HomeMy WebLinkAboutItem 6e. San Luis Obispo Repertory Theatre - Amendment No. 1 To Grant Agreement Item 6e
Department: Administration
Cost Center: 1005
For Agenda of: 10/1/2024
Placement: Consent
Estimated Time: N/A
FROM: Greg Hermann, Deputy City Manager
Prepared By: Robert Hill, Sustainability & Natural Resources Official
SUBJECT: SAN LUIS OBISPO REPERTORY THEATRE – AMENDMENT NO. 1 TO
GRANT AGREEMENT
RECOMMENDATION
Approve Amendment No. 1 to Grant Agreement between the San Luis Obispo Repertory
Theatre and the City of San Luis Obispo to provide grant funding in the additional amount
of $2,760,000 and authorize the Mayor to execute the agreement.
POLICY CONTEXT
SLO REP’s long-standing plans for construction of a new Downtown Theatre project (the
“Downtown Theatre”) are consistent with the plans for the Cultural Arts District identified
in the City’s Downtown Concept Plan (2017) and the “Economic Resiliency, Cultural
Vitality and Fiscal Sustainability” Major City Goal, Strategic Approach 1.4(a), “Continue
to work with our community partners to ensure the Cultural Vitality of the City,” as
specified in the City’s 2023-25 Financial Plan.
DISCUSSION
Background
The San Luis Obispo Repertory Theatre (“SLO REP”), previously known as the San Luis
Obispo Little Theatre, has been a long-standing tenant of the City’s old library property at
888 Morro Street located next door to City Hall. SLO REP first began to set forth a vision
for a new 300-seat community theatre in the early 1990s. In March 2000, the City Council
identified several options for such a theatre within what would become known as the
Cultural Arts District Parking Structure site located at the corner of Palm and Nipomo
Streets and committed to working with SLO REP.
SLO REP is a strong community partner and local non-profit, including a sound Board
and governance structure, professional staff and theatre offerings, and implementation of
a significant capital campaign in anticipation of the design, construction, and operating
costs associated with the planned move to a new location.
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Item 5e
On May 22, 2019, the City and SLO REP entered into an Exclusive Negotiating
Agreement (“ENA”) to set the parameters and conditions for SLO REP’s long-term use of
a portion of the City property for construction and operation of a new Downtown Theatre
where the Cultural Arts District Parking Structure will also be located.
On January 25, 2022, SLO REP submitted to the City Council a formal “Challenge Grant”
request for funding in the amount of $3,940,000 towards construction of the new
Downtown Theatre project. At its regularly scheduled meeting on February 15, 2022, the
City Council appropriated the requested funding as part of the FY 2021-2022 Mid-Year
Budget Review. On April 21, 2022, the City and SLP REP entered into a Grant Agreement
for funding in the aggregate amount of $3,940,000 (Attachment B).
On May 22, 2024, the City and SLO REP entered into Amendment No. 1 to the Exclusive
Negotiating Agreement to extend the term for up to a one-year term in total, with additional
provisions that require a written document that demonstrates an operating reserve of 20%
for the first year of operating the new theatre and a three-year operating plan, including
the establishment of a fund for building and facilities maintenance and repair. It is
anticipated that the ENA will be replaced by a long-term lease with a term not-to-exceed
99 years when SLO REP can demonstrate that all conditions of the ENA, as amended,
have been met (Attachments C and D). A lease agreement is tentatively planned for
Council consideration in November 2024.
On May 30, 2024, the City Council received from SLO REP an update to their Challenge
Grant request (Attachment E). In making its request for additional funding, SLO REP’s
letter describes the following investment rationale:
1. Direct economic impact of more than $4 million annually once fully operational.
2. Attraction of 50,000 people annually to the downtown area.
3. Consistency with Major City Goals for arts and culture, as well as relevant DEI
activities through multi-cultural programming, diverse casting, theatre offerings,
and support of other local non-profits / community-based organizations.
4. Activation of “Theatre in the Park” events to reach new audiences at no -cost or
low-cost at staged outdoor venues such as Mission Plaza or Mitchell Park.
On June 4, 2024, the City Council adopted Resolution No. 11501 (2024 Series) approving
the Fiscal Year 2024-25 Budget, including an additional $2.76 million in grant funding to
SLO REP towards the project (Attachment F).
Key Highlights of the Grant Agreement and Amendment No. 1
The existing Grant Agreement and draft Amendment No. 1 include the following key deal
points and structure, consistent with prior direction from the City Council:
1. Grant funding in the combined amount of $6,700,000 ($3,940,000 plus
$2,760,000).
2. The Exclusive Negotiating Agreement and Amendment No. 1 to Exclusive
Negotiating Agreement are incorporated by reference.
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Item 5e
3. SLO REP must meet a series of conditions precedent to funding, including raising
and first utilizing all other necessary funds to complete the project, execution of a
long-term lease for the property on which the new Downtown Theatre will be
constructed, and obtaining all required building permits and project entitlements.
4. Grant funds may be used for direct construction costs at the new Downtown
Theatre only.
5. Grant funds will be disbursed only on a reimbursement basis upon submittal of
satisfactory invoices.
6. SLO REP shall submit quarterly progress reports to the City.
Public Engagement
SLO REP’s Updated Challenge Grant Request was considered as part of the FY 2024-
2025 Supplemental Budget Review at the City Council’s regularly scheduled and noticed
meeting. Council considered both public testimony and written correspondence submitted
by SLO REP and its supporters detailing their current anticipated budget and necessary
funding required to complete the new Downtown Theatre building.
The contractual arrangements specified in the draft Amendment No. 1 to Grant
Agreement are considered a matter of routine City business in order to carry out City
Council’s budget priorities; however, any member of the public may provide written
comments or in-person testimony addressing this item.
CONCURRENCE
The City’s Public Works Department and Community Development Department have
offered their concurrence with the recommended action.
ENVIRONMENTAL REVIEW
Entering into the subject Grant Agreement is not considered a project, in and of itself,
under CEQA Guidelines Section 15378. However, the City completed environmental
review as lead agency for both its Parking Structure and the Downtown Theatre and
certified a Final Environmental Impact Report by Resolution No. 10923 (2018 Series).
FISCAL IMPACT
Budgeted: Yes Budget Year: 2024-25
Funding Identified: No
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Item 5e
Fiscal Analysis:
Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $3,940,000 $2,760,000 $ $
State
Federal
Fees
Other:
Total $3,940,000 $2,760,000 N/A N/A
In Council Agenda Correspondence published contemporaneous with the June 4, 2024
City Council meeting, staff described that the requested $2,760,000 could be funded by
designating a portion of the Infrastructure Investment Fund (IIF) that had been identified
for the Prado Bridge (which is not expected to go to construction in the current fiscal year).
Further, “Staff would return to Council in September (upon completion of the unaudited
year-end report) with an amended grant agreement. Staff would also recommend that the
Council prioritize backfilling the funding for the Prado Bridge project using one-time funds
available as a part of the Mid-year budget update in February 2025.”
As described under a separate Council Agenda Report also on the October 1, 2024,
agenda titled FY 2023-24 Year End Budget Report (Unaudited), the General Fund ended
the year with sufficient fund balance available to contribute the full additional $2.76 million
previously authorized by Council to the Infrastructure Investment Fund. Staff will include
a recommendation with the FY 2024-25 Mid-Year Budget Report to make this contribution
to the IIF, which will ensure that other projects funded out of the IIF will not be impacted.
ALTERNATIVES
1. Council may direct modifications to the draft Amendment No. 1 to Grant
Agreement to incorporate different terms or requirements.
2. Council could direct staff to bring back an item for future budget hearings when
action could be taken to identify other funding sources in support of the draft
Amendment No. 1 to Grant Agreement. This alternative is not recommended as
sufficient funding is available to allocate to the IIF as part of the FY 2024-25 Mid-Year
Budget Report, as contemplated at the June 4, 2024, City Council meeting.
ATTACHMENTS
A - Draft Amendment No. 1 to Grant Agreement
B - Grant Agreement - April 21, 2022
C - Exclusive Negotiating Agreement – May 22, 2019
D - Amendment No. 1 to Exclusive Negotiating Agreement – May 22, 2024
E - SLO REP Challenge Grant Update – May 30, 2024
F - City Council Minutes - June 4, 2024
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AMENDMENT NO. 1 TO GRANT AGREEMENT
SAN LUIS OBISPO
REPERTORY THEATRE
THIS AMENDMENT NO. 1 TO GRANT AGREEMENT is made and entered in the City
of San Luis Obispo on _____________________________________, by and between the City of
San Luis Obispo, a California Municipal Corporation and Charter City (“the City”) and San Luis
Obispo Repertory Theatre, a California non-profit organization (“SLO REP”). The City and SLO
REP are jointly referred to as the “Parties”.
WITNESSETH:
WHEREAS, on May 22, 2019, the City and SLO REP entered into an Exclusive
Negotiating Agreement (“ENA”), and on May 22, 2024 entered into Amendment No. 1 to the
Exclusive Negotiating Agreement, which together set forth the current parameters, conditions,
milestones, and conditions precedent to entering into a long-term lease for SLO REP to use a
portion of City property to construct and operate a new theatre building adjacent to the City’s
Cultural Arts District Parking Structure, and
WHEREAS, on April 21, 2022, the City and SLO REP entered into a Grant Agreement
that set forth certain parameters, conditions, milestones, and conditions precedent to the City
providing one-time only grant funding to SLO REP to be paid in installments not-to-exceed the
aggregate sum of $3,940,000 for reimbursement of direct construction costs incurred for the new
theatre building, and
WHEREAS, on June 4, 2024, the City Council adopted Resolution No. 11501 (2024
Series) approving the Fiscal Year 2024-25 Budget and, upon consideration of public testimony
and written correspondence submitted by SLO REP detailing their current anticipated budget and
necessary funding required to complete the new theatre building, included an additional
$2,760,000 million in grant funding to SLO REP towards the project, for a total in grant funding
towards the project, by the City of San Luis Obispo, in the amount of $6,700,000.
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NOW THEREFORE, in consideration of their mutual promises, obligations, and covenants
hereinafter contained, the parties hereto agree as follows:
1. The Grant Agreement is hereby amended as follows:
i. The sum of grant funding shall be increased by the amount of
$2,760,000.00 for a total of $6,700,000.00.
ii. The Exclusive Negotiating Agreement and Amendment No. 1 to the
Exclusive Negotiating Agreement are hereby incorporated by reference,
and attached hereto collectively as Exhibit A.
2. All other terms and conditions of the Grant Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed
the day and year first written above.
CITY OF SAN LUIS OBISPO SLO REPERTORY THEATRE
_________________________________ ____________________________________
Erica A. Stewart, Mayor Kevin Harris, Managing Artistic Director
ATTEST
_________________________________
Teresa Purrington, City Clerk
APPROVED AS TO FORM
_________________________________
J. Christine Dietrick, City Attorney
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GRANT AGREEMENT
SAN LUIS OBISPO
REPERTORY THEATRE
This agreement dated ____________________________ is between SAN LUIS OBISPO
REPERTORY THEATRE, a California non-profit corporation (“SLO REP”) and CITY OF SAN
LUIS OBISPO, a California Municipal Corporation and Charter City (“CITY”) (the “Grant
Agreement”) with reference to the following:
WHEREAS, SLO REP and CITY previously entered into an Exclusive Negotiating Agreement
(the “ENA”) on May 22, 2019, that identified a mutual interest in the development of a new theatre
site, to be leased by SLO REP, and a new City parking structure to be located on CITY property,
together with obligations to be performed by both CITY and SLO REP and recitation of conditions
precedent for purposes of SLO REP entering into a long-term lease with CITY for a portion of
CITY’s property; and
WHEREAS, SLO REP issued a written Challenge Grant Request to the City Council dated January
25, 2022, that set forth a rationale and basis for SLO REP’s request of CITY to contribute to the
construction of its new downtown theatre project (the “Downtown Theatre”), to be located at the
corner of Palm Street and Nipomo Street, San Luis Obispo, and contiguous with CITY’s planned
Cultural Arts District Parking Structure (“Parking Structure”); and
WHEREAS, at its regularly scheduled meeting on February 15, 2022, the City Council
appropriated $3.94 million, as requested by SLO REP, as part of its approval of the FY 2021-2022
Mid-Year Budget Review; and
WHEREAS, CITY’s financial support towards construction of the Downtown Theatre to be leased
and used by SLO REP is intended to be a challenge grant that will serve to motivate and catalyze
other funders and donors in furtherance of SLO REP’s overall capital campaign and fundraising
goals for the construction of the Downtown Theatre site development; and
WHEREAS, the new Downtown Theatre will ultimately be available to both residents of the City
and visitors alike, thereby serving public purposes in furtherance of CITY’s goals for facilitating
both arts and cultural amenities, as well as contributing to a thriving and prosperous downtown
area through economic development activities, and
WHEREAS, SLO REP’s long-standing plans for construction of a new Downtown Theatre are
consistent with CITY’s Downtown Concept Plan (2017) and its “Economic Recovery, Resiliency
& Fiscal Sustainability” Major City Goal specified in the 2021-23 Financial Plan, and
WHEREAS, CITY completed environmental review as lead agency for both the development of
the Parking Structure and the Downtown Theatre and certified a Final Environmental Impact
Report by Resolution No. 10923 (2018 Series).
NOW, THEREFORE, CITY and SLO REP for and in consideration of the mutual benefits,
promises and agreements set forth herein, do agree as follows:
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1. Construction of the Downtown Theatre
On or before the date that is ten (10) years following the execution of this Grant Agreement,
SLO REP shall complete construction of the Downtown Theatre. SLO REP’s failure to
comply with this term may result in amendment, provided substantial progress or
extenuating circumstances can be documented, or termination of this Agreement as
provided herein.
2. Grant Amount and Allowed Expenses
City agrees to pay SLO REP a one-time only grant in installments as provided in Section 4,
the aggregate sum of $3,940,000 (“Grant Funds”), to be used towards the construction of
the Downtown Theatre, subject to the conditions set forth herein. The Grant Funds shall
only be used for Eligible Costs directly related to construction of the Downtown Theatre as
specified below.
CITY’s Grant Funds may only be used for direct construction costs defined as contractor
expenses for labor, project management, material, equipment, utilities and other direct
construction costs ("Eligible Costs"). Payments for “soft” costs are not Eligible Costs and
shall not be paid from CITY Grant Funds. “Soft” costs are expense items that are not
considered direct construction costs such as architectural and engineering expenses or project
fees associated with the project. If there is a dispute about whether a project cost is an Eligible
Cost, CITY shall have final determination of whether the cost is an Eligible Cost.
SLO REP acknowledges that construction of the Downtown Theater is subject to payment
of prevailing wages on the entirety of the project due to the City’s contribution of funding to
the project and that such obligation will be expressly conveyed by SLO REP to and will be
binding on any covered contractor engaged to perform work on the Downtown Theatre
project.
3. Conditions Precedent to Funding
SLO REP shall satisfy the following required conditions prior to any disbursement of Grant
Funds by CITY. With respect to any requested reimbursement, SLO REP shall:
a. Maintain its 501(c)(3) non-profit status.
b. Shall secure all other grant funds, donations, pledges, or financing necessary to
complete construction of the Downtown Theatre, inclusive of the amount of Grant
Funds provided by the CITY pursuant to this Grant Agreement, and shall first utilize
(or provide for first utilizing) all other grant funds, donations, or financing then
available (collectively “Other Available Funding”) for the construction of the
Downtown Theatre prior to any request for reimbursement from CITY. However,
SLO REP’s initial reimbursement request for Grant Funds may be made prior to
complete exhaustion of Other Available Funding, as necessary, to ensure continued
availability of funding to complete construction of the Downtown Theatre in
conformance with the construction schedule to be provided under Section 3(e) and the
schedule of values to be provided under Section 3(f). However, in no instance shall
reimbursement requests for CITY’s Grant Funds exceed the estimated value of
completed improvements.
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c. Continue to adhere to all of the requirements of the ENA, attached hereto as Exhibit
A and hereby incorporated by reference, until such time as a long-term lease is
entered into with CITY, as contemplated by the ENA. Once the long-term lease is in
place, SLO REP shall abide by all lease terms and conditions.
d. Have secured all necessary project entitlements and building permit(s) for
construction of the Downtown Theatre that may be applicable as further described in
Paragraph 6, below.
e. Have submitted to the Public Works Director’s reasonable satisfaction a critical path
construction schedule that includes all Downtown Theatre project-related tasks, and
thereafter update this critical path construction schedule and furnish the same to the
City on a quarterly basis (4 times a year) until construction is complete and a
certificate of occupancy for the Downtown Theatre is furnished.
f. Submit to the Public Works Director's reasonable satisfaction a “schedule of values”
for items of work the general contractor will thereafter be completing. Identify in the
schedule of values each of the items that are proposed to be funded, and when, by
CITY Grant Funds.
4. Reimbursement Requests
Upon satisfaction of the conditions identified in Section 3, reimbursement payment requests
for Eligible Costs identified in the construction schedule required pursuant to Section 3(e)
shall be submitted to CITY’s Deputy City Manager. Reimbursement payment requests shall
include supporting documentation including contractor invoices and the most current
building inspection documentation available at that time, as well as a statement that the
construction work progress has been accepted by SLO REP. Reimbursement payment
requests may be submitted on a bi-monthly (twice per month) basis and will be reviewed
and approved for reimbursement by the CITY in a timely manner, and CITY will make best
efforts to process and pay reimbursement requests within fifteen (15) business days from
the date of such payment request, provided that sufficient documentation supporting the
reimbursement request is provided to CITY. Sufficiency of payment documentation shall
be in the sole but reasonable discretion of the CITY and CITY reserves the right to request
and receive additional reasonable documentation to support SLO REP’s reimbursement
requests and as may be appropriate to aid in City’s determination of whether the requested
reimbursement payment is for an Eligible Cost.
5. Construction at Other Sites
If SLO REP determines that construction of the Downtown Theatre at the specified site is
impractical or inadvisable for any reason, then SLO REP may not use the Grant Funds for
any other purpose without prior written approval of the City Council.
6. Permits
SLO REP shall apply for and obtain all necessary building and other related permits and
project entitlements necessary to construct the Downtown Theatre in conformance with
local, state, and federal laws. This Grant Agreement does not authorize the construction of
the Downtown Theatre or otherwise alter or impact the exercise of the City’s independent
regulatory and land use authority.
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7. Funding Source Recognition
SLO REP will ensure recognition of the role of CITY in providing funding through this
Grant Agreement. CITY shall be identified as a funding source in all applicable
publications, press releases, social media outreach and similar fundraising promotions.
8. Amendments
CITY and SLO REP may amend this Agreement at any time provided that such
amendments make specific reference to this Grant Agreement, and are executed in writing,
signed by a duly authorized representative of each organization, and approved by the City
Council. Such amendments will not invalidate this Agreement, nor relieve or release either
CITY or SLO REP from its obligations under this Grant Agreement, except as expressly
provided in writing in any such duly executed amendments.
9. Quarterly Reports and Financial Assurance
The SLO REP shall provide quarterly reports on both Downtown Theatre construction
project progress including the use of CITY Grant Funds. These reports shall be due at the
end of the first month after the end of the calendar quarter (i.e. January, April, July, and
September) and submitted to the Deputy City Manager. The quarterly reports should
include percentage of construction completion, other available funding on hand or then
receivable, and work anticipated to be completed in the following quarter. CITY reserves
the right to request and receive copies of invoices, account statements, or audits of SLO
REP’s financial records pertinent to the Downtown Theatre’s construction and in CITY’s
sole discretion, to withhold reimbursement payments until satisfactory reports and
supporting documentation are received.
10. Assignability
The SLO REP shall not assign or transfer any interest in this Grant Agreement without the
prior written consent of the City Council.
11. Conflict of Interest
No member of the CITY’s governing body and no other public official of such locality, who
exercises any functions or responsibilities in connection with the planning or carrying out
of the Downtown Theatre project, will have any personal financial interest, direct or
indirect, in this Grant Agreement; and the SLO REP will take appropriate steps to assure
compliance.
SLO REP agrees to abide by the provisions of 24 CFR 84.42 and 570.611, which require in
part, that SLO REP to maintain a written code or standards of conduct that will govern the
performance of its officers, employees or agents engaged in the award and administration
of contracts supported by Federal funds.
12. Severability
If any provision of this Grant Agreement is held invalid, the remainder of the Grant
Agreement will not be affected thereby and all other parts of this Grant Agreement will
nevertheless remain in full force and effect.
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13. Entire Agreement
This Agreement constitutes the entire agreement between CITY and SLO REP for the use
of funds received under this Grant Agreement and shall supersede all prior communications
and proposals, whether electronic, oral, or written between CITY and SLO REP with
respect to this Grant Agreement.
14. No Agency or Employment
The SLO REP is solely responsible for all activities supported by this Grant Agreement.
Nothing in this Grant Agreement creates a partnership, agency, joint venture, employment,
or any other type of relationship between SLO REP and CITY. SLO REP shall not represent
itself as an agent of CITY for any purpose, and has no authority to bind CITY in any manner
whatsoever. SLO REP and all of its agents, representatives, or participants in any manner
in the performance of its obligations and duties hereunder, shall be employees, independent
contractors, or volunteers solely of SLO REP. They shall not for any purpose be considered
employees or agents of CITY.
15. Indemnification
The SLO REP agrees, to the fullest extent permitted by law, to defend, indemnify, and hold
harmless CITY its officers, directors, affiliates, employees, and agents (“City
Indemnitees”), from and against any and all claims, liabilities, losses and expenses
(including reasonable attorney’s fees) directly, indirectly, wholly or partially arising from
or in connection with any act or omission of SLO REP, its employees or agents, in applying
for, accepting, or use of the Grant Funds, or in carrying out the Downtown Theatre project
as set forth. In the event the City Indemnitees are made a party to any action, lawsuit, or
other adversarial proceeding arising from SLO REP’s performance under this Grant
Agreement, SLO REP shall provide a defense to the City Indemnitees or at the City’s option,
reimburse the City Indemnitees their costs of defense, including reasonable legal fees,
incurred in defense of such claims.
16. Termination
The City Manager may, within his or her reasonable discretion, initiate termination of this
Grant Agreement in the event of any material breach of the terms of this Grant Agreement
by SLO REP. Material breach includes breach of Sections 1-7, 9 and 15 of this Grant
Agreement, but does not include minor delays in reporting or other delays in obligations set
forth herein caused through no fault of SLO REP as well as administrative or clerical errors
made in good faith. Upon the City Manager’s written notice of breach, SLO REP shall have
forty-five (45) calendar days to cure any such breach (the “Notice of Breach”). Should SLO
REP fail to cure, or provide documentation of substantial progress towards curing such
breach within forty-five (45) calendar days of the date of the Notice of Breach, the City
Manager shall provide written notice of termination of this Grant Agreement (the “Notice
of Termination”). Said termination shall be effective thirty (30) calendar days after the City
Manager mails the Notice of Termination to SLO REP. Any remaining Grant Funds in
excess of then unpaid Eligible Costs, as defined in Section 2, actually incurred as of the date
of notice of termination shall revert to CITY upon the effective date of termination.
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17. Notices
For purposes of notice under this agreement, all notices shall be considered effective upon
being sent by certified mail to the following addresses:
CITY:
City of San Luis Obispo
990 Palm Street
San Luis Obispo, CA 93401
Attn: City Manager
SLO REP:
San Luis Obispo Repertory Theatre
888 Morro Street
San Luis Obispo, CA 93401
Attn: Managing Artistic Director
CITY OF SAN LUIS OBISPO, A MUNICIPAL CORPORATION
By:
Derek Johnson, City Manager
SAN LUIS OBISPO REPERTORY THEATRE, A CALIFORNIA NON-PROFIT
CORPORATION
By: ___________
Kevin Harris, Managing Artistic Director
APPROVED AS TO FORM:
By:
J. Christine Dietrick, City Attorney
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EXCLUSIVE NEGOTIATING AGREEMENT
This Exclusive Negotiating Agreement (“Agreement”) is entered into this ___day of ______, 2019 (the
“Effective Date”), by and between the City of San Luis Obispo, a California charter municipal corporation
("the City'') and San Luis Obispo Repertory Theatre, a California non-profit corporation (“SLO REP”). The
City and SLO REP are jointly referred to as the “parties”.
RECITALS
WHEREAS, the City is the legal owner of the property located at 888 Morro Street in San Luis Obispo,
California (the “Property”); and
WHEREAS, the City identified a portion of the Property as the site of a proposed public parking structure
(“Palm Nipomo Parking Structure”) and anticipates that an estimated 18,000 square foot portion of the
Property will not be needed for the Palm Nipomo Parking Structure (“Remainder Property”); and
WHEREAS, SLO REP desires to construct a not-for-profit live performance theatre facility and related on-
site and off-site (if any) improvements (“Theatre”) on the Remainder Property; and
WHEREAS, the parties recognize that the exact location, size and availability of the Remainder Property
for the Theatre cannot be determined at this time, and understand that the Remainder Property has
development restrictions including maintenance of trees, street setbacks and provision of pedestrian
connections/plazas from the Palm Nipomo Parking Structure to Monterey Street that affect the net buildable
land; and
WHEREAS, the City wishes to support community-based performing arts groups by encouraging
development of a live performance theatre facility in the downtown; and
WHEREAS, the City and SLO REP recognize that identifying a location for the Theatre, as well as some
of the terms of a future lease, may help SLO REP’s capital fundraising efforts; and
WHEREAS, construction of the Palm Nipomo Parking Structure and the Theatre and related rezoning and
general plan amendments will require environmental review, and SLO REP must provide certain
information about the Theatre before City can conduct the environmental review; and
WHEREAS, the City’s Financial Management Manual allows exclusive negotiations for long term lease of
City property when the there is a clear link between the proposal and accomplishment of significant City
goals, plans or policies; and
WHEREAS, the City considers the development of a not-for-profit live performance theatre on the
Remainder Property to be in the public interest and in accordance with the City's goals and the existing and
proposed Downtown Concept Plan.
NOW, THEREFORE, in consideration of the mutual covenants, conditions, promises and agreements
herein set forth, the parties agree as follows:
DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222
5/22/2019
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AGREEMENT
1. RECITALS. The above Recitals are true.
2. TERM. This Agreement shall commence upon the Effective Date and shall continue in effect
for a period of five (5) years (the “Term”), unless sooner terminated as provided herein. The
Parties may extend the Term of this Agreement in writing upon mutual consent.
3. PURPOSE. The purpose of this Agreement is to enable the City to proceed with the Palm
Nipomo Parking Structure, and to allow SLO REP to explore the feasibility of SLO REP
financing, designing, constructing and operating the Theatre, at its sole cost and expense, on the
Remainder Property.
4. CITY’S OBLIGATIONS. The City shall, during the Term of this Agreement:
a. Exclusivity. Negotiate exclusively with SLO REP as the future tenant of the
Remainder Property.
b. Initiate Rezoning, General Plan amendments, and Lot Line Adjustment.
Upon City Council authorization, initiate all rezoning, General Plan amendments,
and a lot line adjustment necessary to allow the construction of the Palm Nipomo
Parking Structure on a portion of the Property and the Theatre on the Remainder
Property. The intent of this Agreement is for the Remainder Property to be created
as a “finished lot,” although the City legally cannot, and therefore does not,
contractually agree as to how it will exercise its legislative authority to rezone or
amend the General Plan and its land use authority to complete a lot line adjustment.
c. Environmental Review. The City has completed environmental review of the Palm
Nipomo Parking Structure and the Theatre and has certified a Final Environmental
Impact Report (“FEIR”) by Resolution No. 10923 (2018 Series). If SLO REP makes
any changes to the Theatre design or if any of the conditions set forth in CEQA
Guidelines § 15162 are triggered, then SLO REP may negotiate the portion of costs it
will bear in the event substantial new environmental issues are discovered during
construction, or if any project-specific environmental review related to the Theatre is
deemed necessary.
5. SLO REP’s OBLIGATIONS. SLO REP shall, during the term of this Agreement:
a. Non-Profit Status. Be a California non-profit corporation in good standing and be
exempt from state and federal income taxes under section 501 (c) (3) of the Internal
Revenue Code.
b. Proof of Financial Ability. Provide to City’s reasonable satisfaction that it has the
financial ability to design, construct and operate the Theatre on the Remainder
Property. At a minimum SLO REP shall:
Fundraising Plan. Provide the City with a fundraising plan by December 31,
2019 that is acceptable to, and approved by, the City Manager, whose approval
shall not be unreasonably withheld, delayed or conditioned. The fundraising plan
shall include a timeline with milestones that shall be met no later than 1 year
from the estimated completion of the Palm Nipomo Parking Structure. These
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milestones shall include, at a minimum, prior to commencement of lease
negotiations, but no later than one (1) year after City’s award and execution of a
contract to construct the Palm Nipomo parking Structure, that SLO REP shall
demonstrate, to the City Finance Director’s reasonable satisfaction, that SLO
REP has available at least 50% of all the funds necessary to design and construct
the Theatre.
i. Preliminary Cost Estimates. Provide the City with preliminary costs estimates
by December 31, 2020 to design, construct and operate the Theatre for at least
the first two (2) years after completion of construction. Update those estimates
as design progresses, but at least every 6 months. SLO REP will include the
payment of prevailing wages in its estimates.
ii. Annual Financials. Annually, on or before December 31st of each year, provide
the City with a current financial statement, copy of most recent filed state and
federal tax returns, and copies of current bank statements, to demonstrate
fundraising results for the Theatre.
iii. Formal Development Application. Finalize and submit a formal development
application for the Theatre to the City.
iv. Compensation for City Review Costs. Discuss and finalize how City
processing and review costs will be funded.
c. Environmental Review Information. Provide the City promptly with all information
necessary to conduct any subsequent environmental review of the Theatre that may be
necessary. This information includes, but is not limited to, square footage of structure;
square footage of various uses such as office, storage, classroom, and theatre; number
of seats; maximum number of performances per week, and any other information
deemed necessary by City.
6. TERMINATION. Either party may terminate this Agreement without liability to the other party
at any time by written notice to the other. This Agreement shall automatically terminate in the
event SLO REP fails to secure building permits for the Theatre one year after the completion of
the Palm Nipomo parking structure.
7. CONDITIONS PRECEDENT TO LEASE NEGOTIATION AND EXECUTION. All of the
following conditions must be met as conditions precedent prior to lease execution for the
Remainder Property:
a. Lease negotiation:
i. Rezoning and Lot Line Adjustment. City has rezoned and/or amended the
City’s general plan and has perfected a lot line adjustment that will create the
Remainder Property as a “finished lot” allowing for construction and its use as
the Theatre.
ii. Obligations Met. Both City and SLO REP have met all of their respective
obligations under the Agreement.
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b. Availability of Funds for Design, Construction, and Operation of the Theatre Prior
to execution of the lease, SLO REP demonstrates to the City Manager’s reasonable
satisfaction that SLO REP has met all applicable fundraising milestones in the
fundraising plan approved by the City Manager.
c. Non-Profit Status. SLO REP has maintained its non-profit and tax-exempt status under
applicable state and federal law.
d. Design and Construction Schedule. Prior to lease execution, provide to the City’s
Community Development Director’s reasonable satisfaction, a design and construction
schedule, demonstrating, at a minimum, the Theatre will be constructed and completed
within 3 years of the completion of the Palm Nipomo Parking Structure.
e. Design Coordination. Coordinate design of the Theatre with the City to ensure it is
compatible with the Palm Nipomo Parking Structure.
8. GENERAL LEASE TERMS. If the parties enter into the exclusive negotiations, the parties
desire that the lease include the following general provisions; provided, the actual language of
each provision is subject to further negotiation, and most material terms and provisions of the
lease have not yet been discussed. The City shall not lease the land for minimal rent unless the
lease is completely acceptable to the City and approved by the City Attorney. Nothing in this
paragraph shall be interpreted as an agreement or offer to lease upon the terms, provisions or
language set forth below.
a. SLO REP shall commence construction of the Theatre no later than one (1) year after the
completion of the Palm Nipomo Parking Structure and shall complete construction of the
Theatre within three (3) years after that. SLO REP shall not commence construction of
the Theatre unless SLO REP demonstrates, to the City’s Finance Manager’s reasonable
satisfaction prior to expiration of the year within which SLO REP is to commence
construction, that SLO REP has all of the funds necessary to design and construct, as
well as operate for at least one (1) years after completion of construction, the Theatre,
plus a 15% contingency, available in cash or approved financing (the “Required Funds”).
If SLO REP does not timely demonstrate that SLO REP has the Required Funds, or if
SLO REP fails to timely begin or timely complete construction, SLO REP shall be in
substantial default, and the lease shall automatically terminate unless City agrees
otherwise in writing. The Theatre shall be deemed complete only upon issuance of a
Certificate of Occupancy.
b. Minimum 40-year term with the right of first refusal for additional lease years provided
that Theatre is in good standing at the time of the renewal window, which shall open
after 35 years and conclude after 37 years unless the window is extended.
c. Rent of $1.00 per year provided SLO REP:
i. Is a California non-profit corporation in good standing; and
ii. Is a federal and state income tax exempt 501 (c)(3) entity; and uses the
Remainder Property solely as a live performance theatre and related City
approved community uses.
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iii. SLO REP’s failure to maintain its non-profit corporate status in good standing
or its tax-exempt status under applicable state and federal law or to use the
Remainder Property for any purpose other than as a live performance theatre and
related City approved community uses during the term or any extended term of
the lease, shall be a material breach of the lease. In the event any such breach
occurs, City may, at its option, either terminate the lease or raise the rent to fair
market rates for neighboring commercial uses.
d. SLO REP shall design, construct, operate and maintain the Theatre and all street frontage
and landscaping, utility extensions and connections, and other improvements, based on
agreed upon and approved plans and specifications, at its sole cost and expense without
any assistance from the City.
e. SLO REP shall be responsible for meeting or mitigating all conditions, impacts,
mitigations and requirements identified in the environmental review and entitlement
processes for issues associated with the SLO REP’s operation of a theatre on the
Property, at SLO REP’s sole cost and expense.
f. The design of the Theatre must be compatible with the design of the Palm Nipomo
Parking Structure, including the parking structure’s entrance and exiting needs, as
determined by the sole discretion of the Public Works Director.
g. SLO REP shall take all reasonable efforts to preserve, protect, and maintain the large oak
tree on 614 Monterey, along with the tree on the corner of Monterey and Nipomo.
h. If the SLO REP is not in material compliance with the Lease or ceases to be financially
solvent and to maintain the Property in a commercially reasonable manner, the lease shall
contain provisions for the City to declare a default of the Lease, for SLO REP to effect a
reasonable cure of the default(s), and for the City to terminate the Lease if the default(s)
are not cured pursuant to the terms and conditions of the Lease, and for the Remainder
Property to revert to the City.
i. Prevailing wages shall be paid by SLO REP for construction of the Theatre and related
improvements, mitigations etc.
j. SLO REP shall pay all applicable parking in lieu fees for a Community Partner, as
determined by the sole discretion of the City’s Public Works Director.
k. Payment of possessory interest and other taxes by SLO REP.
l. Other long-term landlord protection ground lease provisions, such as City standard
insurance requirements, indemnity provisions, attorneys’ fees, prohibitions against
nuisance, waste, requiring maintenance at SLO REP expense, etc.
m. If the City Council does not move ahead with the construction of the Palm/Nipomo
structure, a new agreement will need to be negotiated between the parties for a mutually
acceptable alternate site or an alternate set of requirements for a portion of the Property.
n. The City will not subordinate its interest in the Remainder Property to any financing.
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10. AMENDMENT. This Agreement may be extended or modified with the mutual consent of the
parties. Any such extension, amendment, modification or variation from the terms of this
Agreement shall be in writing and shall be effective only upon approval by the City Council.
11. COMPLETE AGREEMENT. This written Agreement, including all writings specifically
incorporated herein by reference, shall constitute the complete agreement between the parties.
No oral agreement, understanding or representation not reduced to writing and specifically
incorporated herein shall be of any force or effect, nor shall any such oral agreement,
understanding or representation be binding upon the parties.
12. NOTICE. All notices to the parties shall be in writing and shall be sent by United States mail,
postage prepaid by registered or certified mail addressed as follows:
City: Derek Johnson
City Manager
990 Palm Street
San Luis Obispo, CA 93401
SLO REP: Kevin Harris
Managing Artistic Director
888 Morro Street
San Luis Obispo, CA 93401
13. AUTHORITY TO EXECUTE AGREEMENT. Both City and SLO REP warrant and represent
that each individual executing the Agreement on behalf of each party is a person duly authorized
and empowered to execute agreements for such party.
IN WITNESS WHEREOF, the parties execute this Agreement on the day and year first above written.
ATTEST CITY OF SAN LUIS OBISPO
Teresa Purrington
City Clerk
Date Heidi Harmon
Mayor
Date
APPROVED AS TO FORM: SLO REPERTORY THEATRE
J. Christine Dietrick
City Attorney
Date Kevin Harris
Managing Artistic Director
Date
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AMENDMENT NO. 1 TO EXCLUSIVE NEGOTIATING AGREEMENT
THIS AMENDMENT NO. 1 TO EXCLUSIVE NEGOTIATING AGREEMENT is made and
entered in the City of San Luis Obispo on _______________________________________, by and between
the City of San Luis Obispo, a charter municipal corporation (“the City”) and San Luis Obispo Repertory
Theatre, a California non-profit organization (“SLO REP”). The City and SLO REP are jointly referred to
as the “Parties”.
WITNESSETH:
WHEREAS, on May 22, 2019, the City and SLO REP entered into an Exclusive Negotiating
Agreement (“ENA”) that set forth certain parameters, conditions, milestones, and conditions precedent to
entering into a long-term lease for SLO REP to use of a portion of City property to construct and operate a
new theatre building adjacent to the City’s Cultural Arts District Parking Structure, and
WHEREAS, the ENA has a five-year term that may be extended by mutual agreement of the Parties
and both the City and SLO REP have a desire to continue working together towards the construction and
long-term operation of a new theatre building; and
WHEREAS, both the City and SLO REP have completed and will continue to maintain their
respective obligations specified in the ENA, as well as satisfy the necessary conditions precedent to lease
negotiations and execution (paragraphs 5, 6, and 8), and the Parties are presently working together to move
towards the preparation of a mutually agreeable lease agreement.
NOW THEREFORE, in consideration of their mutual promises, obligations, and covenants
hereinafter contained, the parties hereto agree as follows:
1. The Exclusive Negotiating Agreement is hereby amended as follows:
i. The term shall be extended for a period of six (6) months from the date of this
Amendment No. 1, provided that SLO REP shall disclose to City other sites or
options, if any, that it may be considering for the theatre. The ENA may be
extended for an additional six (6) month period thereafter with approval by the
City Manager. The additional six (6) month extension may only be considered
upon SLO REP delivering a written notice of intent to proceed with final lease
negotiations with the City.
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ii. Paragraph 8a., General Lease Terms, shall be amended as follows: “SLO REP
shall commence construction of the Theatre no later than one (1) year after the
completion of the Palm Nipomo Cultural Arts District Parking Structure and
shall complete construction of the Theatre within three (3) years after that.
SLO REP shall not commence construction of the Theatre unless SLO REP
demonstrates, to the City’s Finance Manager Director’s reasonable satisfaction
prior to expiration of the year within which SLO REP is to commencement of
construction, that SLO REP has all of the funds necessary to design and
construct, as well as operate for at least one (1) years after completion of
construction, the Theatre, plus a 15% construction contingency, available in
cash or approved financing (the “Required Funds”), and SLO REP shall also
submit to the City Manager (or their delegate) a written document that
demonstrates an operating reserve of 20% for the first year of operating the
new theatre and three year operating plan including the establishment of a fund
for building and facilities maintenance and repair.”
iii. Paragraph 8b., General Lease Terms, shall be replaced as follows: “A lease
term not-to-exceed ninety-nine (99) years.”
2. All other terms and conditions of the Exclusive Negotiating Agreement remain in full force
and effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day
and year first written above.
CITY OF SAN LUIS OBISPO SLO REPERTORY THEATRE
_________________________________ ________________________________
Erica A. Stewart, Mayor Kevin Harris, Managing Artistic Director
ATTEST
_________________________________
Teresa Purrington, City Clerk
APPROVED AS TO FORM
_________________________________
J. Christine Dietrick, City Attorney
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