Agenda packet, regular meeting — National City City Council, September 19, 2023 (part 2 of 2)

Homeownership Strategy in National City

According to the 2020 Census count estimates, 32.7% of housing units in National City are owner- occupied. In contrast, 55% of housing units in California are owner -occupied. Homeownership can help families purchase property that is likely to steadily incre ase in value over time and that can be passed down to the next generation. The passing of wealth through generations gives future generations a financial step up and creates upward economic mobility. Ideally, this generational cycling of wealth will give the future family the financial means to purchase their own home, invest in businesses, or use it to attend college.

Historically, t he majority of City -owned property used for housing in National City has been allocated to meet the need for affordable rent al housing. Although the City has created some homeownership opportunities recently through the First -Time Homebuyer Program and infill development using HOME Investment Partnership funds from the U.S. Department of H ousing and Urban Development (HUD) , the number of homebuyer units could be further increased by conducting a financial feasibility study on the development of homeownership units on City-owned property.

The Community Development Commission -Housing Authority of the City of National City (“Housing Authority”) approved a 5 -year Housing Strategic Plan in August 2021. The Housing Strategic Plan also establishes guidance for the Housing Authority to utilize City-owned real estate and its financial assets for housing purposes to stimulate housing programs, including first-time homebuyer opportunities. The Housing Strategic Plan identifies six City -owned properties to consider for housing development by 2025 and recommends homeownership projects for the majority of the City’s properties being considered for future development. The Strategic Plan can be found on the Housing Authority’s Plans, Projects, and Programs webpage:
https://www.nationalcityca.gov/government/national-city-housing-authority/plans-projects-and- programs.

Amendment to City Council Policy #901 Revised

The staff has revised City Council Policy # 901 amendment after receiving additional direction from the City Council at the August 15, 2023 meeting. The revised Policy #901 amendment requires a study and development of homeownership units with maximized affordability on city- owned property zoned for residential use and includes a 75% local preference for residents of National City.

Furthermore, when a City -owned property is considered for disposition by the City or Housing Authority, a study will be conducted using various development models, conditions, and options that impact the project budget, development, and unit affordability . The findings and considerations from the study by the Housing Authority must be presented to the City Council for review. The City Council may accept the study or direct staff to issue a request for proposals for the subject property.

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The study of said City property will analyze and evaluate various development models for homeownership, which may include:
 Condominiums
 Townhomes
 Limited-Equity Cooperatives
 Rent-to-own units
 Community Land Trusts
 Other Models or Combinations Thereof

Additionally, the subject property will also studied and evaluate d for various conditions and options that may impact the project budget, development, and unit affordability for homeownership, which may include:
 Construction Defect Insurance Law
 Gap Financing Options
 State Legislation
 Deed Restrictions
 Ratio of market rate to affordable homeownership units  Unit size and distribution with an emphasis on larger units  Funding available to subsidize affordable homeownership such as pre-paid mortgage insurance or first-time homebuyer programs
 Other Conditions and Options

FINANCIAL STATEMENT:

The City may need to assist the homeownership project by deferring the receipt of payment for the value of the land to make it financially feasible to build homeownership units. The City may consider providing loans to make the homes affordable to lower-income first-time homebuyers through the equity created through the development. If the City or Housing Authority assists the homebuyer through a loan secured by the homebuyer’s housing unit, the City’s subsidy will be recaptured when the property is sold or transferred.

RELATED CITY COUNCIL 2020-2025 STRATEGIC PLAN GOAL:

Housing and Community Development

ENVIRONMENTAL REVIEW:

This is not a project under CEQA and is therefore not subject to environmental review. CCR15378; PRC 21065.

PUBLIC NOTIFICATION:

Agenda Report posted within 72 hours of meeting date and time in accordance with Brown Act.

ORDINANCE:

Not Applicable

EXHIBITS:

Exhibit A - Current City Council Policy No. 901 Redlined Exhibit B - Proposed City Council Policy No. 901
Exhibit C - PowerPoint
Exhibit D - Resolution and Exhibit – City Council Policy No. 901

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Exhibit “A”

CITY COUNCIL POLICY

CITY OF NATIONAL CITY

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19 , 2023January 22, 2019

Background:

The City of National City is owner of substantial real property which is used f or various municipal purposes. As public service needs change, the requirements for these properties may be revised and, on occasion, certain parcels may be in excess of the City's current need. This requires that each individual site be reviewed in terms of its potential for future public use, as well as its potential economic benefit to the City.

The proceeds from the sale and lease of City -owned lands and the revenues generated from leases are normally utilized for General Fund purposes unless the property sold or leased belonged to a restricted program.

Purpose:

It is the purpose of this policy 1) to establish a procedure by which unused and marginally used City -owned real estate is r eviewed for its potential public use, and for designating unneeded parcels for lease or sale; 2) to provide methodology for the sale or exchange of City -owned real estate and 3) to establish policies for the leasing of City - owned real property; and 4) to require a study and development of homeownership units with maximized affordability on city-owned property (parcels) zoned for residential use and include a 75% local preference for residents of National City..

Policy:

It is the City's policy to manage its real estate assets so that municipal needs which rely on these assets may be properly implemented. It is not the City's policy to speculate in real estate. The City Council will review City -owned real estate not used for municipal purposes and determine t he appropriate use of the property. Those properties not needed for either City or public use within the foreseeable future, may be made available for lease or sale.

The City shall optimize the sale price or lease rent from City -owned real estate based on relevant factors, including 1) an appraisal reflecting current market value when either a transaction or authorization to sell or lease is presented to the City Council, 2) prevailing economic conditions and market trends, and 3) any special benefits to a ccrue from the sale or lease.

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TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19,
2023January 22, 2019

Exhibit “A” Page 2 of 14
The City shall seek market value for its properties . Discounts will not be negotiated unless an extraordinary need or circumstance is recognized by Council Resolution setting forth the amount of the discount from appraised va lue and the public purpose served in justification of the discount.

City staff under the direction of City Manager shall prepare and present to the City Council a comprehensive Property Management Plan with periodic reviews as needed, and updates to the C ity Council. The Property Management Plan shall include an overall review of the City's real estate portfolio (or inventory) , an operating plan for corporate property, a disposition plan for surplus property, market research to support anticipated transactions and a request for authority to act within defined parameters (as described in this policy).

The major elements of the property management plan are to include:
• Property evaluation and characterization of real estate assets • Strategy for City occupied real estate
• Investment Portfolio Plan (leases to for-profit tenants) • Review of not-for-profit leases
• Disposition Plan for surplus assets
• Business Case development review to support proposed transactions • Legal document development and review

Procedure for sale of City ownedCity-owned Real Estate:

A. Real Estate Review

As part of an overall property management plan for the City's real estate assets, staff will review the City's property inventory to determine which properties are no longer needed for public facilities or to support the elements of the General Plan and whose disposition will provide a greater public benefit.

B. Homeownership Requirement

City-owned property zoned for residential use requires a study and development of homeownership units with maximized affordability on city-owned property zoned for residential use and includes a 75% local preference for residents of National City.

When a City -owned property is considered for disposition by the City or Housing Authority, a study will be con ducted using various d evelopment models, conditions, and options that impact the project budget, development, and unit affordability. The findings and considerations from the study by the Housing Authority must be presented to City Council for review. The City Council may accept the study or direct staff to issue a request for proposals on the subject property.

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TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19,
2023January 22, 2019

Exhibit “A” Page 3 of 14
The study will analyze and evaluate various development models for homeownership, which may include:
 Condominiums
 Townhomes
 Limited-Equity Cooperatives
 Rent-to-own units
 Community Land Trusts
 Other Models or Combinations Thereof

The subject property will also be studied and evaluate d for various conditions and options that may impact the project budget, development, and unit affordability for homeownership, which may include:
 Construction Defect Insurance Law
 Gap Financing Options
 State Legislation
 Deed Restrictions
 Ratio of market rate to affordable homeownership units  Unit size and distribution with an emphasis on larger units  Funding available t o subsidize affordable homeownership such as pre -paid mortgage insurance or first-time homebuyer programs
 Other Conditions and Options

C. Available Real Estate for Sale
A City-owned property may become available for sale if:
• The property is not currently used by the City or does not support a municipal function; and.
• The property is vacant and has no foreseeable use by the City; and • The property is a non -performing or under-performing asset and greater value can be generated by its sale; and
• Significant economic development opportunities can be generated by selling the property..

Factors to be considered in determining whether a property should be sold include:
• Will the City be relieved of potential liabilities and/or cost of maintaining property that does not generate income or provide public benefit? • Property tax increment that will be created by returning the properties to the tax rolls.
• Stimulation of the economy by providing opportunities for private sector investment.
• Generation of revenue.

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TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19,
2023January 22, 2019

Exhibit “A” Page 4 of 14
• The sale of the property will generate greater economic value than a ground lease, if a ground lease is a feasible option.

DB. Governmental Clearance Process

Government Code Section 54222 requires that a local agency proposing to dispose of surplus property must first notify all governmental agencies operating within the City as to the availability of the property. The agencies are given 60 days to respond with an intent to acquire, if not, the property may be deemed cleared for public sale.

Regarding the list of properties for sale:
• Governmental agencies are regularly contacted as the surplus list is updated. • City departments are individually contacted as the surplus list is updated. • Council members are given a preliminary review and opportunity to comment on foreseeable uses for the property.

EC. Approval Process

• City-owned properties that have been identified by the City Manager as candidates for sale will be presented to the City Council for approval to be sold.
• If a property is of a type and location that would make a ground lease feasible, an economic analysis of the benefits of lease vs. sale will be conducted. • If the property is zoned for residential use a study will be conducted usin g various development models , conditions, and options that impact th e project budget, development, and unit affordability. The findings and considerations from the study by the Housing Authority must be presented to City Council for review. The City Council may accept the study or direct staff to issue a request for proposals on the subject property.
• If City Council determines that the property may be sold, it shall authorize City Manager to sell the property for a price equal to or greater than a minimum price established by a current (less than six month s old) appraisal.

The authorization to sell the property will be valid for twelve months from the date of City Council action.
• The City Manager or designee may enter into purchase and sale agreements, close escrows and execute and deliver grant deeds to the purchasers of th e properties at at prices equal to or greater than the minimum price approved by City Council on terms and conditions deemed reasonable, and in the City's best interests.
• City Manager or designee will provide a report to the City Council, regarding the price, terms, and conditions of all transactions.
• Properties that cannot be sold at a price equal to or greater than the minimum price approved by Council will be returned to Council for further Formatted: Bulleted + Level: 1 + Aligned at: 0.5" +
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TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19,
2023January 22, 2019

Exhibit “A” Page 5 of 14
consideration prior to disposition. Council approval will be required to sell a property at a price less than the minimum price previously approved by the City Council.

FD. Method of Sale

Properties may be sold by any method allowed by City Council Policy. This includes direct negotiation, request for proposal, l isting with a broker, sealed bid, auction or other appropriate method as determined by the City Council. Possible method of sale for all properties will be included in the enabling resolution authorizing their sales.

GE. Marketing

Properties offered for sale shall receive the widest possible exposure to the open market place marketplace. This may be accomplished through direct marketing techniques, such as requests for proposals (RFP), advertising, exposure through the real estate media, posting the prope rty on the multiple listing service , or any other appropriate method . When appropriate, properties may be listed for sale with qualified real estate brokers. The authorization to utilize the services of a real estate broker will be contained in the enabling resolution.

HF. Real Estate Brokers

Real estate brokers may be used to represent the City in the sale of its properties.

Brokers will be selected for individual assignments through Requests for Proposals (RFP) or Requests for Qualifications (RFQ) and a subsequent bid or other methods that result in the City receiving the services of a qualified broker at the best value to the City. The maximum approved commission rate will be contained in the enabling resolution for the property's sale. If the property is listed with a broker, the City reserves the right to exclude from the listing agreement potential buyers whose interest in purchasing a subject property has been made a part of the record prior to the execution of such agreement.

IG. Exclusively Negotiated Sales
It will be the City's policy to insure the highest price for its real estate by pursuing open market transactions. However, on certain occasions, an exclusively negotiated sale may be justified as applicable and may be approved under one of the following conditions:

1. When a parcel is landlocked.

2. When the sale is to a contiguous owner.

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TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19,
2023January 22, 2019

Exhibit “A” Page 6 of 14

3. When a fee interest in a pipeline or other right -of-way is no longer required, it may be sold to a contiguous owner. A restrictive pipeline easement of ade quate width or other required easements will be reserved from said sale.

4. When other governmental, public and quasi -public agencies submit acquisition proposals a sale may be consummated. These agencies shall include but not be limited to: Federal, State, and County agencies; school districts, special districts, and regulated utility companies.

5. When qualified non -profit institutional organizations offer to purchase City -owned land, a negotiated sale may be consummated at fair market value providing th ere is: 1) a development commitment, and 2) a right to repurchase or a reversion upon a condition subsequent. Institutional organizations such as places of public assembly, hospitals, extended care facilities, private schools and community service o rganizations are required to develop under the City's conditional use permit procedure.

6. When a property has been offered by public auction and no acceptable bids were received, it may be sold on a negotiated basis to any applicant submitting an acceptable offer within six months following the date of auction.

7. Real property exchanges may be consummated by direct negotiation . However, exchanges will be considered only with other governmental agencies or when there is an advantage to the City.

JH. Rezoning

Prior to completion of the sales transaction, City land shall be considered for rezoning in accordance with the General Plan, existing community plans or other City Council direction if a higher sale price will result. Also, all unnecessary easements affecting title to the property shall be removed if this will result in a commensurate increase in value.

KI. Easements

The City will receive current fair market value for the removal of restrictive easements or access rights previously paid for by the C ity or other governmental agency or reserved in a sale of City property.

LJ. Priority Handling

Since time is of essence in land transactions, all such actions by the City Council and staff shall be given the highest priority and special handling.

MK. Public Utilities Installed by Private Entities

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TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19,
2023January 22, 2019

Exhibit “A” Page 7 of 14
The applicant for the use of unimproved City land for public purposes, such as streets, sewers, and other public utilities, shall compensate the City for the fair market value of the rights to be granted by th e City. The amount of compensation shall be established by appraisal.

Procedure for leasing City-owned Real Property
The City of National City has a very diverse real estate portfolio. While the policies herein are to act as the standard that governs mo st leases, the City acknowledges that parts of its leasing portfolio have specialized needs or restrictions. In these cases, this policy will act as a framework for a sub -policy that will govern a specific area. Should a conflict arise between the framewor k policy and the sub -policy, the sub -policy will govern.

A. A. Criteria for Leasing
City property shall be considered for leasing when one or more of the following criteria apply:

1. The property is not required for current municipal use, but is to be held f or possible possible future use and can be leased as an interim measure.

2. The property can only be leased because of legal restraints. For example, property held under Tideland trust grants or as dedicated parks.

3. The City requires substantial contro l over development, use and reuse of the property.

4. The property has the immediate potential of a high return to the City because of its high demand and type of use, such as commercial and industrial land.

5. The property can be efficiently utilized by a provider of services needed by the City.

6. The property can be leased to promote a substantial economic development opportunity.

B. B. Property Management Plan
The City Council may approve the execution of lease transactions that meet the terms of the City 's asset strategy for a particular property previously approved by City Council in an overall Property Management Plan . Negotiated transactions that fall outside of the parameters of an approved Property Management Plan either will be submitted individually for City Council approval, or deferred until the next periodic update and approval of the plan.

C. C. Lessee Selection for New Leases
Competitive offers for lease of City property shall be solicited from the open market place. This may be accomplished thr ough a number of marketing techniques, such as Request for Proposals (RFPs), a marketing subscription system, direct advertising, use of a Multiple Listing Service (MLS) , listing with a broker, posting the property and any other appropriate means.

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TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19,
2023January 22, 2019

Exhibit “A” Page 8 of 14

In certain limited situations, the City may exclusively consider a single proposal for lease of City property. Potential lessees wishing to exclusively negotiate with the City must submit for City staff review a business case with sufficient justification as to how it is capable of optimizing the use of the property and return to the City, thereby negating the need for a competitive process . This information will be included when the lease transaction is presented for City Council approval.

Leasehold proposals shall be evaluated in terms of:

1. The degree to which the proposed use is in compliance with the City's strategic plan for the property.

2. In terms of the amount of consideration offered in the form of rent.

3. In terms of the financial feasibility of the proposal.

4. The capability, expertise and experience of the potential lessee with respect to the proposed leasehold development and operation.

5. If new development is proposed, a development plan that includes a description of the development team and its qualifications.

6. The details of each person or entity that will have an interest in the proposed lease

7. Special public benefits to be derived (if any).

D. D. Rate of Return
The City shall obtain fair market rents for its leases commensurate with the h ighest and best use of the property. The fair market rent shall be based on an appraisal that complies with the definition of Market Rent found in the Uniform Standards of Professional Appraisal Practice (USPAP) published by the Appraisal Foundation. The appraisal shall be no more than six months old at the time the lease transaction is presented for City Council approval. If the cost of an appraisal is not justified by the anticipated rents, the City may choose an alternative method to establish rent. City leases shall contain terms and conditions which will sustain a fair rate of return throughout the duration of the lease.

E. E. Rental Terms
Rental terms may be negotiated on the basis of fixed rates (flat rent leases) or percentages of the lessee's gross in come derived from business conducted on the property, with a provision for a minimum rent on percentage leases.

F. F. Percentage Leases

Minimum Rent
The minimum rent component for a new percentage lease shall be set at no less than eighty percent (80%) of t he fair market rent as defined above. In certain cases, a portion of the minimum rent may be abated for new construction or redevelopment on Formatted: Indent: Left: 0.25"
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TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19,
2023January 22, 2019

Exhibit “A” Page 9 of 14
the leasehold. The minimum rent shall be adjusted upward throughout the duration of the lease at intervals of not m ore than every five (5) years to reflect no less than eighty percent (80%) of the average annual rent actually paid or accrued during the three (3) years preceding the adjustment. In no event shall the adjusted minimum rent be less than the minimum rent in existence immediately preceding the adjustment.

Percentage Rates
Percentage leases shall provide for adjustments of percentages rates every five (5) years to current fair market rates as established by appraisals of prevailing market percentage rates primarily within the Southern California area.

G. G. Flat Rate Leases

Market Rate Adjustments
Flat rate leases shall provide for upward adjustment of rent every five (5) years to current fair market rent.

Consumer Price Index Adjustments
Flat rate leases sha ll provide for upward adjustment of rent in the interval term between market rate adjustments by changes in the consumer price index. The index used for consumer price index adjustments will be the All Urban Consumers index for Los Angeles - Riverside - Orange County, California with a base year of 1982 -84.

If the U.S. Department of Labor indices are no longer published, another substitute index generally recognized as authoritative will be used. Flat rate leases may include pre-determined periodic increase s to rent instead of consumer price index adjustments. These periodic increases would occur at least every five (5) years.

H. H. Rent Arbitration
Leases can provide for binding arbitration when the City and lessee cannot agree on the new rent for a rental pe riod under review. The City and lessee shall each select a professional independent real estate appraiser who in turn will select a third independent real estate appraiser to determine the fair market rent. If the two selected appraisers fail to mutually s elect a third appraiser, then the third appraiser will be appointed in accordance with the rules of the American Arbitration Association . The City and lessee shall pay the cost of its own selected appraiser and equally share the cost of the third appraiser.

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TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19,
2023January 22, 2019

Exhibit “A” Page 10 of 14
absolute estate and as vacant and available for lease or sale for the authorized purposes of the lease at the commencement of the rental period under review. Rates established for purposes of periodic percentage rental adj ustments shall not consider any abatement as may be appropriate in a "new" development of vacant land. It shall also be assumed that all
required regulatory approvals to permit the use authorized in the lease have been obtained.

J. J. Lease Term

Short-Term Lease
The City Manager, at all times, shall have power, without advertising, notice, or competitive bidding, to lease any City property for a term of three (3) years or less (short-term lease). The City Council will be notified of a short -term lease not l ater than fifteen (15) days following its execution. A short -term lease may not be renewed without approval of the City Council. The City Manager , or designee may also execute rental agreements covering up to eighteen (18) months for tenant occupancy of City-owned residential housing.

Long-Term Lease
A lease in excess of three (3) years requires a resolution passed by a majority vote of all members of the City Council. The length of lease term shall be based on the level of capital improvements to be made by the lessee and the economic life expectancy of the development. These factors can be determined utilizing cost estimating and economic life expectancy resources such as tables provided by Marshall Valuation Service. The City may consider other relevant information in determining if a longer lease term is warranted, such as if the proposed leasehold development is expected to generate above average returns to the City or significantly improve the quality of the property. A lease shall not exceed 55 years unless the conditions set forth in Government Code section 37380(b) are met,

K. K. Lease Amendments
Amendments to long-term leases require City Council approval. The City's agreement to an amendment may be contingent upon updating sections of the lease to incorporate current City standard lease provisions and an adjustment to fair market rent.

L. L. Subleases
A lessee may sublease all or part of the leased property to a qualified sub -lessee subject to approval by the City. No sublease shall be approved which would be detrimental to the City's rights under the master lease or for a use that is not Formatted: Font: Bold, No underline
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TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19,
2023January 22, 2019

Exhibit “A” Page 11 of 14
consistent with uses allowed by the master lease . The City Manager may authorize subleases which meet these conditions and which do not require amendment of the master lease. Unless special circumstances
exist. Leases shall provide for the City to receive a minimum of fifty percent (50%) of the incremental gross rental revenues due to the lessee from subleases.

M. M. Leasehold Financing
The City will not subordinate it s fee interest to encumbrances placed against any leasehold by a lessee. The City Council may approve appropriate financial encumbrances of the leasehold interest, which provide that all loan proceeds are used for authorized improvement of the property unt il the leasehold is fully developed in accordance with the lease . City staff shall take appropriate steps to review the proposed financing and insure that loan proceeds go into the leasehold. Maximum loan proceeds shall not be in excess of seventy -five per cent (75%) loan -to-value, where "value " refers to the leasehold improvements, as determined by a lender's appraisal which has been reviewed and approved by City staff. The loan term shall not exceed the term of the lease.

Loans or refinancing in the form of encumbrances against the lease for the purpose of reducing equity or financing the sale of leasehold interest will not be allowed until the property is fully developed for uses authorized in the lease. After the property is developed, such financing may be permitted so long as there is also substantial benefit to be gained by the City. This may take the form of either a percentage share of the loan proceeds or an upward adjustment to the rent. Either of which shall be based on commercially reasonable comparables found in the market.

N. N. Leasehold Improvements
Leasehold improvements installed by lessees shall be removed at the lease termination without cost to the City, or will revert to the City, at the City's option. All leasehold improvements and altera tions require prior written approval of the City Council.

O. O. Maintenance and Utilities Responsibility
City leases shall require the lessee to maintain all improvements on the property at its own expense and be responsible for the cost of all utilities. Le ases for multi-tenanted space shall include specific requirements delineating appropriate responsibilities.

P. P. Lease Audits
All percentage leases may be audited by the City’s Finance Department in the first year of operation to establish proper reporting procedures and at least once every three (3) years thereafter. More frequent audits may be made if appropriate. The City shall reserve the right to audit all other leases and agreements subject to this Council Policy, if determined to be warranted by the City’s Finance Department.

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Page 186 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19,
2023January 22, 2019

Exhibit “A” Page 12 of 14

Q. Q. Leasehold Assignments
Requests for assignment of leasehold interest shall be evaluated on the same basis as the criteria used in evaluating a leasehold proposal. The City Manager may authorize assignments which do not require amendment of the master lease. Consent may be contingent on the payment of additional consideration to the City, either as a percentage share of the purchase price of the leasehold interest or an upward adjustment to the rent. Either of which shall be base d on commercially reasonable comparables found in the market. If new financing is involved in the sale, the requirements of 'Leasehold Financing' shall apply.

R. R. Lease Extensions & Renewals
Requests from existing lessees for lease extensions or renewals m ay be considered if such proposals promote capital investment and redevelopment of City property.

Whenever an existing lessee is seeking renewal of an expiring long -term lease that is not contemplated in a previously approved property management plan, the City Manager will bring the issue before the applicable City Council Committee with an appropriate recommendation. In addition to the criteria used to assess new lease proposals, City staff also will review the lessee's history with respect to: maintenanc e of the property; compliance with existing lease terms; prompt rent payments; and a rental return consistent with maximizing the property's full potential.

The lessee must propose capital investment that: will increase the value or the useful life of the leasehold improvements by an amount more than can be reasonably amortized over the remaining lease term; is not recurring in nature; and is at least ten percent (10%) or more of the value of the existing improvements . It specifically should exclude expend itures to correct deferred maintenance and expenditures for repairs to keep the existing improvements in good condition. The length of any extended lease term shall be calculated by the same method used for calculating the length of new leases.

S. S. City's Interest in Leasehold Improvements
City lease agreements provide the City the right to assume ownership of the leasehold improvements at the end of the lease . The value of the City's interest in the leasehold improvements can be appraised using widely accepted appraisal methods. In the event the City grants a lessee a lease extension, the City shall be compensated by an amount equal to the change in present value attributable to the deferral of its interest in the leasehold improvements. This amount either can be paid as an upfront payment at the beginning of the extended term or amortized over time with appropriate interest applied. The City shall offset from the value of its interest in the leasehold improvements any increased economic benefit derived from an extended lease. The City shall not receive any compensation for its interest in the leasehold improvements on leases extended prior to the last twenty percent (20%) of the existing term.

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Page 187 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19,
2023January 22, 2019

Exhibit “A” Page 13 of 14

T. T. Leasing to Non- Profit Organizations
It shall be the policy o f the City Council to allow direct negotiation with nonprofit organizations for the use of City -owned lands for the purpose of providing the community with cultural, recreational, educational enrichment, and other public services to the citizens and visito rs of National City. Relative to this policy the following will apply:

1. Available City property shall be leased at fair market value to nonprofit organizations when it is deemed by Council that appropriate public benefit will be derived.

2. The only discount in the land rental rate which will be considered is that which will be a direct offset to City expenditures. An example would be where the non -profit organization is constructing and operating a facility to provide a service that would otherwise be a recog nized obligation of the City to provide.

3. Council approval of a prospective nonprofit organization’s use of City -owned land shall be obtained prior to commencement of lease negotiations.

4. No lease will become effective until firm financial commitments have b een obtained under an appropriate lease option arrangement.

5. Lessees will be required to construct, operate, and maintain the premises at their sole cost.

6. Lessees shall be incorporated nonprofit organizations under the laws of the State of California.

7. Development on parklands shall be in conformance with City park development plans, and construction shall comply with City park design criteria.

8. Lessees shall provide desired services and facilities to the general public without discrimination as to race, color, creed, sex, age, or national origin.

9. When leases permit revenue producing activities, some measure of rental compensation shall be paid to the City. However, this provision will not apply to occasional fund raising events provided the funds are used excl usively for the specified purpose(s) of the lease.

10. Properties with significant potential for commercial, industrial, or scientific research uses shall not be available for nonprofit use.

11. Subleases will be considered on their individual merits by the City a nd consistency with conditions placed upon the City. Fees generated from subleasing will belong to the City and be deposited with the City upon receipt by the Agency.

U. U. Security Deposits
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Page 188 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19,
2023January 22, 2019

Exhibit “A” Page 14 of 14
The standard security deposit for a new lease agreement shall be equivalent to two (2) month's rent. The security deposit may take the form of cash, an instrument of credit or a
faithful performance bond . For a lessee making a substantial investment in improvements, the security deposit will be refunded upon completion of the improvements.

Related Policy References
Government Codes: 37350 and 37380
Government Codes: 54200-54232, 54235-54237

Prior Policy Amendments
August 14, 1990
January 22, 2019

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Page 189 of 223 ends

Exhibit “A”

CITY COUNCIL POLICY

CITY OF NATIONAL CITY

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Background:

The City of National City is owner of substantial real property which is used f or various municipal purposes. As public service needs change, the requirements for these properties may be revised and, on occasion, certain parcels may be in excess of the City's current need. This requ ires that each individual site be reviewed in terms of its potential for future public use, as well as its potential economic benefit to the City.

Purpose:

It is the purpose of this policy 1) to establish a procedure by which unused and marginally used City -owned real estate is reviewed for its p otential public use, and for designating unneeded parcels for lease or sale; 2) to provide methodology for the sale or exchange of City -owned real estate and 3) to establish policies for the leasing of City - owned real property; and 4) to require a study and development of homeownership units with maximized affordability on city-owned property (parcels) zoned for residential use and include a 75% local preference for residents of National City.

Policy:

It is the City's policy to manage its real estate asset s so that municipal needs which rely on these assets may be properly implemented. It is not the City's policy to speculate in real estate. The City Council will review City -owned real estate not used for municipal purposes and determine the appropriate use of the property. Those properties not needed for either City or public use within the foreseeable future, may be made available for lease or sale.

The City shall seek market value for its properties . Discounts will not be negotiated unless an extraordinary need or circumstance is recognized by Council Resolution setting

Page 190 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 2 of 13
forth the amount of the discount from appraised value and the public purpose served in justification of the discount.

City staff under the direction of City Manager shall prepare and present to the City Council a comprehensive Property Management Plan with periodic reviews as needed, and updates to the City Council. The P roperty Management Plan shall include an overall review of the City's real estate portfolio (or inventory) , an operating plan for corporate property, a disposition plan for surplus property, market research to support anticipated transactions and a request for authority to act within defined parameters (as described in this policy).

Procedure for sale of City-owned Real Estate:

A. Real Estate Review
As part of an overall property management plan for the City's real estate assets, staff will review the City's property inventory to determine which properties are no longer needed for public facilities or to support the elements of the General Plan and whose disposition will provide a greater public benefit.

B. Homeownership Requirement
City-owned property zoned for residential use requires a study and development of homeownership units with maximized affordability on city-owned property zoned for residential use and includes a 75% local preference for residents of National City.

When a City -owned property is considered for disposition by the City or Housing Authority, a study will be conducted using various d evelopment models, conditions, and options that impact the project budget, development, and unit affordability. The findings and considerations from the study by the Housing Authority must be presented to City Council for review. The City Council may accept the study or direct staff to issue a request for proposals on the subject property.

Page 191 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 3 of 13
The study will analyze and evaluate various development models for homeownership, which may include:
 Condominiums
 Townhomes
 Limited-Equity Cooperatives
 Rent-to-own units
 Community Land Trusts
 Other Models or Combinations Thereof

The subject property will also be studied and evaluate d for various conditions and options that may impact the project budget, development, and unit affordability for homeownership, which may include:
 Construction Defect Insurance Law
 Gap Financing Options
 State Legislation
 Deed Restrictions
 Ratio of market rate to affordable homeownership units  Unit size and distribution with an emphasis on larger units  Funding available to subsidize affordable homeown ership such as pre -paid mortgage insurance or first-time homebuyer programs
 Other Conditions and Options

C. Available Real Estate for Sale
A City-owned property may become available for sale if:
• The property is not currently used by the City or does not support a municipal function; and
• The property is vacant and has no foreseeable use by the City; and • The property is a non -performing or under-performing asset and greater value can be generated by its sale; and
• Significant economic development opportuni ties can be generated by selling the property.

Page 192 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 4 of 13
D. Governmental Clearance Process

Government Code Section 54222 requires that a local agency proposing to dispose of surplus property must first notify all governmental ag encies operating within the City as to the availability of the property. The agencies are given 60 days to respond with an intent to acquire, if not, the property may be deemed cleared for public sale.

E. Approval Process
• City-owned properties that have been identified by the City Manager as candidates for sale will be presented to the City Council for approval to be sold.
• If a property is of a type and location that would make a ground lease feasible, an economic analysis of the benefits of lease vs. sale will be conducted. • If the property is zoned for residential use a study will be conducted usin g various development models, conditions, and options that impact the project budget, development, and uni t affordability. The findings and considerations from the study by the Housing Authority must be presented to City Council for review. The City Council may accept the study or direct staff to issue a request for proposals on the subject property.
• If City C ouncil determines that the property may be sold, it shall authorize City Manager to sell the property for a price equal to or greater than a minimum price established by a current (less than six month s old) appraisal.

The authorization to sell the property will be valid for twelve months from the date of City Council action.
• The City Manager or designee may enter into purchase and sale agreements, close escrows and execute and deliver grant deeds to the purchasers of the properties at prices equal to or gre ater than the minimum price approved by City Council on terms and conditions deemed reasonable, and in the City's best interests.
• City Manager or designee will provide a report to the City Council, regarding the price, terms, and conditions of all transactions.
• Properties that cannot be sold at a price equal to or greater than the minimum price approved by Council will be returned to Council for further consideration prior to disposition. Council approval will be required to sell a property at a price less than the minimum price previously approved by the City Council.

F. Method of Sale

Page 193 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 5 of 13
Properties may be sold by any method allowed by City Council Policy. This includes direct negotiation, request for proposal, listing with a broker, sealed bid, auction or other appropriate method as determined by the City Council. Possible method of sale for all properties will be included in the enabling resolution authorizing their sales.

G. Marketing

Properties offered for sale shall receive the widest possible exposure to the open marketplace. This may be accomplished through direct marketing techniques, such as requests for proposals (RFP), advertising, exposure through the real estate media, posting the property on the multiple listing service , or any other appropriate method.

When appropriate, properties may be listed for sale with qualified real estate brokers.

The authorization to utilize the services of a real estate broker will be contained in the enabling resolution.

H. Real Estate Brokers
Real estate brokers may be used to represent the City in the sale of its properties.

Brokers will be selected for individual assignments through Requests for Proposals (RFP) or Requests for Qualifications (RFQ) and a subsequent bid or other methods that result in the City receiv ing the services of a qualified broker at the best value to the City. The maximum approved commission rate will be contained in the enabling resolution for the property's sale. If the property is listed with a broker, the City reserves the right to exclude from the listing agreement potential buyers whose interest in purchasing a subject property has been made a part of the record prior to the execution of such agreement.

I. Exclusively Negotiated Sales
It will be the City's policy to insure the highest pr ice for its real estate by pursuing open market transactions. However, on certain occasions, an exclusively negotiated sale may be justified as applicable and may be approved under one of the following conditions:

1. When a parcel is landlocked.

2. When the sale is to a contiguous owner.

3. When a fee interest in a pipeline or other right -of-way is no longer required, it may be sold to a contiguous owner. A restrictive pipeline easement of adequate width or other required easements will be reserved from said sale.

Page 194 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 6 of 13
a condition subsequent. Institutional organizations such as places of public assembly, hospitals, extended care facilities, private schools and community service organizations are required to develop under the City's conditiona l use permit procedure.

7. Rea l property exchanges may be consummated by direct negotiation . However, exchanges will be considered only with other governmental agencies or when there is an advantage to the City.

J. Rezoning
Prior to completion of the sales transaction, City land shall be considered for rezoning in accordance with the General Plan, existing community plans or other City Council direction if a higher sale price will result. Also, all unnecessary easements affec ting title to the property shall be removed if this will resu lt in a commensurate increase in value.

K. Easements
The City will receive current fair market value for the removal of restrictive easements or access rights previously paid for by the City or other governmental agency or reserved in a sale of City property.

L. Priority Handling
Since time is of essence in land transactions, all such actions by the City Council and staff shall be given the highest priority and special handling.

M. Public Utilities Installed by Private Entities
The applicant for the use of unimproved City land for public purposes, such as streets, sewers, and other public utilities, shall compensate the City for the fair market value of the rights to be granted by the City. The amount of compensation shall be established by appraisal.

Procedure for leasing City-owned Real Property
The City of National City has a very diverse real estate portfolio. While the policies herein are to act as the standard that governs most leases, the City acknowledges that parts of its leasing portfolio hav e specialized needs or restrictions. In these cases, this policy will act as a framework for a sub -policy that will govern a specific area. Should a conflict arise between the framework policy and the sub -policy, the sub -policy will govern.

A. Criteria for Leasing
City property shall be considered for leasing when one or more of the following criteria apply:

Page 195 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 7 of 13

1. The property is not required for current municipal use, but is to be held for possible future use and can be leased as an interim measure.

2. The prop erty can only be leased because of legal restraints. For example, property held under Tideland trust grants or as dedicated parks.

3. The City requires substantial control over development, use and reuse of the property.

4. The property has the immediate p otential of a high return to the City because of its high demand and type of use, such as commercial and industrial land.

5. The property can be efficiently utilized by a provider of services needed by the City.

6. The property can be leased to promote a s ubstantial economic development opportunity.

B. Property Management Plan
The City Council may approve the execution of lease transactions that meet the terms of the City's asset strategy for a particular property previously approved by City Council in an ove rall Property Management Plan . Negotiated transactions that fall outside of the parameters of an approved Property Management Plan either will be submitted individually for City Council approval, or deferred until the next periodic update and approval of the plan.

C. Lessee Selection for New Leases
Competitive offers for lease of City property shall be solicited from the open market place. This may be accomplished through a number of marketing techniques, such as Request for Proposals (RFPs), a marketing sub scription system, direct advertising, use of a Multiple Listing Service (MLS) , listing with a broker, posting the property and any other appropriate means.

Leasehold proposals shall be evaluated in terms of:

1. The degree to which the proposed use is in compliance with the City's strategic plan for the property.

2. In terms of the amount of consideration offered in the form of rent.

3. In terms of the financial feasibility of the proposal.

4. The capability, expertise and experience of the potential lessee with respect t o the proposed leasehold development and operation.

5. If new development is proposed, a development plan that includes a description of the development team and its qualifications.

Page 196 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 8 of 13

6. The details of each person or entity that will have an interest in the proposed lease

7. Special public benefits to be derived (if any).

D. Rate of Return
The City shall obtain fair market rents for its leases commensurate with the highest and best use of the property. The fair market rent shall be based on an appraisal that complies with the definition of Market Rent found in the Uniform Standards of Professional Appraisal Practice (USPAP) published by the Appraisal Foundation. The appraisal shall be no more than six months old at the time the lease transaction is presented for City Council approval. If the cost of an appraisal is not justified by the anticipated rents, the City may choose an alternative method to establish rent. City leases shall contain terms and conditions which will sustain a fair rate of return throughout the duration of the lease.

E. Rental Terms
Rental terms may be negotiated on the basis of fixed rates (flat rent leases) or percentages of the lessee's gross income derived from business conducted on the property, with a provision for a minimum rent on percentage leases.

F. Percentage Leases
Minimum Rent
The minimum rent component for a new percentage lease shall be set at no less than eighty percent (80%) of the fair market rent as defined above. In certain cases, a portion of the minimum rent may be abated for new construction or redevelopment on the leasehold. The minimum rent shall be adjusted upward throughout the duration of the lease at intervals of not more than every five (5) years to reflect no less than eighty percent (80%) of the average annual rent actually paid or accrued during the three (3) years preceding the adjustment. In no event shall the adjusted minimum rent be less than the minimum rent in existence immediately preceding the adjustment.

G. Flat Rate Leases

Market Rate Adjustments
Flat rate lease s shall provide for upward adjustment of rent every five (5) years to current fair market rent.

Consumer Price Index Adjustments

Page 197 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 9 of 13
Flat rate leases shall provide for upward adjustment of rent in the interval term between market rate adjustments by changes in the consumer price index. The index used for consumer price index adjustments will be the All Urban Consumers index for Los Angeles - Riverside - Orange County, California with a base year of 1982 -84.

If the U.S. Department of Labor indices are no longe r published, another substitute index generally recognized as authoritative will be used. Flat rate leases may include pre-determined periodic increases to rent instead of consumer price index adjustments. These periodic increases would occur at least every five (5) years.

H. Rent Arbitration
Leases can provide for binding arbitration when the City and lessee cannot agree on the new rent for a rental period under review . The City and lessee shall each select a professional independent real estate appraiser wh o in turn will select a third independent real estate appraiser to determine the fair market rent. If the two selected appraisers fail to mutually select a third appraiser, then the third appraiser will be appointed in accordance with the rules of the Amer ican Arbitration Association. The City and lessee shall pay the cost of its own selected appraiser and equally share the cost of the third appraiser.

I. Appraisal Assumptions
City leases shall include a definition of the fair market value to be used to adju st rent and an identification of the premise for that value. In establishing the fair market value of leased property, any appraisal shall consider the property as a fee simple absolute estate and as vacant and available for lease or sale for the authorize d purposes of the lease at the commencement of the rental period under review. Rates established for purposes of periodic percentage rental adjustments shall not consider any abatement as may be appropriate in a "new" development of vacant land. It shall also be assumed that all
required regulatory approvals to permit the use authorized in the lease have been obtained.

J. Lease Term
Short-Term Lease
The City Manager, at all times, shall have power, without advertising, notice, or competitive bidding, to leas e any City property for a term of three (3) years or less (short-term lease). The City Council will be notified of a short -term lease not later than fifteen (15) days following its execution. A short -term lease may not be renewed without approval of the Ci ty Council. The City Manager , or designee may also execute rental agreements covering up to eighteen (18) months for tenant occupancy of City-owned residential housing.

Long-Term Lease
A lease in excess of three (3) years requires a resolution passed by a majority vote of all members of the City Council. The length of lease term shall be based on the level

Page 198 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 10 of 13
of capital improvements to be made by the lessee and the economic life expectancy of the development. These factors can be determined utilizing cost est imating and economic life expectancy resources such as tables provided by Marshall Valuation Service. The City may consider other relevant information in determining if a longer lease term is warranted, such as if the proposed leasehold development is expe cted to generate above average returns to the City or significantly improve the quality of the property. A lease shall not exceed 55 years unless the conditions set forth in Government Code section 37380(b) are met,

K. Lease Amendments
Amendments to long-term leases require City Council approval. The City's agreement to an amendment may be contingent upon updating sections of the lease to incorporate current City standard lease provisions and an adjustment to fair market rent.

L. Subleases
A lessee may sublease all or part of the leased property to a qualified sub -lessee subject to approval by the City. No sublease shall be approved which would be detrimental to the City's rights under the master lease or for a use that is not consistent with uses allowed by the master lease . The City Manager may authorize subleases which meet these conditions and which do not require amendment of the master lease. Unless special circumstances exist. Leases shall provide for the City to receive a minimum of fifty percent (50%) of the incremental gross rental revenues due to the lessee from subleases.

M. Leasehold Financing
The City will not subordinate its fee interest to encumbrances placed against any leasehold by a lessee. The City Council may approve appropriate financial encumbrances of the leasehold interest, which provide that all loan proceeds are used for authorized improvement of the property until the leasehold is fully developed in accordance with the lease . City staff shall take appropriate steps to review the proposed f inancing and insure that loan proceeds go into the leasehold. Maximum loan proceeds shall not be in excess of seventy -five percent (75%) loan -to-value, where "value " refers to the leasehold improvements, as determined by a lender's appraisal which has been reviewed and approved by City staff. The loan term shall not exceed the term of the lease.

Page 199 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 11 of 13

N. Leasehold Improvements
Leasehold improvements installed by lessees shall be removed at the lease termination without cost to the City, or will revert to the City, at the City's option. All leasehold improvements and alterations require prior written approval of the City Council.

O. Maintenance and Utilities Responsibility
City leases shall require the lessee to maintain all improvements on the property at its own expense and be responsible for the cost of all utilities. Leases for multi -tenanted space shall include specific requirements delineating appropriate responsibilities.

P. Lease Audits
All percentage leases may be audited by the City’s Finance Department in the first year of operation to establish proper reporting procedures and at least once every three (3) years thereafter. More frequent audits may be made if appropriate. The City shall reserve the right to audit all other leases and agreements subject to this Council Policy, if determined to be warranted by the City’s Finance Department.

Q. Leasehold Assignments
Requests for assignment of leasehold interest shall be evaluated on the same basis as the criteria used in evaluating a leasehold proposal. The City Manager may authorize assignments which do not require amendment of the master lease. Consent may be contingent on the payment of additional consideration to the City, either as a percentage share of the purchase price of the leasehold interest or an upward adjustment to the rent. Either of which shall be based on commercially reasonable comparables found in the market. If new financing is involved in the sale, the requirements of 'Leasehold Financing' shall apply.

R. Lease Extensions & Renewals
Requests from existing lessees for lease extensions or renewals may be considered if such proposals promote capital investment and redevelopment of City property.

Whenever an existing lessee is seeking renewal of an expiring long-term lease that is not contemplated in a previously approved property management plan, the City Manager will bring the issue before the applicable City Council Committee with an appropriate recommendation. In addition to the criteria u sed to assess new lease proposals, City staff also will review the lessee's history with respect to: maintenance of the property; compliance with existing lease terms; prompt rent payments; and a rental return consistent with maximizing the property's full potential.

Page 200 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 12 of 13
should exclude expenditures to correct deferred maintenance and expenditures for repairs to keep the existing improvements in good condition. The length of any extended lease term shall be calculated by the same method used for calculating the length of new leases.

S. City's Interest in Leasehold Improvements
City lease agreements provide the City the right to assume ownership of the leasehold improvements at the end of the lease. The value of the City's interest in the leasehold improvements can be appraised using widely accepted appraisal methods. In the event the City grants a lessee a lease extension, the City shall be compensated by an amount equal to the change in p resent value attributable to the deferral of its interest in the leasehold improvements. This amount either can be paid as an upfront payment at the beginning of the extended term or amortized over time with appropriate interest applied. The City shall off set from the value of its interest in the leasehold improvements any increased economic benefit derived from an extended lease. The City shall not receive any compensation for its interest in the leasehold improvements on leases extended prior to the last twenty percent (20%) of the existing term.

T. Leasing to Non- Profit Organizations
It shall be the policy of the City Council to allow direct negotiation with nonprofit organizations for the use of City -owned lands for the purpose of providing the community with cultural, recreational, educational enrichment, and other public services to the citizens and visitors of National City. Relative to this policy the following will apply:

1. Available City property shall be leased at fair market value to nonprofit organizations when it is deemed by Council that appropriate public benefit will be derived.

2. The only discount in the land rental rate which will be considered is that which will be a direct offset to City expenditures. An example would be where the non -profit o rganization is constructing and operating a facility to provide a service that would otherwise be a recognized obligation of the City to provide.

3. Council approval of a prospective nonprofit organization’s use of City -owned land shall be obtained prior to commencement of lease negotiations.

4. No lease will become effective until firm financial commitments have been obtained under an appropriate lease option arrangement.

5. Lessees will be required to construct, operate, and maintain the premises at their sole cost.

6. Lessees shall be incorporated nonprofit organizations under the laws of the State of California.

7. Development on parklands shall be in conformance with City park development plans, and construction shall comply with City park design criteria.

Page 201 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 13 of 13

8. Lessees sha ll provide desired services and facilities to the general public without discrimination as to race, color, creed, sex, age, or national origin.

10. Properties with significant potential for commercial, industrial, or scientific research uses shall not be available for nonprofit use.

11. Subleases will be considered on their individual merits by the City and consistency with conditions placed upon the City. Fees generated from subleasing will belong to the City and be deposited with the City upon receipt by the Agency.

U. Security Deposits
The standard security deposit for a new lease agreement shall be equivalent to two (2) month's rent. The security deposit may take the form of cash, an instrument of credit or a faithful performance bond . For a lessee mak ing a substantial investment in improvements, the security deposit will be refunded upon completion of the improvements.

Related Policy References
Government Codes: 37350 and 37380
Government Codes: 54200-54232, 54235-54237

Prior Policy Amendments
August 14, 1990
January 22, 2019

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City Council Policy #901:

Amendment to Expand Homeownership
SEPTEMBER 19, 2023
CARLOS AGUIRRE, ACTING DEPUTY CITY MANAGERPage 203 of 223 Background
• Policy #105* request was submitted by Councilmember Rodriguez to review and discuss Policy #901 Management of Real Property (Sale, Lease, Rental, Surplus)
• Intent of the request was to consider a policy that expands homeownership opportunities on City-owned properties
• Staff proposed draft language for the Amendment to Policy #901 on August 15, 2023, and was directed by the City Council to make additional revisions to the Policy.
• Housing Strategic Plan provides an inventory of all City-owned properties zoned for housing and identifies housing priority sites. • Objective #3: Special consideration is provided to homeownership opportunities
2 September 19, 2023 Policy #901 Amendment to Expand Homeownership

Page 204 of 223 ends

City Council Policy #901*
Revised per City Council direction given at the August 15, 2023 meeting.

September 19, 2023 Policy #901 Amendment to Requiring Homeownership3 Policy# 901 purpose:
(1) procedures for disposition of surplus property;
(2) provides a methodology for the sale and exchange of City-owned real estate;
(3) policies for leasing City-owned property; and
(4) to require a study and development of homeownership units with maximized affordability on city-owned property (parcels) zoned for residential use and include a 75% local preference for residents of National City.*
*Proposed Amendment

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City Council Policy #901
Amendment Continued
September 19, 2023 Policy #901 Amendment to Expand Homeownership4 • When a City-owned property is considered for disposition, a study will be conducted using various development models and conditions that impact the project budget, development, and unit affordability.
• The findings and considerations from the study by the Housing Authority must be presented to City Council for review.
• The City Council may accept the study or direct staff to issue a request for proposals for on the subject property.

Page 206 of 223 ends

September 19, 2023 Policy #901 Amendment to Expand Homeownership5 A study of a property will analyze and
evaluate various development models
for homeownership, which may include:
• Condominiums
• Townhomes
• Limited-Equity Cooperatives
• Rent-to-Own Units
• Community Land Trusts
• Other Models or Combinations
Thereof
Various conditions and options will be studied and
evaluated that may impact the project budget,
development, and unit affordability for
homeownership, which may include:
• Construction Defect Insurance Law
• Gap Financing Options
• State Legislation
• Deed Restrictions
• Ratio of market rate to affordable
homeownership units
• Unit size and distribution with an emphasis
on larger units
• Funding available to subsidize affordable
homeownership such as pre-paid mortgage
insurance or first-time homebuyer programs
• Other Conditions and Options
City Council Policy #901
Amendment Continued

Page 207 of 223 ends

PROPOSED AMENDMENT TO
CITY COUNCIL POLICY #901

QUESTIONS & COMMENTS
6 September 19, 2023 Policy #901 Amendment to Expand Homeownership Page 208 of 223 RESOLUTION NO. 2023 -

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NATIONAL CITY, CALIFORNIA, AMENDING CITY COUNCIL POLICY NO. 901, ENTITLED “MANAGEMENT OF REAL PROPERTY,” TO REQUIRE A STUDY AND DEVELOPMENT OF HOMEOWNERSHIP UNITS

WITH MAXIMIZED AFFORDABILITY ON CITY -OWNED PROPERTY ZONED FOR RESIDENTIAL USE AND INCLUDE A 75% LOCAL PREFERENCE OR RESIDENTS OF NATIONAL CITY.

WHEREAS, the City of National City is the owner of substantial real property that is used for various municipal purposes; and

WHEREAS, as public service needs change, the requirements for these properties may be revised and, on occasion, certain parcels may be in excess of the City's current need, which requires that each individual site be reviewed in terms of its potential for future public use, as well as its potential economic benefit to the City; and

WHEREAS, the purpose of Policy No. 901 entitled "Management of Real Property" is to 1) establish a procedure by which unused and marginally used City-owned real estate is reviewed for its potential public use, and for designating unneeded parcels for lease or sale; 2) provide a methodology for the sale or exchange of City-owned real estate; and 3) establish policies for the leasing and rental of City-owned real property; and

WHEREAS, on February 21, 2023, the City Council of City of National City (“City Council”) provided direction to City staff to create a policy that would prioritize homeownership development in National City on City-owned property; and

WHEREAS, on August 15, 2023, the City Council provided further direction to City staff to amend the Policy No. 901; and

WHEREAS, on September 19, 2023, staff presented an amendment to the purpose of Policy No. 901 requiring a study and development of homeownership units with maximized affordability on city -owned property zoned for residential use and to include a 75% local preference or residents of National City.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF NATIONA L CITY, CALIFORNIA, DOES RESOLVE, DECLARE, DETERMINE, AND ORDER AS FOLLOWS:

Section 1: That the City Council hereby approves the amendment of City Council Policy No. 901, entitled ‘Management of Real Property,’ attached hereto.

Section 2: The City Clerk shall certify to the passage and adoption of this Resolution and enter it into the book of original Resolution.

PASSED and ADOPTED this 19th day of September, 2023.

Ron Morrison, Mayor
ATTEST:

Shelley Chapel, MMC, City Clerk

APPROVED AS TO FORM: Page 209 of 223

Barry J. Schultz, City Attorney

Page 210 of 223 ends

Exhibit “A”

CITY COUNCIL POLICY

CITY OF NATIONAL CITY

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Background:

The City of National City is owner of substantial real property which is used f or various municipal purposes. As public service needs change, the requirements for these properties may be revised and, on occasion, certain parcels may be in excess of the City's current need. This requ ires that each individual site be reviewed in terms of its potential for future public use, as well as its potential economic benefit to the City.

Purpose:

It is the purpose of this policy 1) to establish a procedure by which unused and marginally used City -owned real estate is reviewed for its p otential public use, and for designating unneeded parcels for lease or sale; 2) to provide methodology for the sale or exchange of City -owned real estate and 3) to establish policies for the leasing of City - owned real property; and 4) to require a study and development of homeownership units with maximized affordability on city-owned property (parcels) zoned for residential use and include a 75% local preference for residents of National City.

Policy:

It is the City's policy to manage its real estate asset s so that municipal needs which rely on these assets may be properly implemented. It is not the City's policy to speculate in real estate. The City Council will review City -owned real estate not used for municipal purposes and determine the appropriate use of the property. Those properties not needed for either City or public use within the foreseeable future, may be made available for lease or sale.

The City shall seek market value for its properties . Discounts will not be negotiated unless an extraordinary need or circumstance is recognized by Council Resolution setting

Page 211 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 2 of 13
forth the amount of the discount from appraised value and the public purpose served in justification of the discount.

City staff under the direction of City Manager shall prepare and present to the City Council a comprehensive Property Management Plan with periodic reviews as needed, and updates to the City Council. The P roperty Management Plan shall include an overall review of the City's real estate portfolio (or inventory) , an operating plan for corporate property, a disposition plan for surplus property, market research to support anticipated transactions and a request for authority to act within defined parameters (as described in this policy).

Procedure for sale of City-owned Real Estate:

When a City -owned property is considered for disposition by the City or Housing Authority, a study will be conducted using various d evelopment models, conditions, and options that impact the project budget, development, and unit affordability. The findings and considerations from the study by the Housing Authority must be presented to City Council for review. The City Council may accept the study or direct staff to issue a request for proposals on the subject property.

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TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

The subject property will also be studied and evaluate d for various conditions and options that may impact the project budget, development, and unit affordability for homeownership, which may include:
 Construction Defect Insurance Law
 Gap Financing Options
 State Legislation
 Deed Restrictions
 Ratio of market rate to affordable homeownership units  Unit size and distribution with an emphasis on larger units  Funding available to subsidize affordable homeown ership such as pre -paid mortgage insurance or first-time homebuyer programs
 Other Conditions and Options

C. Available Real Estate for Sale
A City-owned property may become available for sale if:
• The property is not currently used by the City or does not support a municipal function; and
• The property is vacant and has no foreseeable use by the City; and • The property is a non -performing or under-performing asset and greater value can be generated by its sale; and
• Significant economic development opportuni ties can be generated by selling the property.

Page 213 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 4 of 13
D. Governmental Clearance Process

Government Code Section 54222 requires that a local agency proposing to dispose of surplus property must first notify all governmental ag encies operating within the City as to the availability of the property. The agencies are given 60 days to respond with an intent to acquire, if not, the property may be deemed cleared for public sale.

The authorization to sell the property will be valid for twelve months from the date of City Council action.
• The City Manager or designee may enter into purchase and sale agreements, close escrows and execute and deliver grant deeds to the purchasers of the properties at prices equal to or gre ater than the minimum price approved by City Council on terms and conditions deemed reasonable, and in the City's best interests.
• City Manager or designee will provide a report to the City Council, regarding the price, terms, and conditions of all transactions.
• Properties that cannot be sold at a price equal to or greater than the minimum price approved by Council will be returned to Council for further consideration prior to disposition. Council approval will be required to sell a property at a price less than the minimum price previously approved by the City Council.

F. Method of Sale

Page 214 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

G. Marketing

When appropriate, properties may be listed for sale with qualified real estate brokers.

The authorization to utilize the services of a real estate broker will be contained in the enabling resolution.

H. Real Estate Brokers
Real estate brokers may be used to represent the City in the sale of its properties.

Brokers will be selected for individual assignments through Requests for Proposals (RFP) or Requests for Qualifications (RFQ) and a subsequent bid or other methods that result in the City receiv ing the services of a qualified broker at the best value to the City. The maximum approved commission rate will be contained in the enabling resolution for the property's sale. If the property is listed with a broker, the City reserves the right to exclude from the listing agreement potential buyers whose interest in purchasing a subject property has been made a part of the record prior to the execution of such agreement.

1. When a parcel is landlocked.

2. When the sale is to a contiguous owner.

3. When a fee interest in a pipeline or other right -of-way is no longer required, it may be sold to a contiguous owner. A restrictive pipeline easement of adequate width or other required easements will be reserved from said sale.

Page 215 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

7. Rea l property exchanges may be consummated by direct negotiation . However, exchanges will be considered only with other governmental agencies or when there is an advantage to the City.

L. Priority Handling
Since time is of essence in land transactions, all such actions by the City Council and staff shall be given the highest priority and special handling.

Procedure for leasing City-owned Real Property
The City of National City has a very diverse real estate portfolio. While the policies herein are to act as the standard that governs most leases, the City acknowledges that parts of its leasing portfolio hav e specialized needs or restrictions. In these cases, this policy will act as a framework for a sub -policy that will govern a specific area. Should a conflict arise between the framework policy and the sub -policy, the sub -policy will govern.

A. Criteria for Leasing
City property shall be considered for leasing when one or more of the following criteria apply:

Page 216 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 7 of 13

1. The property is not required for current municipal use, but is to be held for possible future use and can be leased as an interim measure.

2. The prop erty can only be leased because of legal restraints. For example, property held under Tideland trust grants or as dedicated parks.

3. The City requires substantial control over development, use and reuse of the property.

4. The property has the immediate p otential of a high return to the City because of its high demand and type of use, such as commercial and industrial land.

5. The property can be efficiently utilized by a provider of services needed by the City.

6. The property can be leased to promote a s ubstantial economic development opportunity.

Leasehold proposals shall be evaluated in terms of:

1. The degree to which the proposed use is in compliance with the City's strategic plan for the property.

2. In terms of the amount of consideration offered in the form of rent.

3. In terms of the financial feasibility of the proposal.

4. The capability, expertise and experience of the potential lessee with respect t o the proposed leasehold development and operation.

5. If new development is proposed, a development plan that includes a description of the development team and its qualifications.

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TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 8 of 13

6. The details of each person or entity that will have an interest in the proposed lease

7. Special public benefits to be derived (if any).

G. Flat Rate Leases

Market Rate Adjustments
Flat rate lease s shall provide for upward adjustment of rent every five (5) years to current fair market rent.

Consumer Price Index Adjustments

Page 218 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

If the U.S. Department of Labor indices are no longe r published, another substitute index generally recognized as authoritative will be used. Flat rate leases may include pre-determined periodic increases to rent instead of consumer price index adjustments. These periodic increases would occur at least every five (5) years.

Long-Term Lease
A lease in excess of three (3) years requires a resolution passed by a majority vote of all members of the City Council. The length of lease term shall be based on the level

Page 219 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Page 220 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 11 of 13

R. Lease Extensions & Renewals
Requests from existing lessees for lease extensions or renewals may be considered if such proposals promote capital investment and redevelopment of City property.

Whenever an existing lessee is seeking renewal of an expiring long-term lease that is not contemplated in a previously approved property management plan, the City Manager will bring the issue before the applicable City Council Committee with an appropriate recommendation. In addition to the criteria u sed to assess new lease proposals, City staff also will review the lessee's history with respect to: maintenance of the property; compliance with existing lease terms; prompt rent payments; and a rental return consistent with maximizing the property's full potential.

Page 221 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

1. Available City property shall be leased at fair market value to nonprofit organizations when it is deemed by Council that appropriate public benefit will be derived.

2. The only discount in the land rental rate which will be considered is that which will be a direct offset to City expenditures. An example would be where the non -profit o rganization is constructing and operating a facility to provide a service that would otherwise be a recognized obligation of the City to provide.

3. Council approval of a prospective nonprofit organization’s use of City -owned land shall be obtained prior to commencement of lease negotiations.

4. No lease will become effective until firm financial commitments have been obtained under an appropriate lease option arrangement.

5. Lessees will be required to construct, operate, and maintain the premises at their sole cost.

6. Lessees shall be incorporated nonprofit organizations under the laws of the State of California.

7. Development on parklands shall be in conformance with City park development plans, and construction shall comply with City park design criteria.

Page 222 of 223 ends

TITLE: Management of Real Property POLICY # 901 (Sale, Lease, Rental, Surplus)

ADOPTED: June 19, 1984 AMENDED: September 19, 2023

Exhibit “A” Page 13 of 13

8. Lessees sha ll provide desired services and facilities to the general public without discrimination as to race, color, creed, sex, age, or national origin.

10. Properties with significant potential for commercial, industrial, or scientific research uses shall not be available for nonprofit use.

11. Subleases will be considered on their individual merits by the City and consistency with conditions placed upon the City. Fees generated from subleasing will belong to the City and be deposited with the City upon receipt by the Agency.

Related Policy References
Government Codes: 37350 and 37380
Government Codes: 54200-54232, 54235-54237

Prior Policy Amendments
August 14, 1990
January 22, 2019

Page 223 of 223 ends

National City City CouncilSeptember 19, 2023

National City City Council
September 19, 2023