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CITY OF LAGUNA HILLS
Supplemental Agenda Material Memo
Supplemental Agenda Materials related to an item on a City Council Agenda, submitted to the City Council after distribution of the agenda packet, will be available for public inspection at the same time the materials are distributed to the City Council. Supplemental Agenda Materials are available for inspection during normal business hours in the City Clerk’s office located at 24035 El Toro Road, Laguna Hills, California. In addition, such materials will be made available for public review at the same time the materials are distributed to the City Council on the City’s website at: https://www.lagunahillsca.gov/supplementalagenda and at the respective public meeting.
DATE: March 14, 2023
TO: City Council
City Staff
FROM: Jennifer Lee, City Clerk
SUBJECT: Special Meeting Agenda Item No. 1. – Review of Civic Center Budget and Consideration of Proposed Repairs and Improvements
Due to a software error, the latest version of the staff report for Special Agenda Item No. 1 was not included in the Special Meeting Agenda Packet. Please disregard the staff report for Agenda Item No. 1 and refer to the attached staff report instead. The attachments to the staff report remain unchanged.
City of Laguna Hills
City Council/Planning Agency
Staff Report
DATE: March 14, 2023
TO: Mayor and Council Members
FROM: Joe Ames
Public Works Director/City Engineer
ISSUE: Review of Civic Center Budget and Consideration of Proposed Repairs and Improvements
RECOMMENDATION: That the City Council: 1) Authorize the Finance Director to amend the fiscal year 2022-2023 budget by $850,000 for CIP No. 505, Civic Center Improvements, funded by General Fund reserves; 2) Authorize the Finance Director to amend the fiscal year 2022-2023 budget by $100,000 as a transfer from the General Fund reserves into the Civic Center Enterprise Fund; 3) Find that environmental review is not required under the California Environmental Quality Act (CEQA) pursuant to the California Code of Regulations, Title 14, Chapter 3, Section 15301 as a Class 1 Categorical Exemption - “Existing Facilities;” 4) Provide direction to City staff regarding future leasing of the Civic Center; and 5) Receive and file the Civic Center Second Quarter Financial Report for Fiscal Year 2022-2023.
SUMMARY:
The Civic Center has deferred maintenance and repair needs which include a new roof, heating and air conditioning hardware and software upgrades, slurry sealing of the parking lot, lobby wall plaster repairs, exterior staircase riser reconstruction, sewer pipe replacements, painting of exterior garden walls, an allowance for minor repairs and improvements, and cooling tower replacement. The cooling tower replacement was authorized by City Council on November 15, 2022, and the equipment is scheduled for delivery in April 2023. In order to make the Civic Center profitable again in the future, City staff is recommending the build out of Suite 205, which has remained an unfinished suite and vacant for the past 18 years. Because the previously approved biennial Civic Center budget included painting the exterior of the building, this work is also included in Civic Center Budget
March 14, 2023
the proposed budget, but could be deferred. Finally, in order to provide for more efficient use of space within the City Hall office space, City staff is recommending minor interior improvements to portions of the northerly City Hall office space in Suite 100.
Therefore, City staff is recommending that a total of $950,000 be transferred from General Fund reserves into CIP No. 505 and the Essex Realty-managed Civic Center Enterprise Fund.
In addition, this agenda report includes the Civic Center Second Quarter Financial Report for Fiscal Year 2022-2023. This Second Quarter Financial Report is intended to provide the City Council with an overview of the Civic Center leasing, operation, and finances as of December 31, 2022.
BACKGROUND:
As of January 31, 2023, the Civic Center Enterprise Fund had a balance of $62,778.46.
This Fund maintained by Essex Realty, which is the day-to-day property management company for the Civic Center, is insufficient to fund the deferred maintenance and repairs needs, and the requested minor interior improvements.
Therefore, City staff is recommending that a total of $950,000 be transferred from General Fund reserves into CIP No. 505 and the Essex Realty-managed Civic Center Enterprise Fund.
The items proposed for funding are as follows:
Enterprise Fund Proposed Improvements Total
Southerly Staircase Riser Reconstruction $45,500.00
Roof Leak Temporary Repairs $8,600.00
Lobby Plaster Repairs (Estimated) $20,000.00
HVAC iVu (Honeywell-Based) Software/Hardware Update $21,258.00 Facility Assessment Report for Long-Term Planning (Estimated) $20,000.00 Sewer Pipe Replacements (Estimated) $15,000.00
Subtotal $130,358.00
Current Enterprise Fund Balance $62,778.46
Requested Transfer into Enterprise Fund $100,000.00
Estimated Balance after Improvements $32,420.46
CIP No. 505 Proposed Improvements Total
New Roof (Estimated)** $250,000.00
Civic Center Budget
March 14, 2023
Tenant Improvements, Suite 205 (Estimated) $200,000.00
Painting of the Exterior including Fixing and Repairing Garden Walls (Estimated)**
$200,000.00
Slurry Seal Parking Lot (Estimated) $25,000.00
Cooling Tower Replacement (Contract Awarded) $146,000.00 City Hall Office Improvements (Estimated) $60,000.00
Subtotal $881,000.00
Current Balance/Budget, CIP No. 505 $50,000.00
Requested Transfer into CIP No. 505 $850,000.00
Estimated Balance after Improvements $19,000.00
Total Requested Funds from General Fund Reserves $950,000.00 **City staff will provide potential alternatives on these items during the oral presentation.
Exhibit A provides a photographic overview of the issues encountered at the Civic Center over the past few months, which showcase the need for these improvements.
While the amount of this annual one-time transfer is larger than past year transfers, an analysis of the financial statements since 2004 reveals there has been a history of General Fund one-time transfers for needed for Civic Center improvements. One-time annual contributions have ranged from $50,000 to $691,693 per year.
Civic Center Income & Loss Review
The Civic Center is currently not profitable. Net income after expenses was negative for the fiscal year ending June 30, 2022. It is projected that net income after expenses will be negative for the fiscal year ending June 30, 2023. Exhibit B is the Civic Center Second Quarter Financial Report for Fiscal Year 2022-2023.
Overall, the Civic Center has not been the profitable enterprise previously expressed.
Exhibit C summarizes the Civic Center’s profits and losses since 2004.
Total net cash flow aggregated since 2004, after capital improvements funded by onetime annual contributions, has been a total loss of $1,146,458.06 over a 19-year period, which is an average annual loss of $60,339.90.
According to past financial statements produced by Essex Realty, since 2004, the City Civic Center Budget
March 14, 2023
has transferred $2,244,798.00 into the Civic Center Enterprise Fund, which is an average annual transfer of $118,147.26 per year.
However, given that City office space is “free” because the City does not pay rent, it could be interpreted that the City’s average annual contributions of $118,147.26 over the past 19 years would otherwise be spent on rent in another office building. City offices occupy 21,033 gross square feet. At this rate, the City is paying the equivalent of $5.62 per square foot per year or $0.47 per square foot per month. Market rate office space for the size space the City requires is currently leasing for approximately $2.25 per square foot, on average. Further, market office rates have not changed appreciably since 2008. (In 2007, the Civic Center’s average lease rate was $2.35 per square foot.) Thus, the City has saved money by owning and operating the Civic Center.
With the proposed budget transfer of $950,000 for additional Civic Center capital improvements, the average annual contributions will change to $159,739.90 over a 20- year period ending June 30, 2023. With this new transfer, as of June 30, 2023, the City will have paid the equivalent of $7.59 per square foot per year or $0.63 per square foot per month. Therefore, after the proposed $950,000 transfer from the General Fund, the City will still save money by owning and operating the Civic Center versus leasing office space. The proposed improvements are intended to address most of the highest expense deferred maintenance and repair needs. In the near future, additional expenses may arise for HVAC distribution and condenser units, and for interior cosmetic upgrades (paint, wallpaper, carpet, flooring). If the proposed funds transfer is approved, City staff is proposing hiring a consultant to prepare an updated facility assessment report which will include a more realistic long-term budget for maintenance, repairs, and improvements.
Plans to Make the Civic Center Profitable
City staff is proposing a two-fold approach toward making the Civic Center profitable in the long term.
First, City staff is proposing to build out Suite 205 into leasable office space. This 2,343 square foot space on the second floor has never been built out. At $2.25 per square foot, this space could generate over $60,000 per year in new revenue. With anticipated build out costs estimated at $200,000, it would take approximately 40 months to recover the capital investment made to make this space leasable.
Second, City staff is proposing to market the Civic Center for medical office use. Because Civic Center Budget
March 14, 2023
general office space rent has not risen with general inflation due to a variety of reasons, including the 2009-2011 recession and, more recently, Covid-19 decreased demand for general office space, general office space rents have been relatively stagnant since 2008. However, medical use office space has and continues to command higher rents.
With the Civic Center’s proximity to other medical use buildings and Saddleback Memorial Medical Center, City staff is proposing to focus on marketing the Civic Center for medical offices. The Civic Center already has a dentist office in Suite 230, which has a higher rental rate than the rest of the building. Based upon an informal evaluation of marketplace medical office rents, it is possible medical office space could be rented for over $4 per square foot instead of the $2.25 per square foot average currently being collected for general office use. Typically, many lessors of medical offices also construct their own tenant improvements at their own expense.
Tenant Suite Leasable
Square
Footage
Current
Rental Rate
(PSY/MO)
Subtotal @
100%
Occupancy
City of Laguna Hills 100 21,033 $0 $0
Banc of California 130 2,394 $2.33 $66,936
County of Orange 150 & 160 4,466 $1.95 $104,504
First Floor Subtotal $171,440
Current Second Floor General
Office Use
200-299 16,096 $2.35
(approximate
average)
$453,907
Current Third Floor General Office
Use
300-399 6,499 $2.35
(approximate
average)
$183,271
Second & Third Floor Subtotal @
100% Occupancy for General
Office Use
$637,178
Civic Center Budget
March 14, 2023
Tenant Total
Leasable
Square
Footage
Proposed
Rental Rate
(PSY/MO)
Subtotal @
100%
Occupancy
Potential Second Floor Medical
Office Use
200-299 16,096 $4.50 $869,184
Potential Third Floor Medical Office
Use
300-399 6,499 $4.50 $350,946
Second & Third Floor Subtotal @
100% Occupancy for Medical
Office Use
$1,220,130
Potential Additional Income for
Medical Office Use per Year
$582,952
Even if this direction toward marketing the Civic Center for medical office use is approved by City Council, existing second and third floor office leases have staggered end dates; therefore, the conversion to medical office use will take time as leases expire.
CEQA FINDINGS:
Environmental review is not required under the California Environmental Quality Act (CEQA) pursuant to the California Code of Regulations, Title 14, Chapter 3, Section 15301 as a Class 1 Categorial Exemption – “Existing Facilities” because the project has negligible or no expansion of use.
FISCAL IMPACT:
Because these improvements were not part of the original FY 22-23 budget, these funds will need to be allocated from General Fund reserves. The total net fiscal impact of the recommended actions will result in a $900,000 reduction of General Fund reserves.
ATTACHMENTS:
• Exhibit A - Civic Center Photographic Overview
• Exhibit B - Civic Center Second Quarter Financial Report for FY 2022-2023 • Exhibit C - Civic Center Profit and Loss Summary
CITY OF LAGUNA HILLS
Supplemental Agenda Material Memo
Supplemental Agenda Materials related to an item on a City Council Agenda, submitted to the City Council after distribution of the agenda packet, will be available for public inspection at the same time the materials are distributed to the City Council. Supplemental Agenda Materials are available for inspection during normal business hours in the City Clerk’s office located at 24035 El Toro Road, Laguna Hills, California. In addition, such materials will be made available for public review at the same time the materials are distributed to the City Council on the City’s website at: https://www.lagunahillsca.gov/supplementalagenda and at the respective public meeting.
DATE: March 13, 2023
TO: City Council
City Staff
FROM: Jennifer Lee, City Clerk
SUBJECT: Special Meeting Agenda Item No. 2. – Discussion of City Council Policy No. 120 Regarding Procedures for Council Members to Place Items on Future City Council Agendas
Per a request by Mayor Heft, please see the attached pages 9 and 10 from the City of Laguna Niguel Mayor and City Council Council Policy regarding Agenda Items for your reference during the discussion of Special Meeting Agenda Item No. 2.
MAYOR AND CITY COUNCIL 9 of 14 COUNCIL POLICY
3/1/2022
N. Agenda Items
The Mayor individually, or any two members of the City Council collectively, may request that the City Manager place an item on a City Council agenda for discussion and/or action. The City Manager shall place such items(s) on the agenda and may provide such preliminary staff analysis or commentary that he/she deem appropriate. However, the City Manager shall not allocate substantial staff time or resources to such item(s) without direction received from a majority of the City Council at a regular or special meeting.
1. Agenda Item Request – No Staff Report or Documentation Required If the Mayor individually, or two members of the City Council collectively, request an item be listed on the City Council agenda for discussion only and with no staff report, staff research, resolution, or other supporting documents needed to take action on the item, that request shall be provided to the City Manager no later than 10:00 a.m. on the Monday of the week prior to the City Council meeting. In the event the Monday deadline date is a City Holiday, the deadline shall be the prior Friday.
The City Manager shall list the title of the discussion item and identify the Mayor or the two Councilmember’s names who made the request in the City Council report section of the agenda.
2. Agenda Item Request – Staff Report and Other Documentation Required If the Mayor individually or two members of the City Council collectively request an item be placed on a City Council agenda for discussion and/or action and that request includes a request that the item is prepared in a form for City Council action, such that the item requires staff analysis, a resolution, or both, that request shall be given to the City Manager no later than 5:00 p.m. on the day that is at least seven (7) City Hall working days prior to the City Council meeting. For example, if a City Council Meeting is scheduled for Tuesday, February 2nd, the deadline to submit an agenda item is Friday, January 22nd, by 5 p.m.
The staff report will state who made the request to place the item on the agenda.
MAYOR AND CITY COUNCIL 10 of 14 COUNCIL POLICY
3/1/2022
3. Agenda Item Request – Emergency, Dire Emergency or Urgent Action Item If an emergency exists, as defined in the Brown Act, such that there is a work stoppage or crippling activity that severely impairs public health, safety, or both, and prompt action is necessary due to the disruption or threatened disruption, or a dire emergency exists, such that there has been a crippling disaster, mass destruction, terrorist act, or threatened terrorist activity that poses peril so immediate and significant, then the discussion of the response to that event permits the majority of the City Council to call an emergency meeting on one-hour notice.
If the item does not qualify as an emergency or dire emergency under the Brown Act sufficient to hold an Emergency Meeting on one-hour notice, but action on the item cannot wait until the next Regular City Council Meeting, then a Special Meeting can be called to address the item if called by the Mayor or by three members of the City Council collectively. Requests for a Special Meeting shall be made no later than two (2) City Hall working days prior to the date and time of the Special Meeting so as to allow City staff time to prepare and distribute an agenda and any associated agenda item materials no later than 24 hours prior to the Special meeting as required by the Brown Act.
Alternatively, if an item comes to the attention of the City after a Regular Meeting agenda has been posted, and there is an immediate need to take action on the item prior to the following Regular Meeting and there is insufficient time to call a Special Meeting under the preceding paragraph to address that item, the item can be added to the agenda by a motion made at the beginning of the Regular Meeting but after the Roll Call and with the affirmative vote of four Councilmembers, and once added, discussion and action on that item can be taken. In that event, the item will be presented with supporting material to the extent reasonably practicable to prepare and present within that limited period of time.
O. Council Meeting Conduct and Decorum
City Council meetings are the public forum to hear, discuss, deliberate and take action on City related business matters. It is expected that City Council meetings will be conducted in a professional, efficient, fair, ethical, candid and civil manner.
Council Members shall adhere to the following:
1. Come to meetings prepared and with all agenda materials reviewed prior to the meeting.
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CITY OF LAGUNA HILLS
Supplemental Agenda Material Memo
Supplemental Agenda Materials related to an item on a City Council Agenda, submitted to the City Council after distribution of the agenda packet, will be available for public inspection at the same time the materials are distributed to the City Council. Supplemental Agenda Materials are available for inspection during normal business hours in the City Clerk’s office located at 24035 El Toro Road, Laguna Hills, California. In addition, such materials will be made available for public review at the same time the materials are distributed to the City Council on the City’s website at: https://www.lagunahillsca.gov/supplementalagenda and at the respective public meeting.
DATE: March 14, 2023
TO: City Council
City Staff
FROM: Jennifer Lee, City Clerk
SUBJECT: Special Meeting Agenda Item No. 2. – Discussion of City Council Policy No. 120 Regarding Procedures for Council Members to Place Items on Future City Council Agendas
Per a request by Mayor Pro Tempore Wheeler, please see the attached red-lined, revised Policy No. 120 for your reference during the discussion of Special Meeting Agenda Item No. 2.
Please note that this is the second Hot Envelope Memo for Special Meeting Agenda Item No.2.
1 CITY OF LAGUNA HILLS
City Council Policy
Subject: Procedures for Council
Members to Place For Placing
Items on a Future City Council
Agenda
Policy No. 120
Effective Date: April 14, 2015
Last Revision: May 8, 2018
PURPOSE:
To establish requirements for City Council Members to place items on a future City Council Agenda.
POLICY:
It shall be a policy of the City of Laguna Hills to follow a prescribed procedure regarding the placement of items on a City Council Agenda by City Council Members.
PROCEDURE:
1) The City Clerk shall assembles a preliminary agenda based on input she receiveds from the City Council, Department Heads and the City Manager regarding reports they are preparing for the meeting. 2) All reports and agenda item requests are due to the City Clerk by 5:00 p.m. on Tuesday, one week in advance of the scheduled meeting. 3) The City Manager and the mayor shall determines which items are placed on the agenda and the timing for scheduling such items. In the mayor’s absence, the mayor pro tempore shall act in the mayor’s place. If there is no agreement on an agenda item between the mayor, the City Manager and the initiator, placement and timing shall be at the discretion of the initiator. Council Members may place request items be placed on a future agenda for purposes of discussion, provided at least one other Council Member concurs with the request.
All such requests shall be made during the “City Council Member Comments” portion of the City Council agenda or in writing to the City Manager and mayor thereafter. If at least two Council Members, upon consensus, agree to have an item placed on a future agenda, such item shall be placed under the “Matters Agendized and Presented by City Council Members” portion of the City Council agenda on a future City Council Policy
No. 120
Council Member Agenda Item Placement Policy
2 agenda for discussion. The timing for the Council Member agenda item shall be at the discretion of the initiating Council Member. 4) In accordance with Procedure 3 above, Council Members must submit their report in writing to the City Clerk by the same deadline as stated above. At a minimum, the report shall must: (1) set forth a subject matter that reasonably describes the issue to be presented for consideration by the City Council; and (2) the report must contain a recommendation if the Council Member desires a specific action to be taken by the City Council at the meeting. Council Members may Reports may provide background information as a part of their report and attachments or exhibits that they believe will be helpful to their presentation and with gaining support for their recommended action.
Council Members may coordinate with the City Manager for may request limited assistance from staff with obtaining copies of existing materials and/or data related to their agenda report, provided said assistance does not require any new work or independent analysis to be performed and in the aggregate, does not require more than onehour of staff time. If the staff time request is large, the City Council shall determine the staff time to be allocated as an agenda item.
5) Council Member agenda reports cannot include any Ordinances or Resolutions. If the ultimate action desired includes adoption of an Ordinance or Resolution, then the recommended action in the Agenda Report should include direction to City staff to prepare said Ordinance or Resolution for consideration by the City Council at a future meeting.
6) The City Clerk and the City Manager shall reviews all staff reports for grammar, spelling, appearance, and format, ensuring that all supporting materials or documents are attached and complete. All changes shall be approved by the initiator and the initiator shall have the final say.
7) The City Manager reviews all reports for content, clarity, and recommended action(s), making changes as he deems appropriate and/or making requests for additional information that he believes are necessary to present the Council with a complete report. The City Manager may exercise his sole discretion and judgment in deciding the content and timing of all agenda items, with the exception of reports that are specifically requested by a majority of the City Council or actions that are required by law.
City Council Policy
No. 120
Council Member Agenda Item Placement Policy
3 ATTACHMENTS:
● NONE