HomeMy WebLinkAboutStaff Report 234-10TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER
DATE: JUNE 7,2010
REPORT TYPE: CONSENT
DEPARTMENT: ADMINISTRATIVE
SERVICES
CMR: 234:10
SUBJECT: Approval of Amendment No.1 to the Option Agre.ement Between the City of
Palo Alto and the Palo Alto History Museum for the Roth Building, 300
Homer Avenue, Providing for a One-Year Extension of the Option Term
RECOMMENDATION
Staff recommends that Council authorize the City Manager to execute the attached Amendment
#1 to the Option Agreement between the City of Palo Alto and the Palo Alto History Museum
(Museum), for the Roth Building located at 300 Homer Avenue. This amendment will extend
the term of the option for one year in order to provide the Museum additional time in which to
meet the conditions of the option.
BACKGROUND
In April 2000, the City Council approved the $1,957,000 purchase of the Roth Building and its
0.41 acre site for potential development as a "public facility or alternative use if a public facility
is not feasible," in conjunction with the South of Forest Avenue Coordinated Area Plan (SOFA
CAP).
On May 20, 2002, Council approved a Request for Proposals (RFP) and directed staff to solicit
proposals for the lease of the Roth Building. The RFP specified that preference be given to non
profit groups located in or serving Palo Alto, that the property by improved and operated at no
cost to the city and required public access to the Roth Building restrooms by users of the
neighboring park. In response to the RFP, one proposal was received in November 2003. The
Museum's proposal to restore, preserve and improve the historic Roth Building for use as the
Palo Alto History Museum was accepted by the Council in April 2004, at which time staff sent
the Museum a draft Option Agreement for its review. In February 2006, staff received the
Museum's proposed changes to the draft option including a request that the City contribute up to
$300,000 to repair leaking and drainage problems at the Roth building. On JulU 10, 2006,
Council created a Capital Improvement Program (CIP) for Roth Building maintenance in the
amount of $415,000 to provide funding for interim measures to prevent further deterioration of
CMR:234:IO Page 1 of4
the building until the Museum takes over the site. On May 14, 2007, Council authorized the
Mayor to execute the Option Agreement and approved a City contribution of $150,000 for repair
of the leaking and drainage problems. The Option Agreement was executed on June 22, 2007
with a twenty-four month term. A summary of the Option Agreement and Lease are attached
(Attachment B).
In January 2009, in response to the written request from the Museum citing difficulties with fund
raising due to the economic downturn, the City Manager, in accordance with the terms of the
option, granted the Museum a one-year extension of the term, to June 30, 2010.
On April 12, 2010, Council approved the nomination of the Category 2 Roth Building to the
National Register of Historic Places and transmittal of letter of support to the State Historical
Resources Commission. On April 30, 2010, the State Historical Resources Commission
recommended that the State Historic Preservation Officer (SHPO) forward the Roth
Building National Register nomination to the Keeper of the National Register for listing on the
National Register of Historic Places.
DISCUSSION
The Museum has now requested an additional extension of the Option term to June 21, 2011, to
provide more time to meet the submittal requirements outlined in the Option Agreement
(Attachment C, April 13, 2010 letter), and have paid the additional $2,000.00 deposit as required
under the terms to extend the Option.
The Option Agreement provided for an initial two-year period to satisfy the specified conditions
prior to exercising the option and entering into the lease. During the option period, the Museum
must obtain plan approvals, permits, variances and any other discretionary approvals that may be
required for the project and provide evidence of sufficient financial security to complete, operate
and maintain the project. Upon written request from the Museum, the City Manager may extend
the term of the option: 1) for a reasonable time in the event the Museum is delayed in fulfilling
the option conditions by any cause not the fault of or within the reasonable control of the
Museum; or 2) for a period not to exceed 180 days in the event the Museum is delayed in
fulfilling the conditions for any other reason. This option provision allows for the City Manager
to administratively grant one extension, which has already been granted. Therefore, any further
extensions must be approved by the City Council.
As stated in the Museum's April 13,2010 letter, the need for another option term extension is
due to the continued difficulty fundraising during the economic downturn. The letter provides an
update on the Museum's progress in both fundraising and project design development. Between
that April letter and the most recent letter, dated May 18, 2010 (Attachment D), the Museum
reports they have selected a contracting firm, obtained additional capital gifts, and due to the
current building economy and efficiencies, have reduced the current capital gift goal to $1.7
million. On May 7, 2010, the Museum's architectural team met with the City Planning
department and submitted its plans to begin the City review, approval and permitting process.
The project's LEED (Leadership in Energy and Environmental Design) design and certification
is underway with a target of Gold or possibly Platinum certification.
CMR:234:10 Page 2 of4
In summary, the Museum notes the challenge the current economy brings to fundraising but is
confident that its fundraising goal is within reach by the end of the calendar year, and that all
remaining Option conditions will be met and permits granted to enable the Museum to sign the
lease and begin construction on the rehabilitation of the building within the next twelve months.
RESOURCE IMPACT
The City of Palo Alto purchased the Roth Building at a cost of $1,957,000, spent an additional
$950,000 to retain the spine, and in 2007 an additional $150,000 to repair leaks and drainage
problems. The cost to the City,for improvements and maintenance allocated in a July 2006 CIP
was $415,000, of which approximately $152,000 has been spent in repairing roofleaks, electrical
problems, glass breakage and providing general maintenance and security. The proposed
improvements, maintenance and operation of the property during the lease term will be at no cost
to the City with the exception of the cost of maintenance and utilities for the restroom open to the
park public. The estimated armual cost to the City for restroom maintenance and utilities is
$25,000 to $30,000.
Extension of the Option will require that the City continue to provide minor maintenance to the
building such as, repairing/replacement of broken windows, repairing roofleaks, both as needed,
and providing minimal heat/ventilation in the finished areas to try to prevent further deterioration
of the finishes. The estimated cost to the City for this maintenance and periodic monitoring is
approximately $5,000 annually.
The estimated value of the proposed tenant improvements is approximately $7 million dollars,
and the entire renovation, development and operation of the Museum is to be at no cost to the
City. In exchange, the City will receive a nominal $1 per year in lease revenue for the facility
during the 40 year lease term.
POLICY IMPLICATIONS
The proposed Amendment to the Option to Lease does not represent any changes to existing City
policy.
ENVIRONMENTAL REVIEW
Extension of an option is categorically exempt from the requirements of the California
Enviromnental Quality Act under Article 19, Section 15301, existing facilities.
CMR:234:10 Page 3 of4
PREPARED BY:
MARTHA MILLER
Manager, Real Property
DEPARTMENTAL HEAD APPROVAL:
CITY MANAGER APPROVAL:
ATTACHMENTS
L Z, Director
Administrative Services
Attachment A: Amendment #1 to the Option Agreement Between the City of Palo Alto
and the Palo Alto History Museum
Attachment B: Summary of Option to Lease with Museum for Roth Building
Attachment C: April 201 0 letter from Steve Staiger, President, Palo Alto
History Museum
Attachment D: May 18,2010 Additional Status Update from Steve Staiger, President, Palo
Alto History Museum
CC: Palo Alto History Museum
CMR:234:10 Page 4 of4
ATTACHMENT A
AMENDMENT NO.1
TO OPTION AGREEMENT BETWEEN
CITY OF PALO ALTO AND PALO ALTO HISTORY MUSEUM
This Amendment No. I to the Option Agreement Between the City of Palo Alto
and the Palo Alto History Museum, dated (" Option"), is made and entered into this
__ day 2010, by and between the CITY OF PALO ALTO, a California municipal
eorporation of the State of California ("CITY"), and PALO ALTO HISTORY MUSEUM, a
California non-profit corporation ("MUSEUM").
RECITALS
WHEREAS, the Option provides for an exclusive two-year option to lease the property
located at 300 Homer Avenue, Palo Alto ("Premises"), for the purpose of developing, operating,
restoring and preserving the Premises as a History Museum ("Projeet") as described in the
Option and the lease attached thereto as Exhibit I ("Lease"); and
WHEREAS, on April 2, 2009, in response to MUSEUM'S written request outlining
difficulties raising funds for the Project due to the recent economie downturn, the City Manager,
in accordance with the terms of the option, granted the Museum a one year extension of the
term, to June 30, 2010; and
WHEREAS, on April 13, 20] 0, MUSEUM submitted a written request for an additional
one-year extension until June 30, 2011, due to the continued difficulty raising funds for the
Project during the economic downturn and to unanticipated "due diligence" required to complete
the design phase of the Project; and
WHEREAS, MUSEUM has shown progress toward fulfilling the option conditions and
desires to improve and operate the Project; and
WHEREAS, MUSEUM and CITY desire to amend the Option to provide for the Project;
NOW, THEREFORE, in consideration of their mutual covenants, the parties hereto agree
as follows:
SEC'll ON 1. Seetion 2 of the Option is hereby amended to read as follows:
"2. TERM OF OPTION.
The term of this option shall he extended to June 30,2011."
SECTION 2. Except as herein modified, all other provisions of and exhibits to
the Option shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment the day and
year first above written.
CITY OF PALO ALTO PALO ALTO HISTORY MUSEUM
By:. ____________________ __
Mayor
Its: ------------------------
ATTEST:
City Clerk
City Manager
APPROVED AS TO FORM:
Senior Assistant City Attorney
APPROVED:
Director of Administrative Services
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ATTACHMENT B
SUMMARY OF OPTION TO LEASE WITH THE PALO ALTO
HISTORY MUSEUM FOR THE ROTH BUILDING
Conditions of the Option
Term of the Option: 2 years (effective June 22, 2007)
Museum Conditions:
Prior to exercising its option to Lease the property, the Palo Alto History Museum (Museum)
must satisfY the following conditions:
1. Pay the option purchase price ($5,000).
2. Submit schematic plans for the project within twelve (12) months of the
commencement of the option.
3. Comply with all requirements of the California Enviromnental Quality Act (CEQA).
4. Receive approval of its development plans for the entire project from the
Architectural ReviewlHistoric Resources Board for SOFAl projects, the Planning &
Transportation Commission and City Council.
5. Receive approvals from the City Engineer and Chief Building Official of construction
drawings, including the construction contract form and proposed construction
schedule.
6. Receive approval from the City Manager of a long-term maintenance plan and
schedule for the building during the Lease term.
7. Receive approval of any land use permits or approvals required to implement the
project and development plans . •
8. Provide evidence to the Real Property Manager that any and all permits from any
agencies having pre-construction jurisdiction over the proposed development have
been authorized and are available.
9. SatisfY the Director of Administrative Services that the Museum has sufficient
finances or financial commitments to implement the project as approved by the City
and furnish to the Director of Administrative Services evidence that sufficient
financial security will be available to construct the project.
10. Submit to the Real Property Manager a security deposit as required by the Lease.
Terms of the Lease
LESSOR:
City of Palo Alto
TENANT:
The Palo Alto History Museum, a non-profit corporation
PREMISES:
300 Homer Avenue, Palo Alto, commonly known as the Roth Building.
PURPOSE:
The purpose of the Lease is to allow the Museum to perform the project as described in
Exhibit C to the Lease by developing and operating a museum open to the public, according
to the terms and conditions of the Lease.
TERM:
The term of the Lease is 40 years.
USES:
A. REQUIRED: Throughout the term of the Lease, the Museum shall provide the following
services, activities and uses:
I. Restoration, preservation and improvement of the Roth Building.
2. Restrooms available to the public using the adjacent City park and a community
meeting room available for use by neighborhood groups.
3. Displays, exhibits and demonstrations relating to local history.
4. All required activities shall be open to the public a minimum of 20 hours per
week and free of charge except the Museum may charge a membership fee for
members and a fee for admission to members and non-members for special
events, activities or use of facilities.
B. PERMITTED: In addition to the required uses, the following uses shall also be
permitted, but only as incidental to the required uses:
I. Workshops, classes and lectures associated with museum purposes.
2. Administrative offices and storage space to support the required services, activities
and uses under the Lease.
2
3. Fund raising activities only to support the required services, activities and uses,
including but not limited to sales of goods and gifts related to the museum use and the
hosting of benefits and social aetivities; and
4. Periodic rental of space to Palo Alto-based community groups and individuals
(including living quarters for a caretaker, dircetor, and/or curator of the Museum
building) and to for-profit organizations for corporate events unrelated to the required
services and uses for the purpose of fund-raising to support the required services and
uses. Rentals must not interfere with the obligation of Museum to provide the
required services, activities and uses.
C. OPTIONAL: Subject to the prior written approval of the City Manager, the Museum
may provide additional services and uses which are ancillary to and compatible with the
required services above, including use of the property for revenue-generating events or
operations so long as such uses do not interfere with Museum's ability to provide the
required services and uses, will not result in damage to the property, and all net revenue
generated by sueh are devoted exclusively to funding the activities of the Museum
conducted at the property.
C. PROHIBITED: Any use not authorized by the Lease.
D. SPECIAL USES:
I. Museum has the right to exclusive use the paved patio area at the rear of the
building, which shall be included in the leased area.
2 Museum has the right to temporarily close the museum operations to conduct
repairs, make alterations, change exhibits, and observe holidays and to suspend
operations for up to an aggregate of one hundred eighty (180) days in any three
(3) year period if for any reason Museum is financially unable to operate the
museum. The Museum shall provide the City with not less than tliirty (30) days'
written notice of its intention to temporarily suspend operations for any period of
time.
CONSIDERA TIONfRENT:
A. MONETARY: One Dollar ($1.00) per year, payable upon execution of the Lease and
thereafter on each anniversary date of the Lease.
B. NON-MONETARY: Development and operation of a muselun consistent with the
purpose and clauses of the Lease, at no cost to the City.
SECURITY DEPOSIT:
A $10,000 secllI'ity deposit is required which can be cash, assignment of savings account,
certificate of deposit or letter of credit.
REQUIRED IMPROVEMENTS TO BE MADE BY TENANT:
3
Required improvements are those improvements which are identified and shown in the plans
approved by the City during the option period
MAINTENANCE OBLIGATIONS OF TENANT;
Except for the publie restrooms to be maintained by the City, the Museum shall be responsible
for all maintenance and repairs on the Property in accordance with the City-approved
maintenance program to preserve the historic features of the building, including in the areas on
the northwestern and southwestern sides of the Roth building, including the sidewalk and
courtyard area.
MAINTENANCE OBLIGATIONS OF CITY;
City to maintain the public restrooms accessible from the exterior of the property, including
water and sewer lines serving the restrooms. City to also maintain all trees except for those
located on the northwestern and southwestern sides of the Roth building, including the courtyard
area. City to be responsible for property damage and pcrsooal injury occurring on or about the
public restrooms.
UTILITIES;
Museum to pay all utilities except for utilities supplied to the public restrooms, which shall be
the responsibility of the City. Museum and City shall each be responsible for the cost of
installing and maintaining its meter for its respective utilities service.
ASSIGNMENTISUBLETTING:
Assignment or encumbrance of the Lease is prohibited except if the Museum dissolves or ceases
doing business, in which case the Museum may assign its interest in the Lease to a non-profit
organization who agrees to abide by the tenns and conditions of the Lease, subject to approval
by the City. The Museum may sublease to other non-profit groups for office use and to a
museum caretaker for residential use subject to compliance with City ordinances and to approval
by the City Manager. Museum also has the right to sublease up to 25 % of the property to for
profit organizations, and portions of the property to a food service operator and a gififbook shop
so long as these uses are in support of Museum's obligation to provide the required services,
activities and uses specified in the Lease.
TAXES, ASSESSMENTS, INSURANCE:
The Museum shall be responsible for all taxes and assessments for the property and shall
maintain insurance meeting the City's standard requirements for insurance protection.
4
Palo Alto History Museum
Project Status Update
Attn: Martha Miller
April 13, 2010
ATTACHMENT C
Please consider this an update to the report dated October 15, 2009.
Fundraising:
The fundraising goal of $7.2 million dollars is, we believe, within reach by the end of the
calendar year given the nature of current activities and support.
Led by a $2 million pledge from the Peery Family Foundation, we are now looking
to close the last $3.1 million dollar gap needed to complete the restoration of the Roth
Building for purposes of relating the remarkable story of the Palo Alto-Stanford
community.
In addition to major financial commitments, the volunteer efforts of the Peery family,
Leonard Ely, and others significantly support our fundraising activities. Concluding the
fundraising this year should result in measurable construction cost savings on the $7.2
million project costs. We are favored with the generous participation of Vance Brown
Builders in keeping capital cost estimates and possibilities current as well as on-going
discussions regarding project cost reductions through value engineering.
We also anticipate finalizing an agreement with a prominent local non-profit in the
very near future which collaboration will benefit both organizations, result in an
approximate $500,000-$750,000 capital commitment, and on-going rent to support
Museum activities.
Though challenged by a difficult economy, several other possibilities are being pursued
with promise for positive outcome.
Building/ architecture:
We are in the schematic design and design development phase of the project. Ongoing
communication by the architeet team with staff should soon resolve some process questions that
remain.
The efforts of a Board committee and the arehitect's team has established the major building
elements and has also identified areas to be dedicated to programming needs for the Museum
building. With this information, we have involved the sub-consultants (structural and
mechanieall eleetrical! plumbing) in the design process.
With the Council approval of the National Register nomination, we are the next step closer to
achieving another funding goal.
Palo Alto History Museum April 13, 2010
LEED design and certification for the building are underway. A target certification level will
need to be established by the Board, but we are certain of Gold and arc looking to Platinum as a
possibility, we believe to be a first in the community for an adaptive reuse project.
The AlE team has collected a variety of technical questions (mostly code issues) and has met
with the Fire and Building Departments with the direct participation of the Public Works
Department for their input. With these major issues addressed the architeet's team has moved
forward on the technical part of the project.
Meetings have been also held with Planning, Real Estate, Parks, Utilities, Sustainability I Green
Building, and Police Departments for their timely input. Planning and Community Services have
provided input and submissions are anticipated in the near future, again, once a few process
questions are clarified.
Summary: While the economy has been a challenge of no small proportion these last
months, the additional support and interest of community members, along with the
on-going efforts of our pro bono fundraising consultant and a number of volunteers,
significant progress is being made. The unveiling of the window graphics at the Roth
Building have generated additional community interest at the building itself.
Architectural/building plans are progressing well and are being received positively.
With the economy and some unanticipated extra work to do due diligence, we are
requesting a one-year extension to complete the project and fill the gap in our local
cultural experience that the Palo Alto History Museum will filL
If you hnve any questions, please feel free to contact me.
Sincerely,
Steve Staiger
President
Palo Alto History Museum
650.322.3089,650.851.2248
sstaiger@pahistorymuseum.org
Palo Alto History Museum
Additional Project Status Update
Attn: Martha Miller
May 18, 2010
ATTACHMENT D
Since significant progress has been made since our communication just last month,
we are providing the following new information pertaining to the History Museum
projec:t:
The board unanimously agreed on a choice of contracting firms, and work is underway
coordinating their efforts with those of our architecture team.
Fundraising efforts have resulted in additional major gifts of $300,000.
Working with our newly selected contractor team to take advantage of the current
building economy as well as their skills with project efficiency combined with the
additional capital gifts, the Museum's capital gifts goal is now $1.7 million.
Additionally, plans were submitted to the City last week for architectural review.
We are very excited to present you with this updated information and look forward to
completing the vision of a place where people can come to experience our remarkable
past that paves the way for the future.
Again, should you have any questions, please feel free to-contact me.
Sincerely,
Steve Staiger
President
Palo Alto History Museum
650.322.3089, 650.851.2248
sstaiger@pahistorymuseum.org
Palo Alto History Museum May 18, 2010