City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Administrative Services
Meeting Date: December 2, 2024
Report #:2410-3651
TITLE
Approval of the Second Amendment to Lease Agreement Between Palo Alto Unified School District (PAUSD) and City of Palo Alto for a Portion of the Cubberley Site at 4000 Middlefield Road through December 31, 2029, Not-to-Exceed $2,500,000 in Rent per Year; CEQA Status— Not a Project
RECOMMENDATION
Staff recommends that the City Council approve and authorize the City Manager, or their designee, to execute the Second Amendment to Lease Agreement by and Between Palo Alto Unified School District, as Landlord, and City of Palo Alto, a California Chartered Municipal Corporation, as Tenant, in accordance with the Memorandum of Understanding (MOU) that the City Council unanimously approved on October 7,2024.
BACKGROUND
Cubberley Community Center has been operated by the City of Palo Alto since 1990. Space is available for rent by the hour, either one-time or on a regular basis for community meetings, seminars, social events, dances, theater performances, music rehearsals and athletic events.
Cubberley is also occupied by organizations that provide services to the community in areas of education, health, childcare, dance, and music instruction.
A portion of the Cubberley site is owned by the City and the remainder is owned by PAUSD, as shown in Exhibit B to the attached agreement (Attachment A). The City currently leases a portion of the PAUSD-owned part of Cubberley on a 54-month term lease agreement that was approved by the City Council on June 23, 2020 and is scheduled to expire on December 31, 20241. The agreement contains an option to modify the leased area and rent accordingly and was exercised when the City Manager executed the First Amendment on June 28, 2022. 1 City Council, 6/23/2020, Staff Report # 11460, https://www.cityofpaloalto.org/files/assets/public/v/1/agendas- minutes-reports/reports/city-manager-reports-cmrs/year-archive/2020/id-11460.pdf
On October 7, 2024, the City Council unanimously passed a motion authorizing the City Manager to execute a MOU with PAUSD for the purchase and lease of land at Cubberley and directed staff and a Cubberley Ad Hoc Committee to proceed with next steps including but not limited to resumption of master planning for the Cubberley site and undertaking the development of formal agreements including a new lease agreement and a purchase and sale agreement2.
ANALYSIS
Staff has negotiated an amendment with PAUSD in accordance with the MOU under the basic terms summarized below.
•Premises: As detailed in Revised Exhibit B of the Second Amendment. Room M3 is being added to the current premises leased by the City, as PAUSD will allow the City to use the space at no cost on a first-come, first-served basis as part of an agreement that allows PAUSD to use the pavilion free of charge for student gym classes. •Term: Extended through December 31, 2029. However, should the bond measure referenced in the MOU not be placed on the ballot or fail to pass, either party may terminate the lease on or after June 30, 2027. Prior to the termination date, the parties will meet and discuss alternative plans, which could include extending the termination date of the lease or entering into a new lease for a portion of PAUSD’s property. •Base Rent: Equivalent to $2,000,000 annually. Upon the PAUSD’s discontinued use of its property at the site (except access to Greendell and associated parking), base rent will increase to $2,500,000 annually. In recognition of previous disputed responsibility for PAUSD’s contribution of maintenance costs arising before the extension date, PAUSD will credit the City $1,000,000 in base rent over a six-month period starting on July 1, 2026.
•Utilities: City will continue to be responsible for all utilities. •Maintenance and Repair: City will maintain the premises it rents and the common areas on the property. City is not responsible for the maintenance of all areas of the Property that are not part of the premises or common areas. For buildings in which City leases only one (or some) rooms as part of the premises, the City will maintain the entire building except for the interior spaces of the rooms that are not part of the premises.
2 City Council, 10/7/2024, Staff Report # 2409-3500,
https://portal.laserfiche.com/Portal/DocView.aspx?id=98415&repo=r-704298fc&searchid=dd229c53-318e-4399- 8eed-614f4d79d5c7
FISCAL/RESOURCE IMPACT
Approval of this amendment extends the City’s lease of a portion of the PAUSD owned part of the Cubberley site at 4000 Middlefield Road potentially through December 31, 2029. Base rent is $2,000,000 per year to be paid in equal monthly installments and will increase to $2,500,000 per year if PAUSD discontinues use of its property at the site. FY2025 Adopted Budget and long-range financial forecast (LRFF) includes adequate rent appropriation based upon the current lease with PAUSD and future budget development will include appropriation according to this amended lease. In recognition of previous disputed responsibility for PAUSD’s contribution of maintenance costs arising before the extension date, PAUSD will credit the City $1,000,000 in base rent over a six-month period starting on July 1, 2026. The City will continue to be responsible for costs related to utilities and will assume all responsibility for maintenance and associated costs for both leased and common areas.
STAKEHOLDER ENGAGEMENT
Following execution of the MOU, PAUSD and City staff worked together to reach agreement on this amendment in alignment with the MOU. This agreement will be scheduled for the PAUSD Board’s approval at their December 17, 2024 meeting.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by the California Environmental Quality Act (CEQA) because amending a lease is an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. CEQA Guidelines section 15378(b)(5).
ATTACHMENTS
Attachment A: Second Amendment to Lease Agreement by and Between Palo Alto Unified School District as Landlord and City of Palo Alto, a California Chartered Municipal Corporation as Tenant
APPROVED BY:
Lauren Lai, Administrative Services Director