Just Compensation and an Administrative Settlement - Metro

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Just Compensation and an Administrative Settlement - Metro Powered By Docstoc
					             Metropolitan Transportation Authority   One Gateway Plaza
                                                     Los Angeles, CA 90012-2952
                                                                                  213.922.2000 Tel
                                                                                  metro. net
                                                       FINANCE AND BUDGET COMMITTEE
                                                                     JANUARY 20, 2010




Approve Just Compensation and an Administrative Settlement in the amount of
$3,265,000 and authorize the Chief Executive Officer to acquire the fee simple interest
in Parcel MC-519, and pay escrow fees and title insurance costs associated with the


The City of Los Angeles ("City") owns a parcel of land located on the east side of La
Cienega Boulevard approximately 100 feet south of Jefferson Boulevard, totaling
approximately 54,301 square feet ("Larger Parcel"). The eastern portion of the Larger
Parcel presently houses the City's Eastern Central Interceptor Sewer Air Treatment
Facility ("ATF"), which also includes surface improvements ("Eastern Parcel"). The
western portion of the Larger Parcel is improved with subsurface pipelines and a tunnel
supporting the City's La Cienega San Fernando Valley Relief Sewer Project
("LACSFVRS Project") ("Western Parcel"). The surface of the Western Parcel is
available for construction of surface improvements which do not conflict with the
subsurface facilities.

The Mid-City/Exposition Light Rail Transit Project ("Project") identified the Western
Parcel of the Larger Parcel as Parcel MC-519. The acquisition of Parcel MC-519 is
necessary for the construction and operation of a five (5) story-parking garage ("Parking
Garage") to support the Expo La Cienega Station. Parcel MC-519 contains
approximately 29,696 square feet and is commonly known as 3410 South La Cienega
Boulevard, Los Angeles, CA ("the Property).

Extensive discussions were held between the Exposition Light Rail Authority ("Expo
Authority") and the Los Angeles Bureau of Sanitation ("LABOS"), resulting in an
agreement that the Project would acquire a fee simple interest in the Western Parcel,
and that the City would retain subsurface and access easements required to support the
 City's LACSFVRS Project. The easements include a pipeline subsurface easement, a
 bypass tunnel easement and a vent pipe utility easement ("Easements"). The City will
 retain fee simple ownership interest in the Eastern Parcel.

An appraisal was obtained to determine the fair market value of the Western Parcel as
encumbered by the Easements. A conditional offer was made to the City on January
12, 2009 in the amount of $2,820,000 based on the appraised value of the Western
Parcel. The MTA appraiser estimated the value of the Western Parcel at $95.00 per
square foot or $2,820,000 (rounded) (see attached Appraisal Summary for details),
while the Eastern Parcel was valued at $57.00 per square foot indicating a total value
for the Larger Parcel of $4,150,000.

The City rejected the conditional offer and submitted a counter offer in the amount of
$3,710,000. The City disagreed with the MTA appraiser's basic conclusion that the
Larger Property should be valued assuming two zones of value and that there was no
severance damage as a result of the acquisition. The City's position is that the entire
Larger Parcel should have been valued assuming one unitary value and concluded to a
value of $95/SF for the entire property. Furthermore, the City contends that the partial
taking resulted in diminution to the value of the remainder parcel (Eastern Parcel)
resulting in severance damage. The City estimated severance damage to be $890,000,
which represents the difference in their opinions of the value of the remainder parcel in
the Before and After Conditions.

Representatives of MTA Real Estate Department, the Expo Authority and various City
departments met to review the appraisal methodology and assumptions. Neither the
City nor MTA would agree that their position was not justified as it relates to severance
damage. It was also agreed that obtaining a third appraisal would not resolve the
differences of opinion, and the time and cost involved in obtaining a new appraisal was
not justified. Therefore, since the primary difference in the value opinions involved the
issue of severance damage, agreement was reached to split the difference in the
amount of the City's estimate of severance damages ($890,000/2 =$445,000). The
recommended purchase price for the Western Parcel is therefore, $3,265,000
($2,820,000 + $445,000 =$3,265,000).

City staff is also recommending approval of the negotiated amount. Negotiations are
underway to finalize a Purchase and Sale Agreement ("PSA"), which will document the
purchase price and other terms of the property transaction, subject to final approval of
the purchase amount.


Funds for the acquisition of Parcel MC-519 are available in the approved FY10 Budget
under Cost Center 6510, Project 800113, Metro Exposition Light Rail Transit Project,
Account No. 53103.
MC-519 Just Compensation                                                                2

 The source of funds for the Exposition Light Rail Transit Project is a combination of
 state and local fund sources. These funds are primarily not eligible for bus and rail
 operating and capital expense. No other source of funds was considered for this
 acquisition because the Board has approved the full funding plan for construction of the


The acquisition of Parcel MC-519 is required for the construction and operation of the
Parking Garage which was approved in the Final Environmental Impact
Report/Statement for the Mid-City/Exposition Light Rail Project. If this parcel is not
acquired, a new site would have to be identified which would result in substantial
construction delays and increased costs. If agreement is not reached regarding price,
the other alternative would be to attempt to acquire the property under the California
Eminent Domain laws. This alternative is not recommended as both public projects are
required and the primary dispute involves the amount to be paid for severance damage.
The recommended payment is reasonable, avoids delays to the Project, litigation and
additional legal costs.


Attachment 1 - Parcel Map
Attachment 2 - Summary of Basis for Just Compensation

Prepared by:    Velma C. Marshall
                Deputy Executive Officer - Real Estate

MC-519 Just Compensation                                                               3
Richard D. Thorpe
Chief Executive Officer
Exposition Light ail Authority

Roger:       lere
Chief, Real Prope, y Management & Development

Arthur 1. Leahy
Chief Executive Officer

MC-519 Just Compensation                        4
                                                                                                                                                                                           Attachment 1

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                                CITY OF lOS ANGELES, COUNTY        or    lOS ANGms, STATE OF CALifORNIA

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                              MID-CITY / EXPOSITION LRT PROJECT                                                                                                                                               12-06-06   ~
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                                                                       ATTACHMENT 2

                                 Parcel MC-519

 Property Owner:      City of Los Angeles, a municipal corporation

Location:             3410 South La Cienega Boulevard, Los Angeles, CA 90016
                      APN: 5047-018-901

Site Description:

The Larger Parcel is located on the east side of La Cienega Boulevard approximately
100 feet south of Jefferson Boulevard. The property has 185.41 feet of frontage on the
east side of La Cienega Boulevard and is separated from Jefferson Boulevard by the
Expo Light Rail right of way. The land area of the Larger Parcel is approximately
54,301 square feet.

The MTA is seeking to acquire the western 29,696 square feet of the Larger Parcel for
the construction and operation of a parking garage to support the La Cienega Station of
the Mid-City/Exposition Light Rail Transit Project ("Project").

The City of Los Angeles is in the process of constructing the Eastern Central Interceptor
Sewer Air Treatment Facility on the eastern portion of the Larger Parcel.

Appraisers:            John G. Ellis, MAl and William Larsen of Integra Realty
                       Resources - Los Angeles

Highest & Best Use: The appraisers indicated that highest and best use is as follows:

As vacant:             Retail commercial uses on the western portion of the Larger
                       Parcel and industrial development on the eastern portion.

As Improved:           Continued use of the eastern portion of the site with the Air
                       Treatment Facility that is currently under construction.

Zoning:                M1 - Limited Industrial Zone

MC-519 Just Compensation                                                                5
 Easements Reserved by City:

 The City needs to reserve the following subsurface easements:

    1.     A pipeline subsurface easement containing approximately 4,703 sq. ft. The
           top of the pipeline structure is approximately 40 feet below the surface of the

    2.     A bypass tunnel easement containing approximately 786 sq. ft. which varies
           from between 32 and 40 feet below the surface.

    3.     A vent pipe utility easement consisting of two portions that have a combined
           area of 1,279 square feet. LABOS will require maintenance to the vent pipe
           and will carry a restriction stating that there is a "no-build zone" above the
           vent pipe easement.

Appraisal Summary:

An independent appraisal firm was retained to appraise the subject property. The
appraisers estimated the market value of the fee simple interest in the Larger Property
using the Sales Comparison Approach. Under this approach, the appraisers researched
and analyzed five recent land sales that were considered to be sufficiently comparable
to the subject property to be used as value indicators. The sales range in size from
12,907 gross square feet to 158,710 gross square feet. Two of the sales were corner
parcels and the remaining three sales were mid-block. Three of the sales were zoned
for commercial uses while the remaining two sales were zoned industrial uses. The
adjusted sales price per square foot of the Comparable Land Sales range from a low of
$88.44 to a high of $135.08.

Based on their analysis of the comparable sales, the appraisers estimated the fair
market value of the Larger Property at $4,150,000. The appraisers valued the subject
property assuming the property has two zones of value. The western portion of the site
would have a unitary value of $95.00 per square foot while the eastern portion of the
site would have a value of $57.00 per square foot.

The appraisers considered the impact of the reserved subsurface easements on the
value of the Property and concluded that the easements did not diminish the value of
site due to the depth of the pipeline and the by-pass tunnel easement. Neither
easement would impact on the future surface development of the Property. It was also
determined that the vent pipe easement could be relocated into an existing non-
exclusive easement area for driveway and sanitary sewer and would therefore have a
nominal impact on the value of the Larger Parcel.

MC-519 Just Compensation                                                               6
 The western 29,636 square feet to be acquired for the proposed project has been
 valued at $2,820,000 or $95.00 per square foot. The appraisers determined that the
 proposed acquisition will not have a detrimental impact on the value of the remainder
 parcel and have therefore concluded that there is no severance damage as a result of
 the proposed taking.

 Final Opinions of Value

                                                          MTA              City
 A. Value of the Larger Parcel as a Whole                 $4,150,000      $5,040,000
B. Value of the Part Taken                                $2,820,000      $2,820,000
C. Value of the Remainder Parcel as Part of the           $1,330,000      $2,220,000
      Whole Before Acquisition
D. Value of the Remainder Parcel After the Taking         $1,330,000      $1,330,000
E. Severance Damage                                              $-0-     $ 890,000
F. Total Compensation for the acquisition of the          $2,820,000      $3,710,000
      Fee Simple Interest in the Part-taken (C+E)
H. Administrative Settlement                              $ 445,000       $ (445,000)
I. Recommended Purchase Price                             $3,265,000       $3,265,000

MC-519 Just Compensation                                                           7

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