HomeMy WebLinkAboutStaff Report 2305-156837.Approval of Amendment No. 1 to the Lease Agreement between the Palo Alto Unified
School District (PAUSD) (Landlord) and the City of Palo Alto (Tenant) for Extended Day
Care Spaces for an Initial 12-Month Term, Rent Not to Exceed $707,676 per Year; CEQA
Status – Not a Project
City Council
Staff Report
From: City Manager
Report Type: CONSENT ITEM
Lead Department: Administrative Services
Meeting Date: June 19, 2023
Report #:2305-1568
TITLE
Approval of Amendment No. 1 to the Lease Agreement between the Palo Alto Unified School
District (PAUSD) (Landlord) and the City of Palo Alto (Tenant) for Extended Day Care Spaces for
an Initial 12-Month Term, Rent Not to Exceed $707,676 per Year; CEQA Status – Not a Project
RECOMMENDATION
Staff recommends that the City Council authorize the City Manager or their designee to execute
the Amendment No. 1 to the Lease Agreement between the Palo Alto Unified School District
(PAUSD) and the City of Palo Alto (City) for Extended Day Care premises. Amendment No. 1
renews the term of the lease for an additional 12 months ending June 30, 2024 at the same base
annual rent of $707,676 and may be renewed for three additional one-year terms upon mutual
written agreement.
BACKGROUND
On June 20, 2022, the City Council approved a lease for elementary school sites from PAUSD to
sublease to providers of afterschool care (CMR: 144561). The current lease is scheduled to expire
on June 30, 2023. An amendment for the Extended Day Care sites has been negotiated to renew
the term for one year and provide options to renew for three additional one-year terms, not to
exceed 5 total years, upon the mutual written agreement of the parties.
The agreement with PAUSD to provide space for extended day care at elementary school sites
began in 1989 as a component of the parties’ lease agreement that also included a lease on the
former 35-acre Cubberley High School site and a Covenant Not to Develop five neighborhood
elementary school sites. The current agreement was amended several times before the current
standalone agreement for the 12 extended day care sites was executed on July 1, 2022. The
1 06/20/2022 City Council, Approval of Lease Agreement between Palo Alto Unified School District (Landlord) and
City of Palo Alto (Tenant) for Extended Day Care Sites for 12 months, Rent Not to Exceed $707,676 per Year
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/city-council-
agendas-minutes/2022/20220620/20220620pccsm-amended-final-final.pdf
current agreement is scheduled to expire on June 30, 2023 and the parties desire to extend the
terms of the agreement to continue City-operated extended day childcare services provided by
Palo Alto Community Child Care (PACCC)2 and Kid’s Choice3.
ANALYSIS
Staff has negotiated an amendment to the lease agreement with PAUSD for the Extended Day
Care Sites under the same general terms as the current agreement (Attachment A). PAUSD is
accepting an amendment to allow for one-year extensions currently to align with their operating
agreements with the childcare providers. The amendment extends the expiration date to June
30, 2024 and provides the option for three additional one-year extensions, up to June 30, 2027,
exercisable upon ninety (90) day notice from either party and mutual agreement. All other the
terms of the lease remain the same. The base rent will remain $58,973 per month per site for an
annual total rent of $707,676. The City will continue to be responsible for minor maintenance
and utilities, estimated at approximately $4,000 per month per site for an approximate annual
total of $48,000. Otherwise, the terms remain the same.
TIMELINE
The lease agreement went to PAUSD’s Board on June 6, 2023 for an initial discussion and will be
presented again on June 20, 2023 for action. If approved, the amendment will commence on July
1, 2023. After the amendment is fully executed, staff will extend the City’s sublease to PACCC and
Kid’s Choice for the 2023 – 2024 school year, which does not require Council approval.
FISCAL/RESOURCE IMPACT
The base rent for the new Extended Day Care lease will remain at $58,973 per month or $707,676
per year. The current base rent collected from PACCC and Kid’s Choice for the Extended Day Care
Sites total $7,380.17 per month or $88,562.04 per year, with a 3% increase annually. There are
sufficient funds in the FY 2024 Proposed Operating Budget to support the recommendations in
this report. Funding is subject to City Council approval through the annual budget process.
POLICY IMPLICATIONS
Continuing to lease the Extended Day Care Sites from PAUSD is consistent with policies and
programs in the Comprehensive Plan promoting City-PAUSD collaboration and the effective
provision of community services.
STAKEHOLDER ENGAGEMENT
The City and PAUSD collaborated on development of the new amendment to provide options to
extend the existing agreement in one (1) year terms through 2027.
2 Palo Alto Community Child Care (PACCC); https://paccc.org/
3 Kids Choice After School Program; https://kidschoiceafterschoolcare.org/
ENVIRONMENTAL REVIEW
This activity is not a project under California Environmental Quality Act (CEQA) as defined in CEQA
Guidelines, section 15378(b)(5), because it has no potential for resulting in either a direct or
reasonably foreseeable indirect physical change in the environment.
ATTACHMENTS
Attachment A: Amendment No. 1 to Extended Day Care Lease with City of Palo Alto and PAUSD
APPROVED BY:
Kiely Nose, Assistant City Manager
AMENDMENT NO. 1 TO
THE LEASE AGREEMENT
BY AND BETWEEN
THE PALO ALTO UNIFIED SCHOOL DISTRICT (LANDLORD)
AND THE CITY OF PALO ALTO (TENANT)
FOR EXTENDED DAY CARE SPACES
This Amendment No. 1 to the Lease Agreement ("First Amendment") is entered into as of
June , 2023 by and between the CITY OF PALO ALTO, a California chartered municipal
corporation ("City"), and Palo Alto Unified School District, a California public school district
("District"). City and District are referred to collectively as the "Parties" in this First Amendment.
RECITALS
A. WHEREAS, the Parties entered into a Lease Agreement for Extended Day Care
Spaces, dated July 1, 2022 ("Lease"), under which the City leases certain space on
District Sites, as described in Section 1.1.14 and Exhibits A of the Lease;
B. WHEREAS, the Expiration Date of the Lease is June 30, 2023;
C. WHEREAS, the Parties now wish to amend the Lease in order to renew its term,
as agreed upon by the Parties.
NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions
of this First Amendment, the Parties agree:
SECTION 1. Reinstatement of Lease. The Parties reinstate and reaffirm all the terms and
obligations previously agreed to by the Parties under the Lease, subject to the modified terms
below.
SECTION 2. Amendment. Pursuant to Section 6.15 of the Lease, the Parties modify the
Lease as follows:
a. Term. The Parties agree to modify Paragraph 6.1.1 of Section 6.1, "Term", of the
Lease to read as follows:
"The term of this Lease shall commence on July 1, 2022 (the "Commencement Date")
and end on June 30, 2023 (the "Expiration Date")(collectively, "Term"), unless sooner
terminated or extended pursuant to the provisions hereof. The District and City agree
to renew the Term of this Lease for an additional one (1) year period, commencing on
July 1, 2023, and ending on June 30, 2024 ("First Renewed Term")."
b. Renewed Terms. The Parties agree to modify Paragraph 6.1.2 of Section 6.1, "Term,"
of the Lease to read as follows:
Page 1 of 3
"This Lease may be renewed for additional one (1) year terms ("Renewed Terms")
upon the mutual written agreement of the Parties but in no event shall this Lease's
Term and Renewed Terms, together, exceed a total of five (5) years. If either party
wishes to renew this Lease, it shall notify the other party in writing at least ninety (90)
days before the expiration of the Term."
SECTION 3. General Provisions.
a. Conflict. This First Amendment is and shall be construed as a part of the original
Lease. In case of any inconsistency between this First Amendment and the Lease,
the terms of this First Amendment shall be controlling.
b. Incorporation of Recitals. The recitals set forth above are terms of this First
Amendment and are fully incorporated herein by this reference.
c. Counterparts. This First Amendment may be executed in counterparts, whether
electronically, via scanned PDF or facsimile, or via wet ink, and all counterparts
together shall be construed as one document.
(SIGNATURE BLOCK FOLLOWS ON THE NEXT PAGE.)
Page 2 of 3
IN WITNESS WHEREOF, the Parties have by their duly authorized representatives
executed this First Amendment effective as of the dates indicated below.
Dated:
Dated:
CITY OF PALO ALTO PALO ALTO UNIFIED SCHOOL DISTRICT
Ed Shikada, City Manager Carolyn Chow, Chief Business Officer
APPROVED AS TO FORM:
City Attorney or designee
Page 3 of 3
i
F