1)     parks and recreation,

2)     public safety,

3)    downtown parking lots or landbanking for development,

4)     public works operations,

5)    future public facilities or provide indirect City services, and

6)     redevelopment agency

A complete listing of all City owned properties is attached to this report as Attachment ‘A’.

Landbanking is defined by the real estate community as “land purchased and held for future development.” Some of the past purchases of land by City Council have been for landbanking purposes; primarily for providing open space, additional storage capacity, or to promote development.

Over the years, the City has taken a conservative approach to acquiring real property. Effort has been made not to pressure owners of desirable properties to sell before they are ready.  Purchases were made from a variety of funding sources, most recently the City’s Land Acquisition Reserve. The Reserve was established in 1994 and was intended to provide funds for acquisition of key parcels so that the City could take advantage of strategic opportunities which are in support of the Downtown Specific Plan or other City plans.

Due to budgetary constraints, the City has not actively pursued further land banking activities since the budget crisis hit.  However, staff is continually monitoring the market for properties that may be desirable for future City use, and explores every opportunity, along with staff from the departments of Finance, Parks and Recreation, as well as the office of the City Manager and City Attorney.

EXISTING POLICY

Open Space Subelement, Goal 2.2B Acquire and develop open space identified as high priority through land dedication or purchase.

Legislative Policy Manual, Policy 2.2.2 The City Council of the City of Sunnyvale has pursued a land management policy that provides for the purchase or other acquisition of the maximum feasible amount of land within the City of Sunnyvale having a high open space value.

DISCUSSION

City owned property can generally be classified into the following 6 categories based on usage:

• Parks and Recreation,
• Public Safety,
• Downtown Parking Lots or Landbanking for Development,
• Public Works Operations,
• Future Public Facilities or Provide Indirect City Services, and
• Redevelopment Agency 

Properties for potential reuse will be discussed in each of the categories above.

Parks and Recreation

The majority of the City’s public facilities, with the exception of Baylands Park, a portion of the Municipal Golf Course, and several joint use school sites, are under the jurisdiction of the Parks and Recreation Department. City Hall, the City Hall Annex, Library, Community Center, as well as all City parks would be included in this category. Most of these properties are needed either to provide public services or to preserve the City’s open space.

All of the City’s properties dedicated as “open space” have a specific use. That is, they serve a specific purpose at present (e.g., athletic field or picnic grounds) or they have an identified future use (e.g., properties along Jackson Avenue are earmarked for expansion of Murphy Park.)   

Staff is currently exploring the possibility of developing community gardens in accordance with Council’s “Relationships With Outside Groups” policy (no impact to City budget), and intends to present options for Council’s consideration in the near future.   

Public Safety

Property used for Public Safety purposes include Public Safety headquarters, its adjacent parking lots and the Department’s six fire stations.

Downtown Parking Lots or Landbanking for Development

Downtown properties include the City’s Multimodal Station, Downtown Parking District lots as well as several residential properties on the block bordered by Charles, Iowa, Mathilda and McKinley Avenues.  On this block, the City owns a duplex, 3 single-family houses and a small parcel of vacant land. These parcels were acquired in 1998 and 1999 to promote downtown development (Council Reports 98-342, 99-070 and 99-320.)  In order for development to occur on this block, several more parcels of land would need to be acquired, either by the City or a private developer. 

These properties generate approximately $70,000 in rental revenue and $15,000 in expenses each year. The estimated current market value for these properties is approximately $2,000,000.

The City also owns several Downtown parcels and parking lots which are adjacent to Town and Country Village and the Mall.   

Public Works Operations

Public Works uses a number of sites that are critical to operation of the City’s water, sewer, stormwater, and garbage collection systems. The City’s SMaRT Station, Water Pollution Control Plant, water wells, tanks, pump and lift stations are included in this category of City property. However, there are 2 properties that are no longer needed for Public Works operations.

At the corner of Wolfe and Homestead Roads, adjacent to the ARCO Station, is a .25 acre abandoned well site that was acquired by the City in 1974. At present, this residentially zoned site is being used as a staging area for contractors involved in City projects, but generates only minimal rental revenue. The current market value of this property is estimated at $550,000.  

At the intersection of Highway 237 and Fair Oaks Way, there is another City owned property that is used as the primary staging area for City contractors. This land was purchased originally in 1978 to allow for the expansion of the Fair Oaks / Highway 237 Interchange. However, the interchange idea was later abandoned and the property has been used as a staging area since that time. The property generates only minimal rental revenue because of the existing practice of only renting City property to contractors engaged in City projects.   The current market value of this industrially property is estimated at $3.5 million.  

Future Public Facilities / Provide Indirect City Services

In addition to its operational properties, the Department of Public Works also has oversight of various rental properties such as Sunnyvale Office and Raynor Activity Centers (shared with P&R,) Fair Oaks Industrial Park, Unilever Margarine Plant, Shimada Building, National Guard Armory, Chamber of Commerce, and various downtown and parksite properties. Some of these properties were purchased to provide future public facilities, i.e. parkland, offices or vehicle storage. Other properties are being used to provide indirect City services, such as operation of a homeless shelter, childcare center, or chamber of commerce.

The 5.6 acre Sunnyvale Office Center was purchased in January 2001 (RTC 00-418) to address a shortage of office space for City staff in the main campus area and for future expansion of the Civic Center Campus. The Center contains 35,000 s.f. of office space, organized into seven, single story wood frame buildings. At present, approximately 70%, or 25,000 s.f. of this office space is being used by City staff.  The remaining square footage is available to the general public for office rentals. Office rents are expected to exceed $500,000 this fiscal year. The City purchased this property for $17,000,000 and used low interest, tax exempt bonds to finance the purchase. Current market value of this property is approximately $18,000,000, if zoned for housing.

The Raynor Activity Center is comprised of eight single story buildings, totaling roughly 30,000 s.f.  At present, the Center is home to a large childcare facility, the philatelic society, and several artists studios. The Center is also used by the City’s Facilities Management Division for storage and the Sunnyvale Gymnastics Club.  In the past, City Council considered it a priority to have childcare facilities at this location.  As a result, childcare has been located at this location for over twenty years. Currently, revenues generated by the Center are in the neighborhood of $100,000 per year.  Only a portion of the Center is available for rent due to the poor condition of the buildings, which were constructed in 1962. It appears that the site has the potential for residential development.  The estimated market value of the site is approximately $16,000,000, if zoned for housing.  

The Fair Oaks Industrial Complex was acquired by the City in early 1991 (RTC 90-567) for development into a neighborhood park at some future date. The original purchase price was $5,400,000.  The Complex is 5.33 acres and contains over 82,000 s.f. of industrial warehouse space within five buildings. Over the years, the City’s General Fund has benefited greatly from the revenues generated by the Complex, which have averaged over $900,000 annually over the past five years. Expenses to operate the Complex during this same time period have averaged only $260,000 annually. The current market value of the Complex is estimated at $12,000,000 if zoning remains as industrial.

The Unilever Margarine Plant at 1484 Kifer Road was donated to the City in

1979 by the Fifth Matador Corporation. Under the terms of the agreement, the City is to honor the preexisting lease agreement with Lipton / Unilever until the lease expires in the year 2017. At that time, Unilever has the option of buying the property, currently estimated at $10,300,000, or the property will revert to City ownership. Rental revenue is fixed at $27,700 annually based on the donation agreement.

The industrial property at 239-241 Commercial Street, formerly known as the Shimada Building, was purchased by the City in early 2003 (RTC 02-398) for $2,530,000 to provide additional vehicle and equipment storage for the adjacent City Corporation Yard. At present, the property is being leased to Sunnyvale Towing for five years, which is expected to generate $72-78,000 per year over the term of the lease.  The current market value of the property is estimated at $2,700,000.

The National Guard Armory and Armory Parking Lot were acquired by the City in 1949 (main property) and 1982 (parking lot).  This 2.45 acre property is used by the National Guard for vehicle storage and training and is also used during the winter months as a homeless shelter. The Armory is currently leased until 2023 to the State of California at a rate of $1 annually. Current market value of this property is estimated at $9,000,000, if zoned for housing.

The City owned Chamber of Commerce Building at 499 South Murphy Avenue has been leased to the Chamber since 1959. At present, the 1,800 s.f. office building is leased to the Chamber for $335 per month due to allowances given for capital improvements made, and the terms of the agreement, which specify only 25% of market rate can be charged. However, starting in June 2005, the Chamber will likely be paying a more market based rent, which is expected to be in the neighborhood of $2,300 per month.  The estimated market value of this property is $300,000, based on a 9% capitalization of the present current market revenue stream of $2,300 per month.

Redevelopment Agency

The City’s Redevelopment Agency owns a number of properties in the downtown area, including Plaza Del Sol, the Target parking structure, a portion of the Macy’s parking lot, and a portion of the parking structure parallel to Mathilda Avenue.  These properties are subject to future land exchange agreements between the City and developers of the mall.

Open Space Agreements with Outside Agencies

In addition to the 6 categories of City owned property, the Department of Parks and Recreation has entered into several open space agreements with the County of Santa Clara, the Cupertino, Sunnyvale, and Santa Clara School Districts, NASA, and the City and County of San Francisco in order to provide additional open space throughout the City. Under the terms of these agreements, approximately 235 acres of open space are maintained by the City at locations such as Baylands Park, the Sunnyvale Municipal Golf Course, John Christian Greenbelt, and 19 elementary and middle schools, in return for use of these locations as open space. A complete list of these agreements, along with terms and annual maintenance costs are attached as Attachment ‘B’.

PAST LANDBANKING PRACTICES

Historically, the Sunnyvale City Council has approved the acquisition of real property for several reasons, including:

1. to create new open space
2. to facilitate departmental operations
3. to provide office space
4. to provide additional vehicle storage
5. to promote development
6. to provide a public service (i.e. Childcare, Homeless Shelter)

Most of these real estate purchases have been made from a variety of sources, most recently the City’s Land Acquisition Reserve. The Reserve was established in 1994 and was intended to provide funds for acquisition of key parcels so that the City could take advantage of strategic opportunities which are in support of the Downtown Specific Plan, or other City plans.

The City Property Manager continually monitors the residential real estate market for properties that may be desirable for City.  If one of these properties were to become available for purchase, staff from the Public Works, Finance, Parks and Recreation, City Attorney and City Manager departments would meet to discuss the pros and cons of acquiring the property. If a property is deemed to have merit and funding is available, City Council would be asked to provide direction.  However, the City has not actively pursued further land banking activities in recent years due to the current budgetary crisis.

Reviewed by:

Marvin A. Rose, Director, Public Works

Prepared by: Michael A. Chan, Senior Administrator / Property Manager

Approved by:

Amy Chan

City Manager

Attachments

A: List of City Owned Properties (MS Excel)
B: Parks Division Open Space – Maintained But Not Owned (MS Excel)