AGENDA ITEM
TO: HONORABLE MAYOR
AND MEMBERS OF THE CITY COUNCIL
FROM: CARLO TOMAINO
CITY MANAGER
BY: GREG KAPOVICH
COMMUNITY DEVELOPMENT DIRECTOR
SUBJECT:
title
HERITAGE SQUARE DISPOSITION AND DEVELOPMENT AGREEMENT
summary
Summary:
The Heritage Square mixed-use project occupies the land between Cherry Avenue to the east, Rose Avenue to the west, Crescent Heights Street to the north, and East Burnett Street to the south. In 2022, the City Council approved Specific Plan 23 for the site to accommodate a mixed-use development consisting of 54 townhomes, six single-family dwellings, and 48,400 square feet of commercial space.
The City of Signal Hill owns approximately 2.4 acres of the 7.8-acre site. Under the proposed Disposition and Development Agreement (DDA), the City would sell its portion to Signal Hill Petroleum (SHP) for redevelopment. Signal Hill Petroleum submitted an offer to purchase the City owned portion of the site to advance the development of the Heritage Square project. Based on City Council direction, staff negotiated a Disposition and Development Agreement that would provide the City with $3,100,000 for the 2.4 acre portion of the property.
The Development Agreement outlines two concurrent phases for the project. The initial phase comprises 54 townhomes and six single-family dwellings, immediately followed by the construction of the commercial component in phase two. The Disposition and Development Agreement (DDA) establish an anticipated five-year timeline to complete the entitlement process, secure third-party remediation approvals, perform site cleanup, obtain building permits, and construct the project. While City staff and Signal Hill Petroleum acknowledge the schedule depends on oversight from external agencies-such as the LA County Site Mitigation Unit-both parties are committed to collaborating to advance both phases of the project as efficaciously as possible.
Staff recommends the City Council approve the proposed DDA, substantially in the form presented, to initiate the sale and redevelopment of the Heritage Square site.
Strategic Plan Goal(s):
Goal No. 1: Financial Stability: Ensure the City’s long-term financial stability and resilience.
Goal No. 3: Economic & Downtown Development: Improve the local economy, support local businesses, and create a vibrant downtown core.
Goal No. 4: Infrastructure: Maintain and improve the City’s physical infrastructure, water system, and recreational spaces.
recommendation
Recommendation:
Staff recommends the City Council approve the proposed Disposition and Development Agreement between the City of Signal Hill and Signal Hill Petroleum, for the sale of 2.4 acres of land (APNs 7214-005-900 through 904) and development of the mixed-use project known as Heritage Square.
body
Fiscal Impact:
The recommendation would have a positive impact on the City’s General Fund. At the conclusion of the proposed Due Diligence period associated with the proposed Disposition and Development Agreement, the City would receive a total of $3,100,000 in one-time funds. The development would also generate one-time development impact fees and result in a new commercial center that would add to the City’s sales tax base.
Analysis:
The Heritage Square mixed-use project serves as one of the City’s primary housing sites in the 6th cycle Housing Element. The City Council approved the Housing Element in 2022, and the Department of Housing and Community Development (HCD) certified it in October of that same year. As part of this approval, the City rezoned the Heritage Square site to the Heritage Square Central Business District Specific Plan (SP-23). This designation allows for mixed-use commercial and residential development. The City also approved development standards that establish a residential density of 60 units and 48,400 square feet of commercial space.
The 7.8-acre project site sits between Cherry Avenue to the east, Rose Avenue to the west, Crescent Heights Street to the north, and East Burnett Street to the south. The City of Signal Hill currently owns approximately 2.4 acres and intends to sell this portion to Signal Hill Petroleum. The Heritage Square Central Business District Specific Plan permits 54 townhomes, 6 single-family dwellings, and 48,400 square feet of commercial space. Under the Disposition and Development Agreement (DDA), the developer would complete the project in two phases. In the first phase, the developer would construct residential units; the second phase would focus on the commercial portion.
The Agreement (DDA) establishes an anticipated five-year timeline to complete the project. For the City Council’s information, staff has summarized key milestones and deadlines below:
|
Milestone Description |
Anticipated Deadline |
|
Due Diligence Period Completion |
February 2027 |
|
Property Purchase Payment ($3,100,000) |
March 2027 |
|
Entitlement Package Submittal |
July 2027 |
|
Entitlement Workshop |
October 2027 |
|
Planning Commission Review |
November 2027 |
|
City Council Review |
December 2027 |
|
Site Remediation Completion |
January 2029 |
|
Building Permit Issuance |
October 2029 |
|
Phase 1 Construction Start |
October 2029 |
|
Phase 1 Construction Completion |
October 2031 |
|
Phase 2 Construction Start |
April 2030 |
|
Phase 2 Construction Completion |
October 2031 |
The developer agreed to pay the City $3,100,000 to purchase the 2.4 acres of city-owned property. Additionally, the DDA outlines a property swap. In exchange for the City’s 21,123 square-foot lot at the southeast corner of Cherry Avenue and Burnett Street, the developer would provide a property of similar size and value. Staff would return to the City Council with the proposed property exchange prior to the end of the eight-month due diligence period. This exchange enables a design that ensures a seamless transition into the adjacent Crescent Heights Historic District. Specifically, the site plan would allow single-family homes on the western edge facing Rose Avenue, while strategically concentrating the project's commercial components along Cherry Avenue.
The developer must also submit a $100,000 deposit to the City upon executing the DDA. The City then affords SHP an eight-month due diligence period to perform economic market analyses, exploratory drilling, well assessments, and abatement procedures. Once this period concludes, the developer owes the City the remaining $3,000,000 balance. Over the proceeding development period, the developer proposes to amend the Specific Plan to right-size the commercial component, remediate the site’s oil well history, obtain building permits, and finish construction.
The City Council previously reviewed and considered the Heritage Square development as part of the Environmental Impact Report (EIR) (SCH No. 2021050296) prepared for the 6th Cycle Housing Element and certified the EIR on September 27, 2022. Pursuant to CEQA, when taking subsequent discretionary action in furtherance of a project for which an EIR has been certified, the lead agency is required to review any changed circumstances to determine whether any of the circumstances under the Public Resources Code section 21166 and State CEQA Guidelines section 15162 require additional environmental review. Staff evaluated approving the DDA in light of the standards for subsequent environmental review outlined in Public Resources Code section 21166, State CEQA Guidelines section 15162.
The previously certified EIR evaluated a maximum of 60 residential units and 48,400 square feet of commercial space. Although the developer intends to amend the existing entitlements, the proposed residential density remains unchanged, and the commercial square footage would remain at or below the level analyzed in the EIR. As such, the proposed project is consistent with the previously certified EIR, and under State CEQA Guidelines section 15162, no additional environmental review is required. Accordingly, no further environmental review is necessary at this time. If the developer substantially modifies or expands the project in the future, additional environmental review may be required. Based on these findings, staff will prepare and file a Notice of Determination within five (5) working days following project approval
Conclusion:
The City of Signal Hill and Signal Hill Petroleum share a mutual interest in Heritage Square. Through negotiations, the parties plan to work collaboratively on a project that meets the City’s goals: providing more housing, fulfilling Regional Housing Needs Assessment requirements, and creating new commercial opportunities for the community. Staff recommends the City Council approve the proposed DDA, substantially in the form presented, to initiate the sale and redevelopment of the Heritage Square site.
Reviewed for Fiscal Impact:
_________________________
Siamlu Cox
Attachment:
A. Disposition and Development Agreement