REPORT TO COUNCIL
SUBJECT
Title
Note and File the Strategy and Next Steps for the Sale of the Loyalton Ranch Property
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
The City of Santa Clara owns and maintains approximately 10,270 rural acres of undeveloped land in Lassen and Sierra Counties near the California-Nevada border. The property is located in northeastern California, about 30 miles north of Truckee, CA, northeast of Sacramento, CA, and about 20 miles northwest of Reno, NV. The land is referred to locally as the Trosi Ranch, and within the City, as the Loyalton Ranch Property. The City purchased the property with electric utility funds in 1977 for $1,613,850 or $157/acre. The City’s Electrical Department doing business as Silicon Valley Power (SVP), is responsible for the maintenance of the property.
On December 14, 2021, the City Council discussed a potential sale of the Loyalton Ranch Property and directed staff to develop a strategy for the sale of the Loyalton Ranch Property and present it to the City Council at a future meeting. The purpose of this report is to discuss the next steps in the process and completed actions to date.
Completed Actions
To proceed in the consideration of the sale, staff has moved forward with a contract for outside counsel for legal support. The firm of Jarvis Fay & Gibson has been hired to provide legal support and guidance on the Surplus Land Act process.
Staff is also proceeding with obtaining an updated appraisal through Valbridge Property Advisers, who completed the previous appraisal on the property. Staff also explored hiring additional “local” appraisers to perform a separate appraisal for comparison purposes. However, after contacting six firms, none were able to provide the service mostly due to capacity constraints.
New Information Since 12/14/21 Council Meeting
On January 19, 2022, staff attended a virtual meeting with representatives from Related and energyRE regarding the Loyalton Ranch Property. Related communicated that they were aware of the property and wanted to learn more about it as a possible future opportunity for renewable energy generation. The energyRE team was focused on understanding the current property uses and topography, as well as adjacency to high voltage transmission lines. However, if Related or any other private entity were interested in purchasing or long term leasing the property, they would need to negotiate with the City through the Surplus Land Act process.
DISCUSSION
The consideration for sale of the Loyalton Ranch Property will start with the Surplus Land Act process. If that process is not successful, staff will proceed with a selection process for a realtor for Council consideration. While this could be a parallel process, there is not sufficient staff capacity to complete a selection process for a service that might not be needed if the Surplus Land Act process is successful.
Surplus Land Act Explained
The purpose of the Surplus Land Act (Gov. Code §§ 54220 et seq.; “SLA”) is to increase the amount of land available for low-income housing as well as recreation and transit-oriented housing. The SLA requires prioritization of these uses when selling or leasing public land that is no longer required for City use. The SLA applies to all general law and charter cities as well as JPAs, successor agencies, and housing authorities. (Gov. Code § 54221 (a)(1).) In 2019, the legislature adopted AB 1486 which contained sweeping amendments to the SLA. These amendments generally broadened the definition of surplus land, narrowly defined the type of land/transactions that are exempt from the SLA, limited certain contracts and terms, required more extensive coordination/notification of the State Department of Housing and Community Development (“HCD”), and added penalties for disposing of surplus land in violation of the SLA.
Generally, the SLA identifies three types of land: (1) land necessary for “agency use,” (2) land no longer necessary for agency use but exempt from most of the SLA (“exempt surplus land”), and (3) land no longer necessary for agency use that is not exempt (“surplus land”). “Agency use” is defined as land that is being used or that has a planned use “pursuant to a written plan adopted by the local agency’s governing board.” Agency use does not include commercial or industrial uses, including retail, entertainment, office, or any property disposed of for the sole purpose of investment or revenue generation. (Gov. Code § 54221(c).)
When the City desires to dispose of land that is not necessary for agency use, the SLA requires the City to take a variety of steps intended to promote use of that land for affordable housing.
Staff does want to note that the SLA exempts agency to agency land transfers. As noted in previous staff reports on the Loyalton Ranch Property, the California Department of Fish and Wildlife (CDFW) has expressed interest in the property, and the City could informally discuss a transfer to CDFW outside the SLA process. The City would ultimately declare the land "exempt surplus" instead of "surplus," and could sell to CDFW without complying with the notice and other requirements of the SLA. Staff is not proposing to take this approach and will instead follow the SLA process, which will still provide an opportunity for CFDW to submit an offer. This allows CFDW to express their interest and reduces unnecessary additional work by the City.
Surplus Land Act Process
It is very important to note that the City is not taking any action to start the SLA process tonight, but just outlining the process for Council information. Below is a summary:
1. Before SLA process begins: City declares the Loyalton Ranch Property to be surplus land and issues a Notice of Availability for the Loyalton Ranch Property.
2. 60 days after Notice of Availability: City negotiates with interested parties for at least 90 days (which negotiation period cannot begin until 60 days has expired).
3. Notify HCD after negotiations but before final disposition: City must provide details of the negotiation/disposition to HCD.
4. Disposition: City can dispose of Loyalton Ranch Property pursuant to the negotiations or outside the SLA process if no negotiations occur or if negotiations are unsuccessful.
Further details are provided below, and additional information will be provided as part of future Council discussions.
Step 1. Declare Loyalton Ranch Property to be surplus land at a regular City Council meeting.
When the City desires to dispose of land not necessary for agency use, it must first declare the land surplus at a regular public meeting. (Gov. Code § 54221(b)(1).) At that meeting, the City must make written findings supporting the declaration that the land is “surplus land.” (Id.) Those findings are intended to demonstrate that the Loyalton Ranch Property is no longer suitable for “agency use”. Staff will bring an item for Council Consideration in a May/June 2022 timeframe.
Step 2. Issue Notice of Availability for Loyalton Ranch Property.
After declaring the Loyalton Ranch Property to be surplus land but prior to disposition or negotiations for the transfer, the City must send a written Notice of Availability (“NOA”) to certain parties designated in the SLA in the form provided in Appendix A to the HCD Guidelines. (Gov. Code §54222; HCD Guidelines, 201.)
Step 3. Receive NOA responses and conduct negotiations
After the City issues the NOA, it cannot take any action to dispose of the Loyalton Ranch Property for 60 days. If the City receives one or more responses to the NOA within those 60 days, the City must engage in good faith negotiations with the responding parties for at least 90 days. The 90-day negotiation period cannot begin until the first day following expiration of the 60-day NOA period.
There are very specific requirements regarding accepting and rejecting offers which will be further discussed when and if the process continues.
Step 4. Final disposition
If negotiations are successful, the City may formally sell the Loyalton Ranch Property.
Next Steps
1. Complete an updated Appraisal for the property.
2. Per Council request, schedule tours of the property for Councilmembers who are interested to visit the site.
3. Schedule for Council consideration declaration of the property as Surplus Land. Staff expects to schedule this for a May/June 2022 timeframe.
ENVIRONMENTAL REVIEW
The discussion on the potential sale of Government Property is not a project within the meaning of the California Environmental Quality Act (“CEQA”). If the City Council directs further action to proceed toward a proposed sale of a surplus government property, the project review will include analysis in accordance to CEQA Guidelines section 15206(b)(4), 15312 and 15061(b)(3).
FISCAL IMPACT
Current anticipated costs include outside counsel support at an amount set forth in the confidential legal services agreement. The updated appraisal will cost approximately $5,500. Funding for these costs is available in the Electric Utility Fund.
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.
RECOMMENDATION
Recommendation
Note and File the Strategy and Next Steps for the sale of the Loyalton Ranch Property.
Staff
Reviewed by: Manuel Pineda, Chief Electric Utility Officer
Approved by: City Manager’s Office