HomeMy Public PortalAbout19770817 - Agendas Packet - Board of Directors (BOD) - 77-21 Meeting 77-21
• Ju
,A-
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Special Meeting
Board of Directors
N 0 T I C E
August 17, 1977 7 :30 P.M.
Midpeninsula Regional Open Space District
745 Distel Drive
Los Altos, CA
There will be a Special Meeting of the Board of Directors of
the Midpeninsula Regional Open Space District at 7 : 30 P.M.
on Wednesday, August 17 , .1977, at 745 Distel Drive, Los Altos ,
California, for the purpose of discussing the agenda items
set forth below:
A G E N D A
ROLL CALL
OLD BUSINESS WITH ACTION REQUESTED
(7 :30) 1. Proposed Land and Water Conservation Fund Appli-
cation - H. Grench
(a) Report
(b) Resolution of the Board of Directors of the
Midpeninsula Regional Open Space District
Approving Application for Land and Water
Conservation Funds (Baylands Park Acquisition
Project)
(7 : 35) 2. Monte Bello Open Space Preserve Addition (Eldridge
Property) - H. Grench
(a) Report
(b) Resolution of the Board of Directors of the
Midpeninsula Regional Open Space District
Authorizing Acceptance of Agreement to Pur-
chase Real Property, Authorizing Officer to
Execute Certificate of Acceptance of Grant
to District, and Authorizing General Manager
to Execute Any and All Other Documents Neces-
sary or Appropriate to Closing of the Trans-
action (Monte Bello Open Space Preserve
Addition - Eldridge Property)
(over)
J
Meeting 77-21
Page two
NEW BUSINESS WITH ACTION REQUESTED
(7 :45) 3. New Safe Deposit Box - A. Crosley
(a) Resolution of the Board of Directors of the
Midpeninsula Regional Open Space District
to Enter into a Rental Agreement for a Safe
Deposit Box in the Vaults of Wells Fargo Bank,
N.A.
(7 :50) 4. Office Space Requirements - H. Grench
(8 :20) 5. Resolution of the Board of Directors of the Midpen-
insula Regional Open Space District Amending Rules
of Procedure To Substitute the Word "CoiYffAttee" In
Place of the Word "Subconx.iittee" in Su,',,)sections l. S0 ,
1. 82 and !. 1,-),4 of the Rules of Procedure A. Crosley
(8 :25) CLAIMS
EXECUTIVE SESSION Land 111egotiations
ADJOURNMENT
t
�a
R-77-39
(Meeting 77-20
Agenda item No. 4)
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
REPORT
August 5, 1977
TO: Board of Directors
FROM: H. Grench, General Manager
SUBJECT: Proposed Land And Water Conservation
Fund Application
Introduction: The federal Land and Water Conservation Fund
Program as administered by the Department of Parks and Recre-
ation of the State of California is a major source of supple-
mental funding for local park agencies. The MROSD made applica-
tions to the program in , 1974 , 1975 and 1976 and the first two
projects were approved.
District staff is recommending application for a grant of $500 ,000
from the Land and Water Conservation Fund Program for acquisition
of a proposed East Palo Alto-East Menlo Park Baylands Preserve.
Ordinarily, the Land and Water Conservation Fund Program calls
for 500 of a project to be funded by the local agency. However, _
there is a provision in the Land and Water Conservation Act where-
by a gift of land can be applied as the local agency contribution
against a Land and Water Conservation Fund project. A possible
gift of foothills land in the Woodside area would be used in this
way.
Description of the Project.
The proposed project and the possible gift represent major poten-
tial acquisitions in San Mateo County.
A. Project Area. The project area consist of land and
water on the shoreline of San Francisco Bay within a
500 acre area in the East Palo Alto and East Menlo Park
baylands just south of the western approach to Dumbarton
Bridge. See the attached map A, for location.
The site would become the natural-area component of the
nearby proposed marina in the vicinity of Cooley Landing_
It is possible that a marina and traditional park facility
could be developed on the southern portion of the project
area by San Mateo County. Final delineation of the natur-
al area to be acquired would depend upon joint planning
with and funding commitments by the County, East Palo
Alto, Menlo Park and, possibly, the Harbor District, and
California Department of Transportation_ The 500 acres
R-77-39 Page two
represents the area within the overall outer project
limits; the actual area acquired with the grant funds
would be less.
The Parks and Recreation Element of the San Mateo County
General Plan shows a portion of this area as a planned
park. Further, the acquisition would contain a section
of the planned San Mateo County Shoreline Recreational
Trail extending the entire length of the Bay. Such a
trail might be closed during the nesting season in order
to protect shoreline bird species. The area would also
serve as scenic viewshed for travellers on the Dumbarton
Bridge. Recreational uses would include hiking, bird-
watching, photography and fishing.
B. Gift Area. The possible gift of approximately 70 acres
is located on the eastern slope of the Santa Cruz Moun-
tains on La Honda Road within the Town of Woodside.
Wunderlich County Park is located 0.2 miles north across
La Honda Road, See the attached map B for location.
The site contains second growth redwood and oak-bay
woodland with scattered Douglas fir at elevations rang-
ing from 800 to 1,100 feet.
The property is currently owned by the Sierra Club Foun-
dation and receives light day use with occasional group
events. The property would remain open for low intensity
recreation using existing trails.
Recommendation: it is recommended that the Board adopt the attached
Resolution of the Board of Directors of the Midpeninsula Regional
Open Space District Approving the Application for Land and Water
Conservation Funds - Baylands Park Acquisition Project.
It must be emphasized that application for funds is not a decision
to acquire the property. A project of this magnitude is only being
recommended because of the possibility of a grant being approved
and the property being acquired at no cost to the District.
HG:pl
-E
JCIO
�y:
SAET E VAPORATORS
of-
6,10 it It
:•'�r. PROJECT AREA 4
APPROX. 500 AC o
5
AREA'
I�FdUDED
B M 8
o Menlo Park.
SO.TffERN^ E.-?Ja TORS
8 M'7 "ems'` 1@1 J� r i;
Henderson =Y�c ! � ii
Y At"ii.TO~• I. y �.v ':7- S r •MCod Ac.i //- •� rhUO
AN
,w ��.Sa•.h- OnIVE' - ar �. HETCN HETCHY f ! 1 t QOtt?f Lan(H .
_ 3 _CCTV----� —��I .(�Ravenswood b
,o, it -+_-a/r--�,�- �J'��• !.1 Jac FarrelC
E\lp P r "'•.ScSs:a.:: i
sch n Qal a I' t� ���P
� BM.:1� s ShJpprrR
` 1�s �l (YrY 3tr�+'&jii ° r .
f r pp H2O may'•• rq , I r�Kava u q ('enter. , "�!t r+•
flr •�ef,'1 % 4$cti � —�Jc- �A r �.. '., L riir•7�1�•ps•v' •r.f "t
i�� _/1 I,' .. e,� p� K , Y` � 1 B Irk�srj_��=-�•� } p - _ � � �� `'r�•"/ +
�,/,o ��� t i � � / r,y'_ f t---�� r"]_ /�:r � i 7 '.fY;';:�rt�'•4..�i�;�� ":F��.:'-"L
I
ry 2 1 ( •F'r to 10 a x
Water
i 01
1'11.
j.
��W` d� �•y .fit :. :. �� �./1 1f lr. r,�ll� -_•�h �!r._— - - `l
t.. ' •t'/2 •:r, � � - ' _ x"'z.a"`.a=•z* " �l`"�i'.�y !;f �(�!_ f�o'� _�._-.-:_..____._ -._-� N�•_{ (� ��, -
it
�, l,\ -ter
. ! .' / 1 i, 'V 1 or a--Mawbod.ri
ch �. _ _--� -A .�'�
---���� - BrcCc� t/
�,J r 4 avehismood�a .$Garekn Oskv �1\ \ p t
I,t,•irke . J' - >1en1 'Oa ~� 'ti �•!['-h Bch T _ ach ,t.' /'t0. �-
F _ - .`� Sch V.
2
ti,1rra,ac j
T _ L-� �• �` /A`�y`�� i i; l � q ?. Ili i f
�J . .35�J \i'S SM �7 1
y ,ptt ` `1_ 'Oe �l \; i � '1tIATko s to t OJP 4E`y y`
y r
- City
S Thon gdina£= r.7 r
Sch • �:I u � �' � ,� '� 'tie.r 'i Mr � DO('a10 Altu� -
7 I y Z° /y ♦�°�Ave_ Ito
NI
�t1AN �/� •�7_ WTI - r`AVE
1
._ JL' I' - 1 ... <ir 1.3 1;:+wA• lt}l a,�'
o y,E a .flarkcY q ' IAtherton �ep. Acar �'
IPOrj.' 4ddrao� 'Jmt r• 't - ,' - •.�! i ' /.. /. ,.':;' •e+�, 1 �•- _ ;tom•• a-
klzl�_, `^'4�; + �!`'%, ''f'/ � ��~� i .•_�� J'_�.f AFCtY�a/f'�OAO� �f `'�•a � � �6 .i'i sl'_ �� �i �
�5satr 4� Menlo J
R;nconada 5:' A a Palo Tito t z
-j�!;8 ,6,. \-�.�`/ ♦ e►', ;r - r 1, d ParA, 1k. .t�ayj _ eF Park
7
o�Q Qto-r,�► �'�t1iCJ � � <:�?�' x`.' �d a �.'•I +,..+ r..
�• Y`it '' 71'' •/�" � aj✓�- r:N G �/ 3
\: \'4 �. �y�°• Z�.�' I �,cM` pF��j`, r ! /%��`.r"•' •� f �i�CCh
4 a.,o =F t+� oc♦- t•,tr `l
/.' `� �`'°P 6,
3ra•:•po� �a t _ e
,/
••. rtVr V.7Lv Lti N�r�rr.. -�•�w.v�ry.--.--r�c�r � ��,r ,C.-/ F a r. ���
dO
vo�dsidX
ldstde Ster± �' 4 t�/�: , • •\ at4 ':• = _ ` `\] �otao i� �;\
9`"�tt Woodside'- '
• \a;\ac.hty% ' •\�1'7 BM •.•f• gett e ..t J• _ ' ` mil/
t\, • • If�f`J 394 Ada6e -
�f •�, a . iCflriler' •Water.`
sue. ,Yla err`�� • to �,• •✓,�,r �_.. , v -
Li
04
it .�•, -�'%JA,\ na� � ,\\� � /,; ,, 9• �� Ra _,, •_ --.__ , .!.-
/. / .Rr /'-. • ai;�a 1, \ \ •\\ z\��•%' `d
00
_ _ {r��•{"y��77�
" '• u �t �� M'A62
' +\ •, _�'1; •� x '. - r.�, � �%' �. '
:fit\
a� V. a ,.\� 4
�,� • gM ter" ��i -
' r � b � ••. ;•Sears�r,:!�r�358 � s
Hiflorical v - -
a--�,-�y _�� '. v* _Wad � P` (��:' a,L%' .�. • .` i Z`� 1 �� �, i/ -p`�'� -_ '
1 as M 732
t �n .a ry a qb \ •1, \ i \ '—is 1 `v
A 1 BM 62� � � � •�k ,��,� .� /! �O.Y:� 47^�, r '``�•t- o�
--, ; PROPOSED PROJECT AREA
N. A �� '-c �---� •r, APPROXIMATELY�70 -ACREST' � _
o i cr --
\ '°,.� I '6 l ���j{fir �s I �t�'�� � C• •`r �� *'fo' '� _AREA EXCLUDED-M.
ti Airway `.� a �* �+ \ �� t
`� Beac � .�' i• :e.++.y QUMrq^ - 9 h� '� a `•s
�, /. •",� VlGad
killingslda z,
1610 7• \ 3:% Sc
a1A �7►__-_.'__`a•'___- -_- Y .� �:.. �♦ l�0 _ at -� 4°0� 's� 3 i 4 r-•..r. car..
�.� ;��• :� tatter- ems. " . v / grWa•t
/5GG j.. ��.4 ' v •� \. ��\. Z a �� '..r vatarc .7 1
1Sr_ru r'
✓ Oyj� - =� t �\�p0 -�:: ;3 ►,ut 5 :r-j Lcr SrATe
_ Sky Londa`• i '' ► \ r `4 ,.q ' ''
' Q )� C2 s - n ter
7� r�-�\ � . '• C,a o" '>�• IC, � O- ---..//d a 1 ` POf�AI� j �
it
.� -2fi �:•• Q' - �✓ ``A \ $•§_�, •\• �•^ _ v'9 -Jr �% Vt�lay ■1,-� � \ \•r` j. ••r �i(y. _'a�_•"{IY'[ �nl:. •^.1 1; �
.`i � j° �I t ••_.� ;Water O •�. �/ �� `,'� �t.
l JQ tt - I \Portolane�y�is' Sri
Sky (��- 1 ll� .~Bht��l•725
RESOLUTION NO. 77-34
RESOLUTION OF THE BOARD OF DIRECTORS OF THE
MIDPENINSULA REGIO14AL OPEN SPACE DISTRICT
APPROVING THE APPLICATION FOR LAND AND WATER
CONSERVATION FUNDS - BAYLANDS PARK ACQUISITION
PROJECT
WHEREAS, the Congress under Public Law 88-578 has
authorized the establishment of a Federal Land and Water
Conservation Fund Grant-In-Aid Program, providing matching
funds to the State of California and its political subdivisons
for acquiring lands and developing facilities for public
outdoor recreation purposes; and
WHEREAS, the State Department of Parks and Recreation
is responsible for the administration of the program within
the State, setting up necessary rules and procedures governing
application by local agencies under the program; and
WHEREAS, said adopted procedures established by the
State Department of Parks and Recreation require the applicant
to certify by resolution the approval of applications and
the availability of local matching funds prior to submission
of said applications to the State; and
WHEREAS, Part V of said applications contains assur-
ances that the applicant must comply with; and
WHEREAS, the proposed Baylands Park Acquisition Project
is consistent with the California Outdoor Recreation Resources
Plan; and
WHEREAS, the project must be compatible with the land
use plans of those jurisdictions immediately surrounding
the project;
NOW, THEREFORE, BE IT RESOLVED. that the Board of
Directors hereby:
1. Approves the filing of an application for Land
and Water Conservation Fund assistance; and
2. Certifies that said agency understands the
assurances in Part V of the application and
certifies that it will comply with the regu-
lations, policies, guidelines, and requirements,
including A-95 FMC 74-4 and FMC 74-7, and as
they relate to the application.
3. Certifies that said agency has matching funds
: a
from the following sources) , namely, property
tax revenue and a gift of land, and can finance
100 percent of the project, half of which will
be reimbursed, and
4. Certifies that the project is compatible with
the land use plans of those jurisdictions immedi-
ately surrounding the project; and
5. Appoints the General .Manager as agent of the
District to conduct all negotiations, execute
and submit all documents including but not
limited to applications, agreements, amendments,
billing statements, and so on which may be neces-
sary for the completion of the aforementioned
project.
( .ieeting 77-21 ,
Agenda iten tto. 3)
RESOLUTION
} NO.
RESOLVED: That this&""Vht r into a Rental Agreement (and renewals thereof) for a Safe
Deposit Box in the vaults of Wells Fargo Bank, N.A. (hereinafter called "Bank' and hereby authorize
the President and the Secretary to execute the lease thereof for and in behalf of this 49M*X, D l s tr tp t
FURTHER RESOLVED:That any anP of the following officers and employees a his
DistriL'1tk)fk�Xshall have the right of access to and control of the contents of said and
Deposit Box,
including the right to remove the whole or any part of the contents thereof, and to surrender the said
Box.releasing Bank from all liability with respect thereto:
PLEASE PRITITLES
ONLY TYPE TITLES O president of the Board
OF OFFICERS AND General Manager
EMPLOYEES District Clerk
AUTHORIZED
HEREUNDER
District
FURTHER RESOLVED: That the certification of the Secretary of this A'go"y Xws to election
or appointment of authorized officers or employees shall be binding upon this and the authority
hereby conferred shall remain in force until written notice of the revocation or modification thereof shall
be delivered to an officer of Bank at the office at which said Safe Deposit Box is located.
-------------------------------------------------------------------------------------------
CERTIFICATION
I HEREBY CERTIFY that I am the Secretary of M]d gnirI5- l-a-Regional OZLe11 -
SPace District, a pt1h11G agerl9Y pg ),that the foregoing Resolution was
unanimously adopted on 19 at a duly and regularly called meeting
of the Board of Directors of said 4&4I,4which meeting a quorum was present, that the same has not
been revoked or amended,that the names and titles of the officers and employees authorized under said Reso-
lution are:
NAME TITLE
Daniel G. Wendin President
PLEASE PRINT OR I� _
2 HP rbe.rt Gren Gb General llanagems __
TYPE NAMES AND 3—Anne. -C a-t ... r- .,jos ,.,
GL.t-L1Lr.C<. L.-.�.-3�.t�J,C.
Ili s t r jx:�--C-�.,er_k_
TITLES HERE
and that the signatures appearing on the reverse side hereof are the signatures of the officers or employees so
designated.
District
IN WITNESS WHEREOF,I have hereunto set my hand and affixed the corporate seal of this C}gIRtRit
this - —_____day of AU USt ,19 77_
(SEAL) iy _�. _ SECRETARY- I
NOTE: If this Certificate is signed by
an officer who is authorized to have COUNTERSIGNATURE:
access to Safe Deposit Box it should
be countersigned by the President or
Vice-President.
PRESIDENT
f
ADDRESS 745 Distel Drive Los Altos , CA TELEPHONE NO C)6tj 4717
BUSINESS Acquisition & preservation of open space land
INTRODUCED BY
BANK REFERENCE
RENTED BY APPROVED BY
SURRENDER OF SAFE
CALIFORNIA lq
THE UNDERSIGNED HEREBY SURRENDERS SAFE NO 3131 WHICH IS NOW EMPTY,AND DISCHARGES WEDS
FARGO BANK, N.A. FROM ALL LIABILITY WITH FESPECT TH€RETO. pUb11C
Midpeninsula Regional Open
KEYS RETURNED Space DistrictA ycv
BY
General Manager (TITLE)
BY
Administrative Aide (TITLE)
CORPORATION LEASE AGREEMENT
SAFE NO.
RENTAL
The undersigned hereby rents the above numbered Safe Deposit Box in the vaults of Wells Fargo Bank, N.A. (hereinafter
called "Bank") subject to "Terms and Conditions" endorsed on back of Rent Receipt issued by Bank, and future amendments
thereto and changes therein. Receipt is hereby acknowledged of a copy of said Rent Receipt and two keys to said Safe. The
undersigned %rocs to indemnify Bank for any loss, damage or liability it may suffer by reason of the failure of the undersigned
to comply with said "Terms and Conditions." The undersigned further agrees to notify Bank of the death of any person having
the right of access to said Safe before seeking access thereto after the death of such person.
Midpeninsula Regional PUBLIC
Opera trict_r ___,pal
DATED: BY PRESIDENT
I9�-. BY SECRETARY
e severally agree to be boundin all respects Ey above Rental Agreement: i
AUTHORIZED SIGNATURES TITLE a
PrP4i Caen
General Manager
District Clerk
S03 (1.72) 02105
M-77-161
(Meeting 77-21
*4§b
I .* Agenda Item No. 4)
0&WC
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MEMORANDUM
August 16, 1977
TO: Board of Directors
FROM: H. Grench, General Manager
SUBJECT: Office Space Requirements
Discussion: At the Board meeting of August 10 1 gave an infor-
mational report on the status of staff attempts to obtain adequate
and functional meeting room and office space. The attached memo-
randum from L. Schwarz to me presents an analysis of renting ver-
sus buying office facilities. The long term economics clearly fav-
or purchase.
Recommendation: The following course of action is recommended for
Board adoption:
(1) Authorize the General Manager to lease for up to 3 years
approximately 3000 square feet of space at the present
location or across the street at a cost not to exceed
72� per square foot per month.
(2) Enter into a 2 to 3 year program of locating a suitable
site for District purchase on or within one block of El
Camino Real and three miles north or south of the present
location; of developing plans and specifications for re-
modelled or new space; and of completing necessary con-
struction.
HG:pl
M-77-160
*461AA� (Meeting 77-21
or Agenda Item No. 4)
8 or
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MEMORANDUM
August 16 , 1977
TO: H'. Grench, General Manager
FROM: L. Schwarz, Financial Analyst
SUBJECT: Decision to Rent or Purchase Office Space
Introduction: Accounting for Time
Fundamental to an analysis of expenditures in different time
periods is the concept of "present value. " $100 deposited
in a bank savings account today will be worth $105 next year,
$110. 25 the year after that, etc. In order to make meaning-
ful comparisons between expenditures that occur at different
times, each expenditure must be brought to a common base:
its present value. Hence, for example , we "discount" a
$105 expenditure that occurs next year to its present value
of $100 , in recognition of the fact that we could put $100
in the bank today and have $105 to pay that expenditure one
year hence.
In comparing the cost of renting to the cost of building office
space, the basic idea is to itemize the expenditures each
alternative entails and discount each expenditure to its pre-
sent value. The alternative whose total expenditures have
a lower present value is then identified as the least costly.
Alternatives must be considered over the same period of time
in order to make a meaningful comparison between them. In
this analysis the alternatives of renting and building office
space will be considered over a 15 year period.
It is important to realize that the two alternatives cannot
be meaningfully compared unless some accounting is made for
the fact that, by following one option, the District will
own a building and a piece of land at the end of the 15 year
period, and that, by following the other option, the District
will own nothing. To account for this difference, it is
necessary to make an estimate of the value of the land and
building at the end of 15 years. This value must be discounted
to its present value and then subtracted from the present
value of the expenditures. In other words, the true present
value of the cost of building office space is the present
value of the total expenditures minus the present value of
the value of the land and building at the end of 15 years.
M-77-160 Page two
An example:
3000 square feet of office space:
Cost to rent - $. 65/sq. ft. per month including
maintenance, or $23,400/year
Cost to build - $40/sq. ft. or $120,000. ,
Additional expenses associated with building:
Land - $160 ,000
Transaction costs, legal fees, staff time, etc.
$5,000
Additional insurance premiums - $1,000/year
Additional interior maintenance - $1,500/year
Additional exterior maintenance - $1,000/year.
Assume that the land will still be worth only $160,000
at the end of 15 years and that the building will be worthless.
Cost of renting:
$243,000 - present value of $23,400/year for 15 years
Cost of building:
$120,000 - building cost
$160,000 - land
$ 5,000 - transaction costs
$ 36,000 - present value of additional insurance
and maintenance for 15 years
($ 77 ,000) - present value of land ($160 ,000 in 15
years)
244,000
Inflation:
Please note, and this is very important, that thus far no
accounting has been made for inflation. Present value analysis
deals only with interest, not with purchasing power. In
equating $100 today with $105 one year hence, we are not account-
ing for price changes over that period.
Consider the simple example in which the costsof renting and
building are compared. Note that it assumes that the cost
of renting will not increase over the 15 years (and that the
land will not appreciate in value) . If however, we assume
an average annual rate of inflation of 5%, the costs of
renting and building change dramatically.
. s
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
M-77-160 Page three
Cost of renting:
$351,000 - present value of $23,400/year for 15
years with 5% rate of inflation
Cost of building:
$120,000 - building cost
$160,000 - land
$ 5,000 - transaction costs
$ 52 ,500 - present value of maintenance and in-
surance expenses for 15 years with
5% rate of inflation
($160,000) - present value of land in 15 years
assuming 5% rate of inflation
$177 ,000
If we assume that land appreciates at a rate of 10%, the
land will be worth $668,000 in 15 years or have a present
value of $320,000. This reduces the cost of building office
space to $17,500.
The reason for this dramatic shift in costs is, I hope,
apparent. The effect of inflation is compounded by time.
The cost of renting is subject to this compounding. The
major costs associated with building are not. Moreover,
in buying land on which to build, the District acquires an
asset which can be expected to appreciate as the result of
inflation.
If the District were to borrow the $285 ,000 required to con-
struct a building and repay that amount in equal annual
installments over a ten year period, paying 6% on the out-
standing balance, the present value of those installment
payments (interest and principal) would be $298 ,000. In
other words, borrowing money to pay all of the costs associ-
ated with building would add an additional $13,000 in trans-
action costs to the present value of the cost of building.
Assuming that the District does borrow the money it needs
to construct a building, the cash outlfows associated with
each alternative are presented in the following table.
M-77-160 Page five
Allowing for Expansion:
Another prospect open to the District is constructing a
building large enough to allow the office to expand. Until the
extra space in the building is needed, the District can rent it
out.
The following example is based on the assumption that, in
five years, the District will need an additional 1500 sq. ft. of
office space. one option is to rent 3000 sq. ft. for the next
five years and 4500 sq. ft. for the following ten years. The
other option is to build 4500 sq. ft. of office space now and
rent out 1500 sq. ft. of it for the next five years. The present
value of each of these options is calculated below, assuming a
five percent annual rate of inflation.
Cost of renting:
$468,000 - present value of rental fees
Cost of building:
$180,000 - building cost
240,000 - land
7,500 - transaction costs
19 ,500 - present value of cost of financing land
and building over 10 years
78,500 - present value of maintenance and insurance
expenses
(58,500) - present value of rental income (1500 sq. ft.
for five years)
(240,000) - present value of value of land at end of
15 years
$227 ,000
If land appreciates in value at the rate of 10% per year,
the present value of the value of the land in 15 years becomes
$480,000. This makes the present value of the cost of building
-$13, 000. What this means is that over a fifteen year period,
appreciation in the value of the land would more than offset all
of the expenditures associated with building the office.
An appreciating asset is not the same as money in the bank.
The following table outlines the actual cash flows associated with
the example under consideration.
M-77-160 Page seven
Conclusion:
While some of the figures in this analysis are nothing more than
broad approximations (e.g. , the annual insurance and maintenance
expenses) , the results are insensitive even to very large changes
in any of the estimates. As long as we make the assumption that
the cost of office space and the value of land will increase at an
annual rate of 5%, the cost of renting will always be significantly
higher than the cost of building office space.
This memo is intended to draw attention to the power of inflation
to compound the cost of renting and to reduce the cost of building
an office. The cash flow tables will, I hope, remind you that
cost is not the only factor to be considered in deciding between
the two options.
M-77-160 Page eight
APPENDIX: MATHEMATICAL FORMULATIONS
Assumptions :
1. All costs for the year are paid at the year' s end,
not monthly (i.e. , cash flows are considered on an annual rather
than a monthly basis) .
2. The cost of debt to the District is 50 , an interest
rate determined in the market place by the recent underwriting.
Present Value Formula :
The present value of $1. 00 at the end of "n" years at
interest rate "r" is :
Cost of Renting:
Let R = annual rental expense (including all maintenance);
then, for 15 years, the cost of renting is :
1s
;>_ 2 - < < .;) /ck+ r\
nr
where i = annual rate of inflation, and
r = the cost of debt to the District
at 65� per sq. ft. per month, R = $23 , 400
If r = . 05 and i = 0, the present value of the expense of
renting is $243 , 000 .
If r = . 05 and i = . 05 ( a more probable assumption) , the
expression which accounts for inflation -- (1+i)" -- and the expres-
sion which accounts for the time value of money -- (l+r)h -- cancel
each other out, and the present value of the cost of renting becomes
15XR or $351 , 000.
Cost of Building:
Let L = cost of land
B = cost of building
T = transaction costs (including cost of financing L & B)
L' = value of land in 15 years
B' = value of building in 15 years
M = annual maintenance cost
then the cost of building office space is :
� T _
M-77-160 Page nine
Our examples have assumed that:
L = $160,000
B = 120 ,000
T = 5,000 (+13 ,000 if L & B financed over 10 yrs @ 6%)
M = 3, 500
B' = 0
r = . 05
Furthermore, we have assumed that land has appreciated at the
rate of inflation, -- that is , that L' = L x (1 + i) s . Hence, if
i = 0, the cost of building is $244 ,000 . If i = . 05 , the cost of
building becomes $177 ,500 (or about $190 ,000 if the land and construc-
tion costs are financed) .
Notice that if L' = L x (1 + i)1' and B' = 0 , the cost of
building becomes : j5 e% �T
If i = r, the cost of building may be simplified to:
B + T + 15M, or $190 ,500
7 7-4 1
A,
Noe
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
REPORT
August 14 , 1977
TO,. H. Grench, General Aanager
FROM: A. Crosley, Administrative Aide
SUBJECT: Office Space Requirements
Background: Since the District entered into a lease agree-
ment to rent office space at 745 Distel Drive (September
300, 1973) , additional space has been needed from time to
time. As indicated in the General Manager' s report (R-7G-
28 dated October 6 , 1976) , staff has attempted to worn
with the landlord to obtain workable, contiguous office
space for the District. Since efforts to do so have not
been successful, staff has also been pursuing alternative
of-'ice space facilities.
Discussion: During the past two months , seven real estate
agents and four architects have presented office space
possibilities for the District 's consideration, most of
which were located near the geographic and population centers
of the District (generally the Palo Alto-Los Altos-Mountain
View area, as described in report R-7G-23 , which was presented
to the Board following annexation) . I personally inspected
twelve locations and evaluated vernal descriptions of many
other possibilities. 1-lost alternatives were rejected for one
or more of the following reasons.
1. Price was too high (prices ranged from 55 to )5 cents
per square foot) .
2. Location was poor (removed from major roads or in a neigh-
borhood lacking pleasant characteristics) .
3. Space inappropriate (too small, poorly arranged, or hidden
from public view.
4. Inadequate utilities or facilities (poor air conditioning,
poor lighting, poor restrooms) .
5. Miether or not landlord would supply janitorial and/or
utilities with the rental price.
R-77-41 Page two
Possibilities for build-to-suit and lease/purchase were gener-
ally found to be scarce or unsuitable for the District.
Following staff analysis of the results of the search for
office space, it was determined that the most feasible alterna-
tives available at this time (other than the District buying
land and building on it for the long term as studied by the
District's Financial Analyst in a separate report) were to
either remain in the District's present location in rearranged
space or to negotiate for space on Distel Circle.
Based on a preliminary estimate of rearranged, contiguous
office space in the present location, the District could rent
about 2,600 square feet for around $1 ,400 per month. Based
upon preliminary estimates from representatives of the Distel
Circle site, the District could rent about 3,000 square feet
for around $2 ,100 per month.
Should the District decide to investigate purchasing its own
site and building its own office facilities , it is likely
that this process would take from 2 to 4 years to accomplish.
In view of the uncertain time period involved, and because
the Distel Circle site offers a number of advantages which
the present Distel Drive location does not have, it is recom-
mended that the District negotiate to lease office space at
730 Distel Circle.
Although the Distel Circle location would not be as inexpensive
initially as remaining on Distel Drive, the cost per square
foot is fair when compared with other alternatives in the
area. The District 's present 'Lease will also expire in a year,
and since the landlord is now as'.�ing for 65G per square foot
from tenants , the District would probably be asked to pay a
similar or hig"l-ier rate at that time (the District now pays
45� and 5VI ) .
A primary advantage of moving is that the District could
arrange office space in a workable , efficient manner to accom-
modate present staff, allow flexibility for some additional
staff if needed, and maintain a meeting room of sufficient
size for conducting Board meetings. Rearrangement of office
space at the present location would allow for adequate work
area, but would not satisfy major office space needs.
In addition, it should be pointed out that the District is not,
and has not been, receiving certain services at this location
for which it is paying. Janitorial service is limited to
emptying wastepaper baskets - to have other cleaning or minor
repairs done requires constant reminders to the landlord. Tile
air conditioning ng system has never worked properly and is a
R-77-41 Page three
major source of work discomfort. The restrooms are shabby,
periodically invaded by ants, often left without supplies or
proper lighting, and are unable to accommodate handicapped
people. The building also lac'x.s the security which the
District should have for its office furniture and equipment.
Recommendation: It is recommended that the Board be asked to
authorize the General Manager to negotiate for office space
at the 730 Distel Circle location, and that the General
Manager be further authorized to give notice to the landlord
at 745 Distel Drive (no later than August 30 , 1977) that
the District chooses to terminate its lease agreement as of
September 30, 1977.
TABLE II
ESTIMATED CASH FLOW
RENT vs. BUILD 4500 SQ. FT. OFFICE
Year 1 2 3 4 5 6 7 8 9 10 11
RENT
Rental Fees* 23,400 24,570 25,800 27,090 28,445 44,800 47,0.35 49,390 51,860 54,450 57 ,175
`Total: Rent 23,400 24,570 25,800 27,090 28,445 44 ,800 47035 49 ,390 51,860 54,450 57,175
BUILD
ments**al Pay- 42 ,750 42,750 42 ,750 42 ,750 42 ,750 42 ,750 42,750 42 ,750 42,750 42,750 0
Interest*** 25,650 23,085 20,520 17,955 15,390 12 ,825 10f260 7,645 5,130 2 ,565 0
Insurance &
Maintenance* 5,250 5,515 5,790 6,080 6,380 60700 7,035 7,385 71755 8,145 8,550
Rental Space*ncome on
Unused Space (11,700) (12,285) (12 ,900) (13,545) (14,220) 0 0 0 0 0 0
Total: Build 61,950 59,065 56,160 53f240. 50,300 62,275 60,045 57,830 55,635 53,460 8,550
.JILD minus RENT 38,550 34,495 30,360 26,150 21,855 17,475 13,010 8,440 3,775 (990) 48,625)
*Increasing 5% per year as a result of inflation
**LIQ equal annual installments to pay for land ($240,000) , construction ($180,000) and transaction costs ($7 ,500)
` ***I "terest @ 6% on unpaid principal balance
i
i
Year 12 13 14 15
RENT
Rental Fees* 60,030 63,035 66,185 69,495
Total: Rent 60,030 63,035 66,185 69,495
BUILD
Principal Pay- 0 0 0 0
ments
Interest*** 0 0 0 0
Insurance &
Maintenance* 8,980 9,430 9,900 10,395
i
0 0 0
8,980 9 ,430 9,900 10,395
i
(51,050) (53,605) (56,285) (59,100)
�w
s
j TABLE I
ESTIMATED CASH FLOW
RENT vs. BUILD 3000 SQ. FT. OFFICE
Year 1 2 3 4 5 6 7 8 9 10 11
I
RENT
Rental Fees* 23,400 24,570 25,800 27,090 28,445 29,865 31,360 32 ,925 34 ,570 36,300 38 ,115
Total: Rent
23,400 24,570 25,800 27 ,090 28,445 29 ,865 31,360 32 ,925 34 ,570 36 ,300 38,115
BUILD
Principal Pay-
ments** 28,500 28,500 28,500 28,500 28,500 28 ,500 28,500 28,500 28,500 28 ,500 0
4 0
Interest*** 17 ,100 15,390 13, 680 11,970 10,260 8,550 6,840 5,130 3,420 1,710
k
Insurance &
Maintenance* 3, 500 3,675 3,860 4,050 4,255 4,465 4,690 4 ,925 5,170 5,430 5,700
' Total: Build 49 ,100 47,565 46,040 44 ,520 43,015 41,515 40,030 38 ,555 37 ,090 35,640 5,700
I
+UILD minus RENT
25,700 22,995 20,240 17,430 14,570 11,650 8 ,670 5,630 2,250 (660) (32,415
*Increasing 5% per year as a result of inflation
*I"r'eval annual installments to pay for land ($160,000) , construction ($120,000) and transaction cost ($5,000)
***fffr rest @ 6% on unpaid principal balance
e
i
Year 12 13 14 15
I
I
RENT
Rental Fees* 40,025 42,025 44 ,125 46,330
Total: Rent 40,025 42 ,025 44 ,125 46,330
BUILD
Principal Pay- 0 0 0 0
ments* *
Interest*** 0 0 0 0
Insurance &
Maintenance* 5,985 6,285 6,600 6,930
Total• Build 5,985 6,285 6,600 6,930
'TILD minus RENT (34 ,040) (35,740) (37,525) (39,400)
MIDPIENINSULA REGMAL !'ARK DiffRiff
745 DISTEL DRIVE,LOS ALTOS,CALIFORNIA 94022 (415) -4717
August 17, 1977
Re: Office space requirements
Dear Colleagues:
This analysis can be substantially simplified:
1. Since land inflates at the District's discount rate, the present value
of its value An IS y4wes, equals its acquisition cost, it can be for-
gotten;
2. The present value of insurance and maintenance is $1.17 per square foot;
3. The building construction and the transactions costs are $41.67 per square
foot;
4. Annual rent, initially, is $7.50 per square foot.
The simplification is to find the number.of years at which the present value
of the rent exceeds $42.84, the net cost per square foot to build. The answer
is a bit under 7 years. Any lifetime greater than 7 years is cheaper in an
owned building than a rented one. Since the building really will have resale
value the number of years to break even actually is less than 7 years.
If you, really simplify and compare $40 per square foot construction cost to
$7.80 rent cost, the number of years to break even is 6.
The cost advantages to building are so overwhelming that I wonder if something
has been overlooked.
Note: As Leonard points out, the alternative that is cheaper in the long run
(because of the assumption that the cost of our money is 5 percent) still
diverts cash away from other uses for ten years.
If the Board places very high value on the opportunities foregone because of
the unavailable cash, then it could make a rational decision to rent. One
way to go at it is to determine that no more money orroed (because it is
all committed to land acquisition) and that money has become so dear that its
cost is much, much more than 5 percent. In this example, if money costs 20
percent then the decision to build is never cheaper.
Herbert A.Grench,General Manager Board of Directors,Katherine Duffy,Barbara Green,Nonette G Hanko,George F.Seager,Edward G.Shelley,Harry A.Tumor,Daniel G.Wondtn
10 X 10 TO '• INCH--;, t INCHES
WKEUFFEI&ESSER CO. u.[ s< 461470
OFF 5 SPACE-
-- - -
1
_ .. -_._ i - _. _ t. J. _ (j__ _J __ _ _ _
."_ _ ._ ... -_—4 .._J.. 1
-
1� all
- - - - -
-
�4T_qTA L
- d�
r-t /
- — = -
$ _ _
_ _ t f _
-_._
1
:
- - - I i
i
r :
•- �- -_.. .. .. -. f + is
. rr -
(Meeting 77-21 ,
Agenda item No. 5)
RESOLUTION NO.
RESOLUTION OF THE BOARD OF DIRECTORS OF THE
MIDPENINSULA REGIONAL OPE14 SPACE DISTRICT
MENDING RULES OF PROCEDURE TO SUBSTITUTE
THE WORD "COMMITTEE" IN PLACE OF THE WORD
"SUBCOJ.�IMITTEE" IN SUBSECTIONS 1 . 80 , 1. 82
A14D 1. 34 OF THE RULES OF PROCEDURE
The Board of Directors of the Midpeninsula Regional Open Space
District does hereby resolve as follows :
Section One. The Rules of Procedure adopted by the
Board of Directors on January 10 , 1975 by Resolution
No. 75-25 (and as subsequently amended) are hereby
amended to substitute the word "cortmittee" in place
of the word "subcommittee" where the word appears in
subsections 1. 80 , 1. 82 and 1. 84 of the Rules of Pro-
cedure.
C-77-18
August 17, 1977
Meeting 77-21
MIDPENINSULA, REGIONAL OPEN SPACE DISTRICT
C L A I M S
# Amount Name Description
3516 $ 42.00 Redwood City Tribune Subscription
3517 600.00 Dunn's Tree Service Remove Fallen Oaks - Permanente Cr.
3519 30.00 Sorensen Signs Lettering-District Vehicles
3520 90.37 Uno Graphics Camping Brochures
3521 38.87 Mt. View Garden Center Cement-Permanente Creek
3522 7.99 Foster Bros. Security System Field Supplies-Keys
3523 128.26 Western Fire Equipment Co. Field Supplies-First Aid Kits
3524 114.02 Emergency Vehicle Equipment District Vehicle Expense
3525 7.39 Los Altos Delicatessen Meal Conference
3526 4,020 .00 Rogers,Vizzard & Tallett Legal Services
3527 200.12 I. B. M. Corporation Office Supplies