Hospital Board to consider approval of RPF to sell land

The Sonoma Hospital District Board will consider an agenda item at tonight’s public meeting to approve an RPF to be sent to developers interested in purchasing the vacant parcel owned by the hospital district. The meeting will be held at the Community Meeting Room, 177 First Street West, in Sonoma. The Agenda (item 8) states as follows:

Agenda Item Title: Letter Requesting Proposals for Development of the South Lot Recommendation: Management recommends that the Board send a letter all parties who may have an interest in developing the 2.83 acres of the South Lot as part of the information gathering period that the Board has requested prior to making a decision. Letters will be sent in February 2017 with proposals due by April 15, 2017. This is in line with the Board’s intention to explore potential uses for the site.

Background: The Sonoma Valley Health Care District (District) leased approximately four acres in 2007 to provide additional parking and a staging area for construction of the new wing. Located between West McArthur Street to the South, Fourth Street West to the east, Hayes Street to the west and Randolph/Arroyo Way to the north, the parcel is commonly referred to as the “South Lot.” At the time of the last lease, the District negotiated the option to purchase the land which had to be exercised before the end of August 2016. The District made the lease payments monthly and a portion was applied to the reduction of the option price.

Current Situation: In August 2016, the District exercised its option to purchase the South Lot for approximately $2 million. The District Board held a public meeting to solicit ideas for its development in October 2016. The parcel is currently zoned for residential use. In addition, the City of Sonoma requires that the hospital continue to have at least 30 additional parking spaces, and therefore at least a portion of the developed parking lot should remain in title with the District. If the entire existing parking lot is maintained, that leaves 2.83 acres of property that could be offered for other uses. Although the South Lot is zoned for residential use, the proposed offer for development does not specify that the development must be for housing. The letter requesting proposals allows the interested party the option to present any reasonable development. The invitation for written offers for the purchase and development of the South Lot will make it clear that under California law the District must receive fair market value for the sale of the property. This RFP letter is the second draft and reflects input offered at the January Board meeting.

Consequences of Negative Action/Alternative Actions: If the Board does not choose to sell a portion of the South Lot property, the hospital will need to find another source of loan repayment by August 2018. The District cannot carry a mortgage on any property. Management does not believe funds will be available from operations when the loan is due. In addition, we have discussed a possible revenue bond and it was found to not be a feasible option.

Financial Impact: 2.83 acres of land in the City of Sonoma that is zoned residential will likely bring in offers of more than $2 million. The hospital would then be able to repay the loan by August 2018 and the quarterly payments of $25,000 will cease, leading to an annual savings of $100,000.