COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Manager's Office

DATE:

December 3, 2003

BOARD MEETING DATE:

December 16, 2003

TO:

Honorable Board of Supervisors

FROM:

Paul T. Scannell, Assistant County Manager

SUBJECT:

Lease of office space at 310 Harbor Boulevard, Belmont for the use of Human Services Agency as a Health Insurance Telecenter, and a corresponding Fourth Amendment to Lease No. 1185 at 264 Harbor Boulevard.

Recommendation
Adopt a Resolution authorizing the Board President to execute a Lease Agreement for 310 Harbor Boulevard, Belmont and a Fourth Lease Amendment to the lease of 264 Harbor Boulevard, and authorizing the County Manager to execute options, notices and amendments associated with the Leases.

Background
The Human Services Agency currently occupies three buildings in the Harbor Park, a business park of five buildings located on Harbor Boulevard in Belmont. The lease of 264 Harbor Boulevard is for the entire building known as Building A, and the lease of 400 Harbor Boulevard includes most of Buildings B and C.

On April 16, 2002, the Board adopted Resolution No. 65195 authorizing the First Lease Amendment to the County's lease of Building A. The First Amendment extended the term of the lease through April 30, 2012, and modified the premises to include all of Building A. On July 30, 2002, the Board adopted Resolution No. 65461 authorizing the Second Lease Amendment. The Second Amendment provided for the County's temporary use of a portion of Building E by the Probation Department during completion of the seismic retrofit of the Hall of Justice. On September 9, 2003 the Board adopted Resolution No. 66238 authorizing the Third Lease Amendment. The Third Amendment extended the Probation Department's occupancy through September 30, 2003. The Second and Third Amendments no longer affect the terms of the lease.

HSA recently developed a new insurance case management system to consolidate handling of all health insurance matters by telephone from a centralized location instead of requiring clients to appear personally at locations throughout the County. After evaluating the feasibility of reconfiguring space currently leased by the County in the Harbor Park, HSA determined that it would be more cost effective to lease the portion of the building at 310 Harbor Boulevard (Building E) that was previously occupied by the Probation Department during the seismic retrofit of the Hall of Justice. Because Building E is furnished with work stations and connected to the HSA telephone and data system, HSA is able to implement the new program quickly and in a cost-effective manner. In order to limit the fiscal impact of leasing the additional space at Building E, Real Property Services negotiated a further amendment of the County's current lease of Building A.

Discussion
At the request of HSA, Real Property Services has negotiated a 8 1/2-year lease of approximately 21,770 square feet of office and record storage space at 310 Harbor Boulevard (Building E). Under the terms of the lease, the County will initially use only 12,000 square feet of the premises at a monthly rent of $17,280 (approximately $1.44 per square foot per month based on the 12,000 square feet in use). At any time during the term of the lease, the County may, by written notice from the County Manager, elect to occupy the balance of the premises, or any portion thereof. The County can elect to use such additional space temporarily or for the balance of the term of the lease, and will pay rent only for the area and duration of the use. The rent for such additional space will be at the rate of $1.44 per square foot per month.

In connection with negotiation of the lease of a portion of Building E, the landlord has agreed to amend the County's lease of Building A. This Fourth Lease Amendment gives the County the right, on thirty days written notice from the County Manager, to reduce the area of the Building A premises by 7,985 square feet, with a corresponding rent reduction of $14,373 per month (approximately $1.80 per square foot per month).

The portion of Building A that HSA intends to vacate is temporarily occupied by HSA staff displaced by a construction project from the HSA facility at 550 Quarry Road. HSA expects to vacate the 7,985 square foot portion of Building A upon completion of the Quarry Road construction, which is currently projected for April 2004. As a net result, the initial impact of the proposed lease and amendment at the Harbor Park will be an increase of 4,015 square feet (12,000 sq. ft. added in Building E, less the reduction of 7,985 sq. ft. in Building A) at an increased monthly cost of $2,907 ($17,280 - $14,373).

In addition, the structure of the new lease provides the County the flexibility, with the written authorization of the County Manager, to use up to 8,160 square feet of additional space in Building E, either on a long or short-term basis, at the convenience of the County. The initial base rent, and the rental rate per square foot for any additional space taken by the County, will remain fixed for the first five-years of the term. Effective November 1, 2008, there will be a one-time adjustment of the rental rate, which will be proportionate to the increase in the Consumer Price Index. The landlord is responsible for the cost of taxes, insurance, utilities, janitorial and maintenance costs for the premises. The County will pay its proportionate share of increases in such operating costs over those of the base year of the term.

Under the terms of the new lease, the County will have the right, without additional charge, to use the furniture, fixtures and equipment that are currently in place at the premises. The landlord has also agreed to make, at its cost, improvements to the premises that are necessary to make them suitable for the County's use.

The Director of the Human Services Agency concurs in this recommendation.

Vision Alignment
The proposed Lease Agreement keeps the commitment of "Ensuring Basic Health and Safety For All" and goal number 8. "Help Vulnerable People - the aged, disabled, mentally ill, at-risk youth and others- achieve a better quality of life." The lease will enable HSA to reorganize its leased facilities in the Harbor Park to accommodate the health insurance telecenter, thereby providing services to the public in a more efficient and cost-effective manner.

Fiscal Impact
The monthly rent at 310 Harbor Boulevard of $17,280 will be partially offset by a rent reduction of $14,373 per month commencing in approximately April of 2004 as a result of the Fourth Amendment of the lease of Building A. The rent for both facilities is included in the approved budget for fiscal year 2003-2004. There is no increase in Net County Cost associated with the rent for Building E; which is 100% reimbursed. There is an estimated decrease in Net County Cost of $8,625 due to the reduction in the rent for Building A.