PURPOSE:

The purpose of this report is to request City Council approval of a resolution extending the multi-year lease agreement between the City and Brandall Modular Corp.

BACKGROUND

On January 25, 2000, the City Council approved a lease agreement between the City and Brandall Modular Corp., whereby the City agreed to lease a modular building as part of the MSB relocation and Development and Community Services Building (DCSB) construction projects. Additional office space was needed to house Public Works Administration and Engineering, and several divisions of the Community Development Department, including Planning, Advanced Planning, Building, and License and Code.  The term of the lease was for a period of three years, including an optional last year, which then reverted to a month-to-month rental charge.  The monthly rental charge for the optional month-to-month period would have been $9,167, for a total of $110,004 for an entire year. 

The optional year and month-to-month periods were included in the lease because the construction schedule of the new DCSB was not established and it was unknown how long the occupants would need to be in the leased building.  The fixed term portion of the lease began August 1, 2000 and terminated on July 31, 2003.  

Three issues have arisen since December 2000 that caused the new DCSB project to slip and necessitated a modular building lease extension. 

1.      In December 2000, the original project manager, Richard Inga, retired.  Three months was required to recruit and retain a new manager.

2.      Once the DCSB project Architect was on board, the occupancy program was substantially increased to include:

• Master Planning of the Civic Center district

• Increased space programming from 57,000 to 68,000 square feet

• to include additional occupants, Public Information Office and Community Room that would also operate as a second City Council Chambers 

3.      The DCSB project was placed on hold in January 2003 for two primary reasons:

• To assess the fiscal impacts, if any, the recent state budget crisis may impose on the City.

• To allow the City further flexibility to consider funding the proposed new Central Library in lieu of the DCSB project.

Consequently the modular building is required for an additional thirty-three to thirty-six months to provide office space until the new DCSB project, recently resumed, is completed.

ANALYSIS:

Staff successfully negotiated with Brandall Modular Corp. for a two year and nine month extension of the current lease agreement.  The agreement will also include an additional three-month option.  The term of the lease extension is based on an estimated DCSB occupancy date of May 2006 and coincides with the earliest possible ground-breaking for a new Central Library at the current modular building site.  The total cost of the lease including the three-month extension, is $296,676.  The pre-payment schedule is:  

8/1/03             $98,496 (+ tax) for 12 months � Payment due by 8/30/03

8/1/04             $98,496 (+ tax) for 12 months

8/1/05             $73,872 (+ tax) for 9 months

5/1/06             $25,812 (+ tax) for 3 months

During negotiations, it was also agreed to modify the �Renewal of Lease Notification� term, reducing it from 180 days to 90 days.  All other terms and conditions will remain the same.

This project is categorically exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15301 (Class 1) of the State CEQA Guidelines regarding existing facilities as the project involves extension of a lease agreement for an existing public facility involving no expansion of use beyond that existing at the time of this determination. 

FISCAL IMPACT

The cost of extending the lease is $296,676. Total tax is $24,476 for a total of $321,152.  There is $122,291 previously appropriated in account 370-CP01A-70019-0000-13572, for the sole purpose of additional lease payments. 

This leaves a balance of $198,861 required for the term of the agreement, including the optional three months.  There are sufficient funds for this balance in the DCSB project account, 370-CP01A-70019-0000-11915.

RECOMMENDATION

Staff recommends that the City Council adopt the proposed resolution extending the multi year lease agreement between the City and Brandall Modular Corp.

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