CITY COUNCIL AGENDA REPORT
200 S. Anaheim Blvd.
Suite #433
Anaheim, CA 92805
Tel: (714) 765-5160
Fax: (714) 765-4454
www.anaheim.net
City of Anaheim
COMMUNITY SERVICES DEPARTMENT
DATE: MAY 7, 2024
FROM: COMMUNITY SERVICES DEPARTMENT
SUBJECT: AMENDMENT NO. 5 TO THE PROPERTY OPERATING
AGREEMENT WITH MUZEO FOUNDATION
ATTACHMENT (Y/N): YES ITEM # 18
GOVERNMENT CODE § 84308 APPLIES: YES
RECOMMENDATION:
That the City Council, by Motion, approve Amendment No. 5 to Property Operating Agreement between the City of Anaheim and the Muzeo Foundation for the continued operations of the Muzeo, for an initial term of five years with an option to extend by an additional five-year term, and one additional three-year extension, making the Maturity Date June 30, 2037, which coincides with the year-end date of the Operating Agreement, with the addition of consumer price index (CPI) increases beginning with the second five- year term on July 1, 2029, and clarifies the matching funding sources for the purpose of meeting its $250,000 matching fundraising requirement, and authorize the Director of Community Services to execute the agreement and to take the necessary actions to implement and administer the Agreement.
DISCUSSION:
In October 2007, the City Council approved a 30-year Property Operating Agreement (Agreement) between the City of Anaheim (City), Anaheim Redevelopment Agency (Agency) and the Muzeo Foundation (Muzeo) for the operation and programming of the Muzeo. Since that Agreement was initiated, thousands of people annually have come to downtown Anaheim to enjoy world-class exhibits. The Muzeo’s objective is to host sophisticated, often nationally recognized traveling exhibits, as well as showcase existing historical collections, expanded arts, cultural, and heritage programs. Additionally, the Muzeo seeks to provide educational opportunities for elementary school-age children through annual tours of the facility. The Muzeo also strives to connect art and cultural programming to local neighborhoods to ensure that all socio-economic segments of Anaheim’s population have the opportunity to be exposed to the benefits the facility has to offer.
The original Agreement included a provision to provide financial assistance to the Muzeo for start-up operating capital while it reached stabilization. As part of the development of the FY 2007/2008 budget, the City Council approved one-time funding to support the first two exhibits and expenses for furnishings, fixtures and equipment associated with the initial opening of the Muzeo. In addition, under this Agreement, a revolving Line of Amendment No. 5 to the Property Operating Agreement with Muzeo Foundation May 7, 2024
Credit (LOC) was established in the amount not to exceed $1 million dollars for a three- year loan period that was set to expire in September 2010. During the loan period, the City could loan the Muzeo an amount equal to the financial gap the Foundation showed in its operating budget, so long as the Foundation could show the City evidence of matching donation pledges in an amount equal to the request. The LOC was to be repaid on a quarterly basis at an interest rate of 5%.
Due to the success of the Muzeo and to ensure its continuity in providing cultural programs and events, in September of 2010, the City Council approved Amendment No.1 to the Agreement which extended the term for five years to June 30, 2015, and reduced the Muzeo Foundation’s LOC to $500,000 for the first year and $200,000 for each remaining four years. To recognize the City’s role in supporting the Muzeo and as an incentive to encourage the Muzeo’s successful fundraising efforts, the portion of the unpaid balance of the LOC still outstanding as of the end of each fiscal year, equal to the amount raised by the Muzeo from donations, would be recast as a grant. In the event the Muzeo Foundation failed to raise at least the amount of the LOC established for each year, the City had the right to terminate the Muzeo LOC and/or terminate the Agreement.
In FY 2012/2013, the Muzeo requested to change the timing of future drawdowns from the end of a fiscal year to a calendar year. Amendment No. 2, dated January 1, 2013, was approved for the purpose of advancing the maturity date of the LOC from June 30, 2015, to December 31, 2014, changing the period during which Muzeo can draw down from the LOC from a fiscal year basis to a calendar year basis, in an amount not to exceed $200,000.
In 2014, the Muzeo requested an additional Amendment to increase the LOC due to increasing costs. Amendment No. 3, dated June 30, 2014, increased the LOC amount from $200,000 to $250,000, and changed back to a fiscal year basis from the calendar year basis commencing July 1, 2014. Additionally, Amendment No. 3 removed all references to the Agency from the Agreement, as it no longer had any responsibilities or obligations to the Muzeo or City regarding the Agreement. This Amendment named the Community Services Department as the Agreement’s managing entity. The Amendment also extended the term of the Agreement to expire on June 30, 2019.
In June 2019, Amendment No. 4 was executed, extending the term of the Agreement through June 30, 2024, and requiring the Muzeo to provide fiscal year-end income and expense statements as well as reports with details on the previous year’s fundraising efforts, impacts to community showing number of community outreach events, number of visitors, number of exhibits, and fundraising events. Additionally, this Amendment provided a Capital Working Line of Credit (CWLOC) in the amount not to exceed $150,000 per fiscal year. The CWLOC assisted the Muzeo’s cash flow with the timing of their expenses with a loan that was to be paid back monthly with interest, and with the entire balance of the loan due in full at the end of each fiscal year. The Muzeo has only had to use this loan once over the last five years. In the event the Muzeo fails to pay the balance remaining on the CWLOC for each year, the City may terminate the CWLOC.
Amendment No. 5 to the Property Operating Agreement with Muzeo Foundation May 7, 2024
Amendment No. 5 is being proposed for the purpose of extending the current financial arrangement to coincide with the year-end date of the original Property Operating Agreement in October 2037. The Amendment also includes the addition of CPI increases to the LOC beginning in July 2029, and clarifies the matching funding sources of the Muzeo to include in-kind volunteer and services hours, as well as admission sales, for the purpose of meeting its $250,000 matching fundraising requirement.
Furthermore, at the close of each fiscal year, the Muzeo shall continue to provide to the City a year-end report including accomplishments and expense and revenue statements.
New reporting will include the addition of an Anticipated Impact Report for the upcoming year identifying planned community outreach events, number of attendees, number of exhibits and fundraising events, and any other community benefiting programs.
Amendment No. 5 will have an initial term of five years with an option to extend by one additional five-year term, and one additional three-year extension, making the maturity date June 30, 2037, which coincides with the year-end date of the Property Operating Agreement in October 2037.
IMPACT ON BUDGET:
The $250,000 LOC funds are included in the Community Services budget.
Respectfully submitted,
Sjany Larson-Cash
Director of Community Services
Attachments:
1. Amendment No. 5
2. Original Property Operating Agreement with Amendments 1 - 4