Committee forwards Department of Environment tenant-improvement allowance at 1455 Market with no recommendation

The Budget and Finance Committee considered a request from the Department of the Environment (DOE) to authorize an additional tenant improvement allowance for DOE—s lease at 1455 Market Street and voted to forward the amended resolution to the full Board without recommendation.

Director Melanie Nutter told the committee that the DOE—s original tenant improvement budget of $2,700,000 had been reduced by design choices and value engineering to $2,000,000 but that a remaining shortfall existed. She said the space is a cold shell requiring substantial HVAC, electrical and other buildout costs and that Hudson Properties had offered $61 per square foot as the landlord contribution for tenant improvements.

Nutter described fundraising and in-kind commitments: she said about $51,989 in in-kind support had been secured, about $7,000 in cash donations, a $20,000 commitment from CH2M Hill and projected an additional $30,000 in commitments still being vetted. "We project another $30,000 and that's why we were confident in reducing the ask to the Board today," she said.

Budget analyst Mr. Rose reviewed the report and said the department—s tenant improvement estimate was $2,027,815 and that identified funding left a shortfall initially reported as $244,400. After the department—s revisions and fundraising the analyst said the shortfall was reduced to roughly $123,790 and recommended amending the resolution to limit any landlord loan to not exceed $124,000.

Supervisor Jane Kim and other members pressed DOE on whether other funding or lower-cost borrowing had been explored and on the effect of LEED Gold municipal requirements. Nutter and Acting Director of Real Estate John Updike explained that municipal projects are required to meet LEED Gold under the city—s environment code and that some furniture and design choices are constrained by LEED considerations; Updike noted that a re-negotiation of the base lease in current market conditions could have produced higher base rent.

A public commenter also questioned a discrepancy between the agenda language ("up to $10 per rentable square foot") and the sponsor's presentation referencing about $5.5 per rentable square foot and asked how that translated to the monthly additional rent figure cited ($3,809.27).

Supervisor Ellsberg moved amendments and to forward the item without recommendation; the motion was taken without objection, and the item will proceed to the Board with no committee recommendation.