COMMUNITY CENTER LEASE RATES

Recommendation

The Parks, Recreation and Community Resources Commission recommend that Council:

1. Approve a two (2) year lease rate increase schedule with $.05 per sq. ft each year as

follows:

• FY 1998-1999 @ $.98 per square foot, and
• FY 1999-2000 @ $1.03 per square foot; and,

1. 2. Approve Amendments to existing leases with South Bay Free Clinic, Easter Seal Society, South Bay Center for Counseling, The Association for Retarded Citizens - Southwest, and Los Angeles County Superintendent of Schools to reflect the newly approved lease rates (Attachment A.)

Background

Per the deed restrictions on the use of the Community Center property, non-profit agencies are the only groups permitted as tenants in the Center.

The Commission is charged with recommending lease rates to the Council and has typically done so in 3-year increments.

The lone exception to this practice occurred at the last review when in consideration of the recession (and the impact it had on non-profit donations), lease rates were frozen for two consecutive Fiscal Years.

In the past five (5) fiscal years, lease rates have been set as follows:

July 1, 1993 through June 30, 1994: $.87 sq. ft.

July 1, 1994 through June 30, 1995: $.90 sq. ft.

July 1, 1995 through June 30, 1996: $.93 sq. ft.

July 1, 1996 through June 30, 1997: $.93 sq. ft

July 1, 1997 through June 30, 1998: $.93 sq. ft.

Recommendations for various rates have been calculated in the past by researching what the "going rate" is for commercial buildings (more specifically, older commercial buildings) in the area and by reducing these rates by 25-50% to account for the non-profit status.

Analysis

The new recommended lease rates will account for the $.03 sq. ft. per year increases that were in place from previous years and would recapture $ .04 of $.06 lost during the two previous Fiscal Years:

July 1, 1998 through June 30, 1999: $.98 sq. ft.

July 1, 1999 through June 30, 2000: $1.03 sq. ft

The Chamber of Commerce reports a range of approximately $1.50 - 2.75 sq. ft for office space in Hermosa Beach. Using the "low end" rate of $1.50 sq. ft. as a baseline, the recommended initial rate of $.98 sq. ft. represents a discount of 35% from the $1.50 level.

Another potential measure for determining rates is the Consumer Price Index figure, which rose by 1% in 1995, 1.5% in 1996, and 1.3% in 1997 which would seem to support this modest increase in our rental rates.

Understanding the uniqueness of the Community Center tenancy and the importance of locale in determining lease rates, it is difficult to find comparable rates in our area. The City of Redondo Beach leases City owned space to a private school for a rate of $1.07 sq. ft..

In evaluating these discounted rates, it is critical to understand how much the City benefits from the tenancy of the social service agencies in the Community Center. They not only provide vital services to those in need (particularly convenient to our residents) but they also provide a way for our residents to participate positively in their community as volunteers for these agencies. Attached you will find a list of the non-profit organizations who lease space in the Community Center.

Other Alternatives Available to the Commission Include:

1. Staff recommendation of $.05 increase for three (3) years.
2. Reduce/increase recommended lease rates.
3. Recommend that the lease rates be tied to the CPI on an annual basis.
4. Request more information.

Fiscal Impact: Estimated annual revenues for FY 98-99: $104,112

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