COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Manager’s Office

DATE:

December 3, 2010

BOARD MEETING DATE:

December 14, 2010

SPECIAL NOTICE/HEARING:

Publish once per week for 3 weeks

VOTE REQUIRED:

4/5ths

TO:

Honorable Board of Supervisors

FROM:

Steve Alms, Manager, Real Property Services Division

SUBJECT:

Resolution authorizing Purchase of Woodhouse Industrial Park Property as the site for the Replacement Jail Project

RECOMMENDATION:

A. Adopt a Resolution authorizing the County Manager or his designee to:

1. Subject to the City of Redwood City satisfactorily meeting its conditional vacation of right-of-way and transfer of property undertakings as set forth in the MOU between the County and Redwood City, accept assignment from Redwood City of four Options To Purchase the land and improvements commonly known as 20, 50, 70 and 80 Chemical Way, Redwood City, by executing the Assignment and Assumption Agreement with Redwood City; and

2. Exercise each and all of the Options To Purchase for and on behalf of the County of San Mateo; and

3. Execute notices, extensions, documents, applications, leases and agreements associated with the acquisition and improvement of the Property, including, without limitation, escrow instructions, certificates of acceptance and relocation agreements, in order to facilitate the acquisition and improvement of the Property and to meet the intent of the Resolution and the Board; and

B. Adopt an Appropriation Transfer Request (ATR) transferring $17,878,258 from Non-Departmental ERAF Reserves to various accounts in the Capital Projects Fund for the acquisition of the Property and related fees and costs, including title and escrow, tenant relocation, environmental insurance, due diligence, and site related studies.

BACKGROUND:

At its October 19, 2010 meeting, your Board approved the Pre-architectural Program and authorized the Sheriff, with support of County staff, to proceed with all necessary steps to bring a proposed Replacement Jail Project at what is now referred to as the “Woodhouse Industrial Park Site” (the “Property”) to this Board for its consideration.

Since that time, with the approval of this Board, the County has executed a Memorandum of Understanding (“MOU”) with Redwood City which evidences and recognizes the relationship and commitments between Redwood City and the County regarding the acquisition of the Property. Further, as of the date of this report, prior to considering this matter, you are scheduled to hold a public hearing to consider the certification of a Mitigated Negative Declaration and the adoption of the Mitigation Monitoring Reporting Program (“MMRP”) for the Replacement Jail Project at Woodhouse Industrial Park in Redwood City. The certification of the Mitigated Negative Declaration and the adoption of the MMRP are prerequisites to the actions recommended herein.

DISCUSSION:

As set forth in the MOU, the County has until December 22, 2010 to execute the Assignment and Assumption Agreement and thereby accept assignment of the Options for the purchase of the Property. The execution of the Assignment and Assumption Agreement by the County provides the County with the right to exercise the Options and purchase the land and improvements comprising the Property, and requires the County to fund $200,000; consisting of $8,000 of non-refundable option consideration and $192,000 as an earnest money deposit that is applicable to the purchase price.

If the County fails to give notice by December 27, 2010 of its intention to close the purchase of the Property, then in order to extend the Option Period, the County would have to make additional payments, significant portions of which are not credited toward the purchase price. The first such payment would extend the Option Period to January 31, 2011. To so extend would result in conversion of the initial earnest money of $192,000 to option consideration, and would require an additional $215,500, bringing the total cumulative consideration to $423,500. Of that sum, $138,500 would not be credited toward the purchase price of the Property. The next four extension payments of $84,500 per month, a total of $338,000, would not apply to the purchase price. The subsequent seven monthly payments of $84,500 would be credited to the price at close of escrow. The last possible date for exercise of the Options is December 27, 2011. In order to avoid the noted additional costs, it is anticipated that the Options will be exercised prior to December 27, 2010.

In accordance with the terms and conditions of the MOU, the City Council of Redwood City has scheduled a Special Meeting for December 21, 2010 to adopt a resolution conditionally vacating all of Redwood City’s interest in and rights in the Chemical Way right-of-way, with said conditions being under the control of the County and including such terms as ownership of the entirety of the Property by the County and the right-of-way no longer being necessary. At its December 21, 2010 meeting, Redwood City will also transfer to the County the two City-owned one foot strips of land that lie between the North side of the Property and Maple Street.

Although it is currently anticipated that the City will act timely and that no extensions will be required, if for some reason an extension is advisable or required, it is recommended that, because this Board is not scheduled to meet again until after December 27, 2010, the County Manager, or his designee, be authorized to exercise the right to extend and pay for the first such extension, with any further extensions requiring approval in advance by this Board.

Exercise of the Options by December 27, 2010 sets the combined cost of the Property at $14,350,000, which includes an allowance of up to $500,000 for a loan prepayment penalty that will be incurred upon sale of 50 Chemical Way. Associated relocation benefits totaling an additional $1,500,000 have been negotiated as part of the option agreements for the properties at 20 and 80 Chemical Way, which are owned by entities that are related to the tenants. Relocation costs associated with 50 and 70 Chemical Way have not been determined, but an estimated cost of $750,000 is included in the ATR for acquisition of the Property.

An ATR in the amount of $ 17,878,258, which is submitted under separate cover, is required to establish an appropriation from Non-Departmental General Fund Reserves to fund the deposits required pursuant to the Options and the Assignment and Assumption Agreement and to fund extension of the Option Period if any such extension is advisable or required. Also included in the ATR are sufficient funds to complete the acquisition of the Property, including title and escrow fees, relocation costs, environmental insurance, reimbursement to Redwood City of due diligence costs, and fees for site-related studies.

It is anticipated that the Jail Project will be bond funded, including reimbursement to County Reserves of the cost of acquisition of the Property and related costs.

Short term interim leases for 20 and 80 Chemical Way were negotiated as part of the option agreements to facilitate timely relocation of the occupants, and to ensure that commencement of construction is not delayed. The agreements include a maximum term of 18 months. The leases of 50 and 70 Chemical Way are with corporate tenants, Airgas, Inc. and ValleyCrest Companies, respectively, and are scheduled to expire in 7 to 8 years. It will be necessary to negotiate new, shorter lease agreements with Airgas and ValleyCrest. With the approval of the Board of Supervisors, the County Manager will pursue negotiations with Airgas and ValleyCrest prior to exercise of the purchase options. The goal is to reach agreement on terms similar to the leases that were incorporated in the purchase options for 20 and 80 Chemical Way. The cost of relocation of Airgas and ValleyCrest has not been determined. Rent concessions may be part of the negotiated relocation compensation.

Consistent with Government Code §65402(a), on November 10, 2010 a letter was delivered to Redwood City requesting that the City issue a finding that acquisition of the Property by the County conforms with the City’s General Plan. A Notice of Intent to Purchase Real Property has been published once each week for three weeks in compliance with Government Code §25350. County Counsel has reviewed and approved the Assignment and Assumption Agreement, the Option Agreements, and the Resolution as to form. Copies of the MOU containing the Assignment and Assumption Agreement, and of the Option Agreements, are available in Redwood City at the Clerk of the Board, 400 County Center, 1^st floor, and at the offices of the Real Property Division at 455 County Center, 4^th floor.

Approval of this action will contribute to the Shared Vision 2025 outcome of a Collaborative Community by evidencing a mutually beneficial cooperative effort between the City of Redwood City and the County and by providing preferred site for the construction of the Replacement Jail Facility.

FISCAL IMPACT:

Purchase of the Property and related costs will be funded from the transfer of $17,878,258 from Non-Departmental ERAF Reserves. The actual total cost could be marginally more or less. If the Options are exercised by December 27, 2010, the County will save $475,000 budgeted for the cost of extensions. Although the budgeted amount is believed to be more than sufficient, relocation costs associated with 50 and 70 Chemical Way could exceed the $750,000 estimate.