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HomeMy WebLinkAboutItem 6a. San Luis Obispo Repertory Theatre Lease Agreement (required by Gov Code Section 53078) Item 6a Department: Administration Cost Center: 1005 For Agenda of: 12/10/2024 Placement: Public Hearing Estimated Time: 20 minutes FROM: Greg Hermann, Deputy City Manager Prepared By: Robert Hill, Sustainability & Natural Resources Official SUBJECT: SAN LUIS OBISPO REPERTORY THEATRE LEASE AGREEMENT RECOMMENDATION Adopt a Draft Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, finding that a Lease Agreement with San Luis Obispo Repertory Theatre for certain real property owned by the City located at 610 and 614 Monterey Street, a portion of 972 Nipomo Street, and a portion of City Parking Lot No. 14 is of Public Benefit in accordance with California Government Code Section 53078 and approving the Lease Agreement” to: 1. Find that a 99-year lease serves the public interest of the City of San Luis Obispo by advancing arts and culture, economic development, and other public benefits, in accordance with California Government Code Section 53083; and 2. Approve a 99-year Lease Agreement between the City of San Luis Obispo and the San Luis Obispo Repertory Theatre and authorize the City Manager 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. The City’s policies for long-term leases of City-owned property are found at Section 475 of the Financial Management Manual, as adopted by City Council (Resolution No. 10175 (2010 Series)). 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. Page 309 of 641 Item 6a 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. 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 (Attachment C). On January 25, 2022, SLO REP submitted to the City Council a formal “Challenge Grant” request for funding in the amount of $3.94 million towards construction of the 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 $3.94 million (Attachment D). On January 23, 2024, the City Council made findings pursuant to the California Surplus Land Act, declaring the subject property surplus exempt under California Government Code sections 54221 and 54234 (Resolution No. 11471 (2024 Series)). On May 22, 2024, the City and SLO REP entered into Amendment No. 1 to the Exclusive Negotiating Agreement to extend the term for an additional 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 Downtown Theatre and a three-year operating plan, including the establishment of a fund for building and facilities maintenance and repair. It was anticipated that the ENA would 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 (Attachment E). On May 30, 2024, the City Council received from SLO REP an update to their Challenge Grant request (Attachment F). 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 a commitment to providing an additional $2.76 million in grant funding to SLO REP towards the project from the City’s Infrastructure Investment Fund. Page 310 of 641 Item 6a On October 1, 2024, the City Council approved Amendment No. 1 to Grant Agreement, which contractually added the $2.76 million in additional grant funds for a total, combined amount of $6.7 million, and also clarified reporting requirements by SLO REP during the course of construction of the Downtown Theatre that will be due to the City for review (Attachment G). On October 24, 2024, SLO REP submitted a memorandum to City staff detailing how SLO REP has met and exceeded all applicable fundraising milestones and other applicable conditions precedent to entering into a lease agreement (Attachment B) with the City, per the Exclusive Negotiating Agreement and Amendment No. 1 to the ENA. At this time, SLO REP has provided evidence that it has assembled approximately $14.1 million that can be used towards total project costs (including design, construction, contingency, fees, and operating reserve) of the approximately $17.8 million that is estimated to be needed, or 79% of the overall total (Attachment H). SLO REP reports that additional funding has been secured since their October 24, 2024, memorandum and they reasonably anticipate successfully completing their capital campaign efforts, including a broad-based public campaign, prior to occupancy and construction, as required by the draft Lease Agreement. Key Highlights of the Lease Agreement The draft Lease Agreement was developed by both staff from the City and SLO REP, together with each party’s respective legal counsel, and includes the following key deal points and structure, consistent with the Exclusive Negotiating Agreement, as amended, and prior direction from the City Council: 1. The term of the lease is 99 years in accordance with Government Code Section 37380 (see further discussion regarding this statute in the sub-section, below). 2. SLO REP shall pay rent of $1/year. 3. SLO REP shall commence construction of the Downtown Theatre no later than one year after delivery of the premises from the City (upon completion of the Cultural Arts District Parking Structure) and must complete construction within three years thereafter. To commence construction, SLO REP must demonstrate that it has all of the funds necessary to complete the project, including a 15% construction contingency, a 20% operating reserve for the first year, and a three- year plan to establish a building and facilities maintenance and repair fund. 4. Construction of the Downtown Theatre shall be in accordance with the approved Final Environmental Impact Report for the project, as well as conditions of approval for the architectural designs and improvements and all pertinent building permit requirements. 5. SLO REP shall use the Downtown Theatre primarily for live performances that will serve the cultural, educational and recreational needs of the community and visitors, and may also provide activities and events such as festivals, workshops, public speakers, educational outreach programs, and special events. Admission fees are SLO REP’s discretion. The City shall have a right to make use of the Downtown Theatre on two occasions per year with advance, reasonable notification. Page 311 of 641 Item 6a 6. Utilities, maintenance, and ownership of improvements are the responsibility of SLO REP, and the lease also includes provisions for insurance requirements, indemnification, and taxes. 7. SLO REP may only assign the lease with City Council approval, sublet a portion of the leased premises with City Manager approval, and may enter into short- term rentals up to 30-days in duration at its discretion. Requirements for Local Government Leases 99-Year Lease Term Under California Government Code Section 37380, cities are typically allowed to lease property owned by it for a term not to exceed 55 years. However, a city may lease property owned by it for a period exceeding 55 years but not exceeding 99 years if certain conditions set forth in Section 37380 are met. Specifically, a charter city, such as San Luis Obispo, may enter a 99-year lease if the lease is “subject to periodic review by the city [taking] into consideration the then current market conditions. The local legislative body may, prior to final execution of the lease, establish the lease provisions which will be periodically reviewed, and determine when those provisions are to be reviewed.” (Cal. Gov. Code § 37380(b)(1).) Charter cities are exempt from satisfying the other conditions listed in Section 37380 and instead “…may utilize a procedure as specified by charter or adopted by ordinance in accordance with its charter.” (Id.) Pursuant to Section 37380(b)(1), the draft lease agreement provides that the lease consideration (paragraph 5) and insurance requirements (paragraph 15) shall be subject to review every twenty years to take into consideration then current market conditions and industry standards. Furthermore, Section 906 of the City’s charter provides that “the City Council, by ordinance or resolution, shall adopt policies and procedures that shall be applicable to the sale of lease of City property." Such policies and procedures are set forth in the City’s Financial Management Manual, which was adopted by Resolution 10052 (2009 Series). The City’s lease of the land to SLO REP has complied with such policies. Surplus Land Act The California Surplus Land Act requires local agencies to prioritize affordable housing, as well as parks and open space, when disposing of “surplus land” (which includes leasing). However, on January 23, 2024, the City Council adopted Resolution No. 11471 (2024 Series) declaring that the proposed lease area is not necessary for the City’s use and is therefore “exempt surplus” land pursuant to California Government Code sections 54221 and 54234. The City’s resolution was forwarded to the California Department of Housing and Community Development for review in accordance with state law and received their concurrence. Page 312 of 641 Item 6a Economic Development Subsidy Under California Government Code Section 53083, the City is required to provide specified information in written form available to the public, through its website, for any economic development subsidy within its jurisdiction and to provide public notice and a hearing regarding the subsidy. An “economic development subsidy” is defined in relevant part under the Government Code as “any expenditure of public funds or loss of revenue to a local agency in the amount of one hundred thousand dollars ($100,000) or more, for the purpose of stimulating economic development within the jurisdiction of a local agency, including, but not limited to . . . grants . . . [and] land price subsidies.” (Cal. Gov. Code § 53083(g)(1)). The City Council has committed $6,700,000 in grant funding toward the Downtown Theatre and the land lease is being offered at a discounted rate due to the long-standing community partnership with SLO REP and the anticipated public benefit the Downtown Theatre will provide. As such, the grant and lease agreement constitute an “economic development subsidy” and disclosure of the following information and a public hearing are required, as follows (shown in italics): (1) The name and address of all corporations or any other business entities, except for sole proprietorships, that are the beneficiary of the economic development subsidy, if applicable. San Luis Obispo Repertory Theatre, A California Non-Profit. P.O. Box 122 San Luis Obispo, CA 93406 (2) The start and end dates and schedule, if applicable, for the economic development subsidy. The start date is upon commencement of possession of the leased premises, anticipated in 2026. City of San Luis Obispo grant funding would be expended within three years following commencement of construction. Rent of $1.00 per year is for a 99-year term. (3) A description of the economic development subsidy, including the estimated total amount of the expenditure of public funds by, or of revenue lost to, the local agency as a result of the economic development subsidy. The total amount of direct expenditures of public funds is $6,700,000.00. The leased premises is currently vacant land that does not produce revenue. (4) A statement of the public purposes for the economic development subsidy. The public purpose for the economic development subsidy is to support arts and cultural activities in the downtown area of San Luis Obispo, which is expected to generate direct and indirect local economic impact benefits. Page 313 of 641 Item 6a (5) Projected tax revenue to the local agency as a result of the economic development subsidy. Projected tax revenue, whether sales tax or property tax, is not yet known. According to data provided by SLO REP and Americans for the Arts: Arts and Economic Prosperity 6 Survey (January 2024), the operation of the new Downtown Theatre will generate $4 million in economic activity on an annual basis. SLO REP will be subject to possessory interest property tax, however as the Downtown Theatre is not yet constructed, it is not yet known what the assessment and taxing rate will be. (6) Estimated number of jobs created by the economic development subsidy, broken down by full-time, part-time, and temporary positions. According to data provided by SLO REP, the operation of the new Downtown Theatre will generate 7 full time positions and 5 full time equivalent positions. Show-specific artist contracts will generate 16.73 full time equivalent positions, for a total of 28.73 full time equivalent positions comprised of 277 positions hired. 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 Lease Agreement are considered a matter of routine City business in order to carry out City Council’s priorities; however, any member of the public may provide written comments or in-person testimony addressing this item. CONCURRENCE SLO REP’s Board of Directors reviewed the draft Lease Agreement at their Annual Meeting on November 2, 2024, and voted to authorize entering into the Lease Agreement. The City’s Public Works Department and Community Development Department have also offered their concurrence with the recommended action. ENVIRONMENTAL REVIEW Entering into the subject Lease 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). Page 314 of 641 Item 6a FISCAL IMPACT Budgeted: Yes Budget Year: 2024-25 Funding Identified: Yes Fiscal Analysis: Funding Sources Total Budget Available Current Funding Request Remaining Balance Annual Ongoing Cost General Fund $6,700,000 State Federal Fees Other: Total $6,700,000 N/A N/A It is anticipated that the recommended actions of this Council Agenda Report will lead to future fiscal outcomes affecting the City. First, it is important to note the previously approved Grant Agreement and Amendment No. 1 to Grant Agreement represent, collectively, a $6.7 million capital investment in the new Downtown Theatre project by the City, in addition to the provision of the subject land lease at $1 per year. The 99-year lease term also represents a long-term commitment by the City to oversee and attend to the terms and provisions of the lease agreement, though this represents a modest amount of staff time expended on an as-needed and annual basis. Second, these investments are made in reasonable anticipation that the Downtown Theatre will generate $4 million per year in direct economic impact, bring 50,000 patrons to the downtown area annually, advance City Council goals to support arts and culture, multi-cultural programming and education, support other nonprofits and community organizations, and launch a new downtown activation of outdoor theatre offerings. ALTERNATIVES 1. Council may direct modifications to the draft Lease Agreement to incorporate different terms or requirements. 2. Council could direct staff to make modifications to the draft Lease Agreement and bring it back as an item for future reconsideration. Should Council choose this alternative, it is recommended that a “date certain” be identified, as the term of the existing Exclusive Negotiating Agreement, as amended, is due to expire in May 2025. Page 315 of 641 Item 6a ATTACHMENTS A - Draft Resolution approving a Lease Agreement with SLO Rep B - Draft Lease Agreement C - Exclusive Negotiating Agreement 2019 D - Grant Agreement 2022 E - Amendment No. 1 to Exclusive Negotiating Agreement 2024 F - SLO REP “Challenge Grant” letter correspondence 2024 G - Amendment No. 1 to Grant Agreement 2024 H - SLO REP “ENA Requirements” memorandum 2024 Page 316 of 641 R ______ RESOLUTION NO. _____ (2024 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, FINDING THAT A LEASE AGREEMENT WITH SAN LUIS OBISPO REPERTORY THEATRE FOR CERTAIN REAL PROPERTY OWNED BY THE CITY LOCATED AT 610 AND 614 MONTEREY STREET, A PORTION OF 972 NIPOMO STREET, AND A PORTION OF CITY PARKING LOT NO. 14 IS OF PUBLIC BENEFIT IN ACCORDANCE WITH CALIFORNIA GOVERNMENT CODE SECTION 53078 AND APPROVING THE LEASE AGREEMENT WHEREAS, the City of San Luis Obispo (“City”) is the owner in fee simple of that certain real property located at 610 and 614 Monterey Street, a portion of 972 Nipomo Street, and a portion of City Parking Lot No. 14 identified as Assessor’s Parcel Nos. 002- 412-011, 002-412-012, 002-412-002 (portion) and 002-412-004 (portion) (collectively, the “Property”); and WHEREAS, t he San Luis Obispo Repertory Theatre (“SLO REP”) has been a long- standing tenant of the City’s 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; and WHEREAS, 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; and WHEREAS, 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 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; and WHEREAS, on January 23, 2024, the City Council made findings pursuant to the California Surplus Land Act, declaring the subject property surplus exempt under California Government Code sections 54221 and 54234 (Resolution No. 11471 (2024 Series)); and Page 317 of 641 Resolution No. _____ (2024 Series) Page 2 R ______ WHEREAS, 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 Downtown Theatre and a three-year operating plan, including the establishment of a fund for building and facilities maintenance and repair. The ENA, as amended, anticipates 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; and WHEREAS, on May 30, 2024, the City Council received from SLO REP an update to their Challenge Grant request. 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. WHEREAS, 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; and WHEREAS, on October 1, 2024, the City Council approved Amendment No. 1 to Grant Agreement, which contractually added the $2.76 million in additional grant funds for a total, combined amount of $6,700,000, and also clarified reporting requirements by SLO REP during the course of construction of the Downtown Theatre that will be due to the City for review; and WHEREAS, October 24, 2024, SLO REP submitted a memorandum to City staff detailing how SLO REP has met and exceeded all applicable fundraising milestones and other applicable conditions precedent to entering into a lease agreement with the City, per the Exclusive Negotiating Agreement and Amendment No. 1 to the ENA. At this time, SLO REP has provided evidence that it has assembled approximately $14.1 million that can be used towards total project costs (including design, construction, contingency, fees, and operating reserve) of the approximately $17.8 million that is estimated to be needed, or 79% of the overall total; and WHEREAS, the lease agreement for the Property has been developed by both staff from the City and SLO REP, together with each party’s respective legal counsel, in a manner consistent with the Exclusive Negotiating Agreement, as amended, and prior direction from the City Council (the “Lease Agreement”). Page 318 of 641 Resolution No. _____ (2024 Series) Page 3 R ______ NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. The above recitals are true and correct and are a substantive part of this Resolution. SECTION 2. Findings. 1. The Lease Agreement set forth in Attachment 1 is hereby approved by the Council of the City of San Luis Obispo and the City Manager is authorized to execute the Lease Agreement upon the effective date of this Resolution. 2. The Lease Agreement serves a public purpose by furthering the City Council’s goal of supporting arts and culture and advancing a Cultural Arts District along lower Monterey Street, as well as the associated economic development benefits that will accrue to the downtown area. 3. The City is authorized to enter into a 99-year term for the Lease Agreement pursuant to California Government Code Section 37380. Paragraph 5 (Consideration) and Paragraph 15 (Insurance Requirements) will be reviewed every twenty years to take into consideration then current market conditions and industry standards. 4. The City has committed $6,700,000 in grant funding toward the Downtown Theatre and rent required under the Lease Agreement is being offered at a discounted rate due to the long-standing community partnership with SLO REP and the anticipated public benefit the Downtown Theatre will provide. As such, terms included in the Grant Agreement as amended, and the Lease Agreement constitute an “economic development subsidy” as defined by California Government Code Section 53083 and disclosure of the following information and a public hearing are required, as follows (shown in italics): (1) The name and address of all corporations or any other business entities, except for sole proprietorships, that are the beneficiary of the economic development subsidy, if applicable. San Luis Obispo Repertory Theatre, A California Non-Profit P.O. Box 122 San Luis Obispo, CA 93406 (2) The start and end dates and schedule, if applicable, for the economic development subsidy. The start date is upon commencement of possession of the leased premises, anticipated in 2026. City of San Luis Obispo grant funding would be expended within three years following commencement of construction. Rent of $1.00 per year is for a 99-year term. Page 319 of 641 Resolution No. _____ (2024 Series) Page 4 R ______ (3) A description of the economic development subsidy, including the estimated total amount of the expenditure of public funds by, or of revenue lost to, the local agency as a result of the economic development subsidy. The total amount of direct expenditures of public funds is $6,700,000.00. The leased premises is currently vacant land that does not produce revenue. (4) A statement of the public purposes for the economic development subsidy. The public purpose for the economic development subsidy is to support arts and cultural activities in the downtown area of San Luis Obispo, which is expected to also generate direct and indirect economic impact benefits. (5) Projected tax revenue to the local agency as a result of the economic development subsidy. Projected tax revenue, whether sales tax or property tax, is not yet known. According to data provided by SLO REP and Americans for the Arts: Arts and Economic Prosperity 6 Survey (January 2024), the operation of the new Downtown Theatre will generate $4 million in economic activity on an annual basis. SLO REP will be subject to possessory interest property tax, however as the Downtown Theatre is not yet constructed, it is not yet known what the assessment and taxing rate will be. (6) Estimated number of jobs created by the economic development subsidy, broken down by full-time, part-time, and temporary positions. According to data provided by SLO REP, the operation of the new Downtown Theatre will generate 7 full time positions and 5 full time equivalent positions. Show-specific artist contracts will generate 16.73 full time equivalent positions, for a total of 28.73 full time equivalent positions comprised of 277 positions hired. The public hearing and disclosure of economic development subsidy contained herein have been duly noticed and carried out in accordance with the requirements of California Government Code Section 53083. Page 320 of 641 Resolution No. _____ (2024 Series) Page 5 R ______ SECTION 3. Environmental Review. The passage of this resolution will not cause a direct physical change in the environment in and of itself. However, it is reasonably foreseeable that the approval of the Lease Agreement will lead to a physical change in the environment through implementation of the Project described and evaluated in the Final Environmental Impact Report (“FEIR”) that was certified by the City Council by Resolution No. 10923 (2018 Series) pursuant to the requirements of the California Environmental Quality Act SECTION 4. Lease Agreement. City staff are hereby authorized to execute the Lease Agreement in the form and manner approved by the City Attorney and to duly oversee and carry out the terms and conditions of the Lease Agreement. Upon motion of Council Member ___________, seconded by Council Member ___________, and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this _____ day of _______________ 2024. ___________________________ Mayor Erica A. Stewart ATTEST: ______________________ Teresa Purrington City Clerk APPROVED AS TO FORM: ______________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on ______________________. ___________________________ Teresa Purrington City Clerk Page 321 of 641 Page 322 of 641 -1- LEASE AGREEMENT City of San Luis Obispo and San Luis Obispo Repertory Theatre THIS LEASE AGREEMENT (the “Lease”) is entered into between the City of San Luis Obispo a political subdivision of the State of California (hereinafter referred to as “City”or “Lessor”) and San Luis Obispo Repertory Theatre, Inc., a California non-profit corporation (hereinafter referred to as “Lessee” or “SLO REP”) and will replace and supersede all previous agreements between City and Lessee with respect to the Premises hereinafter described. RECITALS WHEREAS, the City owns certain real property located at the corner of Palm and Nipomo Streets in the City of San Luis Obispo, as shown on Exhibit “A” attached hereto and incorporated herein by reference (hereinafter referred to as the “Premises”); and WHEREAS,Lessee is a 501(c)(3) non-profit corporation whose mission is to strengthen theatre’s cultural influence and enrich the Central Coast by producing professional theatre, nurturing artists and providing theatre education for children and adults; and WHEREAS, the location of the Premises is ideal for the development of a new live performance theatre contiguous with the City’s planned Cultural Arts District Parking Structure; and WHEREAS, development of the Premises in accordance with Lessee’s existing conceptual plan into a premiere live performance venue (the “Downtown Theatre”)will require substantial grant and private donor funding; and WHEREAS, a stable Lease with a 99-year term will help to ensure the longevity of the Downtown Theatre and will provide the opportunity for the Downtown Theatre to qualify for a broader array of funding; and WHEREAS,the City recognizes the public benefit associated with the development of the Downtown Theatre; and WHEREAS, on the City completed environmental review as lead agency for both its Cultural Arts District Parking Structure and the Downtown Theatre and certified a Final Environmental Impact Report by Resolution No. 10923 (2018 Series) and subsequently approved the architectural designs and related improvements, with conditions, made by Resolution No. 11059 (2019 Series); and WHEREAS,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 live performance venue where the Cultural Arts District Parking Structure will also be located; and WHEREAS, on January 25, 2022, SLO REP submitted to the City Council a formal Page 323 of 641 -2- “Challenge Grant”request for funding in the amount of $ 3,940,000 towards construction of the 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 SLO REP entered into a Grant Agreement for funding in the aggregate amount of $3,940,000; and WHEREAS, on January 23, 2024, the City Council made findings pursuant to the California Surplus Land Act, declaring the subject property surplus exempt under California Government Code sections 54221 and 54234 (Resolution No. 11471 (2024 Series); and WHEREAS,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; and WHEREAS,on May 30, 2024, the City Council received from SLO REP an update to their Challenge Grant request. 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. WHEREAS,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, and on October 1, 2024, the City Council approved Amendment No. 1 to the Grant Agreement; and WHEREAS, the City Council has adopted Resolution No. 11471 (2024 Series) declaring pursuant to Government Code Section 54221 that certain real property owned by the City, and specifically the Downtown Theatre site,is not necessary for the City’s use and is exempt surplus pursuant to Government Code Section 54234. NOW, THEREFORE,in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows: 1. Recitals. Each and every recital above is true and correct and hereby incorporated into this Lease. 2. Premises: City hereby leases to Lessee, and Lessee hereby hires and takes from City, for the term and upon the conditions hereinafter set forth, the Premises which shall be vacant and unimproved as of the commencement of the term. Any objection by Lessee to the Page 324 of 641 -3- condition, improvements, or prior occupancy of the Premises shall be deemed waived if not made within sixty (60) days following the City’s delivery of possession of the Premises to Lessee following completion of the construction of the Cultural Arts District Parking Structure (“Completion of the City Project.”) 3. Quiet Possession: City shall place Lessee in quiet possession of the Premises following Completion of the City Project, and subject to Lessee performing and observing all applicable conditions and covenants as contained in this Lease, City shall secure to Lessee the quiet possession of the Premises during the term hereof against all persons claiming the same. 4. Term: The term of this Lease shall be for a period of ninety-nine (99) years, unless earlier terminated pursuant to the provisions of this Lease. The term shall commence upon Completion of the City Project and delivery of the Premises to Lessee following the execution of this Lease by the San Luis Obispo City Manager and shall terminate ninety-nine (99) years thereafter. In accordance with California Government Code Section 37380, as may be amended from time to time, Sections 5 and 15 of this Lease shall be subject to review every twenty (20) years by the City and shall take into consideration the then current market conditions and industry standards. 5. Consideration: As consideration for the use and occupancy of the Premises, Lessee shall establish, construct and hereafter maintain a venue for live performances. In further consideration for the use and occupancy of the Premises as identified in Paragraph 7 herein, the use of said Premises shall be for the benefit of the public and shall serve the cultural, educational, and recreational needs of the City’s residents, their families and out-of- town visitors. Lessee shall pay rent of $1.00/year, which in the event of a material and uncured breach by Lessee, at City’s option, City may increase to an amount equal to the fair market rental value of the improved Premises as determined by averaging a qualified appraiser's appraisal selected by City with such appraisal selected by Lessee, or at the City’s option, the City may pursue termination of the Lease for such material breach pursuant to Section 34. In further consideration of City’s grant funds awarded towards construction of the Downtown Theatre, Lessee has offered to conduct new “Theatre in the Park” events at staged, outdoor venues, the terms and conditions of which shall be documented under separate agreement between Lessee and City. 6. Construction of Theatre: Lessee shall commence construction of the Downtown Theatre no later than one (1) year after delivery of possession of the Premises to Lessee and following the completion of the Cultural Arts District Parking Structure and Lessee shall complete construction of the Downtown Theatre within the three (3) years thereafter, unless extended by mutual agreement in writing by the parties, notwithstanding any conflicting prior term agreed upon by the parties. Lessee shall not commence construction of the Downtown Theatre unless Lessee demonstrates, to the City’s Finance Director’s reasonable satisfaction prior to commencement of construction, that Lessee has all of the funds necessary to design and construct the Theatre, plus a 15% construction contingency, available in cash or approved financing (the “Required Funds”), and Lessee shall also submit to the City Manager (or their delegate) a written document that demonstrates a 20% operating reserve for the first year of operating the Downtown Theatre together with a three year operating plan including the establishment of a building and facilities maintenance and repair reserve fund. Lessee’s failure Page 325 of 641 -4- to comply with this term upon requisite notice and opportunity to cure as stated in Section 34 would be considered a material breach of the Lease. 7. Use of Premises: The Premises shall be used for the primary purpose of establishing, constructing, managing, operating, and maintaining facilities for live performances that will serve the cultural, educational and recreational needs of local residents and out- of-town visitors and guests. Lessee shall also have the right to conduct and/or provide other related activities and events such as festivals, workshops, public speakers, educational outreach programs and special events (e.g., festivals, concerts, weddings, comedy nights, fund raisers, etc.), provided such uses are consistent with applicable City ordinances and regulations and Lessee complies with all applicable City permit requirements and processes, including but not limited to special event and use permitting requirements. Activities beyond those described above are subject to the prior written approval of the City Manager or their designee (hereinafter collectively referred to as “City Manager”). In the event that any activity or special event causes or creates an objective concern for life, health, safety or compatibility with the surrounding City facilities and adjacent private and public properties, City shall have the right to terminate authorization for such activity or event. 8. Admission Fees: Lessee shall have the right to charge admission or other fees for access to, and use of, the Premises as may from time to time be determined by Lessee. All admission, access and use fees charged by Lessee shall be retained by Lessee to offset operating and maintenance costs, or for such other purposes as may from time to time be designated by Lessee in the sole discretion of Lessee. City shall have a right to make use of the Downtown Theatre on two (2) one (1) day occasions per year with advance, reasonable notification and accommodation of SLO REP’s then existing scheduling and calendar of events, at no cost to City. 9. Utilities: City shall not be required to furnish any service to the Premises, including but not limited to heat, water, electrical, natural gas and garbage disposal, and shall not be liable for any failure of water supply or of any service by any utility. Lessee shall be responsible for establishing all required utilities and all costs relative to the installation and use of such utility services. Lessee shall place all utilities in the name of Lessee, and Lessee agrees to promptly pay all charges for all utilities and services used or charges imposed in or about or supplied to the Premises, and shall defend, indemnify and hold harmless the City against any and all liability on such account. 10. Maintenance: Lessee, at Lessee’s sole cost and expense, shall maintain and keep the Premises and every structural portion thereof, including all interior and exterior features, in a good state of repair during the term of this Lease and shall not, at any time, commit or suffer to be committed any waste, nuisance, or unlawful act thereon. City shall have the right to inspect the Premises at any reasonable time to protect the health, safety and welfare of individuals using the Premises. Lessee shall promptly repair or correct any such maintenance or repair problem(s) identified in writing by the City Manager. Should Lessee fail or neglect to make such repairs as necessary to protect the health, safety or welfare of individuals using the Premises, the City Manager may, after thirty (30) calendar days written notice to Lessee, make said repairs and charge Lessee for same, except in the event that such repairs cannot reasonably be completed within said thirty days, and Lessee timely commences such repairs and diligently Page 326 of 641 -5- pursues completion of the same thereafter. Following completion of any such repairs by the City, Lessee shall reimburse City for said costs upon demand. City shall not forfeit any right under this Lease if it does not elect to make said repairs. 11. Signs: Lessee, at its sole cost, shall have the right to place, construct and maintain signs on the Premises, advertising the Theatre, as well as events and performances at the Theatre. However, no permanent signage, structures, or improvements shall be so placed without the prior written consent of the City Manager. Notwithstanding consent of the City Manager, any sign that Lessee has the right to place, construct, and maintain shall comply with all applicable federal, state and local laws and ordinances, and Lessee shall obtain any approval required by such laws and ordinances prior to such placement or construction. City makes no representation with respect to Lessee’s ability to obtain such approval.Lessee agrees to place signage acknowledging City’s financial contributions to the Downtown Theatre, which may be included with any other acknowledgement of major donors. 12. Construction on Premises: All construction on the premises shall be conducted and carried out in accordance with the certified Final Environmental Impact Report prepared for the Cultural Arts District Parking Structure and the Downtown Theatre approved by City Council Resolution No. 10923 (2018 Series) and the subsequent approval of the architectural designs and related improvements, with conditions, made by Resolution No. 11059 (2019 Series), as has been and may be amended or addended from time to time. All structural: (i) construction, (ii) capital improvements, or (iii) alteration made to the Premises, other than those that are incident to the maintenance and care of the Premises, or construction activities related solely to specific uses which do not require a building permit, shall be administered as follows: A. Subject to subsection (C), Lessee shall have the right, at Lessee’s sole cost and expense, to construct structural improvements and/or alterations of the Premises, or any portion thereof, in a manner consistent with the use of the Premises as set forth herein, subject to the prior review and written approval of the City Community Development Department. B. Prior to such structural construction, improvements, and/or alterations, Lessee shall acquire all necessary building and construction permits including, but not limited to, required permits from the City Community Development Department and other applicable licenses through normal governmental procedures. C. No such structural construction, improvements or alterations shall be made to the Premises or any portion thereof without the submission to, and prior written approval of, the plans by the City Manager. Lessee shall also submit such other documents, including, but not limited to, specifications, working drawings, and other information required by the City Manager covering the project to be constructed by Lessee. Lessee shall submit the plans to the City Manager at least thirty (30) days in advance of the application for permits for any such projects. If the City Manager objects to all or any portion of such plans, the City Manager shall state the objections specifically and in writing, and the Lessee shall make the changes specified and resubmit the plans as revised for the City Manager’s approval as herein provided. The approval of any Plans by the City Manager shall constitute an action of the City in its proprietary capacity Page 327 of 641 -6- only and shall in no way be construed as an approval of the development or building permit application as required by the Community Development Department or excuse Lessee from complying with any laws, rules, regulations and ordinances regarding the development and use of the Premises. D. Nothing herein shall be construed to be a waiver of formal City building and land use review procedures and Lessee shall comply fully with same at Lessee’s sole cost and expense. E. The plans shall comply with industry standards for such construction, alterations, and/or improvements, and shall conform to such rules and regulations necessary to protect the health, safety, and welfare of the public. F. Any contractor or subcontractor responsible to Lessee shall at all times be in compliance with the insurance requirements specified in Section 15. 13. Ownership of Improvements: The ownership of all approved improvements constructed by the Lessee shall remain vested in Lessee until expiration or sooner termination of the term of this Lease. At the expiration or earlier termination of this Lease, all alterations, modifications, or improvements upon the Premises (except those “tenant improvements” referenced below), whether made by City or Lessee shall, absent any agreement between the City and Lessee to the contrary, or unless City otherwise elects, which election shall be made by giving a notice in writing not less than fifteen (15) working days prior to the expiration or other termination of this Lease, become the property of City and shall, without compensation to Lessee, become City property free and clear of all claims to or against the improvements by Lessee or any third person. Lessee shall defend, indemnify, and hold harmless the City against all liability and loss arising from such claims or from the City’s exercise of the rights conferred by this paragraph; in the event the City so elects, City shall be responsible for the removal of said improvements after the termination of the expiration of the tenancy. With respect to Lessee owned tenant improvements (such as signage) or fixtures, at the termination of this Lease, City may notify Lessee to remove any or all of the alterations, additions, fixtures, or tenant improvements made by Lessee.Lessee shall do so, at Lessee’s sole cost and expense, and shall promptly repair any damage caused by such removal in a first-class manner. Removal is to be completed no later than sixty (60) days from the date of said notice or at such further time as City may agree to in writing. In the event Lessee fails to remove any or all of the alterations, additions, fixtures, or tenant improvements required by City, City may remove same and charge Lessee for the cost of such removals and Lessee hereby agrees to pay any and all such costs upon demand. Notwithstanding the foregoing, City and SLO REP acknowledge that, once the Cultural Arts District Parking Structure and the Downtown Theatre construction is complete, that two (2) subterranean stormwater facilities will be in place below the Premises. One of the stormwater facilities is in service to the Cultural Arts District Parking structure and all maintenance and ownership responsibilities thereof shall be borne by City. The City shall have the right, upon Page 328 of 641 -7- reasonable notice to the Lessee, or immediately in emergent situations, to enter the Premises as necessary to access such stormwater facility for annual inspection and maintenance or other legitimate purposes. The other stormwater facility is in service to the Downtown Theatre and all maintenance and ownership responsibilities thereof shall be borne by SLO REP.&LW\ V VWRUPZDWHUIDFLOLW\LVVKRZQRQ([KLELW$ 14. Protection on Premises: Lessee agrees to take all reasonable precautions to protect the Premises from damage, theft, vandalism and other such hazards. Reasonable precautions include but are not limited to Lessee consulting with the City of San Luis Obispo Police Department regarding increasing safety through environmental design. 15. Insurance: Lessee shall obtain and maintain for the entire term of this Lease insurance complying with the provisions of this paragraph. Lessee shall furnish to City a certificate from the insurance carrier showing insurance covering this Lease to be in full force and effect as a condition precedent to this Lease becoming effective. Said policies shall be issued by companies authorized to do business in the State of California, and Lessee shall provide annual updates of its current Certificate of Insurance. Lessee shall provide the following coverage with the following features in accordance with Exhibit B, attached hereto and incorporated by reference. If Lessee fails or refuses to procure or maintain the insurance required by this Lease or fails or refuses to furnish City with the certifications required herein, City shall have the right, at its option, to terminate this Lease in accordance with Section 34. 16. Subordination: The City will not subordinate its interest in the Premises to any Lessee mortgages, deeds of trusts, or other financing that may be recorded against the Premises. Lessee shall not enter into any instrument or agreement purporting to subordinate the City’s interest in the Premises. 17.Mechanic’s Liens: Lessee shall keep the Premises free of mechanics and materialmens’ liens and other liens of like nature other than liens created or claimed by reason of any work done by or at the insistence of the City, pursuant to the City’s ability to do so under Section 10. 18. Indemnification: Lessee shall defend, indemnify and hold harmless the City, its officers, and employees from any and all claims and demands, costs, expenses, judgments, attorney fees or liabilities that may be asserted by any person or entity that arise out of or in connection with the acts or omissions relating to the performance of any obligation or duty provided for or relating (directly or indirectly) to this Lease, the tenancy created under this Lease, or the Premises hereunder. However, this indemnity will not extend to any claims or losses arising out of the gross negligence or willful misconduct of the City, its officers and employees. Furthermore, any deficiency for which the City is threatened or assessed with respect to the construction of the Downtown Theatre by Lessee, pursuant to Section 1720 of the California Labor Code (or its successor) shall be indemnified, defended, held harmless by Lessee. The preceding paragraph applies to any theory of recovery relating to said act or omission by the Lessee, or its agents, employees or other independent contractors directly responsible to Lessee, including, but not limited to, the following: Page 329 of 641 -8- A. Violation of statute, ordinance, or regulation. B. Professional malpractice. C. Willful, intentional or other wrongful acts, or failures to act. D. Negligence or recklessness. E. Furnishing of defective or dangerous products. F. Premises liability. G. Strict liability. H. Violation of civil rights. I. Violation of any federal or state statute, regulation, or ruling resulting in a determination by the Internal Revenue Service, California Franchise Tax Board or any other California public entity responsible for collecting payroll taxes, when the Lessee is not an independent contractor. It is the intent of the parties to provide the City the fullest indemnification, defense, and hold harmless rights allowed under the law. If any word(s) contained herein are deemed by a court to be in contravention of applicable law, said word(s) shall be severed from this Lease and the remaining language shall be given full force and effect. 19. Taxes: During the term of this Lease, Lessee hereby agrees to pay, prior to delinquency, all taxes and assessments, including both general and special, properly levied or assessed against the Premises and in connection with the Premises and Lessee’s operation thereof, including without limitation, taxes on Lessee’s possessory interest hereunder or in the Premises, and taxes or assessments on all structures, improvements, and fixtures now or hereinafter existing on the Premises, and on any personal property situated in, on, or about the Premises, or in, on or about any structures or improvements thereon. Lessee is hereby informed that a possessory interest subject to property taxation may be created by this Lease and that the party to whom the possessory interest is vested may be subject to the payment of property taxes levied on such interest. Lessee hereby agrees to pay such taxes prior to delinquency. 20. Assignment/Subletting/Short-Term Rental: Except as otherwise herein specifically provided, Lessee shall neither transfer nor execute an assignment of this Lease for the Premises, nor grant any interest or privilege whatsoever in connection with this Lease without the prior written consent of the City Council. An “assignment” or “transfer” is defined herein to mean the complete transfer of the leasehold interest and rental rights from Lessee to a third-party renter. Lessee shall have the right at all times to sublet the Premises to other entities with the consent of the City Manager, for a term not to exceed one (1) year, provided that the subletting entity’s proposed uses comply with the Lessee’s uses as provided herein and that the sublease contains insurance, defense and indemnification in substantial conformance with the terms of this Leases and the City is made an express beneficiary of such provisions.“Sublet” is defined herein to mean the partial transfer of rental rights under this Lease from Lessee to a third-party renter, for a temporary period of more than 30 days and for only a portion of the Premises. Lessee shall have the right, at all times, and in its sole discretion, to rent the Premises to other entities, on a short-term basis not to exceed 30 days, provided Lessee maintains all responsibilities and obligations of this Lease during such short-term rental. 21. Environmental Matters/Covenants Regarding Hazardous Materials: Lessee and Page 330 of 641 -9- City shall at all times and in all respects comply with all federal, state and local laws, ordinances and regulations (“Hazardous Materials Laws”) relating to industrial hygiene, environmental protection or the use, analysis, generation, manufacture, storage, disposal or transportation of any oil, flammable explosives, asbestos, urea formaldehyde, radioactive materials or waste, or other hazardous, toxic, contaminated or polluting materials, substances or wastes, including without limitation, any “hazardous substances,” “hazardous wastes,” “hazardous materials,” or “toxic substances”under such laws, ordinances or regulations (collectively,“Hazardous Materials”). Lessee shall, except in the event of City’s negligence or intentional wrongdoing, indemnify, defend, protect, and hold City and each of City’s officers, City Manager, employees, agents, attorneys, successors and assigns, free and harmless from and against any and all claims, liabilities, penalties, forfeitures, losses or expenses or death of or injury to any person or damage to any property whatsoever, arising from or caused in whole or in part, directly or indirectly, by: A. The discharge in or from the Premises of any Hazardous Materials or Lessee’s use, analysis, storage, transportation, disposal, release, threatened release, discharge or generation of Hazardous Materials to, in, on, under, about or from the Premises, or B.Lessee’s failure to comply with any Hazardous Materials Law. Lessee’s obligations hereunder shall include, without limitation, and whether foreseeable or unforeseeable, all costs of any required or necessary repair, cleanup or detoxification or decontamination of the Premises, and the preparation and implementation of any closure, remedial action or other required plans in connection therewith associated with conditions caused by Lessee shall survive the expiration or earlier termination of the term of this Lease. For purposes of the release and indemnity provisions hereof, any acts or omissions of Lessee, or by employees, agents, assignees, contractors or subcontractors of Lessee or others acting for or on behalf of Lessee (whether or not they are negligent, intentional, willful or unlawful) shall be strictly attributable to Lessee. 22. Condemnation: If the whole of the Premises shall be taken or condemned by any competent authority under power of eminent domain for a public or a quasi-public use or purpose, then the leasehold estate hereby created shall cease and terminate as of the date actual physical possession of the Premises is taken by the condemnor. All compensation and damages awarded for such total taking shall belong to and be the sole property of City, provided, however, that Lessee shall be entitled to receive a sum attributable to the taking of: (i) the remaining value of the Premises’ improvements constructed by Lessee, adjusted for depreciation and less total grants provided by the City to Lessee towards construction of the same; and (ii) the damage to Lessee’s equipment, fixtures, or any improvements to the Premises which Lessee would have had, but for the condemnation, the right to remove on expiration or sooner termination of this Lease. Upon termination of the Lease by a total taking all rental and other charges payable by Lessee to or on behalf of City under the provisions of this Lease shall be paid up to the date on which actual physical possession of the leased Premises shall be taken by the condemnor, and the parties hereto shall thereafter be released from all further liability in relation thereto. In the event that there shall be partial taking of the leased Premises during the lease term under the power of eminent domain, this Lease shall terminate as to the portion of the released premises so taken on the date when actual physical possession of said portion is taken by the Page 331 of 641 -10- condemnor.At Lessee’s option, this Lease shall continue in force and effect as to the remainder of the leased Premises. In the event of such partial taking, all compensation and damages for such partial taking shall belong to and be the sole property of City, provided, however, that Lessee shall be entitled to receive any award made for (i) the remaining value of the portion of the Premises’ improvements constructed by Lessee, adjusted for depreciation and less total grants provided by the City to Lessee towards construction of the same; and (ii) the taking of, or damage to, Lessee’s equipment,fixtures, and any improvements made by Lessee to the leased Premises which Lessee would have had, but for the condemnation, the right to remove on expiration or sooner termination of this Lease. In the event that this Lease is retained as to the portion of the leased Premises not condemned, any award made for alteration, modifications or repairs which may be reasonably required in order to place the remaining portion of the leased Premises not taken in a suitable condition for the continuance of Lessee’s tenancy shall belong to and be the sole property of City, but shall be utilized by the City to perform such necessary alterations, modifications and repairs. 23. Destruction of Premises: Should any matter or condition beyond the control of the parties hereto, such as war, public emergency, or calamity, data breach or similar event, fire, earthquake, flood, act of God, strike, pandemic, or any other labor disturbance, prevent performance of this Lease in accordance with the rights and privileges granted herein, this Lease shall, at Lessee’s option, be immediately be terminated and neither party shall be under any further legal obligation to the other by reason of said matter or condition. Should any aforementioned matter or condition create eligibility for Federal, State, or any other governmental jurisdictional relief assistance and/or aid, both parties agree to take all reasonable steps necessary to procure such assistance and/or aid, in their respective capacities at the time of such application. 24. Law: This Lease has been executed and delivered in the State of California and the validity, enforceability and interpretation of any of the clauses of this Lease shall be determined and governed by the laws of the State of California. 25.Lessee’s Responsibility for Compliance: Lessee shall at all times observe and comply with, and shall cause all their agents, employees and sub-contractors to observe and comply with all present and future laws, statutes, ordinances, regulations, rules, resolutions, or other binding enactments of any governmental authority, now or at any time during this Lease and any extensions thereof. If any future laws, rules, regulations or ordinances are passed by the City and said legislative enactment has any impact fiscal or otherwise on Lessee, and if Lessee does not make a timely objection to City during the course of legislative process, Lessee will be deemed to have waived any right to object at a later time and waives all damages flowing therefrom. 26. Venue: The duties and obligations of the parties created hereunder are performable in San Luis Obispo County, and such County shall be the venue for any action or proceeding that may be brought or arise out of or in connection with or by reason of this Lease. 27. Surrender: Lessee hereby acknowledges that upon expiration of the term of this Lease, neither Lessee or the City shall not be under any obligation to operate the Theatre or Page 332 of 641 -11- provide any of the services mentioned in this Lease. 28. Employment Status: Neither Lessee nor any of Lessee’s agents or contractors are or shall be considered to be employees or agents of City in connection with the performance of Lessee’s rights and obligations under this Lease. 29. Non-Discrimination: Lessee and City shall not discriminate against any person or class of persons in violation of the Civil Rights Act of 1964 as amended or any other applicable laws prohibiting discrimination in the use of the Premises. 30. Drug Free Workplace:Lessee and Lessee’s employees shall comply with City’s policy of a drug free workplace. Neither Lessee nor Lessee’s employees shall unlawfully manufacture, distribute, dispense, possess, or use controlled substances, including but not limited to marijuana, heroin, cocaine, methamphetamine, or amphetamines at any of Lessee’s facilities or City facilities or work sites. If any employee of Lessee is found to be under the influence of or in possession of any illegal substance at or on City’s premises, that employee may not return to any of City’s premises. If Lessee becomes aware that any of Lessee’s employees, during the course of their employ with Lessee, are convicted or plead nolo contendere to a criminal substance-abuse statute, Lessee shall be responsible for notifying the City Manager within seventy-two (72) hours of becoming aware of said conviction or plea. Violation of this notification provision shall constitute grounds for termination of this Lease. 31. Americans with Disabilities Act: The Lessee acknowledges the passage of the Americans With Disabilities Act of 1990, 42 U.S.C. sect. 12101 et seq., (“ADA”). Lessee, as required bylaw, hereby agrees and is required to install any and all equipment, perform any and all alterations, improvements or modifications to the Premises such that the Premises are in strict compliance with ADA requirements. 32. Holding Over: In the event that Lessee shall hold over after expiration of the term of this Lease or any extension or renewal thereof, with the consent, express or implied, of City, such holding over shall be deemed merely a tenancy from month-to-month on the terms, covenants, and conditions, so far as applicable, and subject to the same exceptions and reservations, as herein contained, until such tenancy is terminated in a manner prescribed by law. 33. Notices: All notices to Lessee shall be given in writing personally or by depositing the same in the United States mail, postage prepaid, or by certified or registered mail, return receipt requested, and addressed to Lessee at: San Luis Obispo RepertoryTheatre 3533 Empleo Street San Luis Obispo, California, 93401 Attention: ManagingArtisticDirector All notices to City shall be given in writing personally or by depositing the same in the United States mail, postage prepaid, or by certified or registered mail, return receipt requested, and addressed to: Page 333 of 641 -12- Cityof San Luis Obispo 990 Palm Street San Luis Obispo, California, 93401 Attention: City Manager Either party can change address by notifying the other party in writing. 34. Breach: Notwithstanding any other provisions contained herein, City may cancel and terminate this Lease or, at the City’s option,raise the rent to fair market rates for neighboring commercial uses if Lessee shall fail, neglect, or refuse to perform and obey any material term or condition set forth in this Lease, including but not limited to, failure to construct and thereafter operate the Premises as a live performance venue for the benefit of the public as herein provided, failure to maintain its non-profit corporate status in good standing or its tax- exempt status under applicable state and federal law, and failure to commence and complete construction of the Theatre as specified herein, or failure to comply with paragraph 15, provided the City Manager has given to Lessee written notice of thirty (30) days to do so, unless such failure, neglect, or refusal by nature cannot be remedied within thirty (30) days following said notice and Lessee has within thirty (30) days following the notice commenced and does thereafter continue diligent efforts to remedy such failure, neglect, or refusal. Minor administrative errors, oversights, or omissions related to the performance of this Lease shall not constitute a material breach but shall be subject to a thirty (30) day notice to correct. Any waiver by City of any failure by Lessee to comply with the terms and conditions of this Lease shall not be construed to be a waiver by City of any similar or other failure by Lessee to comply with any other term or condition hereof. 35. Waiver of Claim: Lessee hereby waives any claim against the City, its officers, agents or employees for damage or loss caused by any suit or proceeding directly or indirectly attacking the validity of this Lease, or any part thereof or by any judgment or award in any suit or proceeding declaring this Lease null, void or voidable, or delaying the same or any part thereof from being carried out. 36. Provisions Deemed Covenants and Conditions: The parties hereto agree that all the provisions hereof are to be construed as covenants and conditions as though the words importing such covenants and conditions are used in each instance, and that all of the provisions hereof shall bind and inure to the benefit of the parties hereto and their respective heirs, legal representative, successors and assigns. 37. Severability: The invalidity of any provision of this Lease shall not affect the validity, enforceability of any other provision of this Lease. 38. Entire Agreement and Modifications: This Lease embodies the whole Lease between the parties hereto as it pertains to the subject real property and there are no promised terms, conditions, or obligations referring to the subject matter hereof, other than as contained herein. Any alterations, changes or modifications to this Lease must be in writing and executed by both Lessee and City. Page 334 of 641 -13- 39.Lessee’s Termination Rights: If, during the term of this Lease, Lessee is no longer financially capable of conducting the agreed uses at the Premises, or the Premises are no longer of a sufficient size for Lessee’s projected agreed use of the Premises, Lessee shall have the right to surrender the Premises to the City upon one hundred and eighty (180) days written notice to the City, and shall thereafter have no further obligations to the City under the terms of this agreement, provided that the Premises are timely surrendered to the City in accordance with the terms of the notice, in a broom clean condition subject only to reasonable wear and tear. IN WITNESS WHEREOF, the parties hereto have executed this Lease this day of 2024. CITY OF SAN LUIS OBISPO, A MUNICIPAL CORPORATION By:___________________________ Whitney McDonald, City Manager SAN LUIS OBISPO REPERTORY THEATRE, A CALIFORNIA NON-PROFIT CORPORATION By: _______________________ Kevin Harris, Managing Artistic Director APPROVED AS TO FORM: By:___________________________ Christine Dietrick, City Attorney Page 335 of 641 Exhibit A Lease Area Certain real property located at 610 and 614 Monterey Street, a portion of 972 Nipomo Street, and a portion of City Parking Lot No. 14 identified as Assessor’s Parcel Nos. 002-412-011, 002- 412-012, 002-412-002 (portion) and 002-412-004 (portion), as depicted below. San Luis Obispo Repertory Theatre – Lease Area Page 336 of 641 1 EXHIBIT B Lease Agreement City of San Luis Obispo and San Luis Obispo Repertory Theatre INSURANCE REQUIREMENTS Without limiting San Luis Repertory Theatre’s (“SLO REP”) indemnification of the City of San Luis Obispo (“City”), and prior to commencement of the term of the Lease, SLO REP shall obtain, provide, and maintain at its own expense during the term of this Lease Agreement (“Agreement”), policies of insurance of the type and amounts described below in a form satisfactory to City. General liability insurance. SLO REP shall maintain commercial general liability insurance with coverage at least as broad as Insurance Services Office form CG 00 01, in an amount not less than $1,000,000 per occurrence, $2,000,000 general aggregate, for bodily injury, personal injury, and property damage. The policy must include contractual liability that has not been amended. Any endorsement restricting standard ISO “insured contract” language will not be accepted. Workers’ compensation insurance. SLO REP shall maintain Workers’ Compensation Insurance (Statutory Limits) and Employer’s Liability Insurance (with limits of at least $1,000,000). SLO REP shall submit to City, along with the certificate of insurance, a Waiver of Subrogation endorsement in favor of City, its officers, agents, employees, and volunteers. Property insurance.Upon commencement of construction of SLO REP’s improvements and betterments, or installation of equipment, with approval of City, SLO REP shall obtain and maintain insurance on SLO REP’s improvements and betterments. Policy shall be provided for replacement value on an “all risk” basis. There shall be no coinsurance penalty provision in any such policy. Commercial property insurance covering the leased premises, fixtures, equipment, building, all property situated in, on, or constituting a part of the premises and any improvements. Coverage shall be at least as broad as the Insurance Services Offices broad causes of loss form CP 10 20 and approved of in writing by City. Coverage shall be sufficient to insure 100% of the replacement value and there shall be no coinsurance provisions. The policy shall include an inflation guard endorsement, 100% rents coverage, contents coverage, coverage for personal property of others, ordinance or law and increased cost of construction coverage. City shall be included as an insured and as loss payee on any such insurance. City shall not be liable for any business income or other consequential loss sustained by SLO REP. City shall not be liable for any loss of SLO REP’s personal property even if such loss is caused by negligence of City, City’s employees, or agents. Page 337 of 641 2 Proof of insurance.SLO REP shall provide certificates of insurance and required endorsements to City as evidence of the insurance coverage required herein. Insurance certificates and endorsements must be approved by City’s Risk Manager prior to commencement of the term of the Lease. Current certification of insurance shall be kept on file with City for the contract period and any additional length of time required thereafter. City reserves the right to require complete, certified copies of all required insurance policies, at any time. Duration of coverage.SLO REP shall procure and maintain for the contract period, and any additional length of time required thereafter, insurance against claims for injuries to persons or damages to property, or financial loss which may arise from or in connection with the performance of the activities allowed by the Lease by SLO REP, their agents, representatives, employees, or subconsultants. Primary/noncontributing.Coverage provided by SLO REP shall be primary and any insurance or self-insurance procured or maintained by City shall not be required to contribute with it. The limits of insurance required herein may be satisfied by a combination of primary and umbrella or excess insurance. Any umbrella or excess insurance shall contain or be endorsed to contain a provision that such coverage shall also apply on a primary and non-contributory basis for the benefit of City before the City’s own insurance or self- insurance shall be called upon to protect it as a named insured. City’s rights of enforcement. In the event any policy of insurance required under this Agreement does not comply with these specifications or is canceled and not replaced, City has the right but not the duty to obtain the insurance it deems necessary, and any premium paid by City will be promptly reimbursed by SLO REP. In the alternative, City may cancel this Agreement. Acceptable insurers.All insurance policies shall be issued by an insurance company currently authorized by the Insurance Commissioner to transact business of insurance or is on the List of Approved Surplus Line Insurers in the State of California, with an assigned policyholders’ Rating of A- (or higher) and Financial Size Category Class VII (or larger) in accordance with the latest edition of Best’s Key Rating Guide, unless otherwise approved by the City’s Risk Manager. Waiver of subrogation. All insurance coverage maintained or procured pursuant to this agreement shall be endorsed to waive subrogation against City, its elected or appointed officers, agents, officials, employees, and volunteers or shall specifically allow SLO REP or others providing insurance evidence in compliance with these specifications to waive their right of recovery prior to a loss. SLO REP hereby waives its own right of recovery against City and shall require similar written express waivers and insurance clauses from each of its subconsultants. Enforcement of contract provisions (non estoppel). SLO REP acknowledges and agrees that any actual or alleged failure on the part of the City to inform SLO REP of non-compliance with any Page 338 of 641 3 requirement imposes no additional obligations on the City nor does it waive any rights hereunder. Requirements not limiting. Requirements of specific coverage features or limits contained in this section are not intended as a limitation on coverage, limits or other requirements, or a waiver of any coverage normally provided by any insurance. Specific reference to a given coverage feature is for purposes of clarification only as it pertains to a given issue and is not intended by any party or insured to be all inclusive, or to the exclusion of other coverage, or a waiver of any type. If the SLO REP maintains higher limits than the minimums shown above, the City requires and shall be entitled to coverage for the higher limits maintained by the SLO REP. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City. Notice of cancellation.SLO REP agrees to oblige its insurance agent or broker and insurers to provide the City with a thirty (30) day notice of cancellation (except for nonpayment for which a ten (10) day notice is required) or nonrenewal of coverage for each required coverage. If any of the SLO REP’s insurers are unwilling to provide such notice, then SLO REP shall have the responsibility of notifying the City immediately in the event of SLO REP’s failure to renew any of the required insurance coverages or insurer’s cancellation or non-renewal. Additional insured status. General liability, automobile liability, and umbrella/excess liability insurance policies shall provide or be endorsed to provide that City and its officers, officials, employees, agents, and volunteers shall be additional insureds under such policies. Prohibition of undisclosed coverage limitations. None of the coverages required herein will be in compliance with these requirements if they include any limiting endorsement of any kind that has not been first submitted to City and approved of in writing. Separation of insureds. A severability of interests provision must apply for all additional insureds ensuring that SLO REP’s insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the insurer’s limits of liability. The policy(ies) shall not contain any cross-liability exclusions. Pass-through clause.SLO REP agrees to ensure that its subconsultants, subcontractors, assignees, sublessees, permittees, and any other party who is brought onto or involved in the project/service by SLO REP (hereinafter collectively “subcontractor”), provide the same minimum insurance coverage and endorsements required of SLO REP. SLO REP agrees to monitor and review all such coverage and assumes all responsibility for ensuring that such coverage is provided in conformity with the requirements of this section. However, in the event SLO REP’s subcontractor cannot comply with this requirement, which proof must be submitted to the City, SLO REP shall be required to ensure that its subcontractor provide and maintain insurance coverage and endorsements sufficient to the specific risk of exposure involved with subcontractor’s scope of work and services, with limits less than required of the SLO REP, but in all other terms consistent with the SLO REP’s requirements under this agreement. This Page 339 of 641 4 provision does not relieve the SLO REP of its contractual obligations under the agreement and/or limit its liability to the amount of insurance coverage provided by its subcontractors. This provision is intended solely to provide SLO REP with the ability to utilize a subcontractor who may be otherwise qualified to perform the work or services but may not carry the same insurance limits as required of the SLO REP under this agreement given the limited scope of work or services provided by the subcontractor. SLO REP agrees that upon request, all agreements with subcontractors, and others engaged in the project, will be submitted to City for review. City’s right to revise specifications. The City reserves the right at any time during the term of the contract to change the amounts and types of insurance required by giving SLO REP ninety (90) days advance written notice of such change. Notwithstanding the foregoing, pursuant to the Lease, SLO REP’s insurance obligations as set forth in Section 15 of the Lease and as more fully discussed herein will be subject to review every twenty (20) years by the City taking into account market conditions and industry standards. Self-insured retentions.Any self-insured retentions must be declared to and approved by City. City reserves the right to require that self-insured retentions be eliminated, lowered, or replaced by a deductible, or require proof of ability to pay losses and related investigations, claim administration, and defense expenses within the retention through confirmation from the underwriter. Timely notice of claims.SLO REP shall give City prompt and timely notice of claims made or suits instituted that arise out of or result from SLO REP’s performance under this Agreement, and that involve or may involve coverage under any of the required liability policies. Additional insurance.SLO REP shall also procure and maintain, at its own cost and expense, any additional kinds of insurance, which in its own judgment may be necessary for its proper protection. SLO REP’s personal property, fixtures, equipment, inventory, and vehicles are not insured by City against loss or damage due to fire, theft, vandalism, rain, water, criminal or negligent acts of others, or any other cause. Verification of Coverage.Contractor shall furnish the City with a certificate of insurance showing maintenance of the required insurance coverage, as well as endorsements effecting general liability coverage. All endorsements are to be received and approved by the City before work commences. Page 340 of 641 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 Page 341 of 641 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 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222 Page 342 of 641 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. DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222 Page 343 of 641 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. DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222 Page 344 of 641 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. DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222 Page 345 of 641 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 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222 Page 346 of 641 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222 Page 347 of 641 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222 Page 348 of 641 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222 Page 349 of 641 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222 Page 350 of 641 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222 Page 351 of 641 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222 Page 352 of 641 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:            Page 353 of 641 2 | P a g e 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.         Page 354 of 641 3 | P a g e 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.         Page 355 of 641 4 | P a g e 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.         Page 356 of 641 5 | P a g e 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.         Page 357 of 641 6 | P a g e 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         Page 358 of 641 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.          Page 359 of 641 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       Page 360 of 641 Page 361 of 641 Page 362 of 641 Page 363 of 641 Page 364 of 641 Page 365 of 641 Page 366 of 641 Page 367 of 641 Page 368 of 641 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.               Page 369 of 641 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. iii. Item 9 in the Grant Agreement is amended as follows: 9. Quarterly Reports and Financial Assurance 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 begin when construction commences and 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. 2. All other terms and conditions of the Grant Agreement shall remain in full force and effect.           Page 370 of 641 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           Page 371 of 641 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           Page 372 of 641 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 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222          Page 373 of 641 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. DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222          Page 374 of 641 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. DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222          Page 375 of 641 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. DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222          Page 376 of 641 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 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222          Page 377 of 641 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222          Page 378 of 641 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222          Page 379 of 641 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222          Page 380 of 641 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222          Page 381 of 641 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222          Page 382 of 641 DocuSign Envelope ID: 0D5F9552-0A12-4481-A99B-695D14987222          Page 383 of 641 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.                    Page 384 of 641 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                Page 385 of 641 1 Council Minutes October 1, 2024, 5:30 p.m. Council Chambers, 990 Palm Street, San Luis Obispo Council Members Present: Council Member Jan Marx, Council Member Michelle Shoresman, Council Member Emily Francis (for Closed Session only,) Vice Mayor Andy Pease, Mayor Erica A. Stewart Council Members Absent: Council Member Emily Francis (for Regular Meeting only) City Staff Present: City Manager Whitney McDonald, Christine Dietrick, City Attorney, Teresa Purrington, City Clerk _____________________________________________________________________ 1. CLOSED SESSION (4:30 - 5:30 PM) 1.a CALL TO ORDER Mayor Erica A. Stewart called the Closed Session to order at 4:30 p.m. in the Council Hearing Room at City Hall, 990 Palm Street, San Luis Obispo. Council Member Francis attended the Closed Session virtually due to illness. 1.b PUBLIC COMMENT ON CLOSED SESSION ITEMS ONLY Public Comments: None ---End of Public Comment--- 1.c PUBLIC EMPLOYEE PERFORMANCE EVALUATION - GOALS Action: Mayor Stewart indicated that no reportable action was taken on this item. 1.d ADJOURNMENT The Closed Session adjourned at 5:40 p.m. Council Member Francis left the meeting.           Page 386 of 641 2 2. CALL TO ORDER A Regular Meeting of the San Luis Obispo City Council was called to order on October 1, 2024 at 5:45 p.m. in the Council Chambers, 990 Palm Street, San Luis Obispo, by Mayor Stewart. Council Member Francis was absent for the Regular meeting. 4. PRESENTATIONS 4.a DOMESTIC VIOLENCE AWARENESS MONTH PROCLAMATION Mayor Stewart presented a proclamation declaring October as "Domestic Violence Awareness Month" to Jill LeMieux on behalf of Lumina Alliance. 4.b FIRE PREVENTION MONTH PROCLAMATION Mayor Erica A. Stewart presented a proclamation declaring the month of October as "Fire Prevention Month" to Fire Chief Todd Tuggle on behalf of the San Luis Obispo Fire Department. 4.c NATIONAL CYBERSECURITY AWARENESS MONTH PROCLAMATION Mayor Erica A. Stewart presented a proclamation declaring the month of October as "National Cybersecurity Awareness Month" to Interim Assistant City Manager Greg Hermann on behalf of the City's Information and Technology Department. 4.d CAL POLY ENROLLMENT/HOUSING PRESENTATION The City Council received an update on enrollment and housing from Courtney Kienow, Director of Community Relations and Economic Development, Terrance Harris, Vice President of Strategic Enrollment Management, Associate Vice President for Student Affairs Jo Campbell and Vice President of Facilities Management & Development Mike McCormick at Cal Poly. 4.e CITY MANAGER REPORT City Manager Whitney McDonald provided a report on upcoming projects. 6. CONSENT AGENDA Council Member Shoresman requested that Item 6e be pulled from the Consent agenda for discussion. Motion By Vice Mayor Pease Second By Council Member Shoresman           Page 387 of 641 3 To approve Consent Calendar Items 6a to 6d and 6g to 6h. Item 6f removed from the agenda prior to the meeting. Ayes (4): Council Member Marx, Council Member Shoresman, Vice Mayor Pease, and Mayor Stewart Absent (1): Council Member Francis CARRIED (4 to 0) 6.a WAIVE READING IN FULL OF ALL RESOLUTIONS AND ORDINANCES Waive reading of all resolutions and ordinances as appropriate. 6.b MINUTES REVIEW - SEPTEMBER 17, 2024 COUNCIL MINUTES Approve the minutes of the City Council meeting held on September 17, 2024. 6.c SECOND READING AND ADOPTION OF ORDINANCE NO. 1740 (2024 SERIES) APPROVING AN AMENDMENT TO TABLE 2-1 IN TITLE 17 (ZONING REGULATIONS) OF THE MUNICIPAL CODE WITH APPROVAL OF CONDITIONAL USE PERMIT Adopt Ordinance No. 1740 (2024 Series) entitled, “An Ordinance of the City Council of the City of San Luis Obispo, California, approving amendments to Table 2-1 (Uses Allowed by Zone) in Title 17 (Zoning Regulations) to allow Cannabis Retail Storefronts to conduct retail sales by delivery with approval of a Conditional Use Permit or by amendment to an existing Conditional Use Permit. The project is exempt from environmental review (CEQA) (CODE-0401-2024).” 6.d APPROVE A MILLS ACT HISTORICAL PROPERTY PRESERVATION AGREEMENT FOR THE SNYDER HOUSE AT 1406 MORRO STREET (HIST-0386-2024) As recommended by the Cultural Heritage Committee, adopt a Draft Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, approving a Historic Property Preservation Agreement between the City and the owner of the Snyder House at 1406 Morro Street (Application No. HIST-0386-2024).” 6.f AMENDMENT TO COMMUNITY WORKFORCE AGREEMENT FOR PRADO ROAD INTERCHANGE AND PUBLIC SAFETY CENTER PROJECTS This item was pulled by staff and continued to a date uncertain.           Page 388 of 641 4 6.g SECOND READING AND ADOPTION OF ORDINANCE NO. 1741 (2024 SERIES) TO AMEND QUALIFICATION FOR CONSTRUCTION BOARD OF APPEALS Adopt Ordinance No. 1741 (2024 Series) entitled, “An Ordinance of the City Council of the City of San Luis Obispo, California, amending Section 15.04.020, Subsection N, of the San Luis Obispo Municipal Code,” which will remove the local requirement to maintain an Accessibility Board of Appeals pursuant to Health and Safety Code 19957.5. 6.h SECOND READING AND ADOPTION OF ORDINANCE NO. 1742 (2024 SERIES) TO ESTABLISH AN IMPACT FEE DEFERRAL PROGRAM FOR ELIGIBLE AFFORDABLE FOR-RENT RESIDENTIAL PROJECTS Adopt Ordinance No. 1742 (2024 Series) entitled, “An Ordinance of the City Council of the City of San Luis Obispo, California, amending section 4.56.050 (Payment of Fees) of the Municipal Code to establish a development impact fee deferral program for eligible affordable housing projects.” 6.e AMENDMENT NO. 1 TO GRANT AGREEMENT WITH SAN LUIS OBISPO REPERTORY THEATRE Public Comments: Kevin Harris ---End of Public Comment--- Motion By Council Member Shoresman Second By Council Member Marx 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 with the following amendment made to the Agreement: x Section 9 of the Agreement - The quarterly reports should begin when construction begins on the building. Ayes (4): Council Member Marx, Council Member Shoresman, Vice Mayor Pease, and Mayor Stewart Absent (1): Council Member Francis CARRIED (4 to 0)           Page 389 of 641 5 7. PUBLIC HEARING AND BUSINESS ITEMS 7.a 2023-24 ANNUAL REPORT OF THE TOURISM BUSINESS IMPROVEMENT DISTRICT Economic Development & Tourism Manager Molly Cano, Tourism & Community Promotions Manager Jacqui Clark-Charlesworth and TBID Chair Lydia Bates provided an in-depth staff report and responded to Council questions. Public Comments: None ---End of Public Comment--- Motion By Vice Mayor Pease Second By Mayor Stewart 1. To receive and approve the TBID Board’s annual report for FY 2023-24; and 2. Adopt a Draft Resolution of Intention entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, declaring its intention to continue the San Luis Obispo Tourism Business Improvement District, to continue the basis for and to levy the assessment for the district, and to set a date for the Public Hearing on the district and the assessment for 2024-25.” Ayes (4): Council Member Marx, Council Member Shoresman, Vice Mayor Pease, and Mayor Stewart Absent (1): Council Member Francis CARRIED (4 to 0) 7.b ANNUAL UPDATE ON IMPLEMENTATION OF THE ECONOMIC DEVELOPMENT STRATEGIC PLAN Deputy City Manager Greg Hermann, Economic Development & Tourism Manager Molly Cano and Economic Development Analyst McKenzie Taffe provided an in-depth staff report and responded to Council questions. Public Comments: Rachel Whalen Shana Paulson ---End of Public Comment---           Page 390 of 641 6 Motion By Council Member Marx Second By Council Member Shoresman Receive and file the annual update on the implementation status of the Economic Development Strategic Plan (EDSP). Ayes (4): Council Member Marx, Council Member Shoresman, Vice Mayor Pease, and Mayor Stewart Absent (1): Council Member Francis CARRIED (4 to 0) 7.c FISCAL YEAR 2023-24 YEAR END BUDGET REPORT Finance Director Emily Jackson and Principal Budget Analyst Riley Kuhn provided an in-depth staff report and responded to Council questions. Public Comments: None ---End of Public Comment--- Action: By consensus the Council directed staff to receive and file the FY 2023-24 Year End Budget Report; and the Revised Long-Term Forecast, 2025-27 Financial Plan calendar and community outreach survey in preparation for the 2025-27 financial planning process. 10. ADJOURNMENT The meeting was adjourned at 9:14 p.m. The next Regular City Council Meeting is scheduled for October 15, 2024 at 5:30 p.m. in the Council Chambers at City Hall, 990 Palm Street, San Luis Obispo.           Page 391 of 641 Certificate Of Completion Envelope Id: 21730E0CC6364AA1BD52F77E51602650 Status: Completed Subject: Complete with Docusign: Amendment No. 1 to the Grant Agreement w/SLO Repertory Theatre Department: Supplier: Source Envelope: Document Pages: 23 Signatures: 4 Envelope Originator: Certificate Pages: 5 Initials: 0 City Clerk AutoNav: Enabled EnvelopeId Stamping: Enabled Time Zone: (UTC-08:00) Pacific Time (US & Canada) 990 Palm Street San Luis Obispo, CA 93422 cityclerk@slocity.org IP Address: 104.129.202.91 Record Tracking Status: Original 10/2/2024 8:56:07 AM Holder: City Clerk cityclerk@slocity.org Location: DocuSign Signer Events Signature Timestamp Kevin Harris kevinharris@slorep.org Security Level: Email, Account Authentication (None) Signature Adoption: Pre-selected Style Using IP Address: 74.82.136.77 Sent: 10/3/2024 8:52:21 AM Viewed: 10/3/2024 11:38:44 AM Signed: 10/3/2024 11:38:51 AM Electronic Record and Signature Disclosure: Accepted: 10/3/2024 11:38:44 AM ID: 1f556367-1845-4f32-8cab-69ed33cbe655 Christine Dietrick cdietrick@slocity.org City Attorney City of San Luis Obispo Security Level: Email, Account Authentication (None) Signature Adoption: Drawn on Device Using IP Address: 104.129.202.98 Sent: 10/3/2024 11:38:54 AM Viewed: 10/4/2024 9:20:55 AM Signed: 10/4/2024 9:21:01 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign Erica A. Stewart estewart@slocity.org SLO City Council Member Security Level: Email, Account Authentication (None)Signature Adoption: Drawn on Device Using IP Address: 97.93.29.191 Signed using mobile Sent: 10/4/2024 9:21:04 AM Viewed: 10/5/2024 8:53:21 AM Signed: 10/5/2024 8:53:48 AM Electronic Record and Signature Disclosure: Accepted: 9/30/2020 7:31:22 PM ID: aa497747-f8b8-4523-88a2-abadbf479cff Teresa Purrington tpurrington@slocity.org City Clerk City of San Luis Obispo Security Level: Email, Account Authentication (None) Signature Adoption: Uploaded Signature Image Using IP Address: 174.87.88.145 Signed using mobile Sent: 10/5/2024 8:53:50 AM Viewed: 10/6/2024 5:30:14 AM Signed: 10/6/2024 5:30:22 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign Page 392 of 641 In Person Signer Events Signature Timestamp Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Robert Hill rhill@slocity.org Security Level: Email, Account Authentication (None) Sent: 10/6/2024 5:30:25 AM Viewed: 10/7/2024 11:41:30 AM Electronic Record and Signature Disclosure: Accepted: 8/5/2024 3:55:55 PM ID: 8a7b5827-e37e-46c1-808e-5d7ea72068b0 Greg Hermann ghermann@slocity.org Deputy City Manager Security Level: Email, Account Authentication (None) Sent: 10/6/2024 5:30:26 AM Electronic Record and Signature Disclosure: Accepted: 10/3/2024 1:26:19 PM ID: c1a25912-27f2-44df-9477-96f06dc717c2 Dan Clancy dclancy@slocity.org Purchasing Analyst City of San Luis Obispo Security Level: Email, Account Authentication (None) Sent: 10/6/2024 5:30:27 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign Witness Events Signature Timestamp Notary Events Signature Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 10/3/2024 8:52:21 AM Certified Delivered Security Checked 10/6/2024 5:30:14 AM Signing Complete Security Checked 10/6/2024 5:30:22 AM Completed Security Checked 10/6/2024 5:30:27 AM Payment Events Status Timestamps Electronic Record and Signature Disclosure Page 393 of 641 ELECTRONIC RECORD AND SIGNATURE DISCLOSURE From time to time, Carahsoft OBO City of San Luis Obispo (we, us or Company) may be required by law to provide to you certain written notices or disclosures. 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To withdraw your consent with Carahsoft OBO City of San Luis Obispo To inform us that you no longer want to receive future notices and disclosures in electronic format you may: i. decline to sign a document from within your DocuSign account, and on the subsequent page, select the check-box indicating you wish to withdraw your consent, or you may; ii. send us an e-mail to keriksso@slocity.org and in the body of such request you must state your e-mail, full name, IS Postal Address, telephone number, and account number. We do not need any other information from you to withdraw consent.. The consequences of your withdrawing consent for online documents will be that transactions may take a longer time to process.. Required hardware and software Operating Systems: Windows2000? or WindowsXP? 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Page 395 of 641 Acknowledging your access and consent to receive materials electronically To confirm to us that you can access this information electronically, which will be similar to other electronic notices and disclosures that we will provide to you, please verify that you were able to read this electronic disclosure and that you also were able to print on paper or electronically save this page for your future reference and access or that you were able to e-mail this disclosure and consent to an address where you will be able to print on paper or save it for your future reference and access. Further, if you consent to receiving notices and disclosures exclusively in electronic format on the terms and conditions described above, please let us know by clicking the 'I agree' button below. By checking the 'I Agree' box, I confirm that: • I can access and read this Electronic CONSENT TO ELECTRONIC RECEIPT OF ELECTRONIC RECORD AND SIGNATURE DISCLOSURES document; and • I can print on paper the disclosure or save or send the disclosure to a place where I can print it, for future reference and access; and • Until or unless I notify Carahsoft OBO City of San Luis Obispo as described above, I consent to receive from exclusively through electronic means all notices, disclosures, authorizations, acknowledgements, and other documents that are required to be provided or made available to me by Carahsoft OBO City of San Luis Obispo during the course of my relationship with you. Page 396 of 641 To: Robert Hill, ŝƚLJŽĨ^>K From: Kevin Harris, SLO REP RE: ENA REQUIREMENTS for lease negoƟaƟon All of us at SLO REP are thrilled to enter lease negoƟaƟons with the City of SLO and to complete this important milestone in our partnership. According to our updated ENA from May 22, 2024, SLO REP is required to show that our organizaƟon has raised at least 50% of all design/construcƟon costs to complete the project before entering into lease negotiations. Our current cost estimates put the total costs of design/construction at $16,715,973. SLO REP is also required to provide a $300,000 ŽƉĞƌĂƚŝŶŐ ƌĞƐĞƌǀĞƐ fund and pay for approximately $800,000 for in-lieu parking fees before beginning construction. These additional non-direct expenses bring the overall total for the City site to $17,815,973. As of 9/30/24, SLO REP has available funds (cash and signed pledges) totaling $14,095,886, or, 79% of the overall total. Please see attached for a complete breakdown of these funds and SLO REP’s latest bank account statements. SLO REP’s last pricing study was completed in January 2024 and accepted for the updated ENA on 5/22/24. Our construcƟon docs are 100% complete and ready to be submiƩed for review. Our current Ɵmeline calls for an updated pricing study (based on completed construcƟon documents and iniƟal feedback from reviewers) to be completed by December 2024. Please see aƩached for a complete breakdown of our latest pricing study. We are currently preparing our RFP for contractors, using a CMAR structure for the project͖ŽŶƐƚƌƵĐƚŝŽŶ DĂŶĂŐĞƌ Ăƚ ZŝƐŬ ;DZͿ ŝƐ Ă ƉƌŽũĞĐƚ ĚĞůŝǀĞƌLJ ŵĞƚŚŽĚ ǁŚĞƌĞ Ă ĐŽŶƐƚƌƵĐƚŝŽŶŵĂŶĂŐĞƌ;DͿŝƐŚŝƌĞĚƚŽŽǀĞƌƐĞĞĂƉƌŽũĞĐƚĨƌŽŵĚĞƐŝŐŶƚŽĐŽŶƐƚƌƵĐƚŝŽŶ͕ĂŶĚŝƐ ƌĞƐƉŽŶƐŝďůĞĨŽƌĂŶLJĐŽƐƚƐƚŚĂƚĞdžĐĞĞĚĂŐƵĂƌĂŶƚĞĞĚŵĂdžŝŵƵŵƉƌŝĐĞ͘We expect to choose a contractor by 2ndquarter, 2025, and have a final MAXIMUM POSSIBLE COST for the project negotiated by June, 2025. At this point, the cost of the project will be fixed. Please let me know if you need any additional information from SLO REP at this time. Sincerely, Kevin Harris Managing ArƟsƟc Director SLO REP Page 397 of 641 Page 398 of 641 1 San Luis Obispo Repertory Theatre Lease Agreement City Council Meeting –December 10, 2024 2 Recommendation Adopt a Draft Resolution entitled,“A Resolution of the City Council of the City of San Luis Obispo, California,finding that a Lease Agreement with San Luis Obispo Repertory Theatre for certain real property owned by the City located at 610 and 614 Monterey Street,a portion of 972 Nipomo Street, and a portion of City Parking Lot No.14 is of Public Benefit in accordance with California Government Code Section 53078 and approving the Lease Agreement”to: 1.Find that a 99-year lease serves the public interest of the City of San Luis Obispo by advancing arts and culture,economic development,and other public benefits,in accordance with California Government Code Section 53083;and 2.Approve a 99-year Lease Agreement between the City of San Luis Obispo and the San Luis Obispo Repertory Theatre and authorize the City Manager to execute the agreement. 3 New Theatre Renderings Monterey Street Perspective 4 New Theatre Renderings Corner of Monterey and Nipomo Street Perspective 5 New Theatre Renderings Interior Seating and Floor Plan Perspective 6 Policy Context & Background Policy Context •Downtown Concept Plan (2017) •Major City Goal, cultural vitality (2023-25) •Financial Management Manual, Section 475 (real property / long-term leases) Background •SLO REP and City plan for new theatre location beginning 1990’s and 2000’s •Exclusive Negotiating Agreement, as amended City and SLO REP milestones •SLO REP capital campaign Funding secured to date •Grant Agreement, as amended •Surplus Land Act compliance 7 Key Highlights of Lease Agreement •99-year lease term. •Rent of $1 per year. •SLO REP must demonstrate that all funding, plus contingency and reserves, are available prior to commencement of construction, which must begin within one year after completion of the Cultural Arts District Parking Structure and taking possession of the site, and construction must be completed within three years thereafter. •Theatre is to be used primarily for live performances for cultural, educational, and recreational purposes and may also be used for festivals, workshops, public speakers, and educational events. City has the right to use the theatre twice per year. Admission fees are at SLO REP’s discretion. •Utilities, maintenance, insurance, and taxes are SLO REP’s responsibility. •SLO REP may only assign the lease with City Council approval, sublet a portion of the leased premises with City Manager approval, and may enter into short-term rentals up to 30-days in duration at its discretion 8 Economic Development Subsidy •Under California Government Code Section 53083, the City is required to provide specified information in written form available to the public, through its website, for any economic development subsidy within its jurisdiction and to provide public notice and a hearing regarding the subsidy. An “economic development subsidy” is defined in relevant part under the Government Code as “any expenditure of public funds or loss of revenue to a local agency in the amount of one hundred thousand dollars ($100,000) or more, for the purpose of stimulating economic development within the jurisdiction of a local agency, including, but not limited to . . . grants . . . [and] land price subsidies.” (Cal. Gov. Code § 53083(g)(1)). •The City Council has committed $6,700,000 in grant funding toward the Downtown Theatre, and the draft lease agreement for the land specifies $1 per year rent. •The following information is required to be considered as part of a Public Hearing (see next slides): 9 Economic Development Subsidy (1) The name and address of all corporations or any other business entities, except for sole proprietorships, that are the beneficiary of the economic development subsidy, if applicable. San Luis Obispo Repertory Theatre, A California Non-Profit. P.O. Box 122 San Luis Obispo, CA 93406 (2) The start and end dates and schedule, if applicable, for the economic development subsidy. The start date is upon commencement of possession of the leased premises, anticipated in 2026. City of San Luis Obispo grant funding would be expended within three years following commencement of construction. Rent of $1.00 per year is for a 99-year term. (3) A description of the economic development subsidy, including the estimated total amount of the expenditure of public funds by, or of revenue lost to, the local agency as a result of the economic development subsidy. The total amount of direct expenditures of public funds is $6,700,000.00. The leased premises is currently vacant land that does not produce revenue. 10 Economic Development Subsidy (4) A statement of the public purposes for the economic development subsidy. The public purpose for the economic development subsidy is to support arts and cultural activities in the downtown area of San Luis Obispo, which is expected to generate direct and indirect local economic impact benefits. (5) Projected tax revenue to the local agency as a result of the economic development subsidy. Projected tax revenue, whether sales tax or property tax, is not yet known. According to data provided by SLO REP and Americans for the Arts: Arts and Economic Prosperity 6 Survey (January 2024), the operation of the new Downtown Theatre will generate $4 million in economic activity on an annual basis. SLO REP will be subject to possessory interest property tax, however as the Downtown Theatre is not yet constructed, it is not yet known what the assessment and taxing rate will be. (6) Estimated number of jobs created by the economic development subsidy, broken down by full-time, part-time, and temporary positions. According to data provided by SLO REP, the operation of the new Downtown Theatre will generate 7 full time positions and 5 full time equivalent positions. Show-specific artist contracts will generate 16.73 full time equivalent positions, for a total of 28.73 full time equivalent positions comprised of 277 positions hired. 11 Recommendation Adopt a Draft Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, finding that a Lease Agreement with San Luis Obispo Repertory Theatre for certain real property owned by the City located at 610 and 614 Monterey Street, a portion of 972 Nipomo Street, and a portion of City Parking Lot No. 14 is of Public Benefit in accordance with California Government Code Section 53078 and approving the Lease Agreement” to: 1. Find that a 99-year lease serves the public interest of the City of San Luis Obispo by advancing arts and culture, economic development, and other public benefits, in accordance with California Government Code Section 53083; and 2. Approve a 99-year Lease Agreement between the City of San Luis Obispo and the San Luis Obispo Repertory Theatre and authorize the City Manager to execute the agreement. 12