Loading...
HomeMy WebLinkAboutR45-Economic Development Agency ECONOMIC DEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO FROM: Gary Van asdel, Executive Director SUBJECT: AMENDMENTS TO STATE OFFICE BUILDING AGREEMENTS (pHASE II) DATE: May 7, 2001 C ill ". .. .. d.. SvnoDsis of Previous Commission/Council/Committee Action(s): January 4, 1996: Construction Project Management, Operating and Development Agreement (Caltrans Office Building and Parking facility) executed by and between the Redevelopment Agency, the San Bernardino Joint Powers Financing Authority, and the Department of General Services and Department of Transportation of the State of California. June 11, 1999: Exchange Agreement (Phase II Site/9th and Del Rosa) by and between the Redevelopment Agency and the Department of General Services of the State of California. August 23, 2000: Amendment to Exchange Agreement by and between the Redevelopment Agency and the Department of General Services of the State of California. December 18, 2000: The Community Development Commission authorized extension of the closing date in the State Exchange Agreement to match the closing of the 303 Third Street transaction between the State and 303 LLC. SvnoDsis of Previous Actions Continued to Next Pal!e". Recommended Motion(s): (Communitv DeveloDment Commission) MOTION: That the Community Development Commission approve/ratifY execution of the attached Letter Agreement by the Chairperson on behalf of the Agency to amend the 1996 Construction Management Agreement as between the Department of General Services and the Agency regarding construction of the Phase II State Office Building. Contact Person(s): Gary Van asdel/John Hoeger Project Area(s) Central City and Central City North Phone: 663-1044 Ward(s): One (I) Supporting Data Attached: lID Staff Report 0 Resolution(s) 0 Agreement(s)/Contract(s) 0 Map(s) 0 LetterlMemo FUNDING REQUIREMENTS $ None Source: N/ A N/A SIGNATURE: --Co;;-;;;ti~-;I;;;;Jcou;cil-Noies;------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------- GVO:JBH:lag:05-07-01 DGS Agreement COMMISSION MEETING AGENDA Meeting Date: 05/07/2001 Agenda Item Number: ~ Request for Commission/Council Action Department of General Services May 3,2001 Page Number Two Synopsis of Previous Commission/CounciVCommittee Action(s) Continued: February 22, 2001: The Redevelopment Committee recommended a five year extension of the State's construction obligation for the second office building. March 5, 2001: Community Development Commission continued item at request of staff. April 2, 2001: The Community Development Commission approved a Letter Agreement amending the 1996 Construction Management Agreement between the Department of General Services and the Agency deleting the requirement for the State to commence construction of the second office tower ----------------..-------------------------------------------------.------------------------------------------------------------------------ GYO:ffiH:lag:05-07-01 DGS Agreement COMMISSION MEETING AGENDA Meeting Date: 05/07/2001 Agenda Item Number: A'I5' ECONOMIC DEVELOPMENT AGENCY STAFF REPORT --------------------------------------------------------------------------------------------------------------------- Amendments To State Office BuUdinl! Al!reements (Phase II) The Commission approved an action on April 2, 2001 to amend the Agency's Construction Management Agreement with the State of California deleting the requirement that construction of its Phase II building commence within 180 days after the transfer of title to the Phase II Site from the Agency to the State. Deletion of this provision would allow the proceeds of the State's sale of its 303 Third Street building to be released to the Agency and title to transfer to the State without triggering an infeasible construction requirement on the State for the Phase II tower. However, shortly after the Commission Meeting of April 2, 2001, certain business leaders expressed concern that the Commission's action had released the State out of its "commitment" to build the second office tower and thereby opening the door for Riverside to attract said State building. Consequently, the Letter Agreement amending the 1996 Construction Management Agreement was not executed by the Mayor and never forwarded to the State for acceptance. BACKGROUND The Commission may recall that when 303LLC purchases the 303 Third Street building from the State of California, it will trigger certain performance obligations under the Exchange Agreement and the Construction Management Agreement for the State Office Buildings at Fourth and E Streets. Consummating the 303 Third Street purchase will cause funds to be paid from 303LLC to the State that will then be released to the Agency to complete the State's purchase of the Phase II Site adjacent to the Caltrans Building on Fourth and E Streets. The Construction Management Agreement requires the State to begin construction of a 195,000 square foot six-story office building within 180 days of transfer of the Phase II Site and gives the Agency a right to reacquire the Site upon payment of $1,770,500 to the State if the State fails to build the second office tower after title has transferred to the State. According to State officials, there are not currently a sufficient number of State employees in the San Bernardino area to warrant construction of the second office tower at this time, and, even if there were, it would take at least five years to process the necessary legislation and obtain funding authority for the project. Thus, under the current agreement between the parties, when the State completes the purchase of the Phase II Site as required with the proceeds from the sale of the 303 West Third Street property, it will be unable to construct the second office tower and will fall under a "reverter cloud" which will allow for the Agency to reacquire the Phase II Site at anytime thereafter upon payment of $1,770,500. Although the Agency is not presently intending nor does it have the resources to exercise its right to reacquire the Phase II Site, the State cannot be sure that the Agency's position will not change over time. The potential for the Agency to exercise its reverter rights could jeopardize the State's ultimate ability to plan for the Site. ---..-------------.--.-----------------------.-----------------------------------------------------------------------------------------.---- GVO:ffiH:lag:05-07-01 DGS Agreement COMMISSION MEETING AGENDA Meeting Date: 05/07/2001 Agenda Item Number: 1f'l5' Economic Development Agency Staff Report Department of General Services May 3, 2001 Page Number -2- --------------------------------------------------------------------------------------------------------------------- Due to these uncertainties and the long time frames involved, the State requested that the Letter Agreement modify all obligations of the State under the Construction Management Agreement. See the motion as approved by the Commission on April 2, to delete the State's obligation under the Construction Management Agreement. CURRENT ISSUE During the past two weeks the City Attorney, along with Agency Special Counsel, have been negotiating with State representatives in an effort to reach mutually acceptable provisions of a revised Letter Agreement to amend the 1996 Construction Management Agreement. The details of the revised Letter Agreement will be presented by the City Attorney and Agency Special Counsel at the Commission meeting. It is important for all concerned to realize that under the 1996 Construction Management Agreement the State was not, is not and never will be required to build the second office tower. The same can also be said about the proposed Letter Agreement. However, according to State representatives, in light of the State's investment in the Phase II Site and the plans for developing said Site, it is highly unlikely that the State would abandon its investment and construct a competitive office building in some other community. FISCAL IMPACT This action is for a change in performance and does not change the financial terms of the transactions. Closing the 303 Third Street building will result in payments to the Agency of approximately $750,000. This will complete the payment for the Phase II Site (which originally totaled $2,681,500). Caltrans will have $560,367 left owing on the Phase I Site (which originally totaled 3,835,365). RECOMMENDA nON Based upon the foregoing, staff recommends that the Community Development Commission approve/ratify execution of the form of the Letter Agreement by the Chairperson on behalf of the Agency to amend the 1996 Construction Management Agreement as between the Department of General Services and the Agency to delete from the Construction Management Agreement the requiremen for the construction of the Phase II State Office Building and include certain State obligaf for the d elopmpnd maintenance of the Phase II Site in the Letter Agreement. ~ ~ a-I ary Va Osdel, Executive Dire or Econo c Development Agency GYO:JBH:lag:05-07-01 DGS Agreement COMMISSION MEETING AGENDA Meeting Date: 05/07/2001 Agenda Item Number: -B 'I ~ City of San Bernardino ECONOMIC DEVELOPMENT AGENCY Redevelopment. Community Development. Housing. Business: Recruitment, Retention, Revitalization. Main Street, Inc. ~ May 10, 2001 Mr. Michael Courtney, Deputy Director DEPARTMENT OF GENERAL SERVICES 1102 Q Street, Suite 6000 Sacramento, CA 95814 Re: MODIFICATION OF OBLIGATIONS AS TO THE PHASE II SITE - SAN BERNARDINO STATE OFFICE PROJECT; CONTINUING DGS PROPERTY MAINTENANCE OBLIGATIONS Dear Mr. Courtney: This Letter Agreement is executed by and between the Department of General Services of the State of California ("DGS") and the Redevelopment Agency of the City of San Bernardino (the "Agency") with respect to certain provisions contained in the Construction Project Management, Operating and Development Agreement (Caltrans Office Building and Parking Facility) dated January 4, 1996 (the "Construction Management Agreement"). DGS and the Agency have also entered into that certain Exchange Agreement dated as of May 21, 1999, as amended (the "Exchange Agreement"), with respect to the transfer of title of the Phase II Site from the Agency toDGS. The Community Development Commission of the City of San Bernardino acting as the governing body of the Agency (the "Commission") has duly authorized the execution and delivery of this Letter Agreement which is intended to modify the Construction Management Agreement in the manner as hereinafter set forth but solely as between the Agency and DGS and not as the other parties thereto. DGS and the Agency mutually agree that on and after (i) the date of the sale by DGS of the former State Office Building located at 303 East Third Street, San Bernardino, to a party acceptable to the Agency, and (ii) the transfer of title from the Agency to DGS of the Phase II Site (which transfer shall occur by Grant Deed within seven (7) days after the close of escrow on the sale of the 303 East Third Street, San Bernardino property) as referred to in the Construction Management Agreement and the Exchange Agreement, all provisions of the Construction 201 North E Street, Suite 301 . San Bernardino, California 92401-1507' (909) 663-1044 . Fax (909) 888-9413 www.sanbernardino-eda.org. ---,-I.' .-_._-- c_.' MR. MICHAEL COURTNEY May 10,2001 Page Number 2 Management Agreement, including but not limited to Section 3, Section 4(b), (c), (d), (e) and (t), Section 6(c) (1) and (2) and (d) and Section 7, which refer to the Phase II Site shall be deemed to be deleted in their entirety and of no further force and effect. Thereafter, the sole obligations of DGS to the Agency for the Phase II Site shall be as set forth in this Letter Agreement and specifically with reference to the items contained below: I. If authorized and funded by the State Legislature, DGS hereby irrevocably commits that on or before ten (10) years from the date of this Letter Agreement, unless extended as hereinafter provided, DGS shall construct or cause to be constructed a State Office Building on the Phase II Site consisting of a multi-story office building for the State of California govemmental offices of at least 150,000 gross square feet together with the provision of an adequate number of on-site parking spaces to be located within either an adjacent multi-level parking structure to be build on the Phase II Site or the actual structure ofthe State Office Building on the Phase II Site. 2. If on or before the date that is ten (10) years after the date of this Letter Agreement DGS has not obtained all legislative authorizations and funding requirements and has not commenced the actual construction of the State Office Building on the Phase II Site, the Agency shall have the right to repurchase the Phase II Site for an amount equal to $1,770,500.00 by indicating the intent of the Agency to so repurchase the Phase II Site and to thereafter deposit with DGS the full amount of the purchase price. The Agency must so state its intent to repurchase the Phase II Site and must deposit the repurchase price with DGS at any time within ninety (90) days prior to the expiration of said ten (10) year period of time. In the event the Agency does not so state its intent to repurchase the Phase II Site and timely deposit of the repurchase price with DGS, this Letter Agreement shall automatically be extended without any further action of the parties for an additional period of time equal to ten (10) years. The purchase price reflects a reduction of $911,000.00 from the amount paid by the State of California to the Agency to compensate the City of San Bernardino for funds it expended on the design for an office building on the Phase II Site. 3. In the event that the term of this Letter Agreement is automatically extended as provided above, the Agency shall have the same opportunity to provide notice of intent to repurchase the Phase II Site and to deposit with DGS the repurchase price in the event DGS has not commenced the actual construction of the State Office Building prior to the expiration of the extended term of this Letter Agreement. In the event the Agency does . not so state its intent to repurchase the Phase II Site and timely deposit the repurchase price with DGS by the date which is twenty (20) years after the date of this Letter Agreement, this Letter Agreement shall automatically terminate as of the date which is twenty (20) years from and after the date hereof except for the requirement of DGS to properly maintain, repair and upkeep the landscaping of the Phase II Site which shall be ~~" ,'.."'........ MR. MICHAEL COURTNEY May 10, 2001 Page Number 3 an obligation of DGS during the time that DGS, or any transferee or successor in interest, continues to own the Phase II Site until the State Office Building and the required parking structure are constructed thereon. 4. Except for a transaction structured to accomplish the construction of the State Office Building, DGS agrees that during the term of this Letter Agreement and any extension hereto, DGS shall not sell, lease or otherwise transfer the Phase II Site or allow for any interim or permanent development thereon except for the State Office Building and required parking structure as set forth above. 5. DGS agrees that on or before June 15, 2001, it shall submit landscaping conceptual drawings to the Agency showing its intended landscaping improvements to the Phase II Site. The Agency, in cooperation with the City of San Bernardino, agrees to submit comments and suggested changes, if any, to the landscaping plans to DGS by June 30, 2001. Subject to the availability of funding, on or before September 1, 2001, DGS shall commence the work of the installation and construction of the upgraded landscaping on the Phase II Site and shall diligently complete such work within a reasonable period of time thereafter. Such landscaping plans shall comply in all respects with the Environmental Impact Report prepared for the Phase I and Phase II projects, and DGS shall have no obligation to undertake and landscaping improvements that conflict with said EIR, or to undertake any landscaping improvements which would necessitate the preparation of any additional environmental analysis; however, DGS and the Agency recognize that the landscaping contemplated by this paragraph is intended to be interim landscaping and the Agency states that such landscaping is in compliance with the EIR. The Agency and DGS acknowledge and agree that the contemplated landscaping improvements shall consist of the Phase II Site being partially installed with grass to be sodded in certain areas with other areas to be overplanted with wild flowers all in such areas of the Phase II Site as shall be mutually agreed upon between DGS and the Agency together with modifications to the irrigation system to properly irrigate the newly sodded grass. 6. DGS shall continue to have the obligation to undertake the improvement and ongoing maintenance, repair and upkeep of the Phase II Site in a satisfactory manner. Failure of DGS to so properly improve, maintain, repair and provide for the upkeep of the Phase II Site, to improve and upgrade the landscaping of the Phase II Site as required in this Letter Agreement, and after delivery often (10) days' written notice by the Agency to DGS and the failure of DGS to commence to cure such default and thereafter to satisfactorily complete such cure within a reasonable period of time, the Agency shall thereupon be permitted to either commence a legal action to compel the specific performance of the improvement, maintenance, repair and upkeep obligations of DGS under this Letter Agreement or to expend Agency funds to provide for the satisfactory improvement, p,.",-"",,~.~~~- ------,--~ MR. MICHAEL COURTNEY May 10,2001 Page Number 4 maintenance, repair and upkeep of the Phase II Site and to obtain reimbursement of all such Agency costs and expenses, including administrative costs, plus interest thereon at the highest rate allowable under State law. Such reimbursement by DGS shall be subject to the availability of funds and, if necessary, compliance by the Agency with applicable governmental claim procedures. 7. The Agreement between DGS and the Agency entitled "Amendment to Exchange Agreement (Phase II Site/9th and Del Rosa)" dated as of August 23, 2000, is hereby amended by changing the date of "December 30, 2000" as contained in Section I thereof to "May 15, 2001, and such later date as may be necessary but not to exceed May 22, 2001." 8. The Agency agrees to provide DGS all designs and work product it prepared for the buildings on the Phase II Site, and hereby assigns to DGS all right, title and interest of the Agency in said plans and work product. 9. This Letter Agreement shall terminate upon the completion of the State Office Building and required parking structure. MR. MICHAEL COURTNEY May 10, 2001 Page Number 5 All individuals executing this Letter Agreement represent and warrant that all actions have been duly taken to properly approve and authorize the execution hereof by the undersigned and that the individuals so executing this Letter Agreement are duly authorized to so execute on behalf of DOS and the Agency, as applicable. This Letter Agreement has been duly approved and executed by DOS and the Commission on behalf of the Agency as the date set forth above. REDEVELOPMENT AOEN V OF THE CITY OF SAN BERN 0 By: Title: By: Title: Approved as to form and ::1~ Agency Sp al Counsel By: Title: L SERVICES ORNIA ~r' Title: Approved as to form and legal content: By: ~ CI Legal Counsel