A portion of the Sunnyvale Golf Course is located on federally owned land. This 35.45-acre parcel is roughly triangular in shape and is landlocked by Highways 101 and 237 to the north and south and the Sunnyvale Golf Course on the west. The land is severely restricted as to development because it is located in the flight path to Moffett Federal Field. No structures of any kind are allowed in this designated "clear zone". Because of these restrictions and the lack of accessibility, the land is of limited market value. The City spent $1.1 million developing this land to accommodate four holes of the Sunnyvale Golf Course in 1968. There are no federal improvements in this area except for a series of landing approach lights.

Moffett Field was turned over to NASA in 1994. When the last lease agreement with the U.S. Navy expired in July of 1997 the City sought a renewal with NASA. It was at this time that City staff learned of NASA management’s desire to charge a more market-based rental for the property. Several City requests to meet and begin negotiations with NASA were unsuccessful.

After some time, NASA responded to the City with a proposal to receive an offset to their City water, sewer and solid waste charges. The City rejected this proposal because the annual NASA utility bill was approximately $250,000. Another period of impasse began.

NASA restarted negotiations in July 2000 by hiring an outside consultant to determine the fair market rental of the property. The consultant report recommended that 3.5%, or $85,000 of annual Sunnyvale Golf Course revenue be paid to NASA as rent. The consultant used a rate of return basis as his methodology. City staff was concerned with this approach because the City paid for all of the golf course improvements and only the City should be entitled to a return on investment of these assets.

The City hired the appraisal firm of Carnegie Bautovich in April 2001 to determine the market value of the 35 acres and to propose a fair market lease rental. In their final report, the consultant stated a 7-9 percent rate of return on a market value of $650,000 would be appropriate if certain criteria were met, among them the length of contract. (NASA had previously only offered a five-year lease period, which would indicate a lower rate of return)

NASA agreed to use the City’s proposed lease rate and lease term in October of this year. Final agreement language was agreed upon in early December.

It should be noted that concurrent with the above negotiations, the City proposed that this property be considered as surplus under the Federal Surplus Property Act. Under the provisions of this act, certain public agencies could be granted use of land for public benefit purposes at no cost. NASA did not accept this proposal.

While the new annual payment of $45,500 is significantly higher than the previous lease payment, staff believes it also represents a fair and reasonable market based rent. The annual payment for 35.45 acres equates to an annual payment of $.03 per square foot.