City of Gonzales
CITY MANAGER DEPARTMENT
STAFF REPORT
TO: Honorable Mayor Rios and City Council
DATE: May 5, 2025
FROM: Carmen Gil, City Manager
THROUGH: Carmen Gil, City Manager
SUBJECT: Amendment #5 to Lab Corp Lease Agreement
RECOMMENDATION
Staff recommends that the City Council Approve Amendment #5 to the Lease Agreement with Laboratory Corporation of America, a Delaware Corporation for continued use of a portion of the old Medical Building located at 133 Fourth Street (Exhibit A).
BACKGROUND
Laboratory Corporation of America (Lab Corp) has provided routine medical lab services at 133 Fourth Street (Old Medical Building) for years and has requested several extensions to their lease. The original lease was executed in 2016 and since then, we have extended it multiple times (Exhibit B). Through Council instruction, staff conducted a Market Rate Study that proved that the tenant was being undercharged for the space. The going market rate for similar spaces was calculated at $1,150. After negotiations Lab Corp has agreed to pay $850 a month for the space instead of $730. The current Amendment (Amendment #4) expired on April 1st, 2025 and Amendment #5 would extend the Agreement for two additional years, taking us to April 1, 2027 and aligning the end date with the other tenant (Gonzales Medical Center). Section 17 of the Agreement allows for termination of the contract if needed with a 90-day notice.
REVIEW AND ANALYSIS
Lab Corp has been an excellent partner during the time they have been in operation in the building and provides essential access to lab services for the community. Amendment #5 will extend their lease through April 1, 2027, with year two March 31, 2026 through April 1, 2027, increasing to $900 a month.
Explain Recommendation and How it Supports the Vision
AGENDA
ITEM
17 Gonzales will continue to be a safe, clean, family-friendly community, diverse in its heritage, and committed to working collaboratively to preserve and retain its small town charm.
Explain: Having access to medical laboratory services in Gonzales is essential and supports our efforts of providing optimal community health opportunities.
Explain how the Recommendation Directly Implements the Mission The City Council and Staff of the City of Gonzales will realize our Vision by providing the leadership, commitment, and resources necessary to provide excellent services that enhance the quality of life of our diverse community.
Explain: Staff recommends extending the lease to 2027 as the other lease on the building also expiries in 2027. However, if needed we can terminate the Agreement at any time with a 90-day notice.
City services will be delivered in a cost-effective, respectful, and friendly manner to insure the safety and well being of the residents and the promotion of business, recreational, housing and employment opportunities in an environmentally sustainable manner.
Explain: At Council’s direction staff worked to increase the lease amount from $730 to $850 in year 1 and to $900 in year two.
Strong fiscal policies allow us to provide appropriate infrastructure for:
• Public Safety Yes No X N/A
• Housing Yes No X N/A
• Recreation Yes No X N/A
• Environment Yes No X N/A
• Education Yes No X N/A
Explain: Leasing space to health care providers is an excellent use of City-owned buildings.
ALTERNATIVES
Alternative 1 – The City Council could determine another use for that portion of the medical building.
Staff would work with the lab to vacate the premises.
Alternative 2 – The City Council could direct staff to change the lease amount or the term. Staff will address areas as directed.
BUDGET IMPACT
The revenue from the lease is included in the City’s approved budget. If the lease were terminated, there would be a corresponding loss of revenue.
CONCLUSION
Staff recommends that the City Council Approve Amendment #5 to the Lease Agreement with Laboratory Corporation of America, a Delaware Corporation, for continued use of a portion of the old Medical Building located at 133 Fourth Street.
Attachments:
1. Amendment #5 with Lab Corp
2. Lab Corp Lease & Past Amendments