In May 2021, Sutter County completed the purchase of 125,000 square feet of commercial space on 13.3 acres at 850 Gray Avenue in Yuba City which consists of multiple commercial units, including one of which was vacated by the K-Mart corporation in 2014, and three that are occupied by commercial tenants who make lease payments to the County.

Seeking to cut expensive overhead costs for 22 County departments operating out of multiple offices scattered across Yuba City and to make access easier for customers, the Sutter County Board of Supervisors in 2017 identified consolidation of offices as a top priority. Acquisition of the Gray Avenue property was part of that strategy.

In 2017, the County acquired a long-term lease of the former Kmart space from Sears for just over $1 million. (Lease payments were $16,125 per month or $193,500 per year). Purchasing the lease at a rental rate that would not increase for the remaining term of about 30 years positioned the County to negotiate a much lower purchase price than would have been available had the lease not been in place, as validated by two separate independent appraisals of the property.
Because the County held the lease, it was able to complete purchase of the property for $8.2 million, which was more than $4 million below the appraised market value.

The property is within the city limits of Yuba City, so the County has not lost out on property taxes. The commercial businesses within the building continue to pay possessory interest tax in lieu of property tax, and the Schools, City, and County receive their proportionate share.
The property is in the City, so the County never received related sales tax. When the property was first leased in 2017, there was no tenant in the K-mart portion of the building, so no sales tax had been generated for several years. The existing commercial tenants in the building continue to pay sales tax to the city and state based upon their respective sales.

The County planned to consolidate most Health and Human Services functions in the former K-Mart space, but a near doubling of construction costs due to the COVID pandemic and post-COVID inflation posed a dilemma for the Board of Supervisors. Rather than risk having to significantly cut services in other departments to pay the debt on a construction bond, the Board decided to shelve the Health and Human Services consolidation project at this juncture and started the official process to sell the property.

The sale at market value would provide the first opportunity since 2014 that the property could again become a vibrant commercial center.
The Gray Avenue property in total, including two operating restaurants, an operating retail store, and the parking and pad space, are valuable properties. In the meantime, the County has provided additional security patrols and is maintaining the building so that its investment doesn’t lose value and tenants are not impacted.

The ongoing cost to operate the property is less than the revenue generated through leases held by the three existing retail operators, so taxpayers are not footing the bill while the property is on the market.

Sutter County is committed to seeing this property restored to a beneficial use that will add vibrancy to central Yuba City.