REPORT TO COUNCIL
SUBJECT
Title
Action on a Purchase and Sale Agreement to Acquire the Property Located at 3031 Corvin Drive in Santa Clara for Use by the Parks and Recreation Department, Public Works Department, and the Water and Sewer Utilities Department for Workshop and Storage Purposes for a Purchase Price of $6.3 Million and Approve Related Budget Amendments
Report
BACKGROUND
The City of Santa Clara continues to experience increasing operational space constraints across multiple departments as service demands grow and the availability of industrially zoned properties suitable for municipal use remains limited. Several City departments, including the Parks and Recreation Department, the Department of Public Works, and the Water and Sewer Utilities Department, have identified an ongoing and expanding need for additional workshop, storage, and operational support space in order to efficiently maintain City infrastructure, equipment, and materials.
The City was notified of the availability of the property located at 3031 Corvin Drive, Santa Clara, California (APN 216-33-022) (Property). The Property is located adjacent to Fire Station 9 and was identified as a suitable acquisition opportunity due to its proximity to existing City facilities, its building size, its industrial zoning, and its compatibility with public works, maintenance, and utility-related operations.
Working with CBRE, the City expressed interest in acquiring the Property. Accordingly, the City and the seller entered into a Letter of Intent (LOI) outlining the general business terms under which the City would consider entering into a Purchase and Sale Agreement (PSA) for the acquisition of the Property. The City’s commitment to purchase the Property in the LOI is contingent upon the City Council’s approval of a final PSA, in its sole discretion.
DISCUSSION
The Property consists of an approximately 0.61-acre parcel improved with an approximately 17,852-square-foot industrial building constructed in 1970, and will be delivered vacant at closing. The site is located immediately adjacent to Fire Station 9, and the two properties share driveway access. Acquisition of the Property would provide operational benefits to Fire Station 9 by allowing the City to exercise greater control over shared access, circulation, and site security.
The Parks and Recreation Department intends to use the Property primarily to address its growing storage needs, specifically for its field support services operations which includes machinery for sign making. The Department also intends to combine some shop functions with the Department of Public Works such as key making and the use of similar equipment to gain more operational efficiency. Parks and Recreation is currently experiencing space constraints at its Central Park facility, and the additional space will allow the department to consolidate operations and free up existing space for staff use.
The Department of Public Works plans to utilize both the office and shop areas of the building in coordination with Parks and Recreation. The concept is for staff to relocate the current offices and shop on Lafayette Street to the new Corvin Drive location. The office space will be used for Facilities staff and the shop space will be used for materials storage and tools including shop equipment used for fabrication, building, and repairs which is consistent with the operations of a Facilities Maintenance shop. Public Works currently operates a facilities shop located on Lafayette and Comstock Street that is interconnected with Silicon Valley Power (SVP) property. Once the Department is able to relocate staff and equipment to the new Property, it is anticipated that SVP will be purchasing this vacated site, allowing for control and improved security of its facilities at this location. An appraisal on this site is underway and the details of the property transition to SVP will be brought forward for City Council discussion and approval at a later date.
The Water and Sewer Utilities Department will primarily use the facility for storing equipment and supplies. The Department currently stores equipment outside at the Corporation Yard, which has led to issues of inventory damage and more wear and tear. Moving the equipment to the new Property will allow materials to be kept covered, providing protection from the elements and extending the useful life of the equipment. The proposed allocation of space and cost-sharing arrangement for the purchase price and associated closing costs for the warehouse will be delineated as follows.
Proportional Cost Share (total space 17,852 sq. ft.):
|
Dept. |
Office |
Warehouse |
Shared |
Total |
Cost Share |
|
W&S* |
0 |
10,000 |
2,002 |
12,002 |
67.2% |
|
DPW |
3,046 |
914 |
793 |
4,753 |
26.6% |
|
Parks |
0 |
914 |
183 |
1,097 |
6.2% |
|
Total |
3,046 |
11,828 |
2,978 |
17,852 |
100.0% |
*Water (45%), Sewer (45%), and Recycled Water (10%) = 100.00%
Summary of Key Terms of the Agreement.
The terms of the Agreement are consistent with the terms of the LOI. The key Agreement terms include the following:
• Purchase Price: $6.3 million
• Deposit: $189,000. One-Hundred Dollars ($100) of the Deposit amount is paid to the Seller as independent consideration, and the remainder of the Deposit amount becomes non-refundable after the Due Diligence Period. If the City proceeds to purchase the Property this amount, less the $100 independent consideration, is applicable to the purchase price. If the City defaults, this amount would be retained by the Seller as liquidated damages.
• Due Diligence Period: 60 days from the Effective Date of the Agreement 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. “As is” Purchase. The Property will be purchased in its “as is” condition, except to the extent of Seller representations and warranties set forth in Section 7.01 of the Agreement.
Staff has not identified any known environmental issues associated with the Property, but intends to contract for a Phase I Environmental Site Assessment during the due diligence period. If the need for any Phase II studies are identified in this assessment, a targeted Phase II analysis will also be conducted.
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
The purchase price of the property is $6.3 million and the associated closing costs are estimated at $100,000. As the Property will be delivered vacant, City staff also expects funding needs of approximately $510,000 for tenant improvements. These improvements will include items such as new cabinets and countertops, shelving and storage, lighting and exhaust to support safety on site, as well as information technology infrastructure.
In addition to the acquisition-related costs, each Department will be responsible for their proportionate share of the operations and maintenance costs with the Corvin Drive property, including utilities and janitorial services. The annual cost for utilities is estimated at $20,000. The Departments will absorb these costs in the current fiscal year, with an estimated total impact of $6,667 (split amongst the three departments). The costs for DPW will be offset by the current costs being spent at the Lafayette Street site. The Department of Public Works currently oversees a citywide contract for janitorial services. The services anticipated for this Property are expected to be minimal and will be able to be covered under existing appropriations. For future years, the departmental budgets will be adjusted accordingly as part of the annual budget process to incorporate the utilities costs.
Funding of $6.9 million is needed for the property purchase and closing costs as well as tenant improvements. These costs will be spread amongst the departments based on the proportional cost share detailed above, with the General Fund used to cover the costs associated with the Parks and Recreation and Public Works Departments and the Water and Sewer Funds used to cover the costs associated with that department. Staff recommends the following budget amendments to cover the costs associated with the property acquisition, with the funds budgeted in a new Corvin Drive Property Purchase and Improvements project in the Water Utility Capital Fund.
Budget Amendment
FY 2025/26
|
|
Current |
Increase/ (Decrease) |
Revised |
|
General Fund |
|
|
|
|
Transfer To |
|
|
|
|
Water Utility Capital Fund |
$0 |
$2,264,400 |
$2,264,400 |
|
|
|
|
|
|
Fund Balance |
|
|
|
|
Ending Fund Balance - Land Sale Reserve |
$20,825,559 |
($2,264,400) |
$18,561,159 |
|
|
|
|
|
|
Sewer Utility Capital Fund |
|
|
|
|
Transfers To |
|
|
|
|
Water Utility Capital Fund |
$0 |
$2,090,500 |
$2,090,500 |
|
|
|
|
|
|
Fund Balance |
|
|
|
|
Unrestricted Ending Fund Balance |
$11,727,333 |
($2,090,500) |
$9,636,833 |
|
|
|
|
|
|
Water Recycling Fund |
|
|
|
|
Transfers To |
|
|
|
|
Water Utility Capital Fund |
$0 |
$464,600 |
$464,600 |
|
|
|
|
|
|
Fund Balance |
|
|
|
|
Unrestricted Ending Fund Balance |
$1,561,674 |
($464,600) |
$1,097,074 |
|
|
|
|
|
|
Water Utility Capital Fund |
|
|
|
|
Transfers From |
|
|
|
|
General Fund - Land Sale Reserve |
$0 |
$2,264,400 |
$2,264,400 |
|
Sewer Utility Capital Fund |
$0 |
$2,090,500 |
$2,090,500 |
|
Water Recycling Fund |
$0 |
$464,600 |
$464,600 |
|
|
|
|
|
|
Expenditures |
|
|
|
|
Corvin Drive Property Purchase and Improvements |
$0 |
$6,910,000 |
$6,910,000 |
|
|
|
|
|
|
Fund Balance |
|
|
|
|
Unrestricted Ending Fund Balance |
$2,774,970 |
($2,090,500) |
$684,470 |
COORDINATION
This report has been coordinated with the Parks and Recreation, Public Works, Water and Sewer, 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 or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Approve Resolution authorizing the City Manager to execute a Purchase and Sale Agreement (Agreement) with Timothy Charles Bonasera and Emily Ann Bonasera, his wife, and Timothy C. Bonasera, a married man as his sole and separate property, Alison Earle, Trustee of the Exempt Trust FBO Alison Earle created December 30, 2020 under the Michael J. Bonasera Living Trust dated September 27, 1990, Jenette Del Monaco, Trustee of the Exempt Trust FBO Jenette Del Monaco created December 30, 2020 under the Michael J. Bonasera Living Trust dated September 27, 1990, and Susan Bonasera, Trustee of the Exempt Trust FBO Susan Bonasera created December 30, 2020 under the Michael J. Bonasera Living Trust dated September 27, 1990 for 3031 Corvin Drive in the amount of $6.3 Million for use by Department of Public Works, Parks and Recreation and Water and Sewer, 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 following FY 2025/26 budget amendments:
a. In the General Fund, establish a transfer to the Water Utility Capital Fund in the amount of $2,264,400 and decrease the Land Sale Reserve in the amount of $2,264,400 (five affirmative Council votes required for the use of unused balances);
b. In the Sewer Utility Capital Fund, establish a transfer to the Water Utility Capital Fund in the amount of $2,090,500 and decrease the Unrestricted Ending Fund Balance in the amount of $2,090,500 (five affirmative Council votes required for the use of unused balances);
c. In the Water Recycling Fund, establish a transfer to the Water Utility Capital Fund in the amount of $464,600 and decrease the Unrestricted Ending Fund Balance in the amount of $464,600 (five affirmative Council votes required for the use of unused balances); and
d. In the Water Utility Capital Fund, recognize transfers from the General Fund in the amount of $2,264,400, the Sewer Utility Capital Fund in the amount of $2,090,500, and the Water Recycling Fund in the amount of $464,600, decrease the unrestricted ending fund balance in the amount of $2,090,500, and establish the new Corvin Drive Property Purchase and Improvements project in the amount of $6,910,000 (five affirmative Council votes required for the use of unused balances and to appropriate additional revenue).
Staff
Reviewed by: Elizabeth Klotz, Assistant City Manager
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Purchase and Sale Agreement
2. Resolution