Agenda Report
Fullerton City Council
MEETING DATE: NOVEMBER 21, 2023
TO: CITY COUNCIL / SUCCESSOR AGENCY
SUBMITTED BY: SUNAYANA THOMAS, DIRECTOR OF COMMUNITY AND ECONOMIC DEVELOPMENT PREPARED BY: TAYLOR SAMUELSON, SENIOR ADMINISTRATIVE ANALYST SUBJECT: THIRD AMENDMENT TO LEASE AGREEMENT WITH CALVARY CHAPEL OPEN DOOR FOR A LEASE RATE REDUCTION
SUMMARY
Calvary Chapel Open Door has a lease for City-owned property in the City of Anaheim next to 1011 North Harbor Boulevard as a church parking lot through 2027. The church faces financial hardships and requests a 30% lease rate reduction. Staff recommends a 20% reduction for the remainder of the agreement along with community outreach and use of the space for equipment storage.
RECOMMENDATION
1. Approve third amendment to lease agreement with Calvary Chapel Open Door to reduce lease rates by 20% for the remaining lease term for the operation of a church parking lot at City-owned real property Assessor Parcel Number 271-082-26 (Main Plant).
2. Authorize City Manager to execute lease agreements on behalf of the City of Fullerton, in a form approved by the City Attorney.
OR
3. Deny lessee request for rent reduction and provide alternative direction to staff.
CITY MANAGER REMARKS
The City Manager recommends approval.
PRIORITY POLICY STATEMENT
This item matches the following Priority Policy Statement:
Infrastructure and City Assets.
FISCAL IMPACT
The current lease provides the General Fund approximately $30,373 in annual revenue. The third amendment to the lease would result in a 20% lease reduction, decreasing annual lease revenue by $6,557 or an estimated $29,756 decrease over the remaining 4.5 year term. Staff would modify the 20% lease rate reduction against the 3% escalator of the original lease amount each year.
The third amendment would enable the City to utilize lessee space as necessary for storage of city equipment and items on an as needed basis and the Lessor would complete a good faith effort to collaborate where possible on community outreach.
DISCUSSION
Calvary Chapel Open Door approached City staff in early 2023 to identify a path forward for lease modifications due to financial hardships following the Covid-19 pandemic (Attachment 3). The property is a parking lot on City-owned land within the City of Anaheim primarily for Public Works water operations and serves no other governmental purpose. The Church developed the parking lot and entered into the lease agreement on July 16, 2002 (Attachment 4). The church completed grading, paving and fencing on the site after the entering into the lease.
The parties amended the lease in 2007 changing language associated with the term, extending the agreement through 2027 as well as language to the fair market value analysis of similar properties in Orange County (Attachment 5).
The lease agreement adjusts annual rent on a three percent CPI adjustment which has escalated significantly from the original amount. The church has experienced ongoing financial hardships and hopes to continue to lease the property and serve its members into the future. The church has requested a 20 to 30% rent reduction to accommodate their financial situation. Use of this eastern portion of the property has not impacted Public Works Water Operations and staff does not anticipate any impact for the length of the term through 2027.
Existing limitations on site access, as well as proximity to water operations, impact the City’s ability to consider alternative tenants and uses for the space. Staff recommends a 20% reduction for the remainder of the agreement through 2027, as well as conditioning the amendment to require collaboration on community outreach efforts and allowances for the City to use lease premises for equipment storage on a limited basis as determined by the Director of Public Works.
Attachments:
Attachment 1 – Draft Lease Amendment
Attachment 2 – Proposal Letter from Tenant
Attachment 3 – Original Lease Agreement (2002)
Attachment 4 – Lease Amendment Number One
Attachment 5 – Lease Amendment Number Two
cc: City Manager Eric J. Levitt
Lease Amendment with Calvary Chapel Open Door
November 21, 2023 - Page 2