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2006/09/26 City Council ResolutionCOUNCIL RESOLUTION NO. 2006 -235 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ROHNERT PARK CONSENTING TO AND CALLING A JOINT PUBLIC HEARING ON THE PROPOSED THIRD AMENDMENT TO THE REDEVELOPMENT PLAN FOR THE ROHNERT PARK REDEVELOPMENT PROJECT WHEREAS, the Community Development Commission of the City of Rohnert Park (the "CDC ") submitted to the City Council of the City of Rohnert Park (the "City Council ") a proposed Third Amendment (the "Amendment ") to the Redevelopment Plan for the Rohnert Park Redevelopment Project (the "Project ") and consented to and requested that the City Council call a joint public hearing of the CDC and the City Council to consider and act upon the proposed Amendment; and WHEREAS, the City Council acknowledges receipt of the proposed Amendment, along with the Report to the City Council and the proposed Negative Declaration on the Amendment; and WHEREAS, Section 33458 of the California Community Redevelopment Law (Health and Safety Code Section 33000 et M,) authorizes a joint public hearing on the proposed Amendment with the consent of the CDC and the City Council; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ROHNERT PARK DOES RESOLVE AS FOLLOWS: Section 1. The City Council hereby consents to and, at the request of the CDC, calls a joint public hearing of the CDC and the City Council on Tuesday, November 14, 2006, at 6:00 p.m. in the City Council Chambers to consider and act upon the proposed Amendment and all documents and evidence pertaining thereto. Section 2. The City Clerk of the City of Rohnert Park shall, in cooperation with the Secretary of the CDC, prepare, publish and mail such notices and documents and do all other acts as may be necessary to carry out the purposes of this resolution. DULY AND REGULARLY ADOPTED this 26'h day of September, 2006 by the following vote: AYES: Four (4) Council Members Breeze, Flores, Mackenzie and Mayor Smith NOES: None (0) ABSENT: One (1) Vice Mayor Vidak- Martinez ABSTAIN: None (0) ATTEST: goxNenr Wk City Clerk M 19 Z 6 z Mayor Tim Smith Community Development Commission of the City of Rohnert Park Report to the City Council fbr th(D. Third Redevelopment Plan Amendment (q RSG INTELLIGENT COMMUNITY DEVELOPMENT September 26, 2006 ROSENOW SPEVACEK GROUP, INC. 309 WEST 4TH STREET SANTA ANA, CALIFORNIA 92701 -4502 P 714.541.4585 F 714.541.1175 E INFO @WEBRSG.COM REPORT TO CITY COUNT FOR THE THIRD REDEVELOPMENT . AN AMENDMENT Community Development Commission of the City of Rohnert Park TABLE OF CONTENTS INTRODUCTION.............................................................................. ..............................1 PlanAmendment Process ......................................................... ..............................3 Contentsof this Report ............................................................. ..............................3 REASONS FOR THE AMENDMENT ................................................ ..............................5 Infrastructure Financing ........................................................... ..............................5 Affordable Housing Program Financing ................................... ..............................5 CommercialRevitalization Financing ...................................... ..............................6 What the Plan Amendment Would Do ...................................... ..............................6 A Description of the Projects Proposed by the CDC and a Description of How the Proposed Projects Will Improve Conditions and Alleviate Blight ..................6 A DESCRIPTION OF THE PHYSICAL AND ECONOMIC CONDITIONS EXISTING IN THEPROJECT AREA ...................................................................... ..............................7 High Vacancies at Major Employment Centers ....................... ..............................9 High Vacancy Rates and Low Lease Rates along Southwest Boulevard .......... 11 Southwest Shopping Center ........................................................ ............................... 12 Other Commercial Uses along Southwest Boulevard ................. ............................... 15 Deterioration and Deferred Maintenance at Some Residential Properties .......17 Significant Public Infrastructure Projects Remain in the Project Area .............20 A Determination as to Whether the Project Area is Predominantly Urbanized. 21 METHOD OF FINANCING AND THE ECONOMIC FEASIBILITY OF THE AMENDMENT................................................................................ ............................... 22 BondedDebt ........................................................................... ............................... 22 THE FIVE YEAR IMPLEMENTATION PLAN ................................... .............................23 THE REPORT AND RECOMMENDATION OF THE PLANNING COMMMISSION, INCLUDING A DETERMINATION OF CONFORMANCE WITH THE GENERAL PLAN ...................................................................................................... ............................... 23 ENVIRONMENTAL CLEARANCE ................................................... .............................25 A SUMMARY OF THE AGENCY'S CONSULTATIONS WITH AFFECTED TAXING ENTITIES AND A RESPONSE TO SAID ENTITIES' CONCERNS REGARDING THE AMENDMENT................................................................................ ............................... 26 RSG C: \Documents and Settings \jhauff\Local SettingslTeinporary Internet files \OLK23 \06Sept26 DRAFT Report to the City Council (2).doc Page i REPORT TO CITY COUNT FOR THE THIRD REDEVELOPMENT _AN AMENDMENT Community Development Commission of the City of Rohnert Park INTRODUCTION On July 14, 1987, the City Council ( "City Council ") of the City of Rohnert Park ( "City ") adopted Ordinance No. 479, establishing the Rohnert Park Redevelopment Plan ( "Plan "). The Plan enables the City's Community Development Commission ( "CDC ") to undertake a revitalization program within 1,711 acres (approximately 42 percent) of Rohnert Park. Since adoption, the Plan has been amended twice to modify various limitations of the Plan. The first amendment was adopted by the City Council on January 26, 1999 by Ordinance No. 646, which modified time limits in compliance with changes to the California Community Redevelopment Law, Health and Safety Code Section 33000 et seq. ( "Redevelopment Law "). The second amendment was recently adopted by the City Council on May 9, 2006 by Ordinance No. 758, which rescinded the time limit to incur debt and added one year to the duration of the Plan as authorized by Section 33333.6 of the Redevelopment Law. A map of the Project Area is presented below. O RSG Page 1 REPORT TO CITY COUNT FOR THE THIRD REDEVELOPMENT _AN AMENDMENT Community Development Commission of the City of Rohnert Park City of Rohnert Park Redevelopment Area •i��tu Y�i i The redevelopment program to date has mainly emphasized development and rehabilitation of affordable housing, creation of new public facilities, and improvements to public infrastructure. The Plan authorizes a variety of redevelopment activities that may be undertaken by the CDC, within prescribed time and financial limitations established when it was adopted in 1987. For example; the Plan currently authorizes the CDC to perform these redevelopment activities over a 41 year period, and expires in July 2028. After that date, the RSG Page 2' 7 , J 4 \ � GOl �lthSe.D i R < r RO-ERT nw,7 PARK ECP/ FF v� 3VF y� xtec -a - '�j3iT"' SOU TMNE ST 3 •p�::.:: Y'Y � root - ..:z � s � O E •i��tu Y�i i The redevelopment program to date has mainly emphasized development and rehabilitation of affordable housing, creation of new public facilities, and improvements to public infrastructure. The Plan authorizes a variety of redevelopment activities that may be undertaken by the CDC, within prescribed time and financial limitations established when it was adopted in 1987. For example; the Plan currently authorizes the CDC to perform these redevelopment activities over a 41 year period, and expires in July 2028. After that date, the RSG Page 2' REPORT TO CITY CO1. „IL FOR THE THIRD REDEVELOPMEs PLAN AMENDMENT Community Development Commission of the City of Rohnert Park CDC may continue to collect tax increment revenue for up to 10 more years to pay its financial obligations'. The Plan also contains financial limits as required by Redevelopment Law. Among these financial limits is an $80 million cap on the amount of bonded debt principal that may be outstanding at any one time. According to the CDC's 2004- 05 audited financial statements, the CDC has approximately $31 million of bond principal outstanding, leaving an authority to issue up to another $49 million of bonds. As described later in this document, the CDC is anticipating that the remaining $49 million of bond debt that may be issued under the current Plan limit is not sufficient to meet the long term financial needs of the Project Area, and that several significant redevelopment initiatives may be in jeopardy as a result of this constraint. Consequently, the CDC has proposed the third amendment to the Plan ( "Plan Amendment ") in order to increase the limit on the amount of bonds which may be outstanding at any one time, from $80 million to $150 million. Adoption of the proposed Plan Amendment would enable the CDC the ability to effectively complete public infrastructure, affordable housing, and commercial revitalization projects prior to the expiration of the Plan. Plan Amendment Process This document is the Report to the City Council ("Report") for the Plan Amendment, outlining the reasons for increasing the bond debt limit to $150 million and detailing how the Plan Amendment would enable the CDC to complete necessary redevelopment projects and programs more effectively within the Project Area. The Plan Amendment and this Report to the City Council are scheduled to be considered by the CDC and the City Council at a joint public hearing in November 2006. (Notice of the joint public hearing will be published and mailed to all Project Area property owners, residents, business owners, and affected taxing agencies not less than 30 days prior to the public hearing). After the public hearing, the City Council may consider adoption of the Plan Amendment. Contents of this Report Redevelopment Law prescribes the contents of this Report. Accordingly, it has been divided into the following sections: The Reasons for the Amendment. A Description of the Physical and Economic Conditions Existing in the Project Area. Method of Financing and the Economic Feasibility of the Amendment This time limit is exclusive of certain affordable housing obligations that may be funded and implemented after s RSG this date. Page 3 REPORT TO CITY COUN _ FOR THE THIRD REDEVELOPMENT -AN AMENDMENT Community Development Commission of the City of Rohnert Park Report and Recommendation of the Planning Commission including a Determination of Conformance with the General Plan Environmental Clearance A Summary of Consultations with Affected Taxing Agencies The scope of the proposed Amendment is limited to increasing the limit on the amount of bonded indebtedness to $150 million; no other changes to the Redevelopment Plan are proposed. Consequently, several elements required by Section 33352 of Redevelopment Law for this Report do not apply to the proposed Amendment, and are not included in this Report. These excluded elements are the following: The reasons for the selection of the Project Area and description of the specific projects proposed by the agency and how these projects will improve or alleviate the blighting conditions (Section 33352(x) : The proposed Plan Amendment would not alter boundaries or authorize specific projects within the Project Area. An explanation of why the elimination of blight and the redevelopment of the project area cannot be accomplished by the private sector acting alone or by financing alternatives other than tax increment financing (Section 33352(d)): The blight section of this Report addresses why the private sector cannot eliminate remaining blight in the Project Area. The Plan already has tax increment financing authority, which is not altered by the Plan Amendment. • Method of relocation (Section 33352(f)): The Plan Amendment does not alter the CDC's relocation plan or authorize any change to relocation policies. • An analysis of the Preliminary Plan (Section 33352(8)): The boundaries of Project Area would not change with the proposed Amendment. Therefore, an analysis of the Preliminary Plan is not necessary for this Report. • The report and recommendation of the Project Area Committee (Section 33352(i) : No project area committee currently exists and one was not required for this Amendment. • The report of the Countv fiscal officer as reauired by Section 33328 (Section 33352(l)): Because the proposed Amendment would not alter the boundaries of the Project Area, it was not necessary for the Agency to request a base year report from the County of Sonoma pursuant to Section 33328 of Redevelopment Law. Thus, the report of the County fiscal officer was not necessary for this Report. • A neighborhood impact report (Section 33352(m)): Because the Plan Amendment .only alters one particular means of financing redevelopment, the Plan Amendment does not create any impacts on Project Area neighborhoods, cause displacement of housing or households, trigger new Page 4 REPORT TO CITY COL .:IL FOR THE THIRD REDEVELOPME, PLAN AMENDMENT Community Development Commission of the City of Rohnert Park housing production requirements, or mandate the creation of replacement housing. REASONS FOR THE AMENDMENT When the Plan was originally adopted, the City Council estimated that the total necessary bonding capacity of the Project Area would be $80 million. This bond limit was established based on the projected tax increment revenues for the Project Area, and the anticipated costs of the overall redevelopment program. Presently, the CDC has a total of $31 million of bond principal outstanding, leaving the capacity to issue approximately $49 million under the current Plan limit. CDC staff anticipates issuing a bond in late 2006 that would encumber most if not all of the remaining $49 million, leaving the CDC no further ability to issue bonds, despite the fact that the Plan would continue to collect tax increment revenue for another 32 years. While not all redevelopment projects require a redevelopment agency to issue bonds, it is the most effective means to financing larger public infrastructure projects, affordable housing programs, and commercial revitalization initiatives. The CDC has used its past bonding capacity to complete a variety of projects, including assisting the development of Public Safety Building on City Center Drive, the Spreckels Performing Arts Center, the Rohnert Park - Cotati Regional Library, golf course improvements, M Section public swimming pool, and various public infrastructure such as City Center Drive. For these and many other projects, relying upon a pay -as- you -go financing plan would have delayed implementation of projects for years, and in some cases made completion of projects infeasible. Infrastructure Financing The Project is at a point where sizeable redevelopment investments are needed if the CDC is to be successful in completing redevelopment of the Project Area. As indicated in this Report, public infrastructure projects that need to be financed by bond proceeds may cost the CDC over $76 million. The CDC also is facing potentially significant redevelopment costs in the redevelopment of obsolete and vacant commercial properties, as well as a need to more comprehensively address deficient conditions in the affordable housing stock. Affordable Housing Program Financing ORSG The proposed increase to the limit on the amount of bonds would also benefit the implementation of the CDC's affordable housing programs, particularly its construction of new housing to meet affordable housing production requirements. On. December 13, 2005, the CDC adopted a five -year Implementation Plan that, among other things, included a forecast of the number of affordable housing units that may need to be created over the remaining duration of the Redevelopment Plan. As indicated on Page 15 of the Implementation Plan, the CDC anticipates Page 5 REPORT TO CITY COON FOR THE THIRD REDEVELOPMENT AN AMENDMENT Community Development Commission of the City of Rohnert Park a need to create a total of 225 affordable units, including 87 very low income units. While the CDC is working on several initiatives to achieve these production goals, financing the necessary subsidies to create all 225 units will likely be dependent upon the CDC's ability to issue bonds in the future. Bond proceeds are commonly used to fund implementation of affordable housing construction, due to the sizable amount of cash needed to pay for multiple unit projects and the fact that Redevelopment Law requires 45 to 55 year affordability covenants. Based on current subsidy levels for affordable units, the CDC may need tc generate between $15 and $25 million of additional housing bond proceeds tc meet the 225 unit production need for the Project Area. Commercial Revitalization Financing The additional bonding capacity is also needed to enable the CDC to undertake potentially large scale redevelopment projects to revitalize nonresidential parts of the Project Area. The Project Area has two areas where commercial redevelopment is needed: 1) the former 175 -acre Agilent Technologies campus and 2) the 7 -acre commercial district along Southwest Boulevard. Redevelopment of both areas is needed to provide a sustainable reuse of these obsolete areas, and the scale and scope of such efforts may involve costly activities such as relocation, demolition, new infrastructure, and on -site improvements. The CDC is also engaged in other redevelopment initiatives, including the pursuit of developing commercial uses along the Rohnert Park Expressway and Commerce Boulevard to complement public facilities and affordable housing being developed in the area. It is anticipated that efforts to redevelop underutilized and obsolete uses in this area may require additional financial assistance from the CDC. With the participation of property owners and developers, these projects could cost the CDC as much as $25 million, and the ability to issue bonds to fund redevelopment efforts may be essential to stimulate private sector interest. What the Plan Amendment Would Do Adoption of the Plan Amendment would increase the limit on the amount of bonded debt from $80 million to $150 million. The Plan Amendment does not itself authorize the issuance of any bonds, and any future bond issues would be subject to discretionary actions by the CDC and City Council, as well as the strict financial standards imposed by the municipal bond market. However, the Plan Amendment does allow the CDC the financial flexibility to more expeditiously complete redevelopment of the Project Area. A Description of the Projects Proposed by the CDC and a Description of How the Proposed Projects Will Improve Conditions and Alleviate Blight The Plan Amendment does not propose any changes to the list of projects proposed by the CDC in the Plan, but modifies the bond limit so that these RSG Page 6 REPORT TO CITY COb. _IL FOR THE THIRD REDEVELOPMEr� PLAN AMENDMENT Community Development Commission of the City of Rohnert Park projects may be more expeditiously and comprehensively carried out. Without this added financing capacity, the ability to do certain necessary public improvement projects, redevelopment of large -scale vacant and obsolete uses, and implement affordable housing requirements may be in jeopardy. For example, eliminating the high concentration of vacant buildings at the former 175 -acre Agilent campus may require a more sizeable investment of redevelopment funds than the CDC's current net cash flow permits. It was estimated that redevelopment of this site and several other key commercial parcels in the Project Area could cost the CDC approximately $25 million, in today's dollars. The CDC currently generates about $1.0 million a year in net tax increment revenue. Without the added bonding capacity, the CDC potentially would have to wait 25 years (even without inflation in project costs) before it would generate sufficient revenue to meet this single goal. This is not an effective means to implement a redevelopment program where blight is persistent and a community has suffered significant economic losses. By expanding the bond cap to $150 million, the Plan Amendment provides the CDC an important resource to fund projects to remove the remaining blighted conditions. A DESCRIPTION OF THE PHYSICAL AND ECONOMIC CONDITIONS EXISTING IN THE PROJECT AREA O RSG According to Ordinance No. 479 adopting the Plan in 1987, the Project Area was established to address the following conditions of blight as defined by Redevelopment Law at that time: • The subdivision and sale of lots of irregular form and shape and inadequate size for proper usefulness and development; • The laying out of lots in disregard to the contours, and other topography or physical characteristics of the ground and surrounding conditions; • The existence of inadequate public improvements, public facilities, open spaces, and utilities which cannot be remedied by private or governmental action without redevelopment; and • A prevalence of depreciated values, impaired investments, and social maladjustment. Despite the CDC's best efforts over the past 19 years, these conditions continue to persist in portions of the Project Area. For the most part, progress has been hampered by significant changes in the national and local economies that have adversely affected the performance and condition of commercial uses in the Project Area. As a result, both business park and neighborhood centers in portions of the Project Area have greater vacancies and lower lease rates relative to other locations in the City. The value of residential properties has not Page 7 REPORT TO CITY COUNT , FOR THE THIRD REDEVELOPMENT . .,AN AMENDMENT Community Development Commission of the City of Rohnert Park been as acutely impacted by these trends due to increasing home prices throughout the region. However, there is evidence that despite appreciation in home values, homeowners are not able to maintain their homes in all cases, particularly in the more affordable neighborhoods of the City. A map of persistent blight within the Project Area is presented below: City of Rohnert Park Persisting Blighting Conditions 'G6LF' OURSE DR_' gh, vacanoes, at'former° a� �torola.facility g r R NERT: PARK EXPV 1 � .J 4 t :01 High vaca a It is the CDC's plan to address these economic and physical challenges through - a more comprehensive redevelopment effort that involves greater levels of RSG Page 8 REPORT TO CITY COL AL FOR THE THIRD REDEVELOPMU, PLAN AMENDMENT Community Development Commission of the City of Rohnert Park participation with private property owners to facilitate reuse of substandard and obsolete commercial areas, renovation of the City's affordable housing stock to mitigate physical problems, and improvement to public infrastructure to carry out the projects and programs originally set forth in the Plan. Specific conditions in the Project Area are described below. High Vacancies at Major Employment Centers O RSG Like many tech- companies, Agilent Technologies shifted many jobs to Southeast Asia in recent years. At one time, the 700,000 square foot campus off Bodway Parkway employed as many as 4,500 people in Rohnert Park. In 2003, Agilent abandoned their campus in the Project Area, leaving behind 700,000 square feet of business park space. Today, despite the efforts of the current owner to attract tenants to the site, the campus remains largely vacant and is the largest concentration of office space vacancies in the County. Additionally, the Motorola facility on State Farm Drive, which at one time employed over 300 people, abandoned its 132,000 square foot facility in 2003. Since that time, the property has remained vacant. According to a 2006 report from commercial brokers Keegan & Coppin, the former Agilent campus vacancy led them to characterize the vacancy rate not only in Rohnert Park but the entire County as "high ". Their report stated that "The eight quarter office vacancy for the entire county remaining high near 21 percent mostly due to Rohnert Park's overall vacancy rate exceeding 39 percent due to the Agilent campus coming available for the first time and flooding the market with over 700,000 sq. ft. of office /R &D space." Due primarily to the vacant Agilent property in the Project Area, the vacancy rate in the County and City is much greater than that of neighboring Marin County (12.5 percent )2 and Napa County (11 percent)'. 2 Source: NAI BT Commercial, Marin County Office Report, First Quarter 2006 3 Source: Keegan & Coppin Company, Inc. 2006 Commercial Real Estate Forecast Page 9 REPORT TO CITY COUN . FOR THE THIRD REDEVELOPMENT AN AMENDMENT Community Development Commission of the City of Rohnert Park Photo 1: Aerial photograph of the former Agilent campus taken in 2004. (Source: Christopher Chung /Santa Rosa Press Democrat, September 26, 2004.) Photo 2: Vacant Agilent campus located at 1212 Valley House Drive. Approximately 700,000 square feet of vacant office and business park uses in the southern portion of the Project Area has caused the City's vacancy rate to be 39 percent in 2006. High vacancy rates in the Project Area are coupled with low lease rates for office 9. RS+� space Citywide, according to a 2006 report from Keegan and Coppin. As shown Page 10 REPORT TO CITY COL..,;IL FOR THE THIRD REDEVELOPMEN PLAN AMENDMENT Community Development Commission of the City of Rohnert Park in the table below, lease rates in Rohnert Park are between 22 and 32 percent lower than competing submarkets in Santa Rosa, the Airport/Windsor area, and Petaluma. Since virtually all of the commercial office uses in Rohnert Park are located within the Project Area specifically, the statistics for the City presented here are essentially reflective of the Project Area. SUBMARKET AVAILABLE SPACE (SF) (4Q 2005) AVERAGE ASKING RATE PROJECT AREA RENT DIFFERENTIAL Santa Rosa 818,294 (13.8 %) $1.65 32% Lower Airport Area/Windsor 271,939 (25.4 %) $1.50 25% Lower Petaluma 619,638 (24.8 %) $1.44 22% Lower Rohnert Park /Project Area 637,873 (21.0 %) $1.12 As compared to surrounding market areas, it is not likely that the demand exists to reoccupy the former Agilent campus as an office or business park use. The collective vacancy rates in the Project Area and other parts of the County as compared to neighboring areas indicated the market has an oversupply of this space. According to a March 2006 construction report released by the Sonoma County Economic Development Board 4, "...the likelihood of a return to the spectacular (job) highs of the tech boom remains slim for various reasons..." The report went on to add that "office real estate has been the weakest component of (the Sonoma County market area) real estate caused by the slowdown in the County's key sectors ". Absorption of the vacant office space countywide, including the Project Area, will likely take a very long time, if ever. With the greatest concentration of vacant space in the County, the Project Area, and the Agilent site in particular, needs redevelopment to an alternate use (or uses) if this site is to become economically viable in the foreseeable future. The CDC is in preliminary discussions with the current owner of the former Agilent campus (Sonoma Mountain Village) who is proposing plans to demolish the campus and develop a master planned urban village for the site. However, facilitating this development is complicated by the cost of retrofitting and /or demolishing the existing improvements and construction of new infrastructure to service a different land use than what is present today. One of the possible uses of bond proceeds may be to fund infrastructure improvements for the reuse of this site in order to stimulate development of a sustainable development that is compatible with surrounding Project Areas neighborhoods. High Vacancy Bates and Low Lease Rates along Southwest Boulevard Along the south side of Southwest Boulevard, from Old Redwood Highway to Adrian Drive, lies a cluster of retail properties that share similar economic and physical problems. The largest portion of this retail commercial district is the RSG 4 2006 Construction Report, by Moody's /Economy.com, dated March 2006 Page 11 REPORT TO CITY COUN FOR THE THIRD REDEVELOPMENT AN AMENDMENT Community Development Commission of the City of Rohnert Park Southwest Shopping Center, which is located at the eastern end of this corridor. It is adjacent to a block of strip and stand -along retail commercial uses. The conditions present in both areas are described below. Southwest Shopping Center Redevelopment is also needed at the Southwest Shopping Center (aka Rohnert Park Shopping Center), located at 177 -375 Southwest Boulevard in the Project Area. Constructed prior to 1965, the center was the first major shopping center in Rohnert Park. By today's standards, the center is both undersized and functionally obsolete in the face of more contemporary centers elsewhere in the City, which has led to higher vacancy rates and lower lease rates. Photo 3: Southwest Shopping Center (aka Rohnert Park Shopping Center) located at 177 -375 Southwest Boulevard. Despite low lease rates, this center's vacancy rates are more than double that of other neighborhood centers in the City. In June 2006, RSG conducted a market study of major neighborhood shopping centers in Rohnert Park and found that as compared to other centers, the Southwest Shopping Center is significantly underperforming these locations. The following map presents the location, vacancy rate and lease rate for each of the locations studied. (q,RSG Page 12 REPORT TO CITY COL ;IL FOR THE THIRD REDEVELOPME, PLAN AMENDMENT Community Development Commission of the City of Rohnert Park City of'Rohnert Park Selected Shopping Center Comparison ❑ r ..1 �� j+ 1Nolf Den Plaza e ,"-ra mk F § '�. Vacancy'25% Southwest Shd pping Center s '•i Vaean+Fy20% �p a'` �� 1P�� Leese Rate, 52,0....., _ ,;i.�asatRate;$045 �F ::��'' st'� - .v s kpNNgc% PhRY.: Redevelopment Project Area ((j)RSG v Page 13 'ftl1,., i " z GOLF COIJRSE DP Mountain Shado vs Plaza c ! Vacancy: 6% Lease Rate $1.75 -2.25 � 70 w z � ' 7 Gente v Raley`s Town Centre r ..1 �� j+ 1Nolf Den Plaza e ,"-ra mk F § '�. Vacancy'25% Southwest Shd pping Center s '•i Vaean+Fy20% �p a'` �� 1P�� Leese Rate, 52,0....., _ ,;i.�asatRate;$045 �F ::��'' st'� - .v s kpNNgc% PhRY.: Redevelopment Project Area ((j)RSG v Page 13 REPORT TO CITY COUN, , FOR THE THIRD REDEVELOPMENT. _AN AMENDMENT Community Development Commission of the City of Rohnert Park Details on each of the centers are presented below: CENTER GROSS OWNERS YEAR VACANCY LEASE LEASABLE BUILT RATE RATE AREA (SF) Mountain Shadows Plaza 77,699 1 1988 6% $1.75- 909 -999 Golf Course Dr. $2,25 University Square 36,378 1 1988 15% $1.50 1451 -1481 Southwest BI. Raley's Towne Centre 71,168 3 1979 0% n/a 6455 State Farm Dr. Park Plaza Shopping Center 105,180 1 1973 0% n/a 6314 -6420 Commerce BI. Wolf Den Plaza 40,000 1 n/a 25% $2.00 E. Cotati Av. /Bodway Pkwy North Bay Shopping Center 65,660 3 1978 5% $1.50- 6301 -6585 Commerce BI. $1.75 Southwest Shopping Center 41,539 5 1965 20% $0.95 '177 -375 Southwest BI. (L•J)RSG As shown in this analysis, lease rates at the Southwest Shopping Center are between 33 and 55 percent lower than other neighborhood retail centers in the Project Area and City. RSG interviewed both the current broker and the former broker representing this center to better understand the specific reasons for the diminished quality of this property. Among the issues cited by the brokers included the following: "Functional obsolescence ": as the center was expanded over the years the design still remains largely substandard, without space for an anchor tenant to attract patrons to the site. The center is significantly undersized to attract a new anchor tenant to rejuvenate the property and bring customers into the site. Although adjacent to some of the densest parts of the City, the center does not have a grocery store, drug store, or bank to meet the basic needs of most shoppers. Ownership issues: The center is owned by five separate owners, which not only complicates marketing efforts, but also inhibits investment in the property. It is notable that in contrast to other commercial properties in the City, this center has not seen a significant reinvestment since the addition of 93 self storage units along the west side of the property over 16 years ago. Short term, low quality leases: based on analysis of a rent roll for this center, only 1 of the 15 tenants were not on a month -to -month lease. Basic real estate valuation principles dictate that longer term leases are typically more Page 14 REPORT TO CITY COI. _IL FOR THE THIRD REDEVELOPMEI, PLAN AMENDMENT Community Development Commission of the City of Rohnert Park ORSG valuable than short term leases; month -to -month leases are the shortest terms available. According to the Real Estate Investor's Deskbook, "a long- term lease usually means a more secure net operating income than a short - term lease ", and is one of four important factors when considering the capitalization rate in an appraisal of the value of income property5. Location: The center is located in an older area of the City, and is considered to have poorer access to the regional thoroughfares. Redevelopment of this center has been anticipated for some time. In 2003, the City rezoned the property to Mixed Use to allow for more flexibility in redeveloping the center and provide an incentive for transition. However, reuse of the site may require a significant effort on the part of the CDC to coordinate the varied interests of the property owners and existing tenants. Even without this kind of participation, the performance of the center suggests that this may not be a viable commercial location and that a significant redevelopment endeavor is. necessary, from installation of new public improvements to the reuse of the site. Other Commercial Uses along Southwest Boulevard Immediately west of the Southwest Shopping Center, from College View Drive to Old Redwood Highway, lies a series of eight stand alone and strip commercial buildings that are showing signs of obsolescence and economic disuse. The problems in this area include high vacancy rates, mixed and diversified ownership patterns, and substandard lot design by today's standards. According to a June 2006 report from Moody's /Economy.com, retail vacancy rates average approximately 4 percent in Sonoma County. By comparison, the strip commercial uses along this stretch of Southwest Boulevard are much higher. Approximately half of these properties have vacancies, ranging from 20 to 100 percent of the building area. Examples of vacancies include commercial structures at 93 -121 Southwest Boulevard, 125 Southwest Boulevard, 135 Southwest Boulevard, and 145 -157 Southwest Boulevard. s Real Estate Investor's Deskbook by Alvin L. Arnold, Warren Gorman Lamont (publishers), 1987, pages 1 -46 and 1-47. Page 15 REPORT TO CITY COUNk FOR THE -THIRD REDEVELOPMENT AN AMENDMENT Community Development Commission of the City of Rohnert Park (qRSG Photo 4: 135 Southwest Boulevard. A closed furniture store with only a few parking spaces in front. Lot depths in this area are too shallow to accommodate more parking to attract most commercial businesses. Ownership patterns make renovation of this area difficult. First, the lots have separate ingress /egress to Southwest Boulevard, varied set backs from the street, and limited interconnectivity between the parcels to accommodate better on -site circulation and possibly more patronage. This development pattern is no longer viable in today's market, where centers are developed around a central, shared parking area. Freeing up space for parking and better on -site circulation could attract more tenants, but in order for this to occur here, the six property owners would need to cooperate to make this happen, and there has been little evidence that after years of vacancies and decline, the owners are desirous or able to correct these problems. Most of the problems in this area stem from the poor configuration of the lots by today's standards. Brokers described the area as functionally obsolete meaning that the design of the buildings and lots are not adequate for businesses today. Along this corridor, lot depths average approximately 200 feet, which is not sufficient for most commercial users taking into consideration the need for on -site parking (which typically must cover 75% of the lot), building setbacks (these areas are immediately adjacent to sensitive residential uses), and on site landscaping and signage (which is nonexistent on many of the lots). Page 16 REPORT TO CITY COL. .IL FOR THE THIRD REDEVELOPMEN PLAN AMENDMENT Community Development Commission of the City of Rohnert Park Photo 5: 145 -157 Southwest Boulevard. Vacancies in the western portion of this building. Given the concentration of vacancies along this street, the obsolete and substandard design of the properties that result in limited parking and poor onsite circulation, and the overall poor level of patronage of retail businesses in this area and the adjacent Southwest Shopping Center, the long term use of this area may need to evolve to be more economically viable and compatible with surrounding neighborhoods. Brokers interviewed by RSG speculated that the best use for this area may not be commercial, but mixed use that would entail demolition of the existing structures in favor of a project that has better on -site improvements and more efficient circulation. Deterioration and Deferred Maintenance at Some Residential Properties According to the original Report to the City Council and the accompanying Assessment of Conditions Report (both prepared in June 1987), "a substantial number of the existing residential dwelling units are in need of rehabilitation and repair." Homes in so- called Sections A and B of the Project Area (located immediately north and south of Southwest Boulevard, between Interstate 101 and the Northwestern Pacific Railroad right -of -way) had the greatest concentration of problems, since these were the oldest tracts in the City. Problems in these areas included unstable foundations and structural damage, and included photographs depicting examples of these conditions. These physical problems still exist today, as many homeowners have not �"� RSG corrected the problems cited in the neighborhood 19 years ago. The • Page 17 REPORT TO CITY COUN . FOR THE THIRD REDEVELOPMENT _AN AMENDMENT Community Development Commission of the City of Rohnert Park photographs below, taken in April 2006, depict some examples of the structural conditions present in the Project Area. Photo 6: 7048 Adele Avenue. Significant cracking in driveway, comparable to the conditions documented in the 1987 Report to the City Council, stilt exists in many portions of Section A and B neighborhoods. This residence also has a rotting door to the converted garage. (q RSG Page 18 REPORT TO CITY COU, ,IL FOR THE THIRD REDEVELOPMEN PLAN AMENDMENT Community Development Commission of the City of Rohnert Park Photo 7: 285 Arlen Drive. Residence with cracked and buckling walkway, which is a safety hazard. Photo 8: 7754 Adrian Drive. Asphalt roofing peeling off this structure. (q RSG Page 19 REPORT TO CITY COUN FOR THE THIRD REDEVELOPMENT AN AMENDMENT Community Development Commission of the City of Rohnert Park The CDC hopes to use the next several years of the Plan to implement a housing rehabilitation program to address these significant structural problems in Sections A and B, as well as other parts of the Project Area, to mitigate the physical conditions that led to the creation of the Project Area in 1987. The additional bonding capacity created by the Plan Amendment may be used by the CDC to fund improvements to these areas. Significant Public Infrastructure Projects Remain in the Project Area (qRSG Public infrastructure deficiencies were another significant reason for creation of the Plan in 1987. At the time of adoption, inadequate public infrastructure included flood control, traffic; water, and sewer systems. In March 2006, CDC staff compiled a list of needed public improvements for the Project Area. Costs of these improvements were estimated by RSG and City staff, and include direct construction costs, as well as engineering, design, and administrative costs. In total, the inventory of potential public improvement projects may cost more than $76 million. Page 20 REPORT TO CITY COU. AL FOR THE THIRD REDEVELOPMEN . PLAN AMENDMENT Community Development Commission of the City of Rohnert Park PUBLIC IMPROVEMENT PRELIMINARY COST ESTIMATE Roadway Improvement Projects 24,000,000 Median and Parkway Improvements 10,000,000 Sidewalk Installation and Replacement 2,000,000 Water System Pipeline Improvements 7,000,000 Eastside Sewer 4,000,000 Recycled Water Reservoir 12,000,000 Recycled Water Pipeline 2,500,000 Westside Public Safety Station 5,140,000 Eastside Fire Station 4,000,000 Senior Center Expansion Re -roof 300,000 Performing Arts Center Re -roof 500,000 Rohnert Park Community Center Improvements 970,000 Civic Center Drive Plaza 200,000 Public Safety Bay Realignment 1,000,000 Flood Control and Drainage Improvements 3,000,000 Total $76,610,000 The projected public infrastructure costs exceed the current capacity of the CDC to issue bonds under the current Plan limit, which only allows for another $49 million of bonds issued. Without taking into account other potential redevelopment projects such as redevelopment of the Southwest Shopping Center, reuse of the former Agilent campus, and implementation of affordable housing projects, the bond capacityfmust be increased as proposed by the Plan Amendment in order to meet public infrastructure needs of the Project Area alone. A Determination as to Whether the Project Area is Predominantly Urbanized. Under Section 33030 of the Redevelopment Law, a blighted area is one that is predominantly urbanized as defined in Section 33320.1. When the Plan was originally adopted in 1987,. the CDC determined that the Project Area was predominantly urbanized. Because the Plan Amendment does not propose to RSG Page 21 e REPORT TO CITY COUN . FOR THE THIRD REDEVELOPMENT -AN AMENDMENT Community Development Commission of the City of Rohnert Park add any territory to the Project Area, a supplemental urbanization determination is not warranted for this Report. METHOD OF FINANCING AND THE ECONOMIC FEASIBILITY OF THE AMENDMENT Other than increasing the cap on the amount of bonded indebtedness that may be outstanding at any one time, the Plan Amendment would not alter the fundamental methods of financing Plan implementation. The Plan currently authorizes the CDC to implement redevelopment activities through a variety of means, including: • Financial assistance from the City, County, State of California and /or Federal Government; • Tax increment revenue; • Bonded debt; • Proceeds from lease or sale of CDC -owned property; • Loans from private financial institutions; and • Any other legally available source. The reasons for the provision of tax increment revenue and the overall financial feasibility of redevelopment were assessed in the original Report to the City Council. The existing tax increment limitations in the Plan would permit the CDC the ability to issue up to an additional $150 million of bonds. The Plan permits the CDC to collect tax increment revenue for 46 years, or until June 2038. With 32 years remaining on this time limit, the CDC would have at least 7 more years to issue 25 year bonds, a common duration of tax allocation bonds. In addition, the Plan features an annual tax increment revenue limit, equivalent to 1.75 times the maximum annual debt service on indebtedness. Because this tax increment revenue cap would increase proportionally with the amount of bond debt service payments, the increased authority to issue more bonds would not be constrained by the existing tax increment revenue limit. Bonded Debt Under the Plan, the CDC has the capacity to issue bonds and /or notes for any of its corporate purposes, payable in whole or in part from tax increment revenue. Any bonds issued by the CDC are the responsibility of the CDC, and neither the City nor its taxpayers are liable for debt service on these redevelopment Page 22 REPORT TO CITY CO\ ;IL FOR THE THIRD REDEVELOPME, . PLAN AMENDMENT Community Development Commission of the City of Rohnert Park financings. Redevelopment bonds are typically issued based on current cash flows, without regard to the potential increase in revenues that may lie ahead. The Plan caps the maximum amount of bond principal that may be outstanding at any one time at $80 million. According to the 2004 -05 Audit of the CDC, as a result of prior bond financings in 1991, 1999, and 2002, the CDC has $31 million of bond principal outstanding. The proposed Plan Amendment would increase this limit on the amount of bond principal that may be outstanding at any one time to $150 million, inclusive of both preexisting and future housing and nonhousing bond issues. As described earlier in this Report, this new bonded debt limit would enable the CDC to fund a variety of needed redevelopment projects, including up to $76 million of new public improvement projects, $25 million of commercial revitalization projects, and $15 -$25 million of affordable housing programs. THE FIVE YEAR IMPLEMENTATION PLAN On December 13, 2005, the CDC adopted the current five year implementation plan for the Project Area. The implementation plan covers the time period from 2004 -05 through 2008 -09, and describes the CDC's nonhousing and affordable housing program goals and projects for the planning period.. As required by Redevelopment Law, the implementation plan would be reviewed at a CDC public hearing in 2007.The implementation plan is incorporated herein by reference. The Amendment does not alter the implementation plan as adopted. THE REPORT AND RECOMMENDATION OF THE PLANNING COMMMISSION, INCLUDING A DETERMINATION OF CONFORMANCE WITH THE GENERAL PLAN On August 10, 2006, the City of Rohnert Park Planning Commission met to review the proposed Plan Amendment, including its conformance to the City's General Plan. By a unanimous vote, the. Planning Commission adopted Resolution 2006 -42 finding that the proposed Plan Amendment and implementation activities conform to the General Plan. The Planning Commission also recommended that the CDC and City Council adopt the Plan Amendment as proposed. A copy of Resolution 2006 -42 is presented below. QORSG Page 23 REPORT TO CITY COUN , FOR THE THIRD REDEVELOPMENT AN AMENDMENT Community Development Commission of the City of Rohnert Park PLANNING COMMISSION RESOLUTION NO. 2006-42 RESOLUTION OF THE PLANNING COMMISSION OF THE CITY OF ROHNERT PARK. MAILING ITS REPORT AND RECOMMENDATION ON ADOPTION OF THE PROPOSED THIRD AMENDMENT TO THE REDEVELOPMENT PLAN FOR THE ROHNERT PARK REDEVELOPMENT PROJECT WHEREAS, the Community Development Commission of the City of Rohnert Park (the "CDC ") has submitted to the Planning Commission of the City of Rohnert Park (the ".Planning Commission ") a proposed Third Amendment (the "Amendment ") to the Redevelopment Plan (the "Redevelopment Plan") for the Rohnert Park Redevelopment project (the "Project ") which would increase the cap on the amount of bonded indebtedness that may be outstanding at any one time; and WHEREAS, Sections 33453 and 33458 of the Community Redevelopment Law (Health and Safety Code Section 33000 et seq.) provide that the Planning Commission is to review the proposed Amendment and make its report and recommendation thereon to the City Council; and WHEREAS, the Redevelopment Plan authorizes the acquisition of land for, and the construction or acquisition by the CDC, the City or other public agencies of, public facilities within the project area; and WI-II:REAS, Section 65402 ofthe Government Code provides in part: "(a) If a general plan or part thereof has been adopted, no real property shall be acquired by dedication or otherwise for street, square, park or other public purposes, and no real property shall be disposed of, no street shall he vacated or abandoned, and no public building or structure shall be constructed or authorized, if the adopted general plan or part thereof applies thereto, until the location, purpose and extent of such acquisition or disposition, such street vacation or abandonment, or such public building or structure have been submitted to and reported upon by the agency as to conformity with said adopted general plan or part thereof. _ . "(c) A local agency shall not acquire real, property for any of the purposes specified in paragraph (a) nor dispose of any real property, nor construct or authorize a public building or structure; in any county or city, if such county or city has adopted a general plan or part thereof and such general plan or part thereof is applicable thereto, until the location, purpose and extent of such acquisition, disposition, or such public building or structure have been submitted to and reported upon by the planning agency having jurisdiction, as to confomtity with said adopted general plan or part thereof....''; 94303M 8W21J0002 �N�m Page 24 REPORT TO CITY COL ;IL FOR THE THIRD REDEVELOPMEI PLAN AMENDMENT Community Development Commission of the City of Rohnert Park File: PL2006 -01515 Date: August 10, 2006 Item: 1 WHEREAS, the General Plan of the City of Rohnert Park has been prepared and adopted in compliance with the Planning and Zoning Law (Government Code Section 65300 et seg.); and WHEREAS, the Planning Commission has considered the proposed Amendment, the Negative Declaration on the Amendment, the General Plan of the City, and other pertinent reports and information; NOW, THEREFORE, THE PLANNING COMMISSION Oh THE CITY OF ROHNERT PARK DOES RESOLVE, DETERMINE AND ORDER AS FOLLOWS: Section 1. Findines: The Planning Commission hereby finds and determines that: a. Pursuant to Section 33453 of the Community Redevelopment Law, the proposed Third Amendment to the Redevelopment Plan for the Rohnert Park Redevelopment. Project conforms to the General Platt of the City of Rohnert Park; and b. Pursuant to Section 65402 of the Government Code, with respect to activities which may be undertaken within the project area pursuant to the Amendment and that are referred to in said section, such activities and undertakings conform to the General Plan of the City of Rohnert Park, Section 2. Report and Recommendations: The Planning Commission hereby reports to the CDC and the City Council of the City of Rohnert Park the findings referred to in Section I hereof; and recommends the adoption, of the Negative Declaration and approval and adoption of the proposed Amendment in its present form. Section 3. Transmittal: The Planning Director shall transmit a certified true and correct copy of this Resolution to the CDC and the City Council of the City of Rohnert Park for consideration as part of the CDC's Report to the City Council regarding the proposed Amendment, and this Resolution shall be deemed the report and recommendation of the Planning Commission concerning the proposed Amendment. DULY AND REGULARLY ADOPTED on this IOth day of August, 2006, by the City of Rohnert Park Planning Commission by the following vote: Pamela a Stafford, Ghai rson, Rohnert Par k Planning Commission Attest: 2san Azevedo, Rec ding Secretary AYES: i NOES: _ ABSENT. ABSTAIN: ADAMS CALLINAN A HUBLEY_ I KILAT I STAFFORD ENVIRONMENTAL CLEARANCE QO. RSG Environmental review of the Amendment consisted of an Initial Study and Negative Declaration prepared by City staff. A Notice of Intent to Adopt a Negative Declaration for the Plan Amendment, which includes the Initial Study, Page 25 REPORT TO CITY COUN , FOR THE THIRD REDEVELOPMENT _AN AMENDMENT Community Development Commission'of the City of Rohnert Park was completed and published on July 12, 2006. No comments were received by the comment deadline of August 10, 2006 at 5:00 p.m. As part of their review of the Plan Amendment on August 10, the Planning Commission reviewed the Initial Study and Negative Declaration and adopted Resolution 2006 -42 which recommends that the CDC and City Council adopt the Negative Declaration. The Initial Study and Negative Declaration will be considered by the CDC and City Council at the joint public hearing on in November 2006. A SUMMARY OF THE AGENCY'S CONSULTATIONS WITH AFFECTED TAXING ENTITIES AND A RESPONSE TO SAID ENTITIES' CONCERNS REGARDING THE AMENDMENT (q RSG According to the Sonoma County Auditor - Controller's office, the following 12 taxing entities levy taxes within the Added Area: 1) City of Rohnert Park 2) County of Sonoma 3) Sonoma County Library District 4) Sonoma County Water Agency 5) Marin /Sonoma Mosquito & Vector Control District 6) Bay Area Air Quality Management District 7) Sotoyome Resource Conservation District 8) Sonoma County Office of Education 9) Cotati - Rohnert Park Unified School District 10) Bellevue Union Elementary School District 11) Santa Rosa City High School District 12) Sonoma County Junior College District Each of the above taxing entities has been provided copies of the Preliminary Report on the proposed Plan Amendment and the Initial Study and Negative Declaration. With the transmittals of these documents, the Agency has offered to consult with each of the taxing entities pursuant to Section 33328 of Redevelopment Law. Notice of the joint public hearing will also be provided to each affected taxing agency via certified mail. Page 26 REPORT TO CITY CO, -'IL FOR THE THIRD REDEVELOPME, PLAN AMENDMENT Community Development Commission of the City of Rohnert Park ORSG To date, the CDC has not yet been contacted by any taxing entities regarding the proposed Plan Amendment. At the joint public hearing, staff will update the City Council and CDC with respect to any correspondence or other communications with the taxing entities. Page 27