HomeMy WebLinkAbout15 - Sutherland Talla Hospitality AgreementCITY OF NEWPORT BEACH
Hearing Date:
November 14, 2000
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COMMUNITY AND ECONOMIC
Agenda Item
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DEVELOPMENT
No.:
15
PLANNING DEPARTMENT
Staff Person:
Sharon Z. Wood
3300 NEWPORT BOULEVARD
(949) 644-3222
NEWPORT BEACH, CA 92658
(714) 644-3200; FAX (714) 644-3250
REPORT TO THE MAYOR AND CITY COUNCIL
APPROVED
SUBJECT:
Agreement with Sutherland
Talla Hospitality to
Develop Project
Description, Process Development Plan, and Negotiate Ground Lease
for Marinapark
SUGGESTED
ACTION: Approve Agreement
The City Council reviewed proposals for the future use and development of Marinapark on May
9, 2000, and reviewed supplemental information provided by the proponents on August 22. At
the August meeting, the Council directed staff to prepare an agreement with Sutherland Talla
Hospitality that would designate them as the sole entity with which the City will participate with
respect to any redevelopment of the Marinapark site. In taking this action, the City Council was
clear that they were not approving a project or any land use proposal for the site. The Council
also encouraged Sutherland Talla to work with the American Legion in their continuing planning
for the site.
The City Attorney has prepared the attached agreement, and we have discussed it with Mr.
Sutherland, who is in agreement with its provisions. The major provisions of the agreement are
as follows.
1. The project approvals that are necessary before the project proposed by Sutherland Talla can
be developed are listed and acknowledged, to provide a clear understanding that the City and
State agencies will have their full authority to approve, modify or deny the project when
applications are presented.
2. Sutherland Talla is required to prepare a draft project description within 180 days. This
project description must be consistent with the proposal presented to the City earlier, but
must include much more detail regarding the extent of demolition and grading and the
phasing of construction. The City is to review and comment on the draft project description,
and hold a community forum on it, within 60 days, after which the proponent will have 45
days to respond to comments from the review. The Planning Commission and City Council
will then review the project description and approve, modify or reject it. If the project
description is approved, General Plan, Zoning and Local Coastal Program amendments will
be initiated at the same time. Sutherland Talla will be responsible for all costs for preparing
the project description and for the City's costs for its review.
3. The City will conduct an initial study within 30 days of the Council's approval of the project
description. Sutherland Talla is to prepare all draft planning documents for the project at its
expense, and submit them to the City within 90 days of City Council approval of the final
project description. After ensuring that the documents are consistent with the final project
description, the City will commence the development review process for the project,
including CEQA compliance, traffic study, and public hearings. Sutherland Talla will pay
the City's full actual costs associated with the development review process.
4. Within 30 days of receiving all project approvals, the City and Sutherland Talla will
negotiate the terms of an option and/or ground lease. Fifteen days prior to the start of
negotiations, Sutherland Talla will provide the City with detailed financial information,
including updated financial feasibility of the project, ability of the proponents to complete
and operate the project, method and sources of financing, analysis of construction costs, and
background on the proponents. The agreement will terminate if the parties do not reach
agreement within 180 days.
5. The term of the agreement is 36 months.
6. The City agrees to deal exclusively with Sutherland Talla during the term of the agreement,
except for extending leases with current tenants for terms consistent with the term of the
agreement.
7. Sutherland Talla is to deposit $15,000 within 30 days, as an advance to reimburse the City
for its costs in reviewing the project. Additional deposits are required as the City draws
down the advance.
If the City Council approves the agreement, it will not constitute a decision to close the mobile
home park. Staff believes that decision should be made concurrently with the ultimate decision
on the Sutherland Talla development project and ground lease. This approach will allow for
environmental analysis of all aspects of the project in one document, and allow the existing
mobile home park use to remain until such time as the City has definite plans for reuse of the
site.
The proposed agreement ensures that the City will retain its full land use authority for future use
and development of Marinapark, as well as its ability to negotiate a ground lease. The
requirement for project approvals to be complete prior to negotiating lease terms will allow the
City to know exactly what the future use of the site will be when entering into these negotiations.
The timelines in the agreement are appropriate in that they allow reasonable times for the
preparation and review of documents, and over a year for the development review process.
SHARON Z. WOOD
Assistant City Manage
Page 2
AGREEMENT
This Agreement (Agreement) between the City of Newport Beach (City) and Sutherland
Talla Hospitality LLP ("Proponent) is made with reference to the following:
RECITALS
A. City is the owner and/or grantee of certain property in the City of Newport Beach
commonly known as Marinapark (Property), that is described in Exhibit A and
depicted in Exhibit B.
B. The Property is currently improved with a mobilehome park, improvements leased
to the American Legion and the Girl Scouts, and recreational facilities.
C. In November, 1999, City issued a Request for Proposals (RFP) to determine
private sector interest in redevelopment of the Property, the possible uses of the
Property and the benefits of various redevelopment concepts. The City received
eight (8) responses to the RFP and five (5) responses to a subsequent request for
supplemental information.
D. In response to the RFP, Proponent submitted a proposal to construct a luxury hotel
and accessory improvements on the Property (Proposal).
E. City has determined that Proponent's Proposal was the most responsive to the
RFP. City has selected Proponent as (a) the entity responsible for preparing and
processing the Proposal and (b) the entity with which the City will engage in
exclusive negotiations for a long-term lease assuming the Proposal receives all
required approvals.
F. The purpose of this Agreement is to identify the obligations of City and Proponent
with respect to the preparation and processing of the Proposal and to establish a
period during which City is required to work exclusively with Proponent relative to
redevelopment of the Property. This Agreement is also intended to create an
obligation on the part of the City and Proponent to enter into a second agreement
to negotiate the terms of a ground lease or similar agreement pursuant to which
Proponent would construct a project on the Property.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. PROJECT APPROVALS
Proponent acknowledges that the proposed redevelopment of the Property will
require various approvals and permits from agencies with jurisdiction over the
Property. Permits or approvals will or may be required from the City, the
California Coastal Commission and the State Lands Commission. The following
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is a list of actions, permits and/or approvals that are, or may be required, before
Proponent would be able to construct a project that is consistent with the
Proposal (these actions are sometimes collectively referred to as Project
Approvals):
A. Amendment of the Land Use Element and the Recreation and Open
Space Element of the Newport Beach General Plan;
B. Amendment of the Newport Beach Zoning Ordinance and/or adoption of a
Planned Community Development Plan;
C. Amendment of the Land Use Plan of the Newport Beach Local Coastal
Program;
D. Approval of a Traffic Study pursuant to the provisions of Chapter 15.40 of
the Newport Beach Municipal Code (NBMC);
E. Approval of a Mobile Home Relocation Impact Report pursuant to Section
65863.7 of the State Zoning and Planning Act;
F. Approval of an environmental document pursuant to the California
Environmental Quality Act (CEQA) and the CEQA Guidelines;
G. Approval of Commercial Harbor Activities Permit and/or Harbor Permit;
H. Approval of a Coastal Development Permit;
Approval of the State Lands Commission;
J. Voter Approval pursuant to provisions of the Newport Beach City Charter;
K. Approval of a long term ground lease between the City and Proponent.
2. PROJECT DESCRIPTION
City and Proponent shall do the following within the timeframes specified for
completion of each task.
A. PREPARATION OF DRAFT PROJECT DESCRIPTION
Proponent shall prepare a description of the improvements to the Property
contemplated by, and substantially similar to, the Proposal. The
description shall include:
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(1) The precise size, location and use of all existing or proposed
improvements on the Property:
(i) The proposed use of any unimproved portions of the
Property;
(ii) The expected construction schedule, the various types of
equipment proposed to be used during construction (number
of vehicles, days on site and estimated trips);
(iii) The extent of any required grading and demolition;
(iv) The extent and/or phasing of the relocation of any existing
uses on the Property.
This description and the Project Approvals that are, or may be, required to
implement the Proposal shall constitute the Draft Project Description
(DPD).
B. SUBMITTAL AND REVIEW OF DPD
The Draft Project Description shall be provided to the City and all existing
users and occupants of the Property within one hundred and eighty (180)
days after the effective date of this Agreement. The City shall review the
DPD with respect to conformity with the Proposal and sufficiency for
purposes of compliance with CEQA and the CEQA Guidelines. The City
shall conduct one community forum on the DPD with notice published in
the local newspaper and distributed to community groups that the City
determines, in its sole discretion, have expressed an interest in the
Proposal. City shall submit written comments on the DPD to the
Proponent within sixty (60) days after receipt of the DPD.
C. MODIFIED DRAFT PROJECT DESCRIPTION
Proponent shall, within forty-five (45) days receipt of written comments on
the DPD from the City, submit to the City a modified DPD (MDPD) that is
consistent with the written comments of the City. The MDPD may reflect
written or oral comments on the DPD received during the public meeting
or otherwise.
D. CONSIDERATION OF MDPD
The City Manager shall, within 45 days after submittal by Proponent,
present the MDPD to the Planning Commission for recommendations and
to the City Council for review, approval and initiation of any required
3
amendment of the General Plan, Zoning Ordinance and/or Land Use Plan
of the Local Coastal Program. The City Council shall have the right, in its
sole discretion, to approve, modify or reject the MDPD. A decision by the
City Council to approve the MDPD only signifies a determination that the
MDPD is consistent with the Proposal and is sufficient for purposes of
compliance with the California Environmental Quality Act (CEQA) and the
CEQA Guidelines. The City Council shall initiate any required Project
Approval if, and at such time as, the City Council approves the MDPD as
submitted or as modified (the Final Project Description or "FPD").
E. COSTS
Proponent shall
any documents
the costs and e
and the condL
Proponent.
3. PROCESSING FPD
pay all costs and expenses related to the preparation of
necessary to comply with this Section. City shall recover
xpenses related to the review and comment of the DPD
ct of the public forum from the advance posted by
Assuming City Council approval of the FPD, Proponent and City shall do the
following:
A. INITIAL STUDY
The Planning Director shall conduct an Initial Study of the FPD as required
by CEQA and the CEQA Guidelines within thirty (30) days after the City
Council approves the FPD. The Planning Director shall, after conducting
the Initial Study, determine the environmental document necessary to
comply with CEQA, issue a Notice of Preparation, retain a consultant to
prepare the environmental document and generally oversee the work of
the consultant. The Proponent shall, prior to the retention of the
consultant, deposit funds with the City in an amount equal to the contract
price. Proponent shall reimburse the City for all costs incurred in the
preparation of the environmental document. In addition to the deposit of
the contract price, Proponent shall deposit with City any additional funds
within ten days after notice from the Planning Director that those funds are
necessary to complete, or continue work on, the environmental document.
Proponent acknowledges that the costs of preparing an environmental
document are difficult to ascertain or estimate and that unexpected
circumstances frequently arise that require additional environmental
analysis and additional expenditures. Subsequent to issuance of the
Notice of Preparation of the environmental document the FPD shall be
referred to as the "Project."
4
B. PLANNING DOCUMENTS
In addition to payment of all costs associated with preparation of the
environmental document, Proponent shall, at its sole cost and expense,
prepare all planning and zoning documents necessary to the processing of
the Project (Planning Documents). Proponent shall also prepare a fiscal
and/or economic analysis of the Project (economic analysis) consistent
with Council Policy. Proponent shall submit draft Planning Documents to
the Planning Director, and the economic analysis to the Assistant City
Manager, within ninety (90) days after City Council approval of the FPD.
The Planning Director and the Assistant City Manager shall provide written
comments on the draft Planning Documents and economic analysis,
respectively, within forty-five (45) days after submittal. Proponent shall,
within forty-five (45) days after receipt of comments from the Planning
Director, submit to the Planning Director and Assistant City Manager,
modified Planning Documents and an economic analysis that are fully
consistent with the comments. The Planning Director shall have the right,
in her/his sole discretion, to revise the modified Planning Documents to
the extent necessary to conform to the FPD and the plans, resolutions,
policies and ordinances of the City. Proponent shall pay all costs incurred
by the City in commenting on and/or revising the Planning Documents and
the economic analysis.
C. PUBLIC HEARINGS
City shall process the Project in the manner required by law. Proponent
shall attend all public hearings and present such evidence as may be
necessary to ensure that the Planning Commission, City Council and other
public agencies receive all information relevant to consideration of the
Project. Proponent shall pay all costs and expenses related to the
noticing or conduct of any public hearing required by one or more of the
Project Approvals.
4. NEGOTIATION OF OPTION/LEASE
A. LEASE NEGOTIATIONS
City and Proponent shall commence exclusive negotiations regarding the
terms and conditions of a ground lease option and/or a ground lease
assuming, Proponent receives all Project Approvals necessary to obtain
building permits for construction of the Project. The negotiations shall
commence no later than thirty (30) days after Proponent receives all
required Project Approvals and Proponent satisfies the provisions of
subsection B. The Parties shall negotiate the terms and conditions in
good faith in an effort to reach agreement on a fair and equitable option
5
and/or lease as soon as reasonably possible. The Parties shall consider
the general terms and conditions of the 1996 Option and Ground Lease
between the City and the Balboa Bay Club (1996 BBC agreements) in
conducting the negotiations. However, the Parties acknowledge that the
1996 BBC agreements involved unique circumstances — such as an
existing leasehold advantage on the part of BBC — and that the City is fully
justified in negotiating substantially different terms and conditions with
respect to the Property. The parties acknowledge that any discussions or
negotiations concerning an option and/or lease of the Property may be
lengthy and complex. The Parties agree that neither will be bound by any
statement or representation during the processing of the Project or the
subsequent negotiations until agreement is reached on all issues and a
written agreement has been executed by both parties.
B. FINANCIAL ANALYSIS
Proponent shall prepare and provide City with the following at least fifteen
(15) days prior to the commencement of negotiations pursuant to this
Agreement:
1. Information relevant to Proponent's ability to successfully complete
and operate the Project including, without limitation, a written
financial feasibility analysis of the Project including an estimate of
construction costs, an estimate of Project income, a pro forma
statement of Project return, the proposed method and sources of
construction and permanent financing as well as operation.
2. A preliminary analysis, prepared by an architect and structural
engineer reasonably acceptable to the City, of the construction
costs of the Project.
3. A detailed background of Proponent including all general partners,
members, or other principals, together with and background
information, including: (a) prior record of Proponents with respect to
the completion of developments of a scale comparable to the
Project (b) prior experience in the operation of developments
comparable to the Project.
4. A list of financial references.
C. TIMING/TERMINATION
This Agreement shall automatically terminate (unless extended pursuant
to mutual agreement) if the Parties fail to reach agreement on the terms
0
and conditions of an option and/or ground lease within one hundred and
eighty (180) days after negotiations commence.
5. DISCRETION OF CITY
The Planning Commission and City Council retain the full and complete
discretion to disapprove or modify the FPD, any Planning Approval, or any other
action necessary to implementation of the Project. Proponent acknowledges that
certain Project Actions are legislative in nature and may be denied without cause
or findings for denial. This Agreement does not, and shall not be construed, as
creating any obligation on the part of the City Council, the Planning Commission,
any member of the City Council or Planning Commission, or any City employee,
to approve and give special consideration to this Project. This Agreement does
not create any obligations or duty on the part of the City to engage in or continue
any discussions or negotiations regarding a lease of the Property except as
expressly set forth in this Agreement.
6. TERM
A. GENERAL
This Agreement shall commence on the effective date and continue for a
period of thirty-six (36) months plus any extension. The term does not
include the time between City Council approval of the Project and the date
on which the Project is submitted to the voters.
B. CITY MANAGER EXTENSIONS
The Parties acknowledge that substantial time and effort may be required
to obtain all Project Approvals necessary to construction of the Project.
The City acknowledges that Proponent may experience delays in
scheduling required hearings, obtaining project approvals or preparing
required documents even though Proponent has acted in good faith and
with due diligence. The term of this Agreement may be extended by the
City Manager for a total of twelve (12) months upon a determination that
Proponent has experienced unforeseen delays that were beyond the
control of Proponent.
C. MUTUAL AGREEMENT
The term of this Agreement may be extended by mutual agreement of the
Parties.
7
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7. EXCLUSIVITY
During the term of this Agreement, City will deal exclusively with Proponent and
no other person or entity, with regard to the possible redevelopment of the
Property. City shall deal exclusively with Proponent with respect to all Project
Approvals and, except for extensions of existing leases or agreements with
current users or occupants for a term consistent with the provisions of this
Agreement, will not accept applications for any proposed development, lease or
use of the Property.
8. ADVANCE
Proponent shall, within thirty (30) days after the effective date, deposit the sum of
fifteen thousand dollars ($15,000) ("Advance"). The Advance may be used to
reimburse the City for staff time in processing the Project including, without
limitation the review of Planning Documents, compliance with CEQA, preparation
of staff reports and attendance at public hearings. City shall, upon request,
provide Proponent with statements of the amount of the Advance remaining on
deposit. Proponent shall deposit additional funds necessary to restore the full
amount of the Advance when the balance is five thousand dollars ($5,000). City
shall transfer the remaining balance of the Advance to Proponent in the event
this Agreement is terminated or expires.
9. COOPERATION
City and Proponent shall cooperate with one another in the processing of all
Project Approvals. In this regard, City shall sign applications and documents
necessary to secure Project Approvals and shall ensure that a representative of
the City is present at all public hearings involving any Project Approval. City and
Proponent shall participate in public workshops and study sessions held by the
City Council and City commissions on planning and development issues related
to the Property.
10. MISCELLANEOUS
A. NO RELIANCE
Tenant acknowledges that it is not entering into this Agreement in reliance
upon any statement or representation made by or behalf of City or any
promise of any kind whatsoever, except as expressly set forth in this
Agreement.
B. ASSIGNMENT
Proponents may assign or transfer this Agreement, in whole or part,
without the prior written consent of the City Council. City acknowledges
that Proponent may, during the term of this Agreement, enter into
agreements with third parties and Proponent agrees that the City Council's
consent may be given or withheld in its sole discretion. For purposes of
this Agreement, an assignment of this Agreement includes the sale or
other transfer of any interest in Proponent or any agreement between
proponent and a third party that is related to the lease and development of
the Property.
C. ATTORNEY FEES
In any action to enforce this Agreement in any forum, the prevailing party
shall be entitled to reasonable attorneys' fees and costs.
D. GOVERNING LAW
This Agreement shall be governed by and construed in all respects in
accordance with the laws of the State of California, without giving effect to
principles related to conflict of laws.
E. TERMINATION
City may terminate this Agreement in the event Proponent fails to perform
any material obligation (Default). In the event of a Proponent Default City
shall give Proponent ten days written notice to cure the Default and this
Agreement shall terminate unless Proponent commences cure within ten
days and diligently pursues the cure to completion.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
of , 2000 (effective date).
APPROVED AS TO FORM:
Robert Burnham, City Attorney
ATTEST:
LaVonne Harkless, City Clerk
f:\users\cat\shared\burnham\marinapark\2ddraftst110700sou.doc
CITY OF NEWPORT BEACH
A Municipal Corporation
in
John Noyes, Mayor
SUTHERLAND TALLA HOSPITALITY LLP
IN
Stephen Sutherland (Proponent)
9
EXHIBIT A
LEGAL DESCRIPTION
Exhibit A
Legal Description
Portions of Lot, Section 33 and Lot 4, Section 34, Township
6 south, range 10 west, San Bernardino Meridian. Also
Block 117 of Section B, Newport Beach Tract as described
in Deed to the City of Newport Beach recorded in Book 342,
Page 329 of Official Records in the Office of the County
Recorder of Orange County, California.
Together with portion of Block 115 and all of Block 116
(including vacated streets and alleys) of Tract No. 234 as
described in Deeds to the City of Newport Beach recorded in
Book 3566, Page 147 and in Book 3566, Page 153 both of
said Official Records.
2
EXHIBIT B
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The American Legion
NEWPORT HARBOR POST 291
- 215 15th Street
Newport Beach, CA 92663
(949)673-5070
August 30, 2000
Dear Mayor John E. Noyes:
Thank you for allowing me to speak to the Council on Tuesday, August 22nd during the public
hearing on Marina Park and the American Legion. There were a lot of emotions expressed during
the meeting and many more shown outside Council chambers. Most of them fell into the categories
of either the Legion is the problem, the City is the problem, Balboa Peninsula residents are the
problem or the Developer is the problem. As long as those feeling persist it will be difficult to
accomplish anything.
I would like to address those feelings and suggest a way to move things along.
The City Council is not the problem. On August 25, 1997 the Council voted unanimously to
immediately negotiate a long-term lease with the Legion. On October 25, 1999 the Council voted
to immediately extend the present lease for one year, later amended to two years. The City Council
has therefore already shown its good faith. Unfortunately, none of those things happened until just
last week when I picked up the first one-year lease extension.
The end result is that many in the Legion feel betrayed by the City. For over eight years they have
followed City recommendations, put together negotiating teams as they were told and were then
generally mislead. City Managers and Assistant City Managers changed and duties were
reassigned. First the Legion was told the City couldn't start to talk until after the Balboa Bay Club
was settled, then until after Balboa Coves, then more delays until finally they found themselves on
March 15, 2000 without a lease. There are definitely a lot of strong feelings.
The Legion is not the problem. The Legion has proved itself a good citizen of Newport Beach by
moving once to solve a City problem. It serves the City and many groups in it from Newport
Harbor High School reunions, to City maintenance team meetings, to political gatherings, to
weddings. People who are directly eligible to join are veterans, their wives, children and
grandchildren. That is a large percentage of Newport Beach residents. In addition, almost anybody
can be welcome as a guest of one of the above at any time. It is more a facility serving the public
than a private club.
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The Legion has tried to negotiate in a very positive manner in spite of the emotionalism of the
situation. The Legion has written no emotional letters to the editor, there are no lawsuits, no calling
for help from State and National politicians, and no flaming of emotions. The Legion has talked
openly with the various developers, including Sutherland-Talla, seeking solutions that would satisfy
Balboa Peninsula residents, the Legion and the City.
The Developer is not the problem. Sutherland-Talla is only doing what the City requested by
responding to a City request for proposal. They have offered to build the Legion a facility on 181h
Street, although the $500,000 budgeted would not come close to the actual cost. They have offered
a 60-year sub -lease at One Dollar at year. They modified that and agreed the Legion should lease
directly from the City and they would subsidize it to maintain the One Dollar a year. They agreed
to look at some way a marina could be built, or their new one could be shared, so that the American
Legion Yacht Club could remain in existence. They have been very positive and accommodating.
Balboa Peninsula residents are not the problem. Their main concern is the impact on traffic. They
have lived with increasing traffic gridlock and concerns about emergency equipment being able to
get to their homes. For them, it is literally a life or death concern. Any project that increases traffic
will face justifiable opposition.
At appears that the Legion will be signing a long-term lease with the City. The period appears to be
60 years since that is what Sutherland-Talla was offering. It will either be at the present site or
another one. It will either be signed quickly or after a period of long and difficult negotiations.
There is one way to diffuse a lot of the emotional issues and that is to get the lease signed
immediately. Just extend the present terms but include the condition that, upon mutual consent, the
location could be changed in the future.
That would allow Sutherland-Talla to receive a positive reception when they present their plans to
the Legion. Right now, under a perceived threat of eviction, it is difficult to get anyone to think
with an open mind. They are concerned about losing their home and sometimes threatened people
will fight and do irrational things. I have talked to Steve Sutherland and we are targeting a
presentation meeting in the three-week time frame. Having a long-term lease in place by then will
make that very positive meeting.
I also envision a huge lease signing celebration at the American Legion featuring all Council
members. The Legion and Balboa Peninsula residents would then see that the City Council
members have been the good guys in this whole thing all along. Thank you again for allowing me
to appear at the Council meeting and for taking your time reading this proposal.
Sincerely,
6� vfj L
Dennis P. Lahey
Commander
Home Phone 949-548-4408
cc: All Council Members
City Attorney Robert Burnham
July 25, 2000
Robert Burnham, Esq.
City Attorney
City of Newport Beach
3300 Newport Boulevard
Newport Beach, CA 92663
Re: Marina Park Reuse Plan
Dear Mr. Burnham:
G R AYCA RY./
401 B Street, Suite 1700
San Diego, CA 92101-4297
Office: 619-699-2874
Fax: 619-236-1048
Cell: 619-890-2874
Pager: 619-338-3515
Email: cblack@graycary,com
www.graycary.com
Charles E. Black
Admitted to practice in California
Our File No. 105696-111111
Date
Copies Sent To:
,AD -Mayor
QQ'Council Member
J�'Manager
❑ Attorney g
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El
❑ ---- —
We have been asked by our client, RHC Communities, to comment on the City's consideration of
the future use and development of Marina Park ("Park"). Our client made this request because of
our firm's recent experience in the closure of mobilehome parks in Southern California and our
involvement in the litigation resulting from such closures. One example of such a closure is the
Treasure Island in Laguna Beach. In that matter, our firm represented the park owner, Treasure
Island Associates, in which an affiliate of RHC Communities was a partner.
In our experiences with mobilehome park closures, two facts have become clear. First, the
obligations imposed on the party proposing the closure to mitigate adverse impacts to the tenants
(such as relocation) can be extremely onerous. Second, the statutory framework defining the
closure proponent's obligations to tenants is sufficiently vague that litigation is guaranteed.
THE CITY'S ONEROUS OBLIGATIONS UNDER SECTION 65863.7 OF THE CALIFORNIA
GOVERNMENT CODE
a. Applicability of Section 65863.7 to the City
Section 65863.7, subdivision (a) of the California Government Code provides in
relevant part:
Prior to conversion of a mobilehome park to another use ... or prior to closure of a
mobilehome park or cessation of use of the land as a mobilehome park, the person
or entity proposing the change in use shall file a report on the impact of the
SILICON VALLEY SAN DIEGO SAN DIEGO/GOLDEN TRIANGLE SAN FRANCISCO AUSTIN SEATTLE SACRAMENTO LA JOLLA
Gray Cary Ware & Freideririch LLP
Robert Burnham, Esq.
July 25, 2000
Page 2
conversion, closure, or cessation of use upon the displaced residents of the
mobilehome park to be converted or closed. In determining the impact of the
conversion, closure or cessation of use on displaced mobilehome park residents, the
report shall address the availability of adequate replacement housing in mobilehome
parks and relocation costs. (Gov't Code, § 65863.7(a).) (Italics added.)
Under Section 65863.7, subdivision (i), if the "closure, cessation, or change of use is the result of a
decision by a local governmental entity or planning agency not to renew a conditional use
permit. . . under which the mobilehome park has operated[,] ... the local governmental agency is
the person proposing the change in use." (Gov't Code, § 65863.7(i).)
The City, therefore, would be the responsible party for purposes of preparing the
impact report required by Section 65863.7, subdivision (a) and undertaking measures to mitigate
the adverse impact of the change as may be required under Section 68863.7, subdivision (e).
b. Reasonable Costs of Relocation
The mitigation measures required to be taken by the City under Section 65863.7,
subdivision (e) are to be measured against the reasonable costs of relocation to find adequate
housing in a mobilehome park for the displaced residents. (Gov't Code, § 65863.7(e).) Such
reasonable costs of relocation present a potentially burdensome financial obligation on the City
should it decide to close the Park.
The meaning of "reasonable costs of relocation" was explored in depth in the
litigation resulting from the closure of Treasure Island. In that case, the relocation impact report
disclosed that there were few, if any, spaces available in comparable parks (defined as coastal
parks in Southern California). Thus, the preparer of the relocation impact report concluded that
"reasonable costs of relocation" would include the physical relocation of a mobilehome coach to
another park if a space is available, or if no space is available, the acquisition cost of a comparable
replacement coach and appurtenant structures in a comparable park. The relocation impact report
sampled the in -place acquisition cost of coaches in comparable parks and, as a result of that
sampling calculated the "reasonable costs of relocation" for Treasure Island tenants at
approximately $125,000 on an average per coach basis. The Laguna Beach City Council initially
approved the recommendations of the relocation impact report in spite of the owners' contention
that "reasonable costs of relocation" should be limited to the costs of physically relocating a coach
to a comparable park. The difference of opinions manifested itself in dozens of lawsuits, cross
actions and appeals which nearly took 4 years to be resolved and more than two years of lost rent.
The primary lawsuit dealing with "reasonable costs of relocation" Section 65863.7
was Treasure Island v. City of Laguna Beach (Sup. Ct. Orange County, 1994, No. 727255). The
trial court determined that the reasonable cost of relocation legitimately included relocation benefits
to cover either (i) the relocation of the coach and appurtenant structures and improvements to a
relocation park selected by the coach owner or to a mutually agreeable park, all at the expense of
the park owner, (ii) the acquisition of a comparable replacement coach and appurtenant structures
and improvements located or to be located in a relocation park selected by the coach owner or to a
mutually agreeable park, all at the expense of the park owner, or (iii) the payment of relocation
Gray Cary Ware & Freidenrich LLP
Robert Burnham, Esq.
July 25, 2000
Page 3
benefits based on the amount corresponding to the cost of acquisition of a comparable replacement
coach located or to be located in a relocation park selected by the coach owner or in a mutually
agreeable park and the cost of relocating the coach owner, all at the expense of the park owner. In
total, the relocation benefits amounted to approximately $23 million.
In light of the example set by Treasure Island and depending on the number of
residents currently residing in the Park, reasonable costs of relocation can amount to an oppressive
financial liability, presenting a tremendous financial blow to the City's taxpayers.
2. THE CITY'S ADDITIONAL OBLIGATIONS UNDER SECTION 65590 OF THE CALIFORNIA
GOVERNMENT CODE
Because the Park is in a coastal zone, Section 65590 of the California Government
Code imposes additional obligations on the City should it decide to close the Park. Under
Section 65590, for persons and families of low or moderate income who are consequently deprived
of their coach housing due to the Park closure, the City will be required to either (i) construct
replacement housing on the subject property, or (ii) construct replacement housing within three (3)
miles of the coastal zone. Such replacement housing must also be available within three (3) years
of the date upon which work commenced on the conversion or demolition of their coach housing.
(Gov't Code, § 66590.) The City's obligations under Section 65590 present an additional financial
onus to be borne by the City's taxpayers.
CEQA REQUIREMENTS
Under the California Environmental Quality Act ("CEQA"), an Environmental Impact
Report ("EIR") must be prepared if a proposed project may have a significant effect on the
environment. (Pub. Res. Code, § 21100(b)(1).) A significant effect on the environment can include
effects of a proposed project that "will cause substantial adverse effects on human beings, either
directly or indirectly." (Pub. Res. Code, § 15065.) An example of such substantial adverse effects
on human beings can be found in the case of Friends of "B" Street v. City of Hayward (1980) 106
Cal. App. 3d 988. In Friends of "B" Street, the project's displacement of twelve (12) families from
their residences formed a basis upon which the court found significant effects on the environment,
thereby necessitating the preparation of an EIR. Id. at 1003. Here, the potential displacement of an
even greater number of families will result in a more substantial adverse effect on human beings for
purposes of CEQA. In light of Friends of "B" Street, the closure of the Park will probably require
that an EIR be prepared by the City.
Our experiences in mobilehome park closure in Laguna Beach are similar to the experiences of the
Cities of Huntington Beach and Garden Grove where the cities were required to pay relocation
costs of $75,000 per space and $40,000 per space, respectively. Clearly, mobilehome park closure
is an alternative that should be approached carefully and only after evaluation of all of the potential
costs to the City.
Gray Cary Ware & Freidenrich LLP
Robert Burnham, Esq.
July 25, 2000
Page 4
If you have any questions regarding this letter or the topic of mobilehome park closure, please call
at your convenience.
Very truly yours,
Gray Cary Ware & Freidenrich LLP
By: ��,A,
Charles E. Blac�
CEB/bmc
Gray Cary\SD\1375761.1
cc: RHC Communities
The Honorable John Noyes, Mayor
The Honorable Gary Adams, Mayor ProTem
The Honorable Jan Debay, Councilmember
The Honorable Norma Glover, Councilmember
The Honorable Dennis O'Neil, Councilmember
The Honorable Tod Ridgeway, Councilmember
The Honorable Tom Thompson, Councilmember
Mr. Homer Bludau, City Manager
Ms. Sharon Wood, Assistant City Manager
Mr. Dave Kiff, Deputy City Manager
Ficker & Stevens
301 Shipyard Way, Newport Beach, California 92663
949.723.7780
July 10, 2000
Honorable Members of the City Council
City of Newport Beach
City Hall
3300 Newport Blvd.
Newport Beach, CA 92663
Dear Ladies and Gentlemen of the Council,
Date /� ) I ( (L"Cl/
Copies Sent To:
ayor
Council Member
Manager
❑ Attorpey
❑
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As you know, Bill Ficker and I are one of the groups that have made a proposal for the
Marina Park Project. We have been working with Sharon Wood who has been very helpful.
Unfortunately, the direction that we have taken does not fit your RFP format. I'm taking this
opportunity to communicate with you directly because we think the city has a better way to
approach this very complicated and important situation. This property is one of the
remaining major assets that the City controls so it is very important that it be developed with
long-range city needs in mind.
Bill and I have been closely involved with Newport Beach for over eighty years, between us,
most particularly focused on waterfront property and activities, so we feel that we have a
good grasp of what makes this city so great.
It is our belief that the entire selection process has one or more major flaws. Essentially
what has been done is to say to the business community "Give us your ideas and what
you're willing to pay" as the basis for the ultimate selection process. We think this is the
wrong way to go about it and urge you to scrap everything to date and start over in a
different direction.
It is our belief that the city should take the lead and determine what is in the best interest for
the community at large instead of reacting to others. Hopefully, the end result will produce
substantial revenue, but the plan that you determine to serve Newport best may not
produce the same revenues as a Hotel. However, as you well know, we have the
mandates of the Coastal Commission, State Lands and others that make community needs
more important than revenue in most cases.
The present RFP format leads to a determination of the best of the commercial proposals
from a few people whereas the broader potential benefits for the use of the property to the
community at large is perhaps overlooked.
For example: The reality is that most of the marine service businesses in Newport Beach
are in jeopardy. This is no secret and it has been slowly eroding our ability to properly
service our boating community over a number of years and is changing our community
environment, from a water oriented marine residential community to a Jiffy-Lube mentality.
The land owners who lease to shipyards and other support facilities that not only serve the
boating public but also provide an important element of our harbor environment, will keep
disappearing because of increasing environmental concerns and the economic reality that
they cannot afford to pay the ground rent that other users will. This will be an unfortunate
and tragic loss as they move out one by one.
Another example is the proper support for those people who rent the public moorings. In
large part, they have never had land side facilities available to them and generally have no
place to park their cars, use toilet facilities, do their laundry, etc. This is not a healthy or
satisfactory solution. We feel it is incumbent upon the city to change this and in one fashion
or another make parking, storage for dinghies, showers, and adequate trash disposal
facilities available and mandatory for the occupancy of these moorings.
To do all of this obviously requires some land and investment. We feel that this is a typical
example of things that the city should be doing with its land.
Marina Park is an ideal location to provide support for a large number of the moorings. It is
also an ideal location for the creation of a marina service center, including haul -out facilities,
space for marine service operations, etc. The Seawall adjacent to the Cannery Restaurant
is serving as a City Dock for a number of boating needs but is not a good location and
poses problems when barges or large boats come into the Rhine to use it. Marina Park
could fill this need. There are numerous other important demands that need to be met.
Bill and I feel strongly that the Marina Park property should be utilized for a number of these
important activities. We think they are more important to Newport Beach than another
Hotel or preservation of a mobile home park serving a small group of people, or any of the
other uses currently proposed.
What we suggest is that the city cancel the RFP and hire a consultant who can properly
evaluate the broader needs and possible uses of this important property. This consultant
would work to interview and analyze the ideas and desires of various groups including
marine service companies, shipyards, environmentally sensitive groups, and waterfront
landowners, including the residential community at large. We think it would be of great
value to the council in your deliberations. Upon acceptance of the consultant's report, then
you would be in a position to issue a specific RFP or to undertake development yourself
and make this property do a multitude of tasks. We are including a very simplistic sketch of
one approach that would:
A) Preserve the American Legion and the Scouts.
B) Provide marine service facilities that can be rented out at reasonable rates
C) Preserve the beach.
D) Provide support facilities for the mooring users, including parking, dinghy storage,
restrooms, etc.
E) Provide up to 1100 lineal feet of additional guest slips that would serve visitors to
our harbor (a much needed service).
F) Provide several attractive restaurant locations to enable local residents
as well as visitors to enjoy a truly marine waterfront environment.
G) Preclude the need for any dredging or need for additional bulk heading.
H) Provide a public recreation area including a relocated children's play area.
1) Protect harbor vistas.
J) Preserve the tennis courts.
K) Provide parking to meet code.
L) Create a public yacht club (a first).
M) Provide haul out for boat repair.
N) Increase the beach area.
We respectfully recommend that the council consider this alternative approach in your
deliberations. The multitude of facilities and services cited above are much needed and will
serve as a valuable asset for the public. Our belief in this general approach is the reason
that we are unable to draw a definitive plan because it is our belief that the right plan will
evolve after a consideration of the needs of all of the elements above. The attached sketch
is intended to show you how it might work, but could and would change after public input.
We urge your consideration of this proposal.
Richard S. Stevens
William P. Ficker
W
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LEGEND
IDENTIFICATION
AREA SF
PARKING
1.
American Legion
7,500
50
2.
Not a part of this project
3.
Public Y.C. and facilities for slips & offshore moorings
5,400
35
4.
Dry storage
5.
Float and landing for offshore moorings
6.
Recreation and play area
10
7.
Scouts - Boy and Girl
5,000
20
8.
Tennis Courts-4 Parking Under
8
9.
Retail
7,500
25
10.
Restaurant
5,000
50
W
W
11.
Retail
2,500
10
12.
Restaurant
6,500
75
=
13.
Retail
7,000
25
14.
Water and beach sports
4,500
30
iz
W
15.
Parking -two story
LL
16.
Boatslips - 900 LF
15
�
17.
Boatslips - 610 LF
10
18.
Shipyard
20
19.
Existing slips
10
Reference Total
50,900 SF
393
Note total parking shown = 404
FICKER / STEVENS - CONCEPT PLAN