Published in the May 27-June 9, 2015 issue of Morgan Hill Life
Steve Tate
The city of Morgan Hill understands the importance of local businesses that have become a focal point for our community. Respecting that, the city is aware that the sale of the option to purchase Depot Center (located downtown at 95 E. Third Street) for development has created some confusion. To understand what is currently happening, it is necessary to understand the history of what has previously transpired with the option to purchase Depot Center, the “BookSmart site,” and the status of the former Morgan Hill Redevelopment Agency.
In 2010, a partnership (including BookSmart) sold an option to purchase Depot Center from the current owner, Llagas Valley Investments, to the RDA. The agency paid $1.7 million for the option and to terminate a master lease. (The RDA paid $1.5 million to the partnership, which included BookSmart, and $200,000 to Llagas Valley Investments.).
The 2011 abolishment of the RDA by the State of California removed the city from ownership of all former RDA assets including the option to purchase Depot Center. The city has absolutely no control over these assets. They are now held in trust by the city’s Successor Agency until liquidated for the benefit of all.
The Successor Agency to the former RDA followed a rigorous process to sell four sites downtown owned and controlled by the former RDA. A community review committee selected City Ventures as the buyer of the option for $100,000. The terms of the option require City Ventures to pay $2 million to Llagas Valley Investments per the agreement.
Approved by the Oversight Board and the California State Department of Finance, the sale is now in escrow and contractually obligated to be sold unless City Ventures fails to complete the required due diligence before June 16.
The city has identified $1 million of economic assistance for impacted businesses even though it has absolutely no obligation or requirement to provide it.
In 2011, Gov. Jerry Brown dissolved all Redevelopment Agencies in California, including the Morgan Hill Redevelopment Agency. When that occurred the state created a Successor Agency to the former RDA, a local body comprised of the Morgan Hill City Council members; an Oversight Board made up of a regional body comprised of various taxing jurisdiction representatives including the County Board of Education, the County of Santa Clara, the Community College District, the Santa Clara Valley Water District and the city of Morgan Hill. It also made the California State Department of Finance the ultimate authority to approve all actions, sell properties and all real estate assets (such as loans, options and leases) owned by the former Redevelopment Agency in accordance with the new state law.
The state dictated that every decision related to the properties and assets owned by the former RDA must be approved by the Successor Agency, Oversight Board and DOF in the order listed above.
The city of Morgan Hill was required to develop a Long Range Property Management Plan for state approval that was consistent with new state law governing the disposal of property. The Long Range Property Management Plan required the sale of the option to purchase Depot Center, and all other real property assets of the former RDA. Distribution of the sale proceeds from those sales to the other county taxing entities, including schools, community college, the county, and water district.
The Sale of Option to Purchase BookSmart Property was authorized by the Oversight Board and the State of California. Last August, the Successor Agency asked for proposals for development of former RDA property in the downtown and the option to purchase Depot Center, was part of that offering.
Two proposals were received for the option to purchase Depot Center. Both offered $100,000 for the option to purchase the site from Llagas Valley Investments for $2 million.
A committee comprised of the Morgan Hill Economic Development Corporation, representatives of the Morgan Hill Chamber of Commerce and representatives of the Morgan Hill Downtown Association recommended the sale of the option to purchase the site to City Ventures, of Feb. 18, 2015 which proposed:
• 5,000-plus square feet of retail shops, condos/townhomes above along Third Street and a large retail space on the corner
• Live/work units along Depot Street where no retail is required by the Downtown Specific Plan
• Town homes on the rear of the site to interface appropriately with the adjacent single family homes.
There are no other actions required unless City Ventures terminates the agreement during the due diligence period. The agreement does not permit City Ventures to sell the option without the approval of the Successor Agency, the Oversight Board and DOF.
On April 1, the Morgan Hill City Council approved an economic assistance program to assist tenants potentially displaced by the sale of the Depot Center and the other opportunity site properties downtown. The economic assistance program will help pay for permits/fees, brokers commissions, relocation costs, moving expenses, and build out of new space, plus equipment purchases.
If you have questions or concerns regarding this detailed information please feel free to contact Leslie Little, Assistant City Manager for Community Development, at (408) 779-7271. For more information regarding all of the downtown projects visit www.MHDowntown.com.
This column summarizes an email the mayor sent out to the community in late April.
