Agenda, closed session, second session — Hillsborough City Council, December 8, 2025 (part 3 of 3)

DEPARTMENT OF GENERAL SERVICES GOVERNOR GAVIN NEWSOM

BUILDING STANDARDS COMMISSION
2525 Natomas Park Drive, Suite 130
Sacramento, California 95833-2936
(916) 263-0916 FAX (916) 263-0959

CALIFORNIA BUILDING STANDARDS COMMISSION
INFORMATION BULLETIN 25-03
DATE: September 22, 2025
TO: LOCAL BUILDING DEPARTMENTS

STATE AGENCIES AND DEPARTMENTS

CBSC INTERESTED PARTIES
SUBJECT: AB 130 (Chapter 22, Statutes of 2025) and Impact on Process for Local Amendments to Title 24, California Building Standards Code
The purpose of this information bulletin is to alert local building departments, state agencies and departments, and interested parties of new requirements in the California Health & Safety Code (HSC) relating to changes in laws governing the Title 24 building standard local amendment process.

Background
Budget trailer bill AB 130 (Chapter 22, Statutes of 2025, see Sections 29-31 and 37-42 of the bill) became effective June 30, 2025, and enacted a moratorium on state and local building standards affecting residential units beginning October 1, 2025, and ending June 1, 2031. This bulletin seeks to provide local agencies guidance on these new laws now in effect.

Residential Units Not Defined
The scope of the moratorium on residential building standards enacted by AB 130 encompasses “residential units,” which is currently not defined in statute and regulation.

As such, the commission interprets this to mean all Residential Group R occupancies, as listed in Section 310 of the California Building Code (Part 2 of Title 24), as well as detached one- and two-family dwellings and townhouses, as listed in the California Residential Code (Part 2.5 of Title 24). Specifically, the residential Group R occupancies listed in Section 310 of the CBC would include Residential Groups R-1, R-2, R-2.1, R2.2, R-3, R-3.1, and R-4.

ATTACHMENT 3
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6-year Moratorium on Local Amendments Affecting Residential Units AB 130 amends Health and Safety Code Sections 17958, 17958.5, 17958.7, and 18941.5 relative to local amendments to Title 24, and prohibits cities and counties from making changes that are applicable to residential units, unless one of the following conditions is met:
(1) The changes or modifications are substantially equivalent to changes or modifications that were previously filed by the governing body of the city or county and were in effect as of September 30, 2025.

The commission interprets this to mean a local amendment applicable to residential units being carried forward from a previously filed ordinance (i.e., an ordinance amending the 2022 edition of Title 24) with no material change in regulatory effect to the existing standards.
(2) The commission deems those changes or modifications necessary as emergency standards to protect health and safety.

The commission interprets this to mean a local ordinance that has been adopted on an emergency and/or urgency basis in order to protect the health and safety of the regulated community, and necessitates an emergency/urgency finding or justification be included with the ordinance along with other findings required by state law. (3) The changes or modifications relate to home hardening.

The term “home hardening” is not defined in statute or regulation. As such, the commission interprets this to mean local amendments to the California Wildland-Urban Interface Code (Part 7 of Title 24). For local amendments that pertain to home hardening outside of Part 7, the commission may review in consultation with the Office of the State Fire Marshal.
(4) The building standards relate to home hardening and are proposed for adoption by a fire protection district pursuant to Section 13869.7.

As a reminder, local amendments made by fire protection districts are required to be filed with the Department of Housing and Community Development (HCD), not the California Building Standards Commission. If such ordinances are submitted to the commission, they will be referred to HCD for consideration. (5) The changes or modifications are necessary to implement a local code amendment that is adopted to align with a general plan approved on or before June 10, 2025, and that permits mixed-fuel residential construction consistent with federal law while also incentivizing all-electric construction as part of an adopted greenhouse gas emissions reduction strategy.

The commission strongly recommends local agencies include the following information in their filed ordinance:
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1. Clearly identify the adopted greenhouse gas reduction strategy and general plan approved on or before June 10, 2025, and

2. Clearly explain how the ordinance incentivizes all-electric construction and complies with federal law in permitting mixed-fuel residential construction.

The commission, in determining that a modification or change meets any of the criteria contained in paragraphs (1) through (5) above, may rely on a statement by the local agency to that effect.

The commission strongly recommends local agencies include a statement that cites the specific exception(s) from AB 130 that authorize all code changes affecting residential units contained within the filed ordinance. The commission will review this statement, along with reviewing the details of each local ordinance submitted to ensure compliance with these new laws.

Local Administrative Standards
The definition of “Building Standard” in Health and Safety Code Section 18909 includes the following statement relative to administrative standards:

Health and Safety Code Section 18909(c) “Building standard” includes a regulation or rule relating to the implementation or enforcement of a building standard not otherwise governed by statute, but does not include the adoption of procedural ordinances by a city or other public agency relating to civil, administrative, or criminal procedures and remedies available for enforcing code violations.”
While the definition of “Building Standard” does not include specified administrative provisions, AB 130 authorizes changes or modifications related to administrative practices that are proposed for adoption during the intervening period pursuant to Section 18942, and exclusively result in any of the following:
(A) Reductions in time for a local agency to issue a postentitlement permit. (B) Alterations to a local agency’s postentitlement fee schedule. (C) Modernization of, or adoption of, new permitting platforms and software utilized by the local agency.
(D) Reductions in cost of internal operation for a local agency. (E) Establishment, alteration, or removal of local programs related to enforcement of building code violations or complaints alleging building code violations.

These administrative changes or modifications made may be filed with the commission and shall be reviewed by the commission, in consultation with the Department of Housing and Community Development, within 60 days of receipt, if requested by the local agency.
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The commission interprets this to mean that a local jurisdiction is not required to include these or other administrative provisions which are not building standards within their ordinance, but they may if they choose. However, the commission and department will only review the administrative provisions specified in paragraphs (A) through (E) above if formally requested by the local agency, and requires the local agency to include this formal request in the cover letter or transmission email included with the ordinance filing.

Model Home Design Exception
AB 130 also amended Health and Safety Code 18938.5 relative to model home designs. Notwithstanding other laws, AB 130 authorizes that “the state and local building standards in effect at the time an application for a building permit is submitted, for a residential dwelling based on a model home design approved under those standards, shall apply to all future residential dwellings based on that approved model home design in the same jurisdiction, unless the model home design substantially changes at a later date or 10 years have passed since the building permit for the model home design was approved by the jurisdiction, whichever comes first.” The commission notes this new provision does not directly affect the programs, policies and laws under its purview (e.g., review/processing of state and local amendments, administration of the building standard code adoption process, codification and publication of Title 24, etc.). Therefore, the commission is unable to provide guidance on this statute and recommends local jurisdictions consult with their legal counsel and/or relevant industry associations.

Next Steps
In most cases, the commission cannot interpret statute on behalf of local authorities having jurisdiction. Due to the breadth and scope of AB 130 and its impact on the Title 24 local amendment process, the commission’s goal is to provide uniform guidance to local jurisdictions and the regulated community and will continue to do so in the months ahead. Once again, the commission recommends that local jurisdictions consult with their legal counsel when implementing these new laws.

If you have any questions concerning this matter, please contact our office at (916) 263-0916 or email your inquiry to [email protected].

Stoyan Bumbalov
Stoyan Bumbalov
Executive Director
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TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
12 OLD BUSINESS

CITY COUNCIL MEETING
DECEMBER 8, 2025

AGENDA STAFF REPORT
ITEM SUBJECT: 40 Baywood Avenue Property Donation Proposal Discussion SUMMARY: Over the past six years, the Town has been working diligently with the representatives of 40 Baywood to arrive at an agreement that is in keeping with the intentions of the original owner, Mrs. Lilienthal and is feasible for the Town. Since her passing, the Town has been working with the property’s trustee to develop various iterations of a donation agreement that preserves Mrs. Lilienthal’s intent and allows the Town to operate the property in a responsible manner.

Background – Original Intent of Property Owner
In a recorded video of Mrs. Lilienthal, she states “Hi, my name is Terry Lilienthal and welcome to 40 Baywood. My husband Jesse and I have lived here since 1950. I intend to leave our home to the communities of Hillsborough and San Mateo so that others may enjoy it as much as we did.” Title to the property was originally in Mrs. Lilienthal’s trust. Title has now been transferred to Friends of 40 Baywood, a California nonprofit corporate created and operated by the Trustee, Anne Lassahn.

During the negotiation process, the parties discussed an outright gift to the Town, subject to certain operating covenants. Then, Ms. Lassahn proposed a 10-year lease arrangement, which was not acceptable to the Town. As a result of recent discussions, the Town and Friends of 40 Baywood have been discussing a donation agreement with a 10-year term, with certain operating covenants and, if the Town decides not to continue operating the property, a requirement to re-transfer ownership to Friends of 40 Baywood. A draft of the donation agreement with redline changes made by the attorney for Friends of 40 Baywood was discussed at the September 8, 2025 City Council meeting.

Current Proposal
Most recently, representatives of the Town and Friends of 40 Baywood met to discuss modifications to the draft donation agreement that might be acceptable to both parties. The meeting took place on November 4, 2025 at the offices of Lassahn Fiduciary Services. To document the discussions at the meeting, the Town provided a new draft donation agreement on November 9, 2025 (Attachment 1). After reviewing this draft, the representatives of Friends of 40 Baywood sent back a revised draft agreement (Attachment 2).

One new issue has emerged since the last Council meeting: there is approximately $348,000 in past due and current property taxes assessed against the property. Some or all of the property -333-
Agenda Staff Report – Hillsborough City Council
December 8, 2025

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taxes may be removed if Friends of 40 Baywood submits required paperwork to the County Assessor. Both draft donation agreements provide that title to the property will be transferred free and clear of any liens or encumbrances, so the actual donation of the property could not take place until this tax issue is resolved.

The revised donation agreement is the subject of discussion this evening and staff is requesting direction from City Council on whether or not to accept this draft in its current form, continue negotiating, or discontinue the process. The representatives from 40 Baywood indicated that they will not make any additional concessions and would be meeting with brokers to list the property if the Town does not find these terms acceptable.

History
A summary of the prior discussions and proposals made by the Town is provided below:

Date Meeting Town Action 40 Baywood Action
6/8/2020 City Council
Meeting
Town requested additional financial
information and an opportunity to tour the
site
Provided site tours for
interested
Councilmember in June
7/13/2020 City Council
Meeting
City Council directed staff to begin to take
the steps necessary for potential future
acceptance of the donation of 40 Baywood
by:
(1) working with the donor’s representatives
to develop the conditions of the deed
restrictions for the property
(2) develop a Landscape Master Plan in
collaboration with the donor
(3) initiate the formation of a “Friends of the
Property” committee
(4) establish preliminary discussions with
potential partners (e.g., clubs, foundations
or historical groups)
2020 N/A Staff drafted Covenants, Conditions, and
Restrictions (CC&Rs) in accordance with
Council direction and interests expressed by
the donor
No action was taken by
the donor or its
representatives to codify
the agreed upon CC&Rs
11/13/2023 City Council
Meeting
City Council reviewed a proposed lease
agreement and directed staff to not pursue
the lease agreement (Attachment 3)
Provided a proposed
lease agreement
(Attachment 3)
10/17/2024 N/A Trust submitted
proposed terms of gifting
40 Baywood to the Town
(Attachment 4)
11/4/2024 N/A Trust submitted revised
proposed terms of gifting
40 Baywood to the Town
(Attachment 5)
11/12/2024 City Council
Meeting
City Council directed staff to bring the item
back at the January 2025 City Council
meeting with the trustee present for City
Council discussion. Requested financial
information from the trustee and asked to
Partial financial records
were provided but no
inspection of the
property was granted –
specific responses from
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Agenda Staff Report – Hillsborough City Council
December 8, 2025

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Date Meeting Town Action 40 Baywood Action
inspect the building and property in its
current condition
the Trustee included in
January 13, 2025 staff
report (Attachment 6)
1/13/2025 City Council
Meeting
City Council discussed whether to provide
direction to staff to negotiate on terms on
which to accept the donation, the City
Council did not provide direction at that time
3/10/2025 City Council
Meeting
City Council directed staff to schedule a
Study Session in 30-60 days to develop a
counter proposal for the 40 Baywood
property (Attachment 7)
4/23/2025 N/A Trust submitted a
revised lease proposal
for up to 30 years
(Attachment 8)
4/28/2025 City Council
Meeting (Study
Session)
City Council directed staff to reject the lease
proposal and prepare a counterproposal
which includes an agreement in which the
Town commits to not build multifamily
housing on the site with the exception of
potential workforce housing for firefighters or
police officers
9/8/2025 City Council
Meeting
City Council considered revised redline
donation agreement and directed staff to
work with the Trustee to identify a mutually
agreeable revised draft.

Trust submitted a revised
donation proposal
(Attachment 9)
11/4/2025 Town met with
Trustee
Verbal discussion and agreements on key
points to be included in the donation
agreement. Town’s legal staff to draft
donation agreement and share with Trustee
11/9/2025 N/A Town submitted donation agreement to
Trustee (Attachment 1)
11/17/2025 N/A Trustee rejects donation
agreement submitted by
the Town and submits
counter proposal
12/2/2025 N/A Trustee submits revised
version of the donation
agreement from Friends
of 40 Baywood
(Attachment 2)
Revisions to Town’s Donation Agreement
The revised agreement presented by the attorney for 40 Baywood presents several significant issues for Council consideration:

Section 2 – Property taxes. As noted above, the property taxes currently assessed against the property must be resolved before title can be transferred free and clear of liens. The revised agreement does not include a process for when the actual donation would occur, or how the property would be managed in the interim.
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December 8, 2025

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Section 2 – The revised agreement includes three new provisions – (a) a portrait of Mrs. Lilienthal will remain in the main house during the 10-year term, (b) a set of China will remain on display or returned to Friends of 40 Baywood, and (c) the separate building referred to as the library or “mancave” will remain furnished in its current state for the 10-year term. The rationale for this third requirement is not apparent.

Section 3 – The Town’s draft provides that, after one year, the grounds would be open to the public once per quarter for general viewing and that the first floor of the main house would be opened after two years; provided, that these opening dates may be delayed if the grounds or house are not ready for public access due to safety or regulatory compliance issues. The revised agreement requires three open days per quarter. This requirement would be expanded to include the first floor of the main house after two years. Further, if there is a delay in opening the house or grounds due to efforts to meet public safety and access requirements, the 10-year term of the agreement would be extended one day for every day of delay.

Section 4 – The revised agreement restricts the leasing of the property and restricts the potential use of the property for a temporary police station use. A new section (e) has been added to require that certain plaques remain in place.

Section 5 – This section requires that the Town offer the property back to Friends of 40 Baywood or its assignee before offering it for sale during the 10-year term. The Town’s draft provides that the transfer would be for no monetary consideration. The revised agreement provides that Friends of 40 Baywood would pay $10.00 and that this payment will be considered adequate compensation to the Town. The revised agreement increases the time for Friends of 40 Baywood to accept the return of the property from 30 days to 60 days and adds that the property would need to be offered to an assignee designated by Friends of 40 Baywood if the assignee is a nonprofit organization or foundation.

The introduction of an assignee is new and should be carefully considered, as an assignee could have quite different motivations and ideas about how the property should be used and how the donation agreement should be interpreted and performed compared to Friends of 40 Baywood.

Section 6(e) – The Town’s draft provides that, if a dispute goes to binding arbitration, the arbitrator will have discretion to award the prevailing party some, or all of its costs and attorney fees incurred in the arbitration proceeding. The Town’s draft provides that the potential right to recover attorney fees is limited to the Town and Friends of 40 Baywood. The revised agreement expands the right to seek attorney fees to an assignee of Friends of 40 Baywood.

Section 7 – The revised agreement includes new provisions that make time of the essence in performing the agreement and require that a video recorded by Mrs. Lilienthal be made available and shown occasionally at the property.

There are other minor changes made in the revised agreement.

FISCAL IMPACT: There is no fiscal impact associated with this agenda item at this time. -336-
Agenda Staff Report – Hillsborough City Council
December 8, 2025

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ENVIRONMENTAL ISSUES: The proposed action is exempt from environmental review pursuant to the California Environmental Quality Act (CEQA) Guidelines sections 15378(b)(2) and 15378(b)(5) as ongoing administrative or organizational activities that will not result in direct or indirect physical changes in the environment.

ATTACHMENTS:

1. Town’s proposed Donation Agreement (sent November 9, 2025)

2. Trustee’s revised Donation Agreement (sent December 2, 2025)

3. November 13, 2023 Staff Report and Lease Proposal prepared by Trustee

4. October 17, 2024 Proposed Gifting Terms by Trustee

5. November 12, 2024 Staff Report

6. January 13, 2025 Staff Report

7. March 10, 2025 Staff Report

8. April 2025 Revised Lease Proposal

9. September 8, 2025 Staff Report Containing Revised Lease Proposal PREPARED BY: Doug Davis, City Manager
RECOMMENDATION: Discuss and provide direction to the City Manager regarding 40 Baywood to (1) accept the latest donation agreement proposal, (2) direct staff to pursue modifications to the agreement, or (3) reject the latest donation agreement and cease negotiations. -337-
DRAFT

DONATION AGREEMENT
This Donation Agreement (this “Agreement”) is entered into by and between Friends of 40 Baywood Avenue, a California public benefit corporation (“Friends of 40 Baywood”) and the Town of Hillsborough and is based on the following:

WHEREAS, the real property and improvements commonly known as 40 Baywood Avenue, Hillsborough (“40 Baywood” or the “Property”) were owned by Thelma Lilienthal through the Lilienthal Family Trust; and,
WHEREAS, 40 Baywood consists of two parcels, one located in the City of San Mateo and the other in Hillsborough; and,
WHEREAS, prior to her death, Mrs. Lilienthal expressed the desire to donate 40 Baywood to be used for civic and recreational purposes; and,
WHEREAS, following her death, title to 40 Baywood was transferred to Friends of 40 Baywood to fulfill Mrs. Lilienthal’s wishes; and,
WHEREAS, Friends of 40 Baywood desires to transfer title to 40 Baywood to Hillsborough, to continue to effectuate Mrs. Lilienthals’ desires and intentions; and, WHEREAS, Friends of 40 Baywood and Hillsborough intend to ensure that the use and development of 40 Baywood is consistent with the desires and intentions of Mrs. Lilienthal by memorializing certain undertakings by Hillsborough during the period covered by this Agreement;
Now, therefore, for good and valuable considerations, including the obligations and duties set forth herein, the receipt and sufficiency of which are hereby acknowledged, Friends of 40 Baywood and Hillsborough agree as follows:

AGREEMENT

1. Term. This Agreement shall be effective on the date a deed transferring title to 40 Baywood to Hillsborough is recorded with the San Mateo County Recorder (the “Effective Date”) and shall continue for a period of ten (10) year (the “Term”), unless terminated earlier in accordance with Section 5 below.

At the conclusion of the 10-year Term, this Agreement shall automatically terminate and Hillsborough shall no longer be bound by the conditions, restrictions, restraints, and obligations set forth herein.

2. Transfer of Title. The Property shall be transferred to Hillsborough on the Effective Date, free and clear of all liens and encumbrances, and Hillsborough shall accept the Property in its “as-is” physical condition. Any personal property of Friends of 40 Baywood that is not essential to the operation of the Property may be removed prior to the Effective Date. Any ATTACHMENT 1
Town’s proposed Donation Agreement (sent November 9, 2025) -338-
personal property remaining at the Property as of the Effective Date shall be deemed to have been transferred to Hillsborough, in “as-is, where-is” condition.

3. Uses. Hillsborough shall use and operate 40 Baywood during the Term with one or more of the following uses:
• Park and recreational uses.
• Offices for Hillsborough and/or affiliated agencies (including the Central County Fire Department.
• Temporary sleeping or temporary living quarters for employees of Hillsborough and/or affiliated agencies; provided, that the main house shall not be used as a permanent residence for any employee of Hillsborough or an affiliated agency.
• Meeting rooms for community activities, classes, and similar events • Private events including conferences, weddings, memorials, tours, and fundraisers for which a fee may be charged.
• Museums, displays, gift shops, and sale of concessions, either directly by Hillsborough or through leases, concession agreements, or similar arrangements. • Any other civic or public use similar in nature to the above and consistent with the character of 40 Baywood.

In addition to the above, within one year of the Effective Date, Hillsborough will open the grounds of the Property (but not the structures) for visits by residents of Hillsborough and the community at large at least one time per quarter, weather and other conditions permitting, during such dates and times as the City Council deems reasonable. The beginning of these open times may be delayed for a reasonable time if the Property is not in compliance with access and safety requirements and Hillsborough is working diligently to resolve these conditions. The first floor of the main house shall be opened for these periodic visits when it has been brought into compliance with access and safety standards and is being used as offices or meeting spaces that are open to the general public; provided, that administrative office within the main house may be closed off during such visiting hours. It is expected that the first floor will be opened for this purpose within two years of the Effective Date, subject to the compliance provisions below.

The parties acknowledge that implementation of these uses may require modifications to the existing structures and/or additional accessory structures in order to meet legal and operational requirements, including compliance with the Americans with Disabilities Act. Hillsborough shall not be deemed to be out of compliance with this Section so long as it is pursuing compliance reasonably and in good faith.

4. Restrictions. During the Term, Hillsborough shall not do any of the following:
(a) Construct dwelling units or other new habitable buildings outside the general area formerly occupied by servants’ quarters; provided, that this restriction shall not apply to remodeling, reconstructing, adding onto, or replacing existing structures in compliance with -339-
requirements for alteration of historic structures. Notwithstanding the foregoing, Hillsborough may construct additional improvements along the west side of the Property, including restrooms, parking facilities, garages, and storage structures.
(b) Sell either or both of the parcels that comprise 40 Baywood, except as provided in Section 5 below.
(c) Construct or operate the Property as a permanent police station, fire station, or corporation yard or for storage heavy equipment (other than as needed for maintenance and improvement of the Property itself)
(d) Construct or allow to be constructed multi-family housing.

5. Early Termination and Sale of the Property. In the event that operation of the Property becomes financially infeasible or otherwise impractical for Hillsborough during the 10-year Term of this Agreement, Hillsborough may offer the entire Property for sale. Hillsborough shall not offer any portion of the Property for sale while retaining the remainder. Before offering the Property for sale, Hillsborough shall give written notice via email or certified mail to Friends of 40 Baywood of Hillsborough’s intent to sell and Friends of 40 Baywood (or its assignee, provided that the assignee is a nonprofit corporation or foundation) shall have the right to require the return of the Property in its “as-is” condition for no monetary consideration. Friends of 40 Baywood shall have 30 days after receipt of the written notice to exercise this right by giving written notice to the City Manager of Hillsborough via email or certified mail (the “Exercise Notice”). The parties shall open escrow and complete the transfer of title within 60 days of the Exercise Notice. This Agreement shall terminate as of the closing. Use of the Property after closing will be subject to all then-current Zoning Code restrictions. If Friends of 40 Baywood does not give the Exercise Notice within the 30-day period, the right described in this section shall lapse and Hillsborough may sell the Property without restriction.

During the Term, Hillsborough shall not encumber or hypothecate the Property or permit any liens to be placed on the Property or any part thereof. In the event that a third-party lien is recorded, Hillsborough shall take all reasonable actions necessary to remove said lien.

Friends of 40 Baywood may record a Memorandum of this Agreement may be recorded by Friends of 40 Baywood and , in the event a Memorandum is recorded, Friends of 40 Baywood shall record a release of the memorandum at the conclusion of the Term.

6. Dispute Resolution. Should any disputes arise during the Term regarding the performance of this Agreement, the following processes shall be followed:
(a) The party seeking resolution shall give written notice of the matters in dispute to the other party (the “Dispute Notice”). Such notices shall be given to the Chief Executive Officer of Friends of 40 Baywood or the City Manager of Hillsborough, as the case may be. (b) Within 30 days of receipt of the Dispute Notice, the Chief Executive Officer and the City Manager shall meet and confer in person and attempt to resolve the matters in dispute. The -340-
City Manager may be joined by the Mayor, a Councilmember, and/or the Assistant City Manager in such meeting.
(c) If the City Manager and Chief Executive Officer are unable to resolve the matters in dispute, the dispute shall be subject to mediation in accordance with the Commercial Rules of the Judicial Arbitration and Mediation Service (JAMS).
(d) If the parties are unable to resolve their dispute in mediation, the dispute shall be resolved through binding arbitration conducted in accordance with the Commercial Rules of JAMS.
(e) Each party shall bear its own costs and attorney fees during the informal resolution and mediation phases. In the event that an arbitration action is filed and proceeds to a final decision and award, the arbitrator, in his/her discretion, may award some or all of the reasonable attorney fees and costs of the prevailing party. The discretionary award of attorney fees is personal to Hillsborough and Friends of 40 Baywood, and no other person or entity shall be deemed to be a third party beneficiary or have any other right to recover attorney fees or costs under this Agreement

So Agreed:

Date: __________ FRIENDS OF 40 BAYWOOD AVENUE
By: __________________________________
Its: Chief Executive Officer
Date: __________ TOWN OF HILLSBOROUGH
By: __________________________________
Its: City Manager
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5298085.1
DRAFT

WHEREAS, the real property and improvements commonly known as 40 Baywood Avenue, Hillsborough (“40 Baywood” or the “Property”) were owned by Thelma Lilienthal through the Lilienthal Family Trust; and,
WHEREAS, 40 Baywood consists of two parcels, one located in the City of San Mateo and the other in Hillsborough; and,
WHEREAS, prior to her death, Mrs. Lilienthal expressed the desire to donate 40 Baywood to be used for civic and recreational purposes; and,
WHEREAS, following her death, title to 40 Baywood was transferred to Friends of 40 Baywood to fulfill Mrs. Lilienthal’s wishes; and,
WHEREAS, Friends of 40 Baywood desires to transfer title to 40 Baywood to Hillsborough, to continue to effectuate Mrs. Lilienthal’s desires and intentions; and, WHEREAS, Friends of 40 Baywood and Hillsborough intend to ensure that the use and development of 40 Baywood is consistent with the desires and intentions of Mrs. Lilienthal by memorializing certain undertakings by Hillsborough during the period covered by this Agreement;
Now, therefore, for good and valuable considerations, including the obligations and duties set forth herein, the receipt and sufficiency of which are hereby acknowledged, Friends of 40 Baywood and Hillsborough agree as follows:

AGREEMENT

2. Transfer of Title. The Property shall be transferred to Hillsborough on the Effective Date, free and clear of all liens and encumbrances, and Hillsborough shall accept the Property in its “as-is” physical condition. Any personal property remaining at the Property as of the Effective Date shall be deemed to have been transferred to Hillsborough, in “as-is, where-is” condition. Notwithstanding the above, Hillsborough agrees that:

ATTACHMENT 2
Trustee’s revised Donation Agreement (sent December 2, 2025) -342-
5298085.1
(a) The portrait of Ms Lilienthal currently located in the entry way of the main house on the Property will remain in place during the Term.
(b) The China in the butler’s pantry will remain on display during the Term and if Hillsborough determines that they wish it to be moved, they will notify Friends of 40 Baywood who will then have the right to remove it within thirty (30) days of such notification, and if so removed, the China will cease to be a part of this Agreement. (c) The building commonly known as the library or mancave shall remain furnished as it is during the Term (but may be used in accordance with the provisions for uses set forth in this Agreement).

In addition to the above, within one year of the Effective Date, Hillsborough will open the grounds of the Property (but not the structures) for visits by residents of Hillsborough and the community at large (at no charge to any visitors) at least three (3) times per quarter, weather and other conditions permitting, during such dates and times as the City Council deems reasonable to permit the community at large to enjoy the grounds. The beginning of these open times may be delayed for a reasonable time if the grounds of the Property are not in compliance with access and safety requirements and Hillsborough is working diligently to resolve these conditions. Any delay shall increase, day for day for the period of the delay, the Term as set forth in Section 1 above. The first floor of the main house shall be opened for these periodic visits when it has been brought into compliance with access and safety standards and is being used as offices or meeting spaces that are open to the general public; provided, that administrative office within the main house may be closed off during such visiting hours. It is expected that the first floor will be opened for this purpose within two years of the Effective Date, subject to the compliance -343-
5298085.1
provisions below. If the first floor of the main house is not opened for periodic visits with the two (2) year period above, the Term set forth in Section 1 above shall be increased day for day for the period of the delay.

4. Restrictions. During the Term, Hillsborough shall not do any of the following:
(a) Construct dwelling units or other new habitable buildings outside the general area formerly occupied by servants’ quarters; provided, that this restriction shall not apply to remodeling, reconstructing, adding onto, or replacing existing structures in compliance with requirements for alteration of historic structures. Notwithstanding the foregoing, Hillsborough may construct additional improvements along the west side of the Property, including restrooms, parking facilities, garages, and storage structures.
(b) Enter into any agreement to Sell (or enter into one or more leases that extend (including options) beyond the Term ) (or provide an option to purchase or lease) either or both of the parcels that comprise 40 Baywood, except as provided in Section 5 below. (c) Construct or operate the Property as a police station or fire station (other than for administrative offices and only on a temporary basis), or corporation yard or for storage heavy equipment (other than as needed for maintenance and improvement of the Property itself) (d) Construct or allow to be constructed multi-family housing. (e) Remove either of the two (2) plaques by the front door of the main house, the plaque on the fountain in the main driveway, or the plaque on the statute of the woman in the redwood area by the garage.

5. Early Termination and Sale of the Property. In the event that operation of the Property becomes financially infeasible or otherwise impractical for Hillsborough during the Term of this Agreement, Hillsborough may offer the entire Property for sale. Hillsborough shall not offer any portion of the Property for sale while retaining the remainder. Before offering the Property for sale, Hillsborough shall give written notice certified mail to Friends of 40 Baywood of Hillsborough’s intent to sell and Friends of 40 Baywood (which shall include its assignee, provided that the assignee is a nonprofit organization or foundation). Friends of 40 Baywood or its assignee as set forth above shall have the right to require the return of the Property in its “asis” condition for the payment of ten dollars ($10) which is hereby deemed to be adequate consideration. Friends of 40 Baywood shall have sixty (60) days after receipt of the written notice to exercise this right by giving written notice to the City Manager of Hillsborough via email or certified mail (the “Exercise Notice”). The parties shall open escrow and complete the transfer of title within 60 days of the Exercise Notice. This Agreement shall terminate as of the closing. Use of the Property after closing will be subject to all then-current Zoning Code -344-
5298085.1
restrictions; provided, however, Friends of 40 Baywood may use any residential structures built by Hillsborough as residences. If Friends of 40 Baywood does not give the Exercise Notice within the 60-day period, the right described in this section shall lapse and Hillsborough may sell the Property without restriction.

Friends of 40 Baywood may record a Memorandum of this Agreement and , in the event a Memorandum is recorded, Friends of 40 Baywood shall record a release of the memorandum at the conclusion of the Term within thirty (30) days of written notice to Friends of 40 Baywood.

6. Dispute Resolution. Should any disputes arise during the Term regarding the performance of this Agreement, the following processes shall be followed:
(a) The party seeking resolution shall give written notice of the matters in dispute to the other party (the “Dispute Notice”). Such notices shall be given to the Chief Executive Officer of Friends of 40 Baywood or the City Manager of Hillsborough, as the case may be. (b) Within 30 days of receipt of the Dispute Notice, the Chief Executive Officer and the City Manager shall meet and confer in person and attempt to resolve the matters in dispute. The City Manager may be joined by the Mayor, a Councilmember, and/or the Assistant City Manager in such meeting.
(c) If the City Manager and Chief Executive Officer are unable to resolve the matters in dispute, the dispute shall be subject to mediation in accordance with the Commercial Rules of the Judicial Arbitration and Mediation Service (JAMS).
(d) If the parties are unable to resolve their dispute in mediation, the dispute shall be resolved through binding arbitration conducted in accordance with the Commercial Rules of JAMS.
(e) Each party shall bear its own costs and attorney fees during the informal resolution and mediation phases. In the event that an arbitration action is filed and proceeds to a final decision and award, the arbitrator, in his/her discretion, may award some or all of the reasonable attorney fees and costs of the prevailing party. The discretionary award of attorney fees is personal to Hillsborough and Friends of 40 Baywood (and Friends of 40 Baywood’s permitted assignee), and no other person or entity shall be deemed to be a third party beneficiary or have any other right to recover attorney fees or costs under this Agreement

7. Miscellaneous Provisions.
(a) This Agreement includes all of the terms, conditions, and understandings of the parties regarding its subject matter. It may be modified only by a written amendment executed by both parties.
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5298085.1
(b) This Agreement is the product of discussions, negotiations, and drafting by both parties. Neither party shall be deemed to be the drafter of the Agreement for purposes of interpretation.
(c) This Agreement may be executed in counterparts and by facsimile, electronic or Docusign signatures.
(d) Time is of the essence on all provisions in this Agreement. (e) Hillsborough represent and warrants that the City Manager below has the authority to bind Hillsborough in this Agreement.
(f) Hillsborough will make the video that Ms. Lilienthal recorded available on Hillsborough’s website and play it occasionally at the Property for visitors to view.

So Agreed:

TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
18 OLD BUSINESS

CITY COUNCIL MEETING
NOVEMBER 13, 2023

AGENDA STAFF REPORT
ITEM SUBJECT: 40 BAYWOOD AVENUE PROPERTY DONATION UPDATE PURSUANT TO CEQA GUIDELINE 15378
SUMMARY: The subject of 40 Baywood was last discussed at a City Council meeting on July 13, 2020. The item was discussed under the title, “Property Donation – 40 Baywood Avenue.” The nature of that discussion was to review additional financial information (revenue projections and expenditures) as a follow up to prior discussions related to the property donation to the Town. The direction to staff given at that meeting was “to begin to take the steps necessary for potential future acceptance of the donation of 40 Baywood by working with the donor’s representatives to develop the conditions of the deed restrictions for the property; developing a Landscape Master Plan in collaboration with the donor; initiating the formation of a “Friends of the Property” committee; and establishing preliminary discussions with potential partners.” In the time since this direction was given to staff, the property owner has since passed away and the trustee of the Lilienthal Family trust has taken control of the property. The trustee has also formed a non-profit “Friends of 40 Baywood” organization. The trustee has also reached out to Town staff to discuss the Town’s future involvement in the property.

Despite past conversations held at City Council, the trustee has instead offered a lease option to the Town in the amount of $1 per year for 99 years. The terms include restrictions on the amount of space the Town may utilize, allowing the “Friends of 40 Baywood” group to utilize the property, requires the Town to pay the Charity the cost to maintain the property (including property taxes, insurance, repair, replacement, landscaping, gardening, etc.), and requests that the Town re-zone the Property to allow for the Charity to use the property for events (conferences, public meetings, classes, charitable events, and private functions). See Attachment 1 for the full list of general lease parameters.

In addition to the lease parameters, the trustee has provided information related to operating costs of the property, “The ongoing monthly costs to maintain the Baywood Property totals approximately $16,500, and includes but not limited to gardening, koi pond maintenance, utilities, water, cable and garbage, security, pest control and insurance. Note that there will be added costs such as arborist work and other work associated with a property of this size. The above includes the property taxes as of the date of Mrs. Lilienthal’s death. While the Trustee believes that a lease to the Town of Hillsborough would not increase the property taxes for that parcel, it is likely that a lease of the San Mateo parcel to the Town of Hillsborough would result in a reassessment." Town staff reviewed the proposed lease terms and does not believe that the offer is in keeping with the prior Council direction, nor does it serve the best interests of the Town. Further, the proposed -173-
ATTACHMENT 3
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Agenda Staff Report - Hillsborough City Council
November 13, 2023

Page 2 ends

uses by the “Friends of the 40 Baywood” group are not in keeping with the residential nature of the Town and are not in compliance with the existing permitted uses for the zoning designation of the property, as recognized by the Trust’s request for the Town to re-zone the property.

Therefore, staff recommends that the City Council not pursue the lease agreement offered to the Town.

FISCAL IMPACT: There is no fiscal impact associated with this agenda item.

ENVIRONMENTAL ISSUES: The proposed discussion and direction on this item is exempt from environmental review pursuant to the California Environmental Quality Act (CEQA) Guidelines sections 15378(b)(2) and 15378(b)(5) as ongoing administrative or organizational activities that will not result in direct or indirect physical changes in the environment.

ATTACHMENTS: General Lease Parameters
PREPARED BY: Doug Davis, City Manager
RECOMMENDATION: Discuss and provide direction to the City Manager regarding 40 Baywood. -174- -348-
2106841.1
General Lease Parameters
Below are the general parameters for a lease from Friends of 40 Baywood (“Charity”) to the Town of Hillsborough (“Town”).

1. The Town leases the Hillsborough parcel (“Property”) for $1 per year for ninety-nine (99) years.

2. The Town may use up to five (5) of the bedrooms for temporary sleeping quarters for firepersons and police offices to use when they have back-to-back shifts (at least 3 of the bedrooms) and or for other Town uses. The Hillsborough Beautification Foundation may use one of such bedrooms at the discretion of the Town.

3. The Town may use the Property for Town meetings and related functions.

4. The Town shall have no right to sub-divide and or develop the Property and shall have no right to modify the Property including but not limited to the structures contained within the Property.

5. The Charity may conduct tours of the Property, but such tours shall not include access to the bedrooms and offices used by the Town.

6. The Property (excluding the house on the Property) may be open to the public at different times for picnics and other such uses.

7. The Property (exclusive of the five (5) bedrooms above used by the Town) may also be used by the Town for education classes, seminars, and other Town functions.

8. The Charity may create and operate a gift shop, concessions, museums, or similar purposes on portions of the Property (other than in the bedrooms used by the Town).

9. The Charity may use the Property (other than the bedrooms used by the Town) for educational purposes, presentation, school functions, building a sense of community, etc.

10. The Charity and or the Town (and its affiliated agencies) may use the Property (exclusive of the bedrooms used by the Town) for events such as, conferences, public meetings, classes, charitable events, limited private functions, and other similar purposes. All such events shall take into account the noise and the time of the day so as to not unreasonably impact neighboring property owners. The use by the Town for such events as set forth above shall include the Town’s use of the adjacent parcel owned by the Charity. Permits will be obtained prior to such events.

11. The Town shall not sublet all or any portion of the Property and shall not assign the lease. -175- -349-
2106841.1

12. The Property shall not be improved with additional housing.

13. The Town shall pay to the Charity the cost to maintain the Property and the adjacent parcel in San Mateo, including but not limited to any property taxes, insurance, repair, replacement, landscaping, gardening, etc.

14. The Charity may provide funding for capital improvements and major repairs to the structures and grounds from time to time, at the discretion of the Charity. The intent as expressed in the Lilienthal Trust is for the Property to be self-sufficient.

15. The Town shall zone the Property to allow for the above-described uses and permits shall be available for such uses at nominal charge.

16. The Charity shall have the right to store art, furniture, furnishings, photos and other memorabilia in the house and some of these items shall only be accessible by the Charity. -176- -350-
ATTACHMENT 4
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TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
12 OLD BUSINESS

CITY COUNCIL MEETING
NOVEMBER 12, 2024

AGENDA STAFF REPORT
ITEM SUBJECT: 40 BAYWOOD AVENUE PROPERTY DONATION UPDATE PURSUANT TO CEQA GUIDELINE 15378
SUMMARY: The subject of 40 Baywood was last discussed at a City Council meeting on November 13, 2023. The item was discussed under the title, “40 Baywood Avenue Property Donation Update.” The City Council reviewed a proposed lease agreement offered the trustee of the Lilienthal Family trust, who has taken control of the property since the property owner has passed away. The trustee has reached out to Town officials several times to discuss the Town’s future involvement in the property.

BACKGROUND
Prior to the 2023 discussion, the subject of 40 Baywood was last discussed at a City Council meeting on July 13, 2020. The item was discussed under the title, “Property Donation – 40 Baywood Avenue.” The nature of that discussion was to review additional financial information (revenue projections and expenditures) as a follow up to prior discussions related to the property donation to the Town. The direction to staff given at that meeting was “to begin to take the steps necessary for potential future acceptance of the donation of 40 Baywood by working with the donor’s representatives to develop the conditions of the deed restrictions for the property; developing a Landscape Master Plan in collaboration with the donor; initiating the formation of a “Friends of the Property” committee; and establishing preliminary discussions with potential partners.”

PROPOSED LEASE
At the November 13, 2023 meeting, the trustee proposed a lease option to the Town in the amount of $1 per year for 99 years. The terms included restrictions on the amount of space the Town may utilize, allowing the “Friends of 40 Baywood” group to utilize the property, requires the Town to pay the Charity the cost to maintain the property (including property taxes, insurance, repair, replacement, landscaping, gardening, etc.), and requested that the Town re-zone the Property to allow for the Charity to use the property for events (conferences, public meetings, classes, charitable events, and private functions). See Attachment 1 for the full list of general lease parameters.

In addition to the lease parameters, the trustee provided information related to operating costs of the property, “The ongoing monthly costs to maintain the Baywood Property totals approximately $16,500, and includes but not limited to gardening, koi pond maintenance, utilities, water, cable -263-
ATTACHMENT 5
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Agenda Staff Report - Hillsborough City Council
November 12, 2024

Page 2 ends

and garbage, security, pest control and insurance. Note that there will be added costs such as arborist work and other work associated with a property of this size.

The above includes the property taxes as of the date of Mrs. Lilienthal’s death. While the Trustee believes that a lease to the Town of Hillsborough would not increase the property taxes for that parcel, it is likely that a lease of the San Mateo parcel to the Town of Hillsborough would result in a reassessment. If that were to occur, the property taxes and assessments for that parcel could be at least $125,000 per year and possibly more.”
The Town staff reviewed the proposed lease terms and recommended that City Council not pursue the lease agreement as it was not in keeping with the residential nature of the Town and were not in compliance with the existing permitted uses for the zoning designation of the property. The City Council directed staff not to pursue the lease agreement offered to the Town.

NEW PROPOSAL
On October 17, 2024, the trustee submitted proposed terms of gifting 40 Baywood to the Town of Hillsborough (Attachment 2). On November 6, 2024, the trustee provided revised terms:

1. 40 Baywood/the Lilienthal Estate (both San Mateo and Hillsborough parcels) may never be sold, divided or developed by the Town.

2. The Town will be responsible for all property taxes that may be assessed for both the Hillsborough and San Mateo parcels. The Town will pay to maintain the grounds, trees, pond, koi fish, house, Library, garage, Mrs. Lilienthal's art, books and all furnishings in its current state or better. (The Town will not own the art, china, silver or any family heirlooms. They are Lilienthal Trust Assets meant to be on display in the house for public viewing and historical purposes.) The Town will be solely financially responsible for all maintenance, repairs, capital improvements, taxes, HOI, umbrella coverage, a sufficient liability policy and all other normal expenses of ownership.

3. Property is available for the benefit of the community.

4. The Town will assist with and support the trustee's applications to local and national registries for historic places and for preservation recognition.

5. Friends of 40 Baywood is a non-profit organization which has been formed to support the property and programs at 40 Baywood. The organization is looking to form a Memorandum of Understanding with the Town that is mutually agreeable.

Staff has not fully analyzed the proposed terms for any legal or financial impacts to the Town.

Before expending any additional public funds or staff time on this issue, staff is seeking City Council direction on whether or not to proceed with any further analysis.

PRIOR ANALYSIS
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Agenda Staff Report - Hillsborough City Council
November 12, 2024

Page 3 ends

As part of the July 13, 2020 staff report, staff conducted a preliminary analysis of the anticipated costs of managing the property. The staff report and associated exhibits are contained as part of Attachment 3.

At the time of the analysis, staff expected that managing the property would require an ongoing commitment of between $300,000 to $500,000 annually depending on the number of events held and anticipated rental revenue. Additionally, there was an expectation that every ten years there would have been $500,000 in interest income from the endowment at that time which could help fund major capital improvements such as re-roofing, landscaping, equipment replacement, or other capital projects. The most recent proposed gifting terms make no mention of any endowment or interest income being available to the Town, therefore, it can be expected that the capital costs would require additional funding beyond the initial expectation of $300,000 to $500,000 annually.

The proposed gifting terms contain significant costs and liabilities that have not been fully analyzed by the Town. The trustee has provided an itemized list of expenses from this calendar year, January 1, 2024, through September 30, 2024, of $101,721 but this does not include any fees charged by the trustee to manage the trust. This information has been requested by the Town but not provided.

Staff is looking to City Council to provide direction on whether or not further staff time and resources should be allocated to this effort before moving forward.

FISCAL IMPACT: There is no fiscal impact associated with this agenda item.

ATTACHMENTS:

1. Proposed Lease Terms (November 2023)

2. Proposed Terms of Gifting 40 Baywood to the Town of Hillsborough (October 17, 2024)

3. July 13, 2020 City Council Meeting Staff Report with Financial Analysis PREPARED BY: Mandy Brown, Assistant City Manager
RECOMMENDATION: Discuss and provide direction to the City Manager regarding 40 Baywood. -265-
-355-

TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
16 OLD BUSINESS

CITY COUNCIL MEETING
JANUARY 13, 2025

AGENDA STAFF REPORT
ITEM SUBJECT: 40 BAYWOOD AVENUE PROPERTY DONATION UPDATE PURSUANT TO CEQA GUIDELINE 15378
SUMMARY: At the November 12, 2024 City Council meeting, staff presented the following staff report for consideration by the City Council and received direction to bring back this item at the January 2025 City Council meeting with additional information provided by the trustee. The information requested and information received to date is summarized below:

City Council Request: Audited financial statements related to the trust and/or endowment that would accompany the property donation.

Status: The Town has not received audited financial statements. We have received partial operating costs but are not inclusive of any management fees charged to the trust.

Response from the Trustee: “The City Council is not a beneficiary of the trust, and the trust does not account to the Town. The potential gift to the Town is the property in the beautifully restored condition it is in. Therefore, the assets in the trust when Terry passed away and the assets remaining today are not relevant.”
Staff note: If there is no endowment or funds to accompany the property maintenance and capital expenses, the historical financial analyses will need to be revised to reflect this, as it is anticipated that the property would not generate enough income to offset the property expenses, requiring ongoing contributions from the Town in perpetuity.

City Council Request: Building permit history related to property improvements made, both on the Hillsborough and San Mateo parcels.

Status: The Town has not received any information related to building permits from the trustee, the only information available is what was filed with the Town. Any improvements completed without permits or any improvements completed on the San Mateo parcel have not been disclosed to the Town.

Response from the Trustee: “It is probably best for you to work with your building department regarding the work done on the Hillsborough property.”
Finally, the City Council requested attendance by the trustee at the January meeting. As of December 18, 2024, the trustee has confirmed attendance at the meeting. -327-
ATTACHMENT 6
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Agenda Staff Report - Hillsborough City Council
January 13, 2025

Page 2 ends

Previously, the subject of 40 Baywood was last discussed at a City Council meeting on November 13, 2023. The item was discussed under the title, “40 Baywood Avenue Property Donation Update.” The City Council reviewed a proposed lease agreement offered by the trustee of the Lilienthal Family trust, who has taken control of the property since the property owner has passed away. The trustee has reached out to Town officials several times to discuss the Town’s future involvement in the property.

PROPOSED LEASE
At the November 13, 2023 meeting, the trustee proposed a lease option to the Town in the amount of $1 per year for 99 years. The terms included restrictions on the amount of space the Town may utilize, allowing the “Friends of 40 Baywood” group to utilize the property, required the Town to pay the Charity the cost to maintain the property (including property taxes, insurance, repair, replacement, landscaping, gardening, etc.), and requested that the Town re-zone the Property to allow for the Charity to use the property for events (conferences, public meetings, classes, charitable events, and private functions). See Attachment 1 for the full list of general lease parameters.

In addition to the lease parameters, the trustee provided information related to operating costs of the property, “The ongoing monthly costs to maintain the Baywood Property totals approximately $16,500, and includes but not limited to gardening, koi pond maintenance, utilities, water, cable and garbage, security, pest control and insurance. Note that there will be added costs such as arborist work and other work associated with a property of this size.

The above includes the property taxes as of the date of Mrs. Lilienthal’s death. While the Trustee believes that a lease to the Town of Hillsborough would not increase the property taxes for that parcel, it is likely that a lease of the San Mateo parcel to the Town of Hillsborough would result in a reassessment. If that were to occur, the property taxes and assessments for that parcel could be at least $125,000 per year and possibly more.”
Town staff reviewed the proposed lease terms and recommended that City Council not pursue the lease agreement as it was not in keeping with the residential nature of the Town and not in compliance with the existing permitted uses for the zoning designation of the property. The City Council directed staff not to pursue the lease agreement offered to the Town. -328-
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Agenda Staff Report - Hillsborough City Council
January 13, 2025

Page 3 ends

NEW PROPOSAL
On October 17, 2024, the trustee submitted proposed terms of gifting 40 Baywood to the Town of Hillsborough (Attachment 2). On November 6, 2024, the trustee provided revised terms:

1. 40 Baywood/the Lilienthal Estate (both San Mateo and Hillsborough parcels) may never be sold, divided or developed by the Town.

3. Property is available for the benefit of the community.

4. The Town will assist with and support the trustee's applications to local and national registries for historic places and for preservation recognition.

Staff has not fully analyzed the proposed terms for any legal or financial impacts to the Town.

Before expending any additional public funds or staff time on this issue, staff is seeking City Council direction on whether or not to proceed with any further analysis.

PRIOR ANALYSIS
As part of the July 13, 2020 staff report, staff conducted a preliminary analysis of the anticipated costs of managing the property. The staff report and associated exhibits are contained as part of Attachment 3.

Page 4 ends

Staff is looking to City Council to provide direction on whether or not further staff time and resources should be allocated to this effort before moving forward.

FISCAL IMPACT: There is no fiscal impact associated with this agenda item at this time.

ENVIRONMENTAL ISSUES: The proposed discussion and direction on this item are exempt from environmental review pursuant to the California Environmental Quality Act (CEQA) Guidelines sections 15378(b)(2) and 15378(b)(5) as ongoing administrative or organizational activities that will not result in direct or indirect physical changes in the environment.

ATTACHMENTS:

1. Proposed Lease Terms (November 2023)

2. Proposed Terms of Gifting 40 Baywood to the Town of Hillsborough (October 17, 2024)

3. July 13, 2020 Staff Report with Financial Analysis
PREPARED BY: Doug Davis, City Manager
RECOMMENDATION: Discuss and provide direction to the City Manager regarding 40 Baywood. -330-
-359-

TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
12 OLD BUSINESS

CITY COUNCIL MEETING
MARCH 10, 2025

AGENDA STAFF REPORT
ITEM SUBJECT: DIRECT STAFF ON NEGOTIATING THE POTENTIAL 40 BAYWOOD AVENUE PROPERTY DONATION UNDER CEQA GUIDELINE 15378
SUMMARY: At the January 13, 2025 City Council meeting, the City Council discussed the potential 40 Baywood Avenue Property donation (the “donation”) and whether to provide direction to staff to negotiate the terms on which to accept the donation. At the conclusion of that discussion, some members indicated to the trustee that perhaps different terms would allow for the City Council to accept the donation. The City Council did provide direction to staff at that time to negotiate the terms on which to accept the donation.

More recently, some Councilmembers have individually expressed a desire to Town staff to discuss the matter further to bring the issue to a definitive conclusion. To that end, staff is bringing back this item to seek from the City Council formal direction on whether or not to proceed with negotiations to accept the donation. If the City Council opts to direct staff to proceed with negotiations, Town staff will need to undertake a financial analysis of available Town funds, explore the original restrictions proposed by the trustee to determine what those restrictions might allow for in order to determine how much revenue may be generated if the Town opts to use the property in certain limited ways, evaluate property maintenance costs, explore property tax implications from the Town accepting the donation on the San Mateo side, and other financial analysis so that Management staff can serve as the Town’s negotiator to negotiate the overall terms.

To assist the City Council in understanding the original restrictions proposed by the property owner, staff has included the original draft Covenants, Conditions, and Restrictions (CC&Rs) provided to the original property owner during its negotiations in 2020.

The City Council should first decide whether it wants to direct staff to proceed with negotiations. If so, the City Council should also review the draft CC&Rs and provide any direction to staff on any restrictions that they may want to see negotiated.

FISCAL IMPACT: There is no fiscal impact associated with this agenda item at this time.

ATTACHMENTS: Prior 40 Baywood Draft CC&Rs
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ATTACHMENT 7
-360-
Agenda Staff Report - Hillsborough City Council
March 10, 2025

Page 2 ends

PREPARED BY: Doug Davis, City Manager
RECOMMENDATION:

1. By motion, direct staff to proceed or not proceed with negotiations to accept the donation; and

2. Provide direction to staff on any specific restrictions to negotiate. -112-
-361-
From: Anne Lassahn <[email protected]>
Sent: Wednesday, April 23, 2025 11:22 AM
To: Sophie Cole <[email protected]>; Christine Kralik <[email protected]>; Marie Chuang <[email protected]>; Leslie Ragsdale Laurie Adams Subject: 40 Baywood: Update for the April 28th, 2025 City Council Meeting/Study Session Dear Mayor Cole & Town Council:

At the March 10, 2025 Town Council meeting when the Council considered the potential gift of 40 Baywood, several Council members pondered the definition of the word "gift", and felt that a true gift would be one without strings. It was said that if the Town were to accept the gift of 40 Baywood and take on the commitment of owning and paying for it, the Town should have it with no strings attached and with the ability to parcel, sell off or develop parts of it and further, the new law AB 721 that just went into effect to remove barriers to affordable housing effectively prevents deed restrictions and would nullify such restrictions anyhow. Since that meeting, I have consulted Peter Riechert, a seasoned Real Estate attorney who is a senior partner of the law firm of Aaron, Riechert, Carpal and Riffle. He and his associate have studied this new law in detail and agreed with the Council's statement that deed restrictions would not protect 40 Baywood from future development, parceling or sale. He also determined that the 99-year lease offered to the Town would not protect the Property from development, parceling or sale either.

Mrs. Lilienthal was very clear in her stated wishes (Section 5.2 of her Trust that was circulated to the Town Council via email earlier this year) that 40 Baywood would be used for "tours, celebrations, meetings, events, public use, etc. as may be further defined as any grant of the Property which shall also limit the development of the Property in perpetuity." She was clear that this was a civic gift with strings attached: the partner selected would enjoy use and revenue from the Property in exchange for preservation of the trees, pond and structures; open the Property to the community; and work with the Trust (now charitable organization) to maintain the Property and her vision.

Unfortunately, AB 721 has changed the landscape, so the charitable organization that now owns 40 Baywood, can no longer offer full ownership or the 99-year lease to the Town of Hillsborough. What can be offered is a shorter- term lease of 5-30 years (whichever the Town may prefer) again at $1 /year and with the Town having full access and use to both parcels. If the 5-30 year lease term is not amenable to the Town, then I respectfully request that the Town allow the 501 c3 to run and operate 40 Baywood similarly to how the Carolands Mansion is run. I know there was some question about tax-exempt status of the newly formed 501 c3 Friends of 40 Baywood Avenue. I have attached a copy of the IRS Determination Letter for your reference. The 501 c3 allows for both parcels to be tax exempt and not have the obligation of property taxes so long as the Property is being used for charitable, educational and community purposes. It also allows private citizens and organizations to make charitable donations and have a limited number of fund raisers.
1 -19-
ATTACHMENT 8
-362-
I am deeply saddened and profoundly disappointed by the ramifications of AB 721. Though I agree affordable housing should be available, nonetheless, my fiduciary duty requires that I follow Mrs.

Lilienthal's written instructions to do all that I can to preserve the Estate at 40 Baywood. I was optimistic about what her gift could mean for the Town, the community and her memory, but this new law significantly curtails what is even possible. I sincerely hope that the Town Council may find it more appealing to have a shorter-term commitment to 40 Baywood. It may prove to be incredibly useful to the Town during the construction of the new Town Hall. I very much look forward to your reply on how we can best proceed to share this wonderful haven with the community.

Sincerely,
Anne Lassahn
T. Anne Lassahn, M.P.A., C.L.P.F
Professional Fiduciary - License #PF96
Lassahn Fiduciary Services
Main Office
2075 Pioneer Ct
San Mateo, CA 94403
Ph : 650-578-9030
Fa x: 650-578-9050
Palo Alto Office
125 University Ave, Suite 130
Palo Alto, CA 94301
[email protected]
http://lassahnfiduciary.com/
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2 -20- -363-

TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
13 OLD BUSINESS

CITY COUNCIL MEETING
SEPTEMBER 8, 2025

AGENDA STAFF REPORT
ITEM SUBJECT: 40 BAYWOOD AVENUE PROPERTY DONATION - RESPONSE FROM

TRUSTEE
SUMMARY: At the June 9, 2025 City Council meeting, the City Council agreed on several conditions to serve as the basis for a proposal to be developed by the Town to provide to the basis for the terms under which the Town would accept the donation of 40 Baywood. The general terms and direction provided, included:

1. Full ownership of the property by the Town, with no claim by “Friends of 40 Baywood Avenue.”

2. Transfer of all trust assets to the Town for maintenance of the property.

3. Termination of “Friends of 40 Baywood Avenue’s” involvement in property or trust management, in its current form.

The Town sent a letter to the Trustee on June 13, 2025 with the agreed upon terms (Attachment 1), as directed by the City Council.

On Friday, July 11, 2025, the Town received a letter from the Trustee (Attachment 2), in response to the Town’s letter. The response does not reject nor accept the Town’s proposal, but requests that the Town provide a written proposal of usage and commitment “by August 31, 2025.” The letter continues, “If I do not receive a written proposal/commitment by August 31, 2025, I will assume the Town is not comfortable committing to the Property as described above and is rejecting the gift.” In order to adhere to the requirements as stated by the Trustee, the Assistant City Attorney crafted a donation agreement in accordance with the previous direction received by the City Council (Attachment 3). The Town provided this agreement to the Trustee on August 17, 2025. On August 24, 2025, the Trustee submitted a redlined agreement (Attachment 2). Since there are several alterations to the agreement that are outside of the scope of the direction provided by the City Council, the revised changes are being reshared with the Council for consideration. A summary of the proposed modifications is below. - Requirement that the Town open the main house and grounds to the public once a month for at least two hours.
- A prohibition on increasing the square footage of a structure by more than 10%. - Attorneys’ fees clause adds additional language around the process regarding litigation should the Town violate or appear to violate the agreement.
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Agenda Staff Report - Hillsborough City Council
September 8, 2025

Page 2 ends

ALTERNATIVES FOR CONSIDERATION:

It has been indicated to us that the Trustee is no longer interested in negotiating if the Town cannot agree to the redlined changes to the donation agreement. The Trustee has provided the deadline of September 8, 2025 for a final decision. This does not allow for an analysis on the financial feasibility or costs as was originally anticipated by the Town. These changes also may add to the anticipated costs as opening the main house and grounds would require immediate costs such as ADA requirements, insurance, and staffing to comply. The Trustee never declined the Town’s original donation agreement, but offered the counter-proposal of Attachment 4. The Town could reoffer the original agreement as a best and final offer to see if there is any flexibility on the part of the Trustee to agree to the Town’s original request. A summary of alternatives for Council consideration is below:

1. Accept the redlined donation agreement as proposed by the Trustee (Attachment 4).

2. Reject the redlined donation agreement as proposed by the Trustee and reissue the Town’s original proposal and ask for formal acceptance or denial (Attachment 3), though this runs outside of the requested deadline for response.

3. Reject the redlined donation agreement as proposed by the Trustee and cease negotiations.

FISCAL IMPACT: There is no fiscal impact associated with this agenda item at this time.

ATTACHMENTS:

1. June 13, 2025 Letter from Town

2. July 11, 2025 Response to Town’s Letter by Trustee

3. August 17, 2025 Donation Agreement Prepared by the Town

4. August 24, 2025 Donation Agreement Redlined by the Trustee PREPARED BY: Doug Davis, City Manager
RECOMMENDATION: Discuss and provide direction to the City Manager regarding 40 Baywood. -92-
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TOWN OF HILLSBOROUGH
California
Town Hall
Phone: 650-375-7400 | Fax: 650-375-7475 | 1600 Floribunda Avenue, Hillsborough, CA 94010 | www.hillsborough.net June 13, 2025
T. Anne Lassahn
Lassahn Fiduciary Services
2075 Pioneer Ct.

San Mateo, CA 94403
Via postal mail and email to [email protected]
Dear Ms. Lassahn:

The City Council has discussed the 40 Baywood property in detail at several public meetings. At the City Council meeting on Monday, June 9, 2025, the City Council authorized the presentation of the following Conditions of Acceptance of the property:

1. Full ownership of the property by the Town, with no claim by “Friends of 40 Baywood Avenue”

2. Transfer of all trust assets to the Town for maintenance of the property.

3. Termination of “Friends of 40 Baywood Avenue’s” involvement in property or trust management, in its current form.

The City Council has requested your response to the proposal within 60 days. Please respond to me directly and I will provide your response to the City Council at a public meeting.

Sincerely,
Doug Davis
City Manager
[email protected]
ATTACHMENT 1
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ATTACHMENT 2
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DRAFT

WHEREAS, the real property and improvements commonly know as 40 Baywood Avenue, Hillsborough (“40 Baywood” or the “Property”) were owned by Thelma Lilienthal through the Lilienthal Family Trust; and,
WHEREAS, 40 Baywood consists of two parcels, one located in the City of San Mateo and the other in Hillsborough; and,
WHEREAS, prior to her death, Mrs. Lilienthal expressed the desire to donate 40 Baywood to Hillsborough to be used for civic and recreational purposes; and, WHEREAS, following her death, title to 40 Baywood was transferred to Friends of 40 Baywood; and,
WHEREAS, Friends of 40 Baywood desires to transfer title to 40 Baywood to Hillsborough, to effectuate Mrs. Lilienthals’ desires and intentions; and, WHEREAS, 40 Baywood and Hillsborough intend to ensure that the use and development of 40 Baywood is consistent with the desires and intentions of Mrs. Lilienthal by memorializing certain undertakings by Hillsborough during the period covered by this Agreement; Now, therefore, for good and valuable considerations, including the obligations and duties set forth herein, the receipt and sufficiency of which are hereby acknowledged, Friends of 40 Baywood and Hillsborough agree as follows:

AGREEMENT

1. Term. This Agreement shall be in effect for a period of ten (10) years, beginning on the date a deed transferring title to 40 Baywood to Hillsborough is recorded with the San Mateo County Recorder (the “Term”), unless terminated earlier in accordance with Section 4 below.

2. Uses. Hillsborough shall use and operate 40 Baywood during the Term with one or more of the following:
• Park and recreational uses.
• Offices for Hillsborough and/or affiliated agencies (including the Central County Fire Department.
• Sleeping or living quarters for employees of Hillsborough and/or affiliated agencies. • Meeting rooms for community activities, classes, and similar events ATTACHMENT 3
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• Private events including conferences, weddings, memorials, tours, and fundraisers for which a fee may be charged.
• Museums, displays, gift shops, and sale of concessions, either directly by Hillsborough or through leases, concession agreements, or similar arrangements. • Any other civic or public use similar in nature to the above and consistent with the character of 40 Baywood.

3. Restrictions. During the Term, Hillsborough shall not do any of the following:
(a) Construct dwelling units or other new habitable buildings outside the general area formerly occupied by servants’ quarters; provided, that this restriction shall not apply to remodeling, reconstructing, adding onto, or replacing existing structures. (b) Sell the parcel of 40 Baywood located in the City of San Mateo, except as provided in Section 4 below.
(c) Construct or operate the property as a police station, fire station, or corporation yard or for storage heavy equipment (other than as needed for maintenance and improvement of the Property itself)
(d) Construct or allow to be constructed multi-family housing.

4. Early Termination and Sale of the Property. In the event that operation of the Property becomes financially infeasible or otherwise impractical for Hillsborough during the Term, Hillsborough may offer the Property for sale. Before offering the Property for sale, Hillsborough shall give written notice via email or certified mail to Friends of 40 Baywood of Hillsborough’s intent to sell and Friends of 40 Baywood shall have the right to purchase the Property in its “asis” condition for $0.00. Friends of 40 Baywood shall have 30 days after receipt of the written notice to exercise this repurchase right by giving written notice to the City Manager of Hillsborough via email or certified mail (the “Exercise Notice”). The parties shall open escrow and complete the transfer of title within 60 days of the Exercise Notice. This Agreement shall terminate as of the closing. Use of the Property after closing will be subject to all then-current Zoning Code restrictions. If Friends of 40 Baywood does not give the Exercise Notice within the 30-day period, the repurchase right shall lapse and Hillsborough may sell the Property without restriction.

5. Dispute Resolution. Should any disputes arise during the Term regarding the performance of this Agreement, the following processes shall be followed:
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(a) The party seeking resolution shall give written notice of the matters in dispute to the other party (the “Dispute Notice”). Such notices shall be given to the Chief Executive Officer of Friends of 40 Baywood or the City Manager of Hillsborough, as the case may be. (b) Within 30 days of receipt of the Dispute Notice, the Chief Executive Officer and the City Manager shall meet and confer in person and attempt to resolve the matters in dispute. The City Manager may be joined by the Mayor, a Councilmember, and/or the Assistant City Manager in such meeting.
(c) If the City Manager and Chief Executive Officer are unable to resolve the matters in dispute, the dispute shall be subject to mediation in accordance with the Commercial Rules of the Judicial Arbitration and Mediation Service (JAMS).
(d) If the parties are unable to resolve their dispute in mediation, either party may file an action in San Mateo Superior Court seeking declaratory and/or injunctive relief.

6. Miscellaneous Provisions.
(a) This Agreement includes all of the terms, conditions, and understandings of the parties regarding its subject matter. It may be modified only by a written amendment executed by both parties.
(b) This Agreement is the product of discussions, negotiations, and drafting by both parties. Neither party shall be deemed to be the drafter of the Agreement for purposes of interpretation.
(c) This Agreement may be executed in counterparts and by facsimile, electronic or Docusign signatures.

So Agreed:

WHEREAS, the real property and improvements commonly know as 40 Baywood Avenue, Hillsborough (“40 Baywood” or the “Property”) were owned by Thelma Lilienthal through the Lilienthal Family Trust; and,
WHEREAS, 40 Baywood consists of two parcels, one located in the City of San Mateo and the other in Hillsborough; and,
WHEREAS, prior to her death, Mrs. Lilienthal expressed the desire to donate 40 Baywood to Hillsborough to be used for civic and recreational purposes; and, WHEREAS, following her death, title to 40 Baywood was transferred to Friends of 40 Baywood to fulfill Mrs. Lilienthal’s wishes; and,
WHEREAS, Friends of 40 Baywood desires to transfer title to 40 Baywood to Hillsborough, to continue to effectuate Mrs. Lilienthal’s’ desires and intentions; and, WHEREAS, Friends of 40 Baywood and Hillsborough intend to ensure that the use and development of 40 Baywood is consistent with the desires and intentions of Mrs. Lilienthal by memorializing certain undertakings by Hillsborough during the period covered by this Agreement;
Now, therefore, for good and valuable considerations, including the obligations and duties set forth herein, the receipt and sufficiency of which are hereby acknowledged, Friends of 40 Baywood and Hillsborough agree as follows:

AGREEMENT

2. Uses. Hillsborough shall use and operate 40 Baywood during the Term with one or more of the following uses:
• Park and recreational uses.
• Offices for Hillsborough and/or affiliated agencies (including the Central County Fire Department.
• Temporary Sleeping or temporary living quarters for employees of Hillsborough and/or affiliated agencies.

ATTACHMENT 4
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5207187.15206325.1
• Meeting rooms for community activities, classes, and similar events • Private events including conferences, weddings, memorials, tours, and fundraisers for which a fee may be charged.
• Museums, displays, gift shops, and sale of concessions, either directly by Hillsborough or through leases, concession agreements, or similar arrangements. • Any other civic or public use similar in nature to the above and consistent with the character of 40 Baywood.

Notwithstanding the above, (i) Hillsborough shall not permit the main house on 40 Baywood to be used as a residence but may permit employees of Hillsborough and/or affiliated agencies to use it for temporary housing (not more than one week for any person without a break for at least one week), and (ii) Hillsborough shall make the downstairs of the main house and the exterior areas of 40 Baywood available to the surrounding community at least one (1) time per month on a weekend day for at least two (2) hours.

3. Restrictions. During the Term, Hillsborough shall not do any of the following:
(a) Construct dwelling units or other new habitable buildings outside the general area formerly occupied by servants’ quarters; provided, that this restriction shall not apply to remodeling, reconstructing, adding onto, or replacing existing structures, provided, however, that neither the footprint nor the square footage of a structure shall be increased by more than ten percent (10%).
(b) Sell the either or both of the parcelsparcel of 40 Baywood located in the City of San Mateo, except as provided in Section 4 below.
(c) Construct or operate the property Property as a police station, fire station, or corporation yard or for storage heavy equipment (other than as needed for maintenance and improvement of the Property itself)
(d) Construct or allow to be constructed multi-family housing.

4. Early Termination and Sale of the Property. In the event that operation of the Property becomes financially infeasible or otherwise impractical for Hillsborough during the Term, Hillsborough may offer the Property (but not part of the Property) for sale. Before offering the Property for sale, Hillsborough shall give written notice via email or and certified mail to Friends of 40 Baywood (or its assignee or successor in interest provided contact information is provided in writing to Hillsborough) of Hillsborough’s intent to sell and Friends of 40 Baywood shall have the right to purchase the Property in its “as-is” condition for $10.00. Friends of 40 Baywood -105-
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5207187.15206325.1
shall have 30 days after receipt of the written notice to exercise this repurchase right by giving written notice to the City Manager of Hillsborough via email or certified mail (the “Exercise Notice”). The parties shall open escrow and complete the transfer of title within 60 days of the Exercise Notice. This Agreement shall terminate as of the closing. Use of the Property after closing will be subject to all then-current Zoning Code restrictions. If Friends of 40 Baywood does not give the Exercise Notice within the 30-day period, the repurchase right shall lapse and Hillsborough may sell the Property without restriction. Notwithstanding the above, Hillsborough shall not encumber or hypothecate the Property permit any liens to be placed on the Property or any portion of it during the Term. A Memorandum of this Agreement may be recorded by Friends of 40 Baywood.

5. Dispute Resolution. Should any disputes arise during the Term regarding the performance of this Agreement, the following processes shall be followed:
(a) The party seeking resolution shall give written notice of the matters in dispute to the other party (the “Dispute Notice”). Such notices shall be given to the Chief Executive Officer of Friends of 40 Baywood or the City Manager of Hillsborough, as the case may be. (b) Within 30 days of receipt of the Dispute Notice, the Chief Executive Officer and the City Manager shall meet and confer in person and attempt to resolve the matters in dispute. The City Manager may be joined by the Mayor, a Councilmember, and/or the Assistant City Manager in such meeting.
(c) If the City Manager and Chief Executive Officer are unable to resolve the matters in dispute, the dispute shall be subject to mediation in accordance with the Commercial Rules of the Judicial Arbitration and Mediation Service (JAMS).
(d) If the parties are unable to resolve their dispute in mediation, either party may file an action in San Mateo Superior Court seeking declaratory and/or injunctive relief. (e) In the event that either the Town or Friends of 40 Baywood should bring suit for the breach of any provision of this Agreement or for any other relief against the other, then all costs and expenses, including reasonable attorneys' fees, incurred by the prevailing party therein shall be paid by the other party, which obligation on the part of the other party shall be deemed to have accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgment.

6. Miscellaneous Provisions.
(a) This Agreement includes all of the terms, conditions, and understandings of the parties regarding its subject matter. It may be modified only by a written amendment executed by both parties.
(b) This Agreement is the product of discussions, negotiations, and drafting by both parties. Neither party shall be deemed to be the drafter of the Agreement for purposes of interpretation.
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5207187.15206325.1
(c) This Agreement may be executed in counterparts and by facsimile, electronic or Docusign signatures.

So Agreed:

Hillsborough City CouncilDecember 8, 2025

Hillsborough City Council
December 8, 2025