Loading...
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 April 20, 2021 Item #6 Page 2 of 7 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