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HomeMy WebLinkAboutStaff Report 2409-3500CITY OF PALO ALTO CITY COUNCIL Special Meeting Monday, October 07, 2024 Council Chambers & Hybrid 5:30 PM     Agenda Item     AA1.Authorize Execution of a Memorandum of Understanding with the Palo Alto Unified School District for the Purchase and Lease of Land at 4000 Middlefield Road, Informally Known as the Cubberley Site; CEQA Status– Not a Project New Item Added Staff Presentation City Council Staff Report From: City Manager Report Type: ACTION ITEMS Lead Department: City Manager Meeting Date: October 7, 2024 Report #:2409-3500 TITLE Authorize Execution of a Memorandum of Understanding with the Palo Alto Unified School District for the Purchase and Lease of Land at 4000 Middlefield Road, Informally Known as the Cubberley Site; CEQA Status– Not a Project RECOMMENDATION Staff recommends the City Council authorize the City Manager to execute a Memorandum of Understanding with the Palo Alto Unified School District (PAUSD or District) for the purchase and lease of land at 4000 Middlefield Road, informally known as the Cubberley site and direct staff to proceed with next steps including but not limited to resumption of master planning for the Cubberley site and undertaking the development of formal agreements including a new lease agreement and a purchase and sale agreement. EXECUTIVE SUMMARY City and PAUSD officials have successfully concluded negotiations with a joint plan that seeks to advance both school improvements and a vibrant community center at Cubberley for all Palo Alto residents. Adoption of staff’s recommendations contained in this report initiates the steps necessary for the purchase and lease of Cubberley, master planning and site development to accomplish the goals outlined by the City Council on behalf of the Palo Alto community. Adoption of this Council item endorses key terms for the City of Palo Alto and Palo Alto Unified School District (District) to pursue the redevelopment and improvement of Cubberley and District schools and facilities, resulting in the purchase of seven (7) acres of land ($65.5 million), development of a community center, and improvement of schools through a ballot measure before voters in November 2026. In the interim, the City will enter into a new five-year lease continuing current use of the property, including the playing fields and parking lots. The City will pay the District $2 million a year as long as the District uses a portion of the property, and $2.5 million a year when the District is no longer using the property. The City will assume responsibility for maintenance and associated costs for all areas not used by the District. This work reflects and acknowledges the dedication of many over the years to mark this milestone, demonstrating both City and School District alignment on the future of the Cubberley site. It also supports the Council’s 2024 Priority of Community Health, Safety, Wellness and Belonging and responds to community feedback requesting a plan for the future of Cubberley. BACKGROUND The 35-acre Cubberley site, located at 4000 Middlefield Road in Palo Alto, operated as a public high school from 1956 - 1979 – Cubberley High School. Beginning in the late 1980’s, the City began leasing portions of the facilities at the site and today, the City operates Cubberley as a community center, using some of the space for classes and activities in arts, culture and athletics, and sub-leasing additional space at City-subsidized rates to various non-profit and community- serving groups. The current lease agreement expires December 2024. Today, the City owns eight (8) acres of the 35-acre site. PAUSD owns the remaining 27 acres, most of which are leased to the City. There are currently 23 tenants and 24 artists leasing space at Cubberley from the City, and dozens of groups renting the theater, pavilion, classrooms, and athletic fields from the City. Combined, these groups provide the community with programs that support health and wellness, childcare, education, and visual and performing arts. The District uses space for educational purposes and staff offices and has leases with some third-party tenants. The parking lot in the southeast corner of the property houses portable trailers as a temporary site for the Hoover Elementary School during construction at Hoover. ANALYSIS In 2023, the PAUSD Board initiated discussions with a letter inviting the City to make an offer to purchase additional acres at Cubberley. Both parties proceeded by creating Ad Hoc committees. The City’s Ad Hoc committee included Council Members Julie Lythcott-Haims (Chair), Pat Burt and Lydia Kou. Their counterparts from the PAUSD Board were Trustees Jennifer DiBrienza (Chair) and Shounak Dharap. The Ad Hoc committees met jointly over the course of 10 months including once with a mediator before agreeing on terms. Both the City Council and District Board met separately in closed sessions in late September in advance of considering the recommended Memorandum of Understanding in public session. The Memorandum of Understanding (MOU) outlines key terms and conditions for the purchase and lease of property at the site and can be found in Attachment A. A site map of Cubberley property lines can be found in Attachment B. Upon approval of the MOU, the City and District will develop formal agreements such as a purchase and sale agreement and lease agreement to implement the intentions described in the MOU. The Community Services Department will reinitiate master planning for the site, building on work completed in 2019 with Concordia. Making the 2026 ballot will require an expedient process to identify which elements of the Cubberley Concept Plan remain relevant while re- engaging the community to build on the previous work and complete the appropriate level of CEQA analysis. FISCAL/RESOURCE IMPACT Approval of this MOU commits the City to the purchase a 7-acre portion of District-owned land at 4000 Middlefield Road contingent on voter approval of a bond measure in 2026, and extend the lease of facilities. Funding will be needed to advance next steps including a master planning process for the site, needed reviews such as CEQA, drafting of formal agreements, and preparation for the November 2026 ballot measure. Funding has been reserved in the FY 2025 Adopted Budget for real property acquisition to support these next steps. STAKEHOLDER ENGAGEMENT The District and City have worked to reach agreement between parties both in open session meetings and in closed session meetings allowing for opportunities for public comment. Engagement with the community will occur through development of a plan for the community center in preparation for the November 2026 ballot. A workplan reflecting an expedient process will be developed in order to successfully reach the November 2026 election. ENVIRONMENTAL REVIEW Entering a Memorandum of Understanding is not a Project as defined by the California Environmental Quality Act (CEQA). The City will need to complete the appropriate level of CEQA analysis and documentation prior to adopting a new concept plan expected to be complete prior to placement on the November 2026 ballot. ATTACHMENTS Attachment A: MOU with PAUSD for Cubberley Site Purchase and Lease Attachment B: Site Map of Cubberley Property Lines APPROVED BY: Ed Shikada, City Manager MEMORANDUM OF UNDERSTANDING This Memorandum of Understanding (“MOU”) sets forth the mutual understanding of the City and District regarding a series of steps each will take in a collaborative effort to pursue the redevelopment and improvement of Cubberley and District schools. The City of Palo Alto (City) intends to purchase 7 acres of Cubberley Community Center (Cubberley) from the Palo Alto Unified School District (District) in 2027, contingent on November 2026 voter approval of a City- sponsored bond to fund acquisition and development of the Cubberley site. The District intends to use the proceeds of the sale to develop and improve schools throughout Palo Alto. Prior to the 2026 election, the City and the District will each develop their respective conceptual plans for use of voter-approved bond proceeds, with the intention of jointly communicating to the public the City and District improvements that will be enabled by the bond. Dates identified reflect estimated schedules and parties will work to meet them or as soon thereafter as possible. Subject to approval by the Palo Alto City Council and the Board of Education of the Palo Alto Unified School District, the City and District propose to undertake developing formal agreements such as a purchase and sale agreement and lease agreement as needed to implement the intentions described in the below sale and lease term sheet. A lease extension will reflect final details on areas currently occupied by the District and to be leased by the City once the District discontinues use. The lease will also ensure resolution of disputed responsibility for maintenance costs in years prior to December 2024. Cubberley Sale and Lease Term Sheet 1.Sale Terms: In 2027, contingent on voter approval of a bond measure in 2026, the City will purchase 7 acres from the District at the price of $65.5 million. This includes the area currently developed with permanent buildings. a. The purchase price reflects a current (2024) valuation of $60.65 million, escalated by 2.6% per year over 3 years for purchase in 2027. b. By March 30, 2026, the City will develop a plan for a new community center and related uses on the site. c. By March 30, 2026, the District will develop a plan for the use of sale proceeds for the improvement of Palo Alto schools. d. The City and District will coordinate planning for citywide outreach on the goals and plans in support of the proposed sale. e. With a successful bond election, the City will transmit sale proceeds to the District by July 1, 2027. If the bond measure is not placed on the 2026 ballot or is not approved, the proposed sale will not occur. 2.Lease Extension: By January 1, 2025, the City and District will execute a five-year lease of the property based on the following terms: a. The City will lease all District property at the site (not used by the School District) for $2.0 million per year and assume all responsibility for maintenance and associated costs for both leased and common areas. b. Upon the District’s discontinued use of its property at the site (except access to Greendell and associated parking), the lease price will increase to $2.5 million per year. c. In recognition of disputed responsibility for maintenance costs, the School District will credit the City $1.0 million in rent payments in FY 2027. 3. Subsequent Actions, if necessary: a. Should the bond measure not be placed on the ballot or fail to pass, all leases and obligations will terminate on June 30, 2027. Prior to the termination date, the parties will meet and discuss alternative plans, which could include extending the termination date of the lease or entering a new lease for a portion of the District’s property. b. If determined advantageous through the planning efforts of either party, by mutual agreement the parties may modify the property line between their properties and other site arrangements. This MOU is not intended to be, and does not constitute, a binding agreement by the City and the District, nor an agreement by the City and the District to enter into a binding agreement. Nor does this MOU establish a legal partnership or any other legal relationship. This MOU reflects the present understanding of the City and District and a desire by both to develop, respectively, plans for school improvements and a community center, and to collaborate in placing a bond measure before the voters to fund the school improvements and a community center. Neither the City nor the District may claim any legal rights against the other by reason of the signing of this memorandum of understanding or by taking any action in reliance hereon, and each party fully understands that neither party will have any legal obligations to the other, or with respect to the proposed activities in this MOU. The City and the District look forward to this joint effort to develop and improve school and community facilities throughout Palo Alto for the benefit of the entire community. The signatures below indicate our shared understanding and commitment to collaborate to advance the goals described in this MOU. Ed Shikada Don Austin City Manager, City of Palo Alto Superintendent, Palo Alto Unified School District OCTOBER 7, 2024 www.cityofpaloalto.org MEMORANDUM OF UNDERSTANDING City of Palo Alto and PAUSD4000 Middlefield Rd. "Cubberley site" 2 •City to purchase 7 acres for $65.5 million •Based on a valuation of $60.65 million escalated by 2.6% per year over 3 years for purchase in 2027 •Concept plans for a community center and the District’s planned use of sale proceeds for improvements to Palo Alto schools to be completed by 2026 •Execute a 5-year lease: •Rent of $2.0 million/year to $2.5 million/year depending on the District’s use of its property at the site •City responsible for maintenance for both leased and common areas •District to credit City $1 million in rent for past maintenance costs •Sale contingent on voter approval of a bond measure in November 2026 MEMORANDUM OF UNDERSTANDING – KEY TERMS 3 PROPOSED PURCHASE AREA (ORANGE) 4 Authorize the City Manager to execute a Memorandum of Understanding with Palo Alto Unified School District for the purchase and lease of land at 4000 Middlefield Road, informally known as the Cubberley site, and direct staff to proceed with next steps including but not limited to: •Resumption of a compressed master planning for the Cubberley site including CEQA analysis •Development of formal agreements including a new lease agreement and a purchase and sale agreement •Preparation for a November 2026 ballot measure STAFF RECOMMENDATION KRISTEN O’KANE Community Services Director Kristen.O’Kane@cityofpaloalto.org 650-463-4908