Title
A RESOLUTION AUTHORIZING THE CITY MANAGER TO EXECUTE ADDENDA TO LEASES FOR SPACE AT 1769 AND 1566 GEORGETOWN ROAD FOR USE BY THE PUBLIC WORKS DEPARTMENT THROUGH JANUARY 1, 2023; AND DECLARING AN EMERGENCY.
Executive Summary: The Department of Public Works currently leases space at 1769 and 1566 Georgetown Road, Hudson, OH for use as administrative office and operational space. The annual cost of these two leased spaces is $269,654.64. It is necessary to continue to lease these spaces to ensure the minimal office and operational space required to carry out the responsibilities and services of the Public Works Department.
Body
Legislative History
Resolution #15-156, passed October 20, 2015.
Purpose & Explanation
The City currently occupies leased space for the divisions of Service which includes: streets, storm water, pipe maintenance & inspection, water distribution, administrative support, fleet maintenance and sign shop. In 2019, Administrative Support will move to Hudson City Hall. The vacated office space will be utilized by Public Works Management staff.
Draft copies of the three (3) lease addenda are attached. (The original lease would be on file with the Clerk’s office). We have maintained our lease space with three separate leases, as it is more efficient to divide and track the lease costs per budget area. The respective leased areas total square footage will remain unchanged.
The amended lease terms are for four (4) years and will commence on January 1, 2019 and expire on January 1, 2023. There will be no annual cost increases over the next four (4) year term.
* UPDATE:
At the November 20th City Council Workshop Council asked PW staff to look into the following concerns regarding this lease renewal recommendation. Staff has met with the lessor. The following addresses the items of concern:
1. Can the lease termination percentage be reduced from 80% of the remaining lease term? The lessor is not willing to reduce the amount due if the lease is prematurely terminated. It should be noted that the GT space lease amount has not been increased in two terms (six years). A four-year renewal option with no increase would equate to a ten-year period with no increase in the lease rate.
2. Is 80% excessive for a lease termination penalty? In discussions with a commercial real estate representative there is no “industry standard” regarding lease terminations. In the representative’s opinion the City should be comfortable with 80% and the ability to exit a lease at all without paying full costs to the lessor.
3. Economics Analysis - Council also had concerns with which option would be more economical for the City to enter into considering that there may be a new Public Works Facility build within a three-year period. It is the position of staff that a 36-month schedule to secure land, design and build a new PW facility is not feasible and cannot be delivered within that timeframe.
Note:
1.Additional cost of 3 year lease term at 3% per year = $25,000
2.Additional cost of 4 year lease term at 0% per year if terminated at
end of year 3 = $216,000
Recommendation- Considering the preceding information, staff continues to believe the four year lease term at no cost increase is the most logical choice moving forward.
Timing Considerations
* UPDATE:
As the current lease term expires on January 1, 2019, staff is requesting emergency language, so that this Resolution will be effective upon passage.
Fiscal Impact
Currently Budgeted
Supplemental Appropriation Required
X Appropriation Not Required.
Recommendation
Suggested Action
Staff recommends that City Council approve this legislation authorizing the City Manager to enter into lease agreements with Zambrouck Development Co., PO Box 2262 Hudson, OH 44236 for the annual lease amounts as per the Agreements submitted in exhibit A.
Submitted by,
Jane Howington, City Manager
Frank J. Comeriato, Assistant City Manager - Operations
Eric Hutchinson, Assistant Public Works Director
Sonya Mottram, Administrative Support Supervisor