HomeMy WebLinkAbout2023-12-12; City Council; ; Update on Status of Negotiations to Relocate San Diego Gas & Electric’s North Coast Service CenterCA Review CKM
Meeting Date: Dec. 12, 2023
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Gary Barberio, Deputy City Manager, Community Services
gary.barberio@carlsbadca.gov, 442-339-2822
Cindie K. McMahon, City Attorney
attorney@carlsbadca.gov, 442-339-2891
Subject: Update on Status of Negotiations to Relocate San Diego Gas & Electric’s
North Coast Service Center
District: 2
Recommended Action
Receive status update and provide direction on negotiations to relocate SDG&E’s North Coast
Service Center.
Executive Summary
This report provides the City Council with an update on the ongoing negotiations between the
city, NRG Energy and San Diego Gas & Electric over relocating SDG&E’s North Coast Service
Center as part of a previous settlement agreement.
Explanation & Analysis
Background
The City of Carlsbad has been negotiating with NRG Energy and San Diego Gas & Electric
Company to relocate SDG&E’s North Coast Service Center from its current location near the
northeast corner of Carlsbad Boulevard and Cannon Road as anticipated in the “Settlement
Agreement dated as of Jan. 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
and Electric Company.”
After staff, NRG and SDG&E had exhausted options to relocate the service center offsite – e.g.,
The Shoppes at Carlsbad site, the SDG&E-owned property known as Lot 11, and other sites –
on Nov. 15, 2022, the City Council directed staff to discontinue efforts to include Lot 11 in the
city’s negotiations with SDG&E and NRG and to pursue an option for constructing a new service
center on the eastern part of the existing site closer to the railroad tracks, referred to by the
parties as the Against the Tracks option. This option was expected to free up approximately 8-
10 acres on the western part of the existing site for transfer to the city. The City Council also
directed staff to return to the City Council for further direction on March 7, 2023, or sooner.
Dec. 12, 2023 Item #12 Page 1 of 5
However, as reported at the City Council meeting on March 7, 2023 (Exhibit 1), the negotiations
for the Against the Tracks option stalled because the cost of constructing the new service
center significantly exceeded the funding available from NRG and SDG&E under that option. At
that time, NRG was working on selecting a development partner for the future redevelopment
of the adjacent power plant property and anticipated the development partner would provide
solutions for resolving the funding gap.
To allow NRG time to complete its selection process and receive input from its development
partner, the City Council provided the parties an additional six months to explore options and
directed staff to return in September 2023, or sooner, with an update on continuing
negotiations. Since March 2023, the parties have continued to meet regularly (approximately
18 meetings) to try to resolve the funding gap and other ancillary matters.
Although NRG has not yet finalized the selection of its development partner, NRG has
determined through the selection process to date that its development partner will not be able
to resolve the funding gap for the Against the Tracks option.
Instead, on Aug. 31, 2023, NRG proposed a different option for reconfiguring the existing
service center site that would close the funding gap as it involves less new construction and
frees up less land (approximately 5-6 acres) for transfer to the city. The parties are referring to
this option as the Seaside option. At that time, the Seaside option was new and conceptual
only, and NRG and SDG&E’s teams were reviewing the proposal internally to determine its
feasibility. Consequently, city staff lacked sufficient information to present the new Seaside
option to the City Council in September for its consideration and direction. Over the ensuing
three months NRG and SDG&E have determined that the Seaside option is feasible, and the two
parties have solidified a plan to eliminate any funding gap associated with this option.
Seaside option
The Seaside option is similar to the Against the Tracks option in that it reconfigures the current
site to the east, away from Carlsbad Boulevard and the coastline, such that a new service center
administration building could be built on the eastern 13-acre portion of the 19-acre SDG&E
property, with SDG&E parking and materials staging areas relocated to an approximately eight-
acre portion of the NRG property. This option would make available for conveyance to the city
approximately six acres (five acres net) of the western portion of the SDG&E site.
Dec. 12, 2023 Item #12 Page 2 of 5
The eastern one-acre of the six-acre property conveyed to the city would be used to provide
vehicle access to the city’s site and the future NRG redevelopment site from Cannon Road at its
intersection with Los Robles Drive.
While the six acres is less than the eight to ten acres anticipated to become available to the city
under the Against the Tracks option, it would provide the city with options for future use of the
six acres, such as a location for a permanent Fire Station No. 7, ownership (as opposed to a
lease) and possible expansion of Cannon Park, and an area to provide parking for Cannon Park
and beach users.
In addition to the approximately six acres (five acres net) proposed for conveyance to the City
and the possible options for future use of this property, the Seaside option, as currently
proposed, would provide for the following additional community benefits:
• The city would receive from SDG&E a 5.76-acre property on the north shore of the Agua
Hedionda Lagoon (North Shore Bluff Parcel)
• SDG&E will cooperate with the city to develop a trail network in the Hub Park Lease area
on the south shore of the Agua Hedionda Lagoon, including allowing access on the
SDG&E-owned Lot 11 for a trailhead parking lot, access to the pedestrian tunnels
underneath Cannon Road, and access through Lot 11 to the Hub Park Lease area.
SDG&E will also share in the cost of developing this portion of the city trail system.
• The city will receive from NRG an irrevocable offer of dedication for the NRG-owned
Beach Bluff Property (approximately 10.8 acres on the west side of Carlsbad Boulevard),
and the NRG-owned middle Agua Hedionda Lagoon basin (approximately 21 acres
between the railroad tracks and Interstate 5) and the inner basin (approximately 181.23
acres east of I-5). The irrevocable offer of dedication will allow the city to take
ownership of the property at a future date, if so desired.
o The city currently has an irrevocable offer of dedication over the approximately
2.8 acre upper-bluff portion of the Beach Bluff Property. This new irrevocable
offer of dedication would cover the entire approximately 10.8 acres of the
property, or an additional approximately 8 acres. The city also currently has a
lease agreement on the Agua Hedionda Lagoon inner basin and previously had a
lease agreement on the middle basin.
• The city would receive from SDG&E and NRG ownership to the Carlsbad Boulevard and
Cannon Road right-of-way fronting their respective properties.
Recommendation
Staff recommend that the City Council direct staff to continue negotiations with SDG&E and
NRG on the Seaside option and to return to the City Council by March 31, 2024, or sooner, with
an agreement for the City Council’s consideration.
If the parties are unable to reach agreement by March 31, 2024, then the negotiation efforts
shall be reassessed, and a decision made about whether to terminate them. If a decision is
made to terminate negotiations, then the city would receive $10 million from NRG, as identified
in the settlement agreement.
Dec. 12, 2023 Item #12 Page 3 of 5
Alternatively, the parties could agree at that time to extend the March 31, 2024, deadline or
pursue another plan.
Representatives from SDG&E and NRG will attend the City Council meeting to present
information on these issues to the City Council.
Fiscal Analysis
There is no financial impact from this item. No additional funding is being requested.
Options
Staff provide the following options for the City Council’s consideration:
1. Direct staff to continue negotiations with SDG&E and NRG on the Seaside option and to
return to the City Council by March 31, 2024, or sooner, with an agreement for City
Council consideration. If the parties are unable to reach agreement by March 31, 2024,
then the negotiation efforts shall be reassessed, and a decision made about whether to
terminate. If a decision is made to terminate negotiations, then the City of Carlsbad
would receive $10 million from NRG, as identified in the settlement agreement.
Alternatively, the parties could agree at that time to extend the March 31, 2024,
deadline or pursue another plan.
Pros:
• Provides for additional time to reach an agreement on the Seaside option, which
could deliver certain land transfers and other community benefits to the city
Cons:
• None identified
2. Direct staff to terminate negotiations with SDG&E and NRG.
Pros:
• The city would receive $10 million from NRG, as identified in the settlement
agreement
Cons:
• The City of Carlsbad would not receive the other land transfer or community
benefits anticipated from the Seaside option
Staff recommend that the City Council direct staff to pursue Option 1.
Next Steps
Upon receiving City Council direction, staff will continue negotiations with the other parties and
return with an agreement for the City Council and the Carlsbad Municipal Water District Board
to consider by March 31, 2024, or sooner, as appropriate.
Environmental Evaluation
This action does not require environmental review because it does not constitute a project
within the meaning of the California Environmental Quality Act under California Public
Resources Code Section 21065 in that it has no potential to cause either a direct physical
change or a reasonably foreseeable indirect physical change in the environment.
Exhibits
1. March 7, 2023, City Council staff report, with exhibits (on file in the Office of the City Clerk)
Dec. 12, 2023 Item #12 Page 4 of 5
Exhibit 1
March 7, 2023, City Council staff report, with exhibits
(on file in the Office of the City Clerk)
Dec. 12, 2023 Item #12 Page 5 of 5