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HomeMy WebLinkAboutStaff Report 308-06City City of Palo Alto Manager’s Report TO: FROM: DATE: SUBJECT: HONORABLE CITY COUNCIL CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT JULY 24, 2006 CMR: 308:06 APPROVAL OF ALMA STREET ELECTRICAL SUBSTATION RELOCATION AGREEMENT WITH PALO ALTO HIGH STREET PARTNERS FOR $1 MILLION IN EXCHANGE FOR SUBSTATION RELOCATION BY JANUARY 1, 2008 RECOMMENDATION Staff recommends that the City Council authorize the City Manager to approve the Alma Street Electric Substation Relocation Agreement.with Palo Alto High Street Partners (PAHSP). :’~:." .. BACKGROUND PAHSP recently completed a 60-unit condominium project at 800 High Street. The site is adjacent to the City’s Alma Street electrical substation located at 841 Alma Street. The Utilities Department is planning to relocate the substation function to its Quarry Road facility to eliminate redundancy. Since the substation use is incompatible with the new housing development, PAHSP has discussed with the City the schedule for relocating the substation. In order to expedite relocation, PAHSP offered the City $1 million if the substation is relocated by 2008. DISCUSSION The Relocation Agreement (Attachment A) specifies the conditions of the $1 million offer by PAHSP to the City for relocating the substation. The major components include: All substation equipment and associated high voltage lines would be removed by January 1, 2008 ¯PAHSP shall make five annual payments of $200,000 to the City. ¯The Relocation Payment shall be reduced by $100,000 per month pro-rated daily if the relocation is not completed by February 1, 2008. The schedule may be extended by 3 months if the engineering bids for relocation exceed the amount authorized by the City by at least 20% to enable the City to rend the project. The relocation date can be extended without penalty if the schedule cannot be met due to delays beyond the control of the City. CMR: 308:06 Page 1 of 2 The agreement also requires PAHSP to provide the City with a letter of credit as.security for the payments. RESOURCE IMPACT The $1 million will offset the loss of General Fund revenue currently paid by the Utilities Department to the City for leasing the Alma property. ENVIRONMENTAL REVIEW A Mitigated Negative Declaration (MND) has been prepared for the lease agreement with Stanford and the relocation of the substation. The MND is included with the lease agreement staff report in the Council packet for the July 24th meeting. PREPARED BY: DEPARTMENT HEAD REVIEW: CITY MANAGER APPROVAL: EM~ Director of Planning and Community Environment FRANK"BENEST City Manager ATTACHMENT: Attachment A: Relocation Agreement CMR: 308:06 Page 2 of 2 CITY OF PALO ALTO ALMA STREET ELECTRICAL SUBSTATION RELOCATION AGREEMENT This Relocation Agreement (this "Agreement") is entered into effective as of ://"~[~ [ 2. ,2006 (the "Effective Date"), by and between City of Palo Alto ("CITY"), and Palo ~lto High Street Partners, LLC ("PAHSP"). Each of CITY and PAHSP is referred to individually herein as a "Party" and collectively as the "Parties". RECITALS This Agreement is entered into on the basis of the following facts, understandings and intentions of the Parties: No CITY owns the land adjacent to the 800 High Street Project (the "City Parcel") which is currently occupied by the Alma Street Electrical Substation. CITY plans to relocate the Alma Street Electrical Substation operations to the Quarry Road Substation Site on Stanford lands (the "Relocation"). Co PAHSP would like to assist CITY to expedite the removal of this Alma Street Electrical Substation equipment. AGREEMENT Now, therefore, the Parties agree as follows: In consideration for CITY removing the Alma Street Electrical Substation equipment and associated 60 KVA lines along the adjacent alley (the "Equipment") no later than January 1, 2008 (the "Scheduled Relocation Date"), PAHSP shall pay CITY the total amount of $1,000,000 (the "Relocation Payment"), as provided below. Notwithstanding any provision to the contrary contained herein, the Scheduled Relocation Date shall be extended automatically as follows: ao In the event the City staff determines that the Relocation requires an Environmental Impact Report rather than a Mitigated Negative Declaration to satisfy the requirements of the California Environmental Quality Act ("CEQA") or the CEQA regulations, the Scheduled Relocation Date shall be extended by 180 days; Relocation Agreement4 7-12-06 In the event the lowest responsible responsive bid received to perform the Relocation exceeds the maximum amount authorized by the City Council by 20% or more, the Scheduled Relocation Date shall be extended by 90 days; and The Scheduled Relocation Date shall be subject to Force Majeure Delay, as provided below. For purposes of this Agreement, the removal of the Equipment as required by Section 1, above shall be deemed completed when the electrical transformers currently located on the City Parcel have been permanently turned off and the surface of the City Parcel (i.e., above ground) shall have been cleared of electrical equipment. To accomplish this, the City shall use good faith efforts to meet the following schedule (which schedule shall be subject to extension as provided in Section 2, above): a.6-5-06:Bid package released to bidders; b.9-30-06:Contract awarded; c.12-31-07:Transformers permanently turned off; and d.1-1-08:Surface of City Parcel cleared of electrical equipment. PAHSP shall pay the Relocation Payment in installments of $200,000 per year for five years, beginning on the day that the Relocation is completed, and annually thereafter, except as provided below. If the Relocation is not completed by the Scheduled Relocation Date, the $1,000,000 Relocation Payment shall be reduced by $100,000 per month (pro-rated on a daily basis) until such time as the Relocation is completed. Any such reductions in the total consideration shall be applied to final payments due. Intentionally Omitted. PAHSP agrees to reimburse to the CITY funds in an amount not to exceed $140,000, to pay engineering and related costs incurred or to be incurred by CITY in connection with the Relocation if the City does not enter into a new agreement with Stanford University entitling City to complete relocation to the Quarry Road Site by June 30, 2006. PAHSP shall pay such funds upon written request by CITY. The request shall be accompanied by a reasonably detailed statement of costs incurred by CITY. If PAHSP pays any funds for the engineering of the Equipment Relocation, these amounts paid by PAHSP shall be deducted from the first installment of the Relocation Payment due CITY. In the event this Agreement is terminated without the completion of the Relocation, CITY shall have no obligation to repay any portion of the funds paid by PAHSP pursuant to this Section 7. Relocation Agreement4 7-12-06 2 If PAHSP chooses, and CITY agrees, PAHSP may pay the total Relocation Payment early at a mutually agreeable discount. PAHSP’s obligation to pay the Relocation Payment when and as required by this Agreement shall be secured by a Letter of Credit, as follows in tiffs Section 9. ao "Letter of Credit" shall mean an irrevocable documentary letter of credit in favor of CITY, drawn on a bank or other financial institution reasonably acceptable to CITY, with offices in the City of Palo Alto or active representation with a bank in the City of Palo Alto, which PAHSP shall provide to the CITY in accordance with this Section 9. Any Letter of Credit shall state on its face that it shall be renewed automatically, annually, unless drawn down or released. The CITY hereby agrees that any of the ten largest banking institutions qualified to do business in the State of California are acceptable as the issuer of the Letter of Credit. b°.As security for the performance of its obligation to pay the Relocation Payment to the City when and as required by this Agreement, PAHSP shall deliver to the City a Letter of Credit in the original amount of the Relocation Payment (the "Letter of Credit"), which shall not be required to be increased during the term of this Agreement. In the event PAHSP fails to make any payment to the CITY when and as required by this Agreement, the CITY shall have the right, upon written notice to PAHSP, to draw all or part of the Letter of Credit to satisfy the obligation. As PAHSP makes installment payments to the City, PAHSP shall have the right to reduce the amount of the Letter of Credit by the amount of the paid installment, or to substitute the Letter of Credit with a new Letter of Credit in the amount of the remaining balance of the Relocation Payment. The Letter of Credit shall remain in effect and available in the amount of the remaining balance of the Relocation Payment until the Relocation is completed or this Agreement is otherwise terminated. The Letter of Credit shall be released and returned to PAHSP upon the payment in full of all amounts owed to CITY pursuant to this Agreement or the termination of this Agreement prior to the completion of the Relocation. In addition to any right the CITY may have to draw the full amount of the Letter of Credit pursuant to this Section, the CITY shall also have the right, upon written notice to PAHSP, to draw all or part of the Letter of Credit if it is not renewed 30 days prior to its expiry date. In the event that this Agreement is terminated as the result of any cause other than a default by the PAHSP, the CITY shall release and return the full amount of any then remaining Letter of Credit, and the CITY shall have no further right to or interest in the Letter of Credit. 10.Notwithstanding specific provisions of this Agreement, performance by either Party hereunder shall not be deemed to be in default to the extent failures to perform or delays in performance are proximately caused by causes beyond that Party’s control and occurring Relocation Agreement4 7-12-06 11. 12. without the fault or negligence of that Party, including, but not limited to, delays or defaults due to war; insurrection; riots; floods; earthquakes; fires; casualties; acts of God; acts of the public enemy; acts of terrorism; epidemics; orders of a court in litigation, including litigation challenging the validity of this transaction or any element thereof; unusually severe weather; or any other causes beyond the control or without the fault of the Party claiming an extension of time to perform. An extension of time for any such cause shall be for the period of the enforced delay and shall commence to run from the time of the commencement of the delay, if notice by the Party claiming such extension is sent to the other Party within thirty (30) days of the commencement of the delay. Times of performance under this Agreement may also be extended in writing by the CITY and PAHSP. go Subject to force majeure delay, failure or delay by either party to perform any term or provision of this Agreement constitutes a default under this Agreement. The party who fails or delays must immediately commence to cure, correct or remedy such failure or delay and shall complete such cure, correction or remedy with reasonable diligence. The injured party shall give written notice of default to the party in default, specifying the default complained of by the injured party. Delay in giving such notice shall not constitute a waiver of any default nor shall it change the time of default. The party in default shall have a period of thirty (30) calendar days after such notice is received or deemed received within which to cure the default prior to exercise of remedies by the injured party. Except as otherwise expressly provided in this Agreement, any failures or delays by either party in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies. Delays by either party in asserting any of its rights and remedies shall not deprive either party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies. In the event of a default that is not cured within the time provided, the injured party shall have the right to terminate this Agreement. General Provisions. go Entire Agreement -This Agreement contains the entire understanding between the Parties and supersedes any prior written or oral agreement between them respecting the subject matter of this Agreement. There are no representations, agreements, arrangements, or understandings, oral or written, among the Parties relating to the subject matter of this Agreement which are not fully expressed in this Agreement. This Agreement shall be construed in accordance with its fair meaning and not strictly for or against any Party hereto, notwithstanding that this Agreement has been drafted by only one Party. Relocation Agreement4 7-12-06 4 eo f. Amendments - This Agreement is subject to amendment only with the written consent of both Parties. Governing Law - All questions with respect to the interpretation of this Agreement and the rights and liabilities of the Parties shall be governed by the laws of the State of California as applied to contracts entered into between residents of California and performed wholly within California. Severability - If any one or more of the provisions of this Agreement are determined to be invalid or unenforceable, such provision or provisions shall be deemed severable from the remainder of this Agreement and shall not cause the invalidity or unenforceability of the remainder of this Agreement. Counterparts - This Agreement may be executed in any number of counterparts and when so executed, all of such counterparts shall constitute a single instrument binding upon all Parties notwithstanding the fact that all Parties are not signatory to the same counterpart. Arbitration and Attorney’s Fees - Any controversy or claim arising out of or relating to this Agreement, the Project or the Parties’ rights or duties shall be settled by binding arbitration in Santa Clara County, California. Such arbitration shall be conducted by an arbitration service agreed to by the Parties, or, if they are unable to agree within thirty (30) days, by JAMS/Endispute, and judgment upon the award may be entered in any court of competent jurisdiction. The arbitrator shall apply California substantive law to the proceeding. Discovery of documents shall be allowed only to the extent authorized by the arbitrator, and shall be conducted under the direction of the arbitrator. No other form of discovery, including but not limited to the taking of depositions, shall be allowed. This Section shall not prevent any Party from seeking a temporary restraining order, preliminary injunction or other similar equitable remedy from a court, provided that the determination of the availability of such remedy on a permanent basis shall be made by arbitration pursuant to the terms of this Section. The arbitrator shall have the power to grant all legal and equitable remedies and award compensatory damages provided by California law, but shall not have the power to award punitive damages. The arbitrator shall prepare in writing and provide to the Parties an award including factual findings and the reasons on which the decision is based. The prevailing Party or Parties in such arbitration and any ensuing legal action shall be reimbursed by the Party or Parties who do not prevail for their reasonable attorney’s, accountants’, and experts’ fees and the costs of such arbitration and action. go Notices. All notices required hereunder shall be in writing, and shall be delivered by personal delivery, commercial courier by facsimile transmission (provided that receipt is confirmed by telephone or otherwise), or by mailing such notice by first class mail, certified, return receipt requested, postage and fees prepaid, addressed Relocation Agreement4 7-12-06 Date. to each of the respective parties at its address set forth below (or to such other address as either party may designate by written notice to the other). All notices shall be deemed delivered upon actual receipt or refusal of delivery. CITY:Frank Benest, City Manager City of Palo Alto 250 Hamilton Palo Alto, CA 94301 PAHSP:Doug Ross or Curt Peterson, Managers Palo Alto High Street Partners, LLC 909 Alma Street Palo Alto, CA 94301 In Witness Whereof, the Parties hereto have executed this agreement as of the Effective CITY OF PALO ALTO By: Frank Benest, City Manager Approved as to Form: By: Donald A. Larkin, Senior Deputy City Attorney PALO ALTO HIGH STREET PARTNERS, LLC By:. Curt Peterson, Manager g~ lJoug Relocation Agreement4 7-12-06 6