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HomeMy WebLinkAbout2020-08-25 - AGENDA REPORTS - APPROVAL OF REAL PROPTY ACQUISITION, ICE STATION V (2)O Agenda Item: 9 P CITY OF SANTA CLARITA AGENDA REPORT NEW BUSINESS CITY MANAGER APPROVAL:1 DATE: August 25, 2020 SUBJECT: APPROVAL OF REAL PROPERTY ACQUISITION, ICE STATION VALENCIA, 4.39 +/- ACRES IN VALENCIA, ASSESSOR'S PARCEL NO. 2810-043-054 DEPARTMENT: City Manager's Office PRESENTER: Frank Oviedo RECOMMENDED ACTION City Council: 1. Approve the acquisition of real property, 4.39 +/- acres of land with a two-story, 92,751 square -foot building in Valencia, Assessor's Parcel Number 2810-043-054, at a total cost of $14,495,000, which includes $14,200,000 for the purchase price, $45,000 for title, escrow, due diligence, and $250,000 for initial capital improvements. 2. Appropriate $14,495,000 from Facilities Fund Balance (Fund 723) to Recreation Facility expenditure account 15117-5201.005 for the purchase price of the property and related costs. 3. Adopt a resolution declaring the City of Santa Clarita's intent to reimburse certain expenditures from the proceeds of tax-exempt obligations expected to be issued to finance certain public facilities as required by United States Department of Treasury Regulations Section 1.150-2. 4. Authorize the City Manager, or designee, to execute all documents, subject to City Attorney approval. BACKGROUND At the April 28, 2020, City Council meeting, several residents commented during Public Participation to urge the City Council to save the local ice rink, located at 27745 Smyth Drive. The ice rink was built in 2000 and was heavily utilized by the community and attracted patrons regionally for competitive ice sports until the facility closed in March 2020. Page 1 Packet Pg. 50 O In response to residents that spoke that evening, the City Council directed the City Manager to review whether the City of Santa Clarita (City) could play a role in reopening the ice rink. City staff met with members of the ownership group on three separate occasions to better understand what role the City could potentially play in a reopening. As a result of those meetings, the City entered into a contract with Rink Management Services, the nation's largest ice rink management company, to do an evaluation of the business and assist in advising City management. Analysis and Due Diligence _ As part of City staff s analysis and due diligence efforts, an internal City working group was formed, comprised of staff from various City departments including the City Manager's Office, Recreation and Community Services, Public Works, Community Development, and Administrative Services. The internal City working group began an exhaustive review to explore the feasibility of ownership of the property, including site visits of other publicly -owned ice rinks. City staff met with an appraiser and an owner's representative at the property to conduct a walk- through evaluation of the site, including the building interior and rooftop. Additionally, City staff reviewed the building roof with a roofing inspector and the heating, ventilation and air conditioning (HVAC) system with an HVAC contractor. City staff also consulted with the City's financial advisors and consultants that completed a feasibility study on financing options for the potential acquisition of the property. The City working group and consultants reviewed a Property Detail Report summarizing information related to the property, including the owner, location, tax, history, property characteristics, and listing information; a preliminary title report identifying various liens, encroachments, and easements affecting the property; and two appraisal reports providing analysis and conclusions about the property's value based on information gathered by the appraiser from public records, inspection of the exterior building and neighborhood, and selection of comparable sales within the property's market area, including current market trends. Attorneys were also consulted to review all related documents of the purchase and provide advice and insight on the potential acquisition. Potential Property Uses As a result of these efforts, staff determined the best course of action was to acquire the property. Staff arrived to this conclusion based on a number of factors, including re -analyzing studies conducted in 2010 and 2013, which evaluate the local conference center market and potential market demand for a conference center. The results of these studies concluded that there is a need for large business and event spaces in the community. There are a number of existing small to medium sized meeting spaces located in or in close proximity to the City, including facilities operated by hotels, recreational entities, and the City itself. While the vast majority of use would support ice sports, potential uses include business meetings, conferences, tradeshows and other recreational type activities. This will enhance the City's efforts to increase recreational opportunities to the community and will provide additional facility space for local and regional events. As a large event space, it will serve efforts to Page 2 Packet Pg. 51 O increase local hotel patronage and induce visitor spending, with the goal of boosting economic activity and generating local tax revenues while also supporting the ongoing operation of the facility. Negotiations The acquisition includes approximately 4.39 +/- acres of land with a two-story building including a ground floor of 71,288 square feet and second floor mezzanine space of 21,463 square feet, for a total building size of 92,751 square feet, all of the assets within the building needed to run the facility, and an existing cell tower lease agreement which generates revenue. Under a unique public/private partnership, this investment will allow for a private operator to manage the facility, in addition to hosting a wide variety of entertainment events. If the recommended action is approved, the City will solicit proposals for the operation of the facility, including the ice rinks, pro shop, and restaurant. The total cost of the property acquisition is $14,495,000. This includes the $14,200,000 purchase price and $45,000 for title, escrow, and due diligence costs. Additionally, $250,000 is being appropriated for initial capital improvement costs to the property. Reimbursement Resolution The City, or its related entity, the Santa Clarita Public Financing Authority, intends to issue one or more series of tax-exempt bonds (the "Obligations") to finance all or a portion of the associated with the acquisition and rehabilitation of the property. Certain expenditures with respect to the acquisition are expected to be paid by the City prior to the date of issuance of the Obligations. The proposed resolution would allow for the City to be reimbursed for such expenditures. Section 1.150-2 of the Treasury Regulations (the "Treasury Regulations") promulgated under the Internal Revenue Code of 1986, as amended, requires that for an allocation of proceeds of tax- exempt obligations to a capital expenditure paid prior to the issuance of the obligations to be respected by the Internal Revenue Service, the City generally must no later than sixty (60) days following such expenditures have declared their reasonable official intent to reimburse the City for such payment out of the proceeds of the obligations. The proposed resolution would evidence the City's reasonable official intent for purposes of the Treasury Regulations. The resolution is adopted only for the purpose of establishing compliance with the requirements of the Treasury Regulations. It does not obligate the City to make any expenditure or proceed with the acquisition or obligate the City to issue any Obligations. Environmental The proposed acquisition has been reviewed pursuant to the California Environmental Quality Act (CEQA) and the acquisition is exempt under CEQA Section 15301 Class 1 and Section 15323 Class 23. A Notice of Exemption has been prepared and any subsequent or proposed changes in the use or condition of the property will be subject to CEQA guidelines. Page 3 Packet Pg. 52 O ALTERNATIVE ACTION Other action as determined by the City Council. FISCAL IMPACT Upon approval of the recommended actions, $14,495,000 will be appropriated from Facilities Fund Balance (Fund 723) to Recreation Facility expenditure account 15117-5201.005 for the purchase price of the property and related costs. ATTACHMENTS Property Location Map Reimbursement Resolution Page 4 Packet Pg. 53 illiv, 11�11��Il�pjll�pjll�lljq i lz 11111111 , 0 0 1 m 9.b RESOLUTION NO. 20- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA, CALIFORNIA, DECLARING ITS INTENT TO REIMBURSE CERTAIN EXPENDITURES FROM THE PROCEEDS OF TAX-EXEMPT OBLIGATIONS EXPECTED TO BE ISSUED TO FINANCE THE ACQUISITION OF A RECREATIONAL FACILITY AS REQUIRED BY UNITED STATES DEPARTMENT OF TREASURY REGULATIONS SECTION 1.150-2 WHEREAS, the City Council of City of Santa Clarita, California (the "City"), or its related entity, including the Santa Clarita Public Financing Authority (the "Authority") (collectively, the "Issuer") expects to incur one or more series of tax-exempt bonds or other financing obligations (collectively, the "Obligations"), to finance all or a portion of the costs associated with the acquisition of real property, and improvements located thereon 27745 Smyth Drive in Santa Clarita, and rehabilitation, construction and/or installation costs related thereto (the "Project"); and WHEREAS, the City expects that certain expenditures relating to the Project will be incurred and paid from other sources of money available to the City prior to the issuance of the Obligations (the "Reimbursable Expenditures"); and WHEREAS, the City reasonably expects that a portion of the proceeds of the Obligations will be used to reimburse all or a portion of the Reimbursable Expenditures; and WHEREAS, section 1.150-2 of the Treasury Regulations (the "Treasury Regulations") promulgated under the Internal Revenue Code of 1986, as amended, requires that for an allocation of proceeds of the Obligations to a capital expenditure paid prior to the issuance of the Obligations to be respected by the Internal Revenue Service, the City generally must no later than sixty (60) days following such payment have declared its reasonable official intent to reimburse itself for such payment out of proceeds of the Obligations; and WHEREAS, the City desires to facilitate the allocation of proceeds of the Obligations to the reimbursement for payment of the Reimbursable Expenditures for the Project. NOW, THEREFORE, the City Council of the City of Santa Clarita, California, does hereby resolve as follows: SECTION 1. This resolution is adopted for purposes of establishing compliance with the requirements of section 1.150-2 of the Treasury Regulations. This resolution does not obligate the City to make any expenditure or proceed with the Project or obligate the Issuer to cause the issuance of the Obligations until and unless all other necessary actions and approvals are taken or received in accordance with all applicable laws. SECTION 2. The City hereby declares its reasonable official intention to reimburse the applicable Reimbursable Expenditures with respect to the Project from proceeds of Obligations that may hereafter be issued by the Issuer or on behalf of the City. The maximum principal Packet Pg. 55 9.b amount of Obligations expected to be issued for the Project is $16,000,000. All of the Reimbursable Expenditures covered by this resolution were or are to be made not earlier than sixty (60) days prior to the adoption hereof, other than certain de minimis amounts and preliminary expenditures as described in Treas. Reg. Section 1.150-2(f)(2) that are exempt from the sixty-day requirement pursuant to Section 1.150-2 of the Treasury Regulations. The non- exempt Reimbursable Expenditures covered by this resolution are eligible for reimbursement provided the reimbursement occurs not later than eighteen (18) months after the later of the date the original expenditure is made or the date the property is placed in service; but in no event more than three (3) years after the original expenditure is made. SECTION 3. All actions heretofore taken by the officers, or their respective designees, and the employees and agents of the City in connection with the financing of the Project are hereby ratified and confirmed. The officers and their designees, the employees and agents of the City are hereby authorized to take any and all actions in connection with the financing of the Project and as may be necessary and consistent with the purposes of this resolution. SECTION 4. This resolution shall take effect immediately upon its adoption. SECTION 5. The City Clerk shall certify to the adoption of this resolution. PASSED, APPROVED, AND ADOPTED this day of , 2020. MAYOR ATTEST: CITY CLERK DATE: STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF SANTA CLARITA ) I, Mary Cusick, City Clerk of the City of Santa Clarita, do hereby certify that the foregoing Resolution No. 20- was duly adopted by the City Council of the City of Santa Clarita at a regular meeting thereof, held on the day of , 2020, by the following vote: AYES: COUNCIL,MEMBERS: NOES: COUNCIL,MEMBERS: ABSENT: COUNCIL,MEMBERS: CITY CLERK 2 Packet Pg. 56