HomeMy WebLinkAboutStandard Lease Requirements Between City and Nonprofit Organ CITY OF HUNTINGTON BEACH
MEETING DATE: May 21, 2001 DEPARTMENT ID NUMBER:
Council/Agency Meeting Held:
Deferred/Continued to:
Approved ❑ Condi onally Approved ❑ Denied -City Clerk2�nature
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Council Meeting Date: May 21, 2001 Department ID Number: c
CITY OF HUNTINGTON BEACH
REQUEST FOR ACTION _ pomp.
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SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL n
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SUBMITTED BY: AD HOC STANDARD LEASE PROVISIONS COMMITT CAA
PETER GREEN, AND MEMBERS CONNIE BOA MAN ND
DEBBIE COOK
1
PREPARED BY: RON HAYDEN, DIRECTOR OF LIBRARY SERVIC war
SUBJECT: APPROVE AD HOC COMMITTEE RECOMMENDATIONS
FOR STANDARD LEASE PROVISIONS BETWEEN CITY
AND NONPROFIT ORGANIZATIONS
Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,
Attachment(s) 11
Statement of Issue: The Ad Hoc Committee appointed to recommend standard lease provisions
for leases between the City and Huntington Beach nonprofit organizations has reviewed relevant
information and is submitting their recommendations to the City Council.
Funding Source: N/A
Recommended Action: Approve the Ad Hoc Committee's recommendations #1 — 10 regarding
standard lease provisions between the City and Huntington Beach nonprofit organizations as
listed in the analysis section of the RCA and direct staff to include these provisions in all such
nonprofit preferential leases.
Alternative Action(s):
1. Amend the Ad Hoc Committee's recommendations.
2. Reject the Ad Hoc Committee's recommendations.
Analysis: On November 20, 2000, the City Council approved a recommendation from Council
Member Green to establish an Ad Hoc Committee to recommend standard lease provisions for
leases between the City and Huntington Beach nonprofit organizations and return with
recommendations by February 20, 2001. The Ad Hoc Committee is comprised of Council
Members Peter Green, Connie Boardman and Debbie Cook. The staff liaisons to the committee
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REQUEST FOR ACTIOP
MEETING DATE: May 21, 2001 DEPARTMENT ID NUMBER:
included Assistant City Administrator Bill Workman, Administrative Services Director Clay Martin,
Community Services Director Ron Hagan, Real Estate Manager Matt Lamb and Library Services
Director Ron Hayden. Due to the staffing resources required to respond to a series of
unanticipated city issues and scheduling conflicts, it has taken longer than expected to provide
the required information to the committee. Therefore, on February 20, 2001, the City Council
approved an extension of the recommendation until the May 7, 2001 City Council meeting. Some
nonprofit organizations, such as the Huntington Beach Playhouse, have expired leases with the
City and are awaiting the City Council's decision on such lease provisions.
The Ad Hoc Committee and staff reviewed information on four nonprofit organizations that have
lease arrangements with the City. These include the Boys and Girls Club, Surf Museum, Youth
Shelter and the Huntington Beach Playhouse (See Attachment #1). These nonprofit lease
arrangements include lease duration, terms, payments to the City, maintenance and facility
building costs. These arrangements vary. The Ad Hoc Committee addressed these variances in
an attempt to standardize the City's future lease arrangements with nonprofits.
Based on the review of the information, the Ad Hoc Committee developed recommendations for
nonprofit lease provisions with the City. On April 30, 2001, the Ad Hoc Committee agreed that all
leases between the City and nonprofit organizations must contain the following:
1. City Council Approval - All nonprofit leases with the City must have formal approval by the
City Council.
2. Lease Duration - Lease durations (i.e. 1 year, 3 year, 5 year, etc.) will vary based on the
unique conditions such as city subsidy, nonprofit finances, land lease, etc. The Liaison
Department (the Department responsible for interacting with the nonprofit) and the Real Estate
Division will recommend the lease duration based on the evaluation of standard lease
provisions as pertaining to the nonprofit.
3. New Leases / Expiration of Existing Leases - City Council approved standard lease
provisions with nonprofits will be required for all new leases. These provisions will be included
for existing leases with future expiration either upon expiration or by mutual agreement
between the nonprofit and the City.
4. Legal Requirements -All nonprofit leases with the City must be submitted for verification to
the Liaison Department with all necessary legal requirements. These include annual nonprofit
state and federal tax status, valid insurance and other requirements as determined by the City
Attorney.
5. City Direct / Indirect Funding - Liaison Department and Administrative Services
Department (Real Estate Division) will determine if the City is expending funds for the nonprofit
organization. These expenditures can derive directly from the General Fund (or other City
funding source) or indirectly through staff time and administration. The following are examples
of expenditures:
A. Direct: Budgeted within the City's General Fund or other City funding source (i.e.
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• REQUEST FOR ACTIOP
MEETING DATE: May 21, 2001 DEPARTMENT ID NUMBER:
Enterprise fund) such as staff, maintenance, utilities, equipment replacement, capital
improvement, carpeting and remodeling, etc.
B. Indirect: Providing space, staff time and administration.
6. Nonprofit Payment to City — Does the City receive payment from the nonprofit as a
result of the City's related direct or indirect costs? Liaison Department and Administrative
Services Department (Real Estate Division) will determine the following:
A. If City receives payment from the nonprofit, does payment recover City's cost?
B. If not, how are nonprofit program costs recovered?
7. City Subsidy - Annual Audited Financial Statement - If the City provides financial subsidy
(either directly or indirectly), the nonprofit is required to annually submit to the Liaison
Department and the Real Estate Division an annual audited statement or certified copy of
State and Federal Tax returns. The City will review the nonprofit's financial statement or
tax returns to assist in determining the financial solvency of the nonprofit. This review may
analyze such activities as revenues, expenses, amortization, capital and balances.
8. Business Plan - Business Plan Requirements For Preferential Terms With Nonprofit
Organizations (See Attachment #2). All nonprofit organizations will be required to submit
a Business Plan, substantially in the same form, as approved by City Council. The
Business Plan shall be included as an exhibit in any preferential lease or license
agreement with the City. The Business Plan will be the basis for the City Council to value
the community benefits vs. the public subsidy and to understand when that subsidy will no
longer be required by the nonprofit to fulfill their objectives. The Real Estate Division shall
be authorized to amend or add Business Plan requirements to meet the intent of City
Council. The nonprofit organization shall be required to update their Business Plans
annually to reflect any changes. All Business Plans and subsequent modifications must
be accepted in writing by the Real Estate Division and the Liaison Department.
9. Recovery/Remedial Plan - If the nonprofit organization fails to meet its stated goals and
objectives in any one quarter period, the Real Estate Services Division and the Liaison
Department shall be required to meet with the nonprofit to establish a Recovery Plan that
will delineate how the organization will take the appropriate steps to regain and fulfill the
commitments established in the filed Business Plan. The nonprofit will have six (6)
months from the date instituted by City staff to complete the Recovery Plan. If after the
recovery period has lapsed and the nonprofit has still failed to meet its Business Plan,
then the lease agreement will be subject to any action deemed appropriate by City Council
including, but not limited to, termination of the agreement.
10. Fund Augmentation — If the City is providing nonprofit subsidy, the City should encourage
the nonprofit to increase or augment its revenue. These programs can be evaluated
annually, along with the business plan, to evaluate reducing the City's subsidy. The
following are suggested programs to augment nonprofit funding:
A. Establish a foundation or other such nonprofit fundraising group
B. Develop fundraising programs
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• REQUEST FOR ACTIOP
MEETING DATE: May 21, 2001 DEPARTMENT ID NUMBER:
C. Charge appropriate fees to assist in reducing subsidy
D. Apply for grants
E. Solicit corporate sponsors
F. Create funding sources to establish or maintain capital and equipment
replacement
City staff shall include in all preferential leases a section that encapsulates the above stated
requirements.
Based on the approved recommendations by the City Council, the provisions will assist in
standardizing the nonprofit leases. This process should create a measurable, methodical and
consistent approach in negotiating leases between the City and Huntington Beach nonprofit
organizations.
Environmental Status: Not Applicable.
Attachment(s):
DescriptionCity Clerk's No.
Page Number
1. Lease Comparison with Four City Nonprofit Organizations.
2. Standard Lease Provisions for Preferential Terms With Nonprofit
Organizations — Business Plan Requirements
RCA Author: Ron Hayden
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ATTACHMENT ttll
Lease Comparison with Four City Non Profit Organizations -
Including Huntington Beach Playhouse
2 3 4 5 6 7
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1. Boys& Girls 20,000 Serve low/moderate 15 yrs. $I city 1996 None
Club income families
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3.Youth Shelter 3,000 Temp.home facility 20 yrs $10 city 1990 None
for minors
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1-* Boys& Girls Club responsibility-$48,000 Club- $400,000 None $48,000 $2.40
Club
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3. Youth Shelter Shelter responsibility- $22,200 Shelter- $150,000 None $22,200 $7.40
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*See Attachment# I
**See Attachment#2: Section 1: Central Library/HBPH Proportionate Maintenance-Operating- Bond Costs including Library Staffing Capital
Equipment Replacement Costs
***See Section 11 in Attachment#2
Note: HBPH is only organization related to Department(Library)that has enterprise fund(Library Service Fund) requiring operation to
generate revenue for the following costs: bond payment- operating - maintenance - staff nonprofitshb
TTACHMENT #2
STANDARD LEASE PROVISIONS
FOR
PREFERENTIAL TERMS
WITH
NON- PROFIT ORGANIZATIONS
BUSINESS PLAN REQUIREMENTS
Prior to the City of Huntington Beach("City")entering into a lease or license agreement with a
Non-profit Organization("Non-Profit")under preferential terms of either direct or indirect funding
by the City,the Non-Profit shall be required to file a Business Plan with the City as an exhibit to
any agreement. This Business Plan will be the basis for the City Council to value the community
benefit vs. the subsidy and to understand when that subsidy will no longer be required by the Non-
Profit to fulfill their objectives. The Business Plan shall include, but not limited to, the following
minimum areas:
I. Executive Summary
The executive summary should give a brief overview of the organization, history,
achievements and accomplishments within the community, goal and objectives and plan
to complete those goals, obstacles to success, and resources available to Non-Profit.
II. Mission
How is the Non-Profit going to make a difference within the City of Huntington Beach in
the next year and in the next three years?
III. Community Benefits
Provide the previous five (5)years of data, if available,that substantiates the
achievements and accomplishments of the Non-Profit. Types of acceptable information
will include: Level of participation by the community(i.e. attendance), Demographics of
participants,Numbers/types of programs by year, and any other types of information.
Identify any other organizations within the City that provide similar services or functions
and how the Non-Profit provides different or more targeted programs, if applicable.
IV. Goals & Objectives
Detail specific goals and objectives the Non-Profit has on a one (1) and three (3)year
basis to impart their mission to the benefit of the community. All goals and objectives
shall have a measurable component showing under what method the impact,growth,or
other benefit can be quantifiably detailed.
Examples:
(1) Increase annual attendance to museum by 10%or by 2000 people in year 1 and
increase the annual attendance level to 50,000 people by the completion of year 5.
Page 1
(2) Increase gross receipts by$20,000 each year over the next five(5)years with the
annual rent payments to the City increasing by$3,000 for the first three (3)years
and rent payments increasing by$4,000 each year thereafter.
(3) Expand the number of outside exhibits rotating into the museum to a total of five
(5)in the first two (2)years and to a total of six (6)for the following three (3)years.
(4) Institute a new children's outreach program to surrounding elementary schools.
Specifically,partner with one elementary school in the first two (2)years and
modify and/or expand the program based upon the success of the pilot.
The above are only examples of the types of goals and objectives to help the Non-Profit
frame up a basis for a one (1)and three (3)year program. The Non-Profit may add other
qualitative goals and objectives at the end of this section to lay out additional targets that
complete the broader program. The goals and objectives of the Non-Profit should be
realistic. City Council will be expecting completion as stated to form the basis for
approval of the agreement with the Non-Proft.
V. Organization & Operations
• Provide an organizational chart.
Provide a breakdown of the board of directors or governing body.
• In a succinct format, detail how the organization works, areas of responsibility by
division and general job duties by position.
• Detail what type of organizational growth or changes will be needed to meet the
stated goals and objectives of the organization.
• Specify how community assess will be provided into your programs.
Identify how your organization currently or will function to provide your program to
the community.
State any alliances with other organizations.
VI. Financials
(1) Provide a current copy of the Non-Profit's balance sheet as of the last quarter from
the commencement date of the agreement.
(2) Provide a certified copy of the previous year's financial statement or a certified
copy of the previous year's Federal IRS tax form.
(3) Provide the board-approved budget for the current operational year.
(4) Provide a cash flow model for the upcoming three (3)years that reflect all
assumptions for revenue grow, increased expenses, capital improvements, and any
other fiscal assumptions. The assumptions for the model should be stated clearly in
a separate area.
VII. Obstacles
Indicate what obstacles, i.e. financing,resources, community,that may now exist that
would prevent the Non-Profit from successfully meeting all the goals and objectives of
the organization. What future factors could impact the Non-Profit's ability to meet the
established targets?
Page 2
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RCA ROUTING SHEET
INITIATING Library Services
DEPARTMENT:
SUBJECT: APPROVE AD HOC COMMITTEE
RECOMMENDATIONS FOR STANDARD
LEASE PROVISIONS BETWEEN CITY AND
NONPROFIT ORGANIZATIONS
COUNCIL MEETING DATE: May 21, 2001
RCA ATTACHMENTS STATUS
Ordinance (w/exhibits & legislative draft if applicable) Not Applicable
Resolution (w/exhibits & legislative draft if applicable) Not Applicable
Tract Map, Location Map and/or other Exhibits Not Applicable
Contract/Agreement (w/exhibits if applicable)
(Signed in full by the City Attorney) Not Applicable
Subleases, Third Party Agreements, etc.
(Approved as to form by City Attome ) Not Applicable
Certificates of Insurance (Approved by the City Attorney) Not Applicable
Financial Impact Statement (Unbudget, over $5,000) Not Applicable
Bonds (If applicable) Not Applicable
Staff Report (If applicable) Not Applicable
Commission, Board or Committee Report (If applicable) Not Applicable
Findings/Conditions for Approval and/or Denial Not Applicable
EXPLANATION FOR MISSING ATTACHMENTS
REVIEWED RETURNED FORWARDED
Administrative Staff 5 )
Assistant City Administrator Initial
City Administrator Initial )
City Clerk ( ) -
EXPLANATION FOR RETURN OF ITEM:
(Below • . For Only)
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► ti;tld'tD
CITY CLERK
Don & Marilyn MacAllister HUNTIN CITY
BEACH. CA
1121 Park St
Huntington Beach, California 92648 USA 2001 MAY 21 p 3: 51
May 21,2001
Huntington Beach Playhouse
Honorable Mayor & City Council
We of the HBPH Board and its many members & patrons hope that your Council
vote will support the HBPH over the staff recommendations.
Please keep in mind that the original agreement was a multi-year document
approved by the City Council over 6 years ago.
Staff is trying to void this contract, how can they do this?
We are concerned that the act of one person can overrule an approved multi-year
agreement and thus have the City not honor its commitments. How can any
organization, citizen or business have faith in our City if you allow this?
Remember that the only reason that the $5 million bond was approved for the
remodeling and expansion of the Library in the first place was by the inclusion of
the playhouse in the original agreement! We want the Council to continue to honor
this contract and urge you to bring the original contract before the Council for vote.
Not staff recommendation of a $100,000 rent increase.
Now to the item on your agenda regarding nonprofit organizations.
Why is this on your agenda? We are not aware of any notice sent to the NP groups
on this item. Granted you do not at present deal with all of the 340 plus NP groups
that file taxes in HB, but this RCA could affect them.
Please send this RCA back to your Council committee on NP groups. It would seem
that they been bypassed by staff by giving this item directly to Council without their
recommendation!
Yours,
Don MacAllister �A� commV f CATo l v C
Voice 714-960-2892 Fax 714-960-2572 E Mail"donmacallister@compuserve.com" 1