HomeMy WebLinkAbout0445.091(Ill sta1eI 'MIII _______ B---,
october 10, 1991
HONORABLE CITY COUNCIL
Palo Alto, California
~ERLEY SgBL!1t.BES AND SUBL~~! RATES
MemDers of the Council~
R.eport in Brief
Now that the CUbberley Master Plan has been approved and the
CO!'lditional Use Permit has been approved, staff is ready to
impleaent a lease plan. This report requests Council approval of
the proposed general lease plan and the delegation of lease
specific approvals to the City Manager.
Background
On March 7 I 1988, in anticipation of leasing space from the Palo
Alto unified School District (PAUSD) to artists and nonprofit
organizations. Council directed staff. a.rnong ct-her things, to
advise Council on the terms of subleases for the interim space at
the Jordan Schoel site. In a staff report dated April 28, 1988
CMR:259:8, staff recomme~ded the rental rate be based on a prorated
share of the maintenance and utility costs for the site. That per
square-fact cost ~as $.50. Council revised that figure to $.33 1/3
per sq. ft. for artists and $.55 per sq. ft. for nonprofit
organiz.ations {CMR: 297: 8) _ The lease 'With the District for the
Jordan site was temporary in order to provide the District vith
time to analyze their space needs.
CMR: 445:!H
staff's goal in leasing the CUbherley site is to establish rental
rates that ~ill, in the aggreqate, cover the cost. of the "pass
through-lease pa2~ent to PAVS~ and utility costs related to the
tenants. When the City leased CUbberley from the FAUSD in 1990,
the annual lea$e payment was calculated to include an amount equal
to the income the District -was then deriving from its leases at
CUbberley. Tbe initial amount was $1 million, 'Which increases
3nnually by the increase in the local Consumer Price Index (CPI).
While this amount has heen referred to as "pass through" lease
revenue in the past, it is import:1nt to understand that regardless
of how much lease income the City actually realizes at Cubberley,
it is obligated to pay the Sc;!locl Dist.rict annually an amount equal
to $1 million for 1990, increased by the CPI for each subsequent
year. When the District estimated its lease revenue from the site
as $1 million, it did so on a gross rent basis, not net of
utilities or maintenance costs~ In fiscal year 199Q-91, utility
charges for the ~ite totalled $175,000 (which equates to roughly
$.09 per sq. ft.). It is sta.ff's intent to have non-subsidized
tenants pay for those costs. The purpose of setting rental rates
and passing thro~qh utility costs is to ensure that sufficient
funds are available for ~aintenance and improvements at CUbberley.
To ~~e extent that lease income falls below the amount required to
be remitted to the PAUSD and utility costs, the difference ~ould
have to be cade up from ~tility users tax monies set aside from
maintenance and capital improvements.
proposed ,Sublease Pl,a2!.
staff proposes rents be divided among the various user groups so
that current market r3te tenants subsidize some of the rent for the
non-prorit, dance and ar~ist tenants~ In other words, there is
approximately 92,936 sq. ft~ of net rentable space at the Cubberl~y
Site. If e03ch 'tenant paid $1.00 per sq. it., the goal of $ 1
million ~ould be met. However, the $1.00 per sq. ft~ rate wo~ld be
too high for the artists, rlonprofits and dance groups, as suggested
by the public comments receivEd during the council discussion
regarding the Jordan rent process~ Statf proposes the establish
ment of three classes at rent. Th~ non-subsidized rental rate
would range from $1.09 to $1.39 per sq. ft., depending on term and
space; the subsidized nonprofit and dance rate 'Would be $.65 per
sq. ft4; and the rate for artists would be $~J9 per sq. ft.
Attached as Exhibit -A-is a ~ap that shows the CUbherley Site wing
hy wing and room by room~ The wings are lettered and the rooms are
numbered~ The site will be subleaoed in accordance 'With the Master
Plan, with the exceptio~ of the 0 and K ~inqs, ~hich were desig
nated fo~ use by Foothill College. Due to reductions in Foothill's
budget and space needs, staff proposes preparing a Request for
proposal (RFP; for a three-year sublease for the K wing for child
CMR:445:91 2
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day care purposes. The D ~inq roo~s 1, 2, 3 and 4 and H 2~3 ~ould
remain with existing tenants on an extended three year sublease
term. Gym B# the theater, the multipurpose room and rooms 1, 4 and
6 in the H wing and 0-5, 6 and 7 are proposed to pe rented on a~
hourly basis. Based on last year's experience and the high demand
for hourly use, staff anticipates annual revenues from hourly usage
to be about $150,OC'0. Currently, L-l is being usea by Theatre
Works' -Black Box" rent free. Room T-2 and Room H-5 are used by
Cl.ty staff for training and ac:lministrative purposes. Exhibit iIIB
indicates the proposed sub-tenants and lease rates.
pelegation of A".Ith::.:ri ty to city xanager
rhe Palo Alto Municipal Code ,FAMe) regulations currently allow the
City Manager to lease City property for a ter.m not to ~~ceed one
year (PAMe Section 2.30.040). All other real property leases for
more than one-year terms must he approved by Council and signed by
the Mayor~ Because of the complexity and time sensitivity of the
leasing process, staff requests the Counci 1 authorize the City
Manager to enter into subleases at CUbberley for terms exceedinq
one y~arr not to exceed 5 years, based on the proposed sublease and
rate plan. ~~y leases entered into by the City Manager will be
include~ in the annual report to Council on property agreements
under PAKe 2.30.C'O(c).
Enviropellital nip_act ~SR.!lBment
The negative declaration prepared foC' the CUbberley Kaster Plan and
adopted by the City Council on Hay 6, 1991, sufficiently addresses
any possible si9nificant environmental impacts associated 'With this
project.
~a.commend.tions
Staff recommends that Council:
AuthoriZe the city Manager to execute subleases for the Cubberley
site, based on the proposed lease and rate plan.
CKR:445:91 J
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Respectfully submitted,
.t'l~dtlA-..-
WILLI~ W. FELLMAN _ ~Zi:::~ty~ager
~l,{~IS~
Oi ector ~nce
-~ LEMING
~sistant City Ma ger
Attachments. Exhibit A
Exhibit B
Relate4 Staff Reports
CMR'259,S
CMR: 297: 8
CC: Cubberley Steering Committee
CMR:445:91
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CU9:lfRLEY TE~ANT iI~'''~ PROJECTIO~ 2S-S.p-t1
U .. sPA::E SF SFI1t.iO MONT .... lY ANNUAL COMI,4E~TS
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"",Co.. ".' .oW S! » $..<,502 ~,O2~
Dati:::.ll Groop " 'S« "''' .. " D&M$Groc.ip L3 • S« "'''' " '" c..~"""" " 4i-70 .,'" " ..
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Foctt1i~ A.B.',J,e, P.~ -:>4«7 ",. 137.547 $45C,58?
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EXTEND6:I DAY CARE
EAFlL Y ~AH'~ CEHTE~ :ZSIT~S -$600-\$300 :11,:38 $12,~O
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HOUFQY AElIIiAlS "SO,OOe.
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EXHI8~T B