Upsetting a nearby resident and her family who said the proposed use of the former Associated Concrete site is the opposite of what they were promised, the city will sell a 1.63-acre parcel on East Main Avenue to a developer who plans to build a 140-unit apartment complex there.
The Morgan Hill redevelopment oversight board approved the sale Wednesday night, but tried to assure the neighbors that the action does not equate to approval of the project, which must still go through the city planning process.
Oversight board chair and Santa Clara Valley Water District director Don Gage said the sale of the property – and all property formerly owned by the now-defunct redevelopment agency that is now in the city’s hands – is required by the state law approved last year that directs all former RDA assets back to schools, cities, counties and special districts.
“This is separate from the city’s obligations,” Gage said to Peggy Elliott, whose daughter lives next-door to the property in question. “The money needs to be returned” to the taxing agencies.
The property is adjacent to a parcel that was formerly part of the Huntington Square townhome project. That project was never completed after the first 14 units were built in 2010.
The land is now slated to be purchased by USA Properties Fund, who is in contract with Santa Barbara Bank and Trust to buy the remaining Huntington Square property which was foreclosed upon last year.
USA Properties Fund will pay $1.1 million for the city’s property – a price based on an appraisal conducted by Hulberg and Associates last week, according to assistant city manager Leslie Little. That’s about $600,000 shy of the land-only value of the property in 2008, when the RDA purchased it. The RDA bought the site for a total price of about $3.1 million, which included the existing structures and relocation costs for the former occupant.
Jessica Elliott lives in one of the completed Huntington Square units, and she addressed the oversight board in an effort to discourage the board from selling the property. She said the development proposed by USA Properties is not what Elliott and other residents were promised by the previous developer when they moved in, and she’s worried that what she sees as a lower-quality project will bring down her property value.
By approving the sale, even though the transaction is contingent on city approval, the oversight board is legitimizing the reneged commitments, Elliott said.
“We understood this property would turn into more townhomes,” Elliott said. “We had an assurance we would have parking spaces, a common area, and it would be owner-occupied with neighbors who were going to live there for years.”
Probably the sale won’t be final until a development agreement is signed between the developer and the city – one of the last steps in planning before construction can start, Little said.
“We want to make sure they’re not going to speculate on our property,” Little said.
USA plans to build on the adjacent, bank-owned property even if the sale doesn’t go through, according to Steven Gall of USA Properties. That construction would also require city approval.
The developer wants the city’s property because it would improve access to the property next door – which is about 4 acres.
Elliott and her parents Peggy and Lynn, who also spoke at Wednesday’s meeting, vowed they will participate in future public hearings during the city planning process.
USA plans to build 140 units of “class A luxury apartments,” from one to three bedrooms, ranging in size from 750 to 1,250 square feet, May said. Most of the units will be built on the adjacent property, with about 30 units on the city’s site.
The project will be three stories, with garages on the bottom level, May added. It will also have a community recreation area, a manager’s and leasing office, a demo kitchen, pool, spa, outdoor barbecue area and other amenities.
The architecture will be similar to that of the existing residential project on the site, which is just north of the VTA parking area on Butterfield Boulevard, May added.
The city isn’t too dismayed about the 64 percent decline in the property’s land value since its purchase, as the sale of the property to a residential developer fulfills the RDA’s original intent, and besides the appraisal is based on comparisons of similar and nearby properties whose values have also declined.
“We bought that property originally because it was a non-conforming use, and it didn’t belong in the downtown,” Little said. “It was going to stay as a concrete plant, and it would have just stayed there. Nobody else would have come into the market and buy a non-conforming use, and we knew we would end up having to pay for the improvements. That’s why redevelopment agencies were created – to deal with these issues.”
Associated Concrete moved to a more industrial area on Mast Avenue in 2010, with the help of a $400,000 loan from the former RDA. That loan will be forgiven if Associated builds a concrete plant on its new site by 2015. “We did not see a concrete batch plant (downtown) as consistent with our downtown goals,” city manager Ed Tewes added.
Oversight board member and Santa Clara County tax collector George Putris voted against the sale “on principle” because city staff did not give him enough time to review the appraisal, which was completed and distributed to board members Monday.
He said through his cursory review of the appraisal he was unable to determine if the fair market value quoted therein was accurate. He also thought the appraisal should have been made public.
Such appraisals “typically” are not public, because they might contain confidential information about comparable properties, some of which might be in sale negotiations, Little said.
The appraisal compared the property to parcels as far away as San Jose, as there are few similar projects in Morgan Hill, Little added.
The East Main Avenue site will be the first property acquired by the RDA in 2008 to be sold. The RDA purchased a number of properties that year in order to work with private developers to redevelop and improve them. These properties include the site of the vacant Granada Theater and Downtown Mall, the property housing Royal Clothier, and the former site of Simple Beverages on the corner of Monterey Road and Third Street.
The city has said the state law does not allow these properties to be similarly liquidated, because they are controlled by an entity that is separate from the city, even though the city created that entity. The state Department of Finance has not weighed in on whether or not it will force the city to sell those properties.
The RDA transferred those properties to the private nonprofit Economic Development Corporation, which was created by the city council in response to the impending state law to eliminate redevelopment.
The money from the property sale will go back to a fund controlled by the city, and eventually distributed by the oversight board and the county auditor-controller to city’s and county’s general funds, as well as local schools and community colleges and special districts, Little said.
