REPORT TO COUNCIL
SUBJECT
Title
Action on a Purchase and Sale Agreement With Dollinger-Lafayette Associates to Acquire the Improved Property Located at 2900-2930 Lafayette Street in Santa Clara for Use by Silicon Valley Power for a Purchase Price of $5.5 Million and Related Budget Amendment
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
On September 28, 2021, the City Council accepted Silicon Valley Power’s (SVP) Three-Year System Growth Strategy Plan (RTC 21-871). The Three-Year System Growth Strategy Plan identifies proposed projects for both near-term and long-term capital improvement projects needed to support anticipated system growth and to replace end-of-life equipment to ensure system reliability. Two of the key projects are the reconstruction of the Kifer Receiving Station (KRS) and the construction of a Battery Energy Storage System (BESS). These two projects are being constructed/expanded on an SVP owned property adjacent to the Donald Von Raesfeld (DVR) power plant, shown on the Location Map and Adjacent Uses (Attachment #1).
SVP’s infrastructure in the area is becoming constrained and staff, with CBRE as its representative, have been reviewing property opportunities adjacent to DVR for future flexibility and near-term needs. The property located at 2900-2930 Lafayette Street (Property) is adjacent to key SVP properties and infrastructure and the property owner is agreeable to negotiate a Purchase and Sale Agreement. A Letter of Interest (LOI) was executed by both parties on August 14, 2024.
DISCUSSION
The Property is a 43,999 square feet lot with a 15,375 square feet building and existing tenants. A full list of the tenants and lease expiration dates are included in Exhibit C of the Purchase and Sale Agreement (Agreement), Attachment #2. Some leases are month to month, while others terminate in the near future (the latest expiring on May 31, 2026). The City will enter into a property management agreement with a commercial property manager to support the existing tenants when the purchase is completed.
SVP does not currently have a long-term plan for the Property, but due to space constraints around DVR, KRS, and BESS, it is expected that this Property will be needed for SVP infrastructure or other projects in the future. Short term, as part of the system expansion projects and new proactive maintenance contracts, SVP will have storage needs, and this Property could serve as a laydown area for materials and equipment.
The key Agreement terms include the following:
• Purchase Price: $5.5 million
• Deposit: $180,000 refundable deposit and applicable to the purchase price.
• Due Diligence Period: 60 days from receipt of all due diligence documents to review and approval all matters pertaining to the physical, structural, electrical, mechanical, soil, drainage, environmental, economic, tenancy, zoning, land use and other governmental compliance matters and conditions respecting the Property.
Staff has not identified any environmental issues with the Property. Staff reviewed a previously completed Phase I environmental assessment for the Property and the findings were that “[b]ased on current and available historical information, there is a low potential that the Property has been impacted by the current on-site operations” and “based on the review of available information, including current regulatory agency databases, there is a low potential that the Property has been impacted by reported off-site facilities or sources of contamination.” In 2009, the property owner completed a groundwater and sampling analysis, and the finding was that “[b]ased on our sampling, there does not appear to have been a significant impact to the site as a result of the former gas station operations, and no additional environmental assessment is recommended at this time.” Under the Agreement, the City may conduct a new Phase I environmental site assessment, if necessary.
ENVIRONMENTAL REVIEW
The proposed approval of the Agreement is exempt from the California Environmental Quality Act (“CEQA”) pursuant to section 15061(c)(3) of Title 14 of the California Code of Regulations as it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment. The Agreement does not contain any development plans or commitments requiring environmental review.
FISCAL IMPACT
Staff recommends a budget amendment to add additional appropriations to the Capital Outlay budget of the SVP Operating Budget in the amount of $5.5 million. This funding will be transferred from the Electric Utility Fund Balance and will have no impact on the General Fund.
Budget Amendment
FY 2024/25
|
Electric Utility Fund (Fund 091) |
Current |
Increase/(Decrease) |
Revised |
|
Expenditures |
|
|
|
|
Electric Department |
$612,297,653 |
$5,500,000 |
$617,797,653 |
|
|
|
|
|
|
Fund Balance |
|
|
|
|
Unrestricted Ending Fund Balance |
$ 91,295,323 |
($5,500,000) |
$ 85,795,323 |
COORDINATION
This report has been coordinated with the Finance Department and the City Attorney’s Office.
PUBLIC CONTACT
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> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Authorize the City Manager to execute a Purchase and Sale Agreement (Agreement) with Dollinger-Lafayette Associates for 2900-2930 Lafayette Street in the amount of $5.5 Million for use by Silicon Valley Power, in substantially the form presented subject to the review and final approval as to form by the City Attorney;
2. Authorize the City Manager or designee to take any necessary actions to implement and administer the Agreement, including, acceptance of a grant deed on behalf of the City; and
3. Approve the FY 2024/25 budget amendment in the Electric Utility Fund to increase the Electric Department (Capital Outlay) appropriation and decrease the Unrestricted Ending Fund Balance in the amount of $5.5 million (five affirmative Council votes required for the use of unused balances).
Staff
Reviewed by: Manuel Pineda, Chief Electric Utility Officer
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Location Map and Adjacent Uses
2. Purchase and Sale Agreement