AND REASONS THEREFORE As required in Section 33433 the following summary describes the estimated value of the interest to be conveyed, determined as the use with the conditions, covenants, development costs required by the conveyance. The subject property will be conveyed to the Developer subject to the covenants, controls, and restrictions contained in an Agreement. The property is zoned commercial center, and, as such, could be developed to allow a mix of commercial and residential uses that support businesses within the commemial core of the city. This project is consistent with the Downtown Bakersfield Redevelopment Plan which permits commercial development in the area where the project is located. Section 33433 of the California Health and Safety Code requires that when disposing of property, the Agency identify the fair market value of the property and if the Agency is receiving less than fair market value, identify the reasons. The properry's current assessed valuation, as is, is $246,000. Based on an assumption that the new fair market value will be the purchase price it can be concluded that the property will have a new valuation of $610,000 (approximately $20 per square foot) when re- assessed. In addition to the increased valuation of $364,000, the Developer has identified an estimated $1 million worth of rehabilitation costs for building upgrades and improvements, accounting for a projected $1,364,000 investment. Taking into consideration the purchase price, rehabilitation costs, covenants placed on the property through the Agency's involvement, and the cost of an agreement to the Agency, the consideration paid for the interest conveyed is not less than fair reuse value of the property. The office building was originally designed and constructed in 1966. The building has a variety of issues that appear to financially burden the project including asbestos products and materials, the original HVAC system, and concrete block walls without any form of insulation. To comply with today's building standards all of these items need to be removed and replaced. Certain locations of the building need to be reconstructed to with comply with ADA accessibility, passed after the building was constructed. Additionally, there are areas of deferred maintenance that need to be addressed. The combined impact of these building upgrades and improvements are anticipated to exceed $1 million which makes the building incapable of competing in any economic comparison of other properties. Since the property is in the redevelopment project area, tax increment financing assistance to help offset rehabilitation and building code compliance costs is being provided to make the project economically viable. The completion of the office project will further implement the Redevelopment Plan. Because it occupies a visible location within the redevelopment project area, its appearance has been and remains a blighting influence in the project area. The project in its current condition acts as an impediment to private re-investment. The blighting influence is not merely physical but is also an economical hinderance to the project's financial viability. 4. ELIMINATION OF BLIGHT The Report to Council, prepared in connection with the Downtown Bakersfield Redevelopment Plan and subsequent Amended Plans, describes the conditions of blight within the project area that the Plan was adopted to remedy. The blighting conditions which the proposed office project addresses include the following: i. The area contains blight, as the same is defined in the California 5 Community Redevelopment Law, which constitutes social and economic liabilities requiring redevelopment in the interest of the health, safety, and general welfare of the people of Bakersfield. ii. Many buildings and structures in the area used for living, commercial and industrial purposes are vacant, aged and of shifting uses. iii. The area is characterized by economic dislocation, deterioration, and disuse resulting in depreciated land values, impaired investments, and social and economic maladjustment, all contributing to the reduced capacity of the area to generate taxes. iv. The growing or total lack of proper utilization of the areas has resulted in a stagnant and unproductive condition of land potentially useful and valuable for contributing to the public health, safety and welfare. The sale or lease of the property will assist in the elimination of physical and economic conditions of blight as identified in the AB 1290 Implementation Plan for the Downtown Redevelopment Project. The proposed office project would address the following physical blight conditions which are specific to this project and identified in the AB 1290 Implementation Plan: Buildings in which it is unsafe or unhealthful for persons to live and work due to dilapidation and deterioration (California Redevelopment Law Health and Safety Code Section 33031 (a)(1)) by providing moderate to extensive structural and project site repairs including roofing, heating ventilation air conditioning system, insulation, painting, and asbestos removal. ii. Factors that prevent or substantially hinder the economically viable use or capacity of buildings due to lack of parking Code Section 33031 (a)(2) will be addressed by Developer by providing additional parking. The office project currently contains approximately 30 stalls, an inadequate amount for the proposed project. iii. Incompatible land uses which prevent the economic development of the parcel Code Section 33031(a)(3) would be reversed with this project by bringing occupancy to a building which as been vacant for many years. Neighboring new construction projects include the Ying-on Association, Porter-Robertson Engineering and the National Association for People with Disabilities. The proposed office project would eliminate the following economic blight conditions which are specific to this project and identified in the AB 1290 Implementation Plan: Depreciated or stagnant property values and impaired investments Code Section 33031 (b)(1) are found within the project area when it is compared to other metro Bakersfield areas. The proposed office project is incapable of competing in any economic comparison of properties because of the reconstruction costs associated with the rehabilitation of the structure and the cost of other site improvements. When compared to the alternatives of either building a new facility on less expensive industrial property or acquiring a newer existing building in another part of the city, the rehabilitation costs become economically critical. ii. Abnormally high business vacancies is the blight finding in Code Section 3303 l(b)(2). The occupancy and re-use of this building will reduce the downtown vacancy rate, generate additional property tax and bring more people into the central city. The completed project is estimated to house a staff of over sixty five along with offices, studios and engineering spaces. In order for the project to move forward, the Agency will need to provide the assistance described in this report issued in accordance with Section 33433 of the Health and Safety Code. 7 ADDENDUM 1 1.c. Developer Responsibilities (page 3) ii.2. As a result of changing the rebate period from five years to seven years, if the site is removed from the real property tax rolls between 1/1/98 and 12/31/2004, no further rebates of property tax increment will be granted to the Developer until the site is returned to the tax rolls. ii.3. As a result of extending the rebate period from five years to seven years, if the site is removed from the real property tax rolls between 1/1/2005 and 12/31/2007, Developer shall owe Agency a refund of the last annual rebated tax increment which was paid to Developer prior to the site being removed from the real property tax rolls. 2. Cost of Agreement to the Agency (page 4) Agency assistance to KGET-TV in the form of rebating 75 % of the tax increment generated by the project to off-set the cost of acquisition and rehabilitation will be for a seven year period instead of a five year period. The amount to be paid is based on the formula described above and is estimated to range between $31,500 to a maximum of $175,000 over the seven year period. The cost of the proposed agreement to the Agency is the combination of staff costs and tax increment which is estimated to fall between a range of $41,500 to $185,000. BAKERSFIELD EXHIBIT A SCHOOL Ol ST. / -6 ~-42 L sr THE SITE II1~11111111111111111111111111! ] . --. ..... ~. , ~ _~ ~ , ~ ~ .....~ - ~ .... W. E. HOUGHTON S SUBD. 38 i39 $2.$ ST. ~ I Legal Description is: Lots 1 through 24, inclusive, of Block 191 in the City of Bakersfield, County of Kern, State of California as per map recorded November 25, 1898 in Book 1, Pages 13 and 14 of Maps, in the Office of the County Recorder of said County. ASSESSORS MAP N0.....5.~....42...