Staff recommends that the City Council take the following actions:

1. Adopt a resolution authorizing the City Manager to execute a ten-year lease agreement between the United States Postal Service and the City of Roseville to lease a portion of the building located at 116 South Grant Street; and

2. Adopt an ordinance approving a budget adjustment appropriating $275,000 from the Strategic Improvement Fund to a new Post Office Tenant Improvements Capital Improvement Project (CIP), to cover building improvement costs and provide a tenant improvement allowance.

In January, the Roseville Electric Utility purchased the long vacant 53,000 square foot, four-story office building at 116 South Grant Street based on the department’s need for additional space. With the building acquisition, and the upcoming expiration of the United States Postal Service (USPS) lease at 320 Vernon Street, the opportunity arose to relocate the USPS post office to space within the newly purchased building. Based upon strong community support to maintain a post office presence in the downtown and the City’s intent to support the Downtown Specific Plan’s (DTSPs) vision of offering a mix of uses, staff responded to the USPS’s Request For Proposals (RFP) to lease space (for the relocation of the Downtown Roseville post office). The City was successful in responding to the RFP and over the past two months has negotiated lease terms with the USPS.

Lease Agreement
The proposed lease agreement sets forth the terms and conditions under which the USPS will occupy approximately 3,800 square feet of space on the ground floor of the northwest corner of the building at 116 South Grant (see Attachment 1). Terms and conditions of particular note are outlined below:

•   Lease Type – The rent is based on a modified gross lease that covers the tenant’s operating expenses with one lump sum monthly payment, excluding janitorial services.

•   Term – The lease term totals ten (10) years (consisting of two, five-year term periods), effective July 1, 2020 through June 30, 2030, with an option to renew for an additional 10-year term at an agreed-upon rental rate at that time.

•   Rent – The Postal Service shall pay annual rent totaling $118,104 (for the first five-year term) beginning September 1, 2020 through June 30, 2025 and $129,960 (for the second five-year term) beginning July 1, 2025 through June 30, 2030. Rent shall be payable in equal installments at the end of each calendar month during this term.

•   Rent Credit – Two months of free rent will be provided to the Lessee beginning July 1, 2020 and ending August 31, 2020.

•  Tenant Improvement (TI) Allowance – The City will provide up to a total of $200,000 in TI allowance for qualifying expenses.

•   City Obligated Improvements – The City shall complete storefront reconfiguration modifications and construct the necessary demising walls at its sole expense. In addition,  if necessary, the City will install curb cuts along Oak Street to allow for an appropriate loading and unloading zone.

    
•   Modifications – This Agreement and each provision contained herein may be waived, amended, supplemented, or eliminated only by mutual written agreement of the parties.

Following approval of this lease agreement, the USPS will proceed with the TI work necessary to occupy the space.

Budget Adjustment

A Budget Adjustment appropriating $275,000 in the Strategic Improvement Fund (SIF) to the Post Office Tenant Improvements CIP is recommended with this request (see Attachment 2). The CIP will fund the cost of the City’s agreed-upon improvements (if necessary) including the construction of demising walls, storefront modifications, and curb cuts along Oak Street for the USPS loading and unloading zone (estimated to total $75,000). A $200,000 TI allowance will also be provided to the tenant to cover the cost of qualified improvements necessary for the USPS to locate within the building.

The proposed project involves the leasing of an existing facility.  This activity is categorically exempt from the California Environmental Quality Act (CEQA) as a Class 1 Exemption (State CEQA Guidelines Section 15301).  The Exemption has been prepared and no further CEQA action is required.

In addition, the California Environmental Quality Act (CEQA) only applies to projects which have the potential to cause a significant effect on the environment.  Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. (CEQA Guidelines §15061(b)(3)).  Approval of the budget adjustment meets the above criteria and no additional environmental review is required.

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Dominick Casey, City Manager