Supes OK surplus land process: Sutter County looking to sell seven properties, including former Kmart site
Robert Summa, Appeal-Democrat, Marysville, Calif.
7 min read
Mar. 29—The Sutter County Board of Supervisors unanimously approved a recommendation Tuesday that will allow the county to possibly sell seven county properties during a time when staff are currently looking at ways to add needed funds, especially after voters rejected its tax increase measure in the November 2022 election.
Under consideration was allowing county staff to begin the "Surplus Land Act Process" for the properties, one of which has been a point of contention among critics of the county and its spending — the former Kmart shopping center along Gray Avenue in Yuba City.
The county purchased the building for $8.24 million in 2021 and financed $6.725 million of the purchase, according to previous reporting by the Appeal.
Initially identified as a potential headquarters for Sutter County Health and Human Services, in August 2022, the Sutter County Real Estate Committee discussed including commercial retail space in its plans to reutilize the former Kmart building, the Appeal previously reported.
The committee's initial plans to transfer Health and Human Services to the Gray Avenue property were halted due to a significant rise in renovation costs, Sutter County Administrator Steve Smith previously said. What was originally quoted as a $37 million project became $80 million by the beginning of the COVID-19 pandemic.
"During COVID, the cost of the project doubled and then some," Smith previously said. "We were initially looking at remodeling and constructing about 80,000 square feet of the 120,000-square-foot building, but with those costs, we had to reevaluate. Thankfully, with the increase in value with the property, it looks like we have a combination of options. We can still build, likely, a smaller facility on that land and have a developer do the rest whether it's retail or mixed-use, retail and residential."
During its effort to pass Measure A, a one cent sales tax increase that would have significantly contributed to the county's ability to pay employees competitive salaries and fund needed services, Sutter County was frequently criticized for the initial purchase of the property and its reluctance to either sell it or actually make use of it. Smith has said that even if the county were to sell off any "excess property," then that would only be a temporary solution to an ongoing revenue problem — which is exacerbated by the fact that more than 60% of the county cannot be developed because of its federal floodplain status.
Smith also countered some criticism about the county's initial purchase when he told the Appeal in late August 2022 that the property actually has a higher value now than when the county first acquired it.
"A recent market analysis shows the value of that property is approximately $14.4 million, which means the county would make a profit if sold," Smith previously said. "But that would be one-time money and would only fill the projected gap for a short period of time. This is not a viable long-term solution. Also, we would still need space for consolidation or need to remodel a current county facility. It simply is not in the best interest of the county or the community we serve to sell off property at this time. However, the county is actively pursuing development of the property and expects to have options for discussion within the next few months."
After the failure of Measure A in November 2022, the county is now in a position where it feels the sale of the Kmart property could be beneficial.
"The property was purchased in 2021 (subsequent to securing a long-term lease on 850 and 860 Gray Avenue) to house consolidated Health and Human Services programs. However, due to the pandemic, the cost of construction substantially exceeded the original estimates, making full build-out financially unfeasible without significantly impacting provision of services," the county said in a staff report. "Completing the Surplus Land Act process will allow the county to work with a developer to proceed with mixed use (likely a combination of commercial, residential, and/or governmental with a smaller HHS footprint) or sell the land and buildings outright. The county's real estate agent, Turton Commercial Real Estate (TCR), has recommended a listing price of $12.5 to $13 million if the property were to be sold outright; the price if the property were divided for mixed use would be dependent upon the structure of the split. Net proceeds from any sale would go to a combination of General Fund and Developer Impact Fees — Health & Social Services."
According to a staff report, there are a total of 49 properties owned by Sutter County. Some of those properties consist of multiple parcels for a total of 66 parcels, the county said. On Tuesday, county staff asked the Sutter County Board of Supervisors to "begin the Surplus Land Act Process for seven county-owned properties, consisting of a total of 11 parcels, to allow for future sale, increased flexibility of use and potentially consider other properties."
Those properties include the following: — Gray Avenue Complex at 812, 828, 832, 840, 850, and 860 Gray Avenue. This property is the former Kmart shopping center. — 275 Samuel Drive (airport restricted property). This is an existing county corporation yard located off Garden Highway in Yuba City, which currently houses the County's Fleet Management shop. TCR recommends a listing price of $1.1 to $1.75 million. Net proceeds would go to the Road and Airport Funds. — Closed Roads shop at 9001 Sawtelle Avenue. This property is the former Roads shop located in the unincorporated area of southern Sutter County. The property is no longer in use by the County. TCR recommends a listing price of $90,000 to $100,000. Net proceeds go to the Road Fund. — Former Animal Control at 102 Second Street (airport restricted property). This property is located adjacent to the eastern boundary of the airport and is no longer in use by the county. TCR recommends a listing price of $100,000 to $125,000. Net proceeds would go to the Airport Fund. — Lot between Garden Highway and new Animal Shelter (airport restricted property). This property is located on Garden Highway in Yuba City and is adjacent to the southwest portion of county-owned property at 190 Garden Highway. TCR recommends a listing price of $550,000 to $600,000. Net proceeds would go to the Airport Fund. — Residence at 16239 D Street, Meridian. This residential property in Meridian was repossessed by the county via a deed of trust due to an unpaid Community Development Block Grant (CDBG) loan outstanding at the time of death of the occupant/borrower. TCR recommends a listing price of $225,000 to $250,000. Net proceeds go to the CDBG Program Income Fund. — Sign Shop at 3098 Acacia Avenue, Sutter. This is an existing county corporation yard sign shop located at the corner of Acacia Avenue and Pass Road in the community of Sutter. TCR recommends a listing price of $106,000. Net proceeds would go to the Road Fund.
Of all the properties, only the Gray Avenue property would "generate proceeds" for the General Fund, the county said on Tuesday.
Assistant County Administrator Leanne Link said the Surplus Land Act requires that the county work with the California Department of Housing to "first offer the property for affordable housing and infill opportunity and then to other agencies." Link said after that process is completed, then the county can offer the property on the open market.
"The county is not obligated to accept less than market value for the property. So, we're not required to sell it at a discounted price for the required agencies," Link said. "It's important to note that no properties are being offered for sale at this time. Staff will initiate the Surplus Land Act process and we can use the broker's opinion of value to set the initial asking price for those properties. Any offers from potential buyers would have to come back to the board for consideration. In fact, this action may actually allow us more flexibility in the development of the Gray Avenue property. Not necessarily an outright sale, but different types of use that could be beneficial to the community."
During public comment on the matter, Link stressed that "the Surplus Land Act process does not compel the county to sell the property, it only makes it available for the board to make the decision to sell."
