November 22, 2005

SUBJECT:      Appraisal of Five City Owned Properties adjacent to Town and Country Village and Budget Modification No. 16

REPORT IN BRIEF

City Council is being asked to appropriate $35,000 from the General Fund 20-Year Resource Allocation Plan Reserve in order to fund two confidential independent real estate appraisals of five City owned properties adjacent to Sunnyvale Town and Country Village. These appraisals were previously authorized by Council and are required to establish the value of the subject properties in order to respond to a formal request from the owners of Town and Country Village to purchase these properties from the City.  The City has retained two qualified appraisal firms and a budget modification in the amount of $35,000 is being requested to cover the costs associated with these two appraisals, plus an allowance for unforeseen changes in scope.  Once approved, two complete summary appraisals will be issued within 60 days and a Council closed session will be scheduled.

BACKGROUND

In the fall of 2004, the City received separate letters from Andy Kasik and Nicholas Gera requesting that the City offer for sale a property which it owns at 155 S. Taaffe Avenue. In response, the City commissioned an appraisal report on four City owned parcels in the Downtown area.  The four parcels appraised consisted of existing surface parking lots ranging in size from .12 to .32 acres providing adjacencies so that two groups of two parcels each could be assembled. The parcels totaled 39,551 square feet. On November 9, 2004 a final report was issued. After review of the appraisal and consideration of the request of the two adjacent property owners, City Council decided not to offer the subject parcel for sale at that time, but to revisit the matter in approximately twelve months.  

In October, 2005, Town and Country Village was sold by DAI Associates to a joint venture of Prometheus and Sand Hill Property Company.  On November 3, 2005, representatives of the joint venture wrote to the City formally requesting that the City consider selling the four previously appraised parcels plus one additional 1.12 acre parcel.  Prometheus expressed a desire to combine these properties with the Town and Country property in order to redevelop the entire area into a high-density residential project with ground-floor retail uses in accordance with the Downtown Specific Plan adopted in 2003.

EXISTING POLICY

Council Legislative Action Policy 5BCD2: Support coordinated economic development efforts to increase employment opportunities and increase quality of jobs including coordination with the existing employment and training resources funding.

DISCUSSION

The five City owned parcels to be appraised are located between the north side of Capella Way and Washington Avenue, between Aries Way and South Frances Street.  The parcels are currently used as access, circulation, and / or parking to the adjacent shopping center and are referenced in County of Santa Clara records as APN’s 207-07-004/005, 209-07-006/008 and 209-07-015.  With the exception of APN 209-07-006 , the subject parcels are irregular in shape.  The parcels are located in the City’s downtown area and are designated Downtown Specific Plan, Block 1a.  According to County records, the total area of the five parcels combined amounts to 2.03 acres, or 88,300 square feet.

The purpose of the appraisal is to establish a range of value the City can consider selling the property for. State law and sound financial practices require a real estate appraisal when selling public property in order to protect the city and public’s interest in obtaining a reasonable financial return from the sale of the property.

The City has, based on prior Council direction, retained two qualified appraisal firms.  Both firms come highly recommended by other public agencies as skilled and professional appraisers.  Both firms indicate that they can complete summary appraisals within 60 days, after which a Council closed session will be scheduled to discuss the appraisals and determine how the City will respond to the request of the adjacent property owners.

FISCAL IMPACT

A budget modification of $35,000 is necessary to fund the two appraisals.  Funds for this one time cost are available in the General Fund 20-Year Resource Allocation Plan Reserve. 

BUDGET MODIFICATION No. 16

FY 2005/2006

Conclusion

The City has received a letter from the joint venture owners of Town and Country Village, requesting that the City sell five of its downtown parcels in order to create a residential-retail high density project that will ultimately promote economic development and enhance sales and property tax revenues.   

The City has retained, through the City Attorney, two independent real estate appraisers to establish the value of the City owned property and a budget modification is required to cover the costs of appraisal.

PUBLIC CONTACT

Publication and posting of Council Agenda.  In addition, Council reports are available at the Sunnyvale City Library and on the City's internet page.

ALTERNATIVES

1. Authorize and approve Budget Modification No. 16 for the cost of the confidential appraisals of city property in town and Country Village.

2. Do not authorize Budget Modification No. 16 and direct that further work on the appraisals be terminated.

RECOMMENDATION

Staff recommends approval of Alternative #1: Authorize and approve Budget Modification No. 16 for the cost of the confidential appraisals of city property in town and Country Village.

Reviewed by:
Robert Paternoster, Director, Community Development

Prepared by: Michael Chan, City Property Manager

Reviewed by:

Mary Bradley, Director of Finance

Approved by:
Amy Chan

City Manager