Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: 120 EAST COTATI AVENUE DISPOSITION AND
DEVELOPMENT AGREEMENT
Date: January 27, 2026
Written by: Damien O'Bid, City Manager
Recommendation
It is recommended that the City Council approve a resolution directing the City Manager to execute a Disposition and Development Agreement (DDA) with Freebird Development Company, LLC for the development of 120 East Cotati Avenue as a mixed-use affordable housing project.
Background
In 2021, the City of Cotati approved a three-story mixed-use project consisting of 27 residential units and 10,400 square feet of commercial space on the subject site - three parcels totaling 0.86 acres at 120 E. Cotati Avenue. This project was never built.
On March 1, 2022, Northbay Housing filed an SB 35 development application proposing to develop a 5-story, 60-foot tall, 70-unit multi-family housing project on the site. In the summer of 2023, while still in the development review process, the applicant indicated an interest in selling the property.
On December 12, 2023, following a closed session discussion, the Cotati City Council directed staff to initiate purchase of the property at 120 E. Cotati Avenue with funding sourced from the Affordable Housing Fund. This funding source, combined with the requirements of the Surplus Land Act, requires that the City-owned property be developed with affordable housing. The specific affordability levels and unit counts are subject to various factors including zoning, funding sources and development capacity of the property. The City took ownership of this property in late 2023.
On February 13, 2024, the City Council determined that the property at 120 E. Cotati Avenue was “exempt surplus land” and provided direction to staff to issue a Request for Qualifications seeking a qualified developer to partner with the City to develop a 100% affordable housing project at 120 E. Cotati Avenue. This RFQ was issued on March 21, 2024, to over 170 individuals and firms.
On April 30, 2024, City staff received a Developer Qualification Statement from Freebird Development LLC, the only party to respond to the RFQ. After reviewing the statement, an internal panel of City staff determined that Freebird Development was well qualified and versed in the development of affordable housing. On May 30, 2024, City staff interviewed Freebird Development LLC ownership and their development partners and confirmed their qualifications and development acumen.
On June 25, 2024, the City Council authorized the City Manager to enter into an Exclusive Negotiating Agreement (ENA) with Freebird Development LLC to develop a 100% affordable housing project on the city owned parcel. Signed on July 20, 2024, the ENA outlines procedures and standards for negotiating a Disposition and Development Agreement (DDA).
Under the forthcoming DDA, Freebird Development LLC will undertake specific development activities, and the City will transfer the property with a restriction mandating development of the affordable housing project, subject to negotiated conditions. The City and Freebird Development LLC have been negotiating in good faith, adhering to the ENA's terms. This includes submitting designs to City staff for review and feedback and conducting multiple community presentations to gather input on the project's design and operations. The DDA is expected to be finalized and presented to the City Council for approval within the next few months.
On September 18, 2024, City staff and the development team hosted a noticed community engagement meeting at City Hall. About a dozen people attended the meeting; largely residents either adjacent to the site or from nearby residences, including residents from the Charles Street Village senior community. The meeting focused on an introduction of the development team, proposed development & operational goals, and a survey of architectural design preferences.
On November 20, 2024, a second noticed community engagement meeting was held at City Hall, with similar attendance and many of the same attendees from the first meeting. The meeting focused on a recap of the first community engagement meeting, the results of the design survey from the first meeting, and a presentation of four design options: two mission-styled designs and two Craftsman-styled designs. Eight of the twelve attendees expressed preference for the Mission style and at least two of the attendees strongly preferred the Craftsman style.
On December 10, 2024, the project was presented to the City Council at their regular meeting.
The results of the community meetings, including design preferences, were presented. The Council was supportive of the project and expressed support for the mission-style design that was preferred by community members. The primary concern expressed by the Council members was related to traffic and turn movements onto and off E. Cotati Avenue. Staff advised the Council that a transportation impact study would be completed to specifically look at safety concerns. The transportation impact study was completed and provided to the City Council for review at the August 26, 2025 City Council meeting.
On August 18, 2025, the project was presented to the Planning Commission at their regularly scheduled meeting. Similar to the previous City Council meeting, the results of the community meetings, including design preferences, were presented. Additionally, the Planning Commission reviewed recommended Conditions of Approval that are incorporated into the proposed DDA.
On August 26, 2025 the City Council received a presentation on the project. The City Council provided the following feedback as staff finalize discussions regarding the DDA:
• Make the exit from the project onto E. Cotati Ave be right-turn only • Investigate ways to widen the proposed bike lane
Analysis/Discussion
The project site is comprised of three city-owned contiguous parcels that occupy approximately
0.86 acres. The project site is vacant and relatively flat, consisting primarily of grass and scattered trees. The project features a 77,500-square-foot, three-story elevator-served building with 44 residential rental units, including studios and one-, two-, and three-bedroom units. It also includes approximately 3,850 square feet of ground floor retail/commercial space and amenities such as property management and social services offices, a common laundry room, a community room, and a landscaped second-story courtyard with seating and a playground. The project is proposed to be served by an enclosed ground-level parking garage with 54 vehicle spaces and 46 bicycle spaces.
All units, except one two-bedroom manager’s unit, will be deed-restricted as affordable for households earning 30–80% of the area median income. Additionally, twelve units will be designated as supportive housing for individuals with intellectual and developmental disabilities.
Disposition and Development Agreement
Following the City Council meeting on August 26, 2025, City staff and Freebird Development Company, LLC began to negotiate the DDA, with the proposed final DDA attached.
The primary business points in the DDA are as follows:
• The DDA runs through project certificate of completion, or December 31, 2032, whichever occurs first (Section 2.1). The DDA is subject to early termination for default if certain milestones are not met, as laid in the Schedule of Performance (Exhibit B). • All 43 units (excluding the manager’s unit) are restricted to households earning up to 80% of median income for Sonoma County, in accordance with the Regulatory Agreement (Exhibit D) for a term of 55 years.
• Although this Project is a ”by-right” development, it is subject to a variety of conditions of approval via the DDA, as discussed during public meetings (Exhibit E). • There is a 90-day title review period (Section 2.6) and a 180-day due diligence period (Section 2.3), after which time Freebird must give written notice to the City if they approve or disapprove of the property.
• The City would sell the property for $825,000 (Section 3.1), to partially refund the Inclusionary Housing Fund to be available for the production of more affordable housing units elsewhere in the City.
• The City would waive water conservation, traffic, park and recreation, general plan, linkage, and fire impact fees. Water and sewer impact fees are not waived, as they are Enterprise funds subject to different statutes and must be funded (Section 2.4b). • Close of escrow (property sale and transfer to Freebird), would occur when (Section 3.3):
o City has the executed Affordable Housing Agreement.
o All funds to purchase the property have been deposited into escrow and the title company is ready to issue title insurance.
o All permits and governmental approvals have been secured for the Project. o The City has determined that the Project is ready to begin construction within 60 days of closing.
o The City has reviewed and approved the complete financing plan, including all needed financing either closed or ready to close concurrently with close of escrow.
o Neither party is in default of the DDA.
• Freebird will pay the cost of title insurance, transfer taxes, recordation fees and title company fees to close escrow (Section 3.5).
• The property is being sold ”as-is” (Section 3.6).
• Certificate of completion must be achieved within 36 months of close of escrow (Section
5.1(a)).
• The City will provide City staff time at no cost for plan and permit reviews. However, Freebird will pay for all third-party consultant costs (Section 5.1(b)). • Freebird will be required to pay Prevailing Wage to contractors and subcontractors, which includes apprentices and payments towards health care, retirement, etc. (Section
5.4). This is further explained later in the staff report. • Freebird will provide lease space to the City for cellular facilities at no cost, but will not be responsible for any required infrastructure and will be provided acceptable insurance and indemnification (Section 6.1b).
• Freebird will coordinate with the City to lease the commercial space on La Plaza for a community serving use. The City also has the first right of refusal and right to match any lease offers on the commercial space (Section 6.1c).
• Subject to applicable law, the City will provide Freebird with a local priority list for the renters, to provide priority for current residents or employees working within the City of Cotati, individuals or families with children whom attend Rancho Cotati school district facilities, members of the Graton Rancheria Native American Tribe, and employees of Sonoma State University (Section 6.3).
• Default & Termination (Article 7): If either party doesn’t perform any action, condition or covenant, or fails to meet the timelines in the Schedule of Performance (Exhibit B), it would constitute a default of the DDA. The non-defaulting party is required to provide written notice to the other party to cure the default within 30 days. Either party can also terminate the agreement prior to the close of escrow in the event of a failure to fulfill any conditions precedent to the close of escrow (Section 3.3). Freebird can terminate for title defects or upon property inspection, within the due diligence periods. The City can terminate if Freebird attempts to assign rights, substantially change ownership, and after close of escrow if Freebird fails to commence construction, abandons or substantially suspends construction or otherwise materially breaches the agreement. • The DDA includes a power of termination and right of reverter prior to the certificate of occupancy in certain cases (Section 7.5). This mechanism allows for the City to, in theory, terminate the DDA and essentially take the property back. However, Section 7.5b states that the City agrees to subordinate this right to any Holder (lenders) having a security interest in the property. Any lender that loans on the property will insist that the City subordinate so they have a higher lien position on the property in the event of a foreclosure. • The DDA also contains the typical insurance and indemnity clauses, as well as other general legal sections (Section 9).
Conditions of Approval (COA)
The COAs are attached to the DDA as Exhibit E. Note that the City staff are currently working on consolidating this template and referring to standards rather than restating them in the COAs, so the final COAs will likely be further revised to eliminate duplication. At the end of the COA’s, the conditions added during the August 26, 2025 City Council meeting are indicated.
Schedule of Performance (SOP)
The SOP is attached to the DDA as Exhibit B, which contains the project milestones. These milestones are the primary mechanism to provide off-ramps for the City through the ”default” mechanism, as described earlier, including if the project is unable to secure financing and fails to move forward. The proposed schedule has Freebird obtaining State Capital Funding (aka ”Gap Funding”) within two years. Tax credit financing would then need to be secured within two years after that.
The State typically only has one SuperNOFA per year to obtain gap funding, and projects cannot apply for tax credits until all gap funding is secured. Therefore, the proposed schedule allows for two attempts at Gap Funding, an off ramp, and then two attempts at tax credits, and another offramp. If all funding is secured, close of escrow would occur before the end of 2030, followed by construction completion within 36 months.
Regulatory Agreement (Affordable Housing Agreement [AHA]) The AHA form is attached to the DDA as Exhibit B, which is largely a form agreement subject to approval as to form by the City Attorney. Notable terms of the AHA include that it restricts units to 80% of area median income, runs for 55 years, includes local preference policies, income verification and annual reporting, property maintenance/cleanliness requirements and monitoring and record keeping provisions. Note that this agreement also includes a subordination clause (Section 2.5), which could be important in the case of foreclosure. The AHA states that the City will not withhold consent to reasonable requests for subordination of this Agreement, provided that the instruments effecting such subordination include reasonable protections to the City in the event of default, including without limitation, extended notice and cure rights. Although it is unlikely that a lender would require subordination of the AHA, California Housing and Community Development (HCD) may require this if they are a lender on the project. Therefore, it will be important to review any future subordination requests to protect the City’s investment and the affordability of the units, in the event of a foreclosure.
Prevailing Wage & Labor Compliance
Following the August 26, 2025 City Council meeting, the Nor Cal Carpenters Union provided staff with language that they requested be included in the DDA (”Prequalification Requirement”, attached). The proposed language contains sections on prevailing wage, apprenticeship, health care expenditures, dispute resolution, enforcement and severability.
Staff sought to incorporate the core elements of this request while not overly burdening the project to the point that no project moves forward, which would be a loss for everyone. As discussed further below, the proposed DDA includes the requirement for prevailing wage, apprenticeship, and as a required component of prevailing wage, health care expenditures. The DDA also includes various mechanisms for resolving disputes, enforcement and severability of the terms of the agreement.
Prevailing Wage
The proposed DDA requires that the project be constructed as a prevailing wage project (Section
5.4). Prevailing wage law (Labor Code Sections 1720 et seq.), and the implementing regulations of the Department of Industrial Relations (the “DIR”), require the use of apprentices (Labor Code Sections 1777.5 et seq.) and require payment of a variety of fringe benefits, including health care.
As an example, based on the latest prevailing wage determination by the California Department of Industrial Relations (DIR) for Sonoma County (December 1, 2025), this is how a residential carpenter would be paid:
Labor Classification Basic Straight Time Hourly Rate
Carpenter (all subtypes) $61.13
Employer Payments (Labor Code 1773.1) Rate per Hour Worked Health & Welfare $14.37
Pension $11.55
Vacation/Dues $6.08
Training $1.31
Other $3.77
Effective Hourly Compensation $98.21 (Straight time)
The DIR wage determination (see attached example), also includes provisions on the payment of overtime, recognized holidays, predetermined increases ($5.32 on July 1, 2026 applied to wages and/or fringe benefits) and required payments for travel and subsistence. In accordance with Prevailing Wage law and DIR regulations, employers who provide benefits would typically pay the base rate as cash plus the benefit cost towards the benefit programs. If employers don’t have benefit programs, the employer must pay the total hourly rate, including the benefit amounts, as cash.
Under prevailing wage law, workers on the project are required to be paid for the work that they actually do (e.g., labor, carpentry, ironworking), not just their hire title. The contractor is required to submit electronic payroll records to the DIR to prove they're paying correctly, and the proposed DDA also requires the contractor to submit to the City payroll records that are certified by the contractor to be accurate (”Certified Payrolls”), for review by a third-party labor compliance monitor. Additionally, the labor compliance monitor has free access to the project site, where they will interview employees at random and note who is on-site. This is used to spot check the accuracy of the certified payrolls.
As stated earlier, prevailing wage law also requires an apprenticeship program (Labor Code Sections 1777.5 et seq.) under the jurisdiction of the California Apprenticeship Council, established pursuant to Labor Code Section 3070. The California Apprenticeship Council (CAC) sits under the DIR Division of Apprenticeship Standards and issues rules and regulations related to apprenticeship, which become implementing regulations published in the California Code of Regulations. The CAC also hears appeals of DIR Director’s determinations (as the administrator of the apprenticeship program) regarding apprentice disputes.
The CAC has 18 members; 14 are appointed by the governor for four-year terms: six represent management, six represent labor, and two represent the public. The remaining four are ex officio members representing the chancellor of the California Community Colleges, the superintendent of public instruction, Chairperson of the California Firefighter Joint Apprenticeship Committee and the DIR Director.
In accordance with Labor Code 3077, an apprentice is a person with a written agreement that receives training under approved standards developed by the DIR Division of Apprenticeship Standards. Contractors must employ registered apprentices at ratios set by the apprenticeship standards and request them from apprenticeship committees. Apprentices receive a percentage of a journeyman's wage (set by DIR), not less than a set minimum percentage and must complete formal instruction hours. Apprentices perform work under journeyman supervision, following the standards of their registered program.
Labor Compliance
At the City Council meeting on August 26, 2025, it was alleged that Freebird had labor compliance issues on projects in Santa Rosa (South Park Commons) and Healdsburg (Saggio Hills). In addition to the general allegations, the commenter specifically called out violations related to Mitsui Home America (MHA), the framing contractor on South Park Commons and RJP, the framing contractor on Saggio Hills.
In follow up after the meeting, Freebird provided staff a variety of documents to dispute the allegations, including the final third-party labor compliance report on South Park Commons.
Complaints can be filed with DIR by anyone, for any alleged labor compliance issue. When DIR initiates a complaint investigation, there is a significant amount of documentation required by the project Owner, so the Owner will be aware of any investigations.
In summary, staff did not find any complaints, investigations or violations related to MHA on South Park Commons. RJP Framing was the selected framer for the Saggio Hills project, but at the time of the August City Council meeting, this project was just entering the framing phase.
As of the date of this staff report, Freebird is not aware of any complaints or DIR investigations related to RJP’s work on the Saggio Hills project.
Therefore, based on the information available, staff did not find any significant issues of concern on past projects. Regardless, to provide an additional layer of impartial review during construction, the following condition of approval was added to provide a neutral third-party labor compliance monitor to ensure that everyone on site is properly classified and correctly paid. #114. The Applicant shall fund, through a deposit account, the City’s costs for a third-party labor compliance monitor. The third-party labor compliance monitor shall have full access to the construction site, copies of all certified payrolls, and anything else deemed necessary to ensure compliance with labor requirements.
Financial Considerations
The City’s original purchase price was $1,650,000, with funds sourced from the Affordable Housing Fund. Therefore, the $825,000 in sale proceeds would go back into the Affordable Housing Fund. The current estimate of the impact fees that are proposed to be waived are $1,566,170. This does not include impact fees for the water or sewer funds. Therefore, the total estimated city ”hard cost” contribution is $2,391,170 ($54,345 per door). The City will also contribute in-house staff time at no cost, although time will be tracked for costing purposes.
Freebird will retain responsibility for payment for third party consultants and building permit fees (including the labor compliance monitor), as well as various closing costs.
Environmental Issues
The project is exempt from CEQA review pursuant to Government Code Section 65651(a), as established by AB 2162, which designates qualifying supportive housing projects as a use by right in zones where multifamily and mixed-use developments are permitted. As such, the project is subject to a ministerial approval process. According to CEQA Guidelines Section 15268(a), ministerial projects are exempt from CEQA requirements. This project qualifies as supportive housing under Government Code Section 65651(a)(3), as it includes at least 12 units restricted to residents requiring supportive services. Although this project is exempt from CEQA review, the City examined the site extensively between 2017 and 2023 and approved a prior project in 2021 with the same or similar potential impacts to the environment as this project. The prior CEQA analysis described the project and its environmental setting, including the project site’s existing conditions and applicable regulatory requirements, and provided an assessment of the project’s consistency with the City of Cotati General Plan. All adopted mitigating General Plan policies and mitigation measures identified in the 2013 General Plan Environmental Impact Report (EIR) (SCH No. 2013082037) that may apply to the subject project are identified in the analysis and may be imposed as environmental conditions of approval for this project within the Development and Disposition Agreement.