HomeMy WebLinkAboutStaff Report 2025-07-28
City of Gilroy
STAFF REPORT
Agenda Item Title: Purchase of Real Property Located at 6601 Cameron
Boulevard (APN 841-84-009) and Adoption of Resolution
Amending the Fiscal Year 2025-26 (FY26) Budget to
Appropriate $1,185,000 for the Purchase from the Water
Development Impact Fund (435)
Meeting Date: July 28, 2025
From: Jimmy Forbis, City Administrator
Department: Public Utilities
Submitted by: Heath McMahon, Public Utilities Director
Prepared by: Bret Swain, Senior Civil Engineer
STRATEGIC PLAN GOALS: Maintain and Improve City Infrastructure
RECOMMENDATION
1. Approve the purchase of real property located at 6601 Cameron Boulevard (APN
841-84-009) for $1,185,000 and associated transaction costs.
2. Authorize the City Administrator to execute the Purchase and Sale Agreement
and related documents.
3. Adopt a resolution amending the Fiscal Year 2025-2026 (FY26) budget to
appropriate $1,185,000 for the purchase of the property.
EXECUTIVE SUMMARY
Well 9 was recommended as part of the 2004 Water Master Plan and is essential to
meeting the City’s water supply demands. The location at 6601 Cameron Boulevard
has been evaluated and determined to be suitable for a municipal groundwater supply
well. Staff recommends purchase of the subject parcel (APN 841-84-009) for the
appraised value of $1,185,000.
BACKGROUND
The need for a municipal groundwater supply well in this area was identified in the 2004
Water Master Plan. In 2006, a well siting study was conducted to evaluate 16 possible
locations described in the 2004 Water Master Plan. Only two areas were determined to
be feasible for further investigation at that time: one in the Forest Street Park area
where Well 3-02 was constructed to replace Well 3, and another near the McCarthy
Business Park development east of Highway 101 near Pacheco Pass Highway.
The City made multiple attempts in the past to acquire land and develop a well in this
area. Notably, in 2008, the City made a formal offer to purchase a property located
near the corner of Holloway Road and Silacci Way for the purpose of installing a
municipal supply well. Unfortunately, the City was unable to negotiate an agreement for
the acquisition of the land with the property owners.
On September 16, 2019, the City awarded a contract to Luhdorff & Scalmanini
Consulting Engineers (LSCE) to install a test well, evaluate a possible location for Well
9 at 6601 Cameron Boulevard (Site), develop the bid package for construction of Well 9,
support acquisition of the Site, and provide engineering support during construction of
Well 9. LSCE conducted an appraisal of the site to facilitate discussions with the
owner. In October 2019, Conceptual Site Plan Alternatives were developed for the
City’s review.
On June 25, 2021, a Letter of Intent to Purchase Real Property at 6601 Cameron
Boulevard was prepared and transmitted to Joseph A. McCarthy Jr., indicating the City’s
desire to purchase the site contingent upon installation of a test well and satisfactory
results showing suitability for a municipal supply well.
On January 10, 2022, the City entered into an access agreement with McCarthy Ranch,
LLC (Owner) to install a test well to evaluate the Site and underlying groundwater
suitability for the proposed municipal supply well. The Site was determined to be
suitable.
On May 30, 2023, a Site Investigation Summary and Production Well Design
Recommendation Report was completed by LSCE, which indicated a municipal supply
well located at the Site could yield approximately 1,500 gallons per minute of water that
meets Title 22 Drinking Water standards without treatment.
In 2025, Staff initiated a re-appraisal of the Site to ascertain current value. Property
owner has expressed a desire to sell the Site to the City for the appraised value of
$1,185,000.
ANALYSIS
The City’s 2004 Water Master Plan estimated total water production capacity at 15.5
million gallons per day (MGD). During the period between 2004 and 2023, the
population of the City grew by more than 40%. Water demand as of 2023 was
estimated at approximately 16.3 MGD. Both Well 3-02 and Well 9 were planned to be
online pumping water by 2023, but Well 9 has yet to be constructed. It is imperative to
complete this well to increase water production capacity and provide resiliency to the
system. Demand by 2040 is estimated to be 24.9 MGD and two additional new wells will
need to be constructed and online by then.
The Site is an existing parcel located at 6601 Cameron Boulevard and is approximately
53,925 square feet of undeveloped land with existing street and sidewalk frontage
zoned for general industrial. The Assessor’s Parcel Number (APN) for the Site is 841-
84-009. The adjacent parcels are developed and zoned for general industrial. The Site
is adjacent to the Tractor Supply store to the north, office building to the west, an
industrial warehouse facility to the south, and Gilroy Self Storage to the east. This Site
has sufficient land area and is accessible for the intended purpose as a municipal well
site.
This project is an existing funded capital project identified in the FY24-28 Capital
Improvements Plan (CIP) as the McCarthy Site Well (Well #9), CIP No. 800050. Fees
for common area landscaping under the commercial CCRs are anticipated to be less
than $1,500 present value annually. Fees for common area paving under the retail
CCRs are anticipated to be between $5,000 to $25,000 present value, once every five
to ten years depending upon the degree of pavement maintenance required.
ALTERNATIVES
Council may alternatively:
1. Decline to approve purchase.
2. Defer action and direct staff to evaluate other alternatives.
Staff does not recommend either alternative since site suitability for new groundwater
wells is very limited, and the owner is amenable to the sale of the property at this time.
FISCAL IMPACT/FUNDING SOURCE
Funding for this property purchase of $1,185,000 was included in the FY25 budget from
the Water Development Impact Fund (435). Given that the City has entered into its next
fiscal year (FY26), the unspent funds from FY25 need to be reappropriated to now
complete the purchase in FY26. A budget amendment is included to effectuate this.
PUBLIC OUTREACH
Not applicable.
NEXT STEPS
If approved by Council, staff will execute the agreement, establish escrow, and begin
the due diligence processes to effectuate acquisition of the subject property.
Attachments:
1. Att 1 - Land Description - McCarthy Bus Prk - Lot 9 smaller
2. Att 2 - Purchase and Sale Agreement - McCarthy Lot 9 - Drft v5
3. Budget Amendment Resolution - FY26 McCarthy Well Site Purchase - July 2025