Title:
Title
First Amendment to Trust and Funding Agreement with Sierra Health Foundation and Sierra Health Foundation: Center for Health Management for the Oak Park Project. (I02180300)
End
FileID
File ID: 2018-01643
Location
Location: Oak Park Redevelopment Project Area, District 5
Recommendation:
Recommendation
Pass a Motion authorizing the City Manager or City Manager’s designee to enter into the First Amendment to the Trust and Funding Agreement with Sierra Health Foundation and Sierra Health Foundation: Center for Health Management for the Oak Park Project (I02180300).
Contact: Leslie Fritzsche, (916) 808-5450, Economic Investment Manager, Office of the City Manager
Body
Presenter: None
Attachments:
1-Description/Analysis
2-First Amendment to the Trust and Funding Agreement
3-Background on Sierra Health Foundation and Sierra Health Foundation: Center for Health Program Management
Description/Analysis
Issue Detail: On February 27, 2018, City Council approved Resolution # 2018-069, which authorized the City Manager to execute a Trust and Funding Agreement with the Sierra Health Foundation and Sierra Health Foundation: Center for Health Program Management (collectively referred to as “Sierra Health”) for development of a new workforce development and employment initiative for the medical and health-related fields called the Oak Park Project (IO2180300). Initially, the City’s investment of $4,967,500 from former Oak Park redevelopment bond funds into the Oak Park Project was anticipated to acquire two buildings in Oak Park, 3301-3307 Broadway and 2330 Alhambra Boulevard. The first building was expected to house the initiative, while the second building was identified to be used to relocate the Heritage Charter School, which is currently housed in the Broadway building. This transformational initiative was envisioned to leverage the multi-billion-dollar health care assets proximate to the Oak Park neighborhood to provide a new center to foster the healthtech/medtech field and link it to the Oak Park community.
Since that time, Sierra Health’s attempts at acquiring the buildings have led to acquisition of the Alhambra building on April 27, 2018, but have been unsuccessful with the Broadway building. Under the terms of the attached First Amendment to Trust and Funding Agreement for the Oak Park Project (Attachment 2), Sierra Health is seeking latitude to utilize the funds approved by Council to acquire 2925 34th Street and other buildings in Oak Park for the initiative and to broaden the scope of the project to also include workforce development and employment for the financial and technology sectors. An offer has been made for the building at 2925 34th Street, for the initiative. The proposed closing date is December 15th.
Policy Considerations: The Oak Park Project is consistent with the 2030 General Plan as it will add to Sacramento’s economic vitality by enhancing the linkage between local organizations, local businesses and industries to promote specialized training programs and promote growth in key industries. In addition, the project will intensify the use of key infill and opportunity areas along the commercial corridors of Oak Park.
Economic Impacts: The actions in this report will not have any direct economic impacts but the Oak Park Project is designed to be a workforce and employment development initiative to stimulate job creation.in the med-tech, health-tech, financial and technology sectors.
Environmental Considerations: The proposed action includes the purchase of an existing building, 2925 34th Street, designed and used as office space. There would be negligible or no expansion of use at the site, and no exterior changes would be made to the building. Environmental Planning Services has reviewed the project and has determined it is exempt from review under the California Environmental Quality Act (CEQA) pursuant to section 15301 of the CEQA Guidelines (Cal. Code Regs., tit. 14, §15000 et seq.), which covers the repair and minor alteration of existing structures. No unusual circumstances are present that could result in a significant effect on the environment, and there are no significant cumulative effects from the action.
The proposed action includes funding for future purchase and interior renovations to one or more existing buildings to be designed and used as office space. The exact location and improvements required are not known at this time. Future purchases would be subject to City planning and building codes, as well as review as required by the California Environmental Quality Act (CEQA) in connection with any discretionary permit requirements.
Environmental Planning Services has reviewed the proposed action and has determined it is not a project as defined in CEQA, and no CEQA review is required. The action involves the creation of a funding mechanism that does not involve any commitment to any specific project that could result in a significant effect on the environment; therefore, it is not project and not subject to CEQA. CEQA Guidelines sections 15060(c)(3), 15378(b)(4).
Sustainability: The Oak Park Project will fulfill the goal of increasing sustainability by enhancing infill locations.
Commission/Committee Action: None
Rationale for Recommendation: Recent years have seen sustained efforts to bring additional resources, stability and increased prosperity to existing Oak Park residents. Several initiatives including the Promise Zone, the Oak Park Promise Neighborhood, and the California Endowment’s Building Healthy Communities have focused on approaches to improve the health, economic condition and vibrancy of the Oak Park community. Sierra Health has been a key player in these efforts as part of their mission to pursue the promise of heath and racial equity in communities across California. They have served as the fiscal agent for the Building Healthy Communities effort and have organized from Oak Park, the Black Child Legacy Campaign, a community-based effort to reduce the rate of African-American child deaths. Additional background about Sierra Health’s initiatives is included in Attachment 3.
The proposed Oak Park Project is a natural advancement and evolution of these efforts by providing a strong physical hub for the growth of educational opportunities in med-tech, health-tech, finance and technology in the community and to link that growth to the local residents, educational institutions, and locally-based companies. The Oak Park Project will enhance neighborhood engagement and stabilization by renovating existing buildings and by improving the linkages between Oak Park’s K-12 educational system and workforce pipeline initiatives targeted to underserved individuals and communities. While the primary public benefit is the creation of jobs, specifically targeting those for local residents, the initiative is a strategic tool for community economic development and the creation of a healthy, vibrant neighborhood. All net revenues from the project will be reinvested within the Oak Park community. A local community advisory board is in the process of being established to provide input to Sierra Health, as the initiative’s trustee, for the use of those revenues.
2330 Alhambra Boulevard
The 8,900 sq.ft. building has been purchased for the initiative. Originally it was going to serve as the home for the Heritage Peak Charter School which had to be relocated from the Broadway building if purchased. Since the Broadway building is no longer to be purchased as part of this transaction and the Alhambra building is outside of the technical boundaries of the Oak Park project area, the building has to be used for a purpose that benefits the Oak Park project area. All costs associated with the rehabilitation of the building will be borne by Sierra Health since Oak Park funds cannot be used to rehabilitate a building outside the project area.
2925 34th Street
Sierra Health Foundation has under contract a 4,465 sq. ft. building located at 2925 34th Street in Sacramento which they envision using for the Oak Park project. Since the price of this building and the anticipated rehabilitation costs are lower than the original Broadway building, a balance would remain allowing for additional acquisitions as properties are identified.
Financial Considerations: The total project cost is $5,967,500. The sources and uses for the project are:
|
Proposed Uses |
City |
Sierra |
Total |
|
|
Acquisition of 3330 Alhambra |
$1,060,900 |
|
$1,060,900 |
|
|
Estimated Rehabilitation Expenses for Alhambra and General Operating Reserves |
|
$1,000,000 |
$1,000,000 |
|
|
Acquisition of 2925 34th Street (pending) |
$670,000 |
|
$670,000 |
|
|
Rehabilitation for 34th Street and Acquisition and Rehabilitation of other buildings |
$3,156,063 |
|
$3,156,063 |
|
|
Due Diligence Expenses for Alhambra/Broadway buildings |
$80,537 |
|
$80,537 |
|
|
Total Uses |
|
|
$5,967,500 |
|
|
|
|
|
SSources |
|
|
|
City |
$4,967,500 |
|
Sierra Health |
$1,000,000 |
|
Total |
$5,967,500 |
The actions outlined in this report will not result in any additional costs for the Oak Park Project (I02180300) which was established in February 27, 2018, Resolution No. 2018-0069, Section 3. In March 2016, these funds were transferred to the City via an Excess Bond Expenditure Agreement for use in conformance with the Oak Park Redevelopment Plan and Implementation Plans. The uses outlined in this report comport with those plans.
Originally the budget for the project was $5 million and $32,500 was spent to secure the option for the Alhambra building. In February, the balance of $4,967,500 was allocated to the project. Since February, $ 80,537 has been spent, leaving a remaining balance of $3,826,063. The 34th Street property has an expected closing date of December 15th, 2018, and once that property is purchased, $3,156,063 will remain for any rehabilitation of the 34th Street property and acquisitions/rehabilitations of other properties.
Since the Alhambra building is outside of the Oak Park redevelopment project area, and tax increment cannot be used for rehabilitation of the building, Sierra Health has pledged $500,000 - $1,000,000 to cover expenses related to the rehabilitation and any operating deficits.
The proposed First Amendment to the Trust and Funding Agreement for the Oak Park Project (Attachment 2) does not change the main elements of the Trust Agreement. That Agreement creates an express trust known as the “Oak Park Project Trust” under which the grantors and funders are the Sierra Health Foundation and/or The Center and the City of Sacramento, the beneficiaries are the residents of the Oak Park neighborhood and the City, and the trustee shall be The Center. The Center as trustee would own and operate the Broadway and Alhambra buildings in trust for the benefit of the beneficiaries. The Center is a public benefit corporation that is required to register with the Attorney General’s registry of charitable trusts and is subject to oversight by the Attorney General.
All net revenue generated from the lease of the buildings will be held by the Center in trust to be used for public projects and community enrichment projects within the Oak Park area (defined as the former Oak Park redevelopment plan boundaries). The advisory leadership for the Oak Park Project Trust will be a trust advisory committee that consists of members from the Oak Park Neighborhood community leadership, the City, Foundation and The Center. The trust advisory committee will provide The Center with advice about the ownership and operation of the Oak Park Project, including the criteria for the use and distribution of net revenue generated by the Oak Park Project. The trust advisory committee will be subject to the Brown Act.
The agreement includes a provision that up to 20% of the revenue generated from the buildings can be used by The Center for property and project management. These management services would include one full-time on-site Community Manager and one half- time Director for the project.
Local Business Enterprise (LBE): None