Loading...
HomeMy WebLinkAbout12-04-2018 Item 10 - SLO Repertory Theatre Exclusive Negotiating Agreement Department Name: Administration Cost Center: 1003 For Agenda of: December 4, 2018 Placement: Consent Estimated Time: N/A FROM: Derek Johnson, City Manager Prepared By: Robert A. Hill, Interim Deputy Director SUBJECT: SAN LUIS OBISPO REPERTORY THEATRE EXCLUSIVE NEGOTIATING AGREEMENT RECOMMENDATION Authorize the Mayor to sign an Exclusive Negotiating Agreement (ENA) with the San Luis Obispo Repertory Theatre (SLO REP) in a final form acceptable to the City Attorney for long- term use of a portion of the Palm/Nipomo Parking Structure site to construct and operate a new theatre, based on parameters previously set forth by the City Council (Attachment A). DISCUSSION Background The San Luis Obispo Little Theatre, now known as the San Luis Obispo Repertory Theatre, has been a long-standing tenant of the City’s old library property at 888 Morro Street, located next door to City Hall. That lease agreement has been extended numerous times and is currently set to expire in 2022. In January of 1990, the C ity entered into an agreement with SLO REP to allow construction of a 300-seat community theatre on City-owned property located at 1010 Nipomo Street. Over the course of the next decade, SLO REP was unable to meet the original fundraising and construction schedules set forth in that agreement and subsequent amendments. In March of 2000, the Council instead entered into an agreement with the San Luis Obispo Children’s Museum for the 1010 Nipomo Street site upon which the present -day facility would eventually be constructed. At the same time, the Council also committed and authorized continuing work with SLO REP to locate another suitable nearby site and identified several options within what would become the Palm / Nipomo Parking Structure site. In the past five years, SLO REP has become substantially re-invigorated as a community partner and local non-profit, including rebranding from the San Luis Obispo Little Theatre to become SLO REP and to set forth a new presence in the community, building a strong B oard and governance structure, establishing a professional staff and increased theatre offerings, and implementing a successful capital campaign in anticipation of the design, construction, and operating costs associated with the long-planned move to a new location. At this time, SLO REP has developed a conceptual site plan and architecture and has raised significant funding towards the project, with other major donors reported to have expressed serious interest pending Packet Pg. 87 Item 10 additional assurances from the City through the proposed ENA. City and SLO REP staff have been in preliminary discussions since mid-2015, and those discussions have now culminated in the draft ENA that is the subject of this Council Agenda Report . In a parallel process, the City had been working on the environmental document for the Palm/Nipomo Parking Structure that has recently been approved by the City Council. Key Highlights of the Exclusive Negotiating Agreement The ENA includes the following key deal points and structure that are consistent with prior direction from the City Council: 1. Five-year term for exclusive negotiations; 2. SLO REP fundraising plan submittal and proof of financial ability to complete the project ; 3. Lease negotiation and execution can begin when the City has complete d a rezone and / or General Plan Amendment and a lot line adjustment to create the Remainder Property, and SLO REP has evidence of available funds; 4. Anticipated lease terms include a 40-year term with right of first refusal; rent of $1 per year ; and 5. Standard review and approval process and SLO REP completes all conditions of approval, including street frontage improvements and mitigation measures associated with its project . Policy Context The City’s Financial Management Manual (Section 475 -C) allows exclusive negotiations for long-term leases of City property, as well as provisions for leases to non-profit organizations, where there is a clear link between the proposal and accomplishment of significant City goals, plans or policies and where the proposal has a clear and measurable community benefit. Staff and prior Councils have considered the development of a not -for-profit live performance theatre on a portion of the Palm/Nipomo Parking Structure site (referred to in the ENA as the “Remainder Property”) to be in the public interest and in accordance with the City's goals and the “Cultural District” concept that is one of the hallmarks of the new Downtown Concept Plan. Providing non-profits such as SLO REP an opportunity to partner with the City is also a key part of the Land Use Element of the City’s General Plan (2014)1. Public Engagement Substantial pu blic engagement has been undertaken through the planning stages of the Palm/Nipomo Parking Structure, as well as with the Downtown Concept Plan, that reac hes all aspects of the City’s Public Engagement and Noticing Manual (2015). Attachment B contains graphics from SLO REP and the Downtown Concept Plan that have been publicly available. 1 4.8. Downtown as Focal Point. The Downtown should remain the focus for nighttime entertainment, cultural events and related activities. It should be a pleasant and safe place at all times. 5.2.1. Cooperation. The City shall cooperate with other agencies and with community groups to help provide facilities which meet broad community cultural needs. 5.2.3. Community Arts Support. The City shall continue to support community arts programs through a variety of means, such as loans, grants, and help in obtaining sites. Packet Pg. 88 Item 10 CONCURRENCE The Exclusive Negotiating Agreement and recommendation contained herein has been reviewed by the City Attorney’s Office and by the Public Works Department’s Parking Division whom have provided their concurrence. ENVIRONMENTAL REVIEW Entering into the Exclusive Negotiating Agreement with SLO REP is not considered a project under CEQA Guidelines. The Palm/Nipomo Parking Structure, of which the planned new SLO REP Theatre is a part, was evaluated under the Final Environmental Impact Report approved by City Council on July 17, 2018 by Resolution No. 10923 (2018 Series). FISCAL IMPACT Budgeted: N/A Budget Year: 2018-19 Funding Identified: N/A Entering into the Exclusive Negotiating Agreement with SLO REP has very modest fiscal implications in and of itself. It will require only modest staff time from City Administration to oversee the agreement until such time as it ripens into the long-term lease agreement contemplated herein. The ongoing costs associated with siting SLO REP’s new theatre will be addressed in the proposed lease agreement. ALTERNATIVES The City Council could: 1. Approve the Exclusive Negotiating Agreement with amendments; 2. Deny the Exclusive Negotiating Agreement, although this is not recommended given prior Council direction and the good-faith negotiations that have been made to date wit h SLO REP; 3. Continue the item with specific direction to staff to provide more information or make changes, or if more discussion time is required before taking action. Attachments: a - Final Draft Exclusive Negotiating Agreement b - SLO REP Map and Graphics Packet Pg. 89 Item 10 EXCLUSIVE NEGOTIATING AGREEMENT This Exclusive Negotiating Agreement (“Agreement”) is entered into this ___day of ______, 2018 (the “Effective Date”), by and between the City of San Luis Obispo, a California charter city and 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 610, 614, and 630 Monterey 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, 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, 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, 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: Packet Pg. 90 Item 10 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, the City shall 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: Packet Pg. 91 Item 10 i. 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 co mpletion of the Palm Nipomo Parking Structure. These 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. ii. 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. iii. 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. iv. Formal Development Application. Finalize and submit a formal development application for the Theatre to the City. v. 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: Packet Pg. 92 Item 10 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 . 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 t he 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 Packet Pg. 93 Item 10 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. 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, a long 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 Packet Pg. 94 Item 10 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. 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 of San Luis Obispo Attn: Administration 990 Palm Street San Luis Obispo, CA 93401 San Luis Obispo Repertory Theatre Attn: Kevin Harris 888 Morro Street San Luis Obispo, CA 93401 Packet Pg. 95 Item 10 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. City of San Luis Obispo ____________________________________ Heidi Harmon, Mayor Attest: ____________________________________ Teresa Purrington, City Clerk Approved as to Form: ___________________________________ J. Christine Dietrick, City Attorney San Luis Obispo Repertory Theatre By: _________________________________ Michael Simkins Its: President, Board of Directors Packet Pg. 96 Item 10 Concept Site Map, Front Elevation, and Site Plan Proposed site layout of the parking structure with the SLO Repertory Theatre, parking structure, and office/commercial space. Packet Pg. 97 Item 10 Front Elevation Concept Site Plan Concept Packet Pg. 98 Item 10