PURPOSE:

The purpose of this report is to consider modifications to the Agreement Pertaining to the Improvement, Use and Operation of Childcare Center regarding the preference for available spaces and the reduction of tuition rates for a portion of the center�s spaces.

BACKGROUND:

In March 2004 , the Burbank Housing Corporation opened its childcare center at 2300 North Ontario Street in partnership with the Burbank Redevelopment Agency.  The center was developed due to the lack of quality and affordable childcare services in Burbank, a widely recognized problem facing states and localities across the nation.

As part of the Center�s development, the Redevelopment Agency required that 18 of the 92 childcare spaces (20%) have reduced tuition rates.  For example, market tuition rates for infants and toddlers are $231 per week, while the affordable spaces are $200 per week representing a 15 percent difference. The Burbank Redevelopment Agency has historically wanted to enhance or provide a greater level of affordability in the tuition rates, unfortunately, the economics of operating a childcare center has limited the Agency and the Burbank Housing Corporation from offering even more affordable tuition rates.

At the same time, it has also been recognized that demand for childcare comes from both residents of Burbank as well as employees of Burbank businesses.  Early in the planning stages of the center, staff had sought corporate sponsors to help pay for the cost for developing the childcare facility.  Unfortunately, there had not been any strong corporate interest at the time of development.  Corporate interest appears to fluctuate based on the strength of the overall economy and individual corporations. When corporations have a need to hire and/or retain employees they often consider offering benefits such as childcare. Unfortunately, when the Burbank Housing Corporation Childcare Center was being planned, the nation was in a recession and there was limited motivation and ability by companies to support childcare.  However, there have been some changing business dynamics within the City in the immediate vicinity of the Center particularly with the continued development of the Media Studios North office project.  Just recently, WMC Mortgage relocated nearly 1,000 employees into the Media Studios North project and Yahoo! (Overture) plans to begin relocating up to 1,800 employees to Burbank in November 2005.

Staff now sees an opportunity for companies to provide corporate sponsorship that would in return provide deeper discounts for the 18 affordable spaces and ultimately have the ability to create more affordable spaces.

ANALYSIS:

Over the last several months, staff has worked with the Burbank Housing Corporation, Knowledge Learning Centers (the operator of the facility) and the City�s Childcare Committee to allow for corporate sponsorship.  Staff has also had discussions with WMC Mortgage on a plan to provide more affordability in the tuition rates provided they receive some assurances that a portion of their employees could utilize the center, which currently has a significant waiting list.

In developing a plan, staff had to balance the desire to make the spaces available to both Burbank residents and corporations, and be flexible enough to allow several corporations to become corporate sponsors.  In this process, staff also had to make sure the plan would be manageable for Knowledge Learning Centers, while offering the ability to maximize the ability to provide more affordable tuition rates.

Originally, staff proposed that a corporation would be able to receive priority enrollment to purchase a block of 12 childcare spaces at an annual fee of $10,000.  Of this amount, $4,000 would be used to offset Knowledge Learning Center�s costs to administer the enrollment and waiting list, with the remaining $6,000 to be used to reduce the tuition rates.  Assuming the funds are used for the 18 affordable spaces that are available to Burbank residents, this would represent a tuition reduction of $27.78 per month.  For each corporate sponsor who purchased a block of 12 spaces, the tuition reduction would increase accordingly up to over a $100 per month for the 18 spaces if 48 spaces are reserved by corporations, or we could spread the reduction for more than the 18 affordable spaces.  (It is proposed that any one corporation could not purchase more than two blocks of 12 spaces, and that total number of spaces be restricted to 48 spaces representing just over one-half of the total spaces in the center.)

However, it was noted that there is already a significant waiting list at the center, and staff felt that it would be not appropriate to allow corporations to move up on the existing waiting list.  On the other hand, a corporation would not want to pay $10,000 per year, and still not be able to get any of the employee�s children into the center within a reasonable amount of time.  It was therefore recommended that there would be a minimum two year agreement with the first year fee reduced to $5,000, which would then increase back up to $10,000 in the second year.  Effectively, this would reduce the tuition rates for the 18 affordable spaces on average by $20.83 per month over two years for each block of 12 spaces (this represents an additional 10 to 14% reduction depending on the age group).  If two blocks of 12 spaces are reserved, the discount on the 18 affordable spaces would be $41.66 (this represents a 20 to 28% reduction of tuition rates).  If three or four blocks of 12 spaces are reserved, it is recommended that the number of affordable spaces be increased from 18 spaces.  Thus, if three blocks of 12 spaces are reserved the number of affordable spaces will increase by nine spaces for a total of 27 spaces. Accordingly, if four blocks of 12 spaces are reserved, there would be 36 affordable spaces in the 92 space center.

It is proposed that the affordable spaces be reserved for households, who are at or below moderate income levels.  First priority for these lower rates would also be for households in Burbank Housing Corporation or City/Agency-sponsored affordable housing projects.     

USE AND OPERATION OF THE CHILDCARE CENTER AGREEMENT

In order to allow for the flexibility in allowing corporate sponsors to participate, the Agreement Pertaining to the Improvement, Use and Operation Agreement of Childcare Center will need to be amended to change the existing priority enrollment system.  The following outlines the existing priority system and proposed priority system.

Existing Agreement with the Burbank Housing Corporation

1^st Priority - Residents of projects owned by the Burbank Housing Corporation

2^nd Priority � Residents of other affordable housing projects sponsored by the Agency, City or Housing Authority

3^rd Priority � Residents within the Golden State neighborhood

4^th Priority � Any resident within the City Of Burbank

5^th Priority � Any employee whose principal place of work is within Burbank.

Proposed New Priority System

1^st Priority - Residents of projects owned by the Burbank Housing Corporation

2^nd Priority � Residents of other affordable housing units sponsored by the Agency, City or Housing Authority

3^rd Priority � Employees of corporate-sponsored childcare spaces limited to 48 spaces with no more than 25 percent (12 spaces) available for infant and toddlers (the infant and toddler spaces are in highest demand).  No one company may receive more than a block of 24 spaces. The first three priorities combined cannot exceed 60 spaces.

4^th Priority - Any Resident or Employee within the City of Burbank.

5^th Priority � Any non-resident, non-employee.

As previously stated, the affordable spaces must first be reserved for households whose income is at or below moderate income levels.  First priority for these lower rates would also be for households in Burbank Housing Corporation or City/Agency-sponsored affordable housing projects. The Parks, Recreation and Community Services Director must also review and approve each corporate sponsorship agreement.

CONCLUSIONS:

Staff along with the Burbank Housing Corporation and the City�s Childcare Committee has developed a corporate sponsorship program that tries to increase the affordability of the tuition rates. In developing the plan, we had to balance the desire to make the spaces available to both Burbank residents and corporations, and be flexible enough to allow several corporations to become corporate sponsors.  In this process, we also had to make sure the plan would be manageable for Knowledge Learning Centers, while offering the ability to maximize affordable tuition rates. Staff believes the proposed modifications to the Agreement Pertaining to the Improvement, Use, and Operation of Childcare Center accomplishes these goals.

FISCAL IMPACT:

The adoption of the Resolution will not have any fiscal impact on the City or Redevelopment Agency.

RECOMMENDATION:

It is recommended that the Redevelopment Agency adopt the proposed Resolution amending the Agreement Pertaining to the Improvement, Use, and Operation of Childcare Center.

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