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HomeMy WebLinkAboutStaff Report 4.E 12/01/2008TO: John ikoan SOW: TARO d. Cgypsl 4.E -.D,ecem,ber 1, 2008 MEMORAh!l UNt N O V 2 v 2000 Pursuant to Rule II(A)(7) of the Council'.3 RuI056 Policies and Ptoceduras, the undersigned I,Oroby mquast that the Ulowiug hent he added to the agenda for the Commit's lkcomber t, 2008 matin$: Di-mmlon and pussible action on tit* proposed Mastor Agmvment and Titst Amendntml to Putting Ouruge Basamcnt and Operating At roument prescnted by Uaaiu Street Pruperties tegardbte tha 9hmirc Uisuiot project. ibWt Novembcr I5, 2008 Eiatad: Nuvcmiier 25.2008 November 25, 2009 TO: Mayor and City FROM: John Brow SUBJECT: Council Request to Place Item on the December 1, 2008 Agenda Pursuant to the request of Councilors Nan and O'Brien received this date, to place for consideration on the agenda an item: "Discussion and Possible Action on the Proposed Master Agreement and First Amendment to Parking Garage Agreement and Operating Agreement presented by Basin Street Properties regarding the Theater District Project ", this is included on your December 1, 2008 agenda. As you are aware, the majority of the Council is required to approve the placement of such items on the agenda prior to considering them. Staff and Basin Street representatives have worked on the referenced items since your November 17, 2008 meeting, and engaged in a broader discussion regarding Basin Street's request to modify its requirement to build the Riverfront Apartments portion of the Theater District project. It is staff's position that these discussions are not complete, additional work: analytical, review, negotiation, and legal drafting, is needed. Staff deferred placing this item on the December 1, 2008 agenda, in anticipation of resolving this unfinished business prior to bringing the matter to Council at its December 15`h meeting. Attached, for your information, are the most recent drafts of the referenced documents provided by Basin Street, reflecting changes discussed with staff last Thursday. Staff recommends, if Council determines to approve such documents, that it consider additional language changes that strengthen the City's position. Staff will be prepared on December Is` to provide recommended language changes, should it be requested. Also provided, although incomplete as to all the issues and related back up material, is a preliminary draft of a staff report that was intended upon its completion to present this matter to the Council. JCB a MASTER AGREEMENT THIS MASTER AGREEMENT ("Agreement") is entered into as of the -04A day of ^tii.,�iiihai=December, 2008, by and between the CITY OF PETALUMA ("City"), a municipal corporation, the PETALUMA COMMUNITY DEVELOPMENT COMMISSION ("Agency"), and BASIN STREET PROPERTIES ("Basin Street'), a California corporation, and PETALUMA THEATRE DISTRICT PARKING, LLC ("Parking Owner"), a California limited liability company. THE PARTIES ENTER into this Agreement on the basis of the following facts, intentions and understandings: A. City and Basin Street entered into that certain Development Agreement ("Development Agreement") dated as of February 27, 2004. B. Agency and Basin Street have entered into that certain Owner Participation Agreement dated as of February 27, 2004 as amended by that certain First Amendment to Owner Participation Agreement dated as of January 23, 2006. Such Owner Participation Agreement and First Amendment to Owner Participation Agreement are hereinafter collectively referred to as "Participation Agreement." C. City, Agency, Basin Street and Parking Owner have entered into that certain Parking Garage Easement and Operating Agreement ("Parking Agreement') dated as of June 30, 2007 ("Parking Agreement'). D. City and Basin Street have entered into that certain relocation of livery stable letter agreement ("Livery Agreement') dated January 21, 2004. D132/_..,...:_..._ 00.821M-4 E. The parties acknowledge that Basin Street, Parking Owner, City and Agency have completed all of their respective obligations under the Development Agreement, Participation Agreement, Parking Easement and Livery Agreement (collectively "Existing Agreements"), including, but not limited to, completion of all of the improvements anticipated under the Existing Agreements, and City has issued Certificates of Occupancy to Basin Street and Parking Owner with respect to all such improvements. F. The parties further acknowledge that, although the improvements have been complete, the parties still maintain certain contingent obligations and other obligations to one another as further described in this Agreement. G. The economy, as a result of the financial crisis, has become difficult and has caused Basin Street, the City, and the Agency to have to curtail certain programs and reduce staff in ways that limit the parties economic development and the provision of services to the community. H. The parties desire to explore opportunities for economic development in the community as more specifically set forth in this Agreement, and the parties desire to tenninate the Development Agreement, the Participation Agreement and the Livery Agreement except as specified herein and to possibly amend the Parking Agreement as specified herein. NOW, THEREFORE, in consideration, and mutual promises and covenants of the parties, the parties hereto agree as follows: Amendment. The Development Agreement and Owner Participation Agreement are hereby amended such that the original design for the Waterfront Apartment portion of the I --_- IIIIMUMIM-21 -2- I Theater District project, which included 105 apartment units and a three story parking structure, is hereby revised and replaced with the existing as -built design attached hereto as Exhibit A, which includes 90 apartment units served by covered parking in lieu of the parking structure. 2. Development Agreement. The parties acknowledge that the Development Agreement is, as of the date first above written, terminated immediately following the amendment specified in Section 1, and the parties further acknowledge that the termination is pursuant to Section 4.3 of the Development Agreement in that final Certificates of Occupancy for the project have been granted by the City to Basin Street. Owner Particination Agreement. The parties hereby terminate the Owner Participation Agreement except for those obligations of the parties as specified in Exhibit B attached hereto and incorporated herein by reference thereto, and City hereby accepts the improvements pursuant to Section 2.6.6.2 and shall take all actions necessary to effectuate such acceptance. 4. Parking Agreement. The parties hereby agree to explore amending the Parking Agreement on the following terms: a. Consultant. Basin Street, at its sole cost and expense, shall spend up to $10,000 on a parking consultant mutually acceptable to City and Basin Street to explore developing income streams from the existing parking structure ("Structure"). The parties shall select a parking consultant within thirty (30) days of execution of this Agreement, and the City designates City Manager, on City's behalf, as having the right to make a decision on the parking consultant. ,,,._,—,___- 11112 in 113am-1 - 3 - b. Existing Commitments. During such thirty (30) day period, the City, Agency, Basin Street and Parking Owner shall explore and catalog all of the existing parking commitments in the Structure the parties have made to third parties, and they shall jointly prepare a statement of existing parking conditions for the parking consultant. Task. The parking consultant shall be requested to recommend methodologies for developing income from the Structure consistent with the existing parking conditions. d. Profit Sharing. The parties agree that should they find a mutually acceptable parking program that can develop profit from the Structure, the parties shall share the net profits 50% each. -On tinie tn.th"Av. tJie,rl;trties may amend the narking program and :titer the same as thev deem mutually accentable. but with no change ig the profit split. Net profits shall be all profits calculated annually from the Stricture after repayment to Basin Street of expenditures for the parking consultant and payment of all expenses in connection with the adevelonment anti implementation of anv parking fee nropram. including, but not Jimited to. gates. meters. enforcement. security and accountinn exn of the Structure, itxlndi+tebut not ore -existing taxes, insurance, maintenance and any existing debt on the Stricture. In considering whether to institute a parking program the parties shall not nititute a nrogram that neaaflyely_affectq the revenne received by anv of the nartie4 frgJn ,lite downtown tenants and owners Y Terns. The parties agree that the term of the Parking Agreement shall he eitended to a teen of sixty (601 years. -`I- lJ Amendment. The parties agree that they shall amend the Parking Agreement to take into account any mutually acceptable amendments to the Parking Agreement as a result of their determination regarding income streams from the Structure by execntinz, aclinnwledgiu and reenrdingcontemnm-aneonsly with thgtxeeution hereof the Firal Amendment to Parking Agreement attached hereto as Fxhibij_C, g. Livery Agreement, The Livery Agreement is hereby terminated, and Basin Street specifically acknowledges that City may use profits City derives from the Structure for such uses as the City determines in City's sole discretion. 5. Bond Reouirements. The City, Agency, Basin Street and Parking Owner acknowledge that Basin Street discovered one bond obligation that Basin Street had not fulfilled, but all parties now acknowledge that Basin Street has delivered a bond for the public improvements to City and all bond obligations have been met by Basin Street and Parking Owner. 6. Economic Development. Given the economy, the parties shall work in good faith to determine mutually acceptable methods for increasing the economic benefits that the parties derive from the developments referenced in the Existing Agreements. ]SIGNATURES FOLLOW ON NEXT PAGE] - 5 - mm�ne�ngg,-,, IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. Dated: CITY OF PETALUMA By: -,'il-r.JDJM Brown City Manager Attest: By: City Cleric Approved As to Form: By: City Attorney Dated: BASIN STREET PROPERTIES, a California corporation By: Matthew T. White President Dated: PETALUMA COMMUNITY DEVELOPMENT COMMISSION By: -Vhl:rJD]m Brown Executive Director Approved As to Form: M „ i„nuxzws�.z Agency Counsel -6- Dated: PETALUMA THEATRE DISTRICT PARKING LLC, a California limited liability company rI-- :___:.._ ���IIR9iflNi � By: G&W Ventures, LLC, a California limited liability company In Matthew T. White Manager -7- c EXHIBIT A (SEE ATTACHED) DB2/+ . -- Fxbib1t A 10 EXHIBIT B The parties acknowledge that the following provisions contained in the Participation Agreement shall remain in full force and effect for the term provided in the Owner Participation Agreement. I. Section 2.6.5 (Warranty Provisions) 2. Section 3.8 (Indemnity Provisions) 3. Section 4.2 (Ohlieation to Refrain from Discrimination Provisi 4. _Sections 7.1 and 7.2 (Hazardous Material p " h,il-.1+Previsions) ---�- Lection 8.1 (Relocation Holds Harmless and Indemnite Provisionsl 6. Section 10.1 (Indemnity Provisions) DH21— 20Yn]HNS r. 1ILU B EXHIBIT C (SEE ATTACHEDI mm/11IN9198iI E bibit C Recording Requested by And Return To: City Clerk's Office City of Petaluma I1 English Street Petaluma, CA 94952 EXEMPT FROM RECORDING FEES PER GOVERNMENT CODE §§6103,27383 FIRST AMENDMENT TO PARKING GARAGE EASEMENT AND OPERATING AGREEMENT Petaluma Theatre District (Petaluma, California) TI -IIS FIRST AMENDMENT TO PARKING GARAGE EASEMENT AND OPERATING AGREEMENT (the "First Amendment") is made and entered into as of the _ day of December, 2008, by and among the City of Petaluma, a municipal corporation ("City"), the Petaluma Community Development Commission ("Agency"), Basin Street Properties, a California corporation ("Basin Street"), and Petaluma Theatre District Parking, LLC, a California limited liability company ("Parking LLC"). City, Agency, Basin Street and Parking LLC are individually referred to in this First Amendment as a "Party" and collectively as the "Parties". RECITALS A. The Parties entered into that certain Parking Garage Easement and Operating Agreement dated as of June 30, 2007 (the "Agreement"). The Agreement was recorded in the Official Records of Sonoma County on August 20, 2007 as Instrument No. 2007092134. B. The First Amendment is being entered into pursuant to that certain Master Agreement between the Parties of even date herewith. C. The Parties wish to amend the Agreement as set forth in more detail below. AGREEMENT NOW, for good and valuable consideration and other mutual covenants, the Parties hereby agree as follows: 1. Extension of Term. The 20 -year term of the easement granted in Section 3(a) of the Agreement, and the 20 -year term of the Agreement as set forth in Section 29 of the 13 Agreement, are hereby extended for an additional period of forty (40) years, for a total term of sixty (60) years. 2. Maintenance. Notwithstanding Section 7 of the Agreement, expenses incurred by Parking LLC in connection with the generation or collection of parking revenue from the Parking Garage shall be subject to reimbursement out of revenue generated from the Parking Garage, as more fully set forth in the Master Agreement. 3. Parking Fees. Without limiting Parking LLC's existing rights to charge for parking in the Parking Garage, Parking LLC shall have the right to charge for parking in the Parking Garage in accordance with any shared revenue parking program established pursuant to the Master Agreement. 4. Counterparts. This First Amendment may be executed in two or more counterparts, which when taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Parties have executed this First Amendment as of the day and year first above written. Dated: CITY OF PETALUMA By: John Brown City Manager Attest: By: City Clerk Approved As to Form By: City Attorney 2 b) Dated: Dated: BASIN STREET PROPERTIES, a California corporation Matthew T. White President PETALUMA COMMUNITY DEVELOPMENT COMMISSION By: John Brown Executive Director Approved As to Form: Agency Counsel Dated: PETALUMA THEATRE DISTRICT PARKING, LLC, California limited liability company By: G&W Ventures, LLC, a California limited liability company By: 3 Matthew T. White Manager STATE OF CALIFORNIA COUNTY OF On 1008 before me, , Notary Public, personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature: (seal) 1L CITY OF PETALUMA, CALIFORNIA PETALUMA COMMUNITY DEVELOPMENT COMMISSION Agenda Title: Discussion and Possible Action to Adopt Resolution Approving a Design Change for Riverfront Apartments and Execution of a Master Agreement Terminating Theater District Development Agreement and Owner Participation Agreement with Basin Street Properties; and Introduction Ordinance Modifying Theater District Parking Garage Easement Meeting Date: December 1, 2008 Meeting Time: ❑ 3:00 PM Z 7:00 PM Category: ❑ Presentation ❑ Consent Calendar ❑ Public Hearing ❑ Unfinished Business © New Business Department: Director: Contact Person: Phone Number: City Manager John Brown Eric Danly 778-4362 City Attorney Eric Danly Cost of Proposal: N/A Name of Fund: Amount Budgeted: N/A Account Number: Recommendation: It is recommended that the City Council take the following action: Consider: Adoption of resolution approving a design change for the Riverfront Apartments and execution of a Master Agreement terminating the Theater District Development Agreement and Owner Participation Agreement with Basin Street Properties in exchange for an extended easement for public parking in the Theater District Panting Garage and prospective future revenue from parking fees; introducing an Ordinance Modifying Theater District Parking Garage Easement. Summary Statement: Basin Street Properties has completed the public improvements for the Theater District Project pursuant to the Owner Participation Agreement ("OPA"). The private improvements that are also part of the Theater District Project ("the Project") include the Cinema complex, the Parking Garage at. 149 C Street, the Theater Square mixed use project, the Waterfront Office Building and the Riverfront Apartments, with associated landscaping and site improvements for those components. All structures shown on the Project plans have been completed except for 15 of the 105 units and a related above -ground panting structure for the Rivcrfront Apartments. A separate agreement providing for relocation of the old Livery Stable also requires Basin Street to propose a source of funding for some restoration and maintenance. The Livery Stable has been relocated to Steamer Landing Park at Basin Street's expense but issues remain as to continued funding obligations. Basin Street has asked that the City modify the Project plans to accept a design change eliminating the remaining improvements at the Riverfront Apartments, which would then cause termination of the Development Agreement based on Basin Street's receipt of Certificates of Occupancy for all of the improvements specified in the Development Agreement other than the Riverfront items described above. The proposed Master Agreement would terminate the Owner Participation Agreement between the Petaluma Community Development Commission and Basin Street. In exchange, Basin Street has proposed that it extend the City's easement over the Theater District Parking Garage to permit public parking for 40 years above and beyond the existing 20 year easement, perforin a study of possible revenues from paid parking in the garage and split net revenues from any future paid parking 50/50 with the City. I� Attachments to Aeenda Packet Item: 1. Resolution Approving Design Change for Riverfront Apartments and Execution of Master Agreement Terminating Theater District Development Agreement and Owner Participation Agreement with Basin Street Properties 2. Proposed Master Agreement 3. Ordinance Modifying Theater District Parking Garage Easement 4. Proposed Modification to Theater District Parking Garage Easement (Ex. A to Attachment 3) 5. Owner Participation Agreement with Exhibits 6. Development Agreement with Exhibits 7. Letter Agreement regarding Livery Stable dated January 21, 2004 Reviewed by City Attornev: Annroved by City ManaEer: Date: Date: Rev. # Date Last Revised: I File: SRO 1173214 CITY OF PETALUMA, CALIFORNIA DECEMBER 1, 2048 AGENDA REPORT FOR Discussion and Possible Action to Adopt Resolution Approving Design Change for Riverfront Apartments and Execution of Master Agreement "Terminating Theater District Development Agreement and Owner Participation Agreement with Basin Street Properties; and Introduction of Ordinance Modifying Theater District Parking Garage Easement 1. RECOMMENDATION: It is reconirnended that the City Council consider adopting the Resolution Approving Design Change for Riverfront Apartments and Execution of Master Agreement Terminating Theater District Development Agreement and Owner Participation Agreement with Basin Street Properties; and Introduction of Ordinance Modifying Theater District Parking Garage Easement. 2. BACKGROUND: On August 4, 2003, the City Council adopted Ordinance No. 2158 N.C.S., establishing a downtown Theater District combining zone in the Central Business District Redevelopment Area. In February, 2004, a Development Agreement ("DA") between the City and Basin Street Properties and an Owner Participation Agreement ("OPA") between the PCDC and Basin Street Properties were executed, setting out the conditions and responsibilities for development of the public and private improvements to be constructed in the Theater District. An estimated phasing and timing plan was part of the two agreements, but ultimate control of timing of completion was left in the control of the developer, to address market forces. All improvements have been constructed in accordance with the approved development and construction plans; except that 90 traits rather than 105 units were constructed in the Riverfront Apartments, and a two-story above -ground parking structure serving the apartment mixed use complex was not built. In design hearings held in late 2004, SPARC allowed the remaining 15 apartments and the parking structure to be deferred to an unspecified "Phase 11". Staff has opined that there is sufficient existing parking for the residential and retail uses in the Riverfront Apartments complex without the parking structure for the mixed use complex. Basin Street has asked the City and PCDC to accept the Project as complete, without this remaining construction. The separate Theater District Parking Garage has been constructed and is subject to a recorded easement from its owner in favor of the City providing 216 public parking spaces in the garage for a period of 20 years. The private improvements as a whole contain — residential units and square feet of commercial and retail. space. At the time the OPA and DA were executed, Basin Street Properties did not hold title to all of the properties needed for the Project, preventing recordation of the OPA and DA until new title information was provided as to the ownership entities. Basin Street did not provide that information in a timely fashion, the City did not follow up, and as a result the Project construction loan was recorded in first position, and the OPA and DA have not to date been recorded. Despite lengthy discussions, Basin Street has not been willing or able to provide subordination of the construction loan to the City's and PCDC's interests in the OPA and DA. If However, because the Project has been largely completed, because the City and PCDC are receiving the benefits of the public improvements and the redevelopment project, and because Basin Street Properties will remain obligated for the few remaining covenants and obligations from the OPA regardless of recordation, recordation of the OPA is probably less important than it was before the Project was constructed. The surviving covenants include, for example, continuing compliance with nondiscrimination provisions, and various indemnities and warranties. All required security for the public improvement warranties has been provided. The covenants that all private improvements will continue to be used for the purposes of the Project are protected by the conditions of Project approval and land use entitlements which require use in accordance with the Project plans and the Central Petaluma Specific Plan. Major changes in use would require modification and a new entitlement process. The DA will terminate by its own terms on issuance of the last certificate of occupancy for the Project. If the design modification for the Riverfront Apartments is approved by the City and the PCDC, all certificates of occupancy for the Project will have been issued. A Cultural Resources Mitigation Measure #1 for the Project which was part of exhibits to both the OPA and DA requires Basin Street: "...to relocate the historic Livery Stable in a manner that will retain as much of the existing structure and exterior materials as is reasonably possible. The new site for the Livery Stable is on property owned by the City of Petalama (McNear Peninsula) and it is proposed to incorporate the building into a master park plan that includes walling trails, interpretive centers and other related amenities. The City has agreed to accept the building on its property." Basin Street also signed a letter agreement in January 2004 after it began removing the Livery Stable from 102 D St. without proper City permits. The letter agreement contained more detailed obligations regarding the relocation, including restoration and maintenance while in a temporary location, and removal to its ultimate site in what is now Steamer Landing Park. (Attaclmient 7.) The Livery Stable has been moved to its permanent location, on a new foundation. Full restoration has not been completed and further work may be required to make the structure weather tight. This agreement required Basin Street "...to negotiate with the City Manager to establish a fund, payable annually to the City of Petaluma, from revenue sources to be determined by Basin Street Properties, for the on-going restoration of the livery stable in its permanent location." Basin Street has proposed to provide revenue from the proposed modification of the parking garage to satisfy its funding obligations under the January, 2004 agreement. 3. DISCUSSION: If the design modification for the Riverfront Apartments is approved by the City and the PCDC, all certificates of occupancy for the Project will have been issued, and the DA will terminate by its own terms. If the design modification is not approved, it is an open question whether the Project is considered substantially complete without the extra 15 apartments and related parking structure. Basin Street has indicated that it will not seek to extend the DA beyond its February 26, 2009 termination date, and does not intend to construct the SPARC -deferred Riverfront Apartments "Phase Il," (15 units and the parking structure.) The Master Agreement would ensure that Basin Street Properties ontinues to remain liable for the OPA covenants and warranties that survive termination of the OPA. However, later third party purchasers of portions of the Project would not be bound to the same extent if the Master Agreement is approved and the OPA is not reformed to reflect current title owners and _2 recorded. The present title holders all appear to be limited liability companies controlled by Basin Street. 4. FINANCIAL IMPACTS: There may be a minor financial impact to the City from not receiving property tax and other revenue related to occupancy of the 15 apartment units and/or from any portion of construction -related spending on those units that could be shown to affect Petaluma. Provision of a possible revenue stream from a modified parking agreement could offset some or all of the costs of ongoing maintenance for the Livery Stable in its new location at Steamer Landing Park. Basin Street was not required by the OPA or the letter agreement to pay the costs of converting the Livery Stable to a new use, or reconstruction of the interior of the building. Cost over -runs related to the public improvements and failure of a proposed special tax district to cover certain of those costs are discussed in the separate agenda bill on the public improvements. 1173214.2