Loading...
SR-301-001-01 (8) y)A Council Meeting: April 12, 2005 APR 1 2 2005 Santa Monica, CA To: City Council From: City Staff Subject: Authorization to Execute Master Facilities Use Agreement and Related Supplemental Use Agreements with Santa Monica-Malibu Unified School District (SMMUSD) Introduction This report conveys the proposed Master Facilities Use Agreement through which the City will provide unrestricted revenue to the Santa Monica-Malibu Unified School District in return for City use of school facilities in Santa Monica and requests authorization for the City Manager to execute the agreement and related Supplemental Use Agreements for City programs at school sites. Backqround Last spring, the Board of Education and the City Council agreed to basic terms for a multi-year agreement, the stated intent of which was to maximize revenue to the District in return for use of school facilities for community programs. The multi-year agreement represents a significant change from the year-to-year approach previously observed, substantially increasing the base payments to the District, applying a cost-of-Iiving escalator annually, establishing points at which other adjustment to the base payments will be considered and providing greater certainty to the District about the flow of lease revenue. As with previous agreements, the specific uses the City will make of school facilities will be governed by supplemental use agreements - specifically for the gA 1 t\Pf? 1 2 2D()5 operation of Playground Partnership and CREST programs at elementary school sites and Youth Sports Leagues and Sports Camps at middle school sites. A Master Facilities Use Agreement reviewed by the City Manager and Superintendent was agendized by the Board of Education early this year and was referred to the District's Financial Oversight Committee. The Committee submitted its comments to the Board which, at a subsequent public meeting, asked that the City consider those comments in finalizing the agreement. City staff has reviewed those comments in light of the previously agreed terms and conferred with District staff about their effect. Discussion The discussion below addresses the proposed agreement text (Attachment 1) and the comments of the committee (Attachment 2). Recitals The attached agreement references the shared interest of the District and City in regard to serving community youth, while not blurring the distinct roles and responsibilities of the institutions. The recitals suggested by the Financial Oversight Committee seek to substantially broaden the purpose of the agreement, could obscure the State's principal role in supporting public education in California and hence in Santa Monica, may cause public confusion about the distinct roles and responsibilities of the parties and are not germane to the financial terms previously agreed to by the Board and City Council. 2 Should the Council wish to add to the recitals, the City Attorney is prepared to assist with wording that preserves the City's interests. Community Use Language has been included in the proposed agreement to acknowledge that "community use" extends beyond uses the City itself will make under supplemental use agreements, and encompasses uses the District may permit by non-profit agencies. It provides the City first refusal of use of school facilities when not required for the District's own programs. A similar courtesy of first refusal has long been extended by the City to the District in regard to access to City fields and facilities. Techn~alCmrifications Paragraph 1 re: Options to Extend Term: District and City staff concur with the committee's suggestion that the optional extension of the agreement by the parties is best implemented in three- and two-year increments and the agreement reflects this change to the previously agreed terms. Paragraph 5A re: Annual Payments: The financial implications of the timing of payments to the District were specifically addressed by the parties during the course of negotiation of terms. The City offered a single payment at the start of the fiscal year in lieu of a higher base payment amount. The District negotiator specifically opted for the higher base and that decision is reflected in the agreement. The District has not 3 historically requested payment from the City until the second half of the fiscal year in any event. Paraqraph 5B re: Annual CPI Adiustment: The language suggested by the Financial Oversight Committee could be substituted in the agreement and may assist readers in understanding the period over which CPI increase is calculated and the date on which the comparison is made. If timely preparation of the District's budget is better served by calculating CPI growth from January to January rather than February to February, City staff has no objection to employing that schedule. This will be further discussed with District staff prior to Council consideration of the proposed agreement. As to the parenthetical observation of the committee regarding the particular index employed, while eventual standardization to use of a single index in City contracts would be a convenience, City staff has no objection to substituting the All Urban Consumers index for the All Urban Wage Earners and Clerical Workers. Each index has been employed in City agreements over time. District staff has not expressed a preference for a different index. Paraqraph No. 5C(1) re: Adiustment Considerations: In the course of negotiations I District staff proposed no factors to consider regarding the District's financial status. The stated intent of the agreement incorporated in the terms adopted by the Board and 4 Council is "to maximize the exchange of value - community use of District facilities within the City and revenue flow to the District." The conferees will presumably welcome maximum flexibility in their task while being cognizant of the intent. Staff recommends retaining a consideration of the status of all three factors with no additional specificity imposed on the conferees. This section serves to introduce the use of the conference as a means to determine periodically whether a recommendation should be made to modify lease payments in a manner other than that provided for annual adjustment. The succeeding sections detail circumstances under which payments may be adjusted upward (5C(3)) or be adjusted downward, be held constant or not be adjusted by the annual CPI (5C(4)) and 5C(5)). The committee's question regarding "holding payments constant for 2007/08" is answered by Section 5C(4). The committee is concerned that there is no date certain by which recommendations made by the conferees must reach the Board and City Council. City staff believes that providing the conferees with an early objective (March 1) for providing recommendations is sufficiently directive. Given the responsibilities of the parties to the conference, there is every reason to anticipate that they will take the objective seriously while welcoming some flexibility should the circumstances faced be complex. Staff recommends that the time point for submitting recommendations remain an objective. 5 Paraoraph 5C(3) re: Adiustment Formula for Hioher Growth Revenue Years: The committee's observation about the CPI period is apt. While the annual adjustment is to be made based on the February to February CPI, the intent of the parties for the periodic reevaluation conference was to compare actual revenue growth over the specified (fiscal year) period(s) with the increase in the CPI over the same period(s). Language is proposed in the attached agreement to clarify this. Paraoraph 5C(5) re: Adiustment Formula for Slower Growth Revenue Years: Proposed language in the attached agreement should clarify that there is a two-pronged test for the circumstances contemplated in 5C(3). Only one, actual revenue compared to the CPI increase from July 2004 to July 2006 is applicable to 5C(4) and 5C(5). The criteria included in 5C(3), 5C(4) and 5C(5) are to be used by conferees in determining whether to recommend establishing a new higher base payment, holding base payments constant or establishing a new lower base payment on a going forward basis. There was no contemplation in negotiations by the parties of "restoration" of base. The addition of such a provision would confer a benefit unintended by the negotiators. Paraoraph 5C(6) re: The 2009 Adiustment Conference: Language is proposed to clarify the ambiguity cited by the committee. The second point is moot as the contract extensions have been modified to three years and two years. 6 Paraaraph SA re: Valuation of District Facilities: This reference is important and has been included in each of the single year Master Facilities Use Agreements to-date. Because no attempt has been made by the parties to place an exact value on the facilities used by the community, and the parties acknowledge simply that the exchange of value is considered by them to be reasonable and fair, the payments to the District for their use can be flexible and change over time by the methods specified in the agreement. (In discussions leading to approving the terms, the City Council specifically expressed an expectation that if payments to the District could increase during specified periods when the City's revenue position, as defined in the agreement, is strong, similar provision should be made to adjust the payments downward when it is weak.) Paraaraphs SA. 13 and 1S re: Modification bv Mutual Aareement: Redundancies referenced by the committee have been removed from the proposed text, with the provision now appearing only in clause 13. As to the committee's final observations and suggested additional language: . The City Attorney reviewed the document in draft and considers the language sufficiently clear as to covering the use of District facilities within the City to preclude a claim that payments under its terms would be due to any separate District that might be formed by Malibu because under the express terms of the agreement the City is paying the District for the right to use facilities within the City of Santa Monica only. . Nothing in the agreement as drafted suggests that the District does not control its facilities. . Nothing in the agreement as drafted suggests that the District is restricted in any way in the use of the lease payments made under its terms. 7 BudQet Financial Impact Provision has been made in the City's FY 2004/05 budget for payments under the terms previously adopted by the Board and Council. Clarifying the terms of the agreement as noted above will not increase the City's anticipated obligation. Recommendation It is recommended that the City Council discuss the proposed Master Facilities Use Agreement considering the comments of the Financial Oversight Committee of the SMMUSD and authorize the City Manager to execute the agreement and negotiate and execute supplemental use agreements that provide for specific City program use of school facilities, Prepared by: Susan E. McCarthy, City Manager Steve Stark, Director of Finance Attachments: 1) Proposed Master Facilities Use Agreement 2) SMMUSD Financial Oversight Committee Comments 8 Reference: Contract No. 8462 (CCS) -Master Facilities Agreement Contract No. 8463 (CCS) - CREST Contract No. 8464 (CCS) - Playground Partnership Contract No. 8465 (CCS) - Middle School Programs Attachment 1 PROPOSED MASTER FACILITIES USE AGREEMENT THIS MASTER FACILITIES USE AGREEMENT ("Agreement") is entered into this _ day of , 2005, by and between the CITY OF SANTA MONICA, a municipal corporation and charter city ("the City"), and the SANTA MONICA-MALffiU UNIFIED SCHOOL DISTRICT, a unified school district ("the District"), each duly organized and existing under the laws of the State of California. RECITALS: A. The City and the District share mutual goals in assisting in preparing youth to become productive members of society and support each other's efforts in that regard. B. Many of the City's projects and programs for children, youth and their families and certain activities provided by Santa Monica youth-serving non-profit organizations take place at public parks, playgrounds, play fields, and other City-owned recreational facilities. C. However, the City's playgrounds, play fields, and recreational facilities are limited in size and are not sufficient to accommodate all of the current recreational needs of the community's children and youth and their families, D. Opportunities to create new parks and recreational facilities are limited because the City's total land area is very small- approximately eight square miles - and the City is fully built- out. E. Additionally, land values are very high within the City and are rising. F. The District owns and operates school sites within the City which include playgrounds, play fields, recreational facilities and buildings which are under-utilized during non-school hours. G. The City and District desire to enter into a master agreement which will allow City and community use of school facilities within the City to meet certain recreational and other needs during hours when the facilities are available for such use, allowing the District to benefit from such use of the facilities through the generation of revenues for the maintenance of the District's education programs. H. It is the intent of the City and the District to maximize the exchange of value - community use of District facilities within the City and revenue flow to the District. I. It is recognized by the City and the District that new and ongoing resources are desired and necessary to fully support the strategic planes) and the community's expectations of both organizations. 1 PROPOSED AGREEMENT NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. TERM. The term of this Agreement shall be five years commencing on July 1, 2004, and ending on June 30, 2009, unless otherwise terminated pursuant to this Agreement. By mutual agreement the City and District may extend the Agreement in 2009 for an additional 3 years (ending June 30, 2012) and in 2012 for an additional 2 years (ending June 30, 2014). 2. SUPPLEMENTAL USE AGREEMENTS. , Supplemental Use Agreements, governing specific programs and projects, are contemplated by the parties and shall be executed pursuant to this Master Facilities Use Agreement. This provision shall not be construed to prevent the City and the District from entering into other agreements relating to school sites and facilities within the City not specifically mentioned herein, or as the parties may desire. 3. PREMISES. The premises governed by this Agreement ("the Premises") shall consist of playgrounds, play fields, and structures available for City and community use at the District's school sites in Santa Monica. The particular facilities which the City will use at each site shall differ for each program or project and shall therefore be specified in Supplemental Use Agreements governing specific programs and projects operated by the City on District property. However, in general, in making its facilities available pursuant to this Agreement and the various Supplemental Use Agreements, the District shall give the City priority over other non-District users. 4. USE OF PREMISES. The Premises shall be used by the City to provide supervised and unsupervised recreational opportunities, child care, enrichment classes, and other services. Specific programs and projects shall be governed by Supplemental Use Agreements that establish operating guidelines for said programs and projects. Premises may also be made available by the District for use by non-profit organizations providing programs and activities for Santa Monica youth and other users to the extent the uses and scheduling are not in conflict with the provisions of the Supplemental Use Agreements pursuant to this Section. 2 PROPOSED 5. COMPENSATION. A. In consideration of City and community use of School District facilities in Santa Monica and its associated benefits, the City shall pay the District for use of the Premises described in this Agreement initial Annual Base Payments totaling Six Million Dollars ($6,000,000). Payment shall be made in two equal installments, one half by December 31 st and one half by June 30th, In determining compensation, the City and District have not appraised the value ofthe Premises and do not assert that $6,000,000 represents the precise value ofthe facilities the City may access under this Agreement. During the term of this Agreement, the base payment may be adjusted as described below in this Section 5. B. Annual Adjustments Based on the Consumer Price Index. Annual Base Payments will be adjusted by the Consumer Price Index for all urban wage earners and clerical workers for LNLB SMSA (CPI), as measured from February to February with a minimum 2% and a maximum 4% adjustment. C. Periodic Adjustments Based on Facility Use and Revenues. (1) In January 2007 the parties will convene an adjustment conference to assess the state of community use of the Premises and the fiscal status of the two organizations with the objective of adjusting the current payments for the use of said facilities upward or downward by a maximum of$1 ,000,000,00, or holding payments constant for the fiscal year beginning July 2007. The adjustment conference participants ("conferees") will consist ofthe following persons: the City Manager, Superintendent of Schools, the Finance officers of both the City and the District, the Mayor, and the School Board President. The conferees will participate in the adjustment conference with the objective to have recommendations before the City Council and School Board by March 1, 2007. (2) In assessing the fiscal status ofthe City in order to establish the payments for the use of the Premises, the total of the following "Big Eight" General Fund revenue sources will be used: 1) property tax, 2) sales tax, 3) utility users tax, 4) transient occupancy tax (TOT), 5) business licenses tax, 6) real property transfer tax, 7) parking facilities tax, and 8) fines/forfeitures. (3) Ifthe actual growth ofthe "Big Eight" revenues (see subsection (2) above) over the two- year period July 2004 to July 2006 exceeds the increase ofCPI for the same period by 4% and the increase in each of the years July 2004 to July 2005 and July 2005 to July 2006exceeds the CPI for the same periods by at least 1.25%, the conferees will discuss adjusting the base payments by an additional % of 1 % of the average of the actual "Big Eight" revenues for the fiscal year beginning July 2004 and the fiscal year beginning July 2005 to a maximum of$1 ,000,000.00 effective July 2007. While the result ofthe discussions cannot be predetermined, the conferees will be mindful of the intent of this Agreement in approaching the discussion. 3 PROPOSED (4) If the actual growth ofthe "Big Eight" revenues over the two year period July 2004 to July 2006 exceeds the increase in CPI for the same period but does not reach the level specified in subsection (3), above, the conferees will discuss whether to recommend ifthere should be any adjustment to base payments effective July 2007 above that specified in Section B above. While the result ofthe discussions cannot be predetermined, the conferees will be mindful of the intent of this Agreement in approaching the discussion. (5) Ifthe actual growth of the "Big Eight" revenues over the two year period July 2004 to July 2006 does not increase by at least the increase in the CPI for the same period, the conferees will discuss whether: 1) base payments should be held constant, 2) the CPI contemplated in Section B, above, withheld, or 3) base payments reduced by some amount which in no case would exceed $1,000,000.00 effective July 2007. While the result of the discussions cannot be pre-determined, the conferees will be mindful of the intent of this Agreement in approaching the discussion. (6) In January 2009, the adjustment conference described above will be convened to assess the state of community use ofthe Premises and the fiscal status ofthe two organizations and discuss whether to recommend that this Agreement should be extended for an additional 3 years (ending June 30, 2012). Ifso, the procedures described in subsections (3), (4) and (5) above, will be used to set the FY 200912010 base payments, except that the periods of actual revenue and CPI increase comparison will be July 2006 to July 2008 and the previously adjusted maximum will again be adjusted by the change in CPI for the same period, providing a new maximum cap on any adjustment upward or downward. (7) In January 2012, the adjustment conference described above will be convened to assess the state of community use ofthe Premises and the fiscal status ofthe two organizations and discuss whether to recommend that this Agreement should be extended for an additional 2 years (ending June 30, 2014), using the formula described in subsections (3), (4) and (5) above to set the FY 201212013 base payments, except that the periods of actual revenue and CPI increase comparison will be July 2009 to July 2011 and the then current maximum on any adjustment upward or downward will again be adjusted by the change in CPI for the same period, providing a new maximum cap. (8) Notwithstanding the foregoing provisions of Section 5.C., if in each of any two consecutive fiscal years over the term ofthis Agreement the actual growth ofthe total "Big Eight" revenues exceeds 7.5%, the conferees will meet in January to discuss adjusting payments above the then applicable cap effective July 1 ofthe same calendar year. Ifin each of any two consecutive fiscal years over the term ofthis Agreement the actual revenue from the total "Big Eight" revenues declines by 7.5%, the City may convene the conference to discuss temporarily suspending this Agreement. 4 PROPOSED 6. RESPONSIDILITIES OF THE PARTIES. A. The City's Director of Community and Cultural Services shall be responsible for the direction and supervision of the City's programs and projects on the Premises. B. The Superintendent ofthe District or his or her designee, and the Director of Community and Cultural Services, or his or her designee, shall jointly establish a Master Calendar for the City's use of the Premises for the ensuing fiscal year no later than the 1 st day of July of each year. Revisions may be made throughout the year upon mutual agreement of the Superintendent of District and the Director of Community and Cultural Services. C. The District shall ensure that clean and conveniently located restroom facilities are open and available for use by participants in all City operated programs and projects. D, Responsibility for maintenance, repairs, custodial services, utility payments, staffing and security relating to the City's use of the Premises for particular programs and projects shall be specified in Supplemental Use Agreements. E. The District's responsibility for providing equipment and improvements for specific City programs and projects shall be specified in Supplemental Use Agreements. Except as so specified, necessary improvements and equipment shall be purchased, owned, installed, maintained and repaired by the City. 7 . ACCOUNTABILITY. The parties agree that the best interests of the public will be served if the benefits of this Agreement as well as the financial status ofthe two organizations are well understood. To that end, the City Manager and Superintendent will prepare an annual report on the status ofthis Agreement for presentation to the City Council and Board of Education in conjunction with the annual budget cycles ofthe organizations. The City and the District will make the annual report and their proposed and adopted budgets available at public libraries and on-line and will continue to seek ways to make complex financial information more understandable to the community. Both organizations will observe the provisions ofthe Brown Act in regard to this Agreement, as in all matters of governance subject to the terms ofthe Act. The District will continue to benefit from the advice of its Financial Oversight Committee during the term of this Agreement. 8. TERMINATION OF RIGHTS. The City and the District may mutually agree to terminate this Agreement. In that event, District shall have the option of purchasing from the City, all or any part ofthe fixed improvements, of any kind or nature whatsoever, installed by the City on the Premises. In the event the District elects not to purchase all, some or any of said improvements, the City shall remove those items not purchased from the Premises. In such event, the City shall restore the grounds in the area of such removal operations to a neat, clean and acceptable condition. 5 PROPOSED In the event the District intends to dispose of the Premises, the City shall have the right of first refusal to purchase or lease said site or facility to the extent permissible by law. Any such purchase shall be at a price negotiated by the parties or, ifthe purchase is pursuant to the Naylor Bill or any state law providing City the right to purchase District land at a price other than fair market value, then at such price as is determined using the provisions of state law, The City shall provide written notice to the District of its intent to purchase or lease the Premises, or any part thereof, pursuant to this Section within 90 days of agreement to terminate, or within such other time as is required by state law if the Premises is purchased pursuant to state law. The City and District understand that if any initiative is approved by the voters that would adjust or amend the City Charter for the purposes offunding educational programs, this Agreement is no longer binding. 9, MUTUAL INDEMNIFICATION. A. Indemnification by the District. The District hereby agrees to defend, indemnify and hold harmless the City of Santa Monica, its City Council, boards and commissions, officers, agents, employees, and volunteers (collectively "City") from and against all claims, damages, losses, expenses, demands, liability, lawsuits, and judgments including, but not limited to, attorney's fees, arising directly or indirectly from or in any manner related to the District's possession, occupancy or use of the Premises pursuant to this Agreement or arising from or in any manner connected to the District's business, activities, operations, services or work conducted in, or about the Premises, except as otherwise expressly stated herein. For purposes of this paragraph, District use of the premises shall also include use by any organization, entity or individual other than the City and the City's agents. However, the District shall not be required to indemnify the City where such claim arises from the negligence or wrongful misconduct ofthe City. The City shall promptly notify the District of any claim and cooperate with the District in connection with the defense of such claim. B. Indemnification by the City. The City hereby agrees to defend, indemnify and hold harmless the District, its Board of Education, committees, officers, agents, employees, and volunteers (collectively "District") from and against all claims, damages, losses, expenses, demands, liability, lawsuits and judgments including, but not limited to, attorney's fees arising directly or indirectly from or in any manner related to the City's possession, occupancy or use of the Premises pursuant to this Agreement or arising from or in any manner connected to the City's business, activities, operations, services or work conducted in or about the Premises, except as otherwise expressly stated herein. The City's indemnification extends to all City uses and any community user groups pursuant to Supplemental Use Agreements. However, the City shall not be required to indemnify the District where such claim arises from the negligence or wrongful misconduct ofthe District. The District shall promptly notify the City of any claim and cooperate with the City in connection with the defense of such claim. C. Survival of Section. This Section shall survive the expiration or earlier termination of this Agreement. 6 PROPOSED 10. INSURANCE. Prior to execution of this Agreement, the District and the City shall procure and thereafter maintain insurance against claims for injuries to persons or damage to property arising from or in connection with use ofthe Premises pursuant to this Agreement as specified in Attachment A. The acquisition and maintenance of such insurance shall not affect the obligation of indemnity established by Section 9 of this Agreement. 11. COMPLIANCE WITH LAW. All activities undertaken pursuant to this Agreement shall be in accordance with all applicable ordinances, resolutions, statutes, rules and regulations of any federal, state or local governmental agency of competent jurisdiction. 12. NOTICES. All notices, demands, requests or approvals to be given under this Agreement shall be given in writing and conclusively shall be deemed served when delivered personally or on the fifth business day after deposit in the United State mail, postage prepaid, registered or certified, addressed as follows: All notices, demands, requests or approval from the District to the City shall be addressed to the City at: Department of Community and Cultural Services City of Santa Monica 1685 Main Street Santa Monica, CA 90401 Attn: Director All requests for payment shall be addressed to: Department of Finance City of Santa Monica 1717 4th Street, Suite 250 Santa Monica, CA 90401 Attn: Director All notices, demands, requests or approval from the City to the District shall be addressed to the District at: Santa Monica-Malibu Unified School District 1651 16th Street Santa Monica, CA 90404-3891 Attention: Asst. Supt. of Fiscal and Business Services 7 PROPOSED 13. AMENDMENTS TO AGREEMENT. In recognition of the fact that economic and other circumstances affecting the parties' participation in this Agreement are subject to fluctuation and change, the parties expressly note and agree that this Agreement may be amended or modified at any time by agreement of the parties. Any amendment to or modification ofthis Agreement shall be in writing and shall be effective only upon approval of the City Council of the City and the Board of Education of the District. 14. INTERPRETATION OF AGREEMENT. The terms of this Agreement shall be construed in accordance with the meaning of the language used and shall not be construed for or against either party by reason of the authorship of this Agreement or any other rule of construction which might otherwise apply. The section headings are for purposes of convenience only. 15. INTEGRATION OF AGREEMENT. It is understood that there are no oral agreements between the parties hereto affecting this Agreement and the subject matter thereof and this Agreement supersedes and cancels any and all previous negotiations, arrangements, oral agreements and understandings, if any, between the parties, and none shall be used to interpret this Agreement. 16. SEVERABILITY. In the event that part ofthis Agreement shall be declared invalid or unenforceable by a valid judgment or decree of a court of competent jurisdiction, such invalidity or unenforceability shall not affect any of the remaining portions of this Agreement which are hereby declared as severable and shall be interpreted to carry out the intent ofthe parties hereunder unless the invalid provision is so material that its invalidity deprives either party of the basic benefit of their bargain or renders this Agreement meaningless. 17. ATTORNEY'S FEES. If a party to this Agreement is required to initiate or defend, or is made a party to, any action or proceeding in any way connected with this Agreement, the prevailing party in such action or proceeding, in addition to any other relief which may be granted, whether legal or equitable, shall be entitled to reasonable attorney's fees. 18. APPLICABLE LAW. This Agreement shall be construed and interpreted under and governed and enforced according to the laws of the State of California. 8 PROPOSED IN WITNESS WHEREOF, the parties have executed this Master Use Facilities Agreement as of the day and year first above written. CITY OF SANTA MONICA, a municipal corporation ATTEST: By MARIA STEWART City Clerk SUSAN E. MCCARTHY City Manager SANTA MONICA MALIBU UNIFIED SCHOOL DISTRICT, a unified school district APPROVED AS TO FORM: By MARSHA JONES MOUTRIE City Attorney Title: 9 PROPOSED ATTACHMENT A THE DISTRICT'S INSURANCE OBLIGATION The District shall secure before execution ofthis Agreement the following types and amounts of insurance: Minimum Limits of Insurance. The District shall obtain insurance of the types and in the amounts described below: (1) Commercial General Liability Insurance: The District shall maintain commercial general liability insurance or self-insurance (CGL) with a limit of not less than Five Million Dollars ($5,000,000) each occurrence/Five Million Dollars ($5,000,000) in the annual aggregate. (2) Business Auto Liability Insurance: The District shall maintain business auto liability insurance or self-insurance with a limit of not less than One Million Dollars ($1,000,000) each accident. (3) Workers' Compensation and Employer's Liability: The District shall maintain workers' compensation insurance or self-insurance as required by the State of California and Employer's Liability Insurance in the amount of One Million Dollars ($1,000,000) per accident for bodily injury or disease. Minimum Scope of Insurance. (1) CGL insurance shall be written on Insurance Services Office Form CG 0001 (or a substitute form providing equivalent coverage) and shall cover liability arising from premises, operations, independent contractors, products-completed operations, personal injury and advertising injury liability assumed under an insured contract (including the tort liability of another assumed in a business contract). (2) Business Auto Insurance shall cover liability arising out of any auto (including owned, hired, and non-owned autos). Coverage shall be written on Insurance Services Office Form CA 00 01, CA 0005, CA 00 12, and CA 00 20, or a substitute form providing equivalent liability coverage. If necessary, the policy shall be endorsed to provide contractual liability coverage equivalent to that provided in the 1990 and later editions of CA 00 01, 1 PROPOSED Other Insurance Provisions. The general liability and automobile liability policies are to contain, or be endorsed to contain, the following provisions: (1) The City of Santa Monica, members of its City Council, boards and commissions, officers, agents, employees and volunteers are to be covered as insureds with respect to liability arising out of automobiles owned, leased, hired or borrowed by or on behalf ofthe District; and with respect to liability arising out ofthe District's possession, occupancy, or use of the Premises pursuant to this Agreement. Under the CGL policy, using the Insurance Services Office additional insured endorsement form CG 20 10 or a substitute providing equivalent coverage. City and other additional insureds mentioned in this paragraph shall not, by reason of their inclusion as additional insureds, become liable for any payment of premiums to carriers for such coverage. General Liability. Workers' Compensation and Employer's Liability. The insurer shall agree to waive all rights of subrogation against the City of Santa Monica, members of its City Council, boards and commissions, officers, agents, employees and volunteers for losses arising from activities and operations ofthe District in the performance of services under this Agreement. All Coverages, Each insurance policy required by this Agreement shall be endorsed to state that coverage shall not be canceled except after thirty (30) days prior written notice by certified mail, return receipt requested, has been given to the City at the following address: Department of Community and Cultural Services City of Santa Monica 1685 Main Street Santa Monica, California 90401 Attention: Director Acceptability of Insurers. Insurance is to be placed with insurers with a current A.M. Best's rating of no less than A:6, unless otherwise approved by the City's Risk Manager. 2 PROPOSED Verification of Coverage. District shall furnish the City with original certificates of insurance and amendatory endorsements affecting coverage required by this Agreement. The certificates and endorsements for each policy are to be signed by a person authorized by that insurer to bind coverage on its behalf. The certificates and endorsements are to be on forms provided by the City or on other than the City of Santa Monica's forms, provided those forms and endorsements conform to the requirements. All certificates and endorsements are to be received and approved by the City before this Agreement commences. The City reserves the right to require complete, certified copies of all required insurance policies, including endorsements affecting the coverage required by these specifications at any time. THE CITY'S INSURANCE OBLIGATION The City shall secure before execution ofthis Agreement the following types and amounts of Insurance: Minimum Limits of Insurance. The City shall obtain insurance of the types and in the amounts described below: (1) Commercial General Liability Insurance: The City shall maintain commercial general liability insurance or self-insurance (CGL) with a limit of not less than Five Million Dollars ($5,000,000) each occurrence/Five Million Dollars ($5,000,000) in the annual aggregate. (2) Business Auto Liability Insurance: The City shall maintain business auto liability insurance or self-insurance with a limit of not less than One Million Dollars ($1,000,000) each accident. (3) Workers' Compensation and Employer's Liability: The City shall maintain workers' compensation insurance or self-insurance as required by the State of California and Employer's Liability Insurance in the amount of One Million Dollars ($1,000,000) per accident for bodily injury or disease. Minimum Scope of Insurance. (1) CGL insurance shall be written on Insurance Services Office Form CG 00 01 (or a substitute form providing equivalent coverage) and shall cover liability arising from premises, operations, independent contractors, products-completed operations, personal injury and advertising injury liability assumed under an insured contract (including the tort liability of another assumed in a business contract). 3 PROPOSED (2) Business Auto Insurance shall cover liability arising out of any auto (including owned, hired, and non-owned autos). Coverage shall be written on Insurance Services Office Form CA 00 01, CA 00 05, CA 00 12, and CA 00 20, or a substitute form providing equivalent liability coverage. If necessary, the policy shall be endorsed to provide contractual liability coverage equivalent to that provided in the 1990 and later editions of CA 00 01. Other Insurance Provisions. The general liability and automobile liability policies are to contain, or be endorsed to contain, the following provisions: (1) The Santa MonicalMalibu Unified School District, members of its Board of Education, advisory committees, officers, agents, employees and volunteers are to be covered as insureds with respect to liability arising out of automobiles owned, leased, hired or borrowed by or on behalf of the City; and with respect to liability arising out ofthe City's possession, occupancy, or use ofthe Premises pursuant to this Agreement. Under the CGL policy, using the Insurance Services Office additional insured endorsement form CG 20 10 or a substitute providing equivalent coverage. The District and other additional insureds mentioned in this paragraph shall not, by reason oftheir inclusion as additional insureds, become liable for any payment of premiums to carriers for such coverage. General Liabilitv. Workers' Compensation and Emplover's Liability. The insurer shall agree to waive all rights of subrogation against the District, members of its Board of Education, committees, officers, agents, employees and volunteers for losses arising from activities and operations ofthe City in the performance of services under this Agreement. All Coverages. Each insurance policy required by this Agreement shall be endorsed to state that coverage shall not be canceled except after thirty (30) days prior written notice by certified mail, return receipt requested, has been given to the District at the following address: Santa Monica-Malibu Unified School District 1651 16th Street Santa Monica, CA 90404-3891 Attention: Asst. Supt. of Fiscal and Business Services 4 PROPOSED Acceptability of Insurers. Insurance is to be placed with insurers with a current A.M. Best's rating of no less than A:6, unless otherwise approved by the District's Risk Manager. Verification of Coverage. The City shall furnish the District with original certificates of insurance and amendatory endorsements affecting coverage required by this Agreement. The certificates and endorsements for each policy are to be signed by a person authorized by that insurer to bind coverage on its behalf. The certificates and endorsements are to be on forms provided by the City. All certificates and endorsements are to be received and approved by the District before this Agreement commences. The District reserves the right to require complete, certified copies of all required insurance policies, including endorsements affecting the coverage required by these specifications at any time. 5 Attachment 2 Financial Oversight Committee of the Santa Monica-Malibu Unified School District February 14,2005 ~ rc::: 0 I;:: ii e\/7 : ~ LS~,-=" __ ~ ~ '''no'- - L, iu J ~ ,. i 1\'\ -I II \1 I' I, i' ., IlJ I Ms Emily Bloomfield, President and Members of the Board of Education Santa Monica-Malibu Unified School District 1651 16th Street Santa Monica, CA 90404 SANTA MOi'JICA-~,1~r\usu LSD SUPERINTENDHIT'S OFFiCE Re: Draft Master Facilities Use Agreement With City of Santa Monica Dear Ms Bloomfield and Board Members: The Financial Oversight Committee (FOe) offers the following comments on the draft Master Facilities Use Agreement ("Draft Agreement") between the Santa Monica-Malibu Unified School District ("District") and the City of Santa Monica ("City"), dated January 18, 2005, in response to a request from the Board of Education ("Board") during its February 3 meeting. The FOC discussed the Draft Agreement at length at its January 25 and February 7, 2005 meetings. In framing these comments we also considered background information provided by Superintendent Deasy regarding the negotiation process that resulted in the current draft, a letter prepared by the Harding, Larmore et al. law firm, comments by members of the public during our February 7 meeting, and our members' individual familiarity with the public record of discussion about this issue before the Board and the City Council. In keeping with the Board's request, we have organized our comments into three general categories: (1) material inconsistencies we see between the Draft Agreement and the Term Sheet, dated May 5, 2005, which was agreed to by both the Board and the City Council, and which was supposed to be the basis for preparing the Draft Agreement; (2) errors in mathematical formulas or other calculation factors that are central to the financial commitments embodied in the Draft Agreement; and (3) ambiguous language that could cause confusion among the parties as they implement the Draft Agreement in future years, Material Inconsistencies With the Term Sheet One of our most significant concerns) about the Draft Agreement is that it focuses much too narrowly on City use of School District facilities, rather than "community use of school facilities," as clearly stated in the Term Sheet (Term Sheet, para. 1), and "community use of school facilities when they are not required for District use," as stated in the City staff report2 that transmitted the term sheet to the City Council (Staff Report, p. 1). 1 The FOC is also very concerned about the basic structure of the Draft Agreement as an exchange of City funds for use of District facilities, whereas the history of the public discussion about this issue, and the public record of the apparent intent of the parties to the Draft Agreement is clearly much broader. We understand, however, that this structure is based on a strongly held City position, which the Board has chosen to accept. 2 Memorandum to Mayor and City Council from City Staff, Request for Direction to Staff Regarding Proposed Terms for a New Contract Providing Payments to the Santa Monica-Malibu Unified School District in Exchange for Community Access to School Facilities, May 11,2005 Council Meeting. (Hereinafter "Staff Report"). Page 1 Ms. Emily Bloomfield, President and the Board of Education February 14,2005 We recommend the following specific changes to more accurately reflect the intentions of the parties, as stated in the Term Sheet and the Staff Report: 1. Title. The title of the Draft Agreement itself should be modified to simply say, "Agreement." 2. Recital A. Recital A should be modified to read as follows: "For many years, the City and District have worked together to promote the health and welfare of the community's children and youth by providing recreational opportunities and programs which foster good citizenship and facilitatinl! the provision of such opportunities and prOl!rams bv Santa Monica's manv youth-servinl! non-profit orl!anizations." 3. Recital B. Recital B should be modified to read as follows: "Many City and non- profit programs for children, youth and their families take place at public parks, playgrounds, play fields, and other City-owned recreational facilities." 4, Recital F. Recital F should be modified to read as follows: "The District owns and operates school sites within the City which include playgrounds, play fields, recreational facilities and buildings. Many recreational prOl!rams servinl! youth in the community, includinl! City-run prOl!rams and prOl!rams provided bv non- profit orl!anizations, take place on District school campuses in Santa Monica." 5. Recital G, Recital G should be modified to read as follows: "The City and District desire to enter into a master agreement which will allow City and community use of school facilities within the boundaries of the City to meet certain recreational and other needs during hours when the facilities are available for City and community use and will allow the District to benefit from the community's use of the facilities through the generation of revenues for the maintenance of the District's education programs." 6. Paragraph No.3. The heading ofthis paragraph should be modified as follows: "COMMUNITY USE OF SCHOOL DISTRICT PREMISES." 7. Paragraph No.4, The heading ofthis paragraph should be changed to read, "AFTER HOURS USE OF SCHOOL DISTRICT PREMISES," The first sentence of this paragraph should be revised as follows: "The Premises shall be used by the City and community (includinl! non-profit youth-servinl! orl!anizations) to provide supervised and unsupervised recreational opportunities, child care, enrichment classes, and other services." Although it is not specifically addressed by the Term Sheet, the FOC believes that the Draft Agreement fails to express the parties' (and community's) clear intent in supporting City funding of the District, as demonstrated by the public record of discussion before the Board and the City Council -- the critical importance of having excellent public schools to the overall quality of life in Santa Monica, including attracting quality businesses, increased property tax Page 2 Ms. Emily Bloomfield, President and the Board of Education February 14,2005 and other local revenues, among others. Recitals should be added to express this intent, because they are important in guiding the periodic renegotiation conferences required by the Draft Agreement. Accordingly, we recommend that the following additional recitals be added to the Draft Agreement: . The City Charter reco!!nizes the value of public schools in Santa Monica bv providin!! for the establishment of a Board of Education. and bv specifvin!! the City's authority to financiallv assist local public schools. The City has increased its expenditure limits in part for the purpose of allowin!! financial aid to the public schools. . The City and community receive substantial benefits from havin!! excellent public schools in Santa Monica. Excellent public schools prepare students to become civic. cultural. academic and business leaders. help attract Quality businesses to the community. increase property values. !!enerate local tax revenues. help to deter criminal activity. reduce community problems such as poverty. dru!! use and teen pre!!nancv. help provide an educated work force. and contribute to the overall Quality of life in Santa Monica. . The overall purpose of this A!!reement is to enable and ensure that the City provides the School District with stable financial support on an on-!!oin!! basis. This A!!reement is intended to ensure that the children of the community and the public institution that most directlv affects and shapes their lives. the public schools. share directlv in the prosperity of the City. For related reasons, the FOC also recommends that the first sentence of the Compensation paragraph be revised as follows: Paragraph No. 5.A. "In consideration of City and community use of School District facilities in Santa Monica and the many other City and community benefits derived from havin!! excellent public schools (includin!! increased City tax revenues). tThe City shall pay the District initial base payments totaling Six Million Dollars ($6,000,000) annuallv," Calculation and Other Technical Issues The FOC recommends that the Board request revisions or further clarifications about the following calculation and other related technical issues in the Draft Agreement which concern the amount of funding to be provided to the District. 1. Paragraph No.1 re: Options to Extend Term. Although the Term Sheet states that the initial five-year term of the agreement has two 2.5-year options to extend, we are concerned that the even split ofthe total five years of extension complicates both Page 3 Ms. Emily Bloomfield, President and the Board of Education February 14,2005 consideration of periodic increases, and the timing of payments to the District. We recommend, instead, one three-year extension and one additional two-year extension, both defined in terms of fiscal years. 2. Paragraph No, 5A re: Annual Payments. The Compensation paragraph calls for payments to the District to be in two equal installments payable on December 31 and June 30. This is inconsistent with District expenditure patterns, and given the scale of City fund balances each year, does not appear to be required for City cash flow reasons. The FOC recommends, instead, an annual lump sum payment on July 1. If funds must be paid in two equal installments, we recommend half on July 1, the beginning of the fiscal year, and half on January 1, the beginning ofthe second half ofthe fiscal year. 3, Paragraph No. 5B re: CPI Adiustment. This paragraph should be revised as follows, primarily in order to correct an ambiguity as to whether the second payment each year (assuming it remains after February) is subject to CPI adjustment: "Adjustments Based on the Consumer Price Index. The Annual Base Payment for each fiscal year. be!!innin!! in the fiscal year commendn!! July 1.2005. shall be increased by an amount eaual to the percenta!!e chan!!e in the Consumer Price Index For All Urban Wage Earners and Clerical Workers for the Los An!!eles-Riverside-Oran!!e Conntv. CA MSA ("CPI") between Februarv of the precedin!! calendar year to Februarv of the calendar year in which such fiscal year commences. except that such increase shall not be less than two percent and not more than four percent." We note, parenthetically, that the Term Sheet and the Draft Agreement use the wage earners and clerical workers version ofthe CPI, and not the more general measure of inflation reflected in the All Urban Consumers version of the CPI. It is unclear why the wage earners and clerical workers version was selected for use in assessing changes in City revenues.3 4. Paragraph No, 5C(n re: Adiustment Considerations. The periodic adjustment conferees are told to look at three factors: the "state" of community use of school facilities, the fiscal status of the City and the fiscal status of the District. However, the conferees are instructed about how to evaluate only one ofthese factors: the fiscal status of the City. Mention of the others raises questions: ] Although the two versions of the cpr generally move in a similar direction, albeit with different absolute values, the spending habits of the two populations that are measured by each index can result in more distinct differences over short time periods like those that apply to the periodic adjustment considerations in the Draft Agreement. The Urban Wage Earners and Clerical Workers version of the cpr is based on the expenditures of families living in urban areas who meet certain hourly employment criteria, and represents about 32% of the US population. The All Urban Consumers version represents about 87% ofthe US population and is based on the expenditures of all families living in urban areas. As its name suggests, the Urban Wage Earners and Clerical Workers version is most often used as the inflation index for labor wage adjustments, or public agency expenditures that are dominated by labor costs. "Big Eight" City revenues (e.g., property tax, sales tax, hotel bed tax, etc.), which are the focus ofthe adjustment conferences, arguably change in response to more general inflation impacts, Page 4 Ms. Emily Bloomfield, President and the Board of Education February 14, 2005 a. Are the conferees supposed to consider the extent of community use of facilities? If so, how? If their use has not increased, is that supposed to lead to a potential reduction in City funding? Iftheir use has significantly increased, is that supposed to favor an increase irrespective of the City's fiscal status? Rather than the three factors currently referenced, when it is really only the City revenues that are relevant, it seems appropriate to focus instead on City revenues and the purpose of the agreement as set forth in the Recitals, as modified by the recommendations above. b. When this paragraph speaks of "holding payments constant for 2007/2008," presumably there was no intent to delete the CPI adjustment, but only not to further increase the base payment amount. This point should be clarified. c. In addition to the "objective" to have recommendations to the City Council and School Board by March 1,2007, the contract should require that such recommendations be presented by April I, 2007, or whatever other date is necessary in order to fit within the budgetary discussions of both entities. The timing may be important because the District will need to know the amount which will be funded during the next fiscal year before the City Council would normally complete its budget approval in June. Therefore, the Agreement should require the City Council to make that decision at this early stage, particularly when the City's contribution is measured by financial results that will be available and not subject to change between March and June. 5. Paragraph No. 5C(3) re: Adiustment Formula for Higher-Growth Revenue Years. In the January 2007 meeting, the conferees will be looking at increases in the City's "Big Eight" revenues for both a two-year and two one-year time periods and comparing those increases with CPI increases. However, there seems to be a time mismatch. The two- year revenue increases are apparently based upon a comparison of results from the 2003/04 fiscal year through the 2005/06 fiscal year. However, the Draft Agreement's definition ofCPI uses February - February, which is inconsistent with the term of the two fiscal years in question. The same issue is presented in comparing the annual increases in revenue to the annual increase in CPI. These problems may reflect a lack of clarity about annual CPI adjustments during the initial and subsequent base years, as distinguished from CPI calculations applicable to the periodic adjustment calculations. 6. Paragraph No. 5C(5) re: Adiustment Formula for Slower-Growth Revenue Years, This paragraph is not clear whether it is addressing the two-year period or the two fiscal years individually, It starts out with the former by using the word "cumulative" (which seems to be the logically correct result), but ends up with the latter by requiring that the increase be "at least CPI in 2004/2005 and 2005/2006." Further, if the payments are reduced for 2007/08, there is no mechanism for restoring the decrease for 2008/09 other than the 7.5% super-increase specified in Paragraph 5C(7). It would seem that if City general fund revenues are back on track, then the payments should be restored. Page 5 Ms, Emily Bloomfield, President and the Board of Education February 14,2005 7. Paragraph No. 5C(6) re the 2009 Adiustment Conference. This paragraph suffers from some of the same difficulties described above regarding the January 2007 adjustment conference. In addition, the paragraph should be more specific about the details of the formula to be used. Obviously, this conference will be looking at general fund revenue increases in 2006/2007 and 2007/2008 rather than those from two years earlier. Further, ifthe contract is extended for 2.5 years, the procedure for considering the second extension should be spelled out. When does the conference committee meet given that the contract would expire on December 31,2011? When would a decision be made regarding funding for the second half of the fiscal year 2011/2012? The Draft Agreement states that the conference committee would be only setting the 2012/2013 base funding level. Ambiguous Language There are a few additional items in the Draft Agreement which the FOC believes should be clarified in order to avoid any confusion or misunderstanding among the parties in implementing the agreement. Accordingly, we recommend the following: 1. Paragraph No. 5,A. re: Valuation of District Facilities. It is unclear why, in Paragraph 5A, reference is made to the fact that the District has not appraised the value of its facilities when this has no bearing on the compensation. We recommend that this third sentence be removed, 2. Paragraph No. 5.A. and Paragraph No. 15 re: Amendments. Inasmuch as Paragraph No. 13 covers this issue, the fourth sentence in Paragraph 5.A. and the last sentence of Paragraph No. 15 appear to be redundant and could be deleted. Finally, we also recommend that additional provisions be added to the Draft Agreement to address the following issues: . The agreement should not be affected by any withdrawal ofMalibu from the District. . The agreement should specify that the District retains ultimate control over all of its property, including decisions about their temporary or permanent closure, taking into account safety, educational and financial needs. . The agreement should specify that the District may expend the funds received pursuant to the agreement in its sole and absolute discretion. ************ Page 6 Ms. Emily Bloomfield, President and the Board of Education February 14,2005 The FOC appreciates the opportunity to provide these comments on the Draft Agreement, and we hope you find them useful in continuing your discussions with the City. I will be available at the Board meeting on February 17 to respond to any questions you may have about these comments. Sincerely, FINANCIAL OVERSIGHT CO By: cc: FOC Members Superintendent Deasy Page 7