REPORT TO THE CITY COUNCIL
FROM: BRIAN BARR, Director
General Services Department
MINDY CASTO, Chief of Police
Police Department
BY: DESIREE NARANJO, Property Specialist II
General Services Department
SUBJECT
Title
Actions pertaining to a Lease Agreement between the City of Fresno and River Park Properties III, for real property located at 2314 Mariposa Street, Fresno, CA 93721 for the Police Department as a new Headquarters (Council District 3):
1. Adopt a finding of Categorical Exemption pursuant to Section 15301/Class 1 and Section 15332/Class 32 of the California Environmental Quality Act (CEQA) Guidelines
2. Approve a 21-year lease agreement between the City of Fresno and River Park Properties III, a California limited partnership, to lease real property for the purpose of a new Police Department Headquarters, starting at $0 in the first year, then $1,285,598 annually for years two through six, subject to a 10% increase every fifth year thereafter, totaling $29,838,618 over 21 years in rent plus operating costs
Body
RECOMMENDATION
Staff recommends Council approve actions pertaining to a lease agreement between the City of Fresno and River Park Properties III, for real property located at 2314 Mariposa Street, Fresno, CA 93721 for the Police Department as a new Headquarters (Council District 3):
1. Adopt a finding of Categorical Exemption pursuant to Section 15301/Class 1 and Section 15332/Class 32 of the California Environmental Quality Act (CEQA) Guidelines.
2. Approve a 21-year lease agreement between the City of Fresno and River Park Properties III, a California limited partnership, to lease real property for the purpose of a new Police Department Headquarters, starting at $0 in the first year, then $1,285,598 annually for years two through six, subject to a 10% increase every fifth year thereafter, totaling $29,838,618 over 21 years in rent plus operating costs.
EXECUTIVE SUMMARY
The Police Department Headquarters is in a facility originally built in 1959. Construction occurred during a period when asbestos and lead were widely used in construction materials and have since been classified as hazardous materials. Unfortunately, asbestos has been identified above the ceiling on each floor of the building and in the roofing materials. Lead containing materials were also used throughout the building. Many of the building systems are failing and cannot be replaced without complete abatement of these hazardous materials. Therefore, renovation and replacement of key building systems, such as the HVAC, electrical and plumbing systems, and the roof are financially infeasible due to the significant abatement needed before equipment can be replaced. In lieu of investing in the 66-year-old building, the Police Department seeks to enter a lease agreement for the purpose of relocating Headquarters to a renovated building across from the current Headquarters on Mariposa. The new location was originally constructed in 1948, however extensive renovations have recently been completed. The interior partitions were completely removed, hazardous material has been abated, structure has been reinforced, building systems have been replaced, and the building has been reconstructed to 2019 code requirements. Essentially, the building core and shell has been completely renovated, and the building is ready for a full tenant improvement build-out.
The lease agreement between the City of Fresno and River Park Properties III, if approved, is for the entire building which includes three floors of office space, a parking garage, and a basement, totaling 65,690 square feet. The term of the lease will be for 21 years, effective August 15, 2025, with the first year’s rent set at $0 to allow for tenant improvements to be constructed. Then commencing on July 1, 2026, rent will begin at $1,285,598.40 annually for years two through six, subject to a 10% increase every 5th year thereafter. The City will also have the option to purchase the building at the end of the 21-year term for $1.
BACKGROUND
The Police Department Headquarters is in a facility originally built in 1959. Construction occurred during a period when asbestos and lead were widely used in construction materials. Unfortunately, asbestos has been identified above the ceiling on each floor of the building and in the roofing materials. Lead containing materials were also used throughout the building. The use of asbestos and lead in building materials were phased out in the 1970s after they were determined to be hazardous.
Many of the building systems are failing and cannot be replaced without complete abatement of the hazardous materials. Failing systems include the roof, HVAC, plumbing, and electrical building utilities. This has created a challenging work environment for employees assigned to Headquarters. Any plan for renovation of the building and replacement of the building systems will require the complete abatement of the hazardous materials. Renovation would require the Police Department to temporarily relocate during abatement and construction. The abatement and temporary relocation expenses are estimated to exceed $7 million before funding can be allocated to the renovation and replacement of the building systems. As a result, it has been determined to be financially infeasible to renovate the building and replace the building systems.
In lieu of investing in the 66-year-old building, the Police Department seeks to enter a lease agreement for the purpose of relocating Headquarters to a renovated building across from the current Headquarters on Mariposa. The new location was originally constructed in 1948, however extensive renovations have recently been completed. The interior partitions were completely removed, hazardous material has been abated, structure has been reinforced, all building systems have been replaced, and the building has been reconstructed to 2019 code compliance. Essentially, the building core and shell have been completely renovated, and the building is ready for a full tenant improvement build-out.
The City anticipates utilizing bonds to fund the tenant improvements, which are preliminarily estimated not-to-exceed $12 million. A separate action to fund the tenant improvements will be presented to Council for approval.
The lease agreement between the City of Fresno and River Park Properties III, if approved, is for 65,690 square feet of real property with an effective term of August 15, 2025, through August 14, 2046; a total of 21 years. The City will also have the option to purchase the property at the end of the term for $1.
The proposed negotiated lease rate starts at $1.76 per square foot ($1,067,510.40 annually) of rentable space and $1.20 per square foot ($218,088 annually) for parking space in rent with a 10% increase every five years through the end of the term. The area being leased is split up by office space, which includes three floors totaling 50,545 square feet, a parking garage that is 15,145 square feet, and a basement that is 6,925 square feet.
In addition to the monthly rent due, the City shall also be responsible for the building operational costs such as insurance and property taxes. As the City is renting the property, it has a leasehold interest that is subject to property taxes. If the City exercises the option to purchase the property at the end of the lease term, and ownership is transferred to the City, the property will then become exempt from property taxes.
In addition, the Police Department will also be responsible for utilities such as electricity, natural gas, water, garbage, and sewer services.
After relocation of all staff and services, the preliminary plan is to demolish the existing Headquarters. This action will be presented to Council in a future fiscal year.
The lease agreement has been reviewed by the City Attorney’s Office as to form.
ENVIRONMENTAL FINDING
Staff has performed an environmental assessment of this project and has determined this project is exempt under Section 15301/Class 1 (Existing Facilities) and Section 15332/Class 32 of the California Environmental Quality Act (CEQA) Guidelines as follows:
Section 15301/Class 1 consists of the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of existing or former use. The key consideration is whether the project involves negligible or no expansion of use.
Section 15301/Class 1 applies because the proposed project includes the lease of approximately 63,035 square feet of floor area within an existing building for use as the new Police Department headquarters. The building was previously used for the Fresno County Human Services System - Employment and Temporary Assistance and most recently for a professional office space. The City will construct new interior alternations including interior partitions and electrical conveyances, however there will be no expansion of the usable floor area. The existing Police Department headquarters will relocate to the new location. Because the building will continue to be used as administrative space by a public agency, consistent with the prior use, and because the improvements consist of minor alterations, a Class 1 exemption is appropriate.
Section 15332/Class 32 applies because the proposed project meets the conditions set forth in the Class 32 exemption as follows: a) the project is consistent with the applicable general plan designation and all applicable general plan policies as well as with applicable zoning designation and regulations, b) the proposed development occurs within city limits on a project site of approximately ±0.60 acres, which is less than the five acre maximum, and is substantially surrounded by urban uses, c) the project site has no value as habitat for endangered, rare or threatened species, d) approval of the project would not result in any significant effects relating to traffic, noise, air quality, or water quality; in particular according to CEQA Guidelines for Vehicle Miles Traveled Thresholds (VMT) adopted by the City in 2020, development of institutional/government and public service uses that support community health, safety and welfare may be screened from subsequent CEQA VMT analysis. The proposed leased space for the Fresno Police Department facilitates their administration of public safety. Therefore additional VMT review is not required, and e) the site can be adequately served by all required utilities and public services.
By current standards, the subject site and surrounding areas are identified as “in-fill” within an urban setting.
None of the exceptions to Categorical Exemptions set forth in the CEQA Guidelines, Section 15300.2, apply to the project. Furthermore, the proposed project site is a developed property in an urbanized area and is not expected to have a significant effect on the environment. Accordingly, a categorical exemption, as noted above, has been prepared for the project and the area is not environmentally sensitive.
LOCAL PREFERENCE
Local preference was not considered because this item does not include a bid or award of a construction or service contract.
FISCAL IMPACT
The lease agreement will have no impact on the FY 2026 Adopted General Fund budget. Funding for future years will be included in the Police Department’s annual budget as presented to Council.
The City anticipates utilizing bonds to fund the tenant improvements. A separate action to fund the tenant improvements will be presented to Council for approval.
Attachments:
Lease Agreement
Rent Schedule
Environmental Assessment No. P25-PD2314
Levine Act Form