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HomeMy WebLinkAbout2000-09-11 City CouncilCiVy of Palo Alto City Manager’s RiPortTO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT:ADMINISTRATIVE SERVICES DATE: SUBJECT: SEPTEMBER 11, 2000 CMR:358:00 ENDORSEMENT OF RECOMMENDATIONS FROM THE CITY COUNCIL’S AD HOC COMMITTEE ON THE THIRD MIDDLE SCHOOL REGARDING THE POSSIBILITY OF THE PALO ALTO UNIFIED SCHOOL DISTRICT USING EMINENT DOMAIN PROCEEDINGS TO REACQUIRE ALL OR PART OF THE TERMAN COMMUNITY SERVICES FACILITY FOR A THIRD MIDDLE SCHOOL AND RELOCATION OF THE JEWISH COMMUNITY CENTER REPORT IN BRIEF The Palo Alto Unified School District (District) has experienced significant growth in its student population. Currently, the two existing middle schools exceed the optimal enrollment limits established by the Board of Education, and the situation is expected to worsen. Given enrollment figures, the District and the City are in agreement on the need for an additional middle school. The District and the City have been working together to find an optimal solution to the question of where to locate a third middle school. The District’s enrollment declined in the 1970s. In the 1980s, the City acquired several former school sites in order to preserve the locations as community assets. The City has used these sites to provide services to the community. One such site is Terman, which the District has indicated it intends to reacquire a portion of for the third middle school. Currently, the Terman site serves multiple functions, with housing, playing fields, and recreational activities. Many services at Terman are provided through a sublease with the Jewish Community Center (JCC). This sublease is set to expire in 2007. However, the lease contains an option to renew for another 25 years. The JCC requested this renewal in 1997. This report provides background on the City’s history related to the Terman site and the JCC. It provides information on the District’s efforts to open a third middle school. It is followed by an analysis of the options developed by the District, and recommendations from the Council’s Ad Hoc Committee on the Third Middle School regarding the next steps the City should take to further its policy goals. CMR:358:00 Page 1 of 11 RECOMMENDATION If the Palo Alto Unified School District (District) proceeds with its plan to file eminent domain action to reacquire Terman, the Council’s Ad Hoc Committee on the Third Middle School recommends that the City Council take the following actions: 1.Direct staff to work with the District in order to meet the District’s timeline for transitioning ownership of Terman from the City to the District. 2.Direct staff to work with the District to establish a joint use agreement to maintain some level of community services at the Terman facility. Direct staff to evaluate a number of possible sites for community services facilities, which could include the Jewish Community Center (JCC) as well as City programs and other possible non-profit community services. This evaluation of sites would include preliminary environmental studies (e.g., traffic impacts) as well as real estate appraisals. Direct staff to develop a financing package for possible site acquisition. The package should include revenue from the condemnation of Terman by the District, contributions from the JCC and other possible non-profit tenants, and any other potential new revenue. 5.After staff develops such a financing package, direct staff to return to Council to consider acquisition of a suitable site for community services facilities. In assisting the District with relocation assistance for the JCC, direct staff to work with the District and the JCC to develop a plan to avoid or minimize any interruption of JCC services. BACKGROUND Acquisition of Terman In the late 1970s, the District experienced declining enrollment and closed a number of school sites, with the intention of selling them. The City acquired several sites, including Terman, due to the concern that the closure and sale of the sites would adversely affect City programs and services. On November 1, 1981, the City and the District entered into a 19-year lease for the Terman site. The lease purchase agreement includes the District’s express approval of the JCC sublease. The City has used the Terman site for mixed uses (park, recreational, library and housing purposes), including the JCC, to provide various community services. CMR:358:00 Page’2 of 11 In the lease between the District and the City, the District agreed that at the end of the term of the lease it would convey full title of the Terman site to the City. The lease also contains an option to purchase. With the written approval of the District (which may not be unreasonably withheld), the City has the option to purchase the Terman site, including all improvements, for the cost of the remaining rent as of the date of exercising the option. The last payment to the District of $395,015 would be made on November 9, 2000. The total amount the City will have paid to the District over the term of the lease will be approximately $15.2 million. The City has also invested about $2.6 million in repairs and improvements to the facility. The lease purchase agreement is designed to automatically transfer title to the City at the end of the lease, or earlier if the City exercises its option. It should be acknowledged that the lease payment for the Terman property represents only a small portion of the money that the City pays to the District every year. In the 2000-01 fiscal year, the City will provide almost $7 million to the District. The majority of this money ($5.6 million) is for the Cubberley lease and "the covenant not to develop" school sites. Other contributions include half of the cost of District field maintenance, support for crossing guards, and Children’s Theatre School Programs. JCC Lease On July 1, 1982, the City sublet a 5.93 acre portion of the Terman site and the majority of the buildings to the JCC. The JCC made over $1.5 million of improvements to the premises within the first five years of the lease and was granted the maximum term lease of 25 years in 1986. The length of the lease with the JCC was based on the amount of ’ investment the JCC would make to improve its leased portion of the premises. (To date, the JCC has made approximately $2.4 million of improvements to the site.) The JCC currently pays $251,988 per year to rent the facility. The JCC lease term extends beyond the term of the City’s lease purchase with the District because it was agreed that the title to Terman would pass automatically in November 2000. The lease also contains an option to renew, wherein the JCC can extend the term of the lease for a time equal to the initial term of the lease (25 years). In order to exercise the option, the JCC must request the extension, in writing, and be in "substantial compliance" with the terms and conditions of the lease and use permit. In a letter dated July 24, 1997, ten years prior to the termination of the existing JCC lease, the City received a formal request from the JCC to extend the term an additional 25 years. The reason for the early request was to ensure the term of the lease was adequate for the JCC to recover the significant investment ($1.5 to $2 million) it planned for the facility. On October 14, 1997 (CMR:372:97), Council approved proceeding with negotiations with the JCC to extend its lease. After an extensive review and public comment process regarding the Conditional Use Permit, City staff approved the Permit with conditions of approval. The JCC and the neighbors both appealed specific CMR:358:00 Page 3 of 11 conditions of the approval. The Planning Commission and the Council have not yet acted on the appeals, which are on hold due to the District’s interest in the Terman site. Present Situation Current enrollment at the two District middle schools exceeds the maximum established by the Board of Education, and District projections indicate there will be continued enrollment growth. As a result, in a letter to the City Council dated October 4, 1999, the District’s then Board of Education President Don Way requested that the City assist the District in looking for a school site to accommodate a third middle school. Specifically, the District expressed interest in two large, former school district sites controlled by the City (Terman and Cubberley). In a letter dated February 11, 2000, School Board President Cathy Kroymann indicated the District’s intention to reacquire the Terman site for middle school uses. On August 8, 2000, District staff distributed a memo to the Board of Education that discussed a variety of options for a third middle school, and the advantages and disadvantages of each. The memo indicates that the District wishes to open a third middle school no later than August 2003, and that a final plan needs to be in place by this fall. The August 8 memo reiterated that the District believes that the best option for a third middle school is the Terman site. DISCUSSION City Objectives Since receipt of the October 1999 letter, the City has been working with the District on this issue. (See attached chronology.) A Council study session was held in March 2000 to discuss the situation. In addition, a joint meeting was held with the City Council and representatives of the District in May 2000 to discuss joint facilities planning between the City and the District. As a result of this last meeting, the District and the City are now conducting a formal Joint Master Plan of School and Community Service Facilities. The City and the District have developed a work plan for the Joint Master Plan and issued a Request for Proposals. A consultant firm has been selected. As soon as the contract is approved, the Joint Master Plan will commence. The draft study should be complete in six months. Out of these efforts, the City has developed objectives regarding possible outcomes. The City agrees with the District on the need for a third middle school, given current District enrollment and the projected growth in the student population. The City is willing to facilitate acquisition of land for a third middle school; however, any solution must first be consistent with Comprehensive Plan goals related to community service delivery and land use. In addition, the City must be prudent when considering financial impacts to the City of any possible solutions, and their compatibility with the Long Range Financial Plan. CMR:358:00 Page 4 of 11 The City’s Comprehensive Plan includes policies regarding community service delivery as well as land use. For example, the Comprehensive Plan contains the following policy (Policy C-3) regarding community services: "Palo Alto should continue to take a leadership role in addressing community service issues that cross jurisdictional lines." In trying to respond to the Comprehensive Plan’s land use policies, the City obviously aims to minimize any traffic or other neighborhood impacts related to the siting of community service facilities. In this context, the City has established three goals: 1. Facilitate the siting of a third middle school. 2.Ensure that community services are maintained, if not enhanced, for southwest Palo Alto. 3. Preserve the JCC as a community asset for Palo Alto. To further these policy goals, the Council developed an Ad Hoc Committee on the Third Middle School. The Ad Hoc Committee consists of Mayor Liz Kniss, Vice Mayor Sandy Eakins, and Council Members Judy Kleinberg and Vic Ojakian. (Council Members Kleinberg and Ojakian represent the Council on the City-School District Liaison Committee.) The Ad Hoc Committee has met a number of times with staff as well as its counterpart committee of the Board of Education and representatives from the JCC. The Ad Hoc Committee has identified and evaluated numerous options in an effort to develop a win-win framework for solving the third middle school dilemma. Options Identified by the School District Recently, in an effort to move the process forward, District staff identified and discussed; in an August 8 memo to the Board of Education, six options for the third middle school. (The District has subsequently eliminated some of these options.) What follows is a brief discussion of each option, in respect to how the option addresses City goals and policies. Option 1 - District Uses Eminent Domain to Reacquire Terman: Under this option, the District takes the Terman site through the use of eminent domain, and renovates the current buildings for use as a middle school. This option fails to meet City goals for a number of reasons. It makes no provision for the continuation of JCC services or for relocation of the JCC to another site. It is possible, however, that some level of community services could continue through a joint use agreement between the City and the District. The City would incur increased cost for the provision of these new services. This option has the potential to create additional traffic and neighborhood impacts that would need to be addressed by the District. CMR:358:00 Page 5 of 11 Option 2 - District Exchanges 25 Churchill Avenue for Terman: Under this option, the District would exchange its offices at 25 Churchill Avenue (4.4 acres of land) for the Terman site (7.97 acres plus access to 7.66 acres of park land). The District would renovate the current Terman facilities for use as a middle school and the City would lease the Churchill site to the JCC. This option contains a solution for the JCC, and could allow for the continuation of some level of community services in the southwest Palo Alto area through a joint use agreement between the City and the District. The option raises the possibility of traffic and neighborhood impacts, and might require an EIR for the Churchill site. Should this exchange be implemented through a land swap, there would be no negative financial impact to the District or the City. However, the City would still be exposed to some additional costs related to operating community services at Terman, through a joint facilities use agreement with the District. Option 3 - District Reacquires Terman, JCC Relocated to Another Site." This option provides for the District to reacquire the Terman site without the use of eminent domain, and proposes relocation of the JCC to another site. The District would renovate the existing Terman facilities for use as a middle school. With this option, it appears that the District is assuming that the City can and will acquire another site for the JCC. This option provides for the JCC, and could lead to continued services in the Terman area through a possible joint use agreement between the City and the District. However, this option raises significant financial issues for the City. Acquisition of comparable land, if it were to be available, could cost $25 to $30 million. Site development and facility construction could cost another $30 to $40 million. It is unclear who would pay these costs. As mentioned earlier, placing a third middle school at Terman raises possible traffic and neighborhood impacts. Option 4 - Shared Use of Terman by the District and JCC: This option would have the District sharing the Terman site with the JCC. The District would construct a new, compact, school site. This option provides for the JCC and leads to the continuation of services in the Terman area. It has minimum financial impacts for the City. It raises potential traffic and neighborhood impacts. However, the District has concluded that this shared use option may be too tight of a fit and has eliminated its consideration of the option. Option 5 - Build a School at Deer Creek." Under this option, the District would build a new middle school on Stanford land on Deer Creek. This option provides for the JCC and preserves services in the Terman area. There is no negative financial impact to the City. However, it is not consistent with the Comprehensive Plan since the Deer Creek site is beyond the City’s urban growth boundary. Moreover, it is removed from residential areas. Option 6 - Locate the School at Cubberley: This option calls for the District to take the Cubberley site through eminent domain and renovate the facility to open a middle school CMR:358:00 Page 6 of 11 there. This option provides for the JCC, preserves services in the Terman area, and minimizes financial impacts to the City. However, the City could lose a significant number of service providers housed at the Cubberley site, including Foothill College, dance studios, animal rescue services, and child care. (Annually, Cubberley has 800,000 users, of whom 200,000 are Foothill College students.) Moreover, this is a poor location for the middle school given the enrollment data. In addition, the District would lose significant lease revenue from the City. Finally, the District desires to consider the Cubberley site for a future high school if the need arises. The District has removed from consideration shared use of Terman (Option 4) and use of Cubberley (Option 6) and has indicated that an exchange involving 25 Churchill (Option 2) and the use of the Deer Creek site (Option 5) are low priorities. Consequently, the Board of Education has directed District staff to seriously explore the use of eminent domain to reacquire the Terman site (Option 1) and to structure a negotiated agreement among all parties. Council Ad Hoc Committee Recommendations While there may be other options available to the District, the Council’s Ad Hoc Committee is now proposing to the full City Council a set of recommendations that provides a framework for moving forward on the third middle school, maintaining community services in southwest Palo Alto, and preserving the JCC as a community asset. Assuming the District proceeds with eminent domain proceedings at Terman, the Ad Hoc Committee recommends that the City Council take the following actions to address City goals: 1.Direct staff to work with the District in order to meet the District’s timeline for transitioning ownership of Terman from the City to the District. 2.Direct staff to work with the District to establish a joint use agreement to maintain some level of community services at the Terman facility. o Direct staff to evaluate a number of possible sites for community services facilities, which could include the Jewish Community Center (JCC) as well as City programs and other possible non-profit community services. This evaluation of sites would include preliminary environmental studies (e.g., traffic impacts) as well as real estate appraisals. 4.Direct staff to develop a financing package for possible site acquisition. The package should include revenue from the condemnation of Terman by the District, CMR:358:00 Page 7 of 11 contributions from the JCC and other possible non-profit tenants, and any other potential new revenue. 5.After staff develops such a financing package, direct staff to return to Council to consider acquisition of a suitable site for community services facilities. In assisting the District with relocation assistance for the JCC, direct staff to work with the District and the JCC to develop a plan to avoid or minimize any interruption of JCC services. RESOURCE IMPACT Staff has determined that at least a five-acre site will be needed for a new community services facility. At an estimated $5 million per acre, land costs for a five-acre site would total $25 million (not including any relocation costs). If the City were to borrow the funds from the Utility Funds, thus securing a loan with a low interest rate, it is estimated that the debt service costs of a $25 million loan would be $2 million a year for 25 years. To fund $2 million in debt service for 25 years, the City would have to forego contributions on an annual basis to the Infrastructure Reserve Fund (to fund reinvestment in City streets, public facilities, and other infrastructure) and any budget growth to fund new services to meet increased demands. Consequently, it is recommended that the City secure additional revenue sources in structuring a financial package to acquire the new community services facility. For example, the Council could allocate any revenues from the sale of Terman to the purchase of a new site for community services. In addition, Council could direct that new revenue sources, such as those that might be generated from future development impact fees, could be used to help fund acquisition. The City would need significant financial contributions from the JCC and any other non-profit tenants to fund the site acquisition. The JCC would still be responsible for building the community services facility. Once completed, it is likely that there will be ongoing City operating costs for the provision of City services at the new community services facility. In addition, there will be operating costs associated with any joint use agreement with the District at Terman. Finally, there will be costs related to any required preliminary environmental studies. TIMELINE The timeline depends on how quickly the District moves in its eminent domain proceedings. District officials have indicated they wish to move rapidly. Given the time required to evaluate potential sites and develop a financing package, staff should begin on this effort immediately. CMR:358:00 Page 8 of 11 ENVIRONMENTAL REVIEW Any new site for a community services facility would require an environmental review to evaluate traffic, neighborhood, and other potential impacts. ATTACHMENTS Attachment A:Chronology of Actions Middle School Site to Date Related to Terman and the Third PREPARED BY:Shannon Gaffney, Senior Financial Analyst William Fellman, Manager, Real Property DEPARTMENT HEAD APPROVAL: .... ~C~’--~.~ ~~ irector. ~d~ninistrative Services CITY MANAGER APPROVAL:~, . v,~ FRANK BENEST City Manager cc:Cathy Kroymann, President, PAUSD Board of Education Sandy Blovad William Bondy Jim Allen & Virginia Toney Renee & Mark Alloy Elizabeth Allyn Clinton & Verdie Alsop Grace Bates B. Bentrowsky William Bloom Ellen Brown Yvonne Burtness Pat Carlson Carter, Tighe, Leeming & Kajiwara Caroline & Maurice Chase Norman & Carrie Chu Greg & Sung Hee Clemenson Trudi Cobb Mrs. Coppin CMR:358:00 Page 9 of 11 Beth Cowell Russell Currier An~, G. Davis Tina & Rick Dinitz Helen Easterbrook John Elman Sadie-Julian Espar Robert Feiner, MD Ginger Franey Payne Freret Miriam Fretthold Eva & George Gal Alexander Gotsch Jay & Muriel Gould Angelo & Sara Granzotti Bert Growald French & Marge Harris Milan & Vera Henzl Bob & Karen Hessen Marion Hill Joe Hirsch Jo Jaros Tim & Anthea Josling Christopher Keck Sheryl & Richard Keller Floyd Kessler Stewart Klein Ingrid Kohne Deborah Laden Barbara Lawson Diane Lee & Jim Jurkovitch Betsy Levy Tom & Hsu Lo Edith Martin Carl Ann McAusland Winnie & Jack McGannon Marianne McKisock Emmy Lou Miller Barbara Milligan Peter Millward Kent Mitchell, Mitchell & Herzog Bev& Hank Mohr Craig & Seran Mohr CMR:358:00 Page 10 of 11 Bob Moss Michael R. Nabti, Marcu & Millichap Richard Neeley Roger & Robyn Noll Marty Paddock Loma Paisley Nelly & Peter Pottman Lynne & Dana Prescott Robert Rogers Calvin & Misao Sakamoto Ruth Satterthwaite Kenneth Schotz Sid Sideris L. A. Smart Joel Spolen Carol & Tom Sutherland Dotty & Jim Tallmadge Glenna Violette Owen Wolkowitz & Janet Negley Annie Young David Zaidman CMR:358:00 Page 11 of 11 Attachment A Chronology of Actions to Date Related to Terman and Third Middle School Site Date July 24, 1997 Item Description JCC makes formal request to extend the term of the Terman lease for an additional 25 years. October 14, 1997 City Council approves proceeding with JCC lease negotiations. July 8, 1999 JCC submits application for Conditional Use Permit. October 4, 1999 District sends City a letter requesting assistance in looking for a site to accommodate a third middle school. District expresses specific interest in Terman and Cubberley. November 17, 1999 City staff makes an initial finding of JCC compliance with the current lease and use permit, and recommends conditions for a new Conditional Use Permit. December 1, 1999 December 13, 1999 The JCC and neighbors appeal specific proposed conditions of the Permit. Staff sends an informational report (CMR 446:99) to the City Council regarding Terman, Cubberley, and the lease with the JCC. January 25, 2000 Joint statement issued by District and Stanford University on the search for a third middle school site. February 11, 2000 February 28, 2000 District sends City a letter stating that the District intends to reacquire the Terman site for a third middle school. Joint meeting with District, Stanford and the City to discuss site for third middle school. March 8, 2000 March 24, 2000 City Council holds a study session to examine the issues surrounding a third middle school site and the Terman facility. An Ad Hoe Committee of the Council is established to work with the District, JCC, and Stanford. Ad Hoc Committee meeting with District, JCC, Stanford and City. -1- Date March 30, 2000 April 3, 2000 April 25, 2000 May 17, 2000 August 8, 2000 Item Description Ad Hoc Committee meeting with District, City. JCC, Stanford, and Ad Hoc Committee meeting with District, Stanford, and City. Ad Hoc Committee meeting with District, Stanford and City. Special joint session held with City Council and District. Outcome was the agreement on a formal Joint Master Plan of school and community services facilities. District staff distributes a memo to the Board of Education discussing six possible options for locating a third middle school. -2-