Rancho Palos Verdes City Council
   

TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL

FROM: ASSISTANT CITY MANAGER

DATE: NOVEMBER 18, 2003

SUBJECT: EXTENSION OF PALOS VERDES ON THE NET BUILDING LEASE

RECOMMENDATION

Authorize the extension of the lease agreement with Palos Verdes on the Net for the use of the portable building at City Hall until December 31, 2008.

BACKGROUND

On October 1, 1996, the City Council approved a two year lease agreement with Palos Verdes on the Net (PVN) to use the former Recreation & Parks Building located adjacent to City Hall as an office and classroom space in support of their community computer training center and Internet activities. The current lease agreement allows PVN to use the computer center building at no cost, except to pay for customary maintenance costs and $200 per month towards the building's electrical utility costs. Telephone and/or other utilities are furnished at the tenant's sole expense. The City pays the cost of water service. The Council renewed the lease on December 1, 1998 for an additional five (5) year period. The current building lease is due to expire on December 31, 2003.

On May 6, 2003, PVN entered into a separate lease agreement with the City for the use of the old Cox cable studio building at the Civic Center complex as a multimedia production studio. Under the terms of the lease, PVN pays no rent to the City for the use of the building and the City pays for all utilities, including telephone, alarm system, electricity, water and custodial services. In exchange, PVN provides the City with equipment and staffing to develop, film, edit and produce original programming for broadcast on the local cable network Channels 3 and 33. This lease will expire on May 6, 2008.

DISCUSSION

PVN is a non-profit, community-based organization providing a number of information access services to the community, such as computer workshops, internship programs for students and specialized computer training programs for the community at large.

It also administers the Palos Verdes on the Net Internet web page and hosts the web home pages for all four cities on the Peninsula. Since 1998, the City has significantly increased its contract for services with PVN, which in addition to hosting the City’s web site, includes maintaining and upgrading the City’s computer data network and providing additional services on the web site, such as posting City Council staff reports, live web casting of City Council meetings and a email list serve system. The City’s current annual contract for services with PVN is a little over $180,000.

One electric meter currently serves all the buildings in the Civic Center complex. When the lease with Palos Verdes on the Net was first negotiated in 1996, Southern California Edison assisted the City staff in estimating the computer center's proportionate share of the total monthly electrical cost. Based on this estimate, the lease requires PVN to pay the City $200 per month for electrical service. Staff found that this amount was still appropriate when the lease was first extended two years later in 1998.

Because it has been five years since the lease was last renewed, staff looked at the change in electricity usage and costs at the Civic Center in that time. Staff compared the City's electricity bills during FY 97/98 (June through July) and last fiscal year, FY 02/03. In FY 97/98, the City’s average monthly cost for electricity was $1,109. During FY 02/03, this amount increased to $2,418 per month (see chart below). This is a 118% increase, which is attributable to not only an increase in usage, from an average of 11,050 kWh per month in FY 97/98 to 16,396 in FY 02/03, but also to an increase in Edison’s rates from 9.26 cents per kWh to 12.14 cents. Therefore, in order to keep pace with the increase in costs to the City, staff recommends that PVN’s monthly contribution for electricity be increased from $200 to $436.

CIVIC CENTER

ELECTRICITY COSTS

 

FY 97/98

FY 02/03

July

$1,308

$2,840

August

$1,375

$3,103

September

$1,324

$2,945

October

$1,298

$2,685

November

$1,075

$2,564

December

$1,026

Not Available

January

$1,047

$2,325

February

$901

$2,284

March

$1,124

$2001

April

$927

$2,252

May

$933

$1,457

June

$971

$2,144

AVERAGE COST PER MONTH:

$1,109

$2,418

ADDITIONAL INFORMATION

The current lease allows either party to terminate the agreement at any time upon providing 90 days advance written notice. A copy of the current lease is attached to this report for the Council's reference

CONCLUSION

Staff recommends that the current lease with Palos Verdes on the Net, which is scheduled to expire at the end of the year, be extended for an additional five (5) year period, until December 31, 2008. In addition, due to increases in the City’s electricity costs over the last 5 years, staff recommends that PVN’s contribution to these cost be increased from the current rate of $200 to $436. Both of these items are reflected in the attached draft lease amendment, for the Council’s consideration.

FISCAL IMPACT

No new revenue will be generated should the current lease be extended at no cost to the tenant. As PVN will continue to compensate the City for monthly electrical utility costs and be responsible for routine maintenance expenses, there should be no additional City expense related to this lease extension.

Respectfully submitted:

Carolynn Petru

Assistant City Manager

Reviewed,

Les Evans

City Manager

Attachments:

Draft Lease Amendment

Current Lease with Palos Verdes on the Net