HomeMy WebLinkAbout2021-04-20; City Council; ; Authorize Negotiations to Relocate SDG&E’s North Coast Service Center to the City-Owned Parking Lot Properties at the Shopping Center Known as The Shoppes at Carlsbad andMeeting Date: April 20, 2021
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Gary T. Barberio, Deputy City Manager
gary.barberio@carlsbadca.gov, 760-434-2822
Celia A. Brewer, City Attorney
celia.brewer@carlsbadca.gov, 760-434-2891
Subject: Authorize Negotiations to Relocate SDG&E’s North Coast Service Center
to the City-Owned Parking Lot Properties at the Shopping Center Known
as The Shoppes at Carlsbad and Appropriate Funds for Professional
Services
District: 1 and 2
Recommended Action
Adopt a resolution:
•Authorizing staff to work with Brookfield Properties, NRG Energy and San Diego Gas &
Electric to relocate the SDG&E North Coast Service Center from its current location near
the northeast corner of Carlsbad Boulevard and Cannon Road, to a portion of the city
owned parking lot properties at The Shoppes at Carlsbad to facilitate the transfer of the
service center’s current site, as well as other properties, to the City of Carlsbad as
anticipated in the “Settlement Agreement dated as of January 14, 2014 Between and
Among The City of Carlsbad, Carlsbad Municipal Water District, Cabrillo Power I LLC,
Carlsbad Energy Center LLC, and San Diego Gas & Electric Company”
•Appropriating funds in an amount not to exceed $100,000 to retain the professional
services of Kosmont Companies
Executive Summary
On Jan. 14, 2014, the City Council (with Resolution No. 2014-010) and the Carlsbad Municipal
Water District Board (Resolution No. 1487) approved a settlement agreement that resolved
longstanding disagreements between several parties related to the decommissioning and
demolition of the existing power plant known as Encina Power Station and construction of a
new plant known as Carlsbad Energy Center.
Among other things, the settlement agreement anticipated the relocation of SDG&E’s North
Coast Service Center, which is located near the northeast corner of Carlsbad Boulevard and
Cannon Road [Settlement Agreement Section 5.1]. If the center is relocated in accordance with
April 20, 2021 Item #6 Page 1 of 7
the terms of the settlement agreement, NRG would contribute up to $22.5 million to SDG&E for
the relocation and reconstruction of a new service center [5.4], the City of Carlsbad would take
ownership of certain properties totaling 24.5 acres, including the current SDG&E North Coast
Service Center site [5.7], and the city and NRG would work in good faith to consider a joint
development strategy for the power plant site and the service center site [6.2(b)].
The city has worked tirelessly with SDG&E to identify a mutually acceptable relocation site but
has not yet been successful. Any selected service center relocation site must be approved by
the California Public Utilities Commission, and SDG&E’s obligations under the settlement
agreement are contingent on such approval [2.3(c)].
At the time the city entered into the settlement agreement, the parties anticipated the SDG&E-
owned Parcel 11, located east of I-5 and north of Cannon Road, would fulfill the terms of the
settlement agreement if a more acceptable alternative could not be found. Unfortunately, the
parties have determined it would be too expensive and time-consuming to develop Lot 11
based on its challenging topography and sensitive resources and that the cost of constructing
the service center on the site would greatly exceed NRG’s allotted financial contribution and
violate the revenue neutrality requirement of the relocation terms [5.1(c)].
The demolition of the Encina Power Station is proceeding, and the settlement agreement
commits NRG to move forward with redevelopment plans for the site. NRG’s ability to do so
would be greatly enhanced if the NCSC relocation issue is resolved. The settlement agreement
ties all below ground demolition and remediation obligations to the redevelopment of the site.
In recent discussions with NRG, SDG&E and Brookfield Properties, staff have identified a
possible solution to the issue of relocating the service center and are bringing the matter
before the City Council for its consideration and direction.
Discussion
Background
The settlement agreement requires the service center’s relocation to be revenue-neutral for
SDG&E ratepayers, so the city has been reviewing city-owned properties to see if any could
meet the criteria for a new site for the service center. The city owns approximately 67 acres
surrounding the Shoppes, a regional shopping center owned by Brookfield. The city’s properties
are burdened by certain deed restrictions limiting their use to parking lot purposes only.
However, Brookfield is interested in expanding uses at the Shoppes site to include housing and
other potential uses on the city’s properties, which present a number of opportunities.
Based on preliminary discussions with SDG&E, NRG and Brookfield, there is a willingness to
enter exploratory negotiations regarding the potential relocation of the North Coast Service
Center to the city properties at the Shoppes in exchange for, among other possibilities, a
transfer of the remaining portions of the city properties to Brookfield on mutually acceptable
terms.
Potential benefits
City staff believe this transaction has the potential to provide benefits to the public and to the
other parties if the parties work together to relocate the service center to the Shoppes site. The
following is a partial list of these benefits
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Benefits to the City of Carlsbad
•The city could receive the benefits it bargained for in the City Council-approved settlement
agreement, including taking title to approximately 19 acres at the northeast intersection of
Carlsbad Boulevard and Cannon Road as well as additional property identified in the
settlement agreement [5.7].
•City could realize its long-term desire to move the service center off a prime coastal
property.
•Among other potential uses, the city could use this site to increase public safety by building
a much-needed fire station and lifeguard headquarters west of the railroad tracks. The city
has no fire stations west of the tracks and the lifeguards are currently based at Fire Station
1.
•Housing on the city properties would help meet the allocation of housing that state law
requires the city to provide for over the next eight years in its Housing Element, a
component of its General Plan, and may provide increased flexibility for housing decisions
throughout the city.
•If the city takes ownership of the SDG&E property, NRG would be committed to a joint
development strategy with the city, giving the city greater influence over what happens on
both redevelopment sites.
Benefits to NRG
•Moving the service center off its current site would help optimize the adjacent
powerplant site for its redevelopment by NRG.
•Resolving this final item in the settlement agreement allows NRG to move forward in
completing its obligations under the settlement agreement.
Benefits to SDG&E
•Would get a new service center, replacing one decades old.
•Cost of building a new, modern service center would be subsidized by NRG, saving the
utility’s ratepayers $22.5 million.
Benefits to Brookfield
•Could get use of city property surrounding the existing mall buildings for housing and
other uses.
•Could potentially secure greater finality in future land use decisions related to the
Shoppes.
•May be able to realize the “smart growth” potential of the site, allowing for new
transportation alternatives.
•City’s access to infrastructure financing and other governmental funding programs could
benefit redevelopment of the site.
This potential relocation would involve a complex, multi-party transaction. Yet staff believes if
the city works in alignment with all parties it can maximize public benefits to the city and
potentially create increased housing, transportation and revenue potential for all parties.
April 20, 2021 Item #6 Page 3 of 7
Recommendations
Staff recommend the City Council appropriate funds in an amount not to exceed $100,000 to
retain the services of Kosmont Companies to assist the city in these negotiations. Kosmont
Companies specializes in public-private partnerships, redevelopment and creative use of city
tools to create value and revenue streams. The cost of the agreement with Kosmont Companies
would not exceed $100,000, so the city manager would be the awarding authority for the
agreement under Carlsbad Municipal Code Section 3.28.040(C)(2).
City Council authorization of this item would allow staff to begin conversations and pursue
preliminary concurrence on key transaction points related to the transfer, development and/or
reuse of properties, including the city-owned properties. These conversations may include
consideration of delivery of infrastructure and community amenities associated with the
various properties and the potential disposition, exchange and/or leasing of properties,
including consideration of private and public funding, financing mechanisms and/or districts
and other governmental funding programs.
Approval of this item is not a commitment to transact or change any zoning or generate a
project under the terms of the California Environmental Quality Act. This item may be brought
back to the City Council in closed session for direction on price and terms of the real estate
transaction and to open session for direction on non-privileged matters. Both Brookfield and
NRG are committed to seeking extensive public input prior to planning ultimate use of the sites.
Fiscal Analysis
Staff recommend the City Council appropriate funds in an amount not to exceed $100,000 from
the City Council Contingency fund to the Community Services Branch Administration operating
budget to retain the professional services of Kosmont Companies.
Next Steps
Staff will enter into a professional services agreement with Kosmont Companies and begin
negotiations with the other parties and may return to City Council in open or closed session for
further direction as the negotiations proceed.
Environmental Evaluation
The recommended action does not constitute a "project" within the meaning of the California
Environmental Quality Act under California Public Resources Code Section 21065 because it has
no potential to cause either a direct physical change in the environment, or a reasonably
foreseeable indirect physical change in the environment. Therefore, the action does not
require environmental review.
Public Notification and Outreach
Public notice of this item was posted in keeping with the state's Ralph M. Brown Act and it was
available for public viewing and review at least 72 hours before the scheduled meeting date.
Exhibits
1.City Council resolution
April 20, 2021 Item #6 Page 4 of 7
RESOLUTION NO. 2021-090
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, AUTHORIZING STAFF TO WORK WITH BROOKFIELD
PROPERTIES (BROOKFIELD), NRG ENERGY (NRG), AND SAN DIEGO GAS &
ELECTRIC (SDG&E) TO RELOCATE THE SDG&E NORTH COAST SERVICE
CENTER (NCSC) FROM ITS CURRENT LOCATION NEAR THE NORTHEAST
CORNER OF CARLSBAD BOULEVARD AND CANNON ROAD, TO A PORTION OF
THE CITY OWNED PARKING LOT PROPERTIES AT THE SHOPPES AT CARLSBAD
(SHOPPES), AND APPROPRIATE FUNDS IN AN AMOUNT NOT TO EXCEED
$100,000 TO RETAIN THE PROFESSIONAL SERVICES OF KOSMONT
COMPANIES
WHEREAS, on Jan. 14, 2014, the City Council of the City of Carlsbad adopted Resolution 2014-
010 approving a Settlement Agreement between and among the City of Carlsbad (City), the Carlsbad
Municipal Water District (CMWD), Cabrillo Power I LLC and Carlsbad Energy Center LLC (collectively,
NRG), and San Diego Gas & Electric (SDG&E), related to the decommissioning and demolition of the
existing power plant known as Encina Power Station (EPS) and construction of a new plant known as
Carlsbad Energy Center (Settlement Agreement); and
WHEREAS, among other things, the Settlement Agreement anticipated the relocation of
SDG&E's North Coast Service Center (NCSC), which is currently located near the northeast corner of
Carlsbad Boulevard and Cannon Road [5.1]; and
WHEREAS, if relocated in accordance with the terms of the Settlement Agreement, NRG would
contribute $22.5 million to SDG&E for the relocation and reconstruction of a new service center [5.4],
City would take title to certain properties totaling approximately 24.5 acres [5.7], and City and NRG
would work in good faith to consider a joint development strategy for the Encina Redevelopment Site
and the NCSC site [6.2(b)]; and
WHEREAS, despite considerable, good-faith efforts, City and SDG&E have not been able to
identify a mutually acceptable relocation site; and
WHEREAS, the demolition of EPS is proceeding according to the commitments contained in the
Settlement Agreement, however, NRG's ability to move forward with redevelopment plans for the site
would be greatly enhanced if the NCSC relocation issue is resolved; and
WHEREAS, the Settlement Agreement requires relocation of NCSC to be revenue neutral for
SDG&E ratepayers; and
April 20, 2021 Item #6 Page 5 of 7
WHEREAS, City has identified approximately 67 acres of City owned properties surrounding the
Shoppes, a regional shopping center currently owned by Brookfield, that could meet the NCSC
relocation criteria; and
WHEREAS, City has engaged in preliminary discussions with SDG&E, NRG and Brookfield
regarding possibilities for relocating NCSC to a portion of the City owned properties surrounding the
Shoppes, and all parties have been receptive to the idea of engaging in negotiations; and
WHEREAS, these potential relocation negotiations would involve a complex, multi-party
transaction that could help the parties to fulfill the terms of the Settlement Agreement in a manner
which will provide significant public benefit; and
WHEREAS, an Indemnification and Hold Harmless Agreement between Brookfield and the City,
indemnifying the City against any potential claims arising out of the City's participation in such
negotiations, including any alleged violations of the existing Deed Restrictions will be executed; and
WHEREAS, Kosmont Companies specializes in public-private partnerships, redevelopment and
creative use of city tools to create value and revenue streams; and
WHEREAS, the specialized expertise and experience of Kosmont Companies will be beneficial to
the City in the negotiation process and will help optimize the potential public benefits associated with
the relocation.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as
follows:
1.That the above recitations are true and correct.
2.That the City Council authorizes city staff to work with Brookfield, NRG and SDG&E on a
plan to relocate NCSC from its current location near the northeast corner of Carlsbad
Boulevard and Cannon Road, to a portion of the city owned parking lot properties at the
Shoppes in order to facilitate the transfer of the current NCSC site, as well other
properties, to the City of Carlsbad as anticipated in the Settlement Agreement.
3.That the Deputy City Manager, Administrative Services is authorized to appropriate
funds in an amount not to exceed $100,000 from the City Council Contingency fund to
the Community Services Branch Administration operating budget to retain the
professional services of Kosmont Companies.
April 20, 2021 Item #6 Page 6 of 7
4.That staff will return to the City Council in closed session as necessary for direction on
price and terms of the real estate transaction and to open session for direction on non-
privileged matters as the negotiations proceed.
5.That this resolution does not commit the City to transact or rezone or generate a project
under the California Environmental Quality Act.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 20th day of April, 2021, by the following vote, to wit:
AYES: Hall, Blackburn, Acosta, Bhat-Patel, Schumacher.
NAYS: None.
ABSENT: None.
MATT HALL, Mayor
rtsv
BARBARA ENGLESON, City Clerk
(SEAL)
April 20, 2021 Item #6 Page 7 of 7