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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 03/20/2007 - SECOND READING OF ORDINANCE NO. 042, 2007, AUTHORI ITEM NUMBER: 12 AGENDA ITEM SUMMARY DATE: March 20, 2007 FORT COLLINS CITY COUNCIL STAFF: Helen Matson SUBJECT Second Reading of Ordinance No.042,2007,Authorizing the Lease of City-Owned Property at 321 Maple Street For Up to Five Years. RECOMMENDATION Staff recommends the adoption of the Ordinance on Second Reading. EXECUTIVE SUMMARY The Fort Collins Technology Incubator (FCTI) provides critical business assistance to the most promising high tech startup companies in the community. As part of its service,FCTI offers below market lease space to its client companies. This Ordinance,unanimously adopted on First Reading on March 6, 2007, allows FCTI's various participants to lease space for up to five years. ATTACHMENTS 1. Copy of the First Reading Agenda Item Summary- March 6, 2007. ATTACHMENT 1 ITEM NUMBER: 16 AGENDA ITEM SUMMARY DATE: March 6, 2007 FORT COLLINS CITY COUNCIL FF: Helen Matson SUBJECT First Reading of Ordinance No. 042, 2007, Authorizing the Lease of City-Owned Property at 321 Maple Street For Up to Five Years. RECOMMENDATION Staff recommends the adoption of the Ordinance on First Reading. FINANCIAL IMPACT Rent collected from this leaseCsare 4theirstfof din on how many tenants occupy the space and what year the tenanm. F projection purposes, if 50%of the building is leased and those ten the ease term($7/SF),it is estimated that the revenue will be approximately $4,000 short of covering building expenses. Fort Collins Technology Incubator has agreed to cover 50%of the estimated shortfall,or$2,000. The remainder of the shortfall will be covered from the City's Economic Health Budget. However,if 100%of the building is leased and the tenants are in their second year of their lease term ($8/17), the lease will generate approximately$12,824 in Miscellaneous Revenue— General Fund. EXECUTIVE SUMMARY The Fort Collins Technology Incubator (FCTI) provides critical business assistance to the most promising high tech startup companies in the community. As part of its service, FCTI offers below market lease space to its client companies. This Ordinance would allow FCTI's various participants to lease space for up to five ye ( ' 0py BACKGROUND The building located at 321 Maple Street previously housed the City of Fort Collins Budget Department. The Budget Department moved from the premises in November 2006 leaving the building available for potential leasing to the Fort Collins Technology Incubator. March 6, 2007 -2- Item No. 16 With support from the City of Fort Collins, Colorado State University and the Northern Colorado Economic Development Corporation,the Fort Collins Technology Incubator("FCTI")was created in 1998. To date, the Incubator has formally assisted 20 companies. Another 400+ companies — many of which did not launchCeated i lyFycapital o e Incubator presence. In the aggregate these 20 firms have full it average annual salary of$65,600 and they have raised in excession i q The"bottom line"of this program is the creation of good paying j ' thni . The program achieves its success through services such as entrepreneurial advisory boards,discounted professional service providers, access to a multitude of CSU resources, internal resource sharing, counseling, training and networking. Program expansion is underway to increase the level of retired business executive advice and to develop a program to access local sources of early stage investment capital. A recent study completed for the Small Business Administration (SBA) concluded that small business establishment births are the single-largest determinant of the growth rate of gross state product (GSP), state personal income, and total state employment using data from the years 1988- 2002. The authors calculated that increasing small business births by 5 percent increased the growth of the gross state product by 0.47 percent. These same conclusions would have been reached if small businesses were defined as having less than 500 employees or less than 100 employees, the study indicates. The study,Small Business and State Growth:An Econometric Investigation, is available at http://www.sba.jzov/advo/research/rs292tot.ndf Colorado State University has Lentlyrje a c nt to ommend the FCTI as the preferred commercialization avenue for re ti from the $260M annual research budget. Over 40 early and mid-stage startups are actively in contact with the Incubator. Many have expressed interest in space. In the summer of 2004,the FCTI significantly enhanced the level of service to its client companies by offering below market lease space located at 200 West Mountain Avenue, Suite C, which is owned by the City of Fort Collins. This 6,553 square foot building was 100%leased after 6 months and has been totally leased to startup organizations since the fall of 2004. By assisting with a startup's space needs, the FCTI not only helps to mitigate the very tight cash flow situation encountered by most startups,but it also provides a synergistic,collaborative environment in which the talented young companies can thrive. Key operational aspects of the program are as follows: • Provides lease space to qualified candidates on a sliding scale depending on their year in the incubator. Companies i st wi ay$7/SF, $8/SF in the second year of the lease,and$ F for third d n e e rent charged will be gross lease, meaning that all expen s are}n uded lease p ent. Tenants are responsible for janitorial services for the ices ei mmuni 'on expenses. • The FCTI is responsible for the incubation program including selection,business assistance, annual review, graduation, etc. The City's Real Estate Services staff provides property management duties, including lease execution,rent collection and addressing any concerns with the facility. March 6, 2007 -3- Item No. 16 Due to the nature of leasing the facility to several different startups at different lease rates, it is difficult to accurately project City revenue or City expenses on a yearly basis. The costs to be paid by the City include: janitorial services for common areas,utilities,maintenance,snow removal and trash services. However,parkin e t w' yvidClfor by the City. Thefollowing chart offers a look at several 1 epos i ities d e t or revenue to the City. City Annual tan b ' de expense) Based on Occupancy and Rent/SF: $7/SF $8/SF $9/SF 100% of net building area leased 1,603 SF $ 1,504 $ 3,147 $ 4,750 75% of net building area leased 1,202 SF $-1,263 $ -661 $ 1,141 50%of net building area leased 802 SF $4,063 $-3,261 $-2,459 FCTI and the City agree that a minimum 50%occupancy is needed before utilizing the building for Incubator purposes. Staff recommends leasing 321 Maple Street to the Fort Collins Technology Incubator and its client companies. Benefits to the City include: • replacement of m j s los Jth a ral years; increased econ is rob ess, in downtown area; retention of the 's i t tssi Eye and; • an enhanced sales tax base. In addition, the FCTI program is consistent with and in support of strategic recommendations released by the Economic Vitality and Sustainability Action Group. ORDINANCE NO. 042, 2007 OF THE COUNCIL OF THE CITY OF FORT COLLINS AUTHORIZING THE LEASE OF CITY-OWNED PROPERTY AT 321 MAPLE STREET FOR UP TO FIVE YEARS WHEREAS, the City of Fort Collins is the owner of the property legally described as a portion of the Northwesterly One-Quarter of Block 42, Fort Collins, Colorado, also known as 321 Maple Street(the "Property"); and WHEREAS, since 1998, the City has supported the efforts of the Fort Collins Technology Incubator(FCTI), formerly known as the"Fort Collins Virtual Business Incubator Program,"which program has provided critical business assistance to new companies in the Fort Collins community; and WHEREAS, FCTI benefits the City by replacing primary jobs lost by citizens, enhancing the economy in the downtown area, and increasing the sales tax base; and WHEREAS, the City received a proposal from FCTI in March 2004 to increase FCTI's service by offering below market lease space to its client companies; and WHEREAS, the City has leased to FCTI and two of its client companies 6,553 square feet of space located at 200 West Mountain Avenue, Suite C, since the summer of 2004; and WHEREAS, the City desires to lease portions of the Property to clients selected by FCTI for a term of one year, with the option to renew for up to two additional years, at a lease rate of $7/square foot for the first year, $8/square foot for the second year, and $9/square foot for the third year; and WHEREAS, under Section 23-114(a) of the Code of the City of Fort Collins, the Council is authorized to lease for a term of up to five years any and all interests in real property owned in the name of the City, provided that Council first finds that the lease is in the best interests of the City. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the Council hereby finds that leasing the Property at 321 Maple Street under the terms listed above is in the best interests of the City. Section 2. That the City Manager is hereby authorized to execute lease agreements for the Property consistent with the terms of this Ordinance, together with such additional terms and conditions as the City Manager, in consultation with the City Attorney, determines to be necessary and appropriate to protect the interests of the City. Introduced, considered favorably on first reading, and ordered published this 6th day of March, A.D. 2007, and to be presented for final passage on the h day of March, A.D. 007. Mayo ATTEST: L City Clerk Passed and adopted on final reading on the 20th day of March, A.D. 2007. Mayor ATTEST: City Clerk