The American Mall Properties (AMP) proposal is dependent upon an exchange of land between the City and Redevelopment Agency and AMP. The majority of the new retail space and theatres would be built on land currently owned by the Redevelopment Agency (RDA) and the City, while the additional parking and replacement parking would be built on land currently owned by AMP.

AMP has proposed to provide a net cash payment of $1,495,000 to the City for the value difference between the City and RDA-owned parcels and AMP-owned parcels. This is based on the appraisals for the parcels and the actual purchase price paid by the City for the First Interstate Bank Parcel. In the land exchange the City will receive full value in the form of land and cash payment for its land in the transaction.

The benefits to the City and the Redevelopment Agency include facilitating the expansion of Town Center Mall and the construction of new parking spaces in the area. The new retail and entertainment expansion will also generate additional property and sales tax revenue to the City.

Staff is recommending that the Board of the Agency approve the land exchange of the three Agency parcels and cash payment to enable the redevelopment of Town Center.

American Mall Properties (AMP), owner of Town Center, is proposing to add approximately 287,000 square feet of new retail and entertainment space to the existing complex. In addition, two parking structures, a 5-story, 1,200 space structure, and a 4 story, 950 space structure, will be constructed on Sunnyvale Avenue, between Washington Avenue and Iowa Avenue. These structures are to accommodate the increased demand for parking that the new addition will generate, as well as replace the parking that will be demolished when the theatres are built. The majority of the new retail space would be built on land currently owned by the City and the Redevelopment Agency, while the additional parking and replacement parking would be built on land currently owned by AMP. AMP is requesting that the City, the Agency, and AMP enter into a land exchange for these properties.

The Socio-Economic Sub-Element of the General Plan states an objective:

The Redevelopment Plan includes:

The American Mall Properties (AMP) proposal is dependent upon an exchange of land between the City, the Agency and AMP. The majority of the new retail space and theatres would be built on land currently owned by the Redevelopment Agency and the City, while the additional parking and replacement parking would be built on land currently owned by AMP. It also includes a small strip of land that the Agency has owned on the north side of the former First Interstate Bank building lot, and the center section of the existing parking structure.

There are six parcels that are affected as follows:

An appraisal of these parcels was completed by J. Tom and Associates in December,1998. AMP has proposed to provide a net cash payment of $1,495,000 to the City for the value difference between the City and Agency–owned parcels and AMP-owned parcels. This is based on the appraisals for the parcels and the actual purchase price paid by the City for Parcel B.

In addition, the City will purchase Parcels E and F on Sunnyvale Avenue between Washington Avenue and Iowa Avenue. These parcels are being purchased for the construction of new parking garages. The City will own the parking garages and AMP will operate and maintain the parking. Financing of the garages will be through the creation of a Community Facilities District and tax-exempt Mello-Roos bonds. Debt service for the bonds will be the sole responsibility of AMP and secured by Town Center.

In the land exchange the City will receive full value in the form of land and cash payment for its land in the transaction. The benefits to the City and the Redevelopment Agency include the following:

• Through this transaction the City will have facilitated the expansion of Town Center Mall and the construction of new parking spaces in the area.
• The new retail and entertainment expansion will also generate additional property and sales tax revenue to the City.
• Through the proposed land exchange the City and the Agency will have enabled its land, parcels A, B, C, and D to be placed in a higher and better use. Currently these parcels are either used for parking or are vacant.
• Through the land exchange the City will own both the land and the actual parking improvements. This will provide additional parking opportunities to serve both TownCenter and Murphy Avenue. This will not increase any liability on the part of the City with regards to either the financing, the operation or maintenance of the parking garages.

An alternative available to the City is to not sell the two properties on Mathilda and keep them for future development. The difficulty with this is that they are small parcels that are constrained by the availability of parking unless they are developed in concert with Town Center. In order for Town Center to compete in today’s retail market it must be repositioned and upgraded. This proposal provides that opportunity to the City. The City has not been asked by the developer to provide any public subsidies, such as low interest loans or grants or land-write-downs. By contrast many shopping redevelopment projects typically seek and often are able to secure, some form of public financial assistance.

Though there are no guarantees that any project will be successful, similar models in Southern California seem to have been able to breathe life into tired shopping centers. Staff is recommending that Council approve the land exchange and cash payment to enable the redevelopment of Town Center.

The City will receive a cash payment of $1,495,000 which can be used to replenish the City’s land acquisition project. Additional property tax, including tax increment, and sales tax that will be generated by this redevelopment project is projected to be over $1 million annually.

Notice of the public hearing was published in the Mercury-News on March 4, 1999 and March 10, 1999.

Staff recommends Alternative1.

Prepared by:

Dyane Matas
Housing and Neighborhood Preservation Officer

Reviewed by:

David S. Boesch, Jr
Director, Community Development

Approved by:

Robert S. LaSala
Executive Director

A. Site Plan of Properties
B. Resolution