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Further On Dec. 4 Council Hearing Seeking To Reduce Developer's Purchase Price For City-Owned Atlantic/Artesia Parcels (NE corner) By $1 Mil (Nearly In Half)

  • Revised site plan reduces commercial square footage by 17% compared to price reduction of 47%
  • After LB's RDA paid $7.7+ mil to acquire properties, Council voted in Aug. 2016 to sell them $2.1 mil although it wasn't the highest offered price ("slightly less" staff said at the time)
  • AUDIO / Amnesia File: Aug 2016: Hear Councilman (then-Vice Mayor) Richardson praise project as originally proposed, citing its already included amenities

  • LBREPORT.com is reader and advertiser supported. Support independent news in LB similar to the way people support NPR and PBS stations. We're not non-profit so it's not tax deductible but $49.95 (less than an annual dollar a week) helps keep us online.
    (Dec. 4, 2018, 10:50 a.m.) -- LBREPORT.com provides further details below regarding the Dec. 4 City Council hearing item (detailed by LBREPORT.com on November 28) in which city staff seeks Council approval to cut nearly in half the sale price to a developer of city owned properties at the NE corner of Atlantic Ave./Artesia Blvd.

    The properties cost LB's now-dissolved Redevelopment Agency $7.7+ mil to acquire and in August 2016, the Council (having gained approval from Sacramento to sell the properties) voted 9-0 to sell them for $2.1 million. A developer (Atlantic and Artesia LLC, part of Frontier Real Estate Investments, LLC) signed a purchase/sale agreement for $2.1 mil in December 2016.) The Dec. 4 Council hearing item proposes to reduce the sale price to the developer by $1 million, resulting in net sale proceeds of $1.1 million of which the City would receive about 21%.

    Although the Dec. 4 Council hearing item's agendizing memo states that public dedication requirements reduced the anticipated area for development (without citing numbers), the total reduction in commercial space -- even when including a 4,800 sq. ft. "parklet" -- appears to amount to a reduction of roughly 17.3% of the developer's Aug.2016 proposed commercial square footage. This compares to a proposed $1 million reduction in the sale price of 47.56% from the developer's purchase/sale agreement price.

    The developer's revised site plan became visible in an October 2018 Planning Commission agenda item (which city staff announced was postponed at the developer's request) has now been rescheduled for Dec. 6.) The items show what the Council's Dec. 4 hearing materials don't mention: the revised site plan includes two shipping container restaurants. The Dec. 6 Planning Commission materials indicate the revised commercial square footage is now 11,013 sq. feet. This compares 13,320 sq. feet in the August 2016 developer proposed commercial square footage (with two buildings.) (Our math: 13,320 minus 11,013 = 2,307; 2,307/13,320 = 17.31% reduction in revised site plan commercial sq. footage.) This compares to a roughly 47% reduction in sale price (1,000,000/2,100,000 = 47/56% reduction in sale price)

    California's Constitution forbids government entities from making gifts of public money, but in 2016 (at basically the same time as the LB City Council approved the property sale), the state legislature enacted AB 806 (without voted opposition in the Assembly and state Senate.) It's now codified as CA Government Code section 52201 to promote what it called "economic opportunities"...and the Dec. 4 City Council hearing item proposes to use that statute to cut the buyer/developer's cost nearly in half, citing changes to the project's plans it says city staff required that implement "community benefiting design features."

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    In its Dec. 4 agendizing memo, city staff offers the following rationale for its proposed reduced sale price:

    Over the past two years, the Buyer/Developer has been working with City staff on the entitlement of the proposed project as required under the terms of the agreement. Through the entitlement process, City staff has further evaluated the conceptual design and requested significant changes and expansion of the project area. First, an approximate 4,800-square foot "parklet" will be introduced to the southwest corner of the project site and will be open to the public and patrons of the retail center. The space will be available for programming and community engagement to meet the needs for community gathering spaces that currently do not exist in the area. The Buyer/Developer will provide security during regular operating hours. Second, extensive architectural, landscape, and site modifications have been required increasing the quality of the project. The City has requested that the Buyer/Developer provide articulated building facades with brick veneer and smooth stucco finishes, large landscaped setbacks with tier landscaping, off-site landscaping, hardscape (multiple hardscape surfaces including stone pavers, concrete, and granite), and lighting improvements. Third, the Public Works Department has increased public dedication requirements of the project, thus reducing the anticipated area for development. Finally, the site plan has been modified to consist of four free standing buildings. The revised project design and new site plan are attached as Attachment C and D. The City-requested changes in the scope of the project have significantly increased the project costs, originally estimated at approximately $8,000,000.

    Sponsor

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    A little over two years ago at the August 2, 2016 Council meeting on the original purchase/sale agreement, Councilman (then-Vice Mayor) Rex Richardson offered effusive praise for the development as it was initially proposed, saying it included amenities and features sought by the public.

    To hear quick launch audio of then-Vice Mayor/now Councilman Richardson's words on August 2, 2016, followed by comments of Councilwoman Lena Gonzalez and Mayor Robert Garcia (and public testimony) click here.

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    The Aug. 2, 2016 city staff agendizing memo acknowledged that the city chose a developer whose offered $2.1 million purchase price "was not the highest price offered for the property." In publicly presenting the item, LB's now-retired Director of Economic and Property Development, Mike Conway, said the price was "slightly lower" than the highest offer.

    Sponsor

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    For the Dec. 4, 2018 price reduction hearing, CA Government Code section 52201 required the City to prepare and make publicly available a report disclosing certain information about the transaction in seeking to fall within the statute's "economic opportunity" terms. A statutory "economic opportunity" report is included as Attachment E to the Dec. 4 agendizing materials at this link. It states in pertinent part:

    I. Proposed Sale of City Owned Property [§52201(a)(2)(A)) The City assembled the Subject Property through the acquisition of various parcels (approximately 93,230 square feet) and entered into a Purchase and Sale Agreement with the Buyer. The Fifth Amendment amends the purchase price based on certain requirements imposed on the Buyer, by the City, for community-serving purposes, and certain development standards above those otherwise required by applicable zoning. A copy of the Purchase and Sale Agreement and Proposed Fifth Amendment are attached...

    ...II. Cost of the Agreement to the City [§S2201(a)(2)(8)(i)]: The cost of the agreement to the City is approximately $7,790,000 in land acquisition costs through negotiated settlement and the use of eminent domain. Relocation and clearance costs are unknown.

    III. Estimated Value of the Interests to be Conveyed Determined as the Highest and Best Uses Permitted Under the General Plan or Zoning [§S2201(a)(2)(8)(ii)): The estimated value of the interests to be conveyed is $2,100,000. The City conducted a Request for Proposal process requesting proposals consistent with the vision and intent of the North Long Beach Redevelopment Project Area and its guiding documents. Of the proposals received, the Buyer's proposal was selected at a purchase price of $2,100,000 offering the best value to the City with a development concept design that offered a well balanced land use transition while complementing the surrounding residential neighborhood.

    IV. Estimated Value of the Interests to be Conveyed at Highest Use and With Conditions, Covenants and Development Costs [§52201(a)(2)(B)(iii)): The estimated value of the interests to be conveyed at Highest Use and with Conditions, Covenants and Development Costs is approximately $1,100,000.

    V. Explanation of Why the Acquisition, Sale, or Lease of the Property Will Assist in the Creations of Economic Opportunity [§52201(a)(2)(B)(iv)): An economic opportunity is created through the sales agreement which will increase property tax revenues to all property tax collecting entities, by at least 15 percent of total property tax resulting from the project at full implementation when compared to the year prior to the property being acquired by the City.

    The City completed assembly of the Subject Property in 2010, at which time the annual property taxes for the Subject Property was $25,115. Given project costs of approximately $9,000,000, anticipated annual property taxes at full implementation is $90,000, a 258% increase in annual property taxes to affected taxing entities.

    [LBREPORT.com comment: Exactly how it creates a statutory "economic opportunity" to cut the developer/buyer's previously agreed purchase price nearly in half for asserted additional amenities and developer costs after the City already agreed to sell and the buyer agreed to buy properties for $2.1 million that the City's former RDA paid over $7.7+ million to acquire remains unclear to us.]

    At midmorning Friday Nov. 30, LBREPORT.com asked city staff via email if it could cite some Assessor-accepted metric or other accepted metric to support its conclusion that because the project may cost the developer approx $9 million, that the assessor will assess it at 1% of the developer's cost. As of midmorning Dec. 4, staff's reply to us is pending.

    In terms of Fiscal Impact of the staff-requested Council action, the Dec. 4 agendizing memo says the reduced purchase price ($1.1 million instead of $2.1 million) will be paid (less escrow fees, closing costs, etc.) to the L.A. County Auditor-Controller for distribution to various taxing entities based on their share of the 1 percent tax rate. "The City's share is approximately 21 percent of the net sales proceeds. Consistent with City Council direction, 75 percent of the City's share shall be retained for projects within North Long Beach Redevelopment Plan Area and 25 percent shall be used for Citywide economic development priorities. Approval of this recommendation will provide continued support for the local economy and further the intent of the North Long Beach Redevelopment Plan Area."

    As with all Council meetings, LBREPORT.com will stream tonight's Council meeting live (anticipated start time 5:00 p.m.) The hearing item is agenda item #2.



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