Approve an Exclusive Negotiating Agreement with St. John's Retirement Village, including a $400,000 advance of funds secured by a deed of trust, related to the purchase of APNs 005-720-028-000 and 005-720-027-000 (135 Woodland Avenue, Woodland, CA), adopt a budget resolution for advance of funds and receive Board direction on Draft Reuse Plan of the St. John's Campus. (General fund impact to be determined) (4/5 vote required) (Rinde/Nunes)

In late January 2022, County staff were approached by facility leaders and board members of St. John's Retirement Village with an opportunity to acquire their property located at 135 Woodland Avenue in Woodland. The property has operated as a retirement community which included assisted living and memory care. The property is located in north Woodland and bounded by Woodland Avenue to the south and N. Cleveland Street to the East. The property contains the retirement village (about 9.83 developed acres) and an adjacent undeveloped parcel to the north (3.68 acres). These parcels are APN 005-720-028 and APN 005-720-027. The undeveloped parcel has been utilized by Pacific Gas & Electric (PG&E) via a temporary easement for parking and storage.  This easement expires in April and staff anticipates PG&E will be vacating the property.  On the developed parcel, it contains multiple buildings as listed below and shown in Attachment A. 

During early interactions, St. Johns leadership indicated an interest in having either the County or Dignity Health acquire the property. Dignity Health only has an interest in the Adult Day Health Center expansion on the St. John's Campus, so the County engaged in purchase negotiations with the St. John's Board.  Their interest for payment in exchange for the property is to cover their existing debt and finance the wind down costs not covered by decreasing revenue.  These amounts total $2.9M and is the price the County has agreed to in a Letter of Intent that was executed on March 18, 2022 which includes a $400,000 advance to be paid by April 15, 2022 to St. Johns, secured by a deed of trust on the property, and a remaining purchase price of $2.5M.  It is estimated that this amount is below market value, however, the timeframe of this purchase does not allow for an appraisal to be completed before closing. The improved value of the developed property in the County Assessor’s system is $13,367,281 and the undeveloped property has an assessed value of $138,052.  Although the fair market value of the property is likely to exceed the proposed $2.9M purchase price, St. Johns is willing to sell to the County at this price to allow the County to proceed with the anticipated projects on the property, outlined below, that will provide a public benefit, including working with Dignity Health to continue the planned adult day health center and other services to support seniors and the community, while also providing sufficient funds for St. Johns to pay off the 2012 loan secured by a deed of trust on the Property and wrap-up its current operations. The County’s anticipated use of the Property is also consistent with St. John's mission and the wishes of the former owners (Stolle family) who gave the property to St. Johns.

On April 26, 2022, staff will bring the recommended purchase agreement for the property.  If the Board approves the purchase agreement, the next steps are to finalize a reuse plan for each of the buildings on the campus.  Following discussions with Health and Human Services and multiple partner agencies, staff recommend the reuse of the buildings as follows:

If each of these uses materializes, the estimated monthly operating budget is illustrated below.

The potential uses for the Property outlined above will need to borrow money for the upgrades and remodel to get the facility ready for new uses.  The current loan estimate is between $1.2M and $1.7M for adding the infrastructure necessary to qualify for housing vouchers, demolishing a portion of the skilled nursing facility, creating a playground and community garden, improvements needed based on the property inspection and pest report, and general repairs to each of the buildings.

Staff have identified the following funding sources for both the purchase of the property and anticipated rehabilitation:

The County plans to utilize $400,000 of Accumulated Capital Outlay funds in order to provide the advance of funds required by the Letter of Intent and Exclusive Negotiating agreement. A budget resolution is provided in Attachment B which would authorize the appropriation and expenditure of those funds. For the remaining $2,500,000 purchase price, staff are considering whether appropriate to use some of the County's American Rescue Plan funding for this purpose which will likely be discussed later on the agenda today where an American Rescue Plan update is being provided. This funding source would be appropriate given that the facility ultimately closed due to impacts related to COVID-19 but also will primarily serve low-income housing needs which is an eligible category of ARP funding. Should the Board not be supportive of that approach, the County would need to use additional Accumulated Capital Outlay and Capital Improvement Reserve funding to complete the purchase. While available, the use of this level of ACO and CIP reserve funding may slow future investments as part of the capital improvement plan as this would use a substantial amount of those resources for this purpose. For the loan for upgrades and remodels, County staff are preparing an internal loan that would allow for borrowing of this $1.2 to $1.7 million amount from the County general fund which would be repaid over time based on the revenues from the facility. Should these revenue streams be reduced in the future or insufficient to repay the loan, the general fund would be liable for any shortfall that may materialize as a result. The County is also continuing discussions with Dignity Health on the Adult Day Health Center and capital improvements needed to site that facility. Should the construction or renovation costs be reduced, the County may request return of its pro-rata share of previously provided funds for those improvements which may also reduce funding needed for either the acquisition or site improvements. 

One component of the executed Letter of Intent and proposed Exclusive Negotiating Agreement is to advance $400,000 of the purchase to St. John's in order to fund their wind-down operations.  With declining clients and the resulting loss of revenue, there is an inability to pay existing debt service obligations and fund services for the remaining small number of St. John's clients.  There are currently two residents remaining at the facility.  This advance will allow for debt service payments and their continued care until they are relocated.  To assist St. Johns with completing the orderly closing of the residential care facility and in exchange for the exclusive right to negotiate the purchase of the property at a below market sale price, the County would advance $400,000 to St. Johns by April 15, 2022, secured by a deed of trust on the Property.  The advance would be memorialized with a promissory note secured by a deed of trust that would be forgiven if the purchase of the property successfully closes by May 15, 2022. This allows the County to advance funds to St. John's earlier, but also provides the County with the ability to recover the loan proceeds at the time the property sold to another buyer if the County opts not to buy the property based on the due diligence results or the deal falls through for any other reason.

County Counsel, Health and Human Services Agency, Yolo County Housing, Dignity, Agency on Aging Area 4, Meals on Wheels, St John's Retirement Village Board.

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