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375 Knowles Dr. Cont. (see 8/5/14 for previous documents)1°W N p Vilr COUNCIL AGENDA REPORT DATE: SEPTEMBER 9, 2014 MEETING DATE: 09/16/14 ITEM NO: H TO: MAYOR AND TOWN COUNCIL FROM: GREG LARSON, TOWN MANAGER SUBJECT: PLANNED DEVELOPMENT APPLICATION PD -13 -002 GENERAL PLAN AMENDMENT GP -13 -001. ENVIRONMENTAL IMPACT REPORT EIR -13- 003. PROJECT LOCATION: 375 KNOWLES DRIVE. PROPERTY OWNER: COUNTY OF SANTA CLARA. APPLICANT: KT PROPERTIES. A. CONSIDER CERTIFICATION OF AN ENVIRONMENTAL IMPACT REPORT AND ADOPTION OF A MITIGATION MONITORING AND REPORTING PROGRAM. B. CONSIDER A REQUEST FOR A GENERAL PLAN AMENDMENT FROM PUBLIC TO OFFICE PROFESSIONAL. C. CONSIDER A REQUEST FOR A PLANNED DEVELOPMENT TO DEMOLISH THE EXISTING BUILDING AND TO CONSTRUCT 33 SINGLE- FAMILY RESIDENCES ON PROPERTY ZONED O. APN 406- 28 -032. BACKGROUND: On August 5, 2014, the Town Council conducted a public hearing on the proposed General Plan Amendment, Zoning Code Amendment, and Environmental Impact Report (EIR) for the subject property. Following the closing of the public hearing and Council discussion, the Council rescinded Resolution 2011 -063. The remaining items (General Plan Amendment, Planned Development, and EIR) were continued to the September 16, 2014 Council meeting. The remaining items were continued with a request to receive information from El Camino Hospital and the County of Santa Clara regarding their respective plans for their existing property assets. DISCUSSION: Per Council's request a letter was received from El Camino Hospital (Attachment 22) and the County of Santa Clara (Attachment 23). PREPARED BY: LAUREL R. PREVETTI 1 Aaft Assistant Town Manager/Dtrector of Community Development Reviewed by: N/A Assistant Town Manager bwn Attorney Finance \\1Wna \dala\DEV\tC reports\2014\375Knowles9- 16.doc Reformatted: 5/30/02 PAGE MAYOR AND TOWN COUNCIL SUBJECT: 375 KNOWLES DRIVE /GP- 13- 001/PD -13- 002 /EIR -13 -003 September 9, 2014 Following the review of this additional information the Council should continue their discussion and take action on the remaining items (General Plan Amendment, Planned Development, and EIR) as outlined in the staff report for the August 5, 2014 Council meeting. Attachment (Previously received on December 3,2013): 1. Draft Environmental Impact Report Attachment (Previously received on May 2, 2014): 2. Final Environmental Impact Report Responses to Comments Attachments 3 20 (Previously received with the Staff Report on July 31 2014): 3. Mitigation Monitoring and Reporting Program (five pages) 4. Report to the Planning Commission for the meeting of May 14, 2014 with Exhibits 3 -16 5. Desk Item Report to the Planning Commission for the meeting of May 14, 2014 with Exhibits 17 -18 6. Desk Item 2 Report to Planning Commission for the meeting of May 14, 2014 with Exhibit 19 7. Report to the Planning Commission for the meeting of June 25, 2014 with Exhibits 20 -23 (Exhibit 24, Revised Planned Development Ordinance included as Attachment 19 below) 8. Desk Item Report to the Planning Commission for the meeting of June 25, 2014 with Exhibits 25 -27 9. Information received at the June 25, 2014 Planning Commission meeting from the public and fence photographs from the applicant (nine pages) 10. Verbatim minutes from the May 14, 2014 Planning Commission hearing (96 transcribed pages) 11. Verbatim minutes from the June 25, 2014 Planning Commission hearing (72 transcribed pages) 12. Required findings (one page) 13. Report to the Town Council for the meeting of September 19, 2011 with Attachments 1 -4 (provided as background information on Council Resolution 2011 -63) 14. Council Resolution 2011 -063, including Exhibit A (two pages) 15. Draft Resolution for General Plan Amendment (two pages) with Exhibit A (GPA Exhibit — one page) 16. Public communications received from June 26, 2014 through 12:00 p.m., Thursday, July 31, 2014 17. Letter from the applicant (12 pages) 18. Neighborhood Outreach Efforts report from Applicant (one page) 19. Planned Development Ordinance (32 Pages), including Exhibit A (Rezoning Exhibit - one page) and Exhibit B (Official Development Plans - 28 pages) 20. Revised graphics package (15 Pages) PAGE 3 MAYOR AND TOWN COUNCIL SUBJECT: 375 KNOWLES DRNE /GP -13- 001 /PD -13- 002 /EIR -13 -003 September 9, 2014 Attachment (Previously received with Addendum on August 4 2014): 21. Public comments received between 12:01 p.m., Thursday July 31, 2014 and 2:00 p.m. August 4, 2014 Attachments received with this report: 22. Letter from El Camino Hospital, dated September 10, 2014 (two pages) 23. Letter from the County of Santa Clara, dated September 8, 2014 (three pages) 24. Letter from the applicant, dated September 10, 2014 (two pages) Distribution cc: Mark Tersini, KT Properties, 21710 Stevens Creek Blvd., Suite 200, Cupertino, CA 95014 Beverley Bryant, 16940 Placer Oaks Road, Los Gatos, CA 95032 Laura Worthington- Forbes, Kimley Horn & Associates, 100 W. San Fernando Street, Suite 250, San Jose, CA 95113 Bruce Knopf, County of Santa Clara, 70 W. Hedding Street, San Jose, CA 95110 El Camino Hospital, Attn: Ken King, 2500 Grant Road, Mountain View, CA 94040 LRP:JSP:cg THIS PAGE INTENTIONALLY LEFT BLANK El Camino Hospita[ THE HOSPITAL OF SILICON VALLEY 2500 Grant Road Mountain View, CA 94040 -4378 Phone: 650- 940 -7000 www.elcaminohospital.org September 10, 2014 Joel Paulson, Planning Manager Town of Los Gatos 110 E. Main Street Los Gatos, CA 95030 Dear Mr. Paulson: In response to your letter dated August 13, 2014 requesting information regarding our comprehensive plans for replacing the existing hospital and developing associated medical offices, I submit to you the following. The primary El Camino Hospital Los Gatos facilities are the Main Hospital at 815 Pollard Avenue and the Inpatient Rehab Center at 355 Dardanelli Lane. We also own the medical office properties at 777 Knowles Drive, 320, 340 and 360 Dardanelli Lane and the old courthouse property at 14205 Capri Avenue. We purchased the hospital and rehab facilities in 2009 with the knowledge and understanding that the existing facilities would require seismic upgrades in order for them to be compliant until January 1, 2030. We are nearly complete with the required seismic upgrades and we are in the process of upgrading equipment, systems and the overall patient care environment over the next few years. The total investment of these various upgrades is more than $30 million. Comprehensive plans for when and how we will replace the existing hospital facilities do not exist at this time. Our Board of Directors is faced with changes in the healthcare environment that make it difficult to predict the various influences that will shape our future facility needs and plans. Our focus remains to provide quality healthcare services to the communities we serve. Regarding the four recently purchased medical office buildings on Knowles Drive and Dardanelli Lane, it is our intention for the foreseeable future to be a good landlord and maintain the facilities accordingly. The current occupancy of these facilities is approximately 80 percent and we plan to upgrade vacant suites as necessary to attract new physician tenants. As for the old courthouse property, which was purchased prior to our acquisition of the four medical office buildings directly adjacent to the hospital campus, we have yet to develop any definitive plans for the 2.1 acre site. We originally purchased this property due to its proximity to our hospital campus and to preserve options for developing additional medical office space. Now that we own the four adjacent medical offices there is less urgency for developing this site. ATTACHMENT 22 Regarding the Town Council's consideration of the proposed development of 375 Knowles we trust in the judgment of the members to determine what is best for the Town of Los Gatos and we will support any decision that is made. Sincerely, Adz Ken King Chief Administrative Services Officer Cc: Greg Larson, Town of Los Gatos, 110 E. Main Street, Los Gatos, CA 95030 Tomi Ryba, El Camino Hospital, 2500 Grant Road, Mountain View, CA 94040 Glen Williams, County of Santa Clara, 70 W. Hedding Street, l la' Floor, East Wing, San Jose, CA 95110 Mark Tersini, KT Properties, 21710 Stevens Creek Blvd., Suite 200 Cupertino, CA 95014 County of Santa Clara Office of the County Executive County Government Center, East Wing 70 West Hedding Street San Jose, California 951 10 (408) 29 9-5105 September 8, 2014 Mr. Greg Larson Town Manager 110 E. Main St. Los Gatos, CA 91 Subject: 375 Knowles t e, Los Gatos Dear Mr. on_ RECEIVED SEP 0 9 2014 TOWN MANAGER I have the August 13, 2014 letter from Mr. Joel Paulson, Los Gatos Planning Manager addressed to Glen Williams, and am writing to respond to questions that were raised by the Mayor at the Town Council meeting of August 5, 2014 regarding the County's property at 375 Knowles Drive, Los Gatos, CA (the "Clinic Property "). It is correct to say that the Clinic Property is in escrow to be purchased by KT Properties ( "KT"). This is not an option agreement, however; it is an approved purchase contract, for which KT has already paid the County the non - refundable amount of $800,000 as a credit toward the purchase price. An additional non - refundable payment of $100,000 to extend the closing date is scheduled to be paid prior to the date of the Town Council meeting on September 16, 2014, so their investment in the property will increase to $900,000. The Board of Supervisors issued a second request for proposals and has approved two amendments to the approved Purchase and Sale Agreement in order to extend the escrow closing date in exchange for additional non- refifndable deposits. The Board has taken these stens in support of KT's desire to fully work through the entitlement process with the Town, and so that the developer would have adequate opportunity to accommodate, as he has done, all concerns and project changes requested by Town staff and the Los Gatos Town Planning Commission. If KT does not complete the purchase, KT will forfeit the full $900,000 with no recourse. It is important to put the current transaction in its historical context. The Clinic Property was purchased by the County in June 1959. The parcel is improved with an approximately 6,200 - square foot single -story structure constructed circa 1970 and previously used as a mental health clinic. This facility is located on a portion of a larger parcel that was subject to an overarching Property Transfer Agreement with the State Court System, pursuant to which the County had agreed to sell the Courthouse and the Clinic facilities. As early as October 19, 2004 the Board of Supervisors adopted resolutions declaring the Clinic Property surplus and no longer required for County purposes. Early efforts did not result in a viable purchase transaction, and the property Board of Supervisors: Mike Wasserman. Cindy Chavez, Dave Cortese. Ken Yeager, S. Joseph Simitian ATTACHMENT 23 County Executive: Jeffrey V. Smith Mr. Greg Larson Town Manager Town of Los Gatos Page 2 of 3 has sat vacant and unused for over ten years, resulting in ongoing and regular costs for maintenance and security. Over the last ten years, the County has made a concerted effort to work cooperatively with the Town to meet local needs and priorities. On October 6, 2009, the Board again adopted a resolution restating that both the Clinic and Courthouse properties were surplus and stating the County's intention to offer the properties for sale. Following several discussions with Town staff, on December 10, 2010 the Town Manager requested, and the County agreed, to forestall for six months the process of offering the property for sale on the open market. The Town requested an opportunity to explore the viability of a potential acquisition of the properties for a mixed -use project including housing, office, and civic uses. Also during this six month period, the County gave El Camino Hospital an opportunity to consider entering into a long term ground lease with the County for both properties, which they declined. On July 27, 2011 the Town of Los Gatos advised the County that it was withdrawing its interest in acquiring the properties. Subsequently, the Board of Supervisors approved issuance of Requests for Proposals for both the Clinic Property and the Courthouse Property, and bids were opened on November 29, 2011. The high bid for the Courthouse Property was made by El Camino Hospital in the amount of $3,755,999, as the only responsive bidder, and the purchase closed in June 2012. The Board of Supervisors accepted the high bid for the Clinic property by KT in the amount of $1 1,350,000. El Camino Hospital also bid for that property but their highest bid was $5,629,999. KT began working with the Town of Los Gatos upon becoming the successful bidder in order to determine what the Town would support on the site. By this time, the Town of Los Gatos had designated both properties as possible sites for its Affordable Housing Overlay Zones (AHOZ). The Clinic Property Purchase and Sale Agreement allowed KT 180 days to close escrow, during which time KT had the right to cancel the contract without penalty. KT subsequently terminated the Agreement on May 10, 2012, rather than risk $11,350,000, not knowing what would ultimately be approved by the Town. The County subsequently issued a new Request for Proposals on August 7, 2012, this time with a longer due diligence period, in order to give a successful bidder a more reasonable amount of time to determine entitlements from the Town of Los Gatos. County staff notified El Camino Hospital of the issuance of the new RFP and confirmed with them their continued interest in acquiring the property. The bids were opened on September 6, 2012. KT was the sole bidder with a bid of $10,750,000. The Board approved the purchase contract on September 25, 2012, and KT has continued working with the Town of Los Gatos to achieve a site design that the Town could approve. The Town has asked what the County will do with this site if the current escrow does not close. If that was to occur, the County will not realize the balance of the $10,750,000 purchase price, and therefore those funds will not be available to assist with meeting the needs of Santa Clara County residents. Additionally, the County General Fund will be obligated to continue to cover the cost of maintenance and security for the Clinic Property, which will continue to be an attractive nuisance for illegal dumping. Mr. Greg Larson Town Manager Town of Los Gatos Page 3 of 3 It is a Board of Supervisors decision as to how to proceed if the current purchase and sale contract terminates, and the Board has not yet discussed such a termination. Much has changed since the Board declared this property to be surplus in 2004 and in 2009, and I believe that it is unlikely that the Board would decide to reissue a new RFP to sell the property for four reasons: 1. There is no longer any need to sell the parcel, because the County has successfully sold the Courthouse portion of the site and satisfied its financial obligation under the Property Transfer Agreement with the State Court System. 2. It is unlikely that a new RFP would result in bids remotely comparable to the $10.75 million offered by KT. There were no other bids for the property in response to the 2012 RFP, and the next highest bid in 2011 came in at only slightly more than half of KT's bid, or $5.63 million. 3. There is a growing consensus on the Board to only ground lease and not sell properties. If a County property is determined to be surplus to the County's needs, long term ground lease is being considered in lieu of sale. 4. Lastly, the Board could rescind its declaration that the property is surplus, given the improved economy and the difficulty of finding new space for County program needs. The economy is stronger, in -fill locations are getting harder to find, and the County has had to take on significant new responsibilities in the last few years. The County appreciates and supports the Town's careful and deliberate review regarding a private use on this parcel. The County also supports the efforts of KT to design and build an attractive and much needed housing development on this site, and recommends that the Town approve the EIR, and grant the changes in general plan and zoning that the developer has requested, so that the full value of the Clinic Property can be achieved for all the taxpayers of Santa Clara County. I expect that this County response will be distributed to the Town Council as part of the materials for the upcoming Council meeting. Please feel free to contact me or Glen Williams, Asset Development Manager, in my office if you have any questions. Sincerely Director, Asset and rZonomic Development Copy: Joel Paulson, Planning Manager, Town of Los Gatos President Mike Wasserman, Members of the Santa Clara County Board of Supervisors Jeffrey V. Smith, County Executive Mark Tersini, KT Properties THIS PAGE INTENTIONALLY LEFT BLANK Wednesday, September 10, 2014 Mayor Steven Leonardis Members of the Town Council Town of Los Gatos 110 E. Main Street Los Gatos, CA 95030 Dear Mayor Leonardis and Members of the Town Council: My team and I are looking forward to meeting with you next week at the continued Public Hearing on the development proposal that my firm, KT Properties, Inc., has made for 375 Knowles Drive, Los Gatos. We appreciate the time that you have spent considering our plans to build 33 two -story single- family homes on the site, and look forward to your decision on the matter on Tuesday, September 16tH We have been working on the development of the property since November, 2011, and have appreciated the work that the Los Gatos Town Staff, the Planning Commission and you have done to help us to create what we believe will be a signature development in an important area of our town. We have had excellent support from surrounding residential and business neighbors, as well as others in our community, all of whom believe that our project will bring new vibrancy to the North Los Gatos area. My firm was copied on the letter that was sent to Town Manager, Greg Larson by Bruce Knopf, Director, Asset and Economic Development for Santa Clara County. I believe that it thoroughly documents our interactions and commitments to the County with regard to the 375 Knowles Drive land agreements. My letter is written today with the hope that it will be included as part of the Town's Staff Report. As of this date and time, we do not know of any response to you that has been made by El Camino Hospital. It is our understanding that the Town Staff has permitted El Camino Hospital an additional day in which to respond. KT PROPERTIES 21710 Stevens Creek Boulevard, Suite 200, Cuperonu, California 9H14 419/267 -1100 • 1w 4O8/M B620 ATTACHMENT 24 We look forward to the meeting next week, and will be available for any questions that you might have. Thank you again for your hard work on this issue. With my best regards, �- -- -- Mark E. Tersini Vice President cc: Greg Larson, Manager, Town of Los Gatos Laurel Prevetti, Director of Community Development, Town of Los Gatos Joel Paulson, Planning Manager, Town of Los Gatos Bruce Knopf, Director, Asset and Economic Development, County of Santa Clara Glen Williams, Asset Development Manager, County of Santa Clara