City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: October 7, 2024
Report #:2407-3272
TITLE
Authorize the City Manager or their Designee to Exercise the Option to Renew the Lease Between the City of Palo Alto and Steve Nash and Dennis Ryan for 4 Months at 975 Terra Bella Ave in Mountain View at a Monthly Rent of $35,587.95 for a Total Not-to-Exceed of $213,527.70 through February 28, 2025; Direct Staff to Explore Purchase of Property to Meet the Future Needs of Grid Modernization and Other Capital Projects; and Approval of an Amendment to Fiscal Year 2025 Budget Appropriation in the Electric Fund; CEQA Status – Categorically Exempt; Sec. 15301.
RECOMMENDATION
Staff recommends that City Council:
1. Authorize the City Manager or their designee to exercise the option to renew the lease (Attachment A) between the City of Palo Alto and Steve Nash and Dennis Ryan for utility equipment staging and storage for 4 months for the Advanced Metering Infrastructure (AMI) project under the Smart Grid Technology CIP (EL-11014) located at 975 Terra Bella Ave in Mountain View. The 4 month extension is authorized by Section 51 of the lease and will commence on November 1, 2024 through February 28, 2025.
The monthly rent will be $35,587.95 for a total not-to-exceed of $213,527.70 for six months from September 1, 2024 through February 28, 2025.
2. Direct staff to explore the purchase of the commercial property at 975 Terra Bella Ave as a laydown yard, storage and staging area for the grid modernization and future utility capital projects.
3. Amend the Fiscal Year 2025 Budget Appropriation for the Electric Fund (requires a simple majority approval) by:
a. Increasing the Electric Operations Rents and Leases expenses by $213,527.70; and
b. Decreasing Smart Grid Technology CIP (EL-11014) budget by $213,527.70.
BACKGROUND
The City’s Utilities Department has used City owned property, including the current use of the property at 2000 Geng Road as a storage or “laydown” yard for various City Utilities‘ capital improvement projects. On September 14, 2020, the Council approved an interim safe parking ordinance and a three-year lease with the County of Santa Clara (“County”) at 2000 Geng Road for safe parking. The County, leasing property from the City, contracted with Move Mountain View to operate a safe parking program with 12 spaces for recreational vehicles (RVs) or two cars per space. In addition to this City/County partnership, several congregation-based sites host safe parking for passenger vehicles only.
On December 4, 2023, the Council adopted ordinance 18.42.160 to permanently establish congregation-based safe parking and to establish regulations related to safe parking, including a maximum number of vehicles per night on each site. Additionally, Council directed staff to explore the expansion of safe parking, including at the Geng Road site which has higher capacity than the congregation-based sites.
On August 19, 2024, the Council approved Amendment No. 2 to the Lease Agreement by and between the City of Palo Alto (City), as landlord, and the County of Santa Clara, as tenant, at 2000 Geng Road for Safe Parking to expand the premises of the lease and increase by 10 the number of permitted parking spaces. The Geng Road site is the only one in the City which permits recreational vehicles (RVs) and is often at capacity with a waiting list.
ANALYSIS
The relocation of the AMI warehousing and staging site is in response to the City Council request to expand the safe parking site at Geng Road and address vehicle displacement for the El Camino Real (SR 82) project. On September 1, 2024, the City entered into a two-month lease with Steve Nash and Dennis Ryan for 0.86 acres of land at 975 Terra Bella. The purpose of the lease was to provide space for the relocation staging site for the Utilities Advanced Metering Infrastructure (AMI) project. The AMI project consists of replacing 30,000 electric and 8,300 water meters and retrofitting 24,200 gas meters and 12,500 remaining water meters. The AMI deployment began in September 2023 and is expected to be complete by April 2025.
As of June 2024, 21 RVs/or campers and 16 vehicles were counted along SR 82 in Palo Alto. The Caltrans SR 82 Repaving Project removed parking along SR 82 in Palo Alto beginning September 2024, thus making increased safe parking capacity time sensitive to align with the expected displacement. The Utilities Department provided advanced notice and coordinated with the AMI installation contractor Utility Partners of America (UPA) for the site relocation.
The property at 975 Terra Bella Ave (Attachment B) is zoned as general industrial and is located on the southeast corner of Terra Bella Avenue near San Rafael Avenue. Access to the property is good, with a highway interchange less than one-half mile north of the building at Shoreline Boulevard and US Highway 101. The parcel is approximately 37,461 SF or 0.86 acres. The property has two offices which require improvement to meet ADA requirements. The property has ample space to serve as a laydown yard for utility poles, pipes, wires, and other equipment.
The Utilities Department is regularly in need of a laydown and staging area for capital improvement projects. The laydown area is an integral part of any CIP project because it allows the contractor to store and stage the materials, equipment and vehicles required for construction. Given the limited availability and high leasing cost of commercial space to serve as a laydown yard in or near Palo Alto, the cost of the laydown yard is generally a pass-through charge from the contractor to Utilities. The property at 2000 Geng Road has served as the laydown yard for various gas main replacement, sewer main replacement, water main replacement projects including the AMI project. Without a dedicated laydown yard, the cost of future CIP projects will increase and the construction timeline may be extended depending on the proximity of the laydown yard for each project.
The four-month lease extension will allow the City to complete the AMI project and determine whether the property at 975 Terra Bella will be a viable permanent laydown and staging area for grid modernization, fiber-to-the-premises, and future water gas wastewater main replacement projects. During the lease term, the City will perform a property appraisal and obtain construction estimates of remodeling the offices to become ADA compliant. As directed by Council, Utilities would explore acquiring the land. If the purchase is feasible staff would return to Council with recommendations for purchase of the property and then again for facility construction.
FISCAL/RESOURCE IMPACT
Funding of the lease is available in the FY 2025 Smart Grid Technology CIP (EL-11014). Staff recommends an appropriation of $213,528 in the FY 2025 Electric Fund operating budget and offset by a reduction in the Electric Fund Smart Grid Technology CIP.
The potential purchase of property would be determined through negotiation with the seller. If staff returns to Council recommending purchase of the property, staff would also be returning with a funding plan at that time.
STAKEHOLDER ENGAGEMENT
Staff will conduct stakeholder involvement along with the acquisition being recommended.
ENVIRONMENTAL REVIEW
Council action on this item is categorically exempt from California Environment Quality Act (CEQA) review the under CEQA Guidelines Section 15301 as a lease of an existing facility involving no expansion of the existing or former use.
ATTACHMENTS
Attachment A: 975 Terra Bella Lease Agreement
Attachment B: 975 Terra Bella Site
APPROVED BY:
Dean Batchelor, Director of Utilities