Steindorf Tenant Relocation

Jason E. Vann, CFO

September 18, 2014

Goals and Objectives

Provide chronological summary of activities and decisions for tenant relocation

Revisit summary of current plan and why it is our best option

Provide summary of how we utilize Professional Development Center and Shop

(why we need to maintain these buildings)

Revisit summarized cost analysis for current relocation plan

Provide pros & cons for other relocation options and why they were eliminated

Provide summary of potential tenants for available space

In the interest of time we will table the discussion on other

possible revenue enhancements to future board meetings.

Chronology of Tenant Relocation Discussion March 6, 2014 – First discussion on possible relocation plan (Board Meeting)

June 19, 2014 – Facilities committee discussed relocation idea - Why?

Avoid reduction of instructional program

$1.2M STRS contribution increase over 7 years

Discussed various options including Metzler, District Office, Bagby, and Firehouse

Best option: District Office (Shop & Professional Dev. Center) and Bagby (Portables)

Least restrictive environments (i.e., meets window of time and space availability)

Discussed phasing Steindorf project to allow tenants to remain longer until

construction completed

Maintains good working relationship with organizations that benefit our students

Chronology of Tenant Relocation Discussion July 4, 2014 – Facilities committee walked through high level cost estimates

($3.9M) and timeline for decision

Decision no later than end of September or miss window of opportunity

July 16, 2014 –Revisited relocation plan during public meeting (Board Meeting)

Listed Steindorf tenants and related annual revenue ($346k)

Potential revenue loss ($346k) and possible revenue retained (70% or ~$250k)

Potential cost of relocation project ($3.9M)

Summarized pros and cons

Discussed phasing Steindorf project

Timeline for construction:

9 month for portables at Bagby

12 month for new shop

20 months for new Professional Dev. Center (shorter if modular)

Chronology of Tenant Relocation Discussion July 30, 2014 - Facilities Committee continued discussion

Discussed projects needing Division of State Architects (“DSA”) approval

Updated Committee with tenant discussions: needs and interest

Additional cost to relocation plan (Fire Alarm)

August 7, 2014 – Provided financial model detailing impact of not relocating (B. Mtg.)

Fund balance falls below 3% reserve in 2016-17

August 21, 2014 – Board awarded SFA $290K in architectural design contracts (B. Mtg.)

Build new Professional Dev. Center and New Shop D.O. and portables at Bagby

August 27, 2014 – Facilities Committee discussed providing clarification at a

future board meeting on activities and decisions related to current tenant

relocation plan. Also provide detail on options considered, why we are pursuing

this option and eliminated others from consideration

Current Relocation Plan

Lease space at D.O. ($200k in revenue) and Bagby ($50k in revenue)

Build new shop and PD facility (@ $3.9M). [Board approved arch. design on Aug 21st]

Best option because:

Pro: Saves approx. 70% (or $250k) of Steindorf Lease Revenue

Pro: Maintains shop and Professional Development Center for districtwide needs

Pro: Will avoid immediate $250k reduction in instructional program

Equates to 2.5 Teachers; Other possible reductions include:

Music, PE, Field Trips, After School Programs, other “non-core” instructional activities

Professional development / training opportunities reduced

Strategic Tech Plan

Reduce office clerk and other district wide staff hours

Reduce instructional aides ($16k annual cost per instruction aide)

Eliminate kindergarten aides

Current Relocation Plan

Lease space at D.O. ($200k in revenue) and Bagby ($50k in revenue)

Build new shop and PD facility (@ $3.9M). [Board approved arch. design on Aug 21st]

Best option but:

Con: 15 yrs. to breakeven

Con: Additional costs to meet DSA fire alarm requirement

Con: Lost opportunity to use $3.9M to improve facilities (equates to ~ 7 classrooms)

Con: Lost opportunity to use for other revenue enhancements

How We Use Our Facilities

Professional Development Center:

1. Districtwide teacher trainings at least 2 to 3 times a month; other trainings

2. Board meetings at least twice a month; especially needed for recognition nights

3. Utilized by various other agencies and organizations

Current Shop - Used by Buildings and Grounds as well as Maintenance teams to:

4. Work area to build and repair equipment for school sites and various vehicles

At a moments notice it could be for tables, desks, chairs, mowers, trucks, vans

5. Store day to day materials, blue prints, reference manuals, equipment and tools

Other Alternatives Discussed

Split up current relocation plan / Do not replace buildings leased:

Pro: More dollars available for other Master Plan Facilities projects

Pro: No additional cost for DSA compliance

Con: If PD Center is eliminated… no space large enough for districtwide teacher trainings

Con: Additional cost to operating budget to rent shop space from nearby districts

Con: Logistical challenges ensue moving shop location

Con: If you renovate Fire House for shop, District losses $40.8k in annual revenue

Con: Still need to replace

lost lease revenue

or reduce

instructional program

Other Alternatives Discussed

Selling or leasing land at Metzler (2 Acres):

Pro: Additional one-time dollars in selling land. Only for facilities related purposes

Pro: If leased, creates ongoing revenue stream that helps operating budget

Pro: Allows staff to save for new home (similar to Santa Clara Unified plan)

Con: Loss of green space creates negative public opinion

Con: If sold, reduces growth options; Selling does not replace lost lease revenue

Con: If leased, taking back could be costly

Con: Timing of lease revenue may be after 2016-17 fiscal year

Con: Additional cost to manage lease spaces

Con: Unknown cost to make this a viable option

Other Alternatives Discussed

Developing Fire House for lease/sale (13,700 sq. ft.; leasable space may be less):

Pro: Additional one-time dollars in selling land. Only used for facilities projects

Pro: If leased, creates ongoing revenue stream that helps operating budget

Con: Limited space, cost to develop

Con: May need to purchase surrounding property (currently $2.7M fair market value)

Con: Zoning issues may delay sale or lease

Con: Unique turning corner may reduce desirability

Con: Cost of building multi level parking makes the transaction very costly

Con: Timing of revenue received may be after 2016-17 fiscal year

Con: Selling does not replace ongoing lease revenue lost

Other Alternatives Discussed

Vacating multipurpose room at Bagby and converting it into a PD Center:

Pro: Retains Professional Development Center for the district

Pro: Leaves more dollars available for other Master Plan Facilities projects

Con: Doesn’t replace the lease revenue lost at Steindorf

Con: Not large enough to accommodate districtwide teacher trainings

Con: Eliminates option to lease old multi-purpose room (ATLC)

Con: Eliminates option to turn old multi-purpose room into additional classrooms

Con: Timing of revenue may be after 2016-17

Other Alternatives Discussed

Lease under utilized space at Metzler:

(2,880 sq. ft.; $77k ongoing revenue; $1.1M cost to develop)

Pro: Creates at least 3 rooms to recapture ongoing revenue

Pro: Could be a future project to recapture remaining Steindorf revenue lost

Pro: Leaves options open for future growth and use of green space at Metzler

Con: Timing may not work out for some tenants or District

Con: Underground utilities and hard surface work more costly than D.O. and Bagby plan

Con: Approx. 13 years to break even (assuming 2% annual increase in rentals)

Con: By itself, only replaces approx. 20% of Steindorf lease revenue lost

Other Alternatives Discussed

More Cell Towers (Current tower generates $23k / yr. in revenue):

Pro: Retain buildings at D.O.

Pro: Facility dollars are saved for other Master Plan Facilities projects

Con: Need approx. 11 towers to recoup over approx. 70% (or $250k) of lost

lease revenue (probably not feasible)

Con: Not well received by community

Con: No leases for Steindorf tenants

Don’t build space for tenants:

Pro: Saves facility dollars for other Master Plan Facilities projects

Con: Lose $346k in operating revenue; tenants lose space; potential litigation

Con: Need to decide instructional program expenditure reductions

Suggested Tenants for Relocation

Current Shop – Learning Pathways

Board Room – Nancy Doize School of Dance

Bagby Location – After School Adventure

Alternatives for these locations:

Chrysallis Elementary

Over the Rainbow Preschool

Above candidates taking more space

Expansion of Early Discoveries

New clients

Recently vacated D.O. space – A Place to Grow

Recommendation

Staff continues with current relocation plan as previously discussed

Staff continues to look at other long term revenue enhancements

Next Steps

Staff continues discussion w/ tenants to develop spaceS and offset construction costs

Negotiate terms of long term lease

Explore developing D.O. shared playground space; space more desirable to tenants

(increases annual rental revenue)

Clarifying Questions?