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HomeMy WebLinkAbout1989-08-15; City Council; 10200; CARLTAS' REQUEST TO USE $1,200,000 OF THE CARLSBAD AGRICULTRUAL IMPROVEMENTS FUND TO CONSTRUCT AND OPERATE A FLORAL TRADE CENTER1 E: 8 5La a 4 .. z 0 4 g z 3 0 0 6 CI-POF CARLSBAD - AGENWBILL /' / AB#- TITLE:CARLTAS' REQUEST TO USE $1,200,000 OF THE 8 f/!J 8 9 MTG. DEPT. CITY 1 CARLSBAD AGRICULTURAL IMPROVEMENTS FUND TO CONSTRUCT AND OPERATE A FLORAL TRADE CENTER. DEPT. PLN CITY I RECOMMENDED ACTION: That Council adopt Resolution No. 8 +? 3, recommending that the Californ- Coastal Conservancy conditionally P' pprove a request by the Carl tas Compat to use $1.2 million of the Carlsbad Agricultural Improvements Fund 1 partially offset construction and operation costs to develop a floral trac center in Carl sbad. ITEM EXPLANATION The Carl sbad Agricultural Improvements Program was establ ished in conjunctic with the Agricultural Subsidy Program as part of the approval of the Mel' I1 LCP segment in 1981. Subsequent legislation in 1984 eliminated tl subsidy portion of the program, however, the improvements portion wq retained. The Ag- Improvements fund currently total s approximately 1.8 mil 1 ion dol 1 ar The fund has the potential to generate approximately 2.2 million dollars wh( a1 1 properties required to pay fees have devel oped. The Ag-Improvemen Program was established to provide improvements needed to facilitate t' long-term agricultural production within Carlsbad. On July 18, 1989 the Carlsbad Agricultural Improvements Review Board (CAR1 composed of City staff, members of Carlsbad's farm community, the County A advisor, and representatives of the Soil Conservation Service and Coast Conservancy unanimously approved a request by the Carltas Company for 1 million dollars to help offset costs associated with establishing a flor trade center in Carlsbad. Attached are: 1) memorandum to the City Manag (dated July 27, 1989), explaining the Ag-Improvements Program and updati its current status; and 2) the Conservancy's staff review of the Carlt proposal, including an analysis of the Carltas proforma by a qualifi expert. The Carltas proposal is briefly summarized as follows: 1. The request is for 1.2 million dollars of which $700,000 would be used remodel the Burroughs building on Avenida Encinas and $500,00 would used to provide $50,000 annual subsidies for below market rents to t center's tenants for a period of ten years. 2. The Floral Trade Center would bring together the principal marketing a distribution elements of the floral industry which are now spre throughout the county. This would provide growers, distributor wholesalers and auctioneers substantial economies as we1 1 as improvi the market delivery of flowers. 3. Carltas investment in land and improvements is over ten million dollar Private financing does not cover the cost of the project, hence the gr; request. T 1 m m + Page 2 of Agenda Bill No. 4. The $700,000 would fund improvements unique to the floral industry. 5. The $500,000 subsidy is necessary to provide rents affordable to loc: agricultural tenants and to attract private financing. 6. The agreement with Carltas will require repayment of the $700,000 portic of the grant if the project ceases to perform as a floral trade center. The CARIB agreed that the Carltas proposal met a11 of the requirements of ti City’s LCP plus it has the potential to benefit the regions horticultui (especially organic vegetables) because these products could be marked 1 many of the same buyers that traditionally purchase flowers (i.e, th supermarket trade). Therefore the CARIB was unanimous in its decision t approve the request. Staff was however, concerned that the potentia approval committed by the City to enter contracts that could expose the Cit to unwarranted liability. Staff successfully conditioned the CARIB approv; to require Council approval of all permits and contracts implementing tt floral trade center. That way the City could have discretionary review c the proposal, plus it would have review power over all implementir contracts. FISCAL IMPACT The proposal would utilize a major portion of the Ag-improvements fund (1. million vs. 2.2 million). In addition the Conservancy staff is recommendir that Carl sbad administer the grant through an agreement with Carl tas. separate agreement with the Coastal Conservancy would reimburse Carl sbad fc grant disbursements to Carltas as well as the City’s administrative costs The Conservancy is currently proposing a one percent administrative fe ($12,000) to cover these costs, however, the exact fee would be subject t contract negotiations between the Conservancy and the City. Staff i recommending that the City not agree to administer the contract with Carltas It would be preferable to have the Palomar Resource Conservation Distric (RCD) which is already administering an ag-improvements fund grant for ag demonstration projects in Carlsbad. The attached Council resolutio approving the use of Ag-improvements to fund the floral trade concep Carl tas. EXHIBITS 1. City Council Resolution No. f?-29x 2. Memorandum to the City Manager dated July 27, 1989 3. Coastal Conservancy Staff Report on the Carltas Proposal includes a recommendation that the Palomar RCD administer the contract wit m 0 RESOLUTION NO. 89-295 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, RECOMMENDING THAT 1 THE CALIFORNIA COASTAL CONSERVANCY CONDITIONALLY APPROVE A CARLTAS COMPANY 2 REQUEST FOR A 1.2 MILLION DOLLAR GRANT FROM 3 THE CARLSBAD AGRICULTURAL IMPROVEMENTS FUND. 4 The City Council of the City of Carlsbad, California dol 5 hereby resolve the following: 6 7 8 9 10 WHEREAS, the California Coastal Conservancy, the administratc 11 of the ag-improvements program, has established the Carlsbad A! 12 Improvements Review Board (CARIB), to review project proposals and mal 13 recommendations to the Conservancy; and 14 15 16 17 center in Carlsbad; and 38 WHEREAS, the CARIB on July 18, 1989 voted unanimously t 19 20 21 22 23 24 25 26 the LCP; and 27 28 WHEREAS, the Mello I1 segment of the Carlsbad Local Coast; Program establ i shed the Carl sbad Agricultural Improvements Program (LC1 to provide funding for improvements needed to facilitate the long-tei agricultural production within the City; and WHEREAS, the CARIB did receive and review a proposal by tt Carltas Company for a $1,200,000 grant to partially offset constructic and operation costs associated with its development of a floral trat recommend approval of the Carltas proposal; and WHEREAS, the conservancy desires Carl sbad's recommendation c the Carltas proposal before the Conservancy Board formally takes actic on the proposal scheduled for August 18, 1989; and 'c WHEREAS, the proposal is consistent with the policies of tl Mello I1 segment of the Carlsbad LCP; and WHEREAS, Carlsbad has adopted and is committed to implementir 7 t 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 e e WHEREAS, the Carlsbad permits for the Carltas proposal ar pending and formal City action may be subsequent to the Conservancy’ action; and WHEREAS, the Palomar Resource Conservation District 1 qualified to administer the Ag-Improvement Grant; and WHEREAS, Carlsbad desires that the Palomar Resourc Conservation District (RCD) or some similarly qualified organizatic subject to Carl sbad approval administer the Ag- Improvements Fund contrac with the Carltas Company. NOW, THEREFORE, BE IT HEREBY RESOLVED by the City Council c Carlsbad, California as follows: 1. That the above recitations are true and correct. 2. That the City Council recommends that the Californi Coastal Conservancy conditionally approve a request by the Carltas Compan for 1.2 million dollars of the Carlsbad Agricultural Improvements Fund t partially offset construction and operation costs associated with th development of the Carlsbad Floral Trade Center subject to: A) The approval of all required permits. B) The grant being administered by the Palomar Resourc Conservation District or some similarly qualified organization subject t Carl sbad’s approval . PASSED, APPROVED AND ADOPTED at a regular meeting of the Cit Council of the City of Carlsbad, California, on the 15th day of ~ueust 1989 by the following vote, to wit: AYES: Council Members Lewis, Kulchin, Mamaux & Pettine NOES: None ABSENT: Council Member Larson % ATTEST: AL$t~iiii%m\ (SEAL) 1 0 0 JULY 27, 1989 TO: CITY MANAGER FROM: Principal Planner LCP-AGRICULTURAL IMPROVEMENTS FUND The Mello I1 segment of the City's Local Coastal Program (LCP) adopted by the Coastal Commission in 1981, established a Agricultural Improvements Program. The program is administered 3: the Coastal Conservancy and it is funded out of a portion of th ag-subsidy fees which were paid to mitigate ag-land conversior near 1-5. The State Legislature has since eliminated the aq subsidy portion of the fee but not the ag-improvements portior Currently, the ag-improvements fund has accumulated approximate1 1.8 million dollars. The fund has the potential to tota approximately 2.2 million dollars when all properties unde contract to pay the fees have developed. In 1982, the Conservancy Board approved the Carlsbad Agricultura Improvements Program which identified reclaimed water as the tc priority ag-improvement project. The following year (1983), tk Conservancy established the Carlsbad Agricultural Improvement Review Board (CAIRB) which now includes a City representative (Gar Wayne), local agricultural landowners, and the County Farm Advisc and representatives of the U.S. Soil Conservation Service and tl- Coastal Conservancy to assist in both project proposal and proj ec review. The projects evaluated by the CAIRB included: 1. Reclaimed water for irrigation 2. A low interest farm loan fund 3. A crop research and development fund 4. All weather farm roads 5. A farmers market 6. Farm labor housing All of the proposals have met with opposition for one reason ( another and no ag-improvements funds were expended. In 1984-85 tl Conservancy suspended work on the program pending the outcome c the City's LCP negotiations with the Coastal Commissior Subsequently, the Conservancy, in April 1986, reactivated CAIRB ai requested new ag-improvement project proposals. CAIRB has met several times since 1986 to discuss both past ai present project proposals. The CAIRB members agreed to tl viability of four proposals (see attached meeting summaries): 1. A pilot reclaimed water project to see whether loci farmers would find its use acceptable. 2. A grant program to fund development of innovati7 techniques to ensure long term crop/floral productioi These projects are to serve as demonstration projects 1 0 e City Manager July 27, 1989 Page 2, 1989 3. A farmer's market (floral trade center) to serve a wholesale marketing and distribution center. 4. Purchase or long-term lease of heal ag-land fc continued ag-production. The Ecke flower fields nort of Palomar Airport Road were recommended by the Cit representatives for preservation under this proposal The Conservancy staff is currently investigating the first ar; third proposals. If feasible the Conservancy staff will prepar detailed proposals including cast estimates and implementatic schedules and present them to its board for consideration. Th conservancy staff felt that the fourth proposal (purchase or long term lease of Ecke property) did not meet the program requirement of 'Iproviding the improvements needed to facilitate long-term aq production within the planning area". Therefore, the Conservanc requested that the City prepare a detailed proposal which justifie the ag-land purchase (or lease) as a viable component of the Ag Improvements Program. If the City could justify the proposal th Conservancy staff would present the proposal to its Board fc consideration. (This has subsequently been accomplished by th recent Carltas request for a Williamson Act land swap that resulte in placing approximately 50 acres of the Itflower fields1# in ope space zoning.) To date the Conservancy, at the CARIB'S recommendation, has fund€ $125,000 grant program (second proposal) for the innovative demonstration projects. The grant is administered by the Paloinz funds have been committed for projects ranging from techniques t utilize reclaimed irrigation water to money to offset the purchas of the California Floraculture Association auction building. Tlr CARIB has also been working to develop a supply of reclaimed wate (first proposal above) to the area farmers. At present no form2 projects have been proposed and the major obstacle has been farme reluctance to use the water because of possible contaminants. The CARIB on July 18, 1989 unanimously approved a Carltas Compar request for 1.2 million dollars to partially fund the developmer of a floral trade center in Carlsbad. The Coastal Conservancy he requested that the City Council consider the project in concer prior to having the Conservancy Board consider the project. The Conservancy Board will consider the project at its August 1E 1989 meeting in Long Beach. Therefore, staff will prepare z agenda bill regarding the project for Council action hopefully j early August. If Council supports the project the Conservancy hc Resource Conservation District. Approximately $78 I 000 of the grar > I e e City Manager July 27, 1989 Page 3, 1989 requested that the City be represented at the Board hearings. will plan on attending the August 18th Conservancy hearings unles otherwise directed. If you have any questions regarding anything in this memorandum c would like more information, please contact me. i WAYNE a1 Planner arb Attachment I L 0 0 PROPOSAL TO USE CARLSBAD AGRICULTURAL IMPROVMENT FUND FOR THE SAN DIEGO INTERNATIONAL FLORAL TRADE CENTER REQUESTED ACTION: Authorization to disburse an amount not to exceed $1,200,000 from the Carlsbad Agricultural Improvement Fu to the City of Carlsbad to fund the San Diego International Floral Trade Center (or Floral Trade Center), including up to $700,000 to pay for remodel ing the existing building to accommodate the Center, and $500,000 to provide $50,000 annual subsidies for below- market rents for tenants of the Floral Trade Center for period of ten years. LOCATION: 5600 Avenida Encinas, west of Interstate 5, near the Palomar Airport Road intersection, City of Carlsbad, Sar Diego District (See Exhibits A, B, C, and D) ESTIMATED COST: Carltas Company $ 2,600,000 Private Financing $ 7,100,000 ImDrovement Fund Contributions Construction Grant $ 700,000 Rent Subsidies 500, oao $1,200,000 1 I e m DISCUSSION: Program Background- Prior to the adoption of a Carlsbad Local Coastal Plan (LCP) , private devel opment permit appl i cati on were bei n! pursued for projects which would have resulted in the conversion of hundreds of acres of agricultural land in Carlsbad to urban uses. The California Coastal Commiss was denyi ng appl i cat i ons and property owners were frustrated. This land owner frustration led to legislative proposals in Sacramento and to the Coastal Commission drafting land use policies for the city of Carlsbad without the formal approval from the City. The Commission's principle recommendation was the creat of two programs to address the agricultural conversion issue. First, was an "Agricultural Subsidy Program'' wh would allow the conversion of designated agricultural parcels to urban uses upon the payment of a conversion fee, with the revenues from the program providing monetz subsidies to other agricultural landowners who kept the. "Agricultural Improvement Fund" to provide infrastructu) to support the 1 oca1 agricultural economy. The California State Coastal Conservancy was designated the administering agency in the LCP in the event that tl City of Carlsbad proved unwilling to implement the Program. On October 8, 1981, the Conservancy voted to ti all the necessary implementation actions, including collection of fees, payment of subsidies, and acceptanci of open space easements from the Subsidized Agricultura Lands. Landowners in the area never participated in the Carlsb Agricultural Subsidy Program. They were reluctant to restrict their land to permanent agricultural use in return for a subsidy which they felt did not fully compensate them for the difference between agricultural land value and fair market development land value. 1984, Senator Bradley introduced legislation to el iminal the Subsidy Program and return most of the fees collectc to the permit applicants. However, the Agricultural Improvement Fund was not affected by the legislation an( monies have continued to accumulate in this account. Meanwhile, the City of Carlsbad prepared its own LCP an( finally received certification for this plan from the Coastal Commission. This plan allows for the conversioi over time, of all agricultural lands in Carlsbad with tl exception of two large parcels on the southern shore of Agua Hedionda Lagoon. (The new plan does still provide land in agriculture. Second, there was a separate In 2 1 I e 0 for the collection of conversion fees but at a lower rat than under the Commission's program. used for other purposes besides agricultural improvement and they are held in a separate Carlsbad Mitigation Account administered by the Conservancy. ) The Agricultural Improvements Fund monies are held in ar interest-bearing Special Deposit Account administered bj the Coastal Conservancy. The amount on deposit current1 totals approximately $1,830,000; there are $101,000 of commitments from this fund for the Palomar Resource Conservation District on-farm grant program, approved bj the Conservancy in July, 1988, and $500,000 of commitmer for deposit to the fund, for a balance of $2,229,000'as July 1989, The Carlsbad Land Use Plan policies that established the Agricultural Improvement Fund states: The funds can be "These funds shall be used for physical or institutional development improvements needed to facilitate long-term agricultural production within the planning area, and appropriate uses could include . ..cooperative marketing. .I' In 1982 the Conservancy contracted with the consulting firm of Agland Investment Services to prepare a Carlsbad Aqricultural ImDrovements Prosram ReDort which evaluatec variety of agricultural improvement projects. The repor discussed the possibility of funding construction of cooperative marketing or packing facilities but did not find sufficient cooperation or support among the pole the Agricultural Subsidy Lands. The Conservancy Board approved the Improvements Program, as detailed in the Agland report, in October 1982, and authorized establ i shment of the Carl sbad Agricultural Improvement Review Board (CAIRB) to advise the Conservancy on the u: of the funds. At a subsequent meeting in 1986, CAIRB members again introduced the concept of a wholesale marketing and distribution center for the area's agricultural products as a legitimate use of the Improvement Funds. tomato and vegetable growers who occupied the majority c Problems with the County Flower Industry- The flower industry, including potted plants and other nursery crops, produces 47 percent of value of San Diegc County's agri cul tural production. The annual product value for floraculture in 1988 exceeded 280 million agricultural sectors. However, only 4 percent (or 6,lOC dollars, which was the highest of all the County's 3 a a acres) of the County’s agricultural land is committed tc floraculture, which demonstrates the high per-acre yielc of the industry. San Diego County has been a significant center of floral production for the past 40 years. The unique climate conditions have been a prime incentive for growers, bott field and greenhouse, to locate in the area. The indusl has been family based, characterized by large numbers oi individual growers and a relatively unsophisticated marketing and distribution systems relying on wholesale) and some large eastern brokers for distribution and reta sales. The influx of inexpensive foreign floral products couple with skyrocketing land, water, and energy costs have threatened the San Diego industry to the point that virtually all carnation and roses production has ceased, and a large number of growers have closed down operation In response to this threat, some of the remaining grower have organized the San Diego Floral Auction, a marketinc cooperative modeled after the successful Dutch and Canadian auctions, in an effort to minimize production, marketing and distribution costs. The auction has survived, but to succeed as a major force in marketing, must establish an effective site and identity. The other principle elements of the agricultural support sector (the truckers, the farm machinery salesmen, the providers of seeds, chemicals and pesticides) are currently housed in dispersed and outdated rental facilities. Unless steps are taken to provide new renta accommodations, the various elements of the industry wil further disperse, with a concomitant increase in costs t the grower. For the now fragmented floral industry to survive, a commitment to keep the necessary support services in the area is crucial. With efficiency throug centralized facilities, the industry maybe able to successfully compete, even as less field crops and more greenhouse crops become the standard. The private proponent of the San Diego International floral Trade Center, Carltas Company, is under common ownership with Paul Ecke Poinsettia Ranch, the largest agricultural landowner in the Carlsbad area and the largest producer of poinsettias in the country. The Eck properties are among the few in Carlsbad that are still committed to long-term agricultural production in the LC Concerned about the shift of agricultural support facilities away from the coastal areas of northern San Diego County, the Carltas Company prepared a survey of truckers, wholesalers, and packers to ask about their lo Project History: 4 I e 0 range plans. The results were ominous: most firms wer on short-term leases that would expire within two years and most said they could not afford to pay the market rates for industrial leases in the area, which average cents per square foot. In 1986, Carltas originally proposed to build a central marketing, packing and shipping center for the flower industry on €1 Camino Real in Encinitas. The proposal retail marketing of flowers at that location caused insurmountable traffic problems, so Carltas turned its attention to a second undeveloped site on Palomar Airpo Road east of Highway 1. In early 1987, the Carltas Company proposed that monies from the Carl sbad Agricultural Improvement Fund be used fund development of the Floral Trade Center. Carltas presented its pl ans to the Conservancy staff, which reviewed the cash flow projections and confirmed that facility would need some form of subsidy if it were to offer below-market rents to tenants to keep them in Carl sbad. The Carl sbad Agricultural Improvement Review Board acted to recommend approval of the proposed allocation of $937,000 of Agricultural Improvement Fund monies for the Center. Of this amount, $550,000 would I in the form of a grant for site improvements, and $387,( would be in the form of annual rent subsidies over a period of 10 years. This item was never voted upon by * Coastal Conservancy, because detai 1 ed environmental rev needed to be completed first. Subsequently, two issues resulting in a change in the proposed location of the Center. First, the scope of bi the environmental issues that needed to be resolved and the related construction issues would have required up 1 a two year delay in occupancy for the project, a delay which would be damaging to the industry in its current transitional period in San Diego County. Second, an 18, acre site west of Interstate 5 (Exhibit C) became available which included an existing 151,000 square fooi building which could be relatively inexpensively converl to floricultural uses. The freeway access is better thar that of the site originally proposed and the existence ( a building already constructed and though requiring extensive remodeling, offered the possibility of servic. the industry in a timely way. Carltas proceeded to acquire the site formerly occupied a manufacturing facility and completed designs for remodeling and rehabilitation, including a second phase additional multi-tenant facility which would bring the 5 0 @ entire facility to approximately 200,060 square feet. Because the remodeling costs are significantly higher tt originally estimated, Carltas has requested that the amount to be allocated for site improvements for the Floral Trade Center be increased to $700,000, with a parallel increase in the rent subsidy to $50,000 per ye; for a period of ten years. The property lies within the coastal zone and within tht city limits, in an area zoned for planned industrial (PI uses. vehicular access to the freeway provided by the Cannon Road and Pal omar Ai rport Road interchanges. Its 1 ocat i ( is central to North San Diego County's floral wholesale! shippers, and suppliers, and is easily accessed by loca' arteri a1 s. Surrounding 1 ands on a1 1 sides are devel ope( and in commercial or industrial uses. The Carl tas Company's proposed F1 oral Trade Center wi 11 bring together the principal marketing and distribution elements of the industry now spread throughout northern San Diego County. This Floral Trade Center would provic substantial economies to the growers, distributors, wholesalers and auctioneers as well as provide a centralized focus which improves the market del ivery of flower crops grown in San Diego County. The building w purchased and will be maintained and managed by Carltas Company, which proposes to charge rents that are substantially below the market rates for comparable facilities, in order to make the facility affordable to floricultural tenants. Site Description: It is located adjacent to Interstate 5, with Project Description- Carltas has completed the designs and applied for a Planned Industrial Permit from the City of Carlsbad tha should be obtained in mid-July. demolition of the existing interior walls, additional truck bays, plumbing and structural reconfiguration. A second phase, should demand warrant, will consist of a multi-tenant facility to be constructed on the site at some future date. Carltas is planning to subdivide the 18.8 acre site, an sell a 6 acre site back to the previous owner. The ent operations of the Floral Trade Center will be contained the remaining 12 acres. The sale of the 6 acre site wi generate revenue in two installments, in 1989 and 1991, which will be rolled into the financing for the project described below. Proposed special ized improvements for fl oracul ture tena The work includes 6 I I 0 0 are shown in the site plan attached as Exhibit D. building will be partitioned to accommodate 41 differenl tenants, which involves a complete redesign of the interior circulation system as well. The major element: of the floor plan are: 14,000 square foot space to housc the San Diego Flower Auction, a 10,000 square foot trucl terminal area with several loading docks, two large ten; spaces of 10,000 square feet each with separate loading docks, twenty-four booths in the interior of the buildir ranging in size from 360 to 1,850 square feet each of which will have refrigerated storage space, and thirteer medium-sized tenant spaces without cooler storage which will range in size from 1,365 to 3,400 square feet in area. The Floral Trade Center will be accessible from Avenida Encinas using two existing driveways and providt parking for several hundred vehicles. The parking at tt project site needs to be completely reworked, because tt, existing parking is on the 6 acre site that will be sold and the vehicular circulation pattern has to allow for truck access to the new loading docks. Additionally, there is approximately 12,500 SF of officc area which may be partitioned into smaller spaces for tenant support services, and a food service area which will be operated under a lease arrangement. The San Dic International Floral Trade Center will be entirely a wholesale outlet and will not have a retail component ir the first phase of the project. The rents that Carltas is proposing to charge are below market rates for all tenants except the on-site restaura and the offices. For example, the interior booths with cold storage will rent for $1.00 per square foot, while comparable facilities in the Los Angeles area have renta rates of $1.20 a square foot. The space occupied by the San Diego Flower Auction will be available at a rate of $0.60 per square foot, and the truck terminal will rent for $0.45 per square foot, substantially below the $0.75 per square foot market rate. The PROJECT F I NANC ING : Costs- The preliminary budget for the acquisition of the site a construction of the Floral Trade Center project is: Purchase Price $ 10,000,000 less Carl tas Downpayment - 2,000,000 plus Total Phase I Improvements t 1,970,335 Mortgage 8,000,000 Demo1 i ti on 275 , 000 Interior Improvements 468,535 Refrigeration 456,800 7 e 0 Parking Area 500,000 Permi ts/Fees 80,000 Architecture 40,000 Contingency 150,000 less Cash from Subdivision in 1989 - 1,568,16 Fi nanci ng Requ i red Additional Equity Required 8,402,17 - 7,100,19( $1,30 1 ,98! less Private Financina Available The amount of additional equity required will be split between Carltas Company and the contribution of the Agricultural Improvement Fund, as described in the next sect i on. Looking at the annual cash flow for the project indicatc the need for an on-going subsidy of the below-market rental rates for the project. In 1990, the project wil' operate at a loss, but in 1991 there will be a substanti profit due to the receipt of an additional $523,000 fron the sale of the 6 acre parcel. By 1992 when the project is well established and revenues have stabilized, there will still be insufficient spread between the projected Net Operating Income and the Annual Debt Service Expens< to attract private financing for the project. This is ( and it justifies the provision of an additional rent subsidy, as described below. The purpose of the financial assistance is to (1) mainta floral production and agricultural support industries in the North San Diego County area, (2) to establish a centralized distribution and marketing facility in Carlsbad to increase the profits, and thus the viabilitg of the area's flower growers, and (3) to provide a renta structure for the project that will retain agricultural tenants over time. The financial participation will consist of two components: Site ImDrovements- Conservancy staff recommends that $700,000 of the Improvement Fund monies be used to pay f modifications to the existing building to accommodate th specific requirements of the agricultural and floral tenants. The funds will be used specifically to pay for the following improvements which are required by the new site plans and have not yet been installed: primarily to the below-market rents that will be chargec Participation- Cooler Boxes $323,000 Cooler Doors 15,000 Chi 11 er 118,000 Auction Restrooms 10,000 Truck We1 1 /Dock 16,000 8 0 0 P1 umbi ng 50,000 Chain Link Partitions 18,000 30,000 75% Architecture Truck Doors 18,400 $608 , 400 Sky1 ights 10,000 (Note: Company will provide an updated list of elements to be paid for by the Improvement Fund, which will total $700,000) . This level of contribution will leave Carltas with the responsibility of providing $601,985 of additional equi for the project, on top of the $2,000,000 downpayment already provided, for a total contribution from Carltas $2,601,985. The combined equity contributions of Carlt and the Improvement Fund should be able to leverage an project. Rent Subsidies- Conservancy staff recommend that the Improvement Fund also provide $50,000 annually of rent subsidies for the Carlsbad Floral Trade Center project, over its initial 10 year period of operations, for a to of $500,000. This will allow Carltas to provide below- market rental rates that are affordable to local agricultural tenants but at the same time to attract th permanent financing necessary for the project. subsidy will not be tied to specific tenant spaces, sin virtually all of the spaces, with the exception of the office and the cafeteria, will be rented at below-marke rates. There are two reasons for setting the amount of rent subsidy at the $50,000 per year level. First, this amo of subsidy will make the Adjusted Operating Income for project equal 113 percent of the annual debt service expense, which comes close to the 115 percent rule of thumb often applied by private lenders in evaluating thc finances of a project. Second, staff have always anticipated that the funds for the rent subsidies will I the funds provided by the Grupe Development Company (on1 of the original permit applicants who the Coastal Commission required to contribute to the Improvement Fund). obligation to the Fund in ten annual payments of $50,001 apiece, rather than a lump sum payment of $387,000. On an annual basis, Carltas Company would need to docum the amount of rent it received during the previous year from its agricultural tenants, and the spaces they occupied. No more than 30 percent of the tenant spaces At the July 18 meeting Chris Calkins of Carltas additional $7,100,000 of private financing for the The In December 1988, Grupe agreed to pay off its 9 1 e 0 (excluding the restaurant and offices) can be occupied b tenants who are not involved in marketing, packaging, distributing, or supplying the agricultural industry, Carltas will be eligible for the annual rent subsidy. This will effectively reserve at least 29 of the 41 spac in the current design for floricultural tenants or agricultural support services. Staff recommends that the appropriate entity to oversee the application of Improvement Fund monies to the Floral Trade Center is the City of Carlsbad. The City has the accounting procedures in place to keep track of the func and has successfully administered previous grants from t Coastal Conservancy. In addition, the City's building inspectors will need to oversee the construction of the project anyway, and in the long term it will have responsi bil i ty for monitoring the project to ensure that Carltas complies with the terms of its Planned Industria Permit. The City will not be eligible to receive reimbursement for the costs associated with administerin this grant. To implement this project, upon Conservancy board approval, the Conservancy would enter into a contract wi the City of Carlsbad incorporating all the terms and conditions of this staff recommendation. The City would in turn enter into a contract with Carltas Company with the same provisions for disbursements, reports and reimbursements. Both contracts will have a term of ten years. As Carltas completes the site improvements listed in the previous "Participation" section, it will submit invoice for the authorized elements to the City, up to a cost of $700,000. The City will then submit invoices to the Conservancy for payment from the Carl sbad Improvement FL Special Deposit Account. Upon completion of the project the City will perform the final inspections and issue tb occupancy permit. With regard to the annual rent subsidies, Carltas will submit the annual report of the rents and tenants in the Floral Trade Center to both the City and the Conservancy Conservancy staff will analyze the tenant mix, and if, appropriate, will authorize the release of $50,000 of th Improvement Fund monies to the City. The City will then transfer these funds to Carltas. There is a possibility that Carltas will not be able to fill the Floral Trade center with the type of floricultural tenants that it envisions, or that the tenants will later move out to other locations. There i Administration- Reimbursement- 10 L e 0 also a possibility that Carltas will sell the property within the 10 year time period when the rent subsidies a still being paid to a new owner who does not want to continue the Floral Trade Center use. The ability to re the facility at full market rates will make it more attractive from the standpoint of commercial lenders, bu will defeat the purposes for which the Agricultural Improvement Fund monies would be committed to the projec For this reason, the site improvements components of the Improvement Fund contribution will have repayment provisions which will be triggered if any more than 30 percent of the tenant spaces are leased to non- agri cul tural uses. The grant agreement with the City of Carlsbad will call for termination of the agreement and reimbursement of 1C percent of the $700,000 initial grant, plus 10 percent simple interest, if the occupancy of the project by agricultural tenants falls below this threshold. This repayment obligation will be secured by a deed of trust the property in favor of the Coastal Conservancy, which will be subordinate to the construction loan and permane Center continues in operation for a period of ten years longer, there will be no repayment required. With respect to the annual rent subsidy payments, paymen will be made in arrears, upon documentation that no more than 30 percent of the tenant spaces have been occupied throughout the previous year by non-agricultural tenants If Carltas cannot show this to be the case, it will not eligible for a rent subsidy for that year or any subsequent years. This annual reporting requirement wil also allow the Conservancy to monitor the project and trigger the possible reimbursement of the initial site improvements grant, plus interest. LOCAL SUPPORT: In 1988, CAIRB surveyed all farmers in the City of financing. If the San Diego Internationa7 Flora7 Trade Carlsbad with a written questionnaire to identify what type of projects would be considered worthwhile uses of the Agricultural Improvement Funds. Of the 21 responses 48 percent of respondents indicated that cooperative marketing and production facilities should be a high priority project. When asked specifically about the Flor Trade Center proposed by Carltas, 81 percent of the respondents said they were supportive of a project of th type ' CONSISTENCY WITH CONSERVANCY LEGISLATION: (NOTE: This section will be added before the Coastal 11 4 e 0 Conservancy board approves the project. ) GUIDELINES; The 1982 Agl and report recommended that each project proposing to use the Improvement Fund monies be evaluatc against a set of seven criteria. Agricultural Improvement Review Board has added an additional criterion that gives priority to projects within the Carlsbad coastal zone and within the Carlsbac City limits, over projects outside Carlsbad. The Flora' Trade Center project complies with some, but not all of these criteria, as follows: Low Costs. The Conservancy staff and consultants have analyzed the project's financial plan and the need for financial assistance. The project is expensive, because it involves conversion of an existing industrial buildir rather than small-scale improvements on lands that are actually in agricultural production. On the other hand, the Improvement Fund will provide approximately 10% percent of the costs of acquisition and construction, ar roughly only 5% of the net operating income of the project . ReDavment Possibilities. Repayment conditions are attached to the site improvement grant in case occupancj of the Floral Trade Center by floricultural and agricultural tenants falls below 29 of the 41 tenant spaces. This will return all of the initial Improvement Fund investment if the project does not succeed. The re subsidies component of the grant is structured in such a way that, for a period of ten years, if the occupancy rates by the desired types of tenants drop below this threshold, the rent subsidy will be discontinued for tha CONSISTENCY WITH The Carlsbad year and subsequent years. Value - dollars Der acre and total value. This recommendation will result in an investment, over time, $1,200,000, in a twelve acre project, for a value of $100,000 per acre. However, this criterion is not particularly appropriate for evaluation of the Floral Trade Center. through this investment, the Improvements Fund can leverage $10.4 million of investment in the local Carlst agricultural economy. Beneficiaries - qrowers or landowners. The project will benefit most directly the tenants who will occupy the leased area of the Floral Trade Center, who will provide agricultural support services to growers from throughout northern San Diego County. This includes the Carlsbad Floral Auction, a cooperative association comprised of Of more importance is the fact that, 12 I e W local growers. The project will also directly benefit Carltas Company, which will own the building and is a subsidiary of the 1 argest agricultural 1 andowner and grower in the City of Carlsbad. The project will indirectly benefit other local growers, who will be assured that the agricultural services necessary to support their operations remain in the Carlsbad area, a who may receive higher prices for their products throug the centralized marketing, sales, and distribution services that the Floral Trade Center will offer. Broad ADP~ ications, The project will demonstrate the advantages of central ized processing and marketing facilities to an important sector of the State’s agricultural industry. The only comparable facilities the Los Angeles Flower Market. Positive Environmental Impacts. As discussed in more detail below, we anticipate that the City of Carlsbad w find that there are no unmitigated negative environment effects of the project. effects will be indirect. This will provide a center t can attract and retain the agricultural support service necessary to keep the flower industry (and other agricultural sectors) vi ab1 e in northern San Di ego Coun This should, in turn, prolong the lifespan of agricultu operations throughout the Carlsbad area. Prioritv to Carlsbad. The project is located within th City of Carlsbad, and within the Coastal Zone. . The positive environmental CONSISTENCY WITH COASTAL ACT POLICIES: CONSISTENCY WITH CARLSBAD LOCAL COASTAL PLAN: COMPLIANCE WITH CEQA: The City of Carlsbad will need to make findings about compliance with CEQA at such time as it approves the permits for the conversion of the building from office to the Floral Trade Center, and agrees to act as the recipient of the grant of Agricultural Improvement Fund monies. This is anticipated to happen on August 4th, i advance of the Coastal Conservancy hearing on the proje on August 18. The Coastal Conservancy board will not t able to recommend allocation of the Carlsbad Improvemer Fund monies until it has reviewed and approved the environmental documentation prepared by the City. 13 * 0 0 Conservancy staff anticipates that the project may be categorically exempt from CEQA under C1 ass 1 (Cal i forni z Administrative Code Section 15301) as a minor alteratior to existing private structures or facilities, and under Class 4 (California Administrative Code Section 15304) i a minor alteration to land, 14 I 0 e EXHIBITS -Regional: Tenant area -Project Site: - -Letter of Support -CAIRB -Carl sbad City P1 anning -Coastal Commission -Individual Farmers - 15 CHO BERNARD0 PACIFIC BEACH IMPERIAL BEACH .~Xtt\B\t 7Lt (0 c, S 0 0 s OQ, 5: *e %a0 TZ g 2?3:$ 5 2rmg.E ma - cn8G;z 0s GZG 00 L' a# o'o'zz2 azzo c &J rggga 3 3XXY~ - E u 4) c-5 $ gzg(LL LL ,orzg w I 4 is, L a a A 1 5 E g 8 .O 0 a, U c W d 5 P - i $5 =a LC ~ tt3 t3 ti333 ?fat: kt 8 rr3k8! :s: tt 3; z E! :;t$ff f g 3;;;;; 53 q.y- rg - :: 2 :: :E: ::; : :::::::x;: # . ._.I_ __ . . __I- .; D,SF'RJBLLT~."~ 47 M F"E7i/jG .. 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