Fremont City Council Meeting: 09/16/25 07:00 PM
3300 Capitol Avenue Div/Dept: Finance Department
Fremont, CA 94538 Category: Property Acquisitions & Dispositions
SCHEDULED
Sponsors:
COUNCIL STAFF REPORT (ID # 5525) DOC ID: 5525
Updated: 9/12/2025 9:19 AM by Dina Lewis Page 1
AGE WELL CENTER AT SOUTH FREMONT - Consider Proposed Prepayment of Remaining Age Well Center Project Costs, Related Appropriation Actions Contact Persons:
Name: David Persselin Cliff Nguyen
Title: Finance Director Assistant Planning
Manager/Zoning Administrator
Div/Dept: Finance Department Community Development
Phone: 510-494-4631 510-284-4017
E-Mail: [email protected] [email protected]
Executive Summary: The developer of the Age Well Center at South Fremont (Age Well Center) has proposed that the City prepay the remaining balance of the project cost at a discounted amount. Funds are available for this purpose in the Age Well Center Acquisition Reserve (Acquisition Reserve). As the discount appears to be adequate to compensate the City for future interest earnings on the Acquisition Reserve, staff recommends that the City Council authorize the City Manager to execute any necessary documents, pay the discounted amount, close the Acquisition Reserve, and release the remaining reserve allocation to fund balance in the Capital Improvement Fund.
BACKGROUND: The Age Well Center was constructed by East Warren Park LLC (Developer) and accepted by the City on September 23, 2021. Under the terms and conditions of the March 2016 Development Agreement (DA) and June 2018 Public Improvement Agreement (PIA), as amended, for the construction and conveyance of the Age Well Center and its underlying 1.5-acre parcel to the City, the City is required to pay the Developer for the total actual out-of-pocket costs the Developer incurred for constructing the Age Well Center, which totaled $15,172,673.
Upon acceptance of the Age Well Center in September 2021, the City paid the Developer approximately $3.3 million (cost of the land at $2.2 million and $1.1 million in City-requested change orders) plus capital facilities impact fee revenue collected from the 493 units included in the approved master plan, which totaled approximately $754,000.
After the initial reimbursement, the City owed the Developer approximately $11.1 million.
In accordance with the DA, the City is required to pay the remaining amount of the project cost in eight annual installments beginning September 1, 2022. Each annual payment is the difference between the total amount of capital facilities impact fee revenue collected during the prior fiscal year and the lesser of $1 million or the amount of capital facilities impact fee revenue used to pay debt service on existing City obligations. The unpaid balance accrues interest at 0.86%, compounded annually. Any unpaid amount remaining after the last installment from the Capital Facilities Impact Fee Fund on September 1, 2029, must be paid from other City sources. As of September 1, 2025, the remaining balance of the project cost is $9,378,608.
DISCUSSION/ANALYSIS:
Council Staff Report (ID # 5525) Meeting of September 16, 2025 Updated: 9/12/2025 9:19 AM by Dina Lewis Page 2
Prepayment Proposal: As capital facilities fee revenues have declined along with the slowdown the City has experienced in development activity, the Developer has proposed that the City prepay the balance of the project cost now, with a discount to compensate the City for interest it would otherwise earn over the remaining four years of the repayment term. Staff estimates that the Developer’s proposed discount of $1.1 million is reasonable given the current level of interest rates, the expectation of future reductions, and the interest accruing on the unpaid project cost.
Age Well Center Acquisition Reserve: In July 2021, the City Council appropriated $9.1 million in the Capital Improvement Fund as the Age Well Center Acquisition Reserve.
The Acquisition Reserve was intended to serve as the ultimate source of payment to the Developer should capital facilities impact fee revenues prove insufficient.
If the City were to prepay the project cost from the Acquisition Reserve, it would lose the opportunity to earn interest on the reserve balance but avoid accruing interest on the unpaid portion of the project cost. Staff believes the proposed discount would adequately compensate the City for this opportunity cost. Additionally, the remaining balance in the reserve would immediately become available for allocation to other capital improvement projects, while future capital facilities fee revenues would be freed up for allocation to eligible projects.
Staff recommends that the City Council accept the Developer’s proposal and authorize the City Manager to execute any necessary documents, make the prepayment from and then close the Acquisition Reserve, and release the remaining reserve balance of $821,392 to unallocated fund balance in the Capital Improvement Fund.
FISCAL IMPACT: As the City Council has previously established an appropriation for this purpose in the Acquisition Reserve (PWC9063-501), no additional funding action is necessary. However, staff recommends that the City Council approve closing the Acquisition Reserve after the prepayment is completed and releasing the remaining balance to make it available for appropriation to other projects.
ENVIRONMENTAL REVIEW: The recommended action is a financial transaction and is “not a project” as defined by CEQA and is exempt from CEQA review under Section 15378(b)(2) and (b)(5).
RECOMMENDATIONS:
1. Authorize the City Manager to execute any necessary documents, pay the discounted balance of the Age Well Center at South Fremont project costs, $8,278,608, from the Age Well Center Acquisition Reserve (PWC9063-501) in the Capital Improvement Fund (Fund 501), release the remaining reserve allocation to fund balance, and close the reserve.
2. Find that the recommended action is a financial transaction and is “not a project” as defined by CEQA and is exempt from CEQA review under Section 15378(b)(2) and (b)(5).