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Home My WebLink AboutRDA Minutes 1991-01-09 Chairman Jack Drago M I N U T E S ~ Boardmembers: 00~ Richard A. Haffey Redevelopment Agency Gus Nicolopulos John R. Penna Municipal Services Building ~ .... Roberta Cerri Teglia Community Room January 9, 1991 NOTICE IS HEREBY GIVEN, pursuant to Section 54956 of the Government Code of the State of California, that the Redevelopment Agency of the City of South San Francisco will hold a Special Meeting on Wednesday, the 9th day of January 1991, at 6:30 p.m., in the Municipal Services Building Community Room, 33 Arroyo Drive, South San Francisco, California. Purpose of the meeting: 1. Closed Session for the purpose of discussion of personnel matters, labor relations, property negotiations and litigation. Redevelopment Agency City of South San Francisco Dated: January 3, 1991 AGENDA ACTION TAKEN CALL TO ORDER: (Cassette No. 1) 6:33 p.m. Chairman Drago presiding. ROLL CALL: Boardmembers present: Haffey, Nicolopulos, Penna, Teglia, and Drago. Boardmembers absent: None. 1. Closed Session for the purpose The Agency adjourned to a Closed Session of the discussion of personnel at 6:34 p.m. to discuss the items matters, labor relations, noticed, as well as property acquisition. property negotiations and litigation. RECALL TO ORDER: Chairman Drago recalled the meeting to order at 7:12 p.m., all Boardmembers present, no action taken. M/S Haffey/Teglia- To adjourn the meeting. Carried by unanimous voice vote. ADJOURNMENT: Time of adjournment was 7:13 p.m 1/9/91 Page i S AGENDA ACTION TAKEN ~R£SPECTFULLY SUBMITTED, APPROVED. ~a~r~a~ ~erk~ ~j~c k¢~r~a g o ,~C~h a~l r~n A. Battaya, C1 Redevelopment Agency / /Redevelopment Ag~'~c~ City of South San Francisco (~/ City of South San Francisco The entries of this Agency meeting show the action taken by the Redevelopment Agency to dispose of an item. Oral communications, arguments, and comments are recorded on tape. The tape and documents related to the items are on file in the Office of the City Clerk and are available for inspection, review and copying. 1/9/91 Page 2 Chairman Jack Drago M I N U T E S Boardmembers: Richard A. Haffey Redevelopment Agency Gus Nicolopulos John R. Penna Municipal Services Building Roberta Cerri Teglia Community Room January 9, 1991 AGENDA ACTION TAKEN CALL TO ORDER: (Cassette No. 1) 7:13 p.m. Chairman Drago presiding. ROLL CALL: Boardmembers present: Haffey, Nicolopulos, Penna, Teglia and Drago. Boardmembers absent: None. AGENDA REVIEW AGENDA REVIEW Assistant to the City Manager Haskins stated there were no modifications to the Agenda. CONSENT CALENDAR CONSENT CALENDAR __1. Approval of the Minutes of the Regular Meeting of 12/12/90. ~o~ Approved. 2. Motion to confirm expense claims Approved in the amount of $61,205.17. of 1/9/91. M/S Haffey/Nicolopulos - To approve the Consent Calendar. Carried by unanimous voice vote. GOOD AND WELFARE GOOD AND WELFARE No one chose to speak. CLOSED SESSION CLOSED SESSION 3. Closed Session for the purpose of The Agency chose not to hold a Closed the discussion of personnel Session. matters, labor relations, property negotiations and litigation. RECESS: Chairman Drago recessed the meeting at 7:14 p.m., and stated that the Shearwater ~ item would be heard concurrently with the Council item. MEETING RECONVENED: Chairman Drago reconvened the meeting at 8:05 p.m., all Boardmembers present. 1/9/91 Page i AGENDA ^CT T ON TAKEN ADMINISTRATIVE BUSINESS ADMINISTRATIVE BUSINESS 3. Motion to consider a request to Boardmember/Councilman Penna stated that grant a 15 month time extension there had been an opinion issued through to 3/31/92 for submittal of the FPPC that there could be a possible precise plan for Phase I of conflict of interest on his part in Shearwater, and for all other regards to the voting on any Shearwater items that may expire in the formations. He stated that he disagreed interim - continued from the with that decision of the FPPC because of 12/12/90 meeting, some questions he had on how that had come to their conclusion, but he would Boardmember/Councilman Penna stepped remove himself from the dais and abstain. down from the podium at 8:05 p.m. CITY COUNCIL ITEM Director of Economic & Community Development Costello stated that 8. Motion to consider a request to Mainspring Corp. had requested a stay for grant a 15 month time extension each of the two items for fifteen months, to 3/31/92 for the Shearwater and staff was recommending a twelve month Tentative Subdivision Map stay because of the economic turn down SA-87-91 - continued from the and it would keep the tentative map 12/12/90 meeting, alive. She stated that the Oyster Point Overpass would be going out to bid at the time the stay is in effect, and the 15.5 million dollar contribution from Shearwater was very helpful to the project. She related that Shearwater had indicated that they would participate in an assessment district if necessary, but wanted more economic analysis before the district was established. She stated that staff was making the same twelve month stay for each of the items to 12/31/92. Councilwoman Te§lia asked that the letter from Development Consultant Frank T. Cannizzaro of Mainspring Corp., dated 1/7/91, be read into the record (a copy of the letter is attached and is a per- manent part of the record of this meeting). Motion by Councilman Nicolopulos - To grant the 15 month extension for the Shearwater Tentative Subdivision Map SA-87-91. He cited fifteen reasons why he had made the Motion: lawsuits over noise flights; lengthy EIR debate and suit; no housing project aspect - Attorney advised 1/9/91 Page 2 MAINSPRING January 7, 1991 Mayor Jack Drago and Members of the City Council City of South San Francisco City Hall 400 Grand Avenue South San Francisco, California 94083 Re: Shearwater Dear Mayor Drago and Councilmembers: ,** Recently, questions have arisen about the status of Shearwater. This letter is intended to address some of those questions and hopefully correct any misunderstandings that may exist. Progress on the project was substantially delayed initially.by the lawsuit brought by SFO against the City and more recently by significant domestic and international economic pressures. Currently, "take out" negotiations are underway with Shearwater's Japanese partners and we at Mainspring are working diligently to find new investment capital to allow the project to move forward. Because of all the many factors outside of our control, which are necessary ingredients to the Shearwater development process, it is not possible to give any assurances as to when the project will be built. However, we continue to believe that the project is unique, that it provides a very creative solution for the re-use of the city of South San Francisco's bayfront lands, and that it will be of significant future benefit to the City, to adjoining property owners and to the Northern Peninsula generally. 'However, to achieve the Shearwater vision in these difficult times, the City's assistance and cooperation is imperative. Mainspring Corporation 395 Oyster P0int Blvd. 1 / 9 / 91 Su,te 405 Page 2a South San Francisco CA 94080 415.266.9080 FAX: 4152668930 Mayor Jack Drago January 7, 1991 Page Two... Some of the key issues that have been raised concerning the project are as follows: 1. Development Program The development program for Shearwater contemplates doing the grading and contaminated soils clean-up work first, then the public improvements and some site amenities, followed by building construction. Building construction will of course take place in phases to address market conditions that exist at that time. The basic funding for most of the grading and clean-up and for the public improvements is planned to come from an Assessment District Bond issue to be sold by the City. Funding for other public facilities/amenities was anticipated to come from tax increments and other revenues generated by the project as development occurred. 2. Impact of the SFO Lawsuit The Tentative Map for the project was approved on December 11, 1985. On January 14, 1986 the San Francisco International Airport (SFO) brought suit against the City of South San Francisco alleging a number of things including that the environmental impact review process was defective. The trial court agreed with that allegation. The lawsuit effectively brought the project to a halt by creating uncertainties as to if and when Shearwater could proceed. Besides draining working capital reserved for project activities, the lawsuit also reduced the value of the project making it extremely difficult to attract additional capital typically required for a project of this complexity and magnitude. This lawsuit was not resolved until March 10, 1990, when the Court of Appeals ordered suspension of further development of the Shearwater Project until completion of a Supplemental EIR which the City completed shortly thereafter. By that time, the domestic and international financing markets had changed very significantly. 1/9/91 Page 2b Mayor Jack Drago January 7, 1990 Page Three... 3. Stay of the Tentative Map In previous correspondence, we requested the City Council grant a stay of the Tentative Map expiration date for a period of 15-months to March 31, 1992. That request was necessary due to: (1) The past lawsuit between the Airport and the City, substantially delayed the project; and (2) Because of the current uncertainty of the capital markets, adequate time is required to raise the funds necessary to restructure and re-capitalize the project and to provide the guarantee bonds necessary to complete the Final Map requirements. In regards to this latter issue, economists are uncertain as to how long the current financial market condition will remain. Predictions have ranged anywhere between 6-months to sometime into 1992. In the real estate development business, capital financing usually follows consumer up-turns. Accordingly, in order for the project to have a reasonable opportunity to attract capital it is important that the Tentative Map be available to preserve the value of the project and its marketability through this period of economic uncertainty. We believe a 15-month stay period is reasonable under the circumstances. 4. Land-Use Program The original concept for the project was to develop office, retail, public recreational and public access uses on the site. Working with the City, the sponsor was encouraged to include a housing component and also to provide a site for a convention center. The housing component was the major reason for the lawsuit by SFO. The conference/convention center component was not attractive to the project sponsor because generally such facilities require ongoing subsidies in order to cover costs and alternatively, it detracted from the so-called highest and best use of the property, which in the sponsors view was commercial/retail. However, in an effort to be as cooperative with the City as possible, the sponsor included a convention center use on Lot 3. 1/9/91 Page 2c . Mayor Jack Drago January 7, 1991 Page Four... In 1989, the City advised the sponsor that the convention center facility in Shearwater would no longer be required since a conference center was then being proposed at another location on Airport Boulevard. At that point, the issue became moot, except for the need to apply to the City for modifications to the specific plan to eliminate the convention center use. We have not proceeded with that application up until this time because, while it was important, it certainly was not urgent in light of all of the other activities underway at Shearwater. Also, since the issue was thought to be moot, the modification could take place in time as the project moved further along in its development program. 5. Convention Center Site Recently, suggestions have been made to once again locate a convention center on the Shearwater site. While the project sponsor is willing to work with the City in helping it achieve whatever objective it chooses, we see no economic benefit to the project to have a convention center located within its boundaries unless there is substantial subsidy provided by the City or others to offset the loss in economic value of the property. While we are open to discussing the matter with the City, we certainly are not encouraging that option. The issue of site availability for such a facility also needs to be addressed. As indicated above, we cannot be certain as to when or even if, all the necessary site work within the project area will take place. In a possible but, not necessarily probable, optimistic scenario, it is conceivable that a reorganization and recapitalization of the project could take place within the next 6-months including a sale of an assessment bond issued by the city for site improvements. Should that occur, site improvement work could probably st~rt within 3-months afterwards and be completed over the following 18-month period. At that time, a site for the convention center might become available but, of course, there is no guarantee that any of the other accompanying improvements in the project area will have been committed or be under construction. In short, the timely availability of the site cannot be assured at this time. 1/9/91 Pa§e 2d Mayor Jack Drago January 7, 1991 Page Five... 6. Overpass Funding The Shearwater share of the Oyster Point Overpass funding package ($9.1 million contribution and $6.4 million loan advance to the City) was negotiated with the City in 1985. At that time, the sponsors' expectation was that the Project would be under development for at least four to five years before overpass construction got underway in the late 1980's/early 1990's. Funds from project construction financing at the time of obtaining a building permit and possibly tax increments generated during this period of time would be used to pay the Shearwater share. Obviously, the SFO lawsuit changed that development schedule and delayed the project into an economic environment over which the sponsor has no control. However, the Shearwater share still must come from the same sources of funding. Because of these changes in schedules and economic circumstances, the mechanics of how this funding can best be achieved need to be further negotiated with City staff. Hopefully, all of the above will help clarify any misunderstandings about the status and prospect for completion of the Shearwater · Project. We would certainly be pleased to respond to any questions about the above or any other Shearwater issues. We would like to also encourage your support of a 15-month stay to the expiration date for the Tentative Map. We can very well understand the disappointment and perhaps loss of confidence that some of you have had regarding the progress of the Shearwater Project. I can assure you that the project sponsors as well as Mainspring, as the development manager, share many of those same frustrations. However, the creative vision that the project brought to the Oyster Point area and to the City of South San Francisco remains. That vision and the significant, past efforts of both the City and the sponsor to obtain approvals for the Project from other governmental agencies would be lost should the Tentative Map be left to expire or should the project not be given an adequate opportunity to be re-capitalized. 1/9/91 Page 2e Mayor Jack Drago January 7, 1991 Page Six... The alternative to not preserving this opportunity is very likely a site that remains virtually as is with nothing meaningful being developed in the area for years to come. The development approval process, with compounding environmental and special interest demands, and financing processes have become increasingly more complex, time consuming and costly. Every year brings new laws and new players into the public approval process, especially as they relate to waterfront sites. Capital markets have become more volatile and unpredictable. The time and capital risks associated with starting the process over again for this site with its recent history of lawsuits, approval delays and related financial difficulties do not provide an attractive investment profile to prospective investors compared with other opportunities. We submit for your consideration the notion that the best opportunity for realizing any significant development in this former industrial site would be realized by preserving the Shearwater opportunity by agreeing to stay the Tentative Map expiration date until March 31, 1992. Thank you for your courtesies and cooperation in this matter. Sincerely, Frank T. Cannizzaro / D ~ Development Consultant~xir/ Mainspring Corporation FTC/cb cc: Jesus Armas 1/9/91 Page f AGENDA ACTION TAKEN -ADMINISTRATIVE BUSINESS ADMINISTRATIVE BUSINESS 3. and 8. Shearwater Items - Continued. not to include it in EIR, which had led from the Redevelopment Agency and to lawsuits; Mr. Price had difficulty in the City Council respective items, acquiring financing, Mr. Diodati had a one year option and had sold the property to Sumitomo Bank which resulted in a clouded title; bone of contention on housing the City wanted, but Mr. Price said he would do whatever Council wanted; lengthy delays placed Mr. Price in dire financial straits; severe changes in banking industry; caution over loans - a shortage of credit; credit crunch stopped high rise developments in S.F.; 3 years ago property was not reasonable; thrift and banks were more cautious in lending; less foreign capital expected here; recession has not been seen here yet; current slowdown is expected to last for 6 months; he wanted to go with the knowns - which at this time was Shearwater. He related good news: $76,000 allocation from S.M. Transportation Authority for study in S.S.F. which was something he had been working on for 2 years on intra module transportation; the study will cover moving the station to the Shearwater Project, and would begin in 6 or 7 months; $36,000,000 is proposed for the project, and he commended Mayor Drago for its success. Second to the Motion by Councilman/Board- member Haffey. Mayor/Chairman Drago questioned the hesi- tancY for the formation of an assessment district, and the request for an econo- mic analysis. Director of Economic & Community Development Costello stated that the assessment district would assure the City that will it will take place, and the City would receive the money within 30 days of request. She stated that at that time if there was no money then an assessment district would be set up. 1/9/91 Page 3 AGENDA ACTION TAKEN --ADMINISTRATIVE BDSINESS ADMINISTRATIVE BUSINESS 3. and 8. Shearwater Items - Continued Mayor/Chairman Drago stated that he did from the Redevelopment Agency and the not want to jeopardize the Oyster Point City Council respective items. Overpass and was at the point of down scaling this project. Councilwoman/Boardmember Teglia stated that she was prepared to make a Motion to do just that, and was prepared to go with one year after directing staff to begin an assessment district to secure funding for the Overpass. She stated that in her reading of the OPA that stands separate to the tentative map. Councilman/Boardmember Haffey questioned if Councilman/Boardmember Nicolopulos would amend his motion to twelve months. Acting City Attorney/Counsel Haile stated, on the tentative map stay it would be improper to impose conditions at this time, but it would be appropriate to initiate the assessment district but not to take the two together. Councilman/Boardmember Nicolopulos quest- ioned what difference three months made. Councilman/Boardmember Haffey stated that it was a matter of expediency, and the second motion that appeared to be coming of paramount concern was for the Oyster Point, and twelve months is reasonable. Mr. Cannizzaro stated that the more time - the better, but they can live with the twelve months. Amended Motion/Second Nicolopulos/Haffey - To approve a twelve month stay for the Shearwater Tentative Subdivision Map SA-87-91. Acting City Attorney/Counsel Haile referred this to a one time stay, and after one year it was over - it was not an extension, but a stay. Mr. Cannizzaro stated that equivalent to 1/9/91 Page 4 AGENDA ACTION TAKEN ---~DMINISTRATIVE BUSINESS ADMINISTRATIVE BUSINESS ]. and 8. Shearwater Items - Continued the lawsuit, fifteen months could put it from the Redevelopment Agency and together - the lawsuit had been for 52 the City Council respective items, months, and after 12 months staff will look for more stays equivalent to the lawsuit. Acting City Attorney/Counsel Haile stated that there were extensions and the local code provided the final map 24 months to file and included sections of the Subdivision Map Act which allows the bouncil to grant extensions from time to time period to period for and additional three years. He stated that we are dealing with Subsection C that when a project is faced with a lawsuit they come in right away and say, I want a stay for the time this is under litigation. He stated that there is no time limit except sometime before the tentative map expires and the request has been filed by the Developer, and the Council has 40 days. He stated that the language of the Code is that there be a one time stay for the period of the litigation or any lessor period. He stated that the Developer had requested 15 months and the recommen- dation from staff was for 12 months. CITY COUNCIL ACTION Councilman/Boardmember Nicolopulos requested a vote on the 15 month exten- sion of the Tentative Subdivision Map. Motion failed by majority roll call vote, Councilman Nicolopulos voted yes, and Councilman Penna abstained. M/S Teglia/Haffey - To approve the request for a stay of expiration due to litigation on the Shearwater Tentative Subdivision Map SA-87-91 and grant the extension to 12/31/91. Carried by majority roll call vote, Councilman Penna abstained. M/S Teglia/Haffey - To direct staff to immediately begin the process for form- 1/9/91 Page 5 A G E N D A A C T I O N T A K E N 0~?'~I~. ,. ~ADMINISTRATIVE BUSINESS ADMINISTRATIVE BUSINESS 3. and 8, Shearwater Items - Continued ing an assessment district and obtain from the Redevelopment Agency and the financing for the sole purpose of City Council respective items, generating the Shearwater's financial obligation for the Oyster Point Overcrossing Project, and the satisfac- tion of their obligation. Carried by majority roll call vote, Councilman Penna abstained. REDEVELOPMENT AGENCY ACTION M/S Teglia/Nicolopulos - To accept the request for consideration for a time extension for precise plan for Phase I of Shearwater, and for all other items that may expire in the interim for an exten- sion to 12/31/91. Carried by majority roll call vote, Boardmember Penna abstained. M/S Teglia/Haffey - To adjourn the meeting. Carried by unanimous voice vote. ADJOURNMENT Time of adjournment was 8:57 p.m. RESPECTFULLY SUBMITTED, APPROVED. Bar ara A. a aya, Clerk ~/ /~/J'ack Drago, Chairm~F~ Redevelopment Agency / /Redevelopment Age))Fy6y City of South San Francisco [_~/ City of South San~Francisco The entries of this Agency meeting show the action taken by the Redevelopment Agency to dispose of an item. Oral communications, arguments, and comments are recorded on tape. The tape and documents related to the items are on file in the Office of the City Clerk and are available for inspection, review and copying. 1/9/91 Page 6