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HomeMy WebLinkAbout2001-12-04 City CouncilCity of Palo Alto City Manager’s Report TO:HONORABLE CITY COUNCIL ATTENTION:FINANCE COMMITTEE FROM:CITY MANAGER DEPARTMENT:ADMINISTRATIVE SERVICES PUBLIC WORKS DATE: SUBJECT: DECEMBER 4, 2001 CMR: 435:01 PURCHASE OF THE REMAINING HALF INTEREST IN THE FORMER LOS ALTOS TREATMENT PLANT SITE AT 1275 SAN ANTONIO ROAD FOR $3,333,500 RECOMMENDATION Staff recommends that Council direct staff to offer to purchase the City of Los Altos’ remaining half interest in the former Los Altos Treatment plant site at 1275 San Antonio Road for the appraised value ($3,333,500). BACKGROUND On Auga~st 10, 1984 (CMR:146:84) the Cities of Los Altos and Palo Alto entered into a Lease/Purchase Agreement wherein the City of Palo Alto would purchase an undivided half interest in the 13.273 acre former City of Los Altos sewage treatment plant site (LATP) at the northeast end of San Antonio Road. On December 20, 1991, the City of Palo Alto made its final payment and now owns a half interest in the site. The site was originally purchased to be developed as a refuse transfer station; however, that use was abandoned when several cities contracted together to use an alternative site in Sunnyvale. The LATP purchase agreement divides the 13.273 acres into two areas: 9.3 acres as developable, and 3.973 to be dedicated as open space conservation. Under the terms of the agreement, either party has the option to purchase the other party’s interest or both parties can share in the revenue generated from the sale to a third party. The City of Los Altos has already indicated that it would like to sell its half interest. Once the City entered into the LATP agreement, studies were conducted to determine appropriate uses for the site. In FY 1996-97, Council adopted Capital Improvement Program (CIP) project 9701, Los Altos Treatment Plant Site Development Project. One option proposed by the City’s Public Works Department was to move Palo Alto Sanitation Company (PASCO) Waste Management (the City’s refuse contractor) to the CMR:435:01 Page 1 of 4 LATP site. PASCO has leased a City-owned 1.93 acre site and buildings on Geng Road since the early 60’s; however, the existing facilities at the Geng Road site have become too restrictive for current operations. Council directed staff to pursue development of the LATP site as the new location for PASCO and for the Household Hazardous Waste Center. On March 6, 2000, (CMR:161:00) Council approved the application for annexation of the Los Altos portion of the site, a comprehensive plan map amendment, a mitigation and monitoring plan, pre-zoning to allow wetlands restoration and certified the related environmental impact report (EIR). The EIR review process established the mitigation for loss of wetlands at 6.873 acres, (all of the 3.973 area of Army Corps jurisdiction plus 2.9 acres of the site designated as developable acreage in the Lease Purchase Agreement). Staff is of the opinion that determination of the wetlands designated area being increased from 2.9 acres to 6.873 acres takes precedent over the original agreement between the cities and that the compensation should be based on the designated wetlands area. On October 18, 2001, an independent appraiser estimated the value of the entire 13.273 acres at $6,667,000; $6,530,000 for the 6.4 aces of developable acreage and $137,000 for the value of the 6.873 acres of wetlands. On June 11, 2001, City Council adopted the FY 2001-03 Refuse Fund budget, which included amending CIP Project 9701 in order to implement an Environmental Services Center (ESC) in Byxbee Park, located at the City of Palo Alto landfill. The Finance Committee discussed the ESC/Byxbee Park project on July 17, 2001 and determined that there were two distinct projects: 1) the development of an ESC in Byxbee Park, and 2) the disposition of the Los Altos Treatment Site. The Finance Committee also indicated that there was some urgency in resolving the City of Los Altos’ interest in the site, as per the terms of the Lease/Purchase Agreement. Staff proposes to return to the Finance Committee in early 2002 with more detailed information regarding the ESC development in Byxbee Park. The disposition of the Los Altos Treatment Site is the focus of this report. DISCUSSION According to the terms of the original LATP agreement, the status of the site should have been settled by August 10, 1999. The City of Los Altos has waited patiently for the City of Palo Alto to decide if it will either purchase the City of Los Altos’ half interest in the site or sell the entire site to a third party. Staff believes that it is not in a position as yet to recommend to Council that the City sell its interest in the site until the ESC development at Byxbee Park is approved. Staff also believes that due to current economic conditions, this is not the time to sell property. Staff is therefore recommending the City enter into negotiations with the City of Los Altos to purchase its half interest based on half of the current appraised value ($3,333,500). Purchasing the site now would allow the City: 1) to meet its contractual obligation with the City of Los Altos; 2) more time to determine the final disposition of CMR:435:01 Page 2 of 4 the site; and 3) time to annex the site into the City of Palo Alto. The City would then be able to sell the site at a more opportune time should the Council decide to sell. It is not intended that this acquisition imply any commitment to permanently retain the property for the City of Palo Alto. It is recommended as a holding action in order to both satisfy the contractual obligation to the City of Los Altos and allow time for determination of the ultimate use of the site. Alternatives for such use could include: 1) purchase by the Utilities Department for future needs; 2) sale for private development; or, 3) use by the Refuse Fund in conjunction with the land needed for the Environmental Services Center at the current landfill/future Byxbee Park site. Any use of the site would be required to respect the wetlands determination and impact mitigation line of 6.873 total acres. RESOURCE IMPACT Staff proposes that funding for the purchase of the City of Los Altos share of the site come from the Refuse Fund. As of June 30, 2001 the Refuse Fund had approximately $11.1 million in its Rate Stabilization Reserve. Should the City of Los Altos accept Palo Alto’s offer, staff will return to Council with a Budget Amendment Ordinance to appropriate the funds for purchase of the LATP site. POLICY IMPLICATIONS These recommendations do not represent a change in current City policies. ENVIRONMENTAL REVIEW Environmental review and studies have been completed for use of the site for relocation of the PASCO facility and the Environmental Services Center. PREPARED BY: WILLIAM FELLMAN Manager, Real Property CMR:435:01 Page 3 of 4 DEPARTMENT HEAD APPROVAL: CARL GLENN ROBERTS Director, Public Works Service CITY MANAGER APPROVAL: EMILY HARRISON Assistant City Manager CMR:435:01 Page 4 of 4