HomeMy WebLinkAbout2004-06-07 City Council (15)City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:
DATE:
CITY MANAGER
JUNE 7, 2004
DEPARTMENT: ADMINISTRATIVE
SERVICES
CMR: 277:04
SUBJECT:R&T RESTAURANT CORPORATION, PALO ALTO MUNICIPAL
GOLF COURSE RESTURANT, 1875 EMBARCADEROROAD -
REIMBURSEMENT FOR IN-KIND IMPROVEMENTS
This is an informational report and no Council action is required.
BACKGROUND
On October 15, 1996, after a public bid process, Council awarded an option-to-lease for
the golf course restaurant to R&T Restaurant Corporation (R&T). On June 2, 1997,
Council approved a Budget Amendment Ordinance (BAO) in the amount of $54,000 to
provide funds for maintenance and repair of the restaurant facility and repair and
replacement of City-owned restaurant equipment. On May 1, 1998, the long-term lease
between the City and R&T commenced. Terms of the lease included a minimum annual
rent or a percentage of the gross receipts and a 10-to-20-year term, based on the value of
tenant improvements. The initial 10-year term was extended to 15 years in late 1998,
when R&T completed construction of a deck and patio extension to the restaurant at a
cost of $80,000. On October 13, 1998, the Council approved the first amendment to
reduce the minimum rent due to the loss of revenue caused by the City’s extended work
on refurbishing the golf course. The amendment to the lease also included a clarification
as to how utilities were accounted for and paid by the tenant. R&T has recently
remodeled the main serving area and relocated the bar at a cost of $120,000, which meets
the qualifications for the 20-year lease term.
DISCUSSION
During the course of the remodel and relocation of the bar, R&T encountered a leak in
the main drainage line and rotting sub-flooring in ~o areas of the restaurant. It was
easier, less expensive, and less time-consuming to have R&T’s contractor make the
repairs during the remodel than for the City to make the repairs. Estimates for the cost of
the repairs were received and verified by staff as reasonable prior to commencement of
the repair work. This cost amounted to $38,191. R&T also purchased a replacement for
the City-owned refrigerator that had failed in the amount of $6,272. R&T was able to
replace the refrigerator more quickly than the City could have at a cost equal to what the
CMR: 277:04 Page 1 of 2
City would have paid. Once again, R&T requested, and staff agreed, that the City’s
reimbursement be in the form of a rent/utility credit.
The rent/utility credit totals $44,463, representing the cost of the work and equipment
considered to be the City’s responsibility.
RESOURCE IMPACT
R&T’s rent and utility cost for fiscal year 2003-2004 is $87,146. The City expense
account will offset in the amount of $44,463. R&T will pay the minimum rent and
utility charges as per contract stipulations for April, May and June 2004, amounting to
$18,816.
PREPARED BY:
WILLIAM W. FELLMAN
Manager Real Property
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
Administrative Services
EMILY HARRISON
Assistant City Manager
cc: R&T Restaurant
CMR: 277:04 Page 2 of 2