1 STAFF REPORT
DATE: April 5, 2022
TO: Justin Hess, City Manager
FROM: Patrick Prescott, Community Development Director VIA: Simone McFarland, Assistant Community Development Director, Economic Development & Housing
BY: Sarah Eskandari, Real Estate & Project Manager
SUBJECT: Approval to Issue a Request for Proposal Regarding Possible Future Tenants for 2244 N. Buena Vista Street
RECOMMENDATION
Direct staff to issue a Request for Proposals (RFP) to lease 2244 N. Buena Vista Street (“Property”) to a non-profit that will provide mutually agreeable City services that supports the City’s mission.
BACKGROUND
When the Boys and Girls Club announced that they would be moving out of the City - owned building located at 2244 N. Buena Vista, the City Council asked staff to prepare a report offering suggestions on how to re- lease the Property. About the same time, the California Housing and Community Development Department began enforcing the State’s Surplus Land Act (SLA) requiring that cit ies comply with the requirements of the SLA before moving forward with any leases or sale of surplus property.
Surplus Exempt Property
When the City decides to use a property for continued City use, the property is then deemed exempt from the Surplus Land Act. This includes City uses such as a Fire Station, City Hall, and can include property that is being used to provide services pursuant to a written plan adopted by the City. For instance, homeless services provided by a non- profit via the City’s Homelessness Plan.
COMMUNITY
DEVELOPMENT
2 Surplus Property Protocol
On November 2, 2021, the City Council approved the City of Burbank Surplus Property Protocol (Attachment 1), which outlines the City’s process for disposing of non- surplus land, surplus land, and exempt surplus land in compliance with the SLA. In addition, the City Council expressed the following preferences for disposition of property under the Surplus Property Protocol:
1. City Council prefers that future tenants under City leases provide services that benefit the residents of Burbank.
2. Any future tenant’s monthly rent should at a minimum cover the ongoing maintenance costs and possible long-term improvements of the leased property.
Under the adopted Surplus Property Protocol, for surplus exempt property the City will utilize an RFP process to select a non-profit tenant to provide the City service.
Additionally, staff was directed to conduct cost assessments for any future properties that are to be leased in order to bring the current asset up to building and safety codes. The cost analysis for 2244 N. Buena Vista is included as Attachment 2.
DISCUSSION
Current physical state of 2244 N. Buena Vista
The Boys and Girls Club occupied the Property for twenty-seven years through a lease that charged a nominal rent of one dollar per year. As such, the lease rate did not account for the cost of building improvements, cosmetic improvements, or long-term maintenance.
Due to this financing structure and the lease not addressing on- going maintenance, the building requires several repairs before it can be occupied.
Upon the vacancy of the building, the City’s Public Works Department conducted a facility assessment of the Property. An onsite walk with various professionals was conducted to assess the condition of the existing structural, electrical, mechanical, plumbing, roofing and fire life safety. Public W orks was then provided an assessment which includes an overview of the scope and costs that have been deemed necessary. From this assessment, an estimated budget was created (Attachment 2).
The assessment shows that there are significant improvements that are required to bring the property up to building code and safety requirements. Such work includes installing fire sprinklers, fixing the roof and removing non- code compliant trailers on the site. The estimated cost for the required improvements is $1,119,875.00. Additionally, the report identified cosmetic improvements that are needed on the interior as well as the exterior of the building site. Cosmetic costs are estimated to be $228,000.00, and include paint, carpet, cabinetry, landscaping, fixtures, and resurfacing. Together, t his work would require a building permit and would trigger prevailing wage. Staff has budgeted $200,000.00 for construction drawings and $202,181.25 (15% of total estimated construction cost) for prevailing wage. The total estimated cost to complete all recommended repairs and refurbishments is $1,750,056.00.
3 The Property cannot be occupied until the minimum improvements are completed and occupancy is certified to be safe by all departments. Either the new tenant or the City must complete these minimum improvements before occupancy. If the City completes the improvements , Public Works and C ommunity Development will be responsible to submit a full set of construction drawings to the City for approval. Staff will be responsible for both the construction and project management of the Property improvements.
Either way, if the City leases the Property, significant improvements to adhere to building and safety codes must be made. Currently, there are no City designated funds allocated to repair the Property. Funds for this could be negotiated through a future contract, be paid for from the City’s General Fund or City Council could set aside funding through the Community Development Block Grant Process (CDBG) . If CDBG funding is used, this would have to be approved when the City Council reviews and approves the annual spending plan that typically occurs with the new budget cycle.
Direction Requested
Staff is asking for direction regarding how to proceed with the Property.
Option 1
If City Council wishes to designate the Property for lease to a non- profit partner that provides a City use, the Property would not be subject to the statutory SLA process and instead, staff would pursue a non- profit partner through an RFP, with eventual selection and lease negotiation by Council. The City may negotiate lease provisions that financially assist the City in paying for, or recovering portions of, the Ci ty’s costs to complete necessary building improvements; however, the City should expect that a non-profit may not be able to afford any or all of the capital maintenance or improvement costs along with any desired tenant improvements and may ask the City to pay for a portion or all of it. If a potential candidate does show that they have the financial ability to pay for a portion of the improvements, staff recommends the tenant cover the cosmetic costs indicated in attachment #2. The benefit to leasing the property to a non- profit is that they would be providing services that the City does not have the capacity to offer but is much needed by the community. This is staff’s recommendation.
Option 2
Should City Council determine that the Property is not required for a City -use, the SLA process will apply, and staff will have to offer the Property for affordable housing, open space and school use first, before entering into negotiations with a new tena nt. Under the SLA process, the City must enter good faith negotiations for at least 90 days with any interested party who responds to the initial offer to develop the land for affordable housing, open space, or school use. If an agreement cannot be reached during those 90- days, the City could then proceed to secure a tenant for an alternate use of the Property.
Financial assistance with the City’s Property improvement costs could be part of the lease negotiations.
Option 3
If the City Council determines that the Property is not required for a City -use, the City could sell the P roperty. As with Option 2, the City would first need to follow the SLA
4 process by offering the Property for development of affordable housing, open space, or school use, before entering into alternative negotiations. However, during the November 2, 2021, City Council meeting, City Council indicated that that they were not inclined to sell the Property.
FISCAL IMPACT
There are no current fiscal impacts for any of the current Options; however, there will be in the future based on RFP responses. Staff cannot currently estimate the amount until respondent proposals are received.
CONCLUSION
The Property located at 2244 N. Buena Vista is an asset to the City of Burbank that can either be used for furthering its mission to serve the public by leasing the Property to a non-profit that provides City services, which will exempt the P roperty from the SL A process, or the City can lease or sell the Property for a non-City use that would require following the SLA process. If the City decides to lease the Property, it will probably require some type of financial investment on the part of the City to bring it up to code requirements. The amount will depend upon the future tenant, use and negotiations.
ATTACHMENTS
1. November 2, 2021 Surplus Land Protocol Staff Report
2. 2244 N. Buena Vista Property Assessment Report