Title
First Amendment to Lease Agreement No. AGR13-3950 with 999, L.L.C. for the Purpose of Acquiring Suitable Office Space for Fire Administration and modifying the term.
Suggested Motion
I move, pursuant to County Ordinance §31-285 and §10-16-7, NMSA 1978, that Council grant a waiver from the conflict of interest of Councilor Rick Reiss who maintains a substantial interest in the property for which the County seeks to enter into a real estate lease, described herein. As grounds for this motion, Council finds:
1. Councilor Reiss' financial interest in the subject property was publicly disclosed prior to solicitation for the subject property;
2. Councilor Reiss, by abstaining from any participation in the approval of the proposed amendment to the lease, shall not exercise any apparent bias or favoritism; and
3. The approval of the amendment to the lease will be in the best interests of the County.
I further move that Council authorize the County Administrator to execute a first amendment to lease agreement No. AGR13-3950 in substantial conformity to the amended lease attached hereto as Attachment A expanding the space for the Fire Administration staff to 999 Central and replacing the term to one 5-year term with no renewal options
Administrator's Recommendation
The County Administrator recommends that Council approve the motion as requested.
Body
Councilor Rick Reiss is the managing member and has a 25% ownership interest in the property that Fire Administration is currently located. The original lease was from March 5, 2013 for an initial term of five years. There is a current need of additional space for firefighter training classroom as well as storage of emergency medical supplies and personal protective equipment.
As such, Councilor Reiss has a conflict of interest which, unless waived by the Council, would render the lease unethical and unlawful. Both the County Procurement Code and the New Mexico Governmental Conduct Act recognize that conflicts of interest may arise from time to time, particularly in smaller communities such as Los Alamos, when local governmental entities enter into contracts with local elected officials. Both state law and the County Code provide that Council may grant a waiver of the conflict if certain conditions are met and the Council makes a written determination to that effect. The findings which Council must make to grant a waiver of Councilor Reiss' conflict of interest are identified in the motion, above, and are addressed here as follows:
First, Councilor Reiss has publicly disclosed his financial interest in the subject property at the time of the original lease. At that time, Councilor Reiss was brought into the discussions regarding the possibility of a lease arrangement at the beginning of November of 2012. The original lease was approved based on this disclosure.
Second, Councilor Reiss will abstain from any participation in the business item by which Council will consider the proposed amendment to the lease. By abstaining from the business item discussion and vote, Councilor Reiss will not exercise any apparent bias or favoritism in this, the final, procurement step in the process.
Third, approval of the proposed amendment to the lease will be in the best interests of the County and the Department.
Accordingly, the Council must first grant the waiver of the conflict of interest, adopting the motion which includes the required written findings, before or contemporaneously with its award or endorsement of the proposed amendment to the lease.
Staff justification for the proposed amendment to the lease is as follows:
In 2013, the department conducted a thorough evaluation of available commercial rental space in consideration of relocating the fire administrative offices. The rental cost, reconfiguration cost, parking and proximity to the municipal building were considered for six properties. After careful consideration, the 999 Central Avenue, Suite 200 property was ranked highest and was selected.
The Los Alamos Fire Department administrative offices have occupied the 999 Central Avenue, Suite 200 property since May of 2013. The space consists of 7290 square feet, which contains offices for 22 staff members, limited storage, and a small training/ conference room.
There is a need for a larger classroom space for firefighter/EMT training as well as climate controlled storage of emergency medical supplies and uniforms/personal protective equipment.
Acquisition of an additional 1516 square feet (1192 of private space and 324 common area) at 999 Central, Suite 300 would substantially increase the capacity for training and provide climate controlled storage for uniforms, protective clothing, and emergency medical supplies that are currently stored in the basement of Fire Station 4 in less than ideal conditions. This basement storage area has experienced rodent and moisture issues in the past.
The current training space of 520 square feet is insufficient to host the number of students needing to attend training, especially when the training is hands-on, for example CPR training. The existing training room will be converted to a climate controlled space for storage of approximately ten large storage cabinets that will contain uniforms, protective clothing, and emergency medical supplies. The lack of storage space in the current configuration has caused storage of some supplies to be placed in individual offices decreasing the effectiveness of the individual work space.
This change will enhance the LAFD’s ability to provide hands-on training in accordance with the three-year training plan, the accreditation benchmarks, and the Cooperative Agreement with the DOE/NNSA. In addition, the space will allow for enhanced inventory control in a central location free of exposure to moisture and pests.
The costs associated with the acquisition of this additional space will increase the current monthly rent payment by $2411.51, but lower the per square foot base cost of rented space from $20.97 per square foot, to $20.00 per square foot for the existing 7290 sq. ft. and $17.00 for the additional 1516 square feet or an average of $19.48 base rate for the entire 8806 square feet.
We have conducted a study of commercial rental rates for Los Alamos and found base rate pricing ranging between $16.36 - $26.00 per square foot per year. We contacted a local commercial realtor, Terry Salazar, who has no financial interest in our current space, and asked him to provide us with a market analysis of commercial rental rates (see attachment B). Mr. Salazar found that in looking at 25 commercial properties, the average base rental rate is approximately $18.00 per square foot. We also contacted Tai Bixby, who represents Kroeger Corporation (Smiths) for rate quotes. In addition, we referenced rates from two properties that are currently being rented by Los Alamos County (Neptune - occupied by LAC Social Services and Boom Town on Diamond - occupied by LAC Public Health Nurse) for rate comparisons.
From our review of the commercial rental rate information, we concluded that that proposed base rental rates of $20.00 and $17.00 per square foot per year are reasonable and lie within range of the current commercial rental market rates.
The current lease term expires in approximately one year (May 2018) and has provisions to extend beyond this expiration date in two two-year terms thus extending the total term of the current agreement to May 2022. We are recommending the term of the amended lease be reconfigured to be a straight five-year term beginning in July 2017 and expiring in June 2022 with no optional extensions.
We recommend approval of the lease terms for several reasons. The proposed rental rates are reasonable and within the market range. The proximity of the building allows fire admin staff to easily walk between fire administration and the Muni building to conduct routine business. Within a typical work day, fire administration staff and Muni building staff might make 10-20 trips between the two buildings. This proximity eliminates a need to drive a vehicle and find parking to conduct this type of cooperative business between LAC staff members. Adequate on-site parking is another issue that weighs heavily in our evaluation of our fire administration location. Our current location provides 18 parking spaces that are properly signed and reserved for official fire department vehicles only. These reserved spaces provide parking for 12 staff units and 2-3 fire apparatus. In addition, our administrative staff utilizes another 12 non-reserved spaces to park their personal vehicles. Lastly, we utilize additional parking spaces for visitors to the fire administration including those conducting business, attending meetings like our Medical Advisory Committee, or completing training that includes classes offered to the public, responders from other agencies, and in-house department only trainings. Quite a bit of LAC network infrastructure work has gone into the current location and to move to another location would require this work to again be done at a substantial cost. The property owner bore the cost of the original office configuration construction (as specified by the Fire Department at a cost of approximately $175,000) and will bear the cost of the reconfiguration of the second-floor storage area and third floor training and storage area (approximate cost of $25,000). The somewhat central location within our busiest fire district also facilitates the conducting of business and training while limiting delays to calls for emergency services. Our experience since occupying this property in May 2013 has been positive where the property owner has provided all janitorial and maintenance services as promised without incident.
Alternatives
One option would be to remain with the current lease and square footage that expires June 30, 2018. However, the challenges of limited space would continue, including the potential loss of property due to the water and rodent issues at the current storage location. Moving to another rental location could be considered, but it is quite unlikely that we could duplicate the proximity, parking, and office configuration contained within the current location and we would have to bear the cost of moving and quite likely most, if not all, of the reconfiguration costs including construction and network infrastructure. Constructing a LAC owned facility could be an option, but likely would cost somewhere in the $10-20 million-dollar range to build a new facility. Finding open space to build would be another challenge. Additionally, it would require some form of negotiation with DOE to create some sort of a cost sharing agreement on a LAC owned facility whereas DOE currently pays 77% of the cost of the current rental agreement.
Fiscal and Staff Impact/Planned Item
The cost of the amended lease for 999 Central is $2,411.51 per month above the current monthly cost. The cost is within the current and proposed LAFD budget.
Attachments
A - AGR 13-3950
B - Los Alamos Lease Space letter and list from Terry Salazar, Los Alamos Commercial Real Estate Leader
B1 - Salazar listings of Commercial Lease Space
C - 2013 Evaluation of Fire Department Administrative Office Space
D - Fire Admin Lease Presentation
E - 999 Central Original Lease AGR13-3950