TO:
Honorable Mayor and Members of the City Council
THROUGH:
Talyn Mirzakhanian, City Manager
FROM:
Talyn Mirzakhanian, City Manager
Libby Bretthauer, Acting Finance Director
SUBJECT:Title
Consideration of Resolutions Authorizing the Acquisition of Property Located at 400 Manhattan Beach Boulevard; Appropriating $13,221,000 from the CIP Fund for the Purchase and Potential Demolition of the On-Site Structure; Transferring $13,221,000 from the Unreserved General Fund Balance to the CIP Fund; Authorizing the City Manager to Execute All Documents Required to Complete the Acquisition; and Approving the Intention to Issue Tax-Exempt Obligations (Unbudgeted) (City Manager Mirzakhanian).
(Estimated Time: 1 Hr.)
A) ADOPT RESOLUTION NOS. 25-0035 and 25-0036
B) APPROPRIATE FUNDS
Body
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RECOMMENDATION:
Staff recommends that the City Council adopt:
1. Resolution No. 25-0035, authorizing the acquisition of property located at 400 Manhattan Beach Boulevard (MBB) at a purchase price of $13,000,000, authorizing the City Manager to execute all necessary documents required to complete the purchase; appropriating $13,221,000 from the CIP Fund for the purchase price, plus additional closing costs and potential building demolition costs; and transferring $13,221,000 from the unreserved General Fund balance to the CIP Fund.
2. Resolution No. 25-0036, approving the intention to issue tax-exempt obligations and reimburse the General Fund unreserved fund balance within 18 months.
FISCAL IMPLICATIONS:
The negotiated purchase price of the property is $13,000,000, and closing costs are estimated not to exceed $5,000. Additionally, potential demolition of the existing structure is estimated to cost between $156,000 and $221,000, in the event the City Council directs staff to seek bids for the demolition of the onsite structure.
A budget appropriation of $13,221,000 is required from the Capital Improvement Projects (CIP) fund, which is used to manage general governmental infrastructure and facilities capital projects. A corresponding transfer from the unreserved General Fund balance is also required to support the expenditure of CIP Funds.
A Mid-Year Budget Report was presented to the City Council on February 18, 2025. Based on year-end projections, the total General Fund balance is projected to be nearly $32.2 at the end of the fiscal year. Within this total, the City’s Financial Policies designate 20% of operational expenditures ($19.5 million) to be held in reserve, an additional $4.0 million is held in an Economic Uncertainty reserve, and the balance of $8.7 million is unreserved. After transferring $13,221,000 to the CIP Fund, the General Fund balance will be approximately $19.0 million, which is greater than the Government Finance Officers’ Association (GFOA) minimum recommendation of 17% of operational expenditures ($17.2 million). Additionally, this reduction in fund balance is temporary until anticipated bond proceeds reimburse the General Fund.
BACKGROUND:
In January 2025, real property located at 400 Manhattan Beach Boulevard (Assessor’s Parcel Number: 4179007016, 4179007004, and 4179007005) was listed for sale by the owner, U.S. Bank National Association. Given the location of the site in the City’s downtown, its proximity to the City’s Civic Center, and the multitude of opportunities it would present for the City in terms of community benefits, preservation of local character, revenue generation, and investment in long-term value, staff was authorized to commence negotiations with the seller’s representative for the purchase of the property in a series of duly noticed closed sessions with the City Council. City staff negotiated the purchase of the property for $13,000,000.
The site, located in the City’s Downtown Commercial (CD) zoning district, is made up of three parcels and is approximately 16,570 square feet (0.38 acres) in size. It is bounded by Manhattan Beach Boulevard to the north, Morningside Drive to the west, private residential property to the south, and private commercial property (Vons) to the east.
DISCUSSION:
City Council adoption of Resolution No. 25-0035 will authorize the City Manager to acquire the property at 400 Manhattan Beach Boulevard at the negotiated price of $13,000,000, subject to review under Government Code Section 65402. The conditions of the purchase are outlined below:
Purchase Price and Closing Date: The purchase price is $13,000,000, with an initial deposit of $390,000 (3%). The closing date is anticipated to be April 15, 2025.
Title: On or before Closing Date, seller shall resolve any outstanding/existing contract and/or lease obligations concerning the property.
Tax-Exempt Bonds
It is anticipated that future development of the property will be funded through debt issuance and possibly future CIP funds. Resolution No. 25-0036 declares the City’s intention to issue tax-exempt obligations and reimburse the General Fund for the purchase price, closing costs, and potential demolition of the existing structure. To cover any ancillary costs that may arise, the resolution states that a maximum principal amount of the obligations is $13,500,000. This resolution is necessary to comply with U.S. Treasury department regulations and is a standard practice for public agencies planning to issue tax-exempt bonds. Adoption of this resolution preserves the City’s ability to issue tax-exempt financing, which will result in lower borrowing costs for the City, but it does not bind the City to any particular financing option.
General Plan Consistency
The General Plan Land Use designation for the subject property is Downtown Commercial, which is intended to accommodate a “mix of commercial businesses, residential uses with discretionary review, and public uses, with a focus on pedestrian-oriented commercial businesses that serve Manhattan Beach residents.” By acquiring the property, the City would obtain/preserve control over future land uses to ensure consistency with the goals and policies of the General Plan. Future use of the property would be subject to applicable provisions of the Manhattan Beach Local Coastal Program, which implements the vision established by the General Plan. Specifically, acquisition of the property provides the City with the ability to ensure conformity with the following General Plan Land Use Element Goals:
• Goal LU-1: Maintain the low-profile development and small-town atmosphere of Manhattan Beach;
• Goal LU-4: Preserves the features of each community neighborhood, and develop solutions tailored to each neighborhood’s unique characteristics;
• GoalLU-6: Maintain the viability of the commercial areas of Manhattan Beach; and
• Goal LU-7: Continue to support and encourage the viability of the Downtown area of Manhattan Beach.
Pursuant to California Government Code 65402, the Planning Commission is tentatively scheduled to consider General Plan conformity associated with this acquisition at its regularly scheduled meeting on April 9, 2025, prior to close of escrow.
PUBLIC OUTREACH:
Formal public notice is not required for this item; however, the item was included in the agenda for this meeting, which was posted in accordance with the law. Additionally, public outreach will be conducted in the form of community meetings to engage the community in plans for future development of the site.
ENVIRONMENTAL REVIEW:
The City has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Furthermore, any activity proposed at the subject property in the future will be subject to the applicable provisions of CEQA at the time the activity is considered. Thus, no environmental review is necessary.
LEGAL REVIEW:
The City Attorney has reviewed this report and determined that no additional legal analysis is necessary.
ATTACHMENTS:
1. Resolution No. 25-0035
2. Resolution No. 25-0036
3. Location Map