City Council Special Meeting Page 1 of 4 January 30, 2023 7 City of Lafayette
City Council
Meeting Minutes
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To protect public health, our residents, officials, and staff, and aligned with the Governor’s recent executive order N-29-20, certain teleconference requirements of the Brown Act have been suspended, including the requirement to provide a physical location for members of the public to participate in the meeting. Here is how to participate in the meeting and provide public comment:
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City Council Special Meeting Page 2 of 4 January 30, 2023
1. CALL TO ORDER
Mayor Anduri called the Special City Council meeting to order at 7:00 p.m. via teleconference.
2. ROLL CALL
Present: City Council: Mayor Anduri, Vice Mayor Dawson; Councilmembers Gerringer, and Kwok
Absent: Councilmember Candell
Staff Present: Niroop Srivatsa, City Manager; Tracy Robinson, Administrative Services Director; Greg Wolff, Planning and Building Suzanne Iarla, Communications Analyst; Mala Subramanian, City Attorney; Joanne Robbins, City Clerk
3. ADOPTION OF AGENDA
ACTION: It was M/S/C (Kwok/Gerringer) to adopt the agenda. Roll Call Vote: 4-01 (Ayes: Anduri, Dawson, Gerringer, and Kwok; Noes: None; Absent: Candell).
4. PUBLIC COMMENTS – (For items not on the agenda) – None.
5. STAFF REPORT
A. Tracy Robinson, Administrative Services Director
Option to Purchase Police Station Property located at 3471 Mt. Diablo Blvd. and Potential Financing Options to Acquire the Property and Find the Acquisition Exempt from CEQA under CEQA Guideline Section 15061(b)(3)
Recommendation: The City Council authorize staff to exercise the option and close escrow on the property as quickly as possible and find it exempt from CEQA pursuant to CEQA Guideline section 15061(b)(3).
Administrative Services Director Tracy Robinson said at the end of 2016, the City entered a lease for 3471 Mt. Diablo Boulevard. They moved police operations there, so it is effectively the City’s police station. The terms of the lease dictate that the City now has an option to purchase that property. The calculation for setting the price of the property was determined as part of that lease, and the price as of today is roughly $1.67 million. The City invested in some upgrades to the building so it could function as a police station and this cost approximately $2 million.
The City received a very quick valuation on that property just based on a few comparisons. Based on those comparison, the price of $1.67 million is within the values seen from sale prices of properties both from a price for the square footage of the building and a price per square foot of land. From an income approach which would be looking at the asset as an investment property, the City arrived at a value of roughly $1.7 million so the price the City would be paying is in line with the current market.
Secondly, if the City would like to finance this property for 30 years the City has a AAA bond rating. Interest rates for that are roughly around 3.5% to 4% on 30 years which could cost about $90,000 a year. This compares favorably with the price the City is currently paying for rent which is $136,000 per year. If the City financed it for 30 years there would be savings. She guessed at even 20 years it would still be less than rent the City is currently paying.
City Council Special Meeting Page 3 of 4 January 30, 2023 Mayor Anduri referred to the $90,000 for finance cost and the City is paying rent of $136,000. Once the City purchases it, the City will be responsible for utilities. Ms. Robinson stated the City is responsible for utilities now and almost everything at the building, as well as maintenance.
Councilmember Kwok referred to financing and said given the City must purchase a property within a certain amount of days, he asked if the City would purchase the property using cash right now, but then would set up the financing in the months ahead and at some future date, the Council would talk about the 30 year mortgage.
Ms. Robinson said yes, this is exactly how the City would process it. In order to accomplish a financing after the purchase, the Council must adopt a resolution that allows the Council to do that financing after the fact. If the Council decides it wants to move forward with the purchase, she could bring forward a resolution that would allow for financing after the fact. The close of escrow is about 120 days and she would like to have this time to engage a banker, look at their different options, and she could bring that resolution back to the Council on the Consent Calendar or at the next regular City Council meeting.
Mayor Anduri asked and confirmed the Council needs to adopt that resolution before taking title to the property in order to be able to finance the property. He asked how long does the City have after taking title of the property to finance.
Ms. Robinson said she believes there is a finite time period but long enough for the City to accomplish that transaction.
Mayor Anduri asked if the period starts with the City taking title of the property.
Ms. Robinson stated it is a reimbursement resolution which states, “Reimbursement resolutions are a federal tax law document that allow the City to reimburse expenditure with tax exempt dollars. The general rules that you can only look back 60 days from the date of adoption and then generally you have 18 months from the later of the date the expenditure is made OR the date the property is placed in service.” For the City’s purposes, it would have 18 months from the date the expenditure is made, or from the date escrow closes because it has already been put into service.
One other caveat states that the IRS also generally does not like it if you adopt reimbursement resolutions but then do not reimburse expenditures, so there is some value in being reasonably sure you intend to issue bonds if you do a reimbursement resolution. So, you can only look back 60 days from the date of adoption for reimbursable expenditures, and then generally you have 18 months.
Mayor Anduri asked that from closing the City has 60 days after that, and Ms. Robinson said yes, to adopt the reimbursement resolution, but she can clarify that. The Council does not, however, need to decide that tonight and probably does not need to decide at the next meeting, so she will clarify what they mean by “look back 60 days from the date of adoption.”
Councilmember Gerringer asked about the base rate reimbursement and asked to understand how that works. She said in one of the sections of the option to purchase, it lays out the option purchase price and then how it goes up the various amounts over the course of time. Then, there is Section 11.4 which talks about a reimbursement to the tenant if the tenant elects to exercise the option “shall be reimbursed for some base rent.” She asked if this is considered in the purchase price.
City Council Special Meeting Page 4 of 4 January 30, 2023 Ms. Robinson confirmed, as well as the security deposit. She said once the City says it is going to exercise the option, they will look at those numbers again and ensure that the seller is in agreement with those.
Mayor Anduri opened the public comment period, and there were no speakers.
Councilmember Gerringer thanked Ms. Robinson for the staff report and work on the process. She thinks this is an important thing to do given the investments the City has made in improvement s in the property and its location, where they are with rents now, and thinks it is fiscally a good decision to move forward.
Vice Mayor Dawson concurred with Councilmember Gerringer, especially keeping the police department’s work intact, and voiced support.
Councilmember Kwok stated he would support executing the Option to Purchase this property. It was clearly contemplated and well thought out in 2016 and given a good structure. The building has been a positive location for the police department, and it has been built out very well, so it makes sense continuing long-term in that location. He thanked staff regarding the financing for it and financing will be at a lesser cost than the monthly rent so financially it is worth acquiring the property and financing it at a later stage.
Mayor Anduri agreed with the comparison of the rent to the financing cost. He still thinks another comparison between what the City would be paying and financing costs and what return the City receives on its monies in the General Fund. There are possibilities for outflows. He is heartened to hear they have time before deciding as to whether the City finances this property.
ACTION: It was M/S/C (Gerringer/Dawson) that the City Council authorize staff to exercise the Option and close escrow on the property at 3471 Mt. Diablo Boulevard as quickly as possible; and find it exempt from CEQA pursuant to CEQA Guideline section 15061(b)(3). Roll Call Vote: 4-0-1 (Ayes: Anduri, Dawson, Gerringer, and Kwok; Noes: None; Absent: Candell).
6. ADJOURNMENT – 7:19 p.m.
APPROVED:
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Carl Anduri, Mayor
ATTEST:
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Joanne Robbins, City Clerk