February 3, 2004
SUBJECT: New Childcare Provider at Raynor Facility (INFORMATION ONLY)
REPORT IN BRIEF
The City has entered into a five-year lease agreement with Maria and Ikko Fushiki a.k.a. My Dream Academy (Leasee) in order to continue operation of a childcare facility at the former Raynor School on Partridge Avenue. The current tenant, Childcare Development Centers, Inc. (CDI) notified the City on December 10th that they were in the process of selling their Raynor site business to another qualified childcare provider and that they would be vacating the premises no later than June 2004. A series of meetings then began between City staff, CDI and My Dream Academy culminating in an agreement on January 15th.
Section 2.07.030(b) of the Sunnyvale Municipal Code grants the City Manager, or his designee, the authority to sign all revenue producing leases five years or less in duration. Staff from the City Manager’s Office, City Attorney’s Office and the Public Works and Human Resources Departments have reviewed and approved the terms of the lease prior to its final execution. Under the terms of the lease, the City will receive $503,676 from My Dream Academy over the next five years.
Under the terms of the lease, the Leasee will be responsible for all routine maintenance of classrooms and playgrounds, janitorial services, and a pro rata share of utility costs. The City will be responsible for major repairwork and maintenance of ventilation, heating, plumbing, roofing, doors, windows and electrical systems.
BACKGROUND
Child Development Centers Inc. has leased a major portion of the Raynor facility to provide childcare since 1980. At that time, the City had recently purchased the Raynor School site from the Santa Clara Unified School District and had determined that there was a significant need for childcare in Sunnyvale. A portion of the site was set aside for creation of a model childcare center.
On December 10th, CDI notified the City that they would no longer be able to continue childcare operations at Raynor and had identified a potential buyer of their business. The Lessee currently owns and operates a childcare facility in Sunnyvale at 1035 Lorne Way.
DISCUSSION
The terms of the new agreement include: a five-year lease period, proper licensing from the State of California, and a requirement that the Lessee obtain accreditation within 18 months after starting operations through the National Association for the Education of Young Children to ensure quality standards are maintained.
The tenant will pay for custodial services, maintain the premises, provide routine repairs, and pay a pro rata share of utilities. The City will be responsible for major repairs to the building systems (roof, plumbing, ventilation, heating, doors, windows, and electrical.)
The agreement reflects a rate of $.85 / square foot for 9,315 square feet of classroom, bathroom, and storage space. The lease is expected to generate $503,676 over the five-year term. Patrick Henry School, which is located two blocks from the Raynor Facility, is currently leasing classroom space in the $.90 /S.F. range. The lease rate for My Dream Academy reflects a slight discount for the sub-optimal condition of the Raynor buildings.
The new lease agreement becomes effective March 1, 2004 and is scheduled to expire on February 28, 2009. Section 2.07.030(b) of the Sunnyvale Municipal Code grants the City Manager, or his designee, the authority to sign all revenue producing leases five years or less in duration.
FISCAL IMPACT
The proposed lease will generate approximately $500,000 in revenue over the five-year contract period. The revenue will be deposited in the City’s Community Recreation Fund. Costs for minor repairs at the Raynor facility have already been budgeted in the Facilities Management Division of the Parks and Recreation Department. Additionally Council approved a five-year Capital Improvement Project # 824220 beginning in FY 2003-04 to service and/or replace infrastructure components at the Raynor site. This project mitigates issues such as HVAC, electrical, plumbing, windows and other larger infrastructure repairs to maintain a safe environment for the day care center. The new lease is expected to generate an additional $180,000 over the next five years as compared with the current lease with CDI, primarily due to the additional 2 years of revenue that will be provided which would have been difficult to realize with CDI given their economic difficulties.
RECOMMENDATION
No recommendation; information only item.
Prepared by:
Michael A. Chan
City Property Manager/SeniorAdministrator
Reviewed by:
Marvin A. Rose
Director of Public Works
Reviewed by:
Robert Walker
Director of Parks and Recreation
Reviewed by:
Mary Bradley
Director of Finance
Approved by:
Amy Chan
Acting City Manager
Attachments
A. Lease Agreement with My Dream Academy for the Raynor School Site