Steindorf Tenant Relocation

1. Steindorf Tenant Relocation Jason E. Vann, CFO September 18, 2014

2. 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.

3. 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

4. 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)

5. 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

6. 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

7. 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

8. How We Use Our Facilities Professional Development Center: • Districtwide teacher trainings at least 2 to 3 times a month; other trainings • Board meetings at least twice a month; especially needed for recognition nights • Utilized by various other agencies and organizations Current Shop - Used by Buildings and Grounds as well as Maintenance teams to: • 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 • Store day to day materials, blue prints, reference manuals, equipment and tools

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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 leasesfor 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

15. 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

16. 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)

17. Clarifying Questions?