REPORT TO COUNCIL
SUBJECT
Title
Status Report on the BMX lease agreement between the City of Santa Clara and the Police Activities League
Report
COUNCIL PILLAR
Enhance Community Sports, Recreational and Arts Assets
BACKGROUND
The City of Santa Clara leases property located at 5501 Lafayette Street to the Police Activities League (PAL) for the purposes of operating a BMX track. In April 2022, the City Council directed staff to provide a status report on the following four (4) 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 report was presented to City Council at its May 24, 2022 meeting. Following significant discussion, the Council took action to note and file the staff report, directed staff to return with a follow-up report upon completion of the outstanding audit report and encouraged USA BMX and PAL to work together to come to an agreement.
The purpose of this report is to provide the Council with the requested follow-up report as well as responses to inquiries staff has received regarding the PAL lease and the operation of the BMX site.
DISCUSSION
Council Questions & Status of Audit Report
Enclosed as Attachment 1 is a report from PAL dated July 8, 2022 that responds to the following:
1. Council questions raised at the May 24, 2022 Council meeting
2. BMX Audit Report completed by WithumSmith+Brown
3. Information related to efforts to obtain access to the PayPal Account
4. Outreach to USA BMX to work together to re-sanction the Santa Clara BMX track.
As noted in the report, multiple efforts were made to obtain access to the PayPal accounts; however, a response was not received from the account holders. As a result, the audit identified a discrepancy of $129,672 between cash deposited and expected program revenues. Without access to the PayPal account, the auditor was unable to conduct any further evaluation of the discrepancy.
With respect to the feasibility of reopening the BMX Track as a sanctioned facility, USA BMX has consistently stated that it would only consider sanctioning the facility if the City contracted with USA BMX directly. This position was reaffirmed via email by Cody Wilson on November 27, 2022. (Attachment 2)
Inquiries from the public
Since the May meeting, staff has received the following public inquiries regarding the BMX lease and operations:
1. A request regarding the current status and records of payments received for the 2022 year from PAL;
2. A request for information regarding the termination provisions of the lease for the BMX site;
3. A request to discuss what Santa Clara could do to help get BMX riders back to racing under USA BMX; and
4. A request for the names of prior PAL directors, together with their terms of service
Item #1 - Current Status and Records of Payment
The City issued an invoice in the amount of $15,197.86 to PAL on May 20, 2022 for the period 2015-2021. The City had failed to send an invoice to PAL following the transition to a month-to-month lease agreement. The City received payment of this amount from PAL on June 8, 2022. As such, PAL is current on their lease obligation. This information was provided to Mr. Valencia in an email dated October 31, 2022.
In preparation of this report, staff requested that PAL provide an update on their operations. That report dated November 20, 2022 is enclosed as Attachment 3. Please note that one of the items in the report is a reference to a recent notification of non-compliance from the Department of Environmental Health.
A cease and desist order was issued with four action items:
1. Submission of plans for approval to improve onsite drainage systems;
2. Submission of plans for approval related to onsite facilities (snack shack & repair shop);
3. Removal of the sink and associated piping in the snack shack; and
4. Removal of an onsite water fountain.
As the property owner, City staff is working with PAL to ensure compliance. Item #3 was completed in December and it is anticipated that Item #4 will be completed shortly. Items #1 and #2 are more complex and will require both an assessment of work to be performed and the investment of financial resources. The current deadline to submit plans to the County is February 9, 2022. Staff is exploring options and will provide an update to Council on the status of the work in the coming weeks.
Termination Provisions
Amendment #2 of the lease agreement provides for a month-to-month tenancy of the BMX site which can be terminated by either the City or PAL upon fifteen (15) days written notice.
As noted at the May, 2022 meeting by Interim City Attorney Sanchez, any discussion of termination should take into consideration the following:
1. Revenue impact to other PAL-related programs;
2. The City’s contractual obligation to the Related project to make the site available for future development; and
3. The time required to complete a request for proposal process to identify a new operator. The value of the site & associated programming would necessitate the issuance of a request for proposal process to identify a new operator. Purchasing/contracting requirements would not allow the City to enter into direct negotiations with an individual operator. Based on other processes, it is anticipated that a period of six months would be needed to identify a new operator with additional time needed to execute a lease agreement.
Options to Resume Operations as a Sanctioned BMX Site
USA BMX is the official sanctioning body for BMX racing. Unfortunately, the parties have not been able to resolve their issues. USA BMX has indicated that there is no circumstance under which they would sanction a track under the operation of PAL. As such, should the Council wish to resume operations as a sanctioned BMX site, the only option would be to terminate the lease agreement with PAL (as noted above) and issue a request for proposal for a new operator. It is important to note, however, that sanctioning approval can only be obtained from USA BMX. Consequently, staff cannot guarantee that an RFP process would result in a sanctioned track.
Prior PAL Directors
A request was received for a list of prior PAL directors and their terms of service. The following table provides that information for the period 1994 through 2020. The PAL Director position has been vacant since the start of COVID:
|
Director |
Term |
|
Gabby Seagrave |
1994-1997 |
|
Perry DiBenedtto |
1997-2002 |
|
Rich Peterson |
2002-2005 |
|
Patti Lynch |
2005-2007 |
|
Rob Paolinetti |
2008-2009 |
|
Bill Davis |
2010-2013 |
|
Robert Martinez |
2013-2017 |
|
Wali Aminyar |
2018-2020 |
Conclusion
The City has a valid month-to-month lease agreement with PAL. All outstanding financial obligations have been remedied. Insurance is current and PAL has invested in a new timing system and purchased eight new rental bikes since the start of the fiscal year. However, attempts to obtain approval to sanction the track for racing have been unsuccessful. As a result, programming is limited to practice sessions offered three days a week with an estimated 350 participants served to date.
Should the Council wish to pursue termination, the City would be required to provide fifteen (15) days written notice to PAL and then proceed with the development, issuance and review of a request for proposal process to identify a new operator. Estimated time for completion would be a minimum of six months. In addition, the City has a contractual obligation to make the site available for future development that would constrain long-term operations of a BMX program at this site. Moreover, the items identified recently by the Department of Environmental Health will require significant action and may further constrain activities at this site. For these reasons, staff is requesting that Council note and file this report.
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
There is no fiscal impact associated with this report.
COORDINATION
This report has been coordinated with the Santa Clara Police Department, the Finance Department and the City Attorney’s Office
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 the staff report
2. Provide other direction as appropriate
RECOMMENDATION
Recommendation
Alternative 1: Note and file the staff report
Staff
Reviewed by: Cynthia Bojorquez, Assistant City Manager
Approved by: Rajeev Batra, City Manager
ATTACHMENTS
1. Report from PAL dated July 8, 2022
2. Email from C. Wilson of USA BMX dated November 27, 2022
3. Report from PAL dated November 20, 2022