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SR 06-11-2019 3C City Council Report City Council Meeting: June 11, 2019 Agenda Item: 3.C 1 of 5 To: Mayor and City Council From: Karen Ginsberg, Director, Community & Cultural Services Subject: Approval of Lease Agreement with WISE & Healthy Aging for the use of the Ken Edwards Center, located at 1527 Fourth Street, Santa Monica Recommended Action Staff recommends that the City Council authorize the City Manager to negotiate and execute a lease with WISE & Healthy Aging (WISE) for the Ken Edwards Center located at 1527 4th Street for continued provision of comprehensive services to older adults in Santa Monica for a term of five years for $1/year with three five -year options to renew with no escalation. Summary Since 1990, the City has leased the use of the second and third floors of the Ken Edwards Center at 1527 4th Street to WISE & Healthy Aging (WISE) for the provision of comprehensive services to older adults in Santa Monica. WISE intends to remain at this location and staff seeks authorization to continue to lease this property to WISE. The current lease agreement expires June 30, 2019, which provides the City an opportunity to clarify, among other items, the following items not previously addressed in the lease: - In FY 2012-13, the City relocated its Senior Center programming from 1415 Ocean Avenue to the Ken Edwards Center first floor space, although the lease was not amended at that time to address the changed use of the first floor; - Formalize the shared use of the first floor space between the City for evening/weekend public use and WISE for daytime use, and the operating responsibilities thereof; and - Transfer responsibility for operational duties (custodial, maintenance, room set ups, security, etc.) from the City to WISE. The proposed lease term is for a period of five years with three five-year options to renew. Maintenance and operational responsibilities and related costs currently borne 2 of 5 by the City will now be the responsibility of WISE and in exchange the annual rent will decrease to $1/year. The new lease will be effective on July 1, 2019. Discussion WISE & Healthy Aging was a key partner in the vision and construction of the Ken Edwards Center as a one-stop center for older adult wellbeing and has occupied the building since it opened in 1990. WISE & Healthy Aging also receives operational funding through the Human Services Grants Program, which in FY2017-18 provided $1,245,437 to support six programs, with the agency providing an additional $1.6 million in cash match. In the last completed fiscal year, WISE & Health Aging has provided services to over 2,000 duplicated individuals, many of whom receive their services at the Ken Edwards Center. Of those individuals, 1,513 duplicated participants are Santa Monica residents, 65% of whom identify as low-income. The Ken Edwards Center (KEC) was constructed in the late 1980’s to house programs serving older adults. Construction of KEC was completed in part using California State Senior Center Bond Act funds. Applications for Bond Act funds required partnership with operating non-profits and a commitment to a 20-year lease for program operations. The City’s application included partnership agreements with two local non-profits serving seniors, WISE Senior Services and Senior Health and Peer Counseling Center, who also contributed a combined $200,000 towards construction. As building construct ion neared completion, Council approved the negotiation and execution of leases for both agencies for the use of KEC. In July 1990, the City entered into Lease Agreement #5565 with Senior Health and Peer Counseling Center, followed in August 1990, by Lease Agreement #5505 with WISE Senior Services. The leases were executed for a period of twenty years in compliance with state funding requirements. In 2007, as a result of WISE Senior Services merging with Senior Health and Peer Counseling Center (then known as the Center for Healthy Aging), Leases #5505 and 5565 were assigned to the newly formed WISE & Healthy Aging. The merged lease gave WISE exclusive use of the 2nd and 3rd floors for administrative offices and programmatic services while leaving the 1st floor available for community use. Subsequent amendments to the merged lease extended the term through June 30, 2019. 3 of 5 As part of the FY2011 - 15 Community Development Program RFP (now called the Human Service Grants Program), the City solicited applications to transfer the operations of the Senior Center at 1450 Ocean from Community and Cultural Services to a non-profit. On April 24, 2012, Council endorsed staff’s recommendations to transfer operations to WISE & Healthy Aging. The selection of WISE & Healthy Aging allowed the City to implement a key recommendation of the 2008 Evaluation of Services for Older Adults in Santa Monica to create a one-stop senior service center by relocating the Senior Center programming to the KEC. In order to preserve the use of the community meeting rooms at KEC for the public, WISE was not granted exclusive use of the public spaces on the 1st floor through a modified lease. Rather, their use of the space was managed via the City’s room permitting process. This allowed for coordination of City services for room set-up and building opening/closing, while retaining access for the community for late afternoon/evening meetings. This process is labor intensive, requiring the permitting of each of the four rooms for each WISE class, every day. Constantly changing room set- ups, custodial and maintenance demands are straining Public Works capacity. In March 2019, the City and WISE entered into negotiations for a new lease agreement. Discussions with WISE have resulted in agreement on te rms and conditions, subject to Council approval. The new lease terms streamline the lease agreement by, among other things: - Continuing WISE’s current use of the second and third floors - Clarifying the use of the first floor for continued shared use by the City for evening/weekend public use and by WISE for daytime use - Reducing rent from $122,088/year to $1/year in exchange for WISE assuming responsibility for audio/visual systems, maintenance, utilities, custodial, and room set-ups, which are currently paid by the City. - Confirming that WISE has “first right of refusal” for use of the first floor office space that is currently being used by City staff when the City no longer has need of that space. - Clarifying WISE’s responsibilities to comply with the American with Disabilities Act (“ADA”). 4 of 5 The proposed lease with WISE would be for an initial term of five years at $1/year with three five-year options to extend. This rent structure is consistent with comparable leases of City-owned buildings leased to community non-profits. SUMMARY OF PROPOSED LEASE TERMS Lease Commencement July 1, 2019 Rent Commencement July 1, 2019 Term Ends June 30, 2024 Options to Renew Three five-year terms through 2038 Rental Rate $1/year Escalations None The City’s commitment to providing low-cost property for the operation of non-profit community services supports the Council priorities of the Framework, enhancing inclusivity, promoting affordability and fostering the wellbeing of low-income residents. Staff is recommending this lease absent a new RFP process to allow this non -profit agency serving Santa Monica residents and supporting the City’s priorities to continue to operate without the threat of displacement. The process of a competitive bid for occupied and operational facilities creates instability for non-profit agencies and the people they serve. Displacing an agency from a City facility could result in the loss of critical services to residents if an agency is unable to identify an alternate affordable service site. Operationally, the transfer of a facility or program from one agency to another is not seamless, disrupting the relationship that participants have with an agency. These disruptions can lead to vulnerable participants dis-engaging from necessary services, leading to declines in health, mental health and housing stability. Standard City leases identify conditions in which the City is legally able to terminate a lease, such as gross breaches of contract terms or failure of the tenant to meet their obligations to the City, or if the tenant wishes to be released from their lease. If this were to happen, use of the facility would be competitively re-bid. Past Council Actions Meeting Date Description April 24, 1990 Approval of Lease Agreement 5505 April 24, 2012 Approval to move Senior Center operations to WISE/KEC 5 of 5 Financial Impacts and Budget Actions The recommended lease with WISE would generate $1/year in revenues in account 01400002.414260, reducing revenue by $122,087 in the Proposed FY 2019 -21 Budget. In FY 2019-20, City expenditures of approximately $103,185 budgeted in various Public Works (PW) and Community and Cultural Services (CCS) accounts would be reduced due to the transfer of the responsibility of operational costs from the City to WISE, leaving a gap of $18,902 in lost revenue in the first year. Additional savings to close this gap in subsequent years have been identified within the PW Facilities and Maintenance Division and CCS Human Services Division for FY2020-21. Savings generated by this reduction of City costs will be reflected in the Adopted FY2019-21 Budget. Prepared By: Claire Hester, Senior Administrative Analyst Approved Forwarded to Council REFERENCE: Contract No. 10853 (CCS)