On April 10, 2018 City Council faced a council chamber filled with parents from Childrens Corner preschool pleading for space at the new Hillview Community Center. Council heard from a few opponents worried about financial risks and that the City should not be borrowing funds to finance preschool facilities for Los Altos parents.
Key Childrens Corner “Deal” points…
At the end of the day, Council proposed a range of flexible terms and conditions that staff should consider when structuring a lease agreement with Children’s Corner. There was no appetite for opening an RFP process to search for an alternative tenant. Instead, the Council directed staff to enter an Exclusive Negotiation Agreement with the Childrens Corner…preschool, a 40-year tenant. Key deal points…
City debt should be a maximum of $2M.
With the preschool prepaying $1M cash, that means the total cost of producing the space for the Childrens Corner preschool can be no higher than $3M.
Staff should evaluate not only the cost of adding the preschool to the Tam & Noll project…now in progress…but the cost if the school were to built as detached a free-standing project built with prefab technologies. Which path do both parties agree to?
Staff MUST obtain a FIRM total cost estimate for the construction path chosen. The preschool must pay all design costs, where those costs are ACTUAL costs incurred.
The term of the lease should be 10 years to 20 years. The term should be chosen to be one that is most advantageous to the City and mitigates risks to the City. [There is no intent to shift all risk to the prospective tenant Childrens Corner .]
Watching the Council members voting April 10, 2018 on the motion to enter an Exclusive Negotiation Agreement with Childrens Corner was rather entertaining. Lynette Lee-Eng voted NO at first, but when it was apparent the vote was 4 Yes to 1 No, she flipped her vote to a YES. I’ve heard people say she flips her vote a fair amount. They say her nickname is “No, No, Lynette.” And they say that’s odd for a candidate who ran on the tag line, ” Let’s get things done.” Irony?
Let’s talk about the money. With the City now borrowing $2M of money at 3 or 4 percent — rather than using city reserves earning <0.5percent — to pay its share of the cost of construction, the City’s “return on investment” depends much more on the 20-year “salvage value” of the preschool building. Even if both parties agree to use prefab construction, those technologies do have a nice, long 55-year life. I’m going to assert that the “market” value of the asset remains $3M after 20 years. At that point, the City could choose to not renew the Childrens Corner tenant, and instead put it a breakeven Recreation Dept. program there or another rent-paying tenant. If there is a tenant, that tenant subsidizes in the red City services such as those provided to the 200 or so seniors actively using the senior program. [Might be more or fewer of them in 20 years.] At all times, the city owns the land and the structure.
Of course, some of our residents don’t think the City should ever lease to a tenant ever again. They feel so strongly they have launched a local proposition for the November ballot, a proposition which would require voter approval for all leases longer than six months! So we have to vote to keep Los Altos Stage and the Museum and the SCCL library at Hillview and at Woodland?!?! Silly. I call it the proposition to “Prevent Park and Public Land Improvements.” If you think it’s dumb to be asked to vote constantly and be micromanaging the City staff who we pay to do this job, please do not sign the petition for this proposition.
It would have been much nicer to have had the Childrens Corner preschool attached to one of the two wings of the Tam & Noll project. I suspect that is less likely now. Sadly there were a few missteps in the first phase planning process of the Hillview Community Center… with unintended consequences.
It would have been way better if the original lease with Childrens Corner has been inked pronto; they had agreed very quickly to raise the frontend payment from 600K to 1M. Why the wait? Sigh.
The Council study session where T&N offered all the extras was — with 20 20 hindsight — really rushed. How could we know that by spontaneously buying “all of the above” extras — parking lot renewal, pedestrian connections, higher grade finishes, etc. — for nearly $10M more, we were making it more expensive to finance the Childrens Corner preschool’s extra 3000 square feet?
And now it seems likely the Childrens Corner preschool — if a lease agreement does actually get concluded — will be in a separate building. At least let Tam & Noll revaluate where it would get located on the site. Does it really belong visible at the end of the Community Center triangular courtyard? Does that affect the T&N landscape plan? And if there are two different building contractors there at the same time…that new City Public Works project manager will be very very busy. Sigh.
Nevertheless, I still want my City to continue to provide 60 seats an hour of Childrens Corner preschool to 120 young families like we’ve been doing for 40 years. Keep moving forward.
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