Subject: Property Acquisition Policies and Procedures
Index: Real Property Management
Number: 901-2
Effective Date:
Prepared By: Community Development Department
Supersedes: N/A
Approved By:
Attachment 5Attachment 5
Attachment 5
Attachment 5
Policy And Procedure
PURPOSE:
The purpose of these policies and procedures is to establish guidelines for the identification, evaluation, acquisition, acceptance, and management of real property interests by the City. The policy is intended to ensure that all acquisitions serve a legitimate public purpose, are consistent with adopted City goals and plans, are fiscally responsible, and are supported by appropriate due diligence to identify risks, liabilities, and long-term ownership obligations.
This policy applies to fee title acquisitions, easements, rights-of-way, dedications, donations, bargain sales, conservation acquisitions, property exchanges, and any other real property interests acquired by the City.
ORGANIZATION AFFECTED:
All Departments and Divisions.
REFERENCES:
Government Code Sections 37350 et seq.
Government Code Section 65402
California Environmental Quality Act (CEQA)
California Surplus Land Act (Government Code Section 54220 et seq.) City General Plan
Local Coastal Program
Capital Improvement Program
Real Estate Asset Management Program
Applicable State and Federal Grant Requirements
POLICY:
The following policies shall govern the acquisition of real property interests by the City.
Public Purpose
The City shall acquire property only when the acquisition serves a legitimate municipal purpose or advances an adopted City objective.
Staff shall identify and document the public purpose served by a proposed acquisition prior to recommending further evaluation, due diligence, or acquisition. Such purposes may include public facilities, infrastructure, open space, housing, economic development, public access, or other adopted municipal objectives.
Fiscal Responsibility
Property acquisitions shall be evaluated based upon both acquisition costs and long-term ownership obligations.
Staff shall evaluate and document the anticipated financial, operational, maintenance, risk, and long-term ownership implications associated with a proposed acquisition prior to recommending further evaluation, due diligence, or acquisition. Such evaluation may include consideration of acquisition costs, capital improvement requirements, maintenance obligations, funding constraints, revenue opportunities, and other factors affecting the long-term fiscal sustainability of ownership.
Due Diligence Requirement
No property acquisition shall be recommended to the City Council until sufficient due diligence has been completed to identify material risks, liabilities, costs, constraints, and opportunities associated with ownership.
City Council Authority
Unless otherwise expressly delegated by ordinance or resolution, the City Council shall retain authority to approve all acquisitions of real property interests.
Unsolicited Offers and Property Donations
The City may receive unsolicited proposals involving the sale, transfer, donation, or other conveyance of real property interests to the City. Receipt of an unsolicited offer or proposed property donation does not obligate the City to evaluate, negotiate, or accept the property.
Staff may conduct a preliminary review to determine whether an unsolicited acquisition opportunity supports identified City needs, priorities, or adopted objectives and warrants further evaluation.
The City shall not be obligated to accept ownership of property solely because the property is offered without cost.
The absence of an acquisition price does not eliminate future ownership obligations and liabilities. Donated properties shall be subject to the same evaluation and due diligence requirements applicable to purchased properties.
Responsibility
Responsibility and authority for implementation and administration of these policies and procedures shall vest with the City Manager or the City Manager's designee.
PROCEDURE:
Identification of Property
Potential acquisitions may be identified through City-initiated planning efforts or through opportunities presented by property owners, developers, governmental agencies, nonprofit organizations, or other parties.
City-Initiated Identification
Potential acquisitions may be identified through Capital Improvement Program needs, General Plan implementation, strategic planning initiatives, open space preservation opportunities, public infrastructure projects, affordable housing initiatives, economic development programs, or other City operational needs.
Externally Identified Opportunities
Potential acquisitions may be identified through property owner proposals, property donations, development conditions or dedications, grant funding opportunities, or other opportunities presented by external parties.
Preliminary Evaluation
Prior to initiating formal acquisition activities, staff shall prepare a preliminary evaluation of the real property.
Public Benefit
Staff shall identify the public purpose served by the proposed acquisition and the anticipated public benefits associated with ownership. Public benefits may include open space preservation, recreation, infrastructure, transportation, public safety, affordable housing, municipal operations, economic development, land assembly, public access, and similar municipal objectives.
Fiscal and Strategic Review
Staff shall conduct a preliminary review of the anticipated fiscal and strategic implications of a proposed acquisition to inform the determination of whether further evaluation and due diligence is warranted. The review is intended to identify significant considerations that may affect the viability of the acquisition and is not a substitute for the more detailed analyses performed during due diligence or subsequent evaluation activities.
Considerations may include acquisition costs, anticipated operational and maintenance obligations, funding availability and restrictions, potential revenue opportunities, significant known risks or liabilities, and strategic value to the City.
Consistency with City Plans
Staff shall evaluate consistency with applicable City plans and programs, including the General Plan, Local Coastal Program, Capital Improvement Program, Local Hazard Mitigation Plan, adopted strategic plans, Parks and Recreation Master Plan, open space and conservation objectives, and other applicable planning documents.
Alternative Approaches
Staff shall evaluate whether the public purpose served by the proposed acquisition could reasonably be achieved through alternatives to property acquisition, including easements, licenses, maintenance agreements, joint-use agreements, conservation restrictions, or other mechanisms requiring less financial commitment than fee ownership.
Determination to Proceed
Upon completion of the preliminary evaluation, the City Manager or the City Manager's designee shall determine whether the proposed acquisition warrants further evaluation and due diligence. If the proposed acquisition is determined not to warrant further consideration, staff may discontinue the acquisition process. If the proposed acquisition is determined to warrant further consideration, staff may proceed with the due diligence activities described in Section 5.3.
Required Due Diligence
Title Review
A title review shall be completed to identify legal interests affecting the property.
The review shall evaluate:
Ownership and vesting;
Easements;
Encroachments;
Deed restrictions;
Covenants;
Access rights;
Mineral rights;
Existing leases or licenses;
Liens and assessments;
Other encumbrances affecting ownership or use.
Boundary and Survey Review
When appropriate, staff shall obtain or review surveys to verify:
Property boundaries;
Acreage;
Easements;
Access points;
Encroachments;
Topographic conditions;
Consistency between legal descriptions and physical conditions.
Environmental Assessment
Environmental due diligence shall be performed, as appropriate, for the acquisition. Studies may include Phase 1 environmental studies, hazardous materials investigations, natural resource assessments, cultural resource investigations, and other environmental studies appropriate to the property. Staff shall identify potential environmental liabilities and estimated remediation costs.
Geotechnical Evaluation
Properties containing slopes, bluffs, drainage facilities, retaining walls, canyons, or other geologic features shall be evaluated as appropriate.
Reviews may include:
Slope and Stability
Geotechnical investigations;
Slope stability evaluations;
Landslide hazard analyses;
Bluff stability studies;
Erosion assessments;
Retaining wall inspections;
Soil and Seismic Conditions
Soil suitability assessments;
Seismic hazard evaluations;
Liquefaction analyses.
Infrastructure and Facility Assessment
Where improvements exist, staff shall evaluate the condition and functionality of all structures and infrastructure. Assessments may include evaluations of building conditions, structural integrity, building systems, accessibility compliance, utilities, drainage facilities, transportation infrastructure, recreational improvements, and other site improvements. Particular attention shall be given to deferred maintenance obligations and future replacement costs.
Financial Assessment
Staff shall evaluate the anticipated financial implications of acquisition and ownership. The Financial Assessment shall incorporate findings from other due diligence activities, as appropriate. The Financial Assessment shall review for the following considerations:
Financial Considerations
Purchase price or acquisition cost;
Capital improvement requirements;
Potential revenue generation opportunities;
Due diligence expenses;
Funding source restrictions.
Operations and Maintenance Considerations
Landscape maintenance;
Habitat management;
Fuel modification and wildfire mitigation;
Building maintenance;
Utility costs;
Insurance costs;
Storm drain maintenance;
Trail maintenance;
Security needs;
Staffing requirements;
Contract service requirements;
Equipment requirements;
Capital reserve funding.
Risk and Liability Considerations
Public safety concerns;
Environmental liabilities;
Flood hazards;
Litigation exposure;
Accessibility compliance obligations;
Security concerns;
Regulatory compliance requirements;
External agency requirements, approvals, or coordination needs; Unfunded maintenance obligations;
Deferred maintenance liabilities;
Future capital expenditures;
Potential nuisance conditions;
Other material financial risks.
Where feasible, annual costs should be estimated for at least the first ten years of ownership.
Appraisal and Valuation
Acquisitions Involving Compensation
Acquisitions involving compensation shall generally be supported by an appraisal, appraisal review, broker opinion of value, or other valuation method appropriate to the transaction.
Donations and Dedications
Valuation may be obtained for donated property when necessary for financial reporting, tax liability, grant requirements, accounting purposes, or City Council consideration. Donated property shall be evaluated using the same due diligence procedures applicable to other acquisitions under this policy.
Risk Allocation and Long-Term Stewardship
Owner Retained Obligations
The City recognizes that certain properties may provide a public benefit warranting acquisition while simultaneously containing improvements, facilities, operational obligations, or maintenance responsibilities that are not financially feasible, operationally advantageous, or strategically appropriate for the City to assume.
Accordingly, the City may condition acquisition upon the retention of certain maintenance, operational, repair, replacement, monitoring, or management obligations by the transferring property owner or other responsible party.
Financial Contributions
As a condition of acquisition, the City may require one-time or ongoing financial contributions to offset anticipated ownership and maintenance costs.
Funding mechanisms may include maintenance endowments, reserve funds, capital repair contributions, annual maintenance payments, assessment district funding, Community Facilities District funding, special benefit assessments, homeowners association contributions, or other funding arrangements deemed appropriate by the City.
The amount of any contribution may be based upon estimated lifecycle costs, anticipated maintenance obligations, replacement reserves, liability exposure, or other relevant considerations.
Maintenance Agreements
The City may enter into maintenance agreements whereby the transferring property owner, homeowners association, property management entity, developer, assessment district, or other responsible party agrees to continue maintaining specified improvements or facilities following transfer of ownership. Such improvements or facilities may include manufactured slopes, retaining walls, drainage facilities, debris basins, trails, irrigation systems, habitat restoration areas, fuel modification zones, landscaping, or other site-specific improvements. Such agreements may be temporary or perpetual in duration, as determined appropriate by the City.
Easements and Access Rights
In lieu of assuming full maintenance responsibility, the City may require the reservation or grant of easements, access rights, maintenance rights, inspection rights, or other legal instruments necessary to allow continued maintenance by responsible parties.
Such arrangements may be used where the public benefits of City ownership can be achieved without transferring all operational and maintenance obligations to the City.
Long-Term Stewardship Obligations
Where long-term maintenance obligations are retained by another party, the City shall seek to ensure that adequate legal mechanisms exist to provide for continued performance of those obligations.
Such mechanisms may include legal mechanisms such as recorded maintenance agreements, easements, and covenants running with the land; financial mechanisms such as assessment districts, financial security instruments, endowment funding, and performance guarantees; and other enforceable arrangements.
City Council Considerations
Prior to accepting property subject to retained maintenance obligations or cost-sharing arrangements, the City Council shall be provided information necessary to facilitate their consideration of the following:
Whether the proposed arrangement adequately protects the City's interests; Whether sufficient funding exists to address future obligations; Whether the responsible party possesses the ability to perform the required maintenance; Whether adequate enforcement mechanisms exist; and
Whether the arrangement is consistent with the long-term interests of the City.
Properties with Significant Long-Term Ownership Obligations Properties containing manufactured slopes, retaining walls, drainage systems, debris basins, habitat, fuel modification zones, or similar improvements shall receive heightened scrutiny.
The City may require:
Technical Evaluation such as engineering evaluations, geotechnical investigations, or structural assessments; Financial Evaluation such as reserve studies or financial contributions; and/or Corrective Actions such as corrective improvements prior to transfer.
Acquisition Classification
Each property shall be assigned an asset classification to establish its intended role within the City's real estate portfolio. The recommended classification shall be included in the staff report presented for acquisition approval. Asset classifications are defined in the Real Estate Asset Management Program and shall be assigned as part of the acquisition process.
Lifecycle Cost Analysis
The City recognizes that acquisition costs may represent only a small portion of total ownership costs.
Prior to acquisition, a lifecycle cost analysis should generally be prepared when the anticipated ownership obligations, operational complexity, or long-term financial commitments associated with an acquisition warrant additional evaluation before acquisition.
Applicability
Circumstances that may warrant preparation of a lifecycle cost analysis include properties larger than five acres, properties containing buildings or structures, open space properties requiring active management, properties containing significant infrastructure, properties involving substantial annual maintenance obligations, and other acquisitions determined by the City Manager or the City Manager's designee to warrant additional analysis.
Analysis Components
The lifecycle cost analysis should consolidate and summarize, as applicable, findings from the Financial Assessment and other due diligence activities in order to evaluate the anticipated long-term financial implications of ownership, including acquisition, operational, maintenance, regulatory compliance, reserve funding, capital replacement, and risk-related costs.
Open Space and Donated Property Considerations
Properties offered without cost shall not be presumed to provide a net benefit to the City.
Staff shall evaluate whether anticipated ownership costs outweigh the public benefits associated with acquisition.
City Council Findings
Prior to approving acquisitions involving significant ongoing obligations, the City Council should consider whether:
The public benefits justify the anticipated ownership costs; Adequate funding exists to support long-term management and maintenance; The acquisition advances adopted City goals and priorities; and The risks and liabilities associated with ownership are acceptable.
Consultants, Brokers, and Professional Services
Use of Professional Services
Real estate transactions may require specialized expertise beyond existing staff resources. The City Manager or the City Manager's designee may retain consultants, brokers, attorneys, appraisers, engineers, environmental professionals, surveyors, title professionals, or other specialists to assist with evaluating, negotiating, acquiring, or managing real property interests.
Real Estate Brokers
The City may retain licensed real estate brokers when doing so is in the City's best interest. Broker compensation must be established through written agreement and comply with the City's purchasing policies and approval requirements.
Cost Recovery
Where appropriate, the City may require applicants, property owners, homeowners associations, developers, or other parties proposing a transfer to reimburse the City for consultant costs incurred in evaluating the proposed acquisition.
Such costs may include, but are not limited to, environmental studies, engineering evaluations, appraisals, title review, legal services, and other due diligence activities necessary to determine whether acquisition is in the City's interest.
City Manager Recommendation
Based upon information obtained during the acquisition review process, the City Manager or the City Manager's designee shall provide a recommendation to the City Council regarding the proposed acquisition, including any recommended conditions of approval or funding requirements.
City Council Approval
5.10.1 The staff report presented to the City Council for a proposed acquisition must include:
Background — property description, ownership information, proposed acquisition terms, public purpose and anticipated public benefits, and asset classification; Due diligence and environmental findings — summary of due diligence results and environmental review findings; Fiscal impact — appraised value or other valuation information, fiscal impact analysis, lifecycle cost analysis (including estimated annual maintenance costs) if applicable, and funding sources; Discussion — risk assessment summary;
Recommended action — staff recommendation;
Documents — forms of documents to accomplish the proposed acquisition; and Resolution — a proposed resolution authorizing staff to complete the acquisition.
The City Council shall determine whether acquisition of the property is in the best interest of the City and may approve, modify, or deny the proposed acquisition.
The City Council’s official approval of a proposed acquisition shall be documented in a proper recorded instrument executed by the City Manager or designee pursuant to authorization from the City Council by resolution. Such instruments may include deeds, grants and certificates of acceptance in compliance with Government Code section 27281. The City shall not be deemed to have acquired or accepted any interest in any real property until such instrument duly executed by the City Manager or designee is recorded. The City hereby disclaims any liability for any real property interests that have not been accepted in writing in accordance with the foregoing. The City hereby expressly disavows any intention to acquire real property interests through a course of conduct unaccompanied by a duly authorized, executed and recorded written acceptance.