June 20, 2006

SUBJECT:       Related Agreements Between the City of Sunnyvale and Lockheed Martin Corporation Clarifying the Responsibilities Resulting from Sale of Lot 1 and Lot 3 of Tract No. 9800, Moffett Park Subdivision

REPORT IN BRIEF

Lockheed Martin is interested in selling two lots and has requested approval of agreements to clarify the rights and obligations of Lockheed Martin and the future owner of those properties. These properties are within the area covered by the 1994 Site Master Use Permit for Lockheed Martin’s Plant 1. Lockheed Martin has previously sold three sites from the Plant 1 campus (a total of six parcels). Similar clarifying agreements, clarifying the rights and responsibilities for various parties, were executed for each of those sites.

A fourth and fifth clarifying agreement are proposed for two additional sites at the southwest corner of the Plant 1 campus. The agreements clarify which provisions of the Development Agreement have been satisfied, which provisions are still obligations to Lockheed Martin (or transferees) and the allowable additional development on the remainder of the Plant 1 campus. The agreements also acknowledge that the new owner and the City may terminate the Site Master Use Permit and Development Agreement with respect to the two new transfer properties, at which time the underlying zoning (Moffett Park Industrial [MP-I] and Moffett Park Transit Oriented Development [MP-TOD]) will take affect. Staff recommends that the City Council authorize the City Manager to: execute the two clarifying agreements; and, prepare and execute related agreements that allow termination of the Site Master Use Permit and Development Agreement for Lots 1 and 3 (Tract No. 9800) and revert to the Moffett Park Specific Plan and zoning.

BACKGROUND

In January 1995 Lockheed and the City entered into a Development Agreement. It was based on the December 2004 Site Master Use Permit that specified permitted use and development of property owned by Lockheed known as “Plant 1.” The Site Master Use Permit reflected the environmental review of Plant 1 and the general area—particularly the roadway capacity into Moffett Park. The Site Master Use Permit allowed a net increase of 750,000 square feet on Lockheed Martin’s then 550 acre campus. The Development Agreement provides benefits to both Lockheed and the City: it guarantees to Lockheed that the Use Permit is valid until February 2010, and provides the City a schedule of certain public and private improvements along the perimeter of the site which will be undertaken as development proceeds, or within prescribed timelines. The Development Agreement also sets forth that Lockheed Martin may subdivide and may sell all or portions of their property.

In 1998, 1999 and 2001 Lockheed sold properties (Transfer Parcels) that were eventually developed or approved for development for the Yahoo! Campus, the Jay Paul development (commonly referred to as the Ariba Campus), and the future Juniper Networks Campus. In each case the City considered development of the sites in excess of the 750,000 square feet allowed in the Development Agreement by approving individual Use Permits that were accompanied by separate environmental review and mitigation requirements (notably fees to mitigate regional and citywide traffic impacts).

For each of these three sites the conditions of the Site Master Use Permit and Development Agreement were clarified so that the City, Lockheed and any future owner (transferee) of the properties that Lockheed Martin intended to sell (Transfer Parcels) understood the terms and conditions associated with the Transfer Parcels and the property that Lockheed Martin was keeping under their ownership (Retained Property). Three separate documents, titled Clarifying Agreements, were prepared and executed.

On April 27, 2004 the City of Sunnyvale adopted the Moffett Park Specific Plan (MPSP) and on May 18, 2004 adopted an ordinance creating the Moffett Park Specific Plan zoning districts (MP-I and MP-TOD) and an ordinance to rezone property within the Moffett Park Specific Plan area. The Specific Plan indicated that the Yahoo! site allowed development consistent with the previously approved Use Permit. The zoning for the Ariba and Juniper Networks sites allows 50% FAR with the opportunity to go up to 70% FAR in certain circumstances. With the exception of an approximately 23.2 acre area to the west of the Ariba Campus, the Lockheed Retained Properties were zoned for 35% FAR with the ability to develop up to 50% FAR. The MPSP zoning allows development greater than the Lockheed Martin Site Master Use Permit; however, the Development Agreement supersedes the underlying zoning unless a separate action is taken by the City.

On October 24, 2005, the Planning Commission approved a tentative map for the subdivision of a 304 acre Lockheed property (a portion of the Plant 1 campus) into four lots with a remainder fifth lot. On April 11, 2006 the City Council approved the Final Map for this subdivision (Tract Map No. 9800).

On November 22, 2005 the City Council initiated a study to amend the Moffett Park Specific Plan for a 28.7 acre site on the Lockheed property (Lot 3 of the map referenced above). The request was submitted by Jay Paul indicating an interest in purchasing and developing the property to a 70% FAR. Formal applications for a Moffett Park Specific Plan Amendment and Major Design Review have been filed. Environmental review, in the form of a Subsequent EIR to the Moffett Park Specific Plan EIR, is being prepared.

EXISTING POLICY

Moffett Park Specific Plan

Specific Plan Objective LU-1:         Establish development regulations that provide a framework to allow for higher intensity development.

Specific Plan Objective LU-2:         Coordinate land use planning within Moffett Park with transportation planning.

Specific Plan Objective IMP-4:        Allow for flexibility with the Specific Plan so that it is responsive to changes in the marketplace.

DISCUSSION

Lockheed Martin has requested that the City execute a fourth and a fifth clarifying agreement (Attachment A and B) so that they may sell two of their parcels (Lots 1 and 3 of Tract No. 9800). The agreement would clarify to all parties, including future owners, the obligations related to the Site and Master Use Permit and Development Agreement. Further it clarifies that, by mutual consent, future property owners and the City may terminate the existing agreements (the Site and Master Use Permit and the Development Agreement).

Since the preparation of the previous three Clarifying Agreements, several significant actions have occurred. The first is that the City has adopted a Transportation Strategic Program (November 2003) that identifies major traffic improvements and funding mechanisms for those improvements. All development, citywide, that results in net new peak hour trips, is required to mitigate the traffic impacts, through payment of a Traffic Impact Fee. Second, a comprehensive land use study was completed (Moffett Park Specific Plan) and allows development consistent with the City’s long range traffic improvement program. This transportation and land use framework was not available when the other Transfer Parcels were sold and considered for redevelopment. Each of those projects was evaluated on their individual merit and traffic mitigation was required for each project. Because the City Council would have to review and approve these specific development proposals, the clarifying agreements were prepared and executed by staff without prior City Council review of the agreements.

The proposed Fourth Clarifying Agreement and Fifth Clarifying Agreement (Attachments A and B) differ from the previous agreements in three ways:

1.                 The agreement provides an updated accounting of the development potential (as of December 2005) associated with the Retained Property of Lockheed (additions, demolitions and assignments [to transfer parcels] of the original 750,000 s.f. development potential have reduced the remaining development potential to 353,000 s.f.).

2.                 It states that by mutual consent between the City and the owners of the Transfer Parcels the Site Master Use Permit and Development Agreement may be terminated (note: land use control would revert to the underlying zoning, currently the MPSP).

3.                 The agreement is slightly more streamlined in that it incorporates by reference the acknowledgement of provisions of the Development Agreement that have been satisfied.

FISCAL IMPACT

There is no direct fiscal impact by approving the clarifying agreements. The indirect impact is that the properties may redevelop more intensively than would be permitted under the SMUP and Development Agreement and therefore property taxes will be positively affected.

Conclusion

Many actions have occurred that affect Lockheed Martin’s Plant 1 (the property currently and formerly owned). Clarifying Agreements have been used in the past to specify the conditions under which sold or transferred property may be developed. A Fourth Clarifying Agreement and a Fifth Clarifying Agreement are proposed to enable two properties to be sold and to outline the procedure to develop in accordance with the underlying zoning (which would make them not subject to the Site Master Use Permit restrictions).

PUBLIC CONTACT

Public contact was made through posting the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page, and the availability of the report in the Library and the Office of the City Clerk.

ALTERNATIVES

1.               Authorize the City Manager to:

a.      Execute the Fourth Clarifying Agreement and Fifth Clarifying Agreement as prepared in Attachments A and B.

b.      Prepare and execute Agreements to terminate the Site Master Use Permit and Development Agreement for Lot 1 and Lot 3 (of Tract No. 9800) to be recorded against the property.

2.               Alternative 1, with modifications.

3.               Do not approve any agreements between the City and Lockheed Martin concerning the Site and Master Use Permit and Development Agreement.

RECOMMENDATION

Staff recommends Alternative 1, authorize the City Manager to execute the Fourth Clarifying Agreement and Fifth Clarifying Agreement and to prepare and execute agreements to be recorded against the respective properties to terminate the Site Master Use Permit and Development Agreement for Lot 1 and Lot 3.

Staff finds that the clarifying agreements are the first step toward enabling redevelopment of the Lockheed Transfer Parcels under the current zoning consistent with the long range goals of the Moffett Park Specific Plan. The termination agreements will permit the development of the sites into Class A office, consistent with the Moffett Park Specific Plan. Development of the Lockheed Plant 1 was capped (to the net new 750,000 s.f.) because a comprehensive traffic mitigation program was not in place in 1994. The agreements will allow two significantly sized properties to be sold (transferred) and for the City to consider development in accordance with the Moffett Park Specific Plan, rather than the current lower intensity land use entitlement.

Prepared by:

Trudi Ryan, Planning Officer

Reviewed by:

Robert Paternoster, Director Community Development

Approved by:
Amy Chan

City Manager

Attachments

A.                 Draft Fourth Clarifying Agreement

B.                  Draft Fifth Clarifying Agreement