To: Sonoma County Board of Supervisors
Department or Agency Name(s): Public Infrastructure, Health Services
Staff Name and Phone Number: Johannes J. Hoevertsz, Public Infrastructure: 707-565-2550; Tina Rivera, Health Services: 707-565-4774
Vote Requirement: Majority
Supervisorial District(s): Countywide
Title:
Title
Lease for Department of Health Services at 440 Arrowood Drive, Santa Rosa
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Recommended Action:
Recommended action
Authorize the Board Clerk to publish notice declaring the intent of the Board of Supervisors to delegate authority to the Public Infrastructure Department Director to execute a lease agreement, in form approved by County Counsel, with Arrowood Holdings, LLC as Landlord, for a 25,414 square foot, 43 bedroom rehabilitation center at 440 Arrowood Drive, Santa Rosa, for a term of eight (8) years commencing approximately December 1, 2023, at an initial monthly rent of $47,016 ($1.85/sf/month), with annual rent escalations of three percent (3%), with one option to extend the lease term an additional five (5) years.
end
Executive Summary:
The Sonoma County Public Infrastructure (SPI) Department, in consultation with the Department of Health Services (hereinafter, “DHS” or “the Department”), requests Board consideration of a proposed lease of 440 Arrowood Drive, a 25,414 rentable square foot building consisting of 43 bedrooms plus a commercial kitchen and dining area, group meeting rooms, and offices, on a 1.55 acre property, to be occupied by the DHS Behavioral Health Division under its Bridge Housing Program <https://sonomacounty.ca.gov/sonoma-county-to-receive-295-million-in-state-grants-for-behavioral-health-and-homelessness-services>. The facility is currently vacant and most recently served as a facility that provides “Residential Treatment and Chemical Dependency Services,” offering “Specialized treatment services intended for those with co-occurring mental health and substance abuse problems.” DHS Behavioral Health Division’s intended use of this facility is consistent with the property’s previous use and clientele. Our use will include the prioritization of Care Court participants.
The notice of intent in front of your Board serves as community notification and should the public have additional questions regarding the project, they can email DHSDIR@sonoma-county.org.
Discussion:
In April 2023, the Department of Health Services, supported by Sonoma County Public Infrastructure, initiated negotiations to purchase or lease a vacant 25,414 square foot former rehabilitation center at 440 Arrowood Drive, Santa Rosa to be occupied by the Department of Health Services’ Behavioral Health Division’s Homeless Services Team under its Bridge Housing Program to provide temporary, interim housing for Behavioral Health clients with mental illness and/or co-occurring substance use disorder issues who are willing to receive treatment, as well as shelter for their minor children, with the goal to support homeless Behavioral Health clients to quickly exit to permanent housing. Negotiations progressed and lease terms were agreed to in July.
If the proposed lease is approved, the DHS Behavioral Health Division’s Homeless Services Team under its Bridge Housing Program will occupy and provide temporary, interim housing for Behavioral Health clients with mental illness and/or co-occurring substance use disorder issues who are willing to receive treatment, as well as shelter for their minor children. There will be 24/7 medical and clinical staffing with a Behavioral Health Housing Coordinator who will provide “gatekeeping” to assure appropriateness of all referrals. Referrals must be homeless clients with a mental illness and/or co-occurring substance use disorder. The proposed lease will provide enhanced support to help homeless Behavioral Health clients to quickly exit to permanent housing.
Lease Agreement. The proposed Lease Agreement between Arrowood Holdings, LLC as Landlord, and the County of Sonoma, as Tenant, contains the following key provisions:
1. Eight (8) year initial lease term. Term will commence upon completion of certain building improvements, estimated to be around December 1, 2023.
2. One (1) option that will extend the term an additional five (5) years, enabling the County to maintain control of the Premises through late 2036.
3. Premises totals 25,414 rentable square feet consisting of 43 bedrooms plus a commercial kitchen & dining area, group meeting rooms, and offices, on a 1.55 acre property.
4. Initial monthly rent of $47,016 ($1.85/sf/month).
5. Annual rent escalations of three percent (3%).
6. County to pay for its own utilities, janitorial.
7. County to pay for and manage property maintenance and repairs, excluding maintenance of structural elements such as roof, walls, supports, foundation, and parking area which will be landlord’s responsibility.
8. Landlord is responsible for taxes and insurance, with the County responsible for any increase in taxes and insurance costs after Year 1 (County responsibility for insurance cost increases are capped at no more than 8% of the previous year’s insurance cost).
9. On-site parking free of charge.
10. Prior to County occupancy Landlord will make the following improvements:
1. Paint interior and exterior throughout the premises
2. Install new interior flooring thought the premises: Vinyl flooring to be in common areas and bathroom facilities. Carpet to be in bedroom areas.
3. All restrooms to be in working order
4. Existing boiler heat-pump system to be restored to working order
5. Replace windows with new vinyl windows
6. Repair damaged areas of parking lot and stripe/seal, including ADA path of travel from parking lot to building entrance
7. Update landscaping along Arrowwood Drive near entry.
11. The lease can be terminated by the County with 270 days prior written notice for any of the following events: (a) the County Board of Supervisors does not appropriate sufficient funds for the rental of the property covered by this Lease; (b) the County Board of Supervisors discontinues, in whole or in part, the program or agency for which the Premises were leased; or (c) the funding, whether County, State or Federal, for the program or agency for which the Premises were leased is reduced or withdrawn.
12. Termination fee shall equal unamortized tenant improvement and closing costs.
County staff determined that, though there are no recent comparable leases to 440 Arrowwood Drive due to its unique design as a 43-bedroom rehabilitation center, and no similar properties currently on the market for lease or sale, the negotiated rent, lease terms, and Landlord’s Tenant Improvements contribution represent an acceptable fair market rental rate.
Project Costs and Construction Schedule. The total relocation cost to the Department is estimated to be $420,000, consisting of $360,000 for new furniture, and $60,000 for cabling, ISD support, and for Proximity Card installation.
Program Annual Operation. Once the lease is secured, program operations for BHBH can commence on the site. All program operations will be paid for with the proceeds of the BHBH grant award in the amount of $11,246,961 to be spent through 06/30/2027.
Procedural Authority. Government Code Section 25350 requires publication of notice of the Board’s intent to enter into a lease for three successive weeks prior to execution of the lease agreement where it is valued at more than $50,000. If your Board takes the requested action, this matter will return to the Board on or after October 17, 2023, for consideration and consummation of the proposed lease.
Strategic Plan:
This item directly supports the County’s Five-year Strategic Plan and is aligned with the following pillar, goal, and objective.
Pillar: Healthy and Safe Communities
Goal: Goal 4: Reduce the County’s overall homeless population by 10% each year by enhancing services through improved coordination and collaboration.
Objective: Objective 3: Increase investment in programs that treat underlying causes of homelessness, including substance abuse, mental illness, poverty, and lack of affordable housing.
Racial Equity:
Was this item identified as an opportunity to apply the Racial Equity Toolkit?
No
Prior Board Actions:
None
Fiscal Summary
|
Expenditures |
FY 23-24 Adopted |
FY 24-25 Projected |
FY 25-26 Projected |
|
Budgeted Expenses |
|
$760,247 |
$783,055 |
|
Additional Appropriation Requested |
$855,850 |
|
|
|
Total Expenditures |
$855,850 |
$760,247 |
$783,055 |
|
Funding Sources |
|
|
|
|
General Fund/WA GF |
|
|
|
|
State/Federal |
$855,850 |
$760,247 |
$783,055 |
|
Fees/Other |
|
|
|
|
Use of Fund Balance |
|
|
|
|
Contingencies |
|
|
|
|
Total Sources |
$855,850 |
$760,247 |
$783,055 |
Narrative Explanation of Fiscal Impacts:
DHS will request FY 2023-2024 budget appropriations for relocation expenditures in the amount of $855,850 via the Consolidated Budget Adjustments process. These costs will be funded via the $11.25 million award from the state Behavioral Health Bridge Housing Program to house homeless individuals with mental health and substance use disorders. The Department will come back to the board with the Bridge Housing award for appropriations.
New lease cost will be primarily funded via state and federal revenues. Total new annual office lease cost, inclusive of Year 1 relocations costs, are estimated to be $855,850 for FY 23-24, $760,247 for FY 24-25, $783,055 for FY 25-26, $806,546 for FY 26-27, $830,743 for FY 27-28, $855,665 for FY 28-29, $881,335 for FY 29-30, $907,775 for FY 30-31, and $382,886 for FY 31-32 (5 months only before Lease expiration date). BHBH funding will cover the cost of the lease and program operations through 06/30/2027. Expenses thereafter will be covered by reimbursement revenues from claiming Medi-Cal costs and other appropriate funding sources (e.g., Drug Medi-Cal Organized Delivery System, or DMC-ODS, once that program is operational perpetually after FY 24-25). A more detailed budget will be presented at a later date to obtain Board approval for program appropriations.
Narrative Explanation of Staffing Impacts (If Required):
None
Attachments:
1 - Lease Agreement between Arrowood Holdings, LLC as Landlord and the County of Sonoma as Tenant
2 - Notice of Intent to Lease
3 - Relocation and Leasing Cost Estimate
Related Items “On File” with the Clerk of the Board:
None