On February 7, 2017, the Board of Supervisors authorized the Sheriff-Coroner to submit a grant proposal in response to a competitive Request for Proposals ("RFP") released by the California Board of State and Community Corrections ("BSCC") to construct a 416-bed, high security facility (the "Facility") on the campus of the West County Detention Facility ("WCDF"). At the time, the Facility design totaled 118,907 square feet and included approximately 15,000 square feet of new program and medical space to compliment efforts to provide reentry and mental health services to County inmates regardless of classification.
On June 8, 2017, the BSCC funded the County's application in the amount of $70 million. Since that time, County staff has been working with various State agencies on the design of the facility, completion of a comprehensive Real Estate Due Diligence (REDD) process and other logistics related to the project grant. Over this period of time, the project scope was reduced to reflect a 106,430 square foot facility, that includes 288 beds, 96 of which are specifically designed for inmates with mental health needs. Additionally, the State notified the County of the need for clear title on those portions of the WCDF campus that would include the new Facility and underground utilities that would service the building. For that reason, staff has determined it is prudent to seek release of the entire WCDF parcel as a leased asset from the 2017 Series A lease revenue bonds and substitute in the Martinez Detention Facility (MDF). This issue is outlined more completely below:
EXISTING TITLE ENCUMBRANCES ON THE WCDF
The County has leased certain real property and the improvements thereon to the Contra Costa County Public Financing Authority (the "Authority") pursuant to a Site Lease, dated as of March 1, 2017. The Authority has issued lease revenue bonds to finance various public capital improvements for the County, and to secure the bonds, has leased certain real property and the improvements to the County pursuant to a Facility Lease, also dated as of March 1, 2017. Under the lease revenue bond construct, the County pays base rental payments to the Authority pursuant to the Facility Lease for the use and occupancy of certain facilities, including the WCDF, which rental payments are in amounts sufficient to pay debt service on the Bonds held by the Authority.
REMOVAL OF TITLE ENCUMBRANCES
Today's action proposes that the Authority enter into a First Amendment to the Site Lease to release that parcel of real property from the Site Lease consisting of the entire WCDF campus and substitute in the MDF. It is also proposed that the Authority enter into a First Amendment to the Facility Lease to delete said parcel of land from the real property leased pursuant to the Facility Lease consisting of the WCDF campus and substitute in the MDF. The release of such parcel from the Site Lease and the Facility Lease will not cause any reduction in the base rental payments of the County under the Facility Lease and the addition of the MDF property leased pursuant to the Facility Lease following such substitution will result in a fair rental value at least equal to the maximum amount of base rental payments becoming due in each fiscal year during the term of the amended Facility Lease. In addition, the release of property will not adversely affect the County’s use and occupancy of the facilities.
The proposed amendments of the Site Lease and the Facilities Lease are permitted by Section 6.09 of the Trust Agreement, dated as of March 1, 2017, pursuant to which the Bonds are issued as the amendments will accurately describe the parcels intended or preferred by the parties to be leased and will not materially adversely affect the interests of the Bondholders or result in any material impairment of the security given for the payment of the Bonds. Attached to this board order is the form of each the First Amendment to the Site and Facility Leases, which have been prepared by bond counsel in consult with the County's municipal advisor and county administration.
Negative action will result in the WCDF parcel remaining as a leased asset of the 2017 Series A lease revenue bonds. In this scenario, the State would likely not be able to issue its own lease revenue bonds against the property to fund the grant award to the County.