SQUAW VALLEY PUBLIC SERVICE DISTRICT

Transcription

1 EXHIBIT # F-6 8 pages SQUAW VALLEY PUBLIC SERVICE DISTRICT DATE: May 31, 2016 Tenant Request for Rent Reduction TO: FROM: SUBJECT: District Board Members Mike Geary, General Manager & Danielle Grindle, Finance & Administration Manager Creekside Charter Management Request for Reduction in Rent 1810 Squaw Valley Road Old Administration Building BACKGROUND: The Squaw Education Foundation (SEF) on behalf of the Creekside Charter Management and Squaw Valley Preparatory School requests rent reduction for the school year of 50%, or $22,365. The letter was distributed to the Board of Directors on April 22, 2016 and is attached. Creekside Charter Management is leasing the old Administration Building at the District s property at 1810 Squaw Valley Road. The term of the lease is from April 1, 2015 to June 30, Starting July 1, 2016, the rent is $3, per month and is based on a rate of $1.50/ft 2 for 2,485 ft 2 of space. Relevant sections of the commercial lease are attached. The lease also specifies the tenant pay $500 per month for utilities (e.g., electricity, propane, water, sewer, trash) and $1,200 per year for snow removal. The cost for utilities is scheduled to increase to $803/month on July 1, 2016 to cover the actual costs to the District. DISCUSSION: SEF negotiated a lower rent than what the District advertised when the lease was signed in April Current rental rates in Tahoe City and Truckee are in the range of $1.35/ft 2 to $2.00/ft 2. The letter suggests tenant improvements were constructed to make the building structurally sound. Of course, the building was structurally sound when the District entered into the lease and prior to Creekside Charter Management s occupancy. Tenant improvements were made to at the tenant s discretion presumably to improve the floor plan for its needs and uses. 305 Squaw Valley Road P. O. Box 2026 Olympic Valley, CA p. 1 of 2 (530)

2 ALTERNATIVES: 1. Provide a reduction in rent of 50%, or $22,365, to Creekside Charter Management for the period between July 1, 2016 and June 30, 2017 as requested by the tenant. 2. Provide a reduction in rent of another amount. 3. Do not provide rent relief. FISCAL/RESOURCE IMPACTS: The District has raised water and sewer rates since 2010 according to the following schedule: Year Water Rate Increase Sewer Rate Increase % 8% % 6% % 12% % 15% % 11% % 8% 2016 For fiscal year , a one percent (1%) increase in water rates is equivalent to $13,828 and a one percent (1%) increase in sewer rates is equivalent to $11,572. Rent relief in the amount requested ($22,365) is equivalent to a: 1.6% increase in water rates, or 1.9% increase in sewer rates, or reduction in contributions to the District s fixed asset replacement funds in an amount equal to the discount in rent. The District s ad valorem tax revenue for fiscal year is projected to be less than it was in A reduction in rent has not been considered in the preparation of the Annual Budget. RECOMMENDATION: Staff does not have a recommendation specific to the tenant s request but recommends the Board consider the financial impacts described above. ATTACHMENTS: Letter from SEF requesting a reduction in rent dated April 21, 2016 and relevant sections of the commercial lease agreement between the District and Creekside Charter Management for the District s old Administration Building. DATE PREPARED: May 23, Squaw Valley Road P. O. Box 2026 Olympic Valley, CA p. 2 of 2 (530)

3 Squaw Education Foundation April 21, 2016 To: Squaw Valley Public Service District Board of Directors From: Vince Sosnkowski Squaw Education Foundation On behalf of Creekside Charter Management SVPSD Board Members, On behalf of Creekside Charter Management and the students and faculty of Squaw Valley Prep, I request approval of a one- time rent reduction for the school year of 50%. There are three reasons why this is a fiscally prudent move: 1. Squaw Prep is currently undergoing a budget crisis. As some of you may know, Prep/Creekside s long time Director left in the middle of last school year. This caused a lot of turmoil within the school. Jeff Kraunz, the new director of the school has brought solid guidance and stability back to the school. However we are still seeing ripple effects primarily in High School enrollment. Prep is anticipating a budget shortfall of $200,000 for the school year. It has launched an ambitious fund raising program that is currently forecasting approximately $110,000 in family donations. Should we not get at least close to our target, the school will either shut down or change its model to avoid the costs associated with rent and facilities. There is the potential the SVPSD would see NO revenues from the school next year.

4 Squaw Education Foundation 2. With its new director, Prep is building a top tier educational facility here in Olympic Valley. The school, at large, has many families that have moved to the area soley because their children were accepted at Creekside or Prep. As SVPSD revenues are partly based on property values, fostering the development of a top performing school significantly enhances property values. Long term, the existence of Prep will bring a substantial increase in SVPSD revenues. 3. The rental market for office space is currently soft in Olympic Valley. There no likely replacement tenants for this space Upstairs at the old firehouse has gone unrented since Prep moved out. The Poulsen A- Frame adjacent to the Post Office has been for rent for many months Granite Peak Management has purchased the Casa Andina building at the base of Alpine Meadows road and plans on relocating all their offices within the next 12 months. Board Members would be correct to ask if the school expected to grow enough in the coming years be able to support rental payments. It should be noted that current 6 th and 7 th grade classes are over subscribed. Prep is also the obvious choice for those families with children in competitive programs on the Squaw Valley Ski Team. From a community- building point of view, Board Members should be aware that our most vocal voices for saving Prep are its students. I would suggest that teenagers passionately mobilizing to save their school are a rarity in this day and age and should be supported. Finally, the Board should be aware that, during the remodel of the building, Prep incurred an additional $50,000 in expenses associated with making the building structurally sound. Bottom line; the board can vote to support the school, helping build value and revenue in the long run or it can risk the demise of the school and potentially forego any revenues associated with that lease.

5 Squaw Education Foundation Many thanks for your kind support. ~ Vince Vince Sosnkowski Squaw Education Foundation vince@squaw.org Parent of 5 th and 9 th grader

6 COMMERCIAL LEASE THIS LEASE is made and entered into this 8 th of May, 2015 by and between SQUAW VALLEY PUBLIC SERVICE DISTRICT, a California public entity, (hereinafter called "Lessor") and, CREEKSIDE CHARTER MANAGEMENT, a California non-profit public benefit corporation operating a California charter school, (hereinafter called "Lessee"). W I T N E S S E T H: Lessor leases to Lessee, and Lessee hires from Lessor the administrative office space, consisting of approximately 2,485 square feet±, located at 1810 Squaw Valley Road, Olympic Valley, Placer County, California (the "Premises"), upon the following terms and conditions: 1. TERM: The term hereof shall commence on April 1, 2015 and terminate on June 30, 2018, unless sooner terminated pursuant to the terms and conditions herein set forth. 2. RENT; LATE PENALTY AND INTEREST: a. Lessee shall pay monthly rent to Lessor, for the use and occupancy of said premises, the minimum monthly rent of $3, (2,485 x $1.30/square foot) payable in advance on the first (1st) day of each and every month during the term hereof. Lessee shall pay the first month's rent upon execution hereof. b. In the event that Lessee shall fail to pay rent within fifteen (15) days from the date that the same shall become due, Lessee shall additionally pay to Lessor a penalty therefor equal to ten (10%) percent of the installment of rent then due and delinquent. Delinquent rent shall gather interest at the rate of twelve (12%) percent per annum from date due until paid in full. 3. RENTAL RATE INCREASE: a. The monthly rent for hire of said premises shall be subject to adjustment commencing at the conclusion of the initial fifteen month period from date of execution hereof: b. The monthly rent shall be increased to $3, ($1.50/square foot) commencing on July 1, 2016 and shall remain in effect for the remainder of the term hereof. 4. TAXES: a. Lessee shall pay all taxes levied upon personal property, including its own trade fixtures, equipment and inventory. b. Lessee shall pay and be solely responsible for any possessory interest tax levied or Commercial Lease Page 1

7 assessed by the County of Placer and/or any other governmental agency. Lessee shall pay said tax directly to the levying agency upon receipt of the same, if separately billed to Lessee. However, in the event that Lessor shall be separately billed for or on account of any such possessory interest tax, Lessee shall pay to Lessor an amount equal to said tax within thirty (30) calendar days before the taxing authority's delinquency date therefor. c. If Lessee is an entity that qualifies for property tax exemption, Lessee, at Lessee s sole cost, may institute any necessary action to apply for and obtain any exemption from property taxes that Lessee is eligible for as a result of such qualification. Lessor agrees to cooperate with Lessee to execute any documents required to be executed by the owner of the Premises for Lessee to obtain such tax exemption credits, refunds, or abatements. 5. SECURITY DEPOSIT: a. Upon execution hereof, Lessee shall pay to Lessor the sum of $6, (six thousand, four hundred sixty one dollars) as a deposit to secure Lessee's timely and full performance of the terms and conditions hereof. Lessee shall not be entitled to any interest on said security deposit, nor shall Lessor be required to maintain any segregated depository account therefor. b. Should Lessee be in default of payment of rent when due, or should Lessee fail to pay any other sum payable to Lessor hereunder when due, Lessor may, at its sole option and without prior notice thereof, use and apply any portion or all of the security deposit in payment of any such overdue rent or other sum(s) as may then be due and outstanding. In such event and upon written demand from Lessor, Lessee shall forthwith pay to Lessor such sums in cash as may be necessary to restore the security deposit to the full amount originally deposited pursuant hereto. Lessee's failure to do so, within fifteen (15) calendar days after receiving such demand, shall constitute a material breach of this lease. If Lessee is not in default under the Lease at the time of termination, or expiration of the Lease, Lessor shall remit to Lessee all sums held as a security deposit within thirty (30) days of termination or expiration hereof. 6. UTILITIES/SNOW REMOVAL: a. At the fixed rate set forth in Sections 6(b) and (c) below, Lessee shall pay for all utilities and utility-type services supplied to, used or consumed upon the premises by Lessee, including but not limited to electricity, propane, water, sewer, trash and snow removal. Such charges shall be paid by Lessee to Lessor, together with rent, in advance on the first (1 st ) day of each and every month during the term hereof. b. Lessee shall pay the sum of $500 per month, in addition to the rent of the Premises, for utilities and utility-type services supplied to, used or consumed upon the Premises by Lessee, including, but not limited to, electricity, propane, water, sewer, and trash removal. c. Lessee shall further pay the sum of $1,200 per year/$ per month for snow removal. Commercial Lease Page 2

8 d. Because the proposed use of the premises are a new use for the property and the District cannot predict the effects of the change in use on the cost of utilities, the cost of utilities, or a reasonable estimate thereof, shall be adjusted by Lessor and shall be payable to Lessor for the Lease Term, commencing July 1, 2016 and again on July 1, USE OF PREMISES: The leased premises shall be used by Lessee for operation of a school facility, educational instruction and office space, as is allowed by the County of Placer and applicable governmental agencies, and for no other purpose without Lessor's prior written consent. Lessee shall at all times conform and comply with any and all laws, ordinances, regulations, ordinances or restrictions applicable to Lessee's proposed use of the subject property, including any restrictions as may be imposed by the County of Placer applicable to said use. 8. COMMON AREAS AND PRO RATA COSTS: The Premises consist solely of office/classroom space, which is adjoined and partitioned from the Garage Bays and the outbuildings and improvements occupied by the Squaw Valley Fire Department and by Lessor, which are not a part of the demised Premises. a. Lessee shall be entitled to non-exclusive vehicular and pedestrian access on, over and across the improved parking areas, located upon the property which the Premises are a part, which right of use shall be in common with that of Lessor, the Squaw Valley Fire Department, and other of Lessor's tenants. b. Lessee shall have a non-exclusive right to use of six (6) parking spaces for Lessee, its employees, invitees and guests, upon a first-come/first-served basis. Lessor reserves the right to designate specific parking spaces for Lessee and/or to adopt reasonable rules regarding use of the parking lot area. Lessee assumes responsibility for compliance by its employees with the parking provisions contained herein. Lessee agrees to cooperate with Lessor and the other tenants of the Premises, including the Squaw Valley Fire Department, regarding use of available parking. c. Lessee shall not store, house, or maintain any personal property, trade equipment, disabled vehicles, trash, garbage or refuse upon the Property located outside of the demised Premises, whatsoever. Vehicles shall not be parked, left, stored, or repaired upon the premises and no overnight parking of vehicles shall be allowed whatsoever. d. Lessee, its employees and invitees, shall be entitled to use the Common Areas during the term hereof and in common with Lessor and such other persons authorized by Lessor from time to time to use such areas, as authorized by Lessor. e. Lessee is advised that there is no entitlement to off-site parking. If off-site parking is required by Lessee, its agents, employees and invitees, Lessee agrees that it shall make suitable arrangements with the Squaw Valley Ski Corporation, or others, for off-site parking upon adjacent property. Commercial Lease Page 3