City Council

Hillview Community Center faces Budget Scrutiny

Tam and Noll architects presents the Hillview Task Force final recommendations for a conceptual design
Let's review the info presented Dec. 12 and also Nov. 28 about the Hillview project budget
Written by lalahpolitico

It’s time to review the status of City’s Hillview Community Center Project. 1) The Hillview Task Force gave its final report and recommended design concept to Council at the regular meeting Dec. 12, 2017.  2) At the Nov. 14 joint City Council/PTC meeting, City finance staff suggested a project budget cut of $5M on the Hillview project because of fears about City cash reserves becoming too low around 2020. 3) Review of the revised Nov. 28 proposed 20-year lease with Children’s Corner at the new Hillview was “continued” to a future TBD council meeting date in 2018. 4) Should the City be in the transitional kindergarten business?

[Update Dec. 29, 2017 : Corrected the date of the City Finance budget presentation from Nov. 28 to Nov. 14. Added a section at the end of post showing selected city finance slides which portray the forecast deficit caused by the the current $35M budget]

The Project Budget still $34.7M

On Nov. 14 the majority of Council members felt the finance staff argument/projection about  reserves shortfall was unpersuasive because it was too “high level”  and not detailed. They asked staff for a more detailed review of the City’s 10 year budget forecast at a meeting TBD in January. They also asked staff to obtain more fine-grained project cost estimates for the Hillview Community Center from Tam & Noll architects, with and without space for Children’s Corner. [ see Mordo remarks in this prior post]

So as for now,  Mayor Jean Mordo says the budget for the Hillview Community Center Project remains the same as directed by Council on Sept. 26 — namely $34.7M. On Dec. 12 – the last joint meeting of City Council with the Hillview Task Force..– Tam & Noll architects presented the Hillview Community Center Project Plan so far.  The cost estimator presented a new project cost estimate of$ 36.9 M…about a 6% overrun beyond the $34.7M.  He said this was normal at this early concept stage and the designers had experience in creating design efficiencies that would shave the excess over the next detailed design phase.

Hillview Task Force latest project cost estimate as of Dec. 12

The newest cost estimate is $36.9M. The cost estimator says this 6% cost over run can be reduced in the next stage of design. This is “perfectly normal. Nothing to worry about…”


Let’s recall than on September 26, 2017 , City Council agreed to boost the project budget for the new  Hillview Community Center from $25M to $34.7M.

Figure 1: Seven items added to the Project Budget

Hillview Project Los Altos

From the Dec. 12, 2017 City Council Meeting, Staff  Report – Final Hillview Task Force report.


For a short explanation of what the above add-on items really are about  see this post….

Over the course of its deliberations, the Hillview Task Force chose a “triangle floor plan” and associated exterior concepts which were accepted by City Council Dec. 12.  The triangle was one of three floor plans proposed by the architect during the fall.  It’s interesting to see how the floorplan room locations morphed during November and December.  Lalahpolitico: these changes were made by staff & the architect as they attempted to optimize noise, privacy, access, circulation, operations, etc. Most notable is that the architect finally dropped the room label for “Children’s Corner.”

Figure 2: Evolution of the “Triangle” Floorplan

Hillview Task Force, Hillview Project Plan, Childrens Corner, Kinderprep

You can see that many of rooms move around quite a bit. Pay attention to the KinderPrep and Children’s Corner space and yards. In the Dec. 12 version the Children’s Corner label has been removed. It just said “potential program space.” Read about “Kinder”, aka Kinderprep city program below….

Looking at the Evolution of Costs

Figure 3: August 2017 Cost Estimates

Back in August 2017, per this slide, the architects decided to focus on a Hillview project of about 20,750 (23,725)  GROSS square feet based on a square foot cost of $690. The Hillview task force spent a couple of months allocating 15,000 sq feet of INTERIOR space as “assignable” for rooms for various uses within a gross sq. feet building of 20,000.. The task force was not empowered to design our CITY RECREATION PROGRAM just the USES.


Figure 4: Sept. 26 Cost Estimates of Extras

Then at the Sept 26 City Council meeting, the council agreed to upgrades to the Hillview Community Center – “extras”- proposed by T&N architects ….

Hillview Task Force, Childrens Corner, Los Altos

As of Sept. 26 Lalahpolitico believes the gross square feet of the project was understood by many of us to be 20,000 to 20,750 gross square feet. It was a chaotic meeting on Sept. 26… one of the extra items…increase “building area” by 3.000 sf was changed by council member Jan pepper…who suggested paying $3M for “whatever sq. footage that would pay for”. It seems it pays for an additional 4,500 gross sq . feet…because as of Dec. 12 the architect describes the bulding area [gross sq. ft.] at 24,500. And the architect describes the prior building area to be 20,000 not 20,750.


This slide shows the Sept. 26 estimates with Dec. 12 corrections/updates… For a while it was unclear what the Council had ordered on Sept. 26.  The sticky wicket was how much “increase in building area” at Hillview Community Center project was acutally requested.

Staff reheard the tape of the Sept. 26 meeting and decided the council had concurred with Jan Pepper that $3M , not just $2M, should go towards adding whatever amount of sq. footage that would buy.

In other words, they agreed to buy MORE THAN the 3,000 sq feet additional which the architect had proposed.  [And, per lalahpolitco analysis, it turned out that by Dec. 12 it was clear T&N added  4,500 more… based on a prior building area of 20,000].

A need for Plans with Measurements Spelled Out
at Hillview Community Center

Lalahpolitico: If as of Sept. 26, per T&N $2M extra was going to buy 3,000 more gross sq. ft., how come Jan Pepper’s extra $1M  for even more sq. feet only got us another 1500 gross sq. ft  per T&N as of Dec. 12? [Was “expansion” linear through this range?]


The Hillview Task Force was empowered to offer ONLY aesthetic advice and advice on uses, not advice on changes to the budget. However, Lalah agrees a clearer idea of the interior dimensions of rooms would be helpful to see now and in the future. For example, people would like to see that teens are slated to get half the “dedicated” space of seniors, for example, if that is the truth of the matter.

And clearer numbers are needed NOW even more so because of the proposed lease with Children’s Corner.   Are they really paying a fair share…when the cost of their extra square feet seems to be linear?

The lease terms as of Nov. 28 assumed a cost of $2M for  3000+ building area sq. feet and $500,000  for the site work under that for the proposed Childrens Corner area. That cost assumption –   that $1M gets another 1500 sq ft of building area – underlies lease terms. In other words, it is based on the Sept 26 T&N statement that an “Extra” $2M buys 3000+ building area.  And as  of Dec. 12, it looks to Lalahpolitico that T&N architects are sticking to those linear assumptions.  So, for example,  if some donor appears in January 2018 and wants to add 1500 sq. feet to the teen room, it will cost $1M.

The public “gets it” that the plans are still “conceptual”.  We get it that it is hard to crunch the exact dimensions of the building and of the rooms at this stage of design of the floorplan. But perhaps this can be done at certain points in the future? Please.

Dec. 12 – where Costs of “Extras” diverged

At the Dec. 12 City Council meeting, Tam & Noll architects presented a revised total project budget estimate…as they continued their design work on fleshing out the “triangle” floor plan…identifying which “extras” were mispriced in the earlier estimate. Remember…these are estimates!

Figure 5: Project Cost Estimates Dec. 12, 2017

On Dec. 12,the cost estimator said some prior “extra”  item estimates were higher, some were lower. In particular the parking lot renovation was a lot higher.  Lalahpolitco: is there anyway to drop the parking lot refresh, to insure other aspects of the project get done?


That parking lot renovation is now up to $1.5M. Should we postpone it?

Figure 6 : Dec. 12 T&N Depiction of Plan

Hillview Task Force, Hillview Community Center,

With the Council increases to the budget– including $3M for $3000+ and more gross square feet — 4,500 gross sq feet were actually added to the plan by T&N. The architect’s cost estimator says a 6% overrun at this stage is normal. “The designers routinely can shave off costs in the next phase. So don’t worry.”



Review of Proposed Children’s Corner Lease
at Hillview Community Center

In spite of the virulent opposition/antagonism by some community people, Children’s Corner says it still wants to stay at Hillview in the long term…aka the next 20 years.  It wants to pursue the  20 year lease terms that were presented at the Nov. 28 Council meeting.

Lalahpolitico has revised her financial analysis of the proposed  lease terms and the assumed city costs … per the description in the Nov. 28 City Council agenda item.  This time my calculation of the rate of return (IRR) is over 10% on the estimated city investment of $1.5M. See spreadsheet .xls  Dec. lease project Childrens Corner.

The prior analysis is here. Not a heck of lot is different.

This sheet captures the lease terms as described in the Nov. 28 City Council report. The IRR is almost 11% on the 1.5M assumed City investment of city reserves. If more city reserves are required, of course the return would decrease. The math does not include a “salvage value.” But after the 20 years term, since the City can evict the tenant after 20 years, the salvage value could be high. Say… $2M cost of replacement of the space.  Or instead of eviction, the City might renew a lease and let the preschool/childcare continue to subsidize City Rec. programs…as it will be doing after ” breakeven” in year 9 of the proposed agreement.

Is the $1.5 M amount of the assumed city investment portion for the Children’s Corner space too low because the total Childrens corner add-on costs more than $2.5M? It doesn’t  seem so. T&N seems to be estimating an incremental $1M per extra 1500 square feet.

We await more clear info at January 2018 City Council meetings. The absence of room measurements on T&N concept floor plans has not only hampered task force space allocation…but also hampered public evaluation of the latest Children’s Corner Nov. lease – Nov. 28 City Council packet item 4.

Is Children’s Corner really paying a fair share… The lease terms as of Nov. 28 assumed a cost of $2M for  3000+ building area sq. feet and $500,000  for that site work under that. That cost assumption underlying the lease was orginally based on the Sept. 26 T&N statement that an “Extra” $2M buys 3000+ building area.  Now looking at the Dec. 12 T&N numbers in Figure 6,  $3M is buying an extra 4,500. Therefore $1M per 1500 sq feet is still valid for the lease. 

Does the tenant need to take on some of the risk of changing construction costs somehow? I’m no lawyer! But perhaps not…what with a 10% rate of return on City “investment” the cost of the Children’s Corner space could rise quite a bit and still provide a superior rate of return. If it’s fair deal at 10%, would it still be fair at 5%? And is that deal the primary criteria for a decision to lease or not lease? No.  See prior post.

Los Altos, Hillview Community Center, Hillview Task Force

Kinderprep is a new kid on the block at Hillview. It has taken over Rm. 14 which up to a year or two ago was rented to the Mandarin Pre-School. Their lease was not renewed.

Why is Kinderprep more Precious than Children’s Corner at Hillview Community Center?

Perhaps the real issue is not how fair the Children’s Corner rent will be but rather how much space at Hillview should be for preschool kinders? The 40 year-old Children’s Corner has 60 seats and serves 120 families and will implement preferences for Los Altans and City workers. It operates year round from 8 to 6pm.

The 2 year-old Kinderprep for transitional kindergarters has 30 seats serving somewhat fewer than 30 families. It has no admission preferences for now.  It appears to operate on a school year basis and runs 8:30 ish to 2:30 ish.

Both entities use their rooms exclusively and no contractor classes can be scheduled in these interior spaces.

Lalahpolitico: LASD and Cupertino Union school districts offer official State of California transitional kindergarten for free. Yes, there are certainly PRIVATE for fee transitional kindergartens and private kindergartens…but WHY a city-run one?  Perhaps this Kinderprep program and its personnel should be recast as a tenant relationship like Childrens Corner and MVLA adult ed? Is Kinderprep subsidized now?  The salaries? The space? Kinderprep is now occupying  room 14 where the private Mandarian preschool had been located, PAYING RENT.

Why did the Kinderprep program get added by the City? Lalahpolitico speculation: Was it because since 2008, Directors of Recreation have been told by all those prior city councils to evict all Hillview tenants? Thus, in the 2014 planning for a new multigenerational center — because tenants would be gone — the city would have to provide a program for kinders. ??? Historically, Children’s Corner has been the sole kinder services provider.

Los Altos Kinderprep classroom at old Hillview.

The TK program at the City-employee run Kinderprep uses Rm. 14 from about 8:30 to 2:45. You can see that it is dedicated room  and cannot be used for afternoon or evening classes by an outside contractor. All that stuff! One should expect the same exclusive use of Kinderprep at the new Hillview. Unless all this gear is going to be on mobile trolleys?  Hmmm.

Future Childrens Corner Playground…
a Weekend Park at Hillview Community Center

What is new news to Lalahpolitco is that that Children’s Corner outdoor play area at the planned New Hillview Community Center will be available to the public on weekends.  I hadn’t notice that in the lease before.  The non-profit will spend up to $200,000 to create a fenced playground  area, designing it in cooperation with the City.  [FYI: That 200K is NOT  counted as part of the lease financial analysis. And it shouldn’t be as it will be depreciated pretty much to zero after 20 years.]

Summary of Benefits to Hillview Community Center

So to sum up the benefits of the proposed private- public partnership:

  1. weekend public access to playground equipment area purchased for/ by Childrens Corner for up to $200,000 of new equipment
  2. positive rent cash flow to subsidize  non- break even City programs
  3. During and and at end of lease, City owns ALL the improvements
  4. City could NOT renew the tenant at year 20.. and use the 3000 sq feet of interior space for whatever!!! There is no automatic renewal in the lease? Let them build it for us!!! What a deal. They use our land for 20 years, and after 20 years we grab all the improvements they paid for.  Yeah , the improvements will be 20 years old… but still pretty useful. Lalahpolitco: seems like a no brainer to me…but I do try to understand people’s objections.  Seems to be that anything other than a public union employee providing services on city land is bad.  But there is so much of that already.  ?!?!  The whole Rec. Dept program is based on using contractors. I try to understand, but can’t.
Kindprep play space at old Hillview

The city-run, for fee,  Kinderprep transitional kindergarten program is using the improvement – the chain link fence – which was installed by the former tenant in Rm 14, Mandarin Pre-school.

Summary of Negatives

1.Yes, if there really are serious cash flow issues for the City that  can’t be managed by delaying other CIP – capital improvement program projects – well that is worth considered review. According to Mayor Mordo, in January City Council expects to identify CIP projects that can be delayed with the less adverse impact than cutting back on the new Hillview Community Center project.

2.If we really think Children’s Corner is likely to go out of business some time soon …after 40 years of business…and if they do go bust… that we think we can’t find another well-heeled childcare provider to pay the same rent…yes, then we should worry. Do we really think there are no other childcare renters!!! Even the opponents  of this lease…have said there are others. They somehow object to giving the current tenant the right of first refusal.  Lalahpolitico: I find that cutting out the current tenant at the knees to be just plain mean and maybe at the edge of immoral.

3.Around 6,000 square feet of land [3,000 inside and about 3,000 outside] at Hillview will be exclusively used by the non-profit for 20 years. [except the 3,000 outside is a public kiddie park on weekends].  That means we can’t build on it…or make it a parking garage or whatever for 20 years.

Lalahpolitico: Is the 6,000 sq. ft. of land being occupied for 20 years really a lost opportunity? Do you think the City will regrow the spent reserves quickly? Do you think there will be a bond passed to do anything additive to the Community Center in the next 20 years?  [After the failure of Measure A; and competition from an upcoming Library bond effort; and the need to upgrade other Park & Rec assets..the police…etc.]. No, seems highly unlikely.  Therefore, there will be nothing on those 6000 sq ft of City land for 20 years.  Of course this is exactly what some NIMBYs want… nothing there…a reduction of current levels of activity at Hillview Park, not even a continuation of current activity.

Deep Dive on the Finance Staff Scrutiny

Shariff Etman aired senior city staff concerns about the boost in the Hillview budget from $25M…to $35M.  This is in light of news from CALPERS that the annual costs to the city from 2019 to 2035  would increase from about $2M today to about $4M at the highest…and only after 2036 start to decrease dramatically.

See full Etman Presentation here. 

The city has more cash on hand than show in the below slides. But that is committed cash.  These next slides look only at spendable cash.

[Want to see the Finance Annual report with all the cash, sources of funds…? It’s here.]

Figure A: Original Hillview Budget of $25M

Hillview Community Center, at 25M impact on spendable City cash

Slide from Shariff Etman Nov. 14. Spendable Cash position with a $25M Hillview project

Figure B: Current Boosted HV Budget of $35M

Hillview Community Center, at 25M impact on spendable City cash

Figure C: Staff Recommends Cutting HV Budget to $30M

Hillview Community Center, at 25M impact on spendable City cash

Lalahpolitico Bottom Line:

I think that in January the Council can choose to delay some capital project items and instead fully support all the Hillview Project extras/upgrades, AND include  Children’s Corner. Or the council could direct staff to do some borrowing. Delaying some CIP spending can cure City cash flow angst.

But let’s get clearer budget and space numbers from Tam & Noll architects. We’ll see.

Oh, the parking lot renovation could wait perhaps. That frees up $1.5M


Resources/ References:

See full Nov. 14, 2017 City Finance Director Etman Presentation here.  

FINAL Task Force REPORT by Architect is the presentation by T&N at Dec. 12 to Council


HVTF final report at Dec. 12, 2017 City Council Meeting  contains a pic of cost of items at the sept. 26 meeting

About the author


Norma Schroder is an economics & market researcher by trade and ardent independent journalist, photographer and videographer by avocation. Enthralled by the growth of the tech industry over the decades, she became fascinated with the business of local politics only in the past couple of years.