Child Development Inc. has leased a major portion of the Raynor facility to provide childcare since 1980. In August of 1996 (RTC 96-337) Council authorized a complete analysis of the existing contract terms in relation to market conditions and other facility leases in the City. City Council then approved a three year renewal of the contract (RTC 96-473) which is scheduled to expire on June 30, 1999. Staff is recommending a three year renewal of this lease. The current monthly lease rate is $.68 per square foot. Under the terms of the lease agreement attached, this rate would increase to $.70 the first year and then to $.72 and $.74 during the second and third years of the contract period. Projected revenues from this lease are $338,900 over the three year contract period.

It is recommended that City Council approve the extension of the lease with Child Development Centers at the Raynor facility.

Child Development Inc. (CDI) has leased a major portion of the Raynor facility to provide childcare since 1980. At that time the City had purchased the Raynor School site from Santa Clara Unified District and it was determined that there was a significant need for child care in Sunnyvale. A portion of the site was set aside for a model childcare center. Through an RFP process, a five-year contract was awarded to CDI. CDI has operated the childcare center at Raynor (called the Sunnyvale Child Development Center) since that time.

CDI, a non-profit organization, is one of the largest child care providers in the State. The organization offers a variety of support programs in addition to licensed childcare including employer contracts for resource and referral and parent education programs, administration of food programs, and voucher programs for child care subsidies. The Sunnyvale Child Development Center at Raynor is one of seven childcare programs CDI operates in Sunnyvale serving over 700 children.

The terms of the existing agreement include: a three year term, licensed capacity of 216 children, and a requirement that the center obtain accreditation through the National Association for the Education of Young Children to ensure quality standards are maintained. The tenant pays for custodial services and utilities and the City provides maintenance to the structures.

Over the last three years, the lease rate has increased 2 cents per foot per year in an effort to bring the center up to market rate, which is believed to be in the $.75 per square foot range at present. The current monthly lease rate is $.68 a square foot for 13,074 square feet generating $107,328 in revenues annually. The proposed agreement reflects rates of $.70, $.72 and $.74 / square foot over the next three years. This slight discount from market rate takes into consideration the tenant’s long term status. (19 years)

The contract with CDI at the Raynor site has been renewed four times, with the most recent renewal on November 26, 1996. This agreement expires June 30, 1999. City staff is conducting a city-wide review of its facility needs, however, this study is still in progress and there are no changes expected in the use of Raynor over the next three years.

Staff is recommending a three year extension to the agreement with CDI. This would change the expiration date to June 30, 2002. The lease rate would be increased 9% over the contract period increasing 3% July 1, 1999, 3% July 1, 2000 and 3% July 1, 2001. The monthly rate per square foot would initially rise from $.68 to $.70 and to $.72 and $.74 in the subsequent years. Over the three year period, the lease would generate $ 338,900 in revenues. The proposed lease is included as Attachment A.

The proposed lease will generate $338,900 in revenue over the three year contract period. The revenue will be deposited in the General Services Fund to pay for the costs of maintaining the facility.

Posting of the Council Agenda.

2. Request modifications of the proposed lease agreement

Alternative #1.

Prepared by:

Michael Chan
Administrative Services Manager

Reviewed by:

Marvin A. Rose
Director of Public Works

Reviewed by:

Robert Walker
Director of Parks and Recreation

Reviewed by:

Mary Bradley
Director of Finance

Approved by:

Robert S. LaSala
City Manager