REPORT TO THE CITY COUNCIL June 26, 2014 FROM: BRUCE RUDD, City Manager BY: RENENA SMITH, Assistant City Manager SUBJECT ..Title Action pertaining to First Amendment to the Sublease Agreement between the City of Fresno and Community Media Access Collaborative (CMAC) to sublease additional space on the third floor of the Historic Bee Building. 1. Adopt a finding of a Categorical Exemption pursuant to Class 1 of the California Environmental Quality Act (CEQA) Guideline Section 15301 (Existing Facilities) for extension of sublease. 2. Approve First Amendment to the Sublease Agreement between the City of Fresno and Community Media Access Collaborative (CMAC) to sublease additional space on the third floor of the Historic Bee Building ..Body RECOMMENDATION Staff recommends that the City Council: 1. Adopt a finding of a Categorical Exemption pursuant to Class 1 of the California Environmental Quality Act (CEQA) Guideline Section 15301 (Existing Facilities) for extension of sublease. 2. Approval of the First Amendment to the Sublease Agreement between the City of Fresno and the CMAC. The sublease amendment leases an additional 2,055 square foot on the third floor of the Historic Bee Building (MET) to CMAC. EXECUTIVE SUMMARY The City holds title to the Historic Bee Building through the City of Fresno Cultural Arts Properties. There is approximately 38,000 square feet of leasable space in the five story building. The CMAC currently leases the second floor of the building and has requested to expand their operations onto the third floor. The tenant will pay $1.38 per square foot each month for the additional space. This price includes utilities based on average monthly usage/cost over the last two years on the second floor. BACKGROUND On June 17, 2010, the City Council approved the sublease of space to CMAC for office and studio space. The current lease terms include the following: * Lease to cover the entire second floor; * 15 year term; * $300,000 annual payment to the City, increased by 1% per year beginning in the eighth year of the lease; * City to pay CMAC a one-time $20,000 tenant improvement allowance; * CMAC to complete its own tenant improvements; and * City to provide all utilities, maintenance, and common space security. CMAC has approached the City to lease additional space on the third floor. The agreed upon price for the additional 2,055 square footage is $1.38 per square foot which includes utilities with the tenant responsible for improvements. The amended agreement is effective July 1, 2014. Except as otherwise noted the sublease entered into by the City of Fresno and CMAC on July 20, 2010 remains in full force and effect. The current lease is for $300,000 per year with an annual escalation clause of 1 percent starting in year 8. The new lease will be $334,030.80 per year and a comparable escalation clause in future years for the entire agreement. ENVIRONMENTAL FINDINGS Staff has performed a preliminary environmental assessment of this project and has determined that it falls within the Class 1 Categorical Exemptions as set forth in the CEQA Guidelines Section 15301 as this amendment is to a lease of an existing building and will involve negligible expansion of the existing use. Furthermore, none of the exceptions to the Categorical Exemptions set forth in CEQA Guidelines Section 15300.2 apply to this project. LOCAL PREFERENCE N/A FISCAL IMPACT CMAC will pay the City of Fresno $334,030.80 annually through the length of the contract to sublease the second and third floors of the Historic Bee Building (MET). CMAC will fund any needed improvements for the space. The City of Fresno will provide utilities and maintenance services for the building. Consistent with the original agreement the City of Fresno will provide $200,000 annually to CMAC for specific deliverables identified in the Agreement. Not including customary and usual building expenses, the City of Fresno will net $134,030.80 annually from CMAC through the sublease. These funds will offset the annual debt service payment for the building. Attachment: First Amendment to Sublease Agreement