REPORT TO THE CITY COUNCIL FROM: BRIAN BARR, Director General Services Department BY: DESIREE NARANJO, Manager General Services Department SUBJECT ..Title Actions related to the lease of the City Hall Cafe located at 2600 Fresno Street between the City of Fresno and Culinary Studios, Inc., DBA Cracked Pepper Caf� (District 3) 1. Adopt a finding of Categorical Exemption pursuant to Section 15301/Class 1 of the California Environmental Quality Act (CEQA) Guidelines 2. Approve a Lease Agreement between the City of Fresno and Culinary Studios, Inc., DBA Cracked Pepper Caf�, to lease the City Hall Caf� commercial space at 2600 Fresno Street for thirty-six (36) months with options to extend for two additional one-year terms, starting at $0 for thirty-six (36) months and increasing to $17,568 in year four for the first extension and $18,095.04 in year five for the second extension, totaling $35,663.04 over five years in rent ..Body RECOMMENDATION Staff recommends Council 1) adopt a finding of Categorical Exemption pursuant to Section 15301/Class 1 of the California Environmental Quality Act (CEQA) Guidelines and 2) approve a Lease Agreement between the City of Fresno and Culinary Studios, Inc., DBA Cracked Pepper Caf�, to lease the City Hall Caf� commercial space at 2600 Fresno Street for thirty-six (36) months with options to extend for two additional one-year terms, starting at $0 for thirty-six (36) months and increasing to $17,568 in year four for the first extension and $18,095.04 in year five for the second extension, totaling $35,663.04 over five years in rent. EXECUTIVE SUMMARY The City Hall Caf� has been vacant since the COVID-19 pandemic closed City Hall. As a result, visitors and approximately 550 City employees have been unable to purchase fresh food on site. As an interim solution, vending machines were installed for snacks and cold beverages. In 2024, GSD sent a survey to all employees assigned to City Hall requesting input on potential menu offerings at the caf� and received 457 responses. This information has helped GSD evaluate prospective tenants and find the best fit based upon employee preferences. GSD used several avenues to attract a viable tenant including pursuing several local businesses, issuing an RFI, advertising the vacancy, and receiving several unsolicited proposals. After reviewing the various proposals, we identified one prospective tenant with a background in the restaurant business. GSD seeks to enter into a Lease Agreement with Culinary Studios, Inc., DBA Cracked Pepper Caf� (Tenant), owner of the Cracked Pepper located at 6737 N Palm Ave, Fresno, CA 93704, for the caf� space located on the ground floor of City Hall. The tenant shall utilize this space to provide fresh food and drinks for purchase under the name of Cracked Pepper Caf�. The Lease Agreement provides for an initial term of thirty-six (36) months with two one-year options to extend. BACKGROUND The City Hall Caf� was previously operated between 2014 and 2020 under the name of Turtle Caf�. This was a convenient option for employees to purchase meals or a snack on their designated breaks. The Turtle Caf� permanently closed at the start of the COVID-19 pandemic and the caf� has remained vacant since. City Hall is the primary worksite for approximately 550 City employees and visited daily by countless visitors. Fresh food options onsite have been missing since the pandemic. As an interim solution, vending machines were installed for snacks and cold beverages. These machines will be removed once the caf� is open. In 2024, GSD sent a survey to all employees assigned to City Hall requesting input on potential menu offerings at the caf� and received 457 responses. This information has helped GSD evaluate prospective tenants and find the best fit based upon employee preferences. GSD used several avenues to attract a viable tenant including pursuing several local businesses, issuing an RFI, advertising the vacancy, and receiving several unsolicited proposals. After reviewing the various proposals, we identified one prospective tenant with a background in the restaurant business. Following several months of negotiations, we have successfully reached a lease agreement with the owner of the Cracked Pepper restaurant (Culinary Studios Inc.) to open the Cracked Pepper Caf� at City Hall. The Cracked Pepper Caf� will provide fresh food at multiple price points in line with downtown food options including affordable offerings. In addition, the Caf� will offer in-house blended specialty coffees from espressos to drip coffee. The Caf� will operate Monday through Friday, 7:00 am to 5:00 pm and will be closed on City holidays. Hours may be extended by the Tenant to support late public events and meetings, dependent upon demand. The Lease Agreement provides for an initial term of thirty-six (36) months with two one-year options to extend. The lease includes the exclusive use of 1,464 square feet of interior commercial space and non-exclusive use of snack bar annex across the hall in room 1018. In addition, the Tenant will be provided with three parking passes for Tenant's employees. The proposed lease rate is $0 in the first thirty-six months, then starts at $1.00 per square foot for the first one-year extension with a 3% increase the following year. The total rent after the first thirty-six months is $0. Rent increases to $17,568 in year four and $18,095.04 in year five, for a total of $35,663.04 in rent over five years. The Lease Agreement has been reviewed and approved by the City Attorney's Office as to form. ENVIRONMENTAL FINDING Staff have performed a preliminary environmental assessment and have determined that the project falls within the Categorical Exemption set forth in CEQA Guidelines Section 15301/Class 1 (Existing Facilities). None of the exceptions to Categorical Exemptions set forth in the CEQA Guidelines, Section 15300.2 apply to the project. Furthermore, the proposed project is not expected to have a significant effect on the environment. A categorical exemption, as noted above, has been prepared for the project and the area is not environmentally sensitive. LOCAL PREFERENCE Local preference is not applicable to the lease of real property. FISCAL IMPACT Revenue from future option years, if exercised, will be deposited into the General Fund. Attachments: Categorical Exemption Lease Agreement Levine Act