FOR THE COUNCIL MEETING OF SEPTEMBER 17, 2024
COUNCIL AGENDA REPORT
TO: City Council
FROM: Interim City Manager Alex Posada
BY: Assistant City Manager Chuen Wu
SUBJECT: Adoption of a Resolution Approving a Sales and Disposition Agreement Between the City of Santa Maria and Vernon Property Group, LLC for City Surplus Land in Downtown
Description:
The City Council will consider adopting a Resolution approving the Sales and Disposition Agreement between the City of Santa Maria and Vernon Property Group, LLC, which includes the sale of surplus land on various parcels in Downtown.
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
RECOMMENDATION:
Adopt a Re solution approving a Sales and Disposition Agreement between the City of Santa Maria and Vernon Property Group, LLC for various surplus land in Downtown, including parcels identified as Lots 1 through 4.
BACKGROUND:
The City Council has consistently identified the revitalization and redevelopment of Santa Maria’s downtown as a goal and priority. The City has adopted plans to establish a vision and to facilitate the redevelopment of downtown, including an update to the Downtown Specific Plan in 2015 and the adoption of the Downtown Streetscape Plan in 2019.
To further stimulate Downtown redevelopment, the City identified specific City -owned parcels for development, including the northerly parking lot adjacent to the former Fallas/Mervyn’s building and Broadway (Lot 1), the northeast and southeast corners of Main and Broadway (Lot 2 and 3, respectively), and the parking lot east of the Ruffoni building adjacent to Lincoln (Lot 4). The City and the Chamber of Commerce worked together to issue a Request for Proposals (RFP) in September 2020, and four proposals were received in response to the RFP. In January 2021, the City selected the Vernon Property Group, LLC (Vernon Group) based on their submitted project design and team qualifications.
2 The proposed project design included several hundred multi-family housing units, ground- floor commercial retail, and other public amenities, including plazas and open spaces (see Attachment A). This mix of housing, commercial, and gathering spaces, within proximity to each other, meets the vision of a vibrant and pedestrian -friendly downtown.
In the summer of 2021, the City completed initial State Surplus Lands Act requirements, including all required notifications and good-faith negotiations.
In 2022 and 2023, City staff and Vernon Group continued to work together toward a global sales and disposition agreement that includes all four identified City-owned lots. The City and Vernon Group also discussed Surplus Lands Act requirements with State H ousing and Community Development (HCD), including the requirement of setting aside minimum 25 percent of all proposed housing units as income -restricted affordable housing. State HCD had initially communicated to the City that each City -owned lot would nee d a 25 percent housing set -aside, but after additional discussion, HCD agreed that the requirement for affordable housing could be achieved through consolidation by building one affordable housing development on Lot 2.
While Lot 2 will include affordable apartments, Lot 1 will include most of the community amenities of commercial uses, plazas and open spaces, thereby mitigating the displacement of open space at Perlman Park. During the past two years, Downtown Permits were approved for other projects in d owntown, including Heritage Walk Lofts (former Fallas/Mervyn’s), Alvin Newton Apartments (Lot 3), and Cook Street Apartments.
The construction plans for both Heritage Walk Lofts and Alvin Newton Apartments are currently in review by the City. Both projects could break ground later in 2024.
DISCUSSION:
On May 7, 2024, City staff provided an overview of the project design and drawings drafted for Lot 1 and Lot 2. As mentioned, Lot 3 includes the previously approved project of Alvin Newton Apartments. Lot 4 is considered as a future option after progress on Lots 1, 2, and 3.
The overall project design includes reduced parking compared to what is typically required in the City’s development standards. The Downtown Specific Plan allows for reduced parking if the project is located within proximity to the Ci ty’s existing parking garages located at Town Center. Staff also recognizes the necessary tradeoffs for achieving the stated downtown vision of a pedestrian -friendly city center. This tradeoff includes the addition of housing, commercial uses, and gathering spaces in exchange for land and spaces that would otherwise be used for creating parking spaces. The development proposal incorporates an approach that maximizes the value and potential of a limited infill land area. This pedestrian -friendly, urbanized environment simply could not be achieved if typical parking standards for apartments at two spaces per unit, were applied. However, future residents will have the privilege of having many amenities within a short walking distance, including access to public transit, offering a lifestyle that is an alternative to car dependency.
3 The proposed Sales and Disposition Agreement (SDA) includes four City-owned parcels.
The proposed agreement includes project descriptions, design expectations, affordability components, and performance measures for completion. Detailed information for each lot is as follows:
Lot 1:
Lot 1 (APN 123 -280-026) is approximately two acres in size and is currently an underutilized parking lot for Town Center West, although it is used for the weekly farmer’s market. This lot will include most of the amenities proposed for the overall Downtown revitalization project, including ample plazas, open space, and a reconstruction of Heritage Walk, which serves as a paseo extending west from Broadway. Ground floor commercial uses, including food establishments , will be integrated into these gathering areas, creating an inviting destination environment where visitors can enjoy a meal and gather. The SDA requires a minimum of 10,000 sq. ft. for commercial uses, with a minimum of 5,000 sq. ft. for dining and food establishments. As part of a 6 -story mixed- use structure, residential uses will be built over ground floor parking and commercial uses, up to 375 housing units, which may include microunits and con dominiums. The ground floor commercial uses are located in a manner that will minimize the view of the podium parking spaces. On-site parking will meet the Downtown Specific Plan requirements.
Lot 2:
Lot 2 (APN 121-224-035) is approximately 1.12 acres in size and is currently the location for Perlman Park, just south of Union Plaza Apartments. A 6-story apartment building with up to 160 affordable housing units is proposed on this site (Attachment B). 75 parking spaces will be available on-site, with remaining parking spaces provided in nearby parking areas, including the parking structure on the south side of Main Street, which includes 1,078 spaces. There is recognition of a loss of park space; however, this loss is mitigated by the addition of plazas an d open space on the other lots, particularly Lot 1, with new plazas and paseos. The SDA will require that the housing remain affordable to lower - income households, with a minimum overall affordability of 60 percent of the area median income. The SDA will a lso require landscaped paths connecting the corner of Main and Broadway to Central Plaza Park, maintaining access for those areas north and east of the proposed apartments.
Lot 3:
Lot 3 (APN: 125-320-050) is approximately 0.62 acre in size and is currently a plaza area that includes the Firefighters’ and Four Corners’ memorials. The plaza area is north of Bank of America and west of the parking garage on the south side of Main Street. The City Council approved Alvin Newton Apartments at this location in O ctober 2023. The project is a six -story, 75,340-square-foot mixed-use building with 5,760 square feet of ground floor commercial, 82 apartment units, and an open space/plaza area for the Firefighters’ Memorial (Attachment C). This project is currently in building plan check.
4 Lot 4:
Lot 4 (APNs: 123 -043-007, 008, 010, 011, 013, 014) is approximately 0.84 acre in size and is currently a parking lot serving the Ruffoni building that houses various City offices, including Community Development and City Engineering. The parking lot also serves other nearby businesses fronting West Main Street. This lot is considered as a future option after progress on Lots 1, 2, and 3.
Summary Terms
The City proposes terms to incentivize and stimulate new development on these identified surplus lots to advance City goals of Downtown revitalization and economic development.
The terms are summarized in a table in Attachment D and are detailed in the exhibits for the Sales and Disposition Agreement in Attachment E. The Lots are listed in the table in the order of development timing, with Lot 3 scheduled for completion first, then Lots 2 and
1. Vernon Group proposes to construct new mixed -use development, including housing (with 25 percent of the units as income -restricted affordable), commercial uses such as restaurants, and added plazas and open space.
To incentivize development, the City offers the following key incentives:
Discounted price for each Lot at $120,000
Use of the Town Center parking structure on Main Street 50 percent discount on Planning and Building fees, and growth mitigation fees for City Hall, Consolidated Corporation Yard, Police, Fire, Traffic, and Library (depending on final unit count and square footage constructed, is estimated to be over $2 million)
These concessions are subject to performance requirements, including adherence to proposed timing for milestones. While not necessarily a part of the agreement, the City is also spending approximately $3.5 million (in REAP 2.0 and ARPA grant funding combined) on Downtown infrastructure, including sewer line upgrades, a bus rapid transit station, and other pedestrian improvements.
Timing
For each lot, one year is allot ted for Planning review and approval, and preparation of construction plans. Six months are allotted for construction plan review and three years are allotted for construction following construction plan approval. Given the time set aside for plan preparation, review processes, and construction, we could see completion of the following:
Lot 3 (Alvin Newton Apartments) before January 2028
Lot 2 (Perlman Apartments) before March 2029
Lot 1 before December 2031
Lot 4 (as an option) after Lots 1, 2, and 3
Alternative(s)
The City Council can choose not to approve the agreement and provide further direction to staff, which could include further negotiations with the Vernon Group. 5 Fiscal Considerations
The City’s partnership with Vernon Group for the redevelopment of these parcels would result in economic benefits through new housing, commercial activities, and generating increased sales and property taxes. The enhancement of the City’s Downtown will have broader impacts, as new amenities are built and Downtown is seen as a key destination on the Central Coast, inviting added business and tourism. The City is providing several million dollars in concessions, in the form of fee reductions, infrastructure i nvestments, and reduced land prices, but recognizes the investments of the development group. The Vernon Group reports that total Downtown investment is over $150 million.
Impact to the Community
This SDA is a turning point in the progress of the City’s D owntown, with a proposal to change the Downtown into a place that brings in new housing, new commercial uses, and inviting plazas and open spaces for gathering. Existing businesses should see additional foot traffic and increased sales revenue. Residents and visitors will be able to enjoy new activities introduced by the redeveloped spaces. Enhancing the City’s urban core will also have a positive impact to surrounding neighborhoods, as downtown becomes an attractive and vibrant destination. The City will a lso work with downtown businesses to ensure a greater sense of safety in Downtown, with more “eyes on the street,” and a commitment to keep Downtown clean and safe. The approval of the SDA with Vernon Group will provide a path for transformative redevelopm ent to be completed within the next eight years.
ATTACHMENTS
Attachment A: Overall Site Plan
Attachment B: Lot 2 Plans
Attachment C: Lot 3 Plans (Alvin Newton Apartments)
Attachment D: Summary Terms
Attachment E: Sales and Disposition Agreement between City of Santa Maria and Vernon Group