DATE: DECEMBER 13, 2022
DEPARTMENT: COMMUNITY DEVELOPMENT DEPARTMENT
FROM: MEGAN HUNTER, DIRECTOR
BY: MICHAEL GOMEZ, ECONOMIC DEVELOPMENT ANALYST
THROUGH: LISA BRINTON, ASSISTANT DIRECTOR
TITLE: PURCHASE AND SALES AGREEMENTS FOR 34 AND 37 SOLEDAD STREET RECOMMENDED MOTION:
A motion to approve the attached Resolution authorizing the Mayor to execute Purchase and Sales Agreements (PSAs) for two parcels located at 34 and 37 Soledad Street (Chinatown Properties or Properties) in the City of Salinas.
EXECUTIVE SUMMARY:
The City of Salinas was approached by the representative of multiple trusts (Sellers) that own the Chinatown Properties with an offer to sell. An aerial map showing the location of the Properties is provided as Attachment 1 to this staff report. Both Properties are uninhabitable, in dire need of remediation, and are historic buildings located in the Chinatown core. The asking price for the Properties is four hundred thirty thousand, six hundred and twenty-five dollars ($430,625) if purchased together “as is”. A condition of the PSA is that should 37 Soledad be made code compliant within ten (10) years, the City will lease the first floor of 37 Soledad Street to the Asian Cultural Experience (ACE) to create the “Salinas Chinatown Cultural Center and Museum” for one dollar ($1.00) a year for fifty (50) years. With Council approval, the City would Purchase 34 Soledad Street prior to the end of 2022 and would open escrow to purchase 37 Soledad Street with closing contingent upon the Preliminary Title Report being corrected to reflect the removal of two deceased property owners. Draft PSAs and associated exhibits are provided as exhibits to the Resolution, Attachments 2 to this staff report.
BACKGROUND:
34 Soledad Street (Assessor’s Parcel Number [APN] 002-194-029-000; Property 1) is offered for sale with an asking price of two hundred and thirty thousand six hundred and twenty-five dollars ($230,625). It is a two-story building with approximately 5,500 square feet of usable space and an attached 3,850 square foot building in poor condition due to fire damage and decades of deferred maintenance. 37 Soledad Street (Assessor’s Parcel Number [APN] 002-191-012-000; Property 2) is approximately 6,490 square feet building formerly known as the Republic Café. Property 2 is not listed but is being offered at two hundred thousand dollars ($200,000). Property 2 was built in 1942 and renovated in 2010 by the City and California State University Monterey Bay Corporation utilizing Housing and Urban Development Department funding. The renovation included environmental remediation and mitigation; roof replacement; and the renovation of approximately 1,000 square feet of first floor to make it accessible for public use as a “Cultural Center and Museum”. ACE currently leases Property 2 from the Sellers to use as the Asian Cultural Center; however, due to a recent fire in the building it is now uninhabitable.
DISCUSSION:
In December 2019 the City Council approved the Chinatown Revitalization Plan (CRP) as a key strategic planning document which envisions Chinatown as a thriving, affordable, safe, walkable, healthy, and well-connected community that serves a cultural center for the arts and vibrant tourist destination for the City and the region. The City is interested the in the offer to sell the Properties to implement the goals of the CRP. Reuse and redevelopment in Chinatown are financially infeasible due to site constraints including, but not limited to, the size of parcels, unknown environmental concerns regarding building and soil contamination, and the cost of remediation and deferred maintenance. Neither current property owners nor potential future developers can take on these predevelopment and site preparation costs. Should the City acquire the Properties, staff intends to conduct the necessary studies, prepare and implement remediation plans and conduct other predevelopment work to prepare Properties for future mixed-use development including affordable housing and active ground floor spaces.
ACE currently has a lease, which is recorded on Property 2 for operating the Asian Cultural Center with the objective of preserving, promoting, and enriching the history and multicultural identity of Salinas Chinatown. The current lease expires November 4, 2025; however, ACE has the option extend the term of the lease up to five times, each extension for an additional five years until November 30, 2050. Under the PSA for Property 2 the City is to assume the lease with ACE under the same terms and conditions should it be made code compliant with in ten (10) years. If the City decides to terminate the lease prior to June 30, 2025, the City would be obligated to repay ACE of seventeen thousand four hundred dollars ($17,400) per year up to June 30, 2025. The lease agreement is provided as an exhibit to the PSA for Property 2, which is Exhibit B to the Resolution, provided as Attachment 2 to this report. In addition, the Preliminary Title Report, for 37 Soledad Street is to be corrected as two of the four owners having interest on the property are deceased. This process is expected to be resolved through a court order within three to four months.
The Properties which are held in multiple trusts are offered as at package deal at four hundred and thirty thousand six hundred and twenty-five thousand dollars ($430,625). Due to the age of the remaining members of the trust and for tax purposes, the Sellers have requested that escrow close prior to the end of the year. With Council approval, the City would Purchase 34 Soledad Street prior to the end of 2022 and would open escrow to purchase 37 Soledad Street with closing contingent on the Preliminary Title Report being corrected to reflect the removal of two deceased property owners. City staff has verified that all property taxes are up to date and no active liens have been discovered by the title company. At the time of writing this report, staff also have ordered an Environmental Site Assessment Phase I and an Appraisal Report. Based on the Appraisal Report dated December 8, 2022, Property 1 has appraised for three hundred thousand dollars ($300,000), and Property 2 has appraised for one hundred and forty thousand dollars ($140,000). One of the terms and conditions of the PSAs is the Chinatown Properties are purchased together. As a packaged deal, the seller is offering a reduced price, which is a benefit for the City. Any substantive findings would be presented to Council at the time of consideration, however, one of the key terms and conditions is that the City is acquiring the Properties “as is”. The City has not performed a survey of the site; however, given the timeframe in which the seller wishes to relinquish the Properties, staff does not recommend taking this action, as the precise boundaries of the Properties may be determined later if deemed necessary.
CEQA CONSIDERATION:
Not a Project. The City of Salinas has determined that the proposed action is not a project as defined by the California Environmental Quality Act (CEQA) (CEQA Guidelines Section 15378). In addition, CEQA Guidelines Section 15061 includes the general rule that CEQA applies only to activities which have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. The proposed action consists only of the acquisition of the Chinatown Properties, and no action regarding the use of the land is contemplated at this time. Because the matter does not cause a direct or foreseeable indirect physical change on or in the environment, this matter is not a project. Any subsequent discretionary projects resulting from this action will be assessed for CEQA applicability.
STRATEGIC PLAN INITIATIVE:
The proposed acquisition primarily relates to the City’s goals of Economic Development and Housing/Affordable Housing. Future mixed-use redevelopment and reuse of the Chinatown Properties will further the implementation of the CRP by providing active ground floor uses including a cultural and art center and housing units on the second floor thus revitalizing Chinatown’s commercial center on Soledad Street.
DEPARTMENTAL COORDINATION:
The Economic Development Division worked with the Housing Division (Community Development Department) and with the Legal Department to prepare the draft Purchase and Sales Agreements and the preparation of this item.
FISCAL AND SUSTAINABILITY IMPACT:
The source of funds for the acquisition of the Chinatown Properties is from the Affordable Housing Production Fund. On November 16, 2021, Council approved Resolution 22250 appropriating seven million dollars ($7,000,000.00) from the American Rescue Plan Act (“ARPA”) to the Affordable Housing Production Fund. The Purchase Price for both Properties is four hundred thirty thousand six hundred and twenty-five dollars ($430,625) with approximately Escrow cost being a total of three thousand eight hundred and sixty six dollars ($3,866.97). Upon taking ownership, the City will assume responsibility for ongoing property maintenance costs, remediation and repair, and property taxes. The annual costs of property maintenance will vary depending on the level and type of repair, maintenance and/or remediation performed on the Properties. Property taxes will initially be approximately $1,614.12 for Property 1 and $1,791.88 for Property 2 per year. These ongoing costs will need to be included in future annual general fund annual budget requests.
ATTACHMENTS:
Aerial Photograph of Properties and Surrounding Area
Proposed RESOLUTION, including the following Exhibits:
Exhibit “A” – 34 Soledad Street Purchase and Sales Agreement, including a Legal Description, Grant Deeds and Certificate of Acceptance Exhibit “B” – 37 Soledad Street Purchase and Sales Agreement, including a Legal Description, Grant Deeds, Certificate of Acceptance and ACE Lease Agreement Page | 3
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