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Agenda Item
ASR
Control 20-000720 |
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MEETING DATE: |
09/15/20 |
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legal entity taking action: |
Board of Supervisors |
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board of supervisors
district(s): |
3 |
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SUBMITTING
Agency/Department: |
County Executive Office (Approved) |
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Department contact
person(s): |
Thomas A. Miller
(714) 834-6019 |
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Dr. Clayton Chau (714) 834-2830 |
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Subject: Approve Option to Lease with
Mind OC
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ceo CONCUR |
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Clerk of the Board |
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Concur |
Approved Agreement(s) and Resolution(s) |
Discussion |
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3 Votes Board Majority |
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Budgeted: N/A |
Current Year Cost:
N/A |
Annual Cost:
N/A |
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Staffing Impact: |
No |
# of Positions:
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Sole Source:
No |
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Current Fiscal Year Revenue: See Financial Impact Section
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Prior Board Action: 06/11/2019
#S1A, 01/29/2019 #S38B, 02/27/2018 #29, 12/05/2017 #49 |
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RECOMMENDED ACTION(S):
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1. |
Make the following CEQA findings: a. The City of Irvine, as lead agency under CEQA, in Irvine City Council Resolution No. 03-60, adopted on May 27, 2003, certified a Final Program Environmental Impact Report for the Orange County Great Park Annexation, General Plan Amendment, Zoning and Related Actions, SCH# 2002101020, and in Irvine City Council Resolution No. 13-132, adopted on November 26, 2013, certified a Final Second Supplemental Environmental Impact Report for the Heritage Fields Project 2012 GPA/ZC, SCH# 2002101020, which studied the environmental impacts associated with certain use of the premise. The County of Orange has reviewed and considered the Final Program Environmental Impact Report for the Orange County Great Park Annexation, General Plan Amendment, Zoning and Related Actions and Final Second Supplemental Environmental Impact Report for the Heritage Fields Project 2012 GPA/ZC and certifies that it has done so. b. There are no significant environmental effects within the jurisdiction of the County of Orange, which require a finding on the part of the County of Orange. c. The circumstances of the project are substantially the same as described in the Final Program Environmental Impact Report for the Orange County Great Park Annexation, General Plan Amendment, Zoning and Related Actions and Final Second Supplemental Environmental Impact Report for the Heritage Fields Project 2012 GPA/ZC, and no substantial changes have been made in the project, no substantial changes have occurred in the circumstances under which the project is being undertaken, and no new information of importance to the project which was not known or could not have been known when the Final Program Environmental Impact Report for the Orange County Great Park Annexation, General Plan Amendment, Zoning and Related Actions and Final Second Supplemental Environmental Impact Report for the Heritage Fields Project 2012 GPA/ZC were certified has become known. Pursuant to CEQA Guidelines section 15162 and 15168, the County of Orange is authorized to rely on the Final Program Environmental Impact Report for the Orange County Great Park Annexation, General Plan Amendment, Zoning and Related Actions and Final Second Supplemental Environmental Impact Report for the Heritage Fields Project 2012 GPA/ZC certified by the City of Irvine for the approval of the Option and form Ground Lease. |
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2. |
Adopt Resolution making certain findings pursuant to Government Code 26227 related to the approval of the Option to Lease with Mind OC relating to the potential construction, entitlement, operation, maintenance and management of the Be Well OC Wellness Hub 2, South Campus on County-owned property located at 7780, 7800, 7850, 7880, 7900, 8010 and 8226 Marine Way, Irvine. |
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3. |
Approve the Option Agreement with Mind OC, which provides an option to enter into the attendant Ground Lease upon satisfaction of conditions stated in the Option Agreement, and allows for project planning, due diligence and entitlement during the option term regarding the potential development of the Be Well OC Wellness Hub 2, South Campus, a mental health services and community wellness facility, on County-owned property located at 7780, 7800, 7850, 7880, 7900, 8010 and 8226 Marine Way, Irvine, and authorize the Chief Real Estate Officer or designee to execute the option agreements in substantial conformance with the attached forms, with approval of County Counsel, for an up to six-year option term including extensions. |
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4. |
Approve the terms and conditions of the form Ground Lease with Mind OC, which provides for a 60-year term, for the construction, operation, maintenance and management of the Be Well OC Wellness Hub 2, South Campus on County-owned property located at 7780, 7800, 7850, 7880, 7900, 8010 and 8226 Marine Way, Irvine, and authorize the Chief Real Estate Officer or designee to execute the lease agreement in substantial conformance with the attached form, with approval of County Counsel, upon satisfaction of terms and conditions of the Option Agreement with Mind OC. |
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5. |
Upon exercise of the Option for the initial-Take Down Phase by Mind OC and execution of the Ground Lease, authorize the Chief Real Estate Officer or designee to execute amendment(s) to the option and lease, as set forth in the Ground Lease, to allow subsequent Take-Down Phase(s) and their corresponding construction-related terms and conditions. |
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6. |
Authorize the Chief Real Estate Officer or designee to sign any and all necessary documents related to the entitlement, development and construction of the Be Well OC Wellness Hub 2, South Campus, as set forth in the Option Agreement and form Ground Lease, including minor modifications and amendments to the Option Agreement and form Ground Lease that do not materially alter the terms or financial obligations to the County, and perform all activities specified under the terms of Option and Ground Lease agreements. |
SUMMARY:
Approval of the Option and Ground Lease Agreements with Mind OC will result in the entitlement, construction, operation, management and maintenance of the Be Well OC Wellness Hub 2, South Campus at 7780, 7800, 7850, 7880, 7900, 8010 and 8226 Marine Way, Irvine, and expand and enhance Orange County’s shared system of behavioral health care and support by providing a second location for residents of Orange County to access Countywide behavioral health and substance use disorder services, among other related services.
BACKGROUND INFORMATION:
A priority of the 2016 Strategic Financial Plan was the creation of a campus-like setting with co-located behavioral health services that could include a crisis stabilization unit, substance use disorder treatment and crisis residential services (Wellness Campus). The County of Orange’s (County) planning process for the Wellness Campus evolved in conjunction with the creation of Be Well Orange County (OC). Be Well OC is a Countywide movement that brings together behavioral health stakeholders, both in the private and public sectors, including CalOptima, hospitals (Hoag, Providence St. Joseph Health and Kaiser Permanente, collectively, Hospitals), non-profit, academic and faith-based organizations with the goal of establishing a coordinated, Countywide behavioral health services system. By collaborating with Be Well OC, an opportunity emerged for a public-private partnership between the County and Mind OC. Mind OC is a community-owned, not-for-profit 501(c)(3) created to support the advancement of Be Well OC and strategically deliver coordinated, Countywide behavioral health services to the community.
Be Well OC
Wellness Hub 1, North Campus
To support the development and construction of Orange County’s first Wellness Campus, your Board of Supervisors (Board) authorized and approved the following actions:
- December 5, 2017, your Board authorized the Chief Real Estate Officer (CREO) to execute a Purchase and Sale Agreement with the Fountain Valley School District for the acquisition of a 2.10-acre property located at 265 S. Anita Drive, Orange (Anita Property);
- February 27, 2018, your Board approved the purchase of the Anita Property for $7,799,050 and authorized the relocation of all existing tenants;
- June 5, 2018, your Board authorized County staff to work with Mind OC to design and develop a 60,000-square-foot Be Well OC Wellness Hub on the Anita Property;
- January 29, 2019, your Board approved funding, in the amount of $16.6 million, for the design and construction of Orange County’s first Be Well OC Wellness Hub on the Anita Property (Be Well OC Wellness Hub 1, North Campus); and
- June 11, 2019, your Board approved a 60-year Ground Lease with Mind OC for the construction, development, operation, maintenance and management of the Be Well OC Wellness Hub 1, North Campus.
The Be Well OC Wellness Hub 1, North Campus is the first of three Be Well OC Regional Wellness Campuses planned for Orange County. It is currently under construction and scheduled to open in January 2021. The services and uses at the Be Well OC Wellness Hub 1, North Campus include: behavioral health services; wellness and social services; a crisis and stabilization unit; substance use disorder intake and referral; withdrawal management; crisis residential treatment; and substance use disorder and co-occurring residential treatment.
Proposed Be Well
OC Wellness Hub 2, South Campus
Development of a second Be Well OC Wellness Hub is being proposed on a 22-acre portion of the County’s property located in the southern edge of the former Marine Corps Air Station (MCAS) El Toro (Be Well OC Wellness Hub 2, South Campus or Premise). Mind OC is proposing to enter into an Option Agreement, which, upon satisfaction of certain conditions stated in the Option Agreement, would allow for the lease and development of the Premise as a mental health services and community wellness facility to serve the residents of Orange County, regardless of payor. At present, the Premise contains several former MCAS warehouses and building structures that are vacant and no longer in use. During the option term, Mind OC will do all required planning and due diligence related to the possibility of developing the Be Well OC Wellness Hub 2, South Campus on the property. This will include arranging financing and exploring the possibility of utilizing Coronavirus Aid, Relief, and Economic Security Act funding for certain aspects of the development.
Mind OC acknowledges and understands that portions of the Premises are still owned in fee by the United States Department of the Navy (DON). In 2005, after the DON completed its auction of the former MCAS El Toro (Base), the DON transferred ownership of the Base, partially by deed and partially by lease, to Heritage Fields LLC (HF). The DON leased certain portions of the Base, including the Premises, to HF because further environmental remediation was required. A written lease titled Lease in Furtherance of Conveyance (LIFOC) was employed to provide site control in advance of the transfer of a fee interest in the property. Subsequent to the transfer of the Base from the DON to HF, the City of Irvine (City) entered into the Great Park Development Agreement with HF, which allowed for the transfer of certain portions of the Base, including the Premises, to the City. In connection with these transfers, HF assigned all its rights, titles and interests to the City. The City and County negotiated a sublease to transfer possession of the larger parcel, which includes the Premises, to the County. On August 17, 2010, your Board approved a Sublease Agreement by which the City subleased the parcel to the County as a precursor to transfer of fee title (City Sublease). On October 30, 2012, your Board approved and accepted a Quitclaim Deed from the City that transferred fee ownership of 60 acres to the County, and reduced the LIFOC and City Sublease acreage to 40 acres. Per the City Sublease, the County has the right to sublease the City Sublease Parcels to MindOC. MindOC has agreed to comply, at all times, with City Sublease and LIFOC requirements, per the terms of the proposed agreements.
On March 4, 2003, the County, the City and the Irvine Redevelopment Agency entered into a Property Tax Transfer and Pre-Annexation Agreement (Pre-Annexation Agreement) regarding the use of the former Base and its annexation into the City. The Pre-Annexation Agreement provided, among other things, that the City would provide the County with several parcels located at the Base for County use, including the 100-acre parcel. The Premise, which is the subject of the Option Agreement and potential future proposed lease to Mind OC, is part of an approximate 100-acre parcel of acreage transferred to the County under the Pre-Annexation Agreement. Additionally, the Pre-Annexation Agreement provides that the County can use the property for whatever use it deems suitable, and contains a non-exclusive list of uses for the property, which includes the public services-focused governmental uses of the kind, Mind OC proposes to develop.
The 100-acre parcel and a prior development plan were the subject of litigation brought by and against the County by various parties, including the City and HF. On February 19, 2020, the judge presiding over the litigation issued an order on the County’s motion for summary judgment, which ruled that implementation of the prior development plan, which involved a private, third-party developer, was not immune from regulation under the City’s land use and zoning ordinances. The judge ruled that while a governmental project could be permitted and approved by the County through its sovereign immunity, the prior development plan was subject to City regulation because its purpose was not primarily governmental or public. The ruling also pointed out that a government agency may transfer its immunity from local land use and zoning ordinances to a lessee if the use to which the lessee puts the property is primarily a public use, or furthers the governmental purposes of the lessor. In response to the court's ruling, on June 9, 2020, the Board unilaterally vacated the environmental approvals and development plan for the prior project with Lowe Enterprises.
The Project now before the Board consists of mental health, substance abuse treatment, public health services and educational uses, which Mind OC proposes to develop on the Premises. These uses are both public in nature and further the County’s governmental purpose, as stated in the 2016 Strategic Financial Plan, for providing coordinated Countywide behavioral health and substance abuse disorder services to the general public. In addition, the proposed uses are consistent with the non-exclusive list of uses explicitly identified in the Pre-Annexation Agreement.
The Be Well OC Wellness Hub 2, South Campus intends to deliver a broad continuum of health care and wellness support services in one location (Project). The Project will include a Wellness Discovery Center, Be Well Center and Community and Family Center. The Wellness Discovery Center will institute a single point of entry Navigation service to help residents find and connect with a broad range of services across the Orange County system, including suicide prevention, substance use, depression and related disorders, domestic violence, sexual assault, grief, isolation, child and elder concerns and critical incident debriefings. By leveraging state of the art digital technology (telephony, portals, electronic health records, data exchange, reporting and dashboards) and physical co-location, providers in different organizations will more effectively collaborate to establish a robust spectrum of navigation, eliminating service gaps and redundancies. This will help reduce avoidable emergency department admissions, prevents psychiatric inpatient admissions when appropriate and decreases the prevalence of incarceration. The Be Well Center will provide behavioral health and substance use services, which include Crisis Restorative Care, Mind and Body Resiliency Training, Outpatient Mental Wellness Care and Transitional Support. The Community and Family Center will provide a multi-entity health care collective including local Orange County public and private health systems and will integrate health clinics with youth and community education, enrichment and experimental learning spaces. This Project will further promote behavioral health, community wellness and resiliency for all Orange County residents.
Option Agreement
The County and Mind OC have worked diligently to finalize the terms of the Option Agreement and form Ground Lease to allow Mind OC to entitle, construct, operate, manage and maintain the Be Well OC Wellness Hub 2, South Campus on approximately 22 acres of the County’s property.
Per the Option Agreement, Mind OC may exercise the Option to lease the Premises in one or more phases (Take-Down Phases), provided that the conditions of the Option Agreement are met. During the Option Term, Mind OC and the CREO will agree, in writing, on a schedule for the Take-Down Phases as well as a legal description and description for each Take-Down Phase. When the Option is exercised for the initial Take-Down Phase, the County and Mind OC will execute the form Ground Lease, which will be amended to allow subsequent Take-Down Phase(s) and their corresponding construction-related terms and conditions.
The proposed Option Agreement has an initial option term of two years and an Option Price of $1. The option term can be extended two times with prior written approval of the CREO. Each extended option period can have a maximum term of two years, for a possible total of four additional years.
Form Ground
Lease
Term
Upon fulfillment of the conditions in the Option Agreement and exercise of the Option by Mind OC, the County and Mind OC would execute the Ground Lease Agreement (Lease), which substantially conforms to the terms and conditions of the form Ground Lease proposed for approval, to lease the Premises for the purposes of designing and constructing the Project. The Lease would have a Primary Term of 60 years and provides that if no default has occurred and remains uncured, Mind OC would have the option to extend the Primary Term of the Lease for three additional, consecutive terms of 10 years each.
Annual Rent and
Costs
In consideration of the public benefit afforded by the Project and Mind OC’s operation of the Project, the annual rent would be $1. The attached resolution makes certain findings pursuant to Government Code 26227 to permit the Board to approve the Option and execution of the Lease (after fulfillment of the conditions precedent in the Option Agreement) with Mind OC, a nonprofit entity. The Annual Rent Lease for the Primary Term would be pre-paid to the County concurrent with the execution of the Lease. Rent paid to the County will be absolute net to the County, and Mind OC will be required to pay all costs, charges, insurance premiums, taxes, utilities, expenses and assessments incurred for, against or in connection with the Premises.
Throughout the term of the Lease, Mind OC, at its sole cost and expense, will be required to:
- Pay all Operating Costs. Per the Lease, the term Operating Cost means all charges, costs and expenses related to the Premises, including, but not limited to, management, operation, maintenance, overhaul, improvement or repair of improvements and/or the Premises.
- Keep and maintain the Premises and all improvements constructed and installed on the Property in good order, condition and repair so the Premises does not deteriorate more quickly than its age and reasonable wear and tear would dictate.
Construction
The Lease would require Mind OC use reasonable efforts to commence and subsequently complete construction of the Initial Improvements on or before the dates listed in the Construction Schedule, which will be attached as Exhibit B to the Lease and will be established by mutual agreement between the County and Mind OC during the Option term. The preliminary schedule is attached to the Option Agreement as Attachment III and will be updated during the Option term and based on each Take-Down Phase.
Prior to the commencement of construction, Mind OC must provide evidence to the County that funding, as set-forth in the Project Construction Budget, is available to pay for any and all hard and soft costs to be incurred by Mind OC in connection with the design and construction of the Initial Improvements. In addition, if a Certificate of Occupancy (COO) has not been received one year prior to the Outside Date, as defined in the Lease, then, as of the Outside Date, Mind OC shall place all construction funds into an account to which the County has access. If a COO has not been received on the Outside Date, subject to force majeure delays, as defined in the Lease, then the County will have the right to assume sole and absolute control of the construction funds to complete construction of the Project.
Mind OC may not make any material changes to the Construction Drawings, Specifications, Construction Schedule, Construction Budget or the contracts with the Construction and Architect without the prior written approval of the CREO.
Compliance with CEQA: The City of Irvine, as lead agency under CEQA, in Irvine City Council Resolution No. 03-60, adopted on May 23, 2003, certified a Final Program Environmental Impact Report (PEIR) for the Orange County Great Park Annexation, General Plan Amendment, Zoning and Related Actions (SCH# 2002101020), and in Irvine City Council Resolution No. 13-132, adopted on November 26, 2013, certified a Final Second Supplemental Environmental Impact Report (SSEIR) for the Heritage Fields Project 2012 GPA/ZC (SCH# 2002101020), which studied the environmental impacts associated with certain use of the premise. The County of Orange has reviewed and considered the Final PEIR and SSEIR and has certified that it has done so. The County of Orange is authorized by CEQA Guidelines section 15162 and 15168 to rely on the Final PEIR and SSEIR certified by the City of Irvine for the approval of the proposed actions.
FINANCIAL IMPACT:
Revenue for this Lease will be deposited in Fund 135 FY 2020-21 Budget and will be included in the budgeting process for future years.
The Annual Rent of $1 per year for the 60-year Lease term will be pre-paid County concurrent with the execution of the lease.
Fiscal Year: 2020-2021
60-Year Ground Lease Rent Revenue: $60
STAFFING IMPACT:
N/A
REVIEWING AGENCIES:
Health Care Agency
OC Public Works
ATTACHMENT(S):
Attachment A - Government Code 26227
Attachment B - Resolution
Attachment C - Option Agreement with attached form Ground Lease
Attachment D - Property Location
Attachment E - Pre-Annexation Agreement