DATE: OCTOBER 10, 2005

TO: CITY COUNCIL

FROM: CITY MANAGER

SUBJECT: APPROVAL OF THE BUSINESS TERMS FOR THE MEMORANDUM OF
UNDERSTANDING (M.O.U.) BETWEEN THE CITY OF PASADENA AND
SMV TECHNOLOGY PARTNERS LLC.

RECOMMENDATION

Find and determine that the approval of the business terms included in the
Memorandum Of Understanding (M.O.U.) between the City of Pasadena and SMV
Technology Partners LLC is exempt from the California Environmental Quality Act
("CEQA") pursuant to Section 15061 (b)(3) of the State CEQA Guidelines because the
activity undertaken by SMV Technology as a result of the M.O.U. will not have a
significant impact on the environment.
It is recommended that the Pasadena City Council:
1) approve the business terms presented in this report;
2) authorize the City Manager to execute the Memorandum Of Understanding (M.O.U.)
   which incorporates the business terms;
3) instruct staff to negotiate a Development Agreement between the City of Pasadena
   and SMV Technology Partners LLC consistent with the M.0.U; and
4) appropriate $2.64 million to CIP project number 75939. Of this $2.64 million,
   $1 million is from unanticipated revenues from commercial development impact fees
   and $1.64 million will be an advance from the Charter Capital Fund.

BACKGROUND

SMV Technology Partners LLC (the Developer) is proposing to develop a mixed use
(commercial and residential) project at the southeast corner of Sierra Madre Villa
Avenue and Foothill Boulevard, including 212 housing units and approximately 45,000
square feet of theater space. The project will redevelop two substantially vacant
properties that were previously industrial use. It is the intent of this project to further the
City's and the Developer's desire to implement the goals and objectives of the East
Pasadena Specific Plan.

Adopted in 2000, the East Pasadena Specific Plan is one of seven specific plans called
for in the 1994 Land Use Element of the General Plan to direct new development in the
city to areas along major corridors and adjacent to the Gold light rail stations. The
specific plan is divided into three sub-areas: Sub-area d l - Foothill; Sub-area d2 -
Foothill, Rosemead, Sierra Madre Villa; and Sub-area d3 - Hastings RanchIFoothill-
Rosemead Shopping Center Area. The proposed site is located in Sub-area d2.
Since future levels of traffic are a major concern in the East Pasadena Specific Plan,
interim limits were placed upon non-residential and residential development until
improvements to Walnut Street and Kinneloa Avenue are completed. This site is
located in sub-area d2 and under the interim limits, 188 units were allocated to this
area. This is increased to 400 units provided the improvements are constructed. 188
units have been permitted. Therefore the proposed project could only proceed if the
improvements are completed. The total cost for the improvements, including design, is
$3,240,000 of which $600,000 has already been funded, leaving $2,640,000 to be
funded.

The project is a private endeavor with the Developer providing $1,000,000 of the
funding of the total cost of the improvements to Walnut Street and Kinneloa Avenue, for
a total project cost of $2,640,000 and the City advancing the remaining $1,640,000 of
the project costs. It is anticipated that as development occurs in the area, developers
will contribute their fair share to this project and the City will be reimbursed. In addition,
the developer will be contributing a portion of the site for the development of a
performance and educational theater complex consisting of approximately 350 seats
together with administration, educational, rehearsal, storage and other related back-ofhouse
areas. This portion of the site project includes the historic Stuart Pharmaceutical
Company building which will require that the project be developed in a manner that is
consistent with the Secretary of the Interior's Standards for Historic Preservation.
If this M.O.U. is approved, the City of Pasadena intends to negotiate a Development
Agreement with the Developer which if approved, would permit the Developer the right
to develop a total of 212 housing units (including the 15% inclusionary housing
requirement) as provided in the East Pasadena Specific Plan. The business terms to
be included in the Memorandum of Understanding and subsequent Development
Agreement are included in Attachment A of this report. During the negotiating period
staff will also undertake an environmental evaluation of the site pursuant to the
California Environmental Quality Act.

FISCAL IMPACT

The total cost of this project is projected to be $3.24 million. The City has already
appropriated $600,000 in gas tax and commercial developer fees towards this project.
In addition, SMV's share will be $1 million. In order to complete this project, the City will
advance the $1.64 million shortfall from the Charter Capital Fund. It is anticipated that
the City will be repaid this amount over the next five to seven years as other
development projects come online andlor gas tax funds become available. It is
projected that by advancing these funds to the project, the City's General Fund will lose
approximately $50,000 to $75,000 annually in interest income.

Respectfully submitted,
(signed for)
Cynthia J. Kurtz, City Manager
Prepared by:
(signed for)
Leon White, Project Planner
Approved by:
(signed for)
Richard Bruckner, Director Planning & Development


ATTACHMENT A

The following business terms will be included in the Memorandum Of
Understanding (M.O.U.). Subsequent to this M.O.U., the developer and City of
Pasadena shall diligently negotiate a development agreement which shall be
subject to the California Environmental Quality Act (CEQA).

1. Developer will provide $1,000,000 to support the improvements to Walnut
Street and Kinneloa Avenue and the City shall contribute $1.64 million.

2. Developer has informed and represented to the City that a well known
Theater Company is interested in relocating to the subject site and
occupying the Theater Portion of the Project. If for any reason the Theater
Company does not enter into a lease for the Theater Portion, the
Developer will offer the space for use by a tenant which provides a public
benefit, all subject to the reasonable approval of the City.

3. Developer agrees and understands that it is the City's intention to assure
the Theater Portion is utilized for a purpose that is beneficial to the City
and its residents. In the event Theater Company does not enter into a
lease for the Theater Portion, the City shall be entitled at the City's option,
to lease the Theater Portion on the same terms and conditions as those
offered to Theater Company for such period of time (the "interim lease
term") that is required for City to identify and secure a replacement non-
profit or community service tenant acceptable to Developer. City agrees
that any such replacement tenant shall be subject to approval by
Developer. Developer's approval shall not be unreasonably withheld.

4. The Developer will meet the inclusionary housing requirement on site.

5. The occupying Theater Company will be obligated under the lease of the
Theater Portion to provide opportunities for partnership with Pasadena
Unified School District under terms reasonably acceptable.

6. The Developer will conform with the City's First Source Ordinance.

7. The Developer will be responsible for securing all land use entitlements,
paying applicable fees and securing permits for the project.

8. The City will reserve exclusively to the Developer the remaining 212
housing units allocated to sub area d2 as provided in the East Pasadena
Specific Plan. The said 212 units will include the 15% inclusionary
housing requirement.

In processing and approving the development entitlements for the
development of the Project, the City will recognize densities as set forth in
the East Pasadena Specific Plan relating to the Site.

The Developer will submit, as part of the Development Agreement, a Site
Plan of the proposed development including the Residential and Theater
Portion. The Site Plan will identify the building footprint and building
envelope for the proposed buildings.

The City will cooperate with, and support, the efforts of the Developer and
Theater Company to obtain parking from the adjacent MTA garage to
accommodate parking necessary for the operation of the Theater, and the
City will count that location of parking as satisfactory for the operation of
the Theater.