HomeMy WebLinkAboutRES NO 053-10
RESOLUTION NO. 053- 10
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF BAKERSFIELD APPROVING THE TRANSFER OF
REAL PROPERTY BY THE BAKERSFIELD
REDEVELOPMENT AGENCY FOR $1.00 TO CLINICA
SIERRA VISTA FOR THE EAST BAKERSFIELD DENTAL
CENTER
WHEREAS, the Redevelopment Plan for the Southeast Redevelopment Project
Area (the "Redevelopment Plan") was approved and adopted by the City Council of the
City of Bakersfield; and
WHEREAS, the Bakersfield Redevelopment Agency (the "Agency") is authorized
and empowered under Community Redevelopment Law to enter into agreements for the
acquisition, disposition and development of real property and otherwise assist in the
redevelopment of real property within a redevelopment project area in conformity with a
redevelopment plan adopted for such area, to acquire real and personal property within
redevelopment project areas, to receive consideration for the provision by the Agency of
redevelopment assistance, to make and execute contracts and other instruments
necessary or convenient to exercise its powers, and to incur indebtedness to finance or
refinance redevelopment projects; and
WHEREAS, the Agency owns that certain real property of approximately 0.64
acres within the Southeast Bakersfield Redevelopment Project Area, and located in the
City of Bakersfield between California Avenue, and South Owens St. & South Robinson
St., comprised of a portion of assessor parcel no. 018-040-02 ("the Property") and is
more particularly described in Exhibit "A" ("Legal Description"), which is attached hereto
and incorporated herein by reference; and
WHEREAS, CLINICA SIERRA VISTA ("the Buyer"), desires to acquire the
Property to develop a 3,863 Sq. Ft. Dental Clinic on the property. The use of the
Property is in accordance with the Redevelopment Plan and the requirements of the
City of Bakersfield; and
WHEREAS, the Agency and Buyer have negotiated a Disposition and
Development Agreement ("DDA") in good faith in order to implement the provisions of
the Redevelopment Plan by providing for a Dental/ Health Clinic; and
WHEREAS, the purchase price negotiated for the Property as part of the DDA is
the amount of One Dollar ($1.00), which price was determined by the Agency and; by a
fair reuse analysis conducted by GRC & Associates, Inc.; and
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WHEREAS, pursuant to Section 33433 of the California Health and Safety Code,
the Bakersfield City Council may, after a duly noticed public hearing, authorize the
Agency to sell or lease the Property, for the development pursuant to the
Redevelopment Plan upon a determination by the City Council that the disposition of the
Property will assist in the elimination of blight, and is consistent with the implementation
plan adopted for the redevelopment project area pursuant to the Health and Safety
Code Section 33490, and the consideration for such disposition is not less than either
the fair market value or fair reuse value of the Property in accordance with the
covenants and conditions governing the disposition and development costs required
thereof; and
WHEREAS, the proposed Agreement, and a summary report meeting the
requirements of the Health and Safety Code Section 33433, were available for public
inspection consistent with the requirements of the Health and Safety Code Section
33433; and
WHEREAS, notices of the public hearing before the City Council were duly
published on April 20, 2010 and April 25, 2010; and
WHEREAS, the project qualifies as CEQA exempt under Section 15332 under
Infill Development and therefore will not result in any significant effects related to traffic,
noise, air or water quality.
WHEREAS, the City Council has reviewed the summary report required pursuant
to the Health and Safety Code Section 33433 and evaluated other information provided
to it pertaining to the findings required pursuant to the Health and Safety Code Section
33433; and
WHEREAS, the City Council has duly considered all the terms and conditions of
the proposed Agreement and believes that the disposition of the Property pursuant
thereto is in the best interest of the City of Bakersfield and the health, safety, and
welfare of its residents, and in accord with the public purposes and provisions of the
applicable state and local laws and requirements; and
NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED BY
THE BAKERSFIELD REDEVELOPMENT AGENCY OF THE CITY OF BAKERSFIELD,
AS FOLLOWS:
1. The City Council finds and determines that, all of the above recitals are
true and correct findings and based upon evidence provided in the record
before it, the consideration for the Agency's disposition of the Property
pursuant to the terms and conditions of the Agreement, is not less than
the fair reuse value in accordance with the Redevelopment Plan.
2. The City Council hereby finds and determines that the disposition of the
Property pursuant to the Agreement will: (i) assist in the elimination of
blight by providing for the development of Dental Clinic which will serve as
a catalyst for the development of other property in the Southeast
Bakersfield Redevelopment Project Area and will also help to create new
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employment opportunities, and (ii) is consistent with the implementation
plan for the Southeast Bakersfield Redevelopment Project Area adopted
by the Agency pursuant to the Health and Safety Code Section 33490.
3. The City Council hereby approves the proposed sale of the Property by
the Agency to the Buyer upon the terms and conditions set forth in the
DDA.
HEREBY CERTIFY that the foregoing Resolution was passed and adopted by
the City Council of the City of Bakersfield at a regular meeting thereof held
on MAY 0 5 2010 , by the following vote:
W-- I-,
YES: COUNCIL MEMBER HAN,,// SON, BENHAM, CARSON, COUCH, SCRIVNER, SULLIVAN, WEIR
NO COUNCIL MEMBER 1)[7M
ABSTAIN: COUNCIL MEMBER (~>~Q
ABSENT: COUNCIL MEMBER ~16Y~4
CITY CLERK and Ex Offi Clerk of the
Council of the City of Bakersfield
APPROVED: MAY 0 5 2010
By:
HARVEY L. HALL
'44e
Mayor
APPROVED AS TO FORM:
VIRGINIA GENNARO
lputeputy ?f `C~
UA H. RUDNICK
City Attorney II
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ORIGINAL
EXHIBIT "A"
LEGAL DESCRIPTION
Being a division of Parcel "A" of Parcel Map Waiver P00-0738 as evidenced by that
certain Certificate of Compliance recorded October 12, 2000 as Document No.
0200127498 filed in the office of the Kern County Recorder also being a portion of the
Northeast quarter of Section 32, Township 29 South, Range 28 East, Mount Diablo
Base and Meridian in the City of Bakersfield, County of Kern, State of California, more
particularly described as follows:
Parcel 1
Parcel "A" of said Parcel Map Waiver P00-0738 excluding the west 728.33 feet.
Containing 1.10 Gross Acres
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SUMMARY REPORT PERTAINING TO THE AGREEMENT BY AND BETWEEN THE
BAKERSFIELD REDEVELOPMENT AGENCY AND
CLINICA SIERRA VISTA, A CALIFORNIA NON-PROFIT CORPORATION
This report has been prepared in compliance with Section 33433 of the California
Community Redevelopment Law (Health and Safety Code Section 33000 et sea.), which
provides in part:
"Before any property of the agency acquired in whole or in part, directly or indirectly, with tax
increment moneys is sold or leased for development pursuant to the redevelopment plan, the
sale or lease shall first be approved by the legislative body by resolution after public hearing.
Notice of the time and place of the hearing shall be published in a newspaper of general
circulation in the community for at least two successive weeks prior to the hearing.
The Agency shall make available for public inspection and copying at a cost not to
exceed the cost of duplication:
a. A copy of the proposed sale or lease;
b. A summary, which describes and specifies...:
1. The cost of the agreement to the agency, including land acquisition costs,
clearance costs, relocation costs, the costs of any improvements to be provided
by the agency, plus the expected interest on any loans or bonds to finance the
agreements; and
2. The estimated value of the interest to be conveyed or leased, determined
at the highest and best uses permitted under the plan; and
3. The estimated value of the interest to be conveyed or leased, determined
at the use and with the conditions, covenants, and development costs required
by the sale or lease. The purchase price or present value of the lease payments
that 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; and
4. An explanation of why the sale or lease of the property will assist in the
elimination of blight."
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A. PROPOSED AGREEMENT
A copy of the proposed Agreement ("Agreement") between Clinica Sierra Vista, a
California non-profit corporation ("Developer") and the Bakersfield Redevelopment Agency
("Agency") is attached for public review. The Agreement sets forth the responsibilities of the
Developer, Agency and City of Bakersfield ("City") and specifically establishes the parameters,
restrictions and limitations of the proposed redevelopment project ("Project"). The proposed
Project represents a key component of the Southeast Redevelopment Area in Bakersfield.
B. SUMMARY OF THE AGREEMENT
1. The Proiect Site. The Project site consists of a 0.6-acres land parcel located at
the southwest corner of East California Avenue and Robinson Street in the City of
Bakersfield. The site is located within the Southeast Redevelopment Project
Area ("Project Area") adopted by Ordinance No. 3905 on June 30, 1999 by the
City Council of Bakersfield ("City Council"). Development of the site is regulated
by the City of Bakersfield Zoning Ordinance and the Bakersfield General Plan,
which were amended and approved on December 20, 2007 by the Planning
Commission and approved by the City Council on January 16, 2008.
The Project site consists of a portion of a 2.7-acre site that was purchased by the
Agency from the Housing Authority of the County of Kern on November 13,
2006. The site was vacant when purchased.
The Agency intends to convey to the Developer the site "AS IS", with no
warranty, expressed or implied, by the Agency.
A legal description of the site can be found as Exhibit "A" to the Agreement.
2. Proposed Proiect. The Project is planned as a 3,586 square foot health clinic on a
0.6-acre parcel of land.
The Project is planned as a community health center that may include medical,
dental or other health related services. Based on the proposed plans, the Project
will include:
■ Seven operatories, or exam rooms - Facility could support two full-time
dentists and one full-time hygienist;
■ Modern medical equipment, including an integrated digital x-ray technology,
a large waiting room, a large sterilization room, and an electronic medical
records system (Dentrix);
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■ 27 parking spaces;
■ Landscaping and other on-site improvements required by the City
The Project will be located on a commercial arterial (California Avenue) near a
mature residential community.
The Project's goal is to provide dental and other health services to low-income
residents and other population groups of southeast Bakersfield. According to
the Developer, the Project site is located in a low-income area that has limited or
no access to oral health services. This Project could provide dental services to
approximately 2,250 patients and 6,750 visits annually, in addition to other
health related services.
The Project is part of the Agency's larger effort to redevelop and revitalize the
southeast area of Bakersfield. The community around the Project site needs
rehabilitation and revitalization. Once the proposed Project is developed, it
could be a catalyst in revitalizing this community. It could encourage other
complementary and compatible uses to be built in the future, which would
generate additional jobs and services in the area. These benefits would
eliminate some of the existing blighted conditions of the community.
The architecture of the Project will blend well into the community. The Project
will be a first-class development that is constructed with high quality materials.
All construction will be executed in accordance with City specifications,
standards and practices, with all plans approved by the City. There will be
extensive landscaping. Exhibit "B" of the Agreement specifies the Project's
Scope of Development.
3. Schedule of Performance. The Agreement binds the Developer to a specific
schedule of construction, and the Developer must complete the Project in
accordance with the Agreement on or before the date specified in the Schedule
of Performance. The required dates for completing development milestones are
set forth in the Schedule of Performance attached to the Agreement as Exhibit
„C„
4. Agency Off-Site Costs. The Agency will pay an amount not to exceed $54,000 for
curb and gutter, driveway approach, right turn lane (along California Avenue),
handicap ramp and right-of-way improvements. Except for these off-site costs,
the Project site shall be conveyed from the Agency to the Developer in its
current roughly graded condition, absent of any other improvements.
Demolition of subsurface structures, if any, will not be included.
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5. Purchase Price. The terms of the Agreement require the Agency to convey the
site to the Developer for a purchase price of $125,001. The purchase price will
be paid with $1 of cash at the close of escrow and a performance promissory
note of $125,000. Credit towards payment of the performance promissory note
will begin at issuance of the Certificate of Completion for the Project and
$8.333.33 shall be credited each year thereafter for fifteen (15) years of
continuous operation as a health clinic by Developer.
6. Escrow and Title Insurance. Pursuant to the conditions of the Agreement, the
Agency and the Developer shall pay respective escrow fees specified in the
Agreement. The Agency shall pay only for the portion of the title insurance
premium attributable to the standard coverage of a CLTA policy. The Developer
shall pay the premium charged by the title company for the portion of the title
insurance policy above standard coverage. Also, the Developer shall pay
recording fees, notary fees, costs of the extended coverage title policy, if any,
documentary transfer taxes and any and all other charges, fees and taxes levied
by a governmental authority relative to the conveyance of the site.
7. Condition of the Site, Remediation of the Site. The Developer shall indemnify
the Agency on any suits (hazardous, environmental and other) resulting from the
development or use of the site. The Agreement requires that the Developer
accept the site in "AS-IS" condition, with no warranty expressed or implied by
the Agency, including without limitation, the presence of hazardous materials or
the condition of the soil, its geology, the presence of known or unknown seismic
faults, or the suitability of the site for its intended purposes. The Developer shall
have the right, at its sole cost, to make such investigations, as the Developer
deems necessary. If the Developer reasonably disapproves of the environmental
condition of the site, then the Developer has the right to terminate the
Agreement. Once escrow closes, the Developer takes the property "AS-IS" and
assumes all responsibility and liability for hazardous materials of every kind
found on the site, including, but not limited to, clean-up costs.
8. Use Covenants. The Developer covenants and agrees for itself that for fifteen
(15) years the Project will be under the same ownership operating a health care
unit on the Project site.
9. Maintenance Covenants. The Developer covenants and agrees that it shall
maintain the site in accordance with all City regulations in a safe and secure
manner until development of the site is complete.
10. Transfers of Interest in Site. Transfers include the transfer to any person or
group of persons acting in concert of more than 25 percent of the present
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ownership, with the conveyance for permanent financing excepted. Transfers
are permitted only as expressly described in the Agreement. Any assignment
will be subject to such terms and conditions as Agency may choose to impose.
11. Permitted Encumbrances. The Agency shall have the right of reasonable review
and approval of any lender from which the Developer proposes to obtain any
loan, whether or not such Loan is secured by a lien against the site or any portion
thereof. The Agency shall not unreasonably withhold, condition or delay its
approval of any proposed lender or loan.
12. Obligation to Refrain from Discrimination. The Developer covenants that there
shall be no discrimination against or segregation of any person or group of
persons on account of race, color, creed, religion, sex, marital status, sexual
orientation, national origin or ancestry in the sale, lease, sublease, transfer, use,
occupancy, tenure or enjoyment of the site. The anti-discrimination covenants
shall run with the land.
13. Insurance. The Developer is required to maintain automobile, general liability
and builder's all risk insurance. The commercial general liability insurance
coverage shall have minimum limits for bodily injury and property damage
liability of $1,000,000 for each occurrence. In addition, the Developer needs to
provide builder's all risk coverage on an occurrence basis for fire and other
building risks in a form to be approved by the Agency in the amount equal to the
replacement cost of all improvements. The Agreement also requires Workers'
Compensation insurance with a standard waiver of subrogation clauses in favor
of indemnified parties identified in the Agreement. The Developer must furnish
proof of insurance to the Agency prior to the close of escrow.
14. Prevailing Wages. Pursuant to the conditions of the Agreement, the Developer
shall carry out construction of the improvements in conformity with all
applicable State labor laws (Sections 1770 - 1781 of the California Labor Code
and 33423 - 33426 of the California Health and Safety Code.) Agency and
Developer understand that the Project shall be required to pay prevailing wages.
The Developer will indemnify the City and Agency from all claims relating to the
payment of prevailing wages.
15. Indemnification. The Agreement contains a comprehensive hold harmless clause
that requires the Developer to indemnify, upon closing, Agency, City, its officers,
agents and employees from and against any such claim resulting from, arising
out of, connected with, or caused by Developer, Developer's employees, agents,
independent contractors, companies, or subcontractors, in the performance of,
or in any way arising from, the terms and provisions of the Agreement.
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16. Fees and Permits. The Developer is required to secure any and all land use and
other entitlements, permits and approvals required for the improvements. It is
the Developer's responsibility to pay the cost of all such fees and permits. The
approval of the Agreement does not bind the City Council or the Planning
Commission of the City regarding approvals of the Project required by such
bodies.
17. Enforcement of the Agreement. The Agreement provides that if either party
defaults on requirements within the Agreement, then the injured party shall
send a written notice to the defaulting party. If the defaulting party commences
to cure, correct or remedy the situation within thirty (30) calendar days after
receipt of written notice from the injured party such party shall not be deemed
to be in default under the Agreement.
C. SUMMARY OF AGENCY EXPENDITURES
The Agency has incurred the following expenditures to acquire the site:
1. Property Acquisition and Demolition. Expenditures of $352,000 were incurred to
acquire the 2.7-acre, vacant parcel of land on East California and Robinson
Streets, which was approximately $3.00 per square foot. Since the Project site is
a portion of the 2.7-acre site, or 0.6-acres (26,310 square feet) it was estimated
that the pro-rata cost to the Agency of the Project site is $78,930 ($3.00*26,310
sq. ft.).
2. Public Improvements. The Agency plans to spend a maximum of $54,000 on
various off-site improvements, such as driveway approach, right turn lane (along
California Avenue), handicap ramp, curb and gutters for this Project.
3. Bond Interest. The Agency did not use the proceeds of any tax allocation bonds
for the acquisition of the subject properties. Consequently, the Agency did not
incur any bond interest payments.
D. ESTIMATED FAIR MARKET VALUE
1. Highest and Best Use
The California Health and Safety Code requires disclosure of the highest and best use of the
property to be sold as permitted under the redevelopment plan. The Southeast
Redevelopment Project Area Plan relies on the City's General Plan for land use guidance. The
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highest and best use of the site is commercial. However, since the commercial market is
currently weak, it may take many years for development to occur on the Project site.
2. Fair Re-Use Value
The Fair re-use value is the value of the Project site, as restricted by Agency conditions. The
Agency restrictions include fifteen (15) year use covenants under the same ownership. The
Agency plans to convey the Project site to the Developer for a price of $125,001. The price is
the fair market value of the land, estimated at $4.75 per square foot. However, for the
Developer to agree to maintain the use of the Project site as a medical facility under the same
ownership for 15 years, given current difficult economic conditions, the Agency agreed to
provide a $125,000 performance promissory note. Once the Project is completed, the
Developer will be credited $8,333.33 each year for 15 years, if the Project is under continuous
operation as a health clinic and under the same ownership.
Given the 15-year use covenant constraint and other conditions imposed by the Agency on the
Project site, the residual land value was less than Developer's $125,001 purchase price of the
land. Without any site constraints, it is likely that development would not be a health clinic.
However, given that the Project site is a part of a long vacant parcel, it is reasonable to expect
that without Agency assistance, these properties would remain vacant and underutilized for
many more years.
The lack of new health facilities and other types of private development in the vicinity of the
Project site demonstrates that there may be a perceived lack of market demand for these types
of uses. However, the Agency's vision and goals for the community, has determined that the
community needs and could support a health clinic. The Agency also determined that this
Project could be a catalyst for economic development in the community. Therefore, the
Agency acquired the subject Project site for $3.00 per square foot approximately three years
ago.
The Project site's highest and best use most likely would be retail or office space on the site,
given its corner location. The fair re-use value is the value of the Project site, as restricted by
Agency conditions. To calculate fair re-use value, it is necessary to take into account the
development costs and revenues associated with the Project, assign a reasonable return on
investment to the Developer and calculate the residual land value.
Total costs to develop the Project are estimated at $1.6 million, including direct construction,
soft costs and land costs. The value of the Project was estimated at a considerable lower
amount. The difference between total cost and market value results in a very large Project
financial gap. For these reasons, it was necessary for the Agency to contribute $54,000 in off-
site costs and provide the land with use covenants over 15 years. Table 1 shows a summary of
the Project's key figures. The return on cost to the Developer is estimated at 1.56%, assuming
an 8.5% capitalization rate. A return of 8% to 15% is reasonable for a project of similar risk.
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If the Agency decided neither to provide the $125,000 performance loan, nor to pay for the
$54,000 off-site costs the Project would have a negative return and it would not be possible to
develop the Project on the site. Also, if other public grants were not made available to the
Developer, the Project would have a very difficult time getting built.
Based on market conditions in the area, it is GRC's opinion that the Developer's return is
reasonable, but without Agency assistance the Project would not be built. The Developer is
taking significant risk to develop the Project and to assume responsibility for operating a
medical facility for 15 years.
The Agency has determined that the site is being sold for not less than its fair re-use value at
the highest and best use permitted under the Redevelopment Plan and the proposed
Agreement.
Given the restrictions of the Project, as identified in the Agreement, the site is worth the price
being paid by the Developer.
E. ELIMINATION OF BLIGHT
The disposition of property under current law requires that the Agency explain how the
disposition will assist in the elimination of blight. The Project site exhibits characteristics of
blight, since the Project site has been underutilized for several years and the private market has
not been able to put the property to productive use.
The Project site is comprised of a long vacant parcel of land. The Agency believes that the
proposed Project on the site would have two main benefits: 1) Revitalize the community, and 2)
provide much needed medical services for families.
The proposed disposition will allow the development of the site, which will result in a use that
meets the requirements of the Bakersfield Land Use and Development Code, the
Redevelopment Plan, and the amended General Plan. Redevelopment of the site will eliminate
adverse economic and physical conditions, create jobs and generate additional tax revenues to
the City and Agency.
A summary of blight conditions and an explanation of how the Agreement addresses these
conditions is as follows:
Blight. The main characteristic of the Project site blight is underutilization. The site has
been vacant, unused and underutilized for many years. When the Agency acquired the
Project site it was vacant. Redevelopment of the site will contribute to the economic
health of the surrounding area and is anticipated to provide health services for
community residents.
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F. SUMMARY STATEMENT
The full Agreement and this disclosure report prepared in compliance with Section 33433 of the
California Community Redevelopment Law (Health and Safety Code Section 33000 et seq.) are
available for public review at the City Clerk's Office located at 1501 Truxtun Avenue,
Bakersfield, CA 93301 and at the Economic and Community Development Department located
at 900 Truxtun Avenue, Ste. 201, Bakersfield, CA 93301. A photocopy of these documents may
be obtained from the Agency Secretary/City Clerk by paying the usual photocopy fee regularly
charged by the Agency and City.
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i:yz
Memorandum
ECONOMIC DEVELOPMENT
To: Mr. Mike Starr
REDEVELOPMENT
From: Mr. Robert G. Vasquez & Mr. John N. Oshimo
REAL ESTATE CONSULTING
Date: April 21, 2010
AFFORDABLE HOUSING Subject: Clinica Sierra Vista Re-Use Analysis
GRC Associates, Inc. ("GRC") reviewed the proposed Clinica Sierra Vista
project ("Project") to be located at the southwest corner of East California
Avenue and Robinson Street in the City of Bakersfield. GRC completed a re-
use analysis of the Project, which proposes to include medical, dental and/or
other health-related services. The Project will be developed by Clinica Sierra
Vista ("Developer") and subsidized by the Bakersfield Redevelopment Agency
("Agency").
Purpose
The purpose of the reuse analysis is to assess the value of the Project site
with the covenants, conditions and restrictions set forth in the Disposition
and Development Agreement ("DDA"). The analysis makes a determination
of the highest and best use under the Agency's goals for the Project site.
Methodology/Approach
To complete the re-use analysis, GRC reviewed local real estate market
conditions, visited nearby comparable medical clinic built by Developer,
assessed comparable vacant land properties available for sale and estimated
the subject property's value. In order to determine the level of land value
that the Project can support, the analysis considers land acquisition, zoning
858 OAK PARK ROAD and land use controls, and the real estate market. In addition, GRC
SUITE 280 performed the following steps in analyzing the potential uses and reuse
values of the Project site:
COVINA, CA 91724 1. Reviewed the permitted uses of land based on the City's General
T: (626) 331 -6373 Plan, Municipal Code and DDA.
F: (626) 331 - 6375
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Clinica Sierra Vista
April 21, 2010
Page 2
2. Assessed the opportunities and constraints existing on the Project site, such as the
type and capacity of the existing infrastructure, environmental conditions and site
configuration.
3. Estimated Project costs and revenues under the above conditions, restrictions and
covenants. The estimated cost of the Project is $1.6 million. The primary source of
funding for the Project is from a grant procured by the Developer from the American
Recovery and Reinvestment Act of 2009.
4. Calculated Project value based on various assumptions.
5. Reviewed the level of return to the Developer.
Project Description
The Project is planned as a community health center that may include medical, dental or
other health related services. Please see Figures 1, 2 and 3, which shows the location, aerial
and picture of the Project site. A floor plan and site plan are shown in Figures 4 and 5. The
Project consists of a 3,586 square foot structure on a 0.6-acre vacant site. The site is part of
a larger vacant parcel owned by the Agency. The Project site has been vacant for many
years.
Based on the proposed plans, the Project will include:
• Seven operatories, or exam rooms - Facility could support two full-time
dentists and one full-time hygienist;
■ Modern medical equipment, including an integrated digital x-ray
technology, a large waiting room, a large sterilization room, and an
electronic medical records system (Dentrix);
■ 27 parking spaces;
■ Landscaping and other on-site improvements required by the City
■ Seven operatories - Facility could support two full-time dentists and one full-time
hygienist; and
■ 27 parking spaces
The Project's goal is to provide dental and other health services to low-income residents
and other population groups of southeast Bakersfield. According to the Developer, the
Project site is located in a low-income area that has limited or no access to oral health
services. This Project could provide dental services to approximately 2,250 patients and
6,750 visits annually, in addition to other health related services.
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Clinica Sierra Vista
April 21, 2010
Page 3
The community around the Project site needs rehabilitation and revitalization. Once the
proposed Project is developed, it could be a catalyst in revitalizing this community. It could
encourage other complementary and compatible uses to be built in the future, which would
generate additional jobs and services in the area. These benefits would eliminate some of
the existing blighted conditions of the community.
The architecture of the Project will blend well into the community. The Project will be a
first-class development that is constructed with high quality materials. GRC staff recently
visited a comparable clinic completed by the Developer in Arvin, and noted that it was of
very good quality. (Please see Figure 6.) All construction will be executed in accordance
with City specifications, standards and practices, with all plans approved by the City. There
will be extensive landscaping.
Land Use Regulation of Site
GRC reviewed the land use regulations affecting the Project site. As illustrated in Figure 7,
the Project is located within the Southeast Redevelopment Project Area ("Project Area"),
which totals approximately 4,577 acres. Development of the Project site is regulated by City
of Bakersfield General Plan and Zoning Ordinance. The General Plan was amended and
approved by the Planning Commission on December 20, 2007 and approved by the City
Council on January 16, 2008.
Figures 8 and 9 show the General Plan and Zoning designation for the Project site. The
General Plan designation is "General Commercial" and the corresponding Zoning is also
"General Commercial". The proposed Project use is allowed on the site. In summary, the
Project development concept meets current General Plan, Zoning and Redevelopment
requirements.
Site Acquisition Costs
The 0.6-acre Project site is a portion of a 2.7-acre parcel that was purchased by the Agency
on November 13, 2006 for $352,000, or $3.00 per square foot. The property was vacant
when it was purchased by the Agency, and no site clearing costs were incurred. For the
Project site, the Agency will pay up to $54,000 for curb and gutter, driveway approach, right
turn lane (along California Avenue), handicap ramp and right-of-way improvements. Except
for these off-site costs, the Project site shall be conveyed from the Agency to the Developer
in its current roughly graded condition, absent of any other improvements. Demolition of
subsurface structures, if any, will not be included. In total, Agency's costs are estimated at
$132,930, which includes off-site cost of $54,000 and the adjusted 0.6-acre Project land cost
site of $78,930 ($3.00*26,310 sq. ft.).
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Clinica Sierra Vista
April 21, 2010
Page 4
Project Cost
The cost of the Project, excluding land costs, is estimated at $1.6 million. Costs include
construction, soft costs, administrative costs and also the cost of the medical equipment.
Direct construction costs are estimated at $905,800, or $250 per square foot. This is a
reasonable cost estimate for a health clinic building.
Re-Use Analysis
The Agency plans to convey the Project site to the Developer for a price of $125,001. The
price is the fair market value of the land, estimated at $4.75 per square foot. The price will
be paid by a $125,000 performance promissory note and $1 in cash. Once the Project is
completed, the Developer will be credited $8,333.33 each year for 15 years, if the Project is
under continuous operation as a health clinic and under the same ownership.
Given the 15-year use covenant constraint and other conditions imposed by the Agency on
the Project site, the residual land value was less than Developer's $125,001 purchase price
of the land. Without any site constraints, it is likely that development would not be a health
clinic. However, given that the Project site is a part of a long vacant parcel, it is reasonable
to expect that without Agency assistance, these properties would remain vacant and
underutilized for many more years.
The lack of new health facilities and other types of private development in the vicinity of the
Project site demonstrates that there may be a perceived lack of market demand for these
types of uses. However, the Agency's vision and goals for the community, has determined
that the community needs and could support a health clinic. The Agency also determined
that this Project could be a catalyst for economic development in the community.
Therefore, the Agency acquired the subject Project site for $3.00 per square foot
approximately three years ago.
The Project site's highest and best use most likely would be retail or office space on the site,
given its corner location. The fair re-use value is the value of the Project site, as restricted
by Agency conditions. To calculate fair re-use value, it is necessary to take into account the
development costs and revenues associated with the Project, assign a reasonable return on
investment to the Developer and calculate the residual land value.
Total costs to develop the Project are estimated at $1.6 million, including direct
construction, soft costs and land costs. The value of the Project was estimated at a
considerable lower amount. The difference between total cost and market value results in
a very large Project financial gap. For these reasons, it was necessary for the Agency to
contribute $54,000 in off-site costs and provide the land with use covenants over 15 years.
Table 1 shows a summary of the Project's key figures. The return on cost to the Developer
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ORIGMAI
Clinica Sierra Vista
April 21, 2010
Page 5
is estimated at 1.56%, assuming an 8.5% capitalization rate. A return of 8% to 15% is
reasonable for a project of similar risk.
If the Agency decided neither to provide the $125,000 performance loan, nor to pay for the
$54,000 off-site costs the Project would have a negative return and it would not be possible
to develop the Project on the site. Also, if other public grants were not made available to
the Developer, the Project would have a very difficult time getting built.
Based on market conditions in the area, it is GRC's opinion that the Developer's return is
reasonable, but without Agency assistance the Project would not be built. The Developer is
taking significant risk to develop the Project and to assume responsibility for operating a
medical facility for 15 years. The Agency has determined that the Site is being sold for not
less than its fair re-use value at the highest and best use permitted under the
Redevelopment Plan and the restrictions imposed on the Developer by the Agency in the
DDA.
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Table 1
Ciinica Sierra Vista
Pro Forma, GRC
Income:
Clinic Space 3,586 sq. ft. $ 21.00 per year $ 75,306
$ 1.75 per mo.
Gross Income $ 75,306
Vacancy/Collection Losses 5% $ (3,765)
Sub-Total income $ 71,541
Expenses:
Operating Expenses 30% $ 21,462
Repair & Maintenance 6% $ 4,292
Property Taxes ($1.6 mil) 1.30% $ 1,600,000 $ 20,800
Sub-Total Expenses $ 46,555
Net Operating Income $ 24,986
Capitalization Rate 8.50% $ 293,954
Total Capital Invested $ 1,600,000
ROI 1.56%
Source: GRC Assoc., April 2010
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