To: Sonoma County Board of Supervisors
Department or Agency Name(s): General Services, Human Services
Staff Name and Phone Number: Caroline Judy, General Services 707-565-8058; Karen Fies, Human Services: 707-565-6990
Vote Requirement: Majority
Supervisorial District(s): Countywide
Title:
Title
New Lease for Human Services Department at 3843 Brickway Boulevard, Santa Rosa
End
Recommended Action:
Recommended action
Authorize the Board Clerk to publish notice declaring the intent of the Board of Supervisors to execute a lease with Harvest Business Center LLC, as Landlord, for a Premises at 3843 Brickway Boulevard, Santa Rosa, California, for 33,879 rentable square feet rentable square feet of Class A office space for a term of 10 years commencing August 1, 2020, and continuing through July 31, 2030, with three (3) five-year options to extend the lease term through 2045, at an initial monthly rent of Sixty-Two Thousand Six-Hundred Seventy-Six and 15/100 Dollars ($62,676.15), ($1.85 per square foot of Rentable Area per month), with annual rent escalations of three percent (3%). All tenant improvements to the Premises are to be provided by the landlord at the landlord’s sole expense. The lease may be terminated by the County at any time due to non-appropriation of funds or construction of a new County government center.
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Executive Summary:
Purpose. The Director of General Services, in consultation with the Human Services Department, requests Board consideration of a Lease at 3843 Brickway Boulevard for 33,879 rentable square feet to be occupied by the Human Services Department’s Economic Assistance Division. The proposed Lease will increase operational efficiency for the Human Services Department’s Economic Assistance Division by enabling the Division to occupy a Premises that offers an efficient, open layout and existing, high quality improvements well suited for their call center needs. Board approval of the Lease will enable the Department of Human Services to increase their ability to effectively run their operations and serve the public. Annual rent for the new lease will be $213,183.37 less than the current lease, and annual parking fees at the new lease will be $116,064 less than the current lease (parking is free with the new lease), representing $329,247.37 in total annual avoided costs with the new lease.
Discussion:
Human Services Department’s Economic Assistance Division will be relocating to the proposed Premises at 3843 Brickway Boulevard, Santa Rosa.
In August of 2019 the Human Services Department, supported by the Department of General Services, initiated a search for office space from Rohnert Park to the Sonoma County Airport area, with the goal of identifying suitable space to meet the Human Service’s Department Economic Assistance Division’s current and anticipated demand for services for its call center and administrative operations.
The Human Services Department seeks to relocate from its current site at 520 Mendocino Avenue, Santa Rosa, when its lease expires in October 31, 2020 to a site better suited for its operations. The recent transfer of the Economic Assistance Division’s public facing operations from 520 Mendocino Avenue back to Paulin Drive at the County center has provided the Human Services Department with greater flexibility on where to locate the remaining Economic Assistance Division operations.
In September of 2019, the General Services Department initiated lease negotiations on behalf of the Human Services Department at 3843 Brickway Boulevard, a building located close by Human Services’ Administration and Adult & Aging Divisions in the Sonoma County Airport area. The initial term will be ten (10) years and expire on July 31, 2030. The County will have three (3) five (5) year options to further extend the lease term to 2045. The Premises will consist of 33,879 rentable square feet on the first and second floors of the building. The monthly rent will be Sixty-Two Thousand Six-Hundred Seventy-Six and 15/100 Dollars ($62,676.15) or ($1.85 per square foot of Rentable Area per month), with annual rent escalations of three percent (3%). All tenant improvements will be provided at the Landlord’s sole expense.
Your approval of the proposed Lease will allow the Human Services Department uninterrupted operations for up to twenty-five (25) years at its new site at 3843 Brickway Boulevard while giving it the flexibility of terminating the lease at any time due to non-appropriation of funds or construction of a new County government center, and enable the Department’s Economic Assistance Division to occupy a Premises better suited to its operational needs, thereby increasing its operational efficiency and improving its effectiveness in serving the Public.
Lease Agreement. The proposed Lease Agreement between Harvest Business Center LLC, as Landlord, and the County of Sonoma, as Tenant, contains the following key provisions:
1. Ten (10) year initial lease term running from August 1, 2020 to July 31, 2030.
2. Three (3) options that each extend the term an additional five (5) years at a rental rate set at 100% of the prevailing market rate, enabling the County to maintain control of the Premises through July 31, 2045. Each extension option is subject to written notice from the County at least 9 months prior to the end of the then current term.
3. Premises total 33,879 rentable square feet.
4. Rent is Sixty-Two Thousand Six-Hundred Seventy-Six and 15/100 Dollars ($62,676.15), ($1.85 per square foot of Rentable Area per month).
5. Annual rent escalations of three percent (3%).
6. On-site parking spaces are provided free of charge.
7. Landlord will provide tenant improvements at the Landlord’s sole cost.
8. Lease may be terminated by the County at any time due to non-appropriation of funds or construction of a new County government center. Termination fee shall equal unamortized tenant improvement and closing costs.
County staff, with input from real estate brokerages, determined that the negotiated rent, lease terms and Landlord’s Tenant Improvements contribution represent an acceptable fair market rental rate for the location and is consistent with rates and lease terms of other office tenants in the area.
The proposed Human Services Department’s Economic Assistance Division’s Premises will be located in 3843 Brickway Boulevard, Santa Rosa, a two-story, Class office building with free on-site and street parking located near Sonoma County Airport and within walking distance of two other Human Services Department Divisions; Administration and Adult & Aging. The Premises will be improved by the landlord at the landlord’s sole cost.
Project Costs and Construction Schedule. The total relocation cost to the Human Services Department is estimated to be Eight Hundred and Forty Thousand Dollars ($840,000), consisting of Five Hundred and Ninety-Four Thousand ($594,000) for refurbished furniture, Two Hundred and Sixteen Thousand ($216,000) for cabling and ISD support, and Thirty Thousand ($30,000) for Proximity Card installations. Landlord is to complete all tenant improvements, at the landlord’s sole expense, with estimated completion in July, 2020.
Termination Fee Schedule. A termination fee schedule is attached as an Exhibit to the end of the lease that shows $1,257,018 in tenant improvement, brokerage, legal and other closing costs amortized on a monthly, straight line basis at a 8% interest rate over the initial term of the lease. This schedule is to demonstrate what the lease termination fee will be for the County at any specific point during the initial term. For example, if the County terminates the lease in the 85th month of the lease term (after 7 years), the termination fee will be $477,293.
For the past three years staff have negotiated new leases with provisions to enable early termination if and when a new County Center campus is built.
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 January 17, 2020, for consideration and consummation of the proposed lease.
Prior Board Actions:
None
Fiscal Summary
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Expenditures |
FY 19-20 Adopted |
FY20-21 Projected |
FY 21-22 Projected |
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Budgeted Expenses |
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$1,529,437.65 |
$772,796.93 |
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Additional Appropriation Requested |
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Total Expenditures |
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Funding Sources |
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General Fund/WA GF |
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State/Federal |
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$1,529,437.65 |
$772,796.93 |
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Fees/Other |
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Use of Fund Balance |
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Contingencies |
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Total Sources |
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$1,529,437.65 |
$772,796.93 |
Narrative Explanation of Fiscal Impacts:
Funding to finance the costs incurred for relocation and lease costs replacing the original downtown Santa Rosa lease will be provided from the Economic Assistance Medi-Cal allocation. First year FY 2020-2021 costs of $1,529,437.65 will be comprised of actual rent at $689,437.65 ($62,676.15/mo. X 11 months pro-rated) plus relocation costs of $840,000. No additional county General Fund is required for these expenditures.
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Staffing Impacts: |
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Position Title (Payroll Classification) |
Monthly Salary Range (A-I Step) |
Additions (Number) |
Deletions (Number) |
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Narrative Explanation of Staffing Impacts (If Required):
None
Attachments:
Attachment 1 - Lease Agreement between Harvest Business Center LLC as Landlord and the County of Sonoma as Tenant
Attachment 2 - Notice of Intent to Lease
Related Items “On File” with the Clerk of the Board:
None