AgdaPkt 2013-03-25 Joint SA and PFA

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6.3.D. - Page 1 RE PO RT To the Honorable Mayor and City Council From the Cit Mana er March 25, 2013 SUBJECT Resolution Approving an Appropriation in the Amount of $400,000 within the Redwood City Capital Outlay Fund for the Block 2 Development Project and Reducing the Appropriation for Contingencies within the Capital Outlay Fund RECOMMENDATION Adopt Resolution approving an Appropriation in the Amount of $400,000 within the Redwood City Capital Outlay Fund for the Block 2 Development Project and a reduction in the appropriation for contingencies within the Capital Outlay Fund in an equivalent amount. BACKGROUND The City is negotiating with a private development entity to construct a project on the City-owned parking lot on Middlefield Road, known as Block 2. As part of the eventual sale of this property, the City needs to provide clear title. During the title research and mapping of the site, an encumbrance giving certain rights to the Union Pacific Railroad was identified. After discussion with the railroad and independent analysis by the City and its consultants to determine if the railroad's rights were still valid, it was determined that there were potential rights and these rights likely had some value. ANALYSIS The City offered the Union Pacific Railroad $20/square foot for the 12,427 square foot parcel, based on discussions with consultants familiar with other such negotiations. The railroad disagreed with the City's valuation and countered at $30/square foot, for a total price of $327,810. Staff believes this counter offer is within reason, given the cost of land in Redwood City and the mid-Peninsula and recommends completion of the acquisition of the railroad's rights. In order to clear the encumbrance from title, the railroad must relinquish its rights. Staff recommends that the Capital Improvement Budget (Capital Outlay Fund) provide the funding for the acquisition with repayment coming from the ultimate sale of the entire property. Staff currently anticipates City actions on the development proposal and the sale of the property by June 2013. ALTERNATIVES Council could direct staff to identify an alternative funding source for this acquisition.