DATE: December 17, 2024
TO: Board of Supervisors
SUBMITTED BY: Susan Holt, Director, Department of Behavioral Health
Edward Hill, Chief Operating Officer/Interim Director of Internal Services/Chief Information Officer
SUBJECT: Amendment No. 1 to Air Fresno Lease Agreement
RECOMMENDED ACTION(S):
TITLE
Approve and authorize the Chairman to execute Amendment No. 1 to Lease Agreement No. 22-344 with Fresno-Air LTD, to extend the term for an additional two years to September 30, 2026, and increase the maximum rent by $870,997 and operating costs by $226,580, to a total of $2,130,914, then converting to a month-to-month lease ($37,384 per month), for use by the Department of Behavioral Health, while the Olive and Heritage locations are under construction.
REPORT
There is no additional Net County Cost associated with the recommended action, which will provide sufficient space for the Children’s and Transitional Age Youth Clinical Outpatient Operations to function at this location, until the completion of the construction of the Olive Campus, located at 5555 E. Olive Avenue in Fresno (Olive Campus). It is anticipated that the Department of Behavioral Health (DBH) will need to remain at the Air Fresno location until July 2026. This pertains to a location within District 3.
ALTERNATIVE ACTION(S):
Should the recommended action not be approved, DBH can continue to occupy the Air Fresno location under the Lease’s existing month-to-month provisions; however, by allowing the lease to continue long-term on a month-to-month basis, there is the risk that the lessor could unilaterally terminate the lease with only 30 days’ notice.
FISCAL IMPACT:
There is no increase in Net County Cost associated with the recommended action. Rent and operating cost will be fully offset with a combination of Federal Financial Participation and Realignment funds. The rent is $35,933 per month for 38,321 square feet for the current year and will increase by 2% each additional year. In addition to rent, DBH will pay $9,012 per month in operating costs. Sufficient appropriations and estimated revenues are included in the Department’s Org 5630 FY 2024-25 Adopted Budget and will be included in subsequent budget requests.
DISCUSSION:
On February 22, 2022, your Board executed Lease Agreement No. 22-059 for 173,200 square feet of space (151,650 square feet of office space and 21,500 square feet of storage space) at the Heritage Center, which has a general address of 3151 N Millbrook, for DBH’s Children’s and Transitional Age Youth Clinical Outpatient Operations.
Several months later, on August 9, 2022, your Board executed Lease Agreement No. 22-344 for 38,921 square feet of office space located at 2719 N. Air Fresno Drive in Fresno, which had been previously leased by the Department of Social Services for its call center. This lease allowed DBH to relocate its Children’s and Transitional Age Youth Clinical Outpatient Operations, due to ongoing tenant improvements at the Heritage Center.
Currently, DBH is in the process of initiating construction to the Olive Campus, which will eventually house both the Children and Adult Clinical Outpatient Operations. This construction has faced a variety of delays, pushing out the timeline for occupation of the Olive Campus by DBH.
The recommended lease amendment will extend the initial term of the lease to four years, which will subsequently convert to a month-to-month lease at the end of the four-year term. While the existing lease is currently operating on a month-to-month basis, the Department anticipates the construction at the Olive building will not be completed until at least 2026, and therefore, the amendment will add to the fixed term of the lease, to accommodate DBH’s anticipated usage.
Approval of the recommended action will allow DBH to maintain business operations while both the Heritage Center and Olive Campus undergo construction.
REFERENCE MATERIAL:
BAI #35, August 9, 2022
ATTACHMENTS INCLUDED AND/OR ON FILE:
On file with Clerk - Amendment No. 1 to Lease Agreement with Fresno-Air LTD
CAO ANALYST:
Ron Alexander