The Declaration of Covenants, Conditions, Restrictions and Easements for Victorian Square (“CC&Rs”) were adopted on February 7, 1997 by the City of Sparks.  A copy is attached.  They apply to certain parcels within the Victorian Square project area, a six square block area that was adopted pursuant to the Town Center Redevelopment Plan (“Redevelopment Plan”) and, specifically, the 1993 “Phase III” amendments to the plan.  The Redevelopment Plan was subsequently amended in 2000, 2005 and in February of 2015.

The 1993 amendments to the Redevelopment Plan led, in 1996, to the rezoning of Victorian Square and the issuance of a Special Use Permit to revitalize the area by providing a tourist and visitor oriented service and retail area.  The plan included provisions for its implementation, including the CC&Rs, to provide for the “imposition of controls within Victorian Square to insure their proper development and use”.  The CC&Rs were to be imposed by the City as it sold or otherwise transferred property to the Redevelopment Agency or other parties and was to apply to “all development uses, maintenance and operations within Victorian Square”.  Other property owners could become a party to the CC&Rs by consenting to their imposition.

The 1996 Special Use Permit has lapsed, and completion of Phase 1 of that project, as defined in the CC&Rs, never occurred.  The Victorian Square project area has been rezoned twice since 1996, most recently with a Transit Oriented Development zoning designation in 2009.  In addition, the Redevelopment Plan, as it applies to Victorian Square, has been amended three times since 1996 – in 2000, 2005 and 2015.

The Victorian Square project envisioned in 1996, and its implementation strategies, are no longer appropriate due to very different market conditions, the more constrained financial position of the City of Sparks and the Agency, and due to changes in Nevada law that limit the Agency’s ability to do further site assembly.

The CC&Rs have not been amended or rescinded, and no longer serve their intended purpose.  Abrogation (i.e., repeal or nullification) of the CC&Rs at any time, regardless of completion status, requires a written and recorded instrument approved by at least seventy-five percent (75%) of the property owners subject to the CC&Rs.  A higher standard is set by NRS 116.2118 which provides that CC&Rs in a common-interest community can be terminated upon the vote of the property owners to whom at least eighty (80) percent of the votes are allocated.

At present there are only four owners of property subject to the CC&Rs:  the City of Sparks, the Redevelopment Agency, Syufy Enterprises (own the real property leased to Cinemark) and Wolfhound Holdings LLC (owners of two vacant parcels).  The City and Redevelopment Agency are recognized in the CC&Rs as distinct entities.  The CC&Rs, however, specifically exclude the City from functioning as a voting owner of property.  A decision to abrogate the CC&Rs therefore rests on just three property owners: the Redevelopment Agency, Syufy Enterprises and Wolfhound Holdings LLC.

The CC&Rs afford each of these property owners one vote for each one-tenth (1/10) acre of property owned by that party.  At present, the Redevelopment Agency holds 74.6 percent of the votes, Wolfhound Holdings 6.3 percent and Syufy Enterprises 19.1 percent.  Both Wolfhound Holdings and Syufy Enterprises were asked to review and approve the Agreement to Abrogate, Extinguish and Terminate Declaration of Covenants, Conditions, Restrictions and Easements for Victorian Square (attached “Agreement”).  Wolfhound Holdings has agreed to terminate the CC&Rs, as reflected by their signature on the Agreement.  Syufy Enterprises did not respond to City staff’s request.  Syufy Enterprises, and all other property owners within the 1993 Victorian Square project area, were provided written notice that the Agreement would be considered by the City Council on May 11^th.

Wolfhound Holdings and the Redevelopment Agency jointly hold sufficient votes (over 80%) to enable the City Council to abrogate, extinguish and terminate the CC&Rs.  Wolfhound Holdings has granted approval The Redevelopment Agency is being asked to also approve the Agreement, which would permit the City Council to abrogate, extinguish and terminate the CC&Rs.

Alternatives include not approving the proposed agreement or providing other direction to staff.

I move to approve the Agreement to Abrogate, Extinguish and Terminate Declaration of Covenants, Conditions, Restrictions and Easements for Victorian Square.