Agenda Item No.
CITY OF YUCAIPA
AGENDA REPORT
TO: Honorable Mayor and City Council
FROM: Chris Mann, City Manager Z lam%
Steven Graham, City Attorney
Phillip White, Director of Finance
FOR: City Council Meeting of December 11, 2023
SUBJECT: Adoption of Resolution No. 2023-61, a Resolution of the City Council of the City of Yucaipa, California authorizing the City Manager to execute a loan agreement with Koy Builders, Inc., in the amount of $4,500,000 at 7% interest for a term of 3-years secured by a deed of trust on 80 acres of vacant land in the City of Yucaipa (APN 0321-101-01) located generally north of Oak Glen Road west of Five Winds Ranch and authorizing the City Manager to execute an option to purchase agreement in the amount of $5,475,000 for said property
RECOMMENDATION:
That the City Council adopt Resolution No. 2023-61, authorizing the City Manager to Execute a Loan Agreement with Koy Builders, Inc., in the amount of $4,500,000 at 7% interest for a term of 3- years secured by a deed of trust on 80 acres of vacant land in the City of Yucaipa (APN 0321-101- 01) located generally north of Oak Glen Road west of Five Winds Ranch and authorizing the City Manager to execute an option to purchase agreement in the amount of $5,475,000 for said property.
DISCUSSION:
The Resolution will authorize the City Manager to execute a loan agreement and other documents necessary to effectuate a loan by the City of Yucaipa to Koy Builders, Inc. in the amount of $4,500,000 at 7% interest secured by a Deed of Trust recorded on 80 acres of vacant land (APN 0321- 101-01) (the "Property") in the City of Yucaipa located adjacent to the City's Five Winds Ranch.
Additionally, the City Manager will be authorized to execute an Option to Purchase Agreement which will give the City of Yucaipa 3-years to purchase the Property at the appraised amount.
A depiction of the Property
The City of Yucaipa has initiated a long-term planning process to determine the ultimate uses and configuration of recreational amenities at El Dorado Ranch Park/Five Winds Ranch. Five Winds Ranch was recently used to hold the Five Winds Country Music Festival, which was received incredibly well by the community and throughout the region and served to raise awareness of recreational opportunities offered by the City at El Dorado Ranch Park and Five Winds Ranch. As the City begins this planning process, it has become apparent that the Property in question, which is located directly adjacent to Five Winds Ranch, will be critical to any future programming for the Five Winds Ranch property. For example, this land was utilized for parking and on -site recreational vehicle camping at the Five Winds Festival. Not only did this significantly assist with generating revenue to offset programming costs, but without the use of this land there would likely not have been sufficient land area to put on the Festival. The owner of the Property, Koy Builders, Inc., has previously marketed the Property for sale, and has had an approved tract map for 80 single-family homes. The owner has recently indicated to the City that they intend to initiate renewed efforts to sell the Property to a home builder in the immediate future, unless the City is interested in acquiring the land. Should the land be developed into a residential neighborhood, the community will forever lose the ability to utilize it for recreational purposes. In addition, having 80 homes in such close proximity to Five Winds Ranch could complicate future recreational activities and events. For instance, it would likely not be possible to host concerts/festivals such as the Five Winds Country Music Festival in the future. As it is the City's desire and intent to maximize recreational opportunities and to preserve open space in and around El Dorado Ranch Park/Five Winds Ranch, the acquisition of the Property has become a priority.
The City Council therefore directed the City Manager to begin negotiations with Koy Builders, Inc., the owner of the Property. The owner provided an appraisal which valued the property at $9,500,000.
The City obtained an appraisal of its own that valued the property at $5,475,000.
While the City believes the Property will be critical to future programming, purchasing the property before concluding feasibility studies would be speculative. In addition, as the City is currently facing significant budget challenges and will be working with the community over the next year to identify solutions and to implement a plan for returning to fiscal health, the timing of such a land purchase is
not ideal. While the City would like to protect the Property from residential development and preserve the ability to utilize the land for recreational purposes, time is needed to put a comprehensive plan in place for the entire area (El Dorado Ranch Park, Five Winds Ranch and the Property in question) and for the City to correct its structural budget deficits.
After discussing these concerns with the owner of the Property, a deal structure was negotiated whereby the City of Yucaipa would loan $4,500,000 at 7% interest for 3 years and receive an option to purchase the Property at any time during those three years for the City's appraised value of $5,475,000. Therefore, if the City ultimately concludes it desires to purchase the Property in the next three years, it may do so at today's value. On the other hand, if the City does not decide to purchase the Property, it will still have received significantly more interest on the loan than it would have using its current investment strategy. Staff believes the terms of this deal are highly favorable to the City.
FISCAL IMPACT:
The recommended action will authorize the City to fund a loan of $4,500,000. The source of the funds will be the Facilities Construction Capital Projects Fund's "Assigned" resources. Interest payments of 7% will be received and deposited in the same accounting fund. One year of interest payments will be made up -front and paid automatically through escrow.
Attachment:
1. Resolution No. 2023-61
ATTACHMENT 1
RESOLUTION NO.2023-61
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF YUCAIPA,
CALIFORNIA AUTHORIZING THE CITY MANAGER TO EXECUTE A
LOAN AGREEMENT WITH KOY BUILDERS, INC., IN THE AMOUNT
OF $4,500,000 AT 7% INTEREST FOR A TERM OF 3-YEARS SECURED BY A DEED OF TRUST ON 80 ACRES OF VACANT LAND IN THE CITY OF YUCAIPA (APN 0321-101-01) LOCATED GENERALLY NORTH OF
OAK GLEN ROAD WEST OF FIVE WINDS RANCH AND AUTHORIZING
THE CITY MANAGER TO EXECUTE AN OPTION TO PURCHASE
AGREEMENT IN THE AMOUNT OF $5,475,000 FOR SAID PROPERTY
THE CITY COUNCIL OF THE CITY OF YUCAIPA HEREBY FINDS, DETERMINES, ORDERS, AND RESOLVES AS FOLLOWS:
Section 1. The City Council approves a loan in the amount of $4,500,000 to Koy Builders, Inc. at 7% interest for a 3-year term secured by 80 acres of vacant land in the City of Yucaipa (APN 0321-101-01) (the "Property").
Section 2. The City Manager is authorized and directed to finalize the Loan Agreement, Promissory Note, Deed of Trust, and any other documents necessary to effectuate the intent of Section 1 above, and to execute the same, subject to approval as to form by the City of Attorney.
Section 3. The Finance Director is hereby authorized to record any necessary budget adjustments and take such other actions as may be necessary to effectuate the intent of Section 1 above.
Section 4. The City Manager is authorized and directed to finalize an Option to Purchase Agreement for the Property in the amount of $5,475,000.
Section 5. This Resolution shall take effect immediately.
PASSED, APPROVED, and ADOPTED this 1 lth day of December, 2023.
Mayor
ATTEST:
Ana V. Sauseda, CMC
Director of General Services/City Clerk