This report reviews an amended Public Improvements Acquisition and Development Agreement (PIADA) involving American Mall Properties (AMP), the owners of Town Center, the Sunnyvale Redevelopment Agency (Agency) and the City of Sunnyvale. The PIADA is the agreement between AMP and the City and Redevelopment Agency that describes the construction and payment process for the two new parking structures at Town Center. The Agency and Council approved the original agreement on June 15, 1999. Since that time, the agreement has been restructured so that the City will be acquiring the first structure upon completion using Bond Anticipation Notes (BANS) proceeds, and construction of the second structure will be financed through the BANS.

Staff is recommending Council approve the PIADA.

At its meetings on March 11, 1999, the City Council and the Agency approved the land exchange between the Agency and American Mall Properties, and the Council approved the Special Development Permit and the Tentative Map for AMP’s remodeling of the Town Center.

On June 11, 1999, the Agency approved agreements involving AMP, the City and the Redevelopment Agency. These agreements described the exchange of land, the upgrade to the existing parking structure, the demolition of the center section of the existing parking structure, the development of two new parking structures and additional space at the Mall, and the operation and maintenance of the new parking structures. Since that time, AMP has been negotiating with the three major department stores over the terms and conditions of the REA. The majors have approved the amended REA and the Agency approved it on December 14, 1999.

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

The Redevelopment Plan includes:

The Public Improvements Acquisition and Development Agreement (PIADA) is the agreement between AMP and the City and Redevelopment Agency that describes the construction and payment process for the two new parking structures at Town Center. The City and Agency have entered into an agreement with AMP to swap parcels of land on Mathilda Avenue for parcels of land on Sunnyvale Avenue. The Agency will own these two pieces of land and the parking structures to be built on these parcels. This agreement outlines a schedule by which the developer must complete the different phases of construction and ties the new parking structure construction to the theatre and retail additions that AMP is undertaking. It also outlines the events that will occur if AMP does not construct the theatres or only constructs partial improvements. In summary:

• The first parking structure will begin construction in February 2000 and be complete no later than November 15, 2000. The second structure will be completed by June 30, 2001. It is contemplated that the structure to the south, or on the Iowa side (the "Penney’s structure") will be the first structure under construction. If either of the structures is under construction during the 2000 holiday season, AMP must assure that there are at least 3300 spaces available for parking. These may be made available through the use of the new structures before final completion if approved by the City, or valet parking, or remote lots for employee parking. This same provision will hold if the structures are not available when the theatres open. The estimated completion date for the theatres, retail, and parking structures is June 2001.

• The construction of the first structure will utilize private financing. The Agency will purchase the structure on completion with the proceeds from the Bond Anticipation Notes. Though private financing increases the cost of financing, the City’s security is increased by purchasing a completed structure for a predetermined fixed price.

• The cost of construction of the second parking structure will be paid for by the Bond Anticipation Notes, and will be based on a guaranteed maximum price construction contract.

• It is anticipated that the demolition of the center of the existing parking structure will occur in April 2000. Construction of the theatres and retail space adjacent will begin promptly after demolition.

Due to the difficulties in having five parties negotiate the Reciprocal Easement Agreement, the construction schedule has been considerably delayed. The schedule anticipated currently is that one parking structure will open in November 2000, some of the retail on the west (Mathilda) side of the Mall will open for the 2000 holiday season, and the theatres will open in May 2001 in concert with the second parking structure. Given the delays in having the REA approved by the majors, this will be a very tight construction schedule. Currently, it is anticipated that the Penney’s structure will be constructed first. Since this is a smaller structure, it has a higher probability of being able to meet Penney’s request that one structure be available by August for "back to school" shopping. However, November is the deadline agreed to in the REA. (The final decision as to which structure is built first depends on how quickly utility and construction drawings can be completed and approved.)

The developer, AMP, is uniquely suited to develop and construct the parking structures in that the structures will be integrated with and connected to buildings in Town Center. The developer obligated itself to pay special taxes that will provide the debt service on the Notes. The parking structures will be of benefit to the project area governed by the Redevelopment Plan and assist in the elimination of blight in the area by providing additional parking to serve the businesses in the area and facilitating the development of additional retail and theatre uses in the area. There is no reasonable means of financing the parking structures other than through the Mello-Roos mechanism to be paid by special taxes on the Town Center since the Agency does not have sufficient tax increment revenue to construct the structures and the City does not have sufficient unallocated capital funds to construct the structures.

The developer has entered into an operating and maintenance agreement with the City in which the Developer will operate and maintain the structures. Staff is recommending that the Agency approve the PIADA as described and attached.

Approval of the PIADA will allow the construction of Town Center to proceed and allow the developer to finalize the construction financing for the first parking structure. It is anticipated that the redevelopment of Town Center will increase the tax increment to the Agency and will increase sales tax to the City’s General Fund.

This report was noticed through the publication of the City Council and Redevelopment Agency agenda.

Staff recommends approval of Alternative 1.

Prepared by:

Reviewed by:

David S. Boesch, Jr.
Director, Community Development

Reviewed by:

Mary J. Bradley
Director of Finance

Approved by:

Robert S. LaSala
City Manager

1. Public Improvements Acquisition and Development Agreement
2. Resolution