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June 25, 2002
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SUBJECT: |
Second Lease Amendment – Adair School Site (Senior Center) and Budget Modification No. 1 |
REPORT IN BRIEF
City Council is requested to approve a 2nd lease amendment between the City and the Sunnyvale School District (District) for the rental of the former Adair School, located at the corner of Pastoria and McKinley Avenues. For the past twenty years the Department of Parks and Recreation has leased this property in order to conduct senior activities. The current lease ends June 30, 2002. The proposed new lease is for one year (July 1, 2002 - June 30, 2003), and is for 24,528 square feet of classroom space. The proposed rental rate is $1.70 per square foot per month. This differs significantly from the current rent of $.92 per square foot per month for the following reasons: An increase in market rates for elementary school sites since the last lease agreement in 1997 The District has delayed putting the site out to bid in order to accommodate the City for an additional year The short-term nature of the lease Willingness of the City to compensate the District for avoided interim moving costs while the permanent Senior Center is being constructed Acknowledgement of the goodwill that exists between the City and District. The ability to continue senior activities without disruption Rental expense at the Adair Site will increase from $270,124 to $500,371 for FY 2002/2003 only. This increase was not included in the adopted budget for FY 2002/2003. The adopted budget includes $331,683 over two fiscal years for rental expense at the Adair Site. Staff recommends moving the entire amount into FY 2002/2003 and funding the remaining $168,688 from the General Fund Fiscal Uncertainties line. It is recommended that City Council authorize the City Manager to execute the second lease agreement with the Sunnyvale School District for the Adair Site.
BACKGROUND
Since 1982, the City of Sunnyvale has leased property from the Sunnyvale School District to house the Sunnyvale Multi-Purpose Senior Center. The property is located in the central district of Sunnyvale, across from Washington Park and within a residential neighborhood. The property consists of a former public school site of approximately 7.8 acres, including approximately 25,528 square feet of structures and improvements. Contiguous land is improved with paved/striped parking areas and landscaping. The six major buildings include four former classroom wings, one multi-purpose building with full kitchen/cafeteria and one administrative office building. The existing lease agreement was signed in 1997. Under the terms of the agreement, the City paid a rate of $.75 per square foot per month under the first year of the lease. This rate would then be inflated annually by the change in the Consumer Price Index. Effective rental rates / square foot / month in subsequent years amounted to $.77 in 1998, $.80 in 1999, $.83 in 2000, and $.92 in 2001. The lease agreement was first amended in August of 1999 in order to decrease the size of the facility, to allow the District to open a Technology Training Center in Room 403.
DISCUSSION
In addition to discussing the renewal of the present lease with the District, City staff considered a number of alternate options for a one-year relocation of the Sunnyvale Senior Center. Among the options considered were: 1.Rental of commercial office or R&D space, 2.Renovation of an existing City-owned site, and 3.Relocation to another elementary school site in Sunnyvale Upon further research all three options proved to be problematic. Commercial office space does not offer the kitchen amenities needed to conduct senior activities. Renovation of an existing City site would be very capital intensive and would require 6 months or more to complete. Relocation to another elementary site within Sunnyvale would be very disruptive to seniors. Taken all of these factors into consideration, a one-year extension of the lease at Adair was determined to be the most beneficial both to the City and to the seniors. A series of meetings began this Spring with the District in order to establish the lease amount for the second lease amendment. Based on market comparables from neighboring cities, City staff estimated a fair market rent for the Adair site in the neighborhood of $1.25 per square foot per month. However, in consideration of a variety of factors relative to the City’s and District’s long-term relationship, as well as specific circumstances related to the City’s current delivery of services at the Adair site, an additional $.45 per square foot per month was offered to the District in a letter from the Director of Parks and Recreation to the Deputy Superintendent of Schools on May 23rd. . The District accepted the City’s offer on May 28th. Many factors were considered in determining an offer of
$1.70/sf/month, including the District’s willingness to postpone going out to bid for a new lessor at this site and the disruption to existing Senior services should the Center need to relocate. A recent bid (May 21st) for the Whisman School in Mountain View indicated a fair market rental in the neighborhood of $1.88 /square foot / month was possible at Adair School. The costs and service impacts of having to move the Senior Center, setup in a new location, then move again to the permanent facility at the Community Center in one year’s time were also given serious consideration in determining the City’s offer.
FISCAL IMPACT
The annual rent for the Adair Site, which is budgeted in the City’s Community Recreation Fund (525) by the Parks and Recreation Department, is expected to increase from $270,124 per year to $500,371 per year. The adopted budget includes $331,683 over two fiscal years for rental expense at the Adair Site. Staff recommends moving the entire amount into FY 2002/2003 and funding the remaining $168,688 from the General Fund Fiscal Uncertainties line.
BUDGET MODIFICATION No. 1
FISCAL YEAR 2002/2003
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Current Budget |
Increase/(Decrease) |
Revised Budget |
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Expenditures |
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Program 640 – Leisure Services: Senior Center Lease – FY 2002/2003 |
$245,313 |
$255,058 |
$500,371 |
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Program 640 – Leisure Services: Senior Center Lease – FY 2003/2004 |
$86,370 |
($86,370) |
0 |
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Fiscal Uncertainties |
$899,514 |
($168,688) |
$730,826 |
PUBLIC CONTACT
1. Publication and posting of Council Agenda.
2. Copies of this report are available to the public in the Library and on the City of Sunnyvale internet home page.
ALTERNATIVES
1. Approve the second lease amendment as presented.
2.
Identify other facility options for all or part of the Senior Center
RECOMMENDATION
Staff recommends that Council approve Alternative No. 1 and authorize the City Manager to execute a second lease agreement with the Sunnyvale School District to lease 24,528 square feet of classroom space at the Adair Site for one year. Prepared by: Michael Chan Reviewed by: Marvin A. Rose Reviewed by: Robert Walker Reviewed by: Mary J. Bradley Director of Finance Approved by: Robert S. LaSala City Manager
Property Manager
Director of Public Works
Director of Parks and Recreation
2nd Lease Amendment
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