City Council Agenda
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Memo to: |
Manteca City Council |
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From: |
Toni Lundgren, City Manager |
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Prepared by: |
Vanessa Carrera, Deputy Director - Economic Development; Brad Wungluck, Director of Development Services; City Attorney's Office |
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Date: |
November 17, 2026 |
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Subject: |
Approval of Purchase Agreement with Drake Manteca LLC for the Sale of City-Owned Property located at 1403 W. Atherton Drive; Surplus Land Act, General Plan Conformity, CEQA Determinations. |
Recommendation:
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Adopt a resolution 1) finding that the City has complied with the Surplus Land Act (Government Code Section 54220 et seq.) with respect to the property at 1403 W. Atherton Drive; 2) finding that the Planning Commission has reported that the proposed disposition conforms to the City's General Plan under Government Code Section 65402; 3) Determining that approval of the Purchase Agreement does not commit the City to approve any development project and that environmental review under the California Environmental Quality Act (CEQA) will be completed before the City takes any discretionary action on Buyer's project; 4) Approving the Purchase Agreement with Drake Manteca LLC, a Colorado limited liability company, for a purchase price of $4,000,000; and 5) authorizing the City Manager to execute the Purchase Agreement, the Grant Deed, the Memorandum of Condition Subsequent and Power of Termination, and all related escrow and closing documents, in a form approved by the City Attorney.
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Background:
In January 2024, the City purchased property located at 1403 W. Atherton Drive (APN 226-16-022), consisting of approximately 3.85 acres, for $2.2 million using General Fund reserves. In July 2026, a lot line adjustment transferred approximately 0.15 acres to the adjacent parcel at 1565 W. Atherton Drive (APN 226-16-003) to accommodate a future digital billboard. Following the adjustment, 1403 W. Atherton Drive now consists of approximately 3.7 acres.
In June 2026, CBRE, Inc., on behalf of Drake Real Estate LLC, submitted a letter of intent to purchase the property for the development of a build-to-suit Tesla dealership and service center. Tesla selected Drake Real Estate Services, Inc. as its developer, and Drake Manteca LLC (Buyer) is the contracting entity. On September 15, 2026, the City Council met in closed session pursuant to Government Code Section 54956.8 and provided direction to its real property negotiators regarding price and terms. The Purchase Agreement now before the Council reflects those negotiations and provides for the sale of 1403 W. Atherton Drive for $4 million.
Surplus Land Act Compliance
Before a local agency disposes of land it owns, the Surplus Land Act requires the agency to declare the land "surplus land" or "exempt surplus land" at a public meeting and to complete the related notice and reporting steps. The City has completed these steps as follows:
• On April 15, 2025, the City Council adopted Resolution No. 2025-50 declaring the property surplus land under Government Code Section 54220-54234.
• On May 19, 2025, the City sent notices of availability to the entities designated in Government Code Section 54222. No notices of interest were received within the 60-day response period.
• On November 13, 2025, the City provided the California Department of Housing and Community Development (HCD) a copy of the exempt surplus land declaration as required. HCD confirmed compliance by letter dated December 11, 2025.
Staff and the City Attorney's Office have confirmed that these steps are complete and documented in the record. The attached resolution includes the corresponding findings.
General Plan Conformity
Government Code Section 65402 requires the Planning Commission to report on whether a proposed disposition of City real property conforms to the General Plan. On November 5, 2026, the Planning Commission adopted Resolution No. PC 2026-42 finding that the disposition of the property conforms to the General Plan (Attachment 4).
Summary of the Purchase Agreement
• Price and deposit: $4,000,000. A $100,000 deposit is due within three business days after the Effective Date and is refundable during the inspection period, except $100 of independent consideration.
• Effective Date: The Agreement is not binding until the City Council approves it and the City Manager signs it after Buyer.
• Inspection period: 240 days, with up to three 30-day extensions. Each extension requires a $25,000 deposit that is non-refundable, except on City default, and is credited to the price. Buyer must file complete land use applications within 75 days.
• Closing: Within 30 days after the inspection period ends, through Fidelity National Title. Closing is conditioned on Buyer's land use approvals being final and no longer subject to legal challenge.
• Remedies: If Buyer defaults, the City keeps the deposit as liquidated damages. If the City defaults, Buyer's sole remedy is return of the deposit and reimbursement of documented third-party costs up to $350,000. Buyer waives any right to compel the City to convey the property (specific performance). Denial or delay of an approval is not a City default.
• Construction obligations: Buyer must start vertical construction within 12 months and substantially complete the project within 30 months after closing, with force majeure extensions of up to 6 months. If Buyer does not, the City may take back the property and refund the purchase price, less removal costs and liens. This right is subordinate to Buyer's construction lender, which has 120 days to cure. It ends when the City issues a certificate of completion and in all cases expires 30 years after the deed is recorded. Transfers before completion require City consent, except to a construction lender, an approved assignee, or a lease to Tesla.
• City protections: The property is sold AS IS. City representations are limited to the actual knowledge of two named staff members, are capped at $100,000, and survive nine months. Assignment is limited to Buyer's affiliates or Tesla, Inc. or its wholly owned subsidiary. The City expressly retains its police power and full regulatory discretion.
• Broker: The $400,000 commission to CBRE, Inc. is paid from escrow only if the sale closes. Buyer represents that it increased the purchase price to cover the commission, so the commission does not reduce the City's net proceeds.
Environmental Review (CEQA)
Approval of the Purchase Agreement is not approval of Buyer's development project. The Agreement does not commit the City to any definite course of action on the project. Section 28 preserves the City's full discretion under CEQA, including the discretion to adopt mitigation measures, consider alternatives including the no-project alternative, and deny the project. Section 26 confirms that the City enters the Agreement solely as property owner and does not limit its police power. Under Section 11, Buyer's obligation to close depends on Buyer first obtaining all required land use approvals, and those approvals will be subject to CEQA review.
Because the Agreement is expressly conditioned on future CEQA compliance and does not foreclose any alternative or mitigation, approving it does not constitute approval of a project that commits the City to the development (CEQA Guidelines Section 15004(b)(4)). Environmental review will be completed when Buyer's site plan, use permit and other entitlement applications are processed, before the City takes any discretionary action on the project. The City will not convey the property until those approvals are final.
Fiscal Impact:
If the sale closes, the City will receive a purchase price of $4,000,000. The $400,000 broker commission will be paid from escrow, leaving $3,600,000 before the City’s share of customary closing costs, including the standard owner’s title policy and transfer taxes, and any prorations. The remaining proceeds will be deposited into the General Fund.
If the City defaults under the Purchase Agreement, it must return Buyer’s deposit and reimburse Buyer for documented third-party costs, up to $350,000. The City’s post-closing liability for its representations is capped at $100,000.
Documents Attached:
1. Attachment 1 - Resolution
2. Attachment 2 - Purchase Agreement with Drake Manteca LLC (with Exhibits A-D)
3. Attachment 3 - Surplus Land Act Declaration Resolution and HCD Correspondence
4. Attachment 4 - Planning Commission Resolution No. 2026-42 (General Plan conformity)