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JOINT MEETING WITH THE REDDING REDEVELOPMENT AGENCY

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City Council, Special Meeting City Council Chambers 777 Cypress Avenue Redding, California

January 28, 2008, 5:15 p.m. The Special Meeting was called to order by Mayor Stegall at 6:49 p.m. with the following Council Members present: Dickerson, Jones, and Murray. Council Member Bosetti was absent.

Also present were City Manager Starman, Assistant City Manager Moty, City Attorney Duvernay, Transportation & Engineering Director Tippin, Redevelopment Manager Morgon, Senior Redevelopment Project Coordinator Haddox, Senior Redevelopment Project Coordinator Thompson, Associate Redevelopment Project Coordinator Bade, City Clerk Strohmayer, and Assistant Redevelopment Project Coordinator Rudolph.

JOINT MEETING WITH THE REDDING REDEVELOPMENT AGENCY COMMERCIAL PROPERTY PURCHASE AGREEMENT - Lithia Real Estate, Inc. (R-030-050-310)

City Manager Starman provided an overview of the Report to City Council and Redding Redevelopment Agency dated January 23, 2008, incorporated herein by reference, regarding the approval of a Cooperative Agreement between the City and Lithia Real Estate, Inc. (Lithia) regarding improvements to Airport Road and the Commercial Property Purchase Agreement between the Agency and Lithia relative to the purchase of property at 200 and 250 East Cypress Avenue and 176 and 188 Hemsted Drive.

Mr. Starman recalled that in May 2005, the City entered into an informal Letter of Intent (LOI) with Lithia relative to a proposed new Auto Mall near the Highway 44/Airport Road interchange. In October 2005, that LOI was replaced by a new non-binding LOI between the City, the Agency, Lithia, and Thomason Development Company (Thomason). Under the terms of the LOI:

1. Lithia and Thomason would develop a new Auto Mall and related commercial uses at the southeast corner of the Highway 44/Airport Road Interchange.

2. The City and/or the Agency would contribute approximately $2 million to help finance the off-site infrastructure associated with the proposed Auto Mall.

3. The City would work with Lithia and Thomason to expedite the entitlement process for the new Auto Mall.

4. Thomason would purchase the property that Lithia currently owns on East Cypress Avenue and Hemsted Drive. The City and the Agency would work with Thomason in a cooperative manner to redevelop this property.

Mr. Starman explained that subsequent to entering the LOI, Thomason advised the City that it was reluctant to purchase the Lithia property at the improved value, which Lithia estimated to be approximately $7.9 million. Mr. Starman stated that Lithia had indicated that it must sell its Cypress Avenue property in a timely manner in order to move forward with the new Auto Mall and, because the subsequent redevelopment of the Lithia property would benefit the entire community, on April 4, 2006, the Agency's Board, in closed session, agreed to enter into negotiations with Lithia for the purchase of its property.

Mr. Starman indicated that the Agency retained Shaw & Associates, an MAI appraisal firm, to appraise Lithia's property on Cypress Avenue and Hemsted Drive. In an appraisal dated August 2006, the value of the property as developed was determined to be $9.8 million. Notwithstanding this information, Lithia confirmed that it was still willing to sell the property for $7.9 million. In October 2006, the Board, in closed session, reaffirmed its interest in purchasing the property for the previously stated reasons.

On January 7, 2008, the Board once again reaffirmed its interest in purchasing the property. The Board, however, indicated a preference to having an open and competitive process for the subsequent sale and redevelopment of the property, rather than entering into exclusive negotiations with Thomason. It was noted that Thomason's role in the project has changed over the last two years - deciding not to purchase the property from Lithia as originally contemplated and agreeing to sell its interest in the Highway 44/Airport Road property to

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Lithia. As a result, Lithia will serve as the developer for the Auto Mall and the City will construct the improvements to Airport Road.

Mr. Starman stated that in order to move the Auto Mall project forward, the following agreements were being presented to the City Council and the Agency's Board for consideration:

< Cooperative Agreement between the City and Lithia: The City will construct improvements on Airport Road to facilitate the relocation of Lithia's Chevrolet and Toyota dealerships to the new Auto Mall site. The improvements include the widening of Airport Road adjacent to the proposed Auto Mall site, as well as a traffic signal at the westbound on- and off-ramps at Highway 44 and Airport Road. It was noted that these improvements are already contemplated in the City's existing Traffic Impact Fee Program. In addition, Lithia will be required to pay approximately $865,000 in Traffic Impact Fees when it constructs its two dealerships.

The terms of the Cooperative Agreement include:

- Lithia will provide plans and specifications for all improvements by March 1, 2008. The City will reimburse Lithia for the design costs.

- The City will bid and construct the improvements on Airport Road for costs not to exceed $2.2 million.

- Lithia will use its best efforts to obtain all permits for its two dealerships by June 30, 2008.

- Lithia will construct new Chevrolet and Toyota dealerships on Highway 44 and Airport Road by December 31, 2008, and relocate those dealerships by December 2009.

- Lithia will pay the City $500,000 in liquidated damages if it does not relocate its dealerships by December 2009.

- Lithia and the Agency will enter into a Purchase Agreement and Lease Agreement relative to Lithia's parcels on Cypress Avenue and Hemsted Drive.

< Purchase Agreement between the Agency and Lithia: The Agency will purchase the four parcels of land totaling approximately 9.12 acres on East Cypress Avenue and Hemsted Drive.

The primary terms of the Purchase Agreement are: - Purchase price of $7,934,000.

- Earnest money deposit of $50,000. - Additional $1,450,000 at close of escrow.

- Lithia to carry note for $6,434,000 at 7.25% interest all due and payable in two years.

- Escrow to close on or before June 30, 2008.

- Possession of the property to be delivered to the Agency within 545 days of closing.

- The Agency would lease the property back to Lithia during construction of the Auto Mall pursuant to the terms of a Commercial Lease Agreement. The terms of the Lease Agreement include: a lease term of 12 months with 2 three-month extensions; and lease payment of $38,129 per month for the Chevrolet dealership and $14,773 per month for the Toyota dealership, for a total lease payment of $52,903 per month.

It was recommended that the City Council approve the proposed Cooperative Agreement regarding the Airport Road Improvements, authorize the Mayor to execute same, and adopt a budget resolution appropriating an additional $200,000 in Traffic Impact Fees for said project. It was further recommended that the Agency's Board approve the Commercial Property Purchase Agreement and authorize the Chair to execute all documents associated with same.

Chris Young, Redding resident, opined that property speculation belonged in the private sector.

Holly Langsten, Redding resident, spoke in opposition to the proposed Auto Mall being located on Airport Road. She opined that there was not enough of an open door policy to educate residents in the area regarding Lithia’s proposed development. She cited problems

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associated with lighting which would be on 24 hours a day, seven days a week and believed that it would hamper property values, as well as lifestyles.

Willie Preston, representing the Shasta County Taxpayers Association, stated that the taxpayers deserved to know why the City felt it was necessary to get involved in a speculative real estate transaction, especially given the importance being placed on the construction of a new police station.

Mr. Starman related that the Agency's motivation is two-fold. First, it serves as an economic development tool for Lithia, which desires to sell its property in order to facilitate its move to a new location. Secondly, because of the property's location, two overlooking the bluffs and two fronting on a busy street, it serves as a redevelopment opportunity which will benefit the community as a whole. With regard to the police facility, the Agency has tentatively allocated $5 million for this purpose, however, a finding will need to be made that the expenditure of funds is proportionate and will directly benefit the project area in question.

Gary Cadd questioned the value of the property if another car dealership is prevented from utilizing it. He believed that Lithia is in a financial position to construct a new dealership, as well as market its current site. He asked who would be responsible for the clean up of any environmental issues once Lithia vacated the properties. He opined that the City will be better served by expending these funds elsewhere in the City.

Ron Largent, Anderson resident, expressed concern over the precedent this transaction could possibly establish. He did not want to see the City get in a position of buying and selling real estate. He asked the City Council/Agency to take its time and carefully consider this transaction.

In response to Mayor Stegall, Mr. Starman noted that this issue dates back to 2005 when it was agendized and openly discussed. He added that the topic has been public in several different methods.

Kim Pearson, Redding resident, expressed concern over the possible relocation of the dealerships to the Airport Road area and the impacts it would have on the surrounding neighborhoods, i.e., water quality, noise, and lights.

Council Member Murray made a motion to defer action on the item until the next appropriate meeting to allow additional information to be disseminated to the public. The motion died due to lack of a second.

City Manager Starman noted that Lithia's Use Permit Application will require a public hearing before the Planning Commission, and potentially the City Council, thereby providing an opportunity for the residents in the surrounding area to express their concerns.

Joe Machado, Redding resident, questioned the responsibility associated with environmental clean-up issues. He noted that instead of purchasing the property, the City has an opportunity to work with Lithia to place a deed restriction on the property prohibiting future buyers from utilizing the site for car dealership purposes.

Randy Denham noted the importance of maintaining the City’s sales tax base. He favored the City utilizing $2.2 million for the infrastructure improvements to Airport Road, but he did not believe it should be in the real estate market and purchase Lithia’s property. Eihnard Diaz reiterated that the $2.2 million proposed to improve Airport Road is a project anticipated in the Capital Improvement Program for the last five years. He opined that, by definition, redevelopment entails the purchase of real estate. He too acknowledged that there will be processes relative to the Lithia development which will provide residents an opportunity to voice their concerns about possible impacts.

MOTION: Made by Council/Agency Member Dickerson, seconded by Council/Agency Member Murray, to continue this matter to the City Council’s Regular Meeting on February 18, 2008. The Vote: Unanimous Ayes

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DEVELOPMENT FUNDING AGREEMENT - Northern Valley Catholic Social Services, Saint Clare Court for development of 15-unit housing complex located at 2465 and 2475 Beverly Drive and 2474 and 2476 Ramona Place

(G-100-075 & R-030-100-055)

Mayor/Agency Member Stegall stated that her husband was on the Board of Directors for Northern Valley Catholic Social Services (NVCSS), a non-compensated position. She related that there was nothing in the law which requires her to disqualify herself from discussion and voting on this matter.

Redevelopment Manager Morgon highlighted the Report to City Council and Redding Redevelopment Agency dated January 22, 2008, incorporated herein by reference, regarding NVCSS Saint Clare Court, Inc.’s request for a total of $900,000 in funding for the development of its Saint Clare Court affordable rental project.

Mr. Morgon stated that Saint Clare Court is a 15-unit affordable rental project to be developed at 2465 Beverly Drive within the Canby-Hilltop-Cypress Redevelopment Project Area. As proposed, the project will consist of 14 one-bedroom affordable rental units for very-low-income individuals suffering from mental illness and a two-bedroom manager’s unit. Other on-site amenities will include a small office/common area/meeting room; an outside patio area; and a small on-site laundry facility. The project is estimated to cost $2,887,575 to develop. Upon completion of the development, tenants will be provided case management oversight, crisis intervention, linkage with community social services, daily-living assistance, as well as medication, therapy, payee services, and rehabilitation services. Mr. Morgon recalled that the City Council, in May 2006, conceptually approved a loan in the amount of $450,000 in HOME funds for the Saint Clare Court Project. In November 2006, a funding commitment in the amount of $1,783,000 was received from the Department of Housing and Urban Development (HUD). It was further determined that the requirements of the State’s Multi-Family Housing Program (MHP) made it a less than optimum funding source for the project. Therefore, funding in the amount of $450,000 is also being sought from the Agency. Once final project costs are determined, application for additional funding, if necessary, will be made to the Federal Home Loan Bank’s Affordable Housing Program (AHP) later this year. The AHP requires that it be the final financing source applied for on any project.

The Development Funding Agreement (DFA) being considered this evening provides for both the City’s and Agency’s loans to be structured as residual receipts loans. In addition, long-term affordability covenants will be recorded against the property ensuring affordability for a minimum of 55 years. In addition, the City’s funding will be available upon execution of the DFA and following evidence of final HUD site approval to be used for acquisition of the property and for costs associated with pre-development activities, such as completion of the project’s architectural and engineering plans. The Agency’s funds will not be available until immediately prior to the start of construction.

It was recommended that the City Council approve the DFA providing for a $450,000 residual receipts loan utilizing the City’s HOME funds to assist with the development of the Saint Clare Court affordable rental project. It was further recommended that the Board of Directors of the Agency approve the DFA providing for an additional $450,000 residual receipts loan utilizing funding from the Agency’s Housing Set-Aside Fund for the project. In response to Council/Agency Member Jones, Mr. Morgon stated that the neighborhood’s primary concern is not focused on the project, but infrastructure associated with a previous project. He indicated that staff with working to possibly utilize Community Development Block Grant funds to complete drainage improvements and provide a safe path of travel for the neighborhood.

MOTION: Made by Council Member Jones, seconded by Council Member Dickerson, to approve the Development Funding Agreement between NVCSS Saint Clare Court, Inc., the City, and the Redding Redevelopment Agency providing for a $450,000 residual receipts loan utilizing the City’s HOME funds to assist with the development of the Saint Clare Court affordable rental project. The Vote:

AYES: Council Members - Dickerson, Jones, and Stegall NOES: Council Members - None

ABSENT: Council Members - Bosetti and Murray ABSTAIN: Council Members - None

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MOTION: Made by Agency Member Stegall, seconded by Agency Member Dickerson, to approve the Development Funding Agreement between NVCSS Saint Clare Court, Inc., the City, and the Redding Redevelopment Agency providing for a $450,000 residual receipts loan utilizing the Agency’s Housing Set-Aside Fund funds to assist with the development of the Saint Clare Court affordable rental project. The Vote:

AYES: Agency Members - Dickerson, Stegall, and Jones NOES: Agency Members - None

ABSENT: Agency Members - Bosetti and Murray ABSTAIN: Agency Members - None

At the hour of 7:35, Vice Chair Jones recessed the Special Meeting of the Redding Redevelopment Agency.

RESOLUTION - Recognizing James Finck (A-050-060)

MOTION: Made by Council Member Jones, seconded by Council Member Dickerson, to adopt Resolution No. 2008-08 be adopted, a resolution of the City Council of the City of Redding recognizing and honoring James Finck for dedicated commitment to the Redding Shasta Family YMCA and the residents of the City of Redding. The Vote:

AYES: Council Members - Dickerson, Jones, and Stegall NOES: Council Members - None

ABSENT: Council Members - Bosetti and Murray ABSTAIN: Council Members - None

Resolution No. 2008-08 is on file in the office of the City Clerk.

At the hour of 7:49 p.m., Mayor Stegall stated that the City Council would adjourn to closed session to discuss the following:

Closed session pursuant to California Government Code Section 54956.9(b)(3)(A): CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION Significant exposure to litigation

One (1) case (L-100)

Closed session pursuant to California Government Code Section 54957.6: CONFERENCE WITH LABOR NEGOTIATOR

Designated Agency Representative: City Manager Starman

Employee Organizations: Unrepresented Employees, Administrator of the Office of the City Clerk and Administrator of the Office of the City Treasurer

(P-100-050/A-050-055/A-050-100)

At the hour of 8:30 p.m., Mayor Stegall reconvened the meeting to regular session and advised that no reportable action was taken.

ADJOURNMENT

There being no further business, at the hour of 8:31 p.m., Mayor Stegall declared the meeting adjourned. APPROVED: __________________________________ Mayor ATTEST: ______________________________________ City Clerk

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