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ADOPT RESOLUTION TO APPROPRIATE AND RATIFY EXPENDITURES RELATED TO STAFF RELOCATION FROM 400 EAST MAIN STREET
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RECOMMENDATION
It is recommended that the City Council adopt a resolution to:
1. Accept $76,802 in remaining deposit funds from 400 E. Main lease and appropriate funding to the Public Works Facilities Crafts Maintenance Special Services Operating Account.
2. Appropriate funds in the amount of $223,698 from the Fiscal Year 2021-22 Discretionary Projects Contingency Funds to the Public Works Facilities Crafts Maintenance Special Services Operating Account.
3. Transfer funds in the amount of $141,437 from the Victory Park Pool, Project No. CR18020, to the Public Works Facilities Crafts Maintenance Special Services Operating Account.
4. Ratify expenses in the amount of $441,937 for all costs related to staff relocation from 400 East Main Street.
It is also recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of this resolution.
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Summary
In 2015, the City began leasing office space at 400 East Main Street for use by various City departments and staff operations. Throughout the course of the lease, numerous lease amendments were executed to reduce the leased space required by the City and to update certain terms of the lease agreement. Per the terms of the most recent lease agreement, City staff were required to fully vacate the leased space from 400 East Main Street by the end of June 2025 for the 4th floor and by the end of July 2025 for the 3rd floor.
The departure of City staff from 400 East Main Street necessitated expenditures be made that included, but were not limited to, furniture disassembly at 400 East Main Street and reassembly at new staff locations, moving costs, and tenant restoration obligations.
It is recommended that Council adopt a resolution ratifying the expenditure of $441,937 for staff relocation from 400 East Main Street.
DISCUSSION
Background
On February 25, 2015, the City executed a lease agreement with William J. Hoffman, duly appointed Receiver (Landlord), for a portion of the building located at 400 East Main Street. At the time, the leased premises included the entire 4th floor, a portion of the 3rd floor, a portion of the ground floor, a portion of the 7th floor, and seven suites. The original lease was for an eight-year term, with the option to extend the lease up to an additional four years (Attachment A - 2015 Lease Agreement).
On October 16, 2018, by Resolution No. 2018-10-16-1402, Council authorized the first amendment to the standard office lease for reduction of the leased premises (Attachment B - First Amendment Lease).
On February 7, 2023, by Resolution No. 2023-02-07-1211, Council authorized the second amendment, reducing the 7th floor space and extending the lease term for the 3rd and 4th floors through March 31, 2025, with an option to extend the lease term on a month-to-month basis to June 30, 2025 (Attachment C - Second Amendment Lease).
In late 2024, staff notified the Landlord of the City’s intent to exercise the month-to-month extension rights outlined in the second amendment, allowing staff to occupy the 3rd and 4th floors through June 2025. At the same time, staff began negotiations with the leasing agent, CBRE, regarding a third lease amendment that would allow staff to occupy 400 East Main Street beyond June 2025.
On June 9, 2025, the third amendment to the standard office lease was executed, enabling the City to occupy the 3rd floor and to retain information technology equipment on the 4th floor through July 31, 2025 (Attachment D - Third Amendment Lease).
Present Situation
Due to the lease expiration on June 30, 2025, from the 4th floor and July 31, 2025, from the 3rd floor, Information Technology (IT), along with Administrative Services (ASD), Economic Development (EDD), Human Resources (HR), and Fire Administration were among the departments that needed to be moved out of 400 East Main Street. The New City Hall project has experienced significant design modifications resulting in construction delays; therefore, departments needed to be temporarily relocated to City Hall and the Municipal Utilities Department (MUD), Navy Drive facility.
In June 2025, Public Works (PW) and IT Departments worked with MUD to provide temporary workstation spaces to accommodate IT and Fire Administration at the Navy Dr. Wastewater Treatment facility. In July 2025, ASD, EDD, and HR began moving to City Hall. Due to time constraints, the most cost-effective and time-effective way to complete repairs to existing facilities and move departments prior to the lease expiration at 400 East Main Street, was for PW to utilize City staff and vendors.
By July 31, 2025, the 3rd and 4th floors were vacated in accordance with the Third Amendment Lease. The mobilization efforts led by the PW and IT Departments to vacate the 3rd and 4th floors resulted in various expenditures. Such expenditures included cubicle dismantling and reassembling, hauling and dumping trash, acquiring and setting up network cabling, carpet and floor removal and installation at City Hall, painting at City Hall basement, deep cleaning, hazardous material testing, re-keying facilities and offices, HVAC unit purchase and maintenance, installation of security system at Wells Fargo, electrical modifications for office spaces, and moving department items and furniture. Services were contracted for moving out of the 400 East Main Street building. While moving out, the contractor damaged a waterline, causing water damage to the building. The damage was $96,552.57 and was deducted from the City’s security deposit. Risk Services is working through the subrogation process with the moving contractor to ensure the City receives reimbursement for the related costs.
It is recommended that Council adopt a resolution appropriating and transferring funds and ratifying the expenditure of $441,937 for staff relocation from 400 East Main Street.
FINANCIAL SUMMARY
With the appropriation of funds in the amount of $223,698 from the allocated Fiscal Year 2021-22 Discretionary Projects Contingency Funds, the appropriation of $76,802 from the 400 East Main Street lease deposit, and the transfer of funds in the amount of $141,437 from the Victory Park Pool, Project No. CR18020, to the Public Works Facilities Crafts Maintenance Special Services Operating Account, there will be sufficient budget to ratify the expenditure of staff relocation from 400 East Main Street.
Attachment A - 2015 Lease Agreement
Attachment B - First Amendment Lease
Attachment C - Second Amendment Lease
Attachment D - Third Amendment Lease