Council revisits 2004 North House lease; no changes adopted

City staff and councilors used a work session to re-examine the 2004 lease the city holds with North House, reviewing the automatic renewal schedule, rent methodology and community concerns without taking formal action.

A city staff member told the council the lease began Jan. 1, 2004, and is structured as two 25-year terms that renew automatically if performance criteria in Exhibit B are met. "The term of this lease shall commence on January 1st, 2004. Shall continue to and include December 31st, 2029 unless extended or sooner terminated as hereafter provided," the staff member read from the document, noting the first 25-year renewal point falls in 2029.

Staff explained how rent was set and escalated: it was calculated in 2004 by applying the city's commercial property tax rate to an appraised value at the lease's inception, with a fixed 2% annual escalation and a five-year reappraisal. "It's been escalated on a 2% per year," the staff member said, and added that subsequent assessor revaluations have included North House's own improvements, which conflicts with the lease's original intent and makes the reappraisal methodology impractical.

Council discussion focused on three council priorities identified in 2023: updating the lease payment to reflect a fair escalator or market value; removing or rethinking expansion-related goals that no longer match North House's mature operations; and modernizing legal language. Staff said longtime negotiations with North House's board produced agreement on some language changes but stalled over North House's request for a longer term or the option to buy the property.

Bill, a council member, raised concerns about campus density, drainage and the perception that some North House activities resemble commercial landlord or retail operations. "The density is still a huge issue and we can't look at it in the long term with what we're seeing there now because they still have plans to continue to build and develop there," Bill said, adding worries about runoff and parking pressure on the shoreline park.

Staff summarized a letter North House sent in early 2024 that reiterated their priorities and offered a symbolic gesture: "they're prepared to increase their financial commitment... setting aside an additional thousand dollars per month as a symbolic statement of good faith," the staff member said, but stressed that the amount was not an increase to the formal lease payment or a payment in lieu of taxes.

Councilors discussed enforcement tools in the lease, including default provisions that allow the city to require remedies if North House neglects maintenance, but staff said the city has not invoked those remedies during the lease's term. They also noted the piece of property covered by the lease today is a smaller fraction of North House's overall campus than it was in 2004, complicating efforts to tie campus-wide growth to the leased parcel's obligations.

Several councilors and staff urged clearer metrics if the city seeks to change the lease payment: rather than a cash-only figure, the council could translate in-kind community benefits (classes for youth, partnerships with other nonprofits, or programming) into a measurable offset to rent. Staff said the council has not previously specified target metrics that North House could meet.

No motion or formal vote occurred. Councilors directed staff to explore language updates and suggested drafting an "ideal" lease to test with North House, while several members said they were not inclined to sell the property to North House or to extend the lease significantly beyond the current 50-year structure. The council left the matter open for future discussion.

The city did not set a new rent figure or adopt a revised lease in the session; councilors said the next step is for staff to draft updated lease language and potential metrics the council would consider meaningful, then return the item for further consideration.