Item 2F: Kaufman Center Lease - Laserfiche WebLink

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As a condition of the renewal of EECA's lease, the City Manager is establishing the expectation that EECA will pay rent that, over time, will offset the ongoing costs of building and grounds maintenance, though not recovering the full value of the use of the center. While the initial lease rate will not cover current annual maintenance costs, the lease schedule will enable the City to come closer to recovering the regular maintenance costs by the end of the five-year term. Larger repair projects as listed in the Facility Condition Report would still need to be done from the General Capital Projects Fund. During the term of the lease, EECA will be expected to continue to provide minor maintenance, repairs, and upgrades needed maintain the condition of the premises to at least the current level of quality. 2005 commercial rental space rates in this area of town vary widely, starting at about $.50 per square foot per month and going up to approximately $1.75 square foot per month. The current average is about $1.00. Under the terms of the proposed lease agreement, EECA would initially pay $0.015 (1.5 cents) per square foot, increasing to $0.24 (24 cents) per square foot over the five-year term of the lease. The lease rates proposed for the lease with EECA for the 2005-2010 term are: Monthly Annual Cost /SF/month Year One $125 $1250' $.015 / SF Year Two $250 $3000 $.03 / SF Year Three $500 $6000 $.06 / SF Year Four $1000 $12000 $. 12/SF Year Five $2000 $24000 $.24/SF *Year One will be ten months instead of twelve due to extension of the current lease to September 1, 2005. Due to the level of subsidy the City is providing for EECA's use of the Kaufman Center, lease provisions have been included which require EECA to share revenue obtained from subleasing in order to come closer to meeting the maintenance expenditures. The City recognizes that it will take more time for EECA to establish funding sources that will allow its rent payments to cover full maintenance costs. It is expected that EECA will establish partnerships with other organizations over the next few years to increase services provided at the center, as well as to generate more operating revenue. To meet the objective of recovering maintenance costs, the lease includes a revenue sharing requirement that would take effect once EECA's revenues from subleasing reach a floor of $1,000 per month. The amount of revenue from subleases above $1,000 per month would be split equally between EECA and the City. This floor of $1,000 per month is based on EECA's earlier budget projecting $12,000 in rental revenues. The revenue sharing with the City would occur only ifEECA meets the projected rental income. In any event, the total monthly payment to the City will not exceed $2000.00 for the term of this lease, which provides an incentive for EECA to maximize rental revenue while protecting the public' s interest in improving the return on the private use of a City asset. The City Manager believes that this proposal is a reasonable compromise for the City in partnering with EECA, and that City Council adoption of Resolution 4846 is a reasonable approach to balancing the desire to receive fair market rent for use of the Kaufman Center with continued provision of EECA's services to the public. L:\CMO\2005 Council Agendas\M050718\S0507182F.doc