REPORT TO HOUSING AUTHORITY
SUBJECT
Title
Action on Amendment No. 3 to the Exclusive Negotiation Agreement with Habitat for Humanity East Bay / Silicon Valley for 3575 De La Cruz Boulevard
Report
COUNCIL PILLAR
Promote and Enhance Economic, Housing and Transportation Development
BACKGROUND
The City selected Habitat for Humanity East Bay / Silicon Valley (Developer) in 2018 through a competitive process as the developer for a City-owned affordable housing site at 3575 De La Cruz Boulevard. On April 9, 2019, the City Council approved an Exclusive Negotiation Agreement (ENA) with the Developer for the site.
The ENA provided an initial negotiating period of 18 months, commencing on the date the Agreement was fully executed, which could be extended for two additional periods of six months each by the City Manager upon presentation of a written request from the Developer together with a schedule of tasks to be accomplished during the additional period. Both six-month extensions have been authorized by the City Manager with the first authorized. As allowed under the ENA, the City Manager previously granted two six-month extensions for the ENA (Amendment No. 1 and Amendment No. 2) on December 14, 2020 and the second on July 12, 2021 respectively.
An additional extension requires action by the City Council. Habitat for Humanity is now requesting a Council approved Third Amendment to the ENA to grant an extension for an additional six months to allow them additional time to prepare a Disposition and Development Agreement (DDA) for Council consideration.
Site Description
The Property is currently a vacant 0.7-acre site. The site was previously developed with a City Fire Station, which was demolished in 2010. An 80-foot PG&E easement containing transmission lines supported on top of 100-foot tall PG&E lattice towers is located along the Property’s eastern edge. Surrounding land uses include light industrial buildings to the south, single-family residences to the east and north, and Montague Park to the west on the opposite side of De La Cruz Boulevard. Golden State Baptist College is located to the southwest of the project site, also fronting on De La Cruz Boulevard adjacent to Montague Park.
Request for Proposals (RFP)
Prior to the issuance of an RFP the City conducted preliminary outreach for the future development of the property as an affordable housing site. Input from the outreach was incorporated into the RFP. The City then issued an RFP on June 13, 2018 and selected the Developer in October 2018 as the result of the RFP process. The interview panel made a unanimous decision to select Habitat for Humanity East Bay / Silicon Valley determining that their proposal fully addressed the goals of the RFP.
DISCUSSION
Implementation of the Developer’s proposal for 3575 De La Cruz Boulevard would achieve the City’s objective for the development of a mix of affordable housing projects throughout the City, providing a relatively unique-small scale, family-oriented development. As proposed the project also achieves many of the goals and objectives of the RFP, including alignment with community interest in terms of the development program and City standards for financing and affordability. The Developer was also selected based on their well-established history in the production of affordable housing.
The proposed project is the construction of 13 new units of affordable homeownership housing at the site, available to a diverse range of mixed income families earning between 60 percent and 120 percent AMI. The units would be developed as a mix of townhomes and flats, using a cohesive design that maximizes cost efficiencies while providing homes that are attractive, energy efficient, and durable. The conceptual site plan is intended to maximize the number of affordable homes while strategically addressing various site constraints, including positioning the new homes to minimally impact the adjacent property owners and provide a transition to the industrial park to the south.
While the Developer has experienced some setbacks, they have also been making steady progress toward the development of the site. The following represents a synopsis of the activities performed by the Developer over the past 18 months for the project:
Sept. 2019 - Jan. 2020: Held Two (2) community outreach meetings (The first in September 2019 and the second in January 2020) to discuss community concerns with the proposed development.
Jan. 2020 - March 2020: Revised site plan to incorporate PG&E easement property per City request and received PG&E tentative approval to incorporate part of the easement into site plan, increasing unit count from 13 homes to 15 homes.
March 2020 - June 2020: Uncovered old project files for the property relating to previous attempts to develop property by old affiliate Habitat for Humanity Silicon Valley (since merged with the current Developer in 2013). Reviewed files for design issues, consultant notes, and environmental concerns. The old environmental report identified potential site contamination concerns and recommended preparation of a Phase II ESA for property.
June 2020 - Sept. 2020: Obtained environmental consultant proposals, contracted for and obtained a Phase II ESA for the property from Silicon Valley Environmental Group. The Phase II ESA identified groundwater and soil vapor contamination issues above residential limits.
June 2020 - October 2020: Contracted for and obtained Geotechnical Investigation (Soils Report) for the Property by Rockridge Geotechnical and a boundary & topographic survey from the project civil engineers, BKF. HEBSV engaged Geoffrey Holton & Associates to replace Pyatok Architects (bowed out of project for other commitments). HEBSV also contracted for landscape architecture (Jett Landscape), joint trench design (Millenium), and structural engineering (St. Onge & Assoc.) for additional project design services.
Oct. 2020 - May 2021: Reviewed existing property contamination issues with attorneys and environmental consultants to determine feasibility, cost and liability for proposed project. Determined to move forward with proposed development, bid out necessary remediation design work to consultants, and contracted with SCS Engineering in May, 2021 to design vapor extraction system for future development.
March 2021 - April 2021: Analyzed potential governmental agencies to oversee approvals for residential development on site and engaged Santa Clara County Department of Environmental Health as regulatory agency for project regulatory oversight of remedial action.
May 2021 - Sept. 2021: Reviewed liability / insurance issues with GHA Architects, who ultimately determined not to move forward with preparing design for the project. Re-bid project architecture and contracted with Zenith Engineers to provide architectural design for the project.
Conclusion
Staff is recommending the City Council approve Amendment No. 3 to the ENA with Habitat for Humanity East Bay / Silicon Valley to allow more time to complete due diligence and bring forward a Disposition and Development Agreement (DDA) to Council for consideration within the next six months. While the Developer has made steady progress under the ENA, the team has encountered multiple unexpected delays, including modification of the project to incorporate the additional land under the PG&E easement per the City’s request resulting in a new site plan and work to obtain tentative PG&E approvals for partial use of the easement area (parking and common area play). Additionally, the identification, analysis and liability review of the discovered environmental contamination delayed the project for approximately 12 months while cost and suitability for residential homeownership were considered (Covid-19 also played a part in this delay as HEBSV and its consultants adjusted to remote work). The design of the soil vapor extraction system is still an issue, but HEBSV hopes to have determination as to a passive or active system and the relevant pricing in early 2022.
Staff is anticipating an Initial Design Review submittal to the City by December 2021 and Planning Commission review in early 2022. Full entitlements and a DDA are tentatively scheduled for Council consideration in the Summer of 2022.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.
FISCAL IMPACT
There is no cost to the City for this agreement other than administrative time and expense. As noted above, implementation of the proposed project would generate ongoing revenue to the City’s Affordable Housing Fund through repayments of loans.
COORDINATION
This report has been coordinated with the Department of Finance and the City Attorney’s Office.
PUBLIC CONTACT
The project will continue to engage the public during the ENA term. Staff will continue to work closely with community members and other interested stakeholders throughout the process.
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov>.
RECOMMENDATION
Recommendation
Approve and authorize the City Manager to execute Amendment No. 3 to the Exclusive Negotiation Agreement (ENA) with Habitat for Humanity East Bay / Silicon Valley for the development 3575 De La Cruz Boulevard.
Staff
Reviewed by: Andrew Crabtree, Director of Community Development
Approved by: Deanna J. Santana, Executive Director
ATTACHMENTS
1. Habitat-DeLaCruz Exclusive Negotiation Agreement (ENA)
2. Habitat 1st Amendment ENA
3. Habitat 2nd Amendment ENA
4. Amendment 3 ENA Habitat