REPORT TO COUNCIL
SUBJECT
Title
Approval of a Status Report on the Lease Agreement Between the City of Santa Clara and the Police Activities League (PAL) for the Operation of a BMX Track
Report
COUNCIL PILLAR
Enhance Community Sports, Recreational and Arts Assets
BACKGROUND
At its April 19, 2022 meeting, the City Council directed staff to provide a status report at the May 24, 2022 Council meeting on the following issues related to the lease agreement with PAL:
1. PAL’s ability to comply with insurance requirements outlined in the lease agreements;
2. The willingness of USA BMX to continue to work with PAL in sanctioning racing activities;
3. The feasibility of the City assuming responsibility for BMX operations; and
4. The status of a fiscal audit proposed by PAL related to BMX operations.
The purpose of this report to Council is to provide the requested information.
DISCUSSION
1. Insurance
As of May 19, 2022, PAL is fully compliant with the insurance requirements outlined in the City Ground Lease Agreement. (The original ground lease and two amendments are attached as Attachments 1, 2 and 3.) As such, PAL is now able to resume BMX operations at the facility. It is anticipated that BMX programming will have resumed prior to the presentation of this report to City Council on May 24, 2022.
2. USA BMX
On May 11, 2022, staff received an email from USA BMX stating that they are no longer willing to work with the PAL Board and officially requested that the City of Santa Clara vote to turn the lease over to either USA BMX directly or the City’s Park and Recreation Department so USA BMX could work directly with one of these two entities. In light of this statement by USA BMX, it is anticipated that the Santa Clara site will not be eligible for sanctioned events after May 24, 2022.
3. City staff assuming responsibility for BMX track
As staff evaluated the feasibility of assuming responsibility for BMX operations, several factors were taken into consideration:
• The City is facing a significant revenue shortfall in its General Fund. As a department that relies heavily on the General Fund, the Parks and Recreation Department has suffered significant cutbacks and turnover in its staffing with 11 current, full-time equivalent vacancies. Moreover, the Citywide cost containment strategy that limits As-Needed positions further strains the Department’s ability to restore services and adequately address its current workload.
Should the Council wish to shift operational responsibility to the Department, a preliminary estimate to oversee a contract would include the need for two As-Needed Recreation Coordinators (1,950 hours) to supervise the volunteer track operations and manage the agreement; one As-Needed Grounds Maintenance Worker (1,000 hours) to provide facility support and budget for operations, utilities and maintenance. Refinement of these costs would be subject to further review of prior costs and expenditures as well as projected revenues.
• If a third-party contractor were to be hired by the City to manage the track, a transition to a new operator would require the investment of staff time and resources to develop a procurement process to select a new operator. Moreover, it would require the identification of terms and conditions for a new agreement including length of the agreement, cost sharing provisions and scope of programming to be provided. Updated terms and conditions, including insurance requirements would also be required, as the current agreement is outdated.
• The City has an obligation to make the site available for future development as part of the Related project upon an 18-month notice. While it is not known when notice will be given, the City amended the lease agreement to change the term of the agreement with PAL to month-to-month in recognition of this obligation. Should the City wish to proceed with a new lease or operator for the site, the investment of City time and resources could be moot should notice be given that development is proceeding and the 18-month notice is triggered.
• PAL is in compliance with the provisions of the existing lease agreement. The lease does not require that activities be sanctioned events, but rather that PAL make a BMX track available for the Santa Clara community as an enhancement for youth sports in the City. The lease agreement further states that “the property shall not be used for any other use or purpose” (Section 4.1).
4. Status of a fiscal audit proposed by PAL
PAL has retained Mr. Richard Gordon of the Withum Firm to conduct a third-party audit of the BMX program. With over 30 years of experience, Mr. Gordon provides services in investigations and forensic accounting. The work to be conducted by Mr. Gordon will help inform the PAL Board as to the revenues and expenses that can be projected for the BMX track, as well as any system controls that may need to be enhanced. This information would also be helpful should the City wish to proceed with further evaluation of assuming responsibility for the BMX track.
Summary
In light of these factors, staff recommends that the current lease agreement with PAL remain in place until such time as termination is required in accordance with the City’s future development plans.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project" within the meaning of the California Environmental Quality Act ("CEQA") pursuant to CEQA Guidelines section 15378(b)(5) in that it is an administrative activity that will not result in direct or indirect physical changes to the environment.
FISCAL IMPACT
The original lease agreement provided for an annual lease payment of $1,200 with compounded interest of 3%. For calendar year 2021, the amount due for the lease is $2,368.30. Should the lease with PAL be terminated, the City would bill PAL for the appropriate pro rata share of the current calendar year.
COORDINATION
This memorandum has been coordinated with the Finance Department, City Attorney and City Manager’s offices.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
ALTERNATIVES
1. Note and file staff report.
2. Any other Council direction.
RECOMMENDATION
Recommendation
Alternative #1: Note and file staff report.
Staff
Reviewed by: Cynthia Bojorquez, Assistant City Manager
Approved by: Rajeev Batra, City Manager
ATTACHMENTS
Attachment #1 - Ground Lease
Attachment #2 - Ground Lease Amendment #1
Attachment #3 - Ground Lease Amendment #2