Department of Finance
Reference: Tenant Lease Proposal
To: Mayor Gregory Mills and Members of City Council
Through: Michael P. Martinez, City Manager
Prepared By: Catrina Asher, Director of Finance
Date Prepared: October 3, 2023
PURPOSE
To update to the City’s lease agreements with tenants renting office and/or retail space in City-owned facilities.
BACKGROUND
The City leases office and retail space in 3 locations. Those locations are Historic City Hall, 36 S. Main Street, and the Historic Train Depot. In 2020 & 2021, decisions were made to achieve partial cost recovery for these locations and lease agreements were entered into with each tenant.
On September 26, 2023, staff presented Council with a proposal for updates to the tenant leases at these locations. The rental rates in these agreements reflect the following structure:
• Organizations serving vulnerable communities (low income, at risk, etc.) - No rental charge.
• Organizations providing community services (arts, cultural events, etc.) - Rent will be set to cover utility and custodial costs for the space utilized.
• All other nonprofits - Rent will be set to half of market rent, adjusted based on the condition of the facility.
This approach would provide a reduction in rent for all tenants. New rates for each renter are
summarized below:
CRITERIA BY WHICH COUNCIL MUST CONSIDER THE ITEM
Any rates charged that are below market rat must be for organizations providing a public purpose. As such, organizations must be nonprofits or collectives (e.g. Main Street Creatives).
All current leases expire in either December 2023 or January 2024, or are already operating as month-to-month leases. Renewals will be necessary prior to expiration.
FINANCIAL IMPACT
Leases in place now will generate $135,905 in revenue for the City in 2023. This revenue is recorded in the General Fund and offsets the cost of operating and maintaining these facilities. Revenue generated for various options is provided in the attached presentation.
The proposed rental rates would reduce the revenue to the General Fund to $56,979, a reduction of $78,925K. This reduces funding available for other general operations and acts as a financial subsidy for the organizations housed in our buildings.
STAFF RECOMMENDATION
Staff recommends renewing all lease agreements, effective January 1, 2024, with the rates proposed. These agreements would be brought forward as consent items on a future Council agenda.
Attachments:
Ø Resolution