DATE: September 25, 2024
TO: Honorable Mayor and City Councilmembers
FROM: Public Works Department
TITLE: PURCHASE AND SALE AGREEMENT WITH RANCHO MORRO SUR, LLC FOR THE PURCHASE OF A 2.74 ACRE PORTION OF LAND FOR A RECYCLED WATER RESERVOIR AND PUMP STATION
RECOMMENDATION
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Staff recommends that the City Council approve a Purchase and Sale Agreement with Rancho Morro Sur, LLC for the purchase of a 2.74 acre parcel of land located at 1315 Sleeping Indian Road in the Morro Hills area for $410,000 including closing costs for future development as a recycled water reservoir and pump station; authorize the City Manager to execute the agreement upon receipt of all supporting documents, authorize staff to open escrow, and consummate the closing of the transaction; and authorize the City Clerk to accept the Grant Deed for the property at closing.
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BACKGROUND AND ANALYSIS
The Water Utilities Department has identified a 2.74-acre portion of a 47-acre parcel of land owned by Rancho Morro Sur, LLC (“Seller”) located at 1315 Sleeping Indian Road in the Morro Hills area, being a portion of Assessor Parcel Number 121-150-20-00 (the “Property”), as a property of interest to support the expansion of the City’s Recycled Water System (the “Project”). Accordingly, an appraisal of the Property was obtained from the Arens Group, Inc. to determine the fair market value of the Property which was subsequently valued at $356,000. The City had previously acquired another property in South Morro Hills for the same purpose but it was later determined that existing private land use restrictions precluded such use. Authorization to declare that land as surplus, enabling its disposition, is included as a separate item on this agenda.
An offer was submitted to the Seller, based on the appraised value, to which the owner countered, proposing a sale price of $360,000, contingent on the City being responsible for all title, escrow and closing costs. The owner’s counteroffer was accepted, subject to City Council’s approval of a purchase agreement with such terms including an added condition that Seller provide San Diego Gas and Electric (“SDG&E”) an easement over Seller’s remaining parcel to be recorded at closing, to provide the Property the three (3) phase power that is required for the Project (the “SDG&E Easement”).
The Water Utilities Department is expanding the City’s Recycled Water System in phases, based on a Planning Study completed in 2018. The Planning Study included a focused survey of the City’s water demands which could be converted to use recycled water (primarily for irrigation demands). Based on these demands, a proposed distribution referred to as the Upper San Luis Rey Water Reclamation Facility & Recycled Water Conveyance System Project was developed, indicating pipeline alignments, reservoir and pump station locations, to most efficiently serve those demands. The large potential demands in the Morro Hills area would require a transmission main, as well as, a reservoir and pump station. The reservoir location is restricted to certain elevations for optimal system function, and there are few parcels available that meet this requirement. Water Utilities staff have engaged potential future system users in this area regarding the proposed recycled water system by holding numerous workshops and informational meetings.
If the Agreement is approved by Council, during the due diligence period, staff will work with Seller and SDG&E to finalize a utility easement to be recorded at closing from Seller to SDG&E over Seller’s remaining property to ensure that the Property will have the required access to three (3) phase power. Additionally, staff will complete the remaining due diligence tasks, including reviewing and approving the title, obtaining a Phase I Environmental Site Assessment, and updating the soils and geotechnical report to confirm the suitability of the condition of the Property.
The due diligence expenditures and closing costs are estimated not to exceed $50,000. The essential terms and conditions of the acquisition set forth in the Agreement are as follows:
1. Purchase Price of $360,000.
2. Opening of escrow within ten (10) business days following approval of the Agreement by Council, with a refundable opening deposit to be made by the City of $10,000 within ten (10) calendar days after the opening of escrow.
3. City will have approximately seventy-five (75) calendar days following approval of the Agreement by Council, approximately on or before December 9, 2024, to complete its review and approval of the physical condition and suitability of the Property for the City’s intended use.
4. Escrow will close by or before thirty-five (35) calendar days after City approval of the condition and suitability of the Property, approximately by or before January 13, 2025, unless otherwise extended by mutual written agreement.
FISCAL IMPACT
The acquisition of the Property and the associated due diligence and closing costs are estimated at $410,000 and will be charged to the Water Utilities Upper SLR WRF Recycled Water Project account 908142115715.5701.10600 which has an available balance of $3,494,823; therefore, sufficient funds are available. Funding for this project comes primarily from developer fees in the Water Expansion Fund 715.
|
Description |
Amount |
Account Number |
Available Balance |
|
Property Acquisition |
$410,000 |
908142115715.5701.10600 Upper SLR WRF RW Account |
$3,494,823 |
COMMISSION OR COMMITTEE REPORT
Does not apply.
CITY ATTORNEY’S ANALYSIS
The referenced document has been reviewed by the City Attorney and approved as to form.
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Prepared by: Kimberly Duffin, Senior Property Agent
Reviewed by: Hamid Bahadori, Public Works Director
Submitted by: Jonathan Borrego, City Manager
ATTACHMENTS:
1. Staff Report
2. Purchase and Sale Agreement