Background:
One of the City Council’s Strategic Priorities is to “Explore Opportunities for the Scout House.” Staff has prepared the Request for Proposals (RFP) in Attachment #3 seeking technical Proposals to enter into an Operations and Maintenance Agreement (“O&M”) with the City for the renovation/restoration of the Scout House and for subsequent activities programming, operations, management, and maintenance of the facility. The rough cost estimate required to renovate the Scout House is $400,000 - $500,000; however, no City funding is proposed. The selected Proposer/Contractor signing the O&M Agreement will also need to agree to a Site Lease to cover the duration of their occupation of the Scout House, such that they are the City’s Lessee.
The Scout House is a multi-use facility located at the northeast corner of Mission Street and Eighth Avenue. The Scout House was built in 1931 by Carmel Masterbuilder M.J. Murphy. The building has a large room, working fireplace, and a full kitchen, and is a completely contained unit; however, the building has not been in operation for many years. Staff has been exploring ways to find a Contractor to renovate the Scout House.
A proposed O&M Agreement and Site Lease are attached to the RFP as Appendix 6 and 7, respectively. The RFP requests proposed edits to the draft agreements from Proposers. Staff is seeking Council approval to issue the RFP and follow the process outlined below to award the O&M Agreement and Site Lease.
The key terms of the RFP, O&M Agreement, and Site Lease are as follows:
Key RFP Terms:
1. A mandatory Pre-Proposal meeting will be held, and the Scout House will be open for the remainder of the day, for Proposers to take photographs and measurements inside.
2. Selection of the Contractor will be via a qualifications-based selection process. An Evaluation Committee will review all responsive Proposals received, focusing on the qualifications and experience of their Project Team, the technical approach to design and renovation of the facility, approach to activities programming and facility management/maintenance of the facility, and their funding availability.
3. The RFP makes it clear that the facility is a Historic Resource and is subject to the City’s Historic Preservation Ordinance Chapter 17.32. Improvements may require review by the City’s Historic Resources Board and/or Planning Commission.
4. The RFP outlines numerous requirements for the renovation. The most challenging aspects of the renovation include:
- ADA compliance: An elevator or lift may be required. The east wall may also need to be moved to allow for an ADA-compliant parking space on site.
- Part of the downstairs has a low ceiling height which allows for storage but is not habitable space unless this portion of the building undergoes costly structural renovations. This could trigger seismic upgrade requirements.
- Electrical/lighting, mechanical, and plumbing systems need reconstruction
- Contractor to remediate any hazardous materials
- Site work repairs and modifications to utilities are anticipated
- The site is very confined as a staging area for the renovation work
5. A Performance Bond will be required prior to the renovation to ensure that the renovation work, once started, is completed.
6. Proposed activities are likely to include the Boy Scouts; however, the RFP stresses the importance of providing a mix of other community-based activities such that no one organization fully dominates the use of the renovated facility.
7. The successful Proposer may need to present their recommendations for primary and secondary uses of the renovated facility to the Community Activities Commission prior to award of the O&M Agreement and Site Lease.
8. The Contractor would be expected to pay ongoing facility maintenance costs including: custodial, alarm monitoring, pest control, landscape maintenance, water, gas, and electric utilities, and minor building repairs. The City should continue to pay for trash/recycling and sewer service.
9. The Contractor may be required to pay Possessory Interest Tax to Monterey County.
Key O&M Agreement Terms:
The O&M Agreement includes provisions addressing, among others, the following topics.
1. The term of the O&M Agreement will be ten (10) years, with the City having an annual option to extend the Agreement for an additional year for the first five years after the initial ten years conclude. Proposers may recommend alternative time frames.
2. Contractor will also execute a Site Lease to facilitate its renovation of the facility. See Site Lease section below.
3. Contractor will bear the full costs of performing the renovation work.
4. Contractor will comply with existing City regulations concerning how the renovation planning, design, permitting, and construction work will proceed.
5. Contractor will identify the personnel expected to work on the project.
6. Contractor will provide required insurance.
7. Contractor will indemnify City for any losses caused by Contractor’s negligence, recklessness, or willful misconduct.
8. Contractor will obtain a business license from the City.
9. Any disputes will be resolved via mediation and arbitration.
10. City will have the right to terminate the O&M Agreement at any time in its sole discretion.
Key Site Lease / Rent Terms:
The RFP requests that the Contractor signing the O&M Agreement also agree to sign a Site Lease to cover the duration of their occupation of the Scout House, such that they are the City’s Lessee. Under the proposed Site Lease, the Contractor would agree to pay fair market rent for the use and enjoyment of the Scout House.
To offset the cost of paying fair market rent, the Site Lease would authorize the Contractor to undertake various fundraising activities, including, for example, the sale of naming rights of various interior portions of the facility, and the use of the facility for commercial purposes consistent with existing zoning (Residential and Limited Commercial), including a potential sublease of the facility, if desired. This would allow the Lessee to generate revenue once the renovation work on the premises is complete.
The amount of fair market rent to be charged could also take into account that the Contractor would be agreeing to pay the costs of conducting various capital improvements under the terms of the O&M Agreement and the fact that the City will be entitled to use the facility for one day each month.
Process:
If the Council approves issuing the RFP, the City would follow the following process for issuance of the RFP and award of the O&M Agreement and Site Lease.
a. Approval of Lease of Real Property: Pursuant to Government Code Section 52201, a City Council may lease real property to create an economic opportunity. Such a process must be approved by the City Council by Resolution after a Public Hearing. Notice of the time and place of the hearing must be published in a newspaper of general circulation in the community at least once per week for at least two successive weeks. Among other things, the Notice must include the transactional costs to the City of the lease and the estimated value of the interest to be leased, determined at the highest and best uses permitted under the general plan or zoning, and an explanation of why the lease of the property will assist in the creation of economic opportunity. In this case, the City published such notice in the Carmel Pine Cone newspaper on March 24th and March 31st. Attachment #1 is Resolution 2023-040 for Intention to Lease Real Property.
b. Adoption of Surplus Lands Act Resolution: The City lease of the Scout House property is subject to the Surplus Lands Act (“Act”) but is likely exempt due to the City’s ongoing use of the property so long as the City follows required procedures to confirm the exemption. Under guidelines issued by the California Department of Housing and Community Development (“HCD”), prior to disposition of exempt surplus land, public agencies must adopt a resolution supported by written findings determining the property exempt and must provide a copy of the resolution to HCD at least thirty days prior to disposition. While not expressly stated, the Act appears to suggest that if HCD does not notify the agency that the exemption determination violates the Act within 30 days, the agency receives “safe harbor” that it has complied with the law, and is not subject to the penalty provisions.
Accordingly, at the same time the City Council approves the issuance of a Request for Proposals for a Site Lease, the City Council should also adopt the required Surplus Lands Act Resolution and transmit it to HCD at least 30 days before the City intends to award the O&M Agreement and approve the Site Lease. Attachment #2 is Resolution 2023-042 which meets the Surplus Lands Act requirements.
c. Award of O&M Agreement and Approval of Lease: After staff has received and evaluated proposals in response to the RFP, and should the City Council proceed with an award of the O&M Agreement and approval of a Site Lease, the City Council Resolution approving the Site Lease must be adopted by a majority vote and include a finding that the lease of the property will assist in the creation of economic opportunity, and that the lease price is not less than the fair market value at its highest and best use.
Environmental Impact:
The proposed actions do not constitute a “project” as defined by the California Environmental Quality Act (CEQA). Pursuant to Section 15378(b), a project does not include organizational or administrative activities of governments that will not result in direct or indirect physical changes on the environment. However, prior to commencing renovations at the Scout House, the City will complete all necessary reviews pursuant to CEQA.
Even if this action is a project, it is exempt from CEQA review pursuant to CEQA Guidelines Section 15061(b)(3) because it can be seen with certainty that there is no possibility that the action may have a significant effect on the environment, and the action is also categorically exempt pursuant to the existing facilities exemption in CEQA Guidelines Section 15301 as the action is limited to repairs, maintenance and minor alterations to the existing Scout House that involve negligible or no expansion of existing or former use.