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HomeMy WebLinkAboutStaff Report 7177 City of Palo Alto (ID # 7177) City Council Staff Report Report Type: Action Items Meeting Date: 9/26/2016 City of Palo Alto Page 1 Summary Title: Foothill College Upcoming Vacant Space at Cubberley Community Center Title: Direction to Expand Community Use of Upcoming Space at Cubberley Community Center Following Foothill College's Planned Move and Approval of Exemption under California Environmental Quality Act From: City Manager Lead Department: Administrative Services RECOMMENDATION: Staff recommends that Council: 1. Authorize staff to amend the 1991 Cubberley Master Plan to provide for additional uses in Buildings A, B, C, D, I, J, K and P currently occupied by Foothill Community College (educational use) and apply for necessary planning entitlements to allow additional community oriented uses; 2. Authorize the City Manager to accept a lease rate of $1.00 per square foot for Avenidas to occupy up to 10,000 square feet at Cubberley to operate a temporary senior center during the renovations at 455 Bryant Street; and 3. Adopt a finding that these actions are exempt from the California Environmental Quality Act (CEQA) under Section 15301 of the CEQA Guidelines. EXECUTIVE SUMMARY In September 2016, Foothill Community College will leave the Cubberley Community Center and cease paying $1.09 million annually ($91,245 monthly) to the City’s General Fund. This presents the City with considerable space to rent and a financial shortfall to remedy. Relevant to this situation is the December 2014 agreement negotiated between the City and the Palo Alto Unified School District (PAUSD). City staff has been taking steps to lease the upcoming vacant space of approximately 39,000 square feet of exclusive and 18,485 square feet of non- exclusive space that has been occupied by Foothill College. A Request for Proposal (RFP) has been issued and various marketing steps have been taken to advertise the space. Presently responses from interested parties have been received and evaluated. Staff is in the process of notifying the selected proposers and finalizing negotiation to execute leases. City of Palo Alto Page 2 The space used by the Foothill College at Cubberley is designated as educational according to a master plan that was developed in 1991, and updated in 1996 (Attachment A). Staff is requesting to expand the uses of the space to accommodate educational, non-profit, child care, music, theater, dance and other public benefit organizations in order to create more flexibility and allow more users to move into various spaces. Furthermore, Council is asked to approve occupancy of up to 10,000 square feet of vacant space at Cubberley by Avenidas during the upcoming rehabilitation of 455 Bryant street for $1.00 per square foot which is $0.31 lower than the minimum nonprofit rent being negotiated for comparable space. BACKGROUND In 2013, Foothill College notified the City of plans to relocate its Cubberley campus to Moffet Field. Earlier this year, Foothill College formally notified the City that it will vacate all of its space at the Cubberley Community College (Cubberley) by the end of September 2016. Foothill College’s departure leaves a General Fund lease revenue gap of $1.09 million annually ($91,245 monthly). The vacated space consists of approximately 39,675 square feet that was exclusively used by Foothill College and 18,484 square feet that Foothill College shared with other occupants. A listing of Foothill College square footage and uses can be found in Attachment B. The space occupied is designated as educational per the existing Cubberley Master Plan. Table 1 below effective July 1, 2016 illustrates the lease revenue Foothill College paid each month for exclusive use of 39,675 square feet of building space. The RFP mentioned above was limited to the same 39,675 square feet formerly occupied by Foothill College. Table 1 Type Space Square Feet Revenue (Monthly) Avg. Rate Per Square Feet Exclusive Class Rooms, I & P Building 39,675 $74,006 $1.87 Non Exclusive Gym & Pavilion & Locker/shower 18,484 $17,239 $0.93 Total Revenue $91,245 There is an extensive history behind the City’s operation of the Cubberley site and the evolving lease agreements with the Palo Alto Unified School District (PAUSD) since 1989. Cubberley occupies a 35-acre site. The City owns 8 acres in the northeast corner of the site and PAUSD owns the remaining 27 acres. In December 2014, a new lease agreement, “Lease and Child Care Agreement between the City of Palo Alto and the Palo Alto Unified School District”, (CMR: 5297) was signed between the City and PAUSD. The current lease runs through December 2019. During the lease discussions the intent of Foothill College to vacate its space at Cubberley was known and provisions were adopted to clarify the consequences of this event, particularly in terms of the City’s General Fund losing $1.09 million in annual rent. According to Amendment Three (Attachment C) of the Cubberley lease with PAUSD it was agreed that when Foothill College moved all, or a significant part of their operation out of Cubberley, the City and PAUSD would split the lost revenue on an equal basis (50/50) if the City City of Palo Alto Page 3 took all necessary and appropriate steps to market the vacant Foothills space but was unable to find qualified subtenants. Generally, parties have agreed that when Foothill College moves all or a significant part of their operations from Cubberley the shared revenue loss or gain would be processed by either decreasing or increasing the City’s lease payments to PAUSD. Another provision in the agreement was that the City could elect to use Foothill College’s vacated space for its own operations and/or sublease to other, outside entities. If the City elects to use available space for its own operational activities and thereby generates no rent, PAUSD would not be responsible for paying lost revenue for this occupied space for potential lease adjustment scenarios. A Request for Proposal (RFP) was issued to the public over the summer season, to fill the significant amount of Foothill College space and to offset the revenue impact, with a variety of advertisements and marketing measures, to identify potential occupants. The Cubberley complex, zoned as a public facility, has been and continues to be a critical resource for tenants providing a variety of valued community services. Beyond Foothill College, the site houses, for example, artists, child care facilities, dance and music studios, Friends of the Palo Alto Library (FOPAL), and educational programs (Attachment D). As evidenced by the current rate structure where non-profit entities currently pay a minimum of $1.31 per square foot and for-profit entities with a public purpose pay a minimum of $2.00 per square foot. Cubberley activities and programs are restricted to organizations delivering public benefits. According to the agreement with PAUSD, when Foothill College departs at the end of September 2016, the City will have 30 days to provide PAUSD with verifiable documentation on the amount of revenue lost from Foothill College, the status of the vacated property, potential uses and occupants, and other information. As required per the tenements of the agreement with PAUSD, any new leases between the City and new subtenants cannot extend beyond the end date of the City’s current lease, December 2019. DISCUSSION The City received 28 RFP responses to lease former Foothill College leased space. The RFP allowed proposers to provide 1st, 2nd and 3rd choices for space assignments. Organizations offering a variety of services responded including dance, fitness, afterschool enrichment, and local non-profit offices among others. The Municipal Code authorizes the City Manager to award leases not to exceed five years at Cubberley. In connection with the RFP, Staff developed a set of criteria to evaluate the proposals based on public benefit, number of residents served, proposed lease rate, application completeness, and clarity of the proposals. At present the City is in the process of awarding 17 organizations space at Cubberley. The organizations and a brief description of the services they provide are included in Attachment E. It appears that staff will be able to accommodate a majority of the proposers whose applications were responsive to the RFP. City of Palo Alto Page 4 While staff is still in the process of completing the lease agreements we feel confident that the monthly lease revenue anticipated will collectively be between $67,000 and $77,000 per month ($804,000 to $924,000 annually) for the exclusive use space formerly leased by Foothill College. All non-profit organizations being awarded leased space at Cubberley will pay the minimum, $1.31 per square foot or above, with one exception Avenidas, discussed below. All for-profit organizations being awarded leased space at Cubberley will pay the minimum, $2.00 per square foot or above. The lease agreements are still tentative and discussions with new tenants about rates and specific space allocation are ongoing and expected to be completed in October. Regarding Avenidas, the City received an RFP response from Avenidas to use approximately 10,000 square feet for a temporary senior center, while Avenidas renovates the City owned building at 455 Bryant Street, which Avenidas leases from the City to provide senior services. The RFP listed $1.31 as the minimum rate for nonprofit organizations which is more than Avenidas believes they can manage. Avenidas initially offered to pay $0.75 per square foot and after further discussion with City staff increased their offer to $1.00 per square foot. Furthermore, Avenidas would only need and pay for the 10,000 square feet during their construction period, currently estimated to begin in Fall 2017, and anticipated to be complete in Spring 2019 (18 months). Allowing Avenidas to use Cubberley lets Avenidas continue to offer the many senior programs and services it currently provides at the 455 Bryant Street during the renovations. Staff is requesting that Council make the policy decision of whether Avenidas should be allowed to pay $1.00 per square foot which is $0.31 below the minimum established in the RFP for non- profit organizations. Staff recommends accepting the $1.00 per square foot proposal from Avenidas as they are an important city partner providing critical services to seniors in Palo Alto. Moreover, Avenidas is raising more than $13 million dollars to renovate and expand the City owned building at 455 Bryant Street. Lastly, even with this discount for Avenidas, the 17 organizations that will lease Foothill College’s vacated space will generate substantial lease revenue that will get close to covering if not fully cover the loss of Foothill College lease revenue to the City. The City will be renting the suite that is designated for the Avenidas use at Cubberley on an hourly basis until Avenidas’ planned move in fall of 2017. The Junior Museum and Zoo (JMZ) may also benefit from temporary use of the Cubberley space while their facility is rebuilt. Staff has preliminarily identified the Cubberley Auditorium (the same auditorium used to temporarily house the Mitchell Park Library during its rebuild) as a possible location for a temporary space for JMZ. The Auditorium does not currently generate a high level of rental income and as such, would not be a costly site to utilize for the temporary JMZ. Staff intends to return to Council this fall with an update on the plans for the JMZ. At that time we will have more information about JMZ’s needs for a temporary facility as well as renovation needs for the Auditorium once JMZ moves out. City of Palo Alto Page 5 As previously illustrated in Table 1, Foothill College used 18,484 square feet on a non-exclusive hourly basis and paid $17,239 per month. Staff anticipates that other local groups will rent these spaces (Gym A, Pavilion and Locker rooms and showers) with sufficient frequency to maintain this level of revenue generation. This is an initial projection. Staff will have more reliable revenue projections after hourly rentals occur for several months. Cubberley Master Plan In 1991, City Council approved the adoption of the Cubberley Master Plan (CMR: 249:91) and in 1996 the plan was amended (CMR:335:96, Attachment F) to provide more flexibility in leasing the A, K, L, and V buildings. When the City became the master tenant at Cubberley by entering into a lease with PAUSD, Foothill College was already operating its campus at this location. The space designation for all of the buildings that were being used by Foothill College (except building A) was Education. The Master Plan was designed to create a community center at Cubberley which would accommodate the needs of the public and create a sense of community. Proposed uses were grouped into neighborhoods according to similarity of use and facilities. The buildings that were being used by Foothill College were designated in the “Education” category since Foothill College was already operating at Cubberley when the City entered into a lease with PAUSD. Staff recommends that Council approve an expansion of the potential uses for the Foothill College vacated areas to include different types of activities such as: child care, music, theater, dance, educational and other non-profit programs. Table 2 Building Current Designated Uses Proposed Expansion of Uses A Admin & Hourly Education/Nonprofit/Community Organization/Recreation/Childcare B Education Nonprofit/Community Organization/Recreation/Childcare C Education Nonprofit/Community Organization/Recreation/Childcare D Education Nonprofit/Community Organization/Recreation/Childcare I Education Nonprofit/Community Organization/Recreation/Childcare J Education Nonprofit/Community Organization/Recreation/Childcare K Education Nonprofit/Community Organization/Arts/Recreation/Childcare P Education Nonprofit/Community Organization/Arts/Recreation/Childcare The departure of Foothill College presents opportunities and challenges for the City. Opportunities include the addition of new tenants who can provide new and different services to the community. Foothill College departing has also afforded current tenants the chance to expand and/or grow their business creating potential to increase program size and the services provided. Traditionally, the City has housed tenants at Cubberley that cannot afford market rents, but whose services are deemed advantageous to the public and merit subsidization. Per the Cubberley Master Plan and prior policy direction this practice is expected to continue. City of Palo Alto Page 6 Replacing the $1.09 million annual lease revenue from Foothill College will be a major challenge for the City’s General Fund but one that staff is working hard to mitigate. In the FY 2017 Adopted Budget, it was assumed that Foothill College rent would be paid through September 2016; the City would receive lease revenues equivalent to Foothill College rental income from other entities for three months; and that the General Fund would absorb a $500,000 loss. Staff is optimistic that we can complete lease negotiations in a timely manner to realize more than three months of leased revenue this fiscal year. Staff is in the process of negotiation of new leases with seventeen (17) potential new tenants for the vacant space at the Cubberley. In summary, staff is seeking Council direction on the staff recommendation to allow Avenidas to pay a discounted rate of $1.00 for use of up to 10,000 square feet of Cubberley space during the renovation of 455 Bryant Street, and concur with staff’s proposal to lease space to organizations who provide other public benefit programs and services in addition to education in buildings A, B, C, D, J, and K which has historically been limited solely to education programs and services per the 1991 Cubberley Master Plan. To accomplish this expanded use by community organizations, the City will have to amend the Cubberley Master Plan. RESOURCE IMPACT In Fiscal Year 2017 the Adopted Budget General Fund will realize three months of rent from Foothill College, and assume a $500,000 loss of rent due to Foothill College departure from Cubberley. Pending the outcome of the current lease agreements, Staff estimates that In FY 2017, the budget shortfall should not exceed $100,000. Staff is in the process of creating new lease agreements between the City and awardees of the RFP. We anticipate realizing more than three months of lease revenue as adopted in the FY 2017 budget. Precisely how much additional revenue the City will realize is predicated on completing the lease agreements including terms and conditionals for when the lease term will begin and end. Based on the responses to the RFP and our negotiations with the selected organizations and City’s agreement with PAUSD, staff is projecting the following shortfall of rent revenue for the Foothill College vacant space at the Cubberley. The City and PAUSD will share in the shortfall or surplus of rent revenue over $100,000. The total shortfall for fiscal year 2017 is estimated to be $147,960 which results in a net loss to the City of $73,980. For Fiscal year 2018 and 2019 staff is projecting no shortfall in anticipated lease revenue. Fiscal Year Projected Shortfall 2017 $73,980.00 2018 $0.00* 2019 $0.00* *Projected shortfall assumes Avenidas is leasing the second floor of building I at Cubberley POLICY IMPLICATIONS Policy direction for the use of Cubberley space has been established by prior Council actions. A policy change is required should Council direct staff to investigate usage of the Cubberley site by for-profit entities that do not provide community or public services. City of Palo Alto Page 7 ENVIRONMENTAL REVIEW Entering into lease agreements for existing facilities is exempt from the California Environmental Quality Act (CEQA) under Section 15301 (leasing of existing facilities). It is expected that the overall users at Cubberley will decrease slightly as compared to the historic use of the space by Foothill College. Attachments:  Attachment A: Cubberley Designated Uses (PDF)  Attachment B: Foothill College Space at Cubberley (DOCX)  Attachment C: CubberleyLeaseAmendment No.3 December 2014 (PDF)  Attachment D: Cubberley General Tenants 2016 (DOCX)  Attachement E: Draft Awardees (DOCX)  Attachment F: CMR 335:96 (PDF) ond Drive Fairfield Court Ferne Fe r n e A v e San Antonio Avenue Nita Avenu Shasta Drive Mackay Drive Di ablo Court Scripps Avenue Scripps C ourt Nelson Drive Tioga Court kside Drive mond Drive Drive Dake Avenue Ferne A venue San Antonio Court C h r i s topher Court Ca l cat e r r a P lace ElyPlace AdobePlaceNelson C ourt Byron St r e e tKeats CourtMiddlefieldRoad Duncan Place ourt Duncan Place ace Charlesto nRoad S a n A n t o n io A CharlestonCt Cha SeminoleW Sutherland Drive Nelson Drive ElCapitanPlace venue Briarwood Way AvenueMaplewood Pl Ma ckay D rive This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend Cubberly - PAUSD Owned Cubberley - City Owned abc Cubberley Buildings/Structures City Jurisdictional Limits 0'400' Cu b b e r l e y C o m m u n i t y C e n t e r wi t h 20 1 3 A e r i a l P h o t o s CITY O F PALO A L TO IN C O R P ORAT E D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 1 6 1894 The City of Palo Alto assumes no responsibility for any errors. ©1989 to 2016 City of Palo AltoRRivera, 2016-08-15 17:41:14Cubberley 20160815 (\\cc-maps\gis$\gis\admin\Personal\RRivera.mdb) Gym A VU FH H F E D C B A T1 T2 S GymBP L K J I M2 THEATREM3 M4 MP AUDITORIUM PAVILION Mo n t r o s e A v e n u e Building Current Designated Uses A Hourly, Administrative Offices, Education B, C, D, I, J, P Education E, F, U Visual Arts FH, H, T1 Non Profit, Community Organizations Gym, Pavilion Athletics K Education, Childcare, Non Profit, & Community Organizations L1, L2 Music, Theatre, Dance, Education, Arts, Non Profit & Community Organizations L3, L5 Dance, Theater, Arts, Music M Theatre MP - Auditorium Recreation S, T2 Childcare V Music, Theatre, Dance, Education, Childcare, Non Profit & Community Organizations ATTACHMENT A ATTACHMENT B Ownership Building/Space Footage Rent Rate Type PAUSD B 4,340 $1.87 Exclusive CPA C 4,400 $1.87 Exclusive CPA D-3-5-6-7- 2,880 $1.87 Exclusive CPA J Wing 7,633 $1.87 Exclusive CPA P – Occupied by Reach 14 reserve parking 3,000 $1.87 Exclusive PAUSD A 3 – 4/closets 1,680 $1.87 Exclusive PAUSD I – Administration Bldg. 12,540 $1.87 Exclusive PAUSD G 5 - Weight room 1,658 $1.87 Exclusive PAUSD G9- Office 345 Exclusive PAUSD Aerospace room 196 $1.87 Exclusive PAUSD Pavilion Office 570 $1.87 Exclusive PAUSD Pavilion 11,700 $0.93 Part time non- exclusive PAUSD Gym-A 5,500 $0.93 Part time non- exclusive PAUSD Pavilion Locker shower room 1,220 $0.93 Part time non- exclusive ATTACHMENT C ATTACHMENT C ATTACHMENT C ATTACHMENT C ATTACHMENT C ATTACHMENT C ATTACHMENT C ATTACHMENT C ATTACHMENT D Cubberley General Tenants Unit Number Square Footage Use ACME Education L1 3,910 Education ACME Education FH 1,000 Education CA Law Revision D2 800 Education Children's Preschool S, T1, T2* 8,772 Child care Dance Action L3 3,130 Dance Dance Connection L5A, K5 3,060 Dance Friends of Palo Alto Library H2, H3, H4A 2,496 Community based non-profit Good Neighbor Montessori K3, K4 3,010 Education Hua Kuang Chinese Reading Room H4B 672 Non-profit- community organization Melody Academy of Music K6 800 Education PASHPI Stevenson House Parking area N/A Month-to-Month, Parking only Zohar School of Dance L4 3,740 Dance Artists (twenty two) E, F, and U 15,465 Visual Arts Attachment E Cubberley Community Center – RFP for new tenants to lease former Foothill College space Cubberley RFP – Draft Awardees Reach - A non-profit organization that serves stroke survivors from Palo Alto and the mid- peninsula. Reach is a unique program that offers rehabilitation serves and an extremely low cost. Genius Kids - Genius Kids is an independent Accelerated Learning Center founded on the philosophy “Never 2 Little 2 Learn”; based on the simple belief that every child is a “genius” and as educators and parents, it is our responsibility to awaken the “inner genius” in each child. Imagination School - provide progressive education to children as a nonprofit K-8 school by fostering in-depth learning, inspiring creativity, cultivating critical thinking, social emotional learning, collaboration and communication skills to realize every student’s potential. Melody Music - Provides classical and contemporary music education and service for Palo Alto community. Acme Education - provides academic enrichment and Chinese culture and language classes. Acme builds a partnership of children, teachers, and families, and is dedicated to joyful discovery of each child’s innate character, capability, and potential. Cardiac Therapy - A non-profit organization that provides cardiac rehabilitation services to people in the mid-peninsula. Cardiac Therapy is the only non-hospital based cardiac rehabilitation program in the mid-peninsula. Silicon Valley Karate- a non-profit organization that teaches karate and self-defense for all ages and skill levels in the community. Art in Action – A non-profit organization that provides a comprehensive visual arts education program. Ranger Taekwondo - Ranger Taekwondo teaches martial arts and self-defense classes to children and adult. Curriculum is based on the Ranger inspired values, where students will incorporate discipline, training, and mental fitness to better themselves in body and mind. Brainvyne - Brainvyne has two arms – a non-profit foundation that provides equal access to all children for STEAM education through scholarships and subsidies for classes; and an operational arm that runs camps, classes and other programs. The foundation receives funding from the operational arm as well as from donations, with a singular mission of serving less fortunate families in the local community and the broader bay area. California Pops – a non-profit organization that provides popular orchestral music presentations (in the style of the Boston Pops) and performance opportunities for qualified orchestral instrument players of all ages. Attachment E Cubberley Community Center – RFP for new tenants to lease former Foothill College space Living Wisdom – a non-profit educational program that focuses on a curriculum that provides children with a balanced education for academic success and important life skills. Palo Alto Humane society – a non-profit organization that provides the following animal services; Spay/neuter and veterinary bill assistance; bilingual animal care education; animal welfare advocacy (Helpline; community partnerships with Library, PAUSD, YMCA, Scouts, local businesses, May Fete, Lytton Gardens, Veterans Administration; animal shelter consulting with City; advising City Council on animal issues). Dance Connection – Provides dances classes for different ages and abilities and creates a space for students--children, teens, and adults to have a creative space and outlet to balance everyday stresses. Art in living- A non-profit Foundation that offers yoga, breathing and meditation programs that have been proved to decrease stress, improve well-being and emotional resilience. Ivy Education – provides 1 on 1 and small group tutoring for students K-12 Chinese for Christ Church – a church program that exist to serve and reach the un-churched Chinese of Palo Alto so that they may know Jesus and joyfully worship God. The program desires to be “a church not for ourselves.” The highest importance is the needs of those outside our church, so focus on the community. Avenidas – Works in partnership with the City of Palo Alto to provide services for seniors. Avenidas will provide programs at Cubberley while their facility is under renovation. Palo Alto Soccer Club – Provides world class youth development services to over 1,000 youth players in the City of Palo Alto. ATTACHMENT F ATTACHMENT F ATTACHMENT F ATTACHMENT F ATTACHMENT F