Form revised: December 14, 2010

FISCAL NOTE FOR CAPITAL PROJECTS ONLY

Department:	Contact Person/Phone:	CBO Analyst/Phone:
Seattle Center	Ned Dunn 684-7212 Jill Crary 684-7107 Rebecca Keith, Law, 684-8239	Greg Shiring 386-4085

Legislation Title: AN ORDINANCE relating to the Seattle Center; authorizing the Director of Seattle Center to execute a lease agreement with Center Art, LLC for the development, construction, and operation of a glass and gardens exhibition space for Chihuly glass, a retail shop and related uses, while also providing for improvements to public areas of Seattle Center; and ratifying and confirming certain acts.

Summary and background of the Legislation:

The attached legislation authorizes a lease agreement with Center Art, LLC (“Center Art”) under which the City leases certain spaces on the Seattle Center campus (see below) to Center Art.  In exchange, Center Art shall pay rent and provide public benefits, as further described below.

The area covered in this lease agreement is the South Fun Forest site that is being vacated by the Fun Forest in early 2011.  As part of Seattle Center’s planned redevelopment of this area, in April 2010 the department issued a Request for Proposals (RFP) for redevelopment of the South Fun Forest site.  The department received nine responses to the RFP.  In an effort to involve a broad range of community interests in the review, the department established a citizens RFP review panel (the “Review Panel”) that included members of the Century 21 Master Plan Committee, with the Chair of the Seattle Center Advisory Commission acting as Chair of the Review Panel.  Between June and September, the Review Panel analyzed the proposals according to a number of principles and criteria set forth in the RFP, including consistency with the Planning and Design Principles of the Century 21 Master Plan.  The Review Panel led a community meeting and open house on July 7, where all proposals were displayed.  In September, the Review Panel submitted its recommendation to the Seattle Center Director that the proposal submitted by the Space Needle LLC to construct and operate an exhibit space, event pavilion and art garden featuring the work of glass artist Dale Chihuly, and including a number of public benefits, best satisfied the criteria and would most benefit Seattle Center.

The Seattle Center Director forwarded the Review Panel’s recommendation to the Mayor.  Subsequent discussions involving the Mayor’s Office, the City Council, Seattle Center, and the Space Needle led to the lease agreement with Center Art to be authorized by this legislation.  A summary of the lease agreement terms follows:

Areas included in Lease

· Exhibit and Garden Area – Approximately 20,557 square feet in the former Fun Forest Pavilion Building (excluding the Mural amphitheatre support spaces, which will continue to be used by the City) and a paved area of approximately 38,811 square feet.  This area will be used primarily for a Chihuly glass exhibition, including indoor and outdoor glass art exhibitions, gardens, and related ancillary uses.

· Public Use Area – Under the lease, Center Art will lease and make improvements to an area in which the City has reserved rights.  This area will remain open to the general public and is referred to in the lease as the “Public Use Area”.  The Exhibit and Garden Space and Public Use Area are depicted in Exhibit 3 of the Lease Agreement.  The lease contemplates that after the initial improvements are complete, the premises may be reduced by a lot line adjustment, if feasible.

· Retail Space – An existing retail building of approximately 853 square feet leased for retail sales.

Term of Agreement

· Initial term of five (5) years, with Center Art having the right to renew the lease for five (5) additional five-year terms.

· The initial term of the lease shall commence on the later of April 1, 2011, or the date Center Art receives permits for demolition, clearing and grading work and takes possession of the leased premises.

Rent

· Center Art will pay an annual base rent of $350,000 for the initial five-year term, increasing to $500,000 per year in years 6 through 30.

· Center Art will pay additional rent of 8% of the net proceeds from the sale of Chihuly fine art sold on the site for any lease option extension period (years 6 – 30).

· The base rent during the five, five-year renewal periods shall be increased by the CPI, provided that the total CPI increase to the base rent does not exceed 10% for any five-year period.

· The base rent shall commence upon the opening of the exhibition to the general public, no later than April 2012.

· During construction, Center Art shall pay rent of $10,000 per month.

Public Benefits and Community Partners

· Center Art will donate $1,000,000 to fund a children’s playground at Seattle Center with structures designed by local artists.

· Center Art will contribute $50,000 each year for maintenance of the children’s playground.

· Center Art will support arts education and engagement with at least four community partners for the first five years.  These partners are initially identified as follows:

Ø Seattle Public Schools – develop an 8th grade student curriculum program and provide for transportation of students to and from the exhibit.

Ø Pilchuck Glass School – Sponsorship of a new arts lecture series with Pilchuck that culminates in a celebration of the work of Pilchuck and honors the Pacific NW Studio Glass Movement. 

Ø Pratt Fine Arts Center – Free admission for Pratt students, an arts lecture series on the site, support of fundraising support for scholarships and tuition assistance.

Ø Arts Fund – Hosting of an annual event to raise funds for the arts.

· An additional approximately 39,042 square feet of the Seattle Center campus, adjacent to the north, east and south boundaries of the Premises has been identified as the “Project Improvement Area” and will be redeveloped as part of the project to create enhanced open space and pedestrian pathway for public use. 

· Center Art will work cooperatively with Seattle Center to create a regular free admission program in conjunction with other Seattle Center resident organizations under a branded “Center Nights” or similar framework, pursuant to which Center Art shall make a minimum of 10,000 free tickets available annually.  

· Center Art will use all commercially reasonable efforts to design and construct the Project according to LEED Silver standards.

Tax Revenues

· The City will collect additional revenue from a combination of sales and use tax, B&O tax, and admissions tax as a result of the Chihuly exhibition.

· The County will receive additional tax revenues from the sales and use tax on food and beverages from the planned cafe.

· The City and State will share the proceeds of 12.84% leasehold excise tax on lease payments made as part of the Chihuly exhibit. 

Other

· At the end of the lease term, all capital improvements made to the premises by Center Art, other than the improvements in public areas, shall be removed at Center Art’s expense, although the Director has the option under the lease to allow the improvements (with the exception of artwork) to remain and become City property.

Please check any of the following that apply:

__ __ This legislation creates, funds, or anticipates a new CIP Project.

(Please note whether the current CIP is being amended through this legislation, or provide the Ordinance or Council Bill number of the separate legislation that has amended/is amending the CIP.)

____ This legislation does not have any financial implications.

(Stop here and delete the remainder of this document prior to saving and printing.)

__X__ This legislation has financial implications. (Please complete all relevant sections that follow.) 

Appropriations:

This table should detail existing appropriations and reflect appropriations that are a direct result of this legislation.  If this legislation does not directly change an appropriation, but has budget impacts,  please explain in the notes section below:

Fund Name and Number	Department	Budget Control Level*	Existing 2010 Appropriation	New 2011 Appropriation (if any)	2012 Anticipated Appropriation
TOTAL

*See budget book to obtain the appropriate Budget Control Level for your department.

Appropriations Notes:

No new appropriation needed.  The capital project being constructed pursuant to this agreement is 100% privately-funded.  The lease payments are included in the department’s revenue projections in the 2011 Adopted and 2012 Endorsed Budgets.

Uses and Sources for Operation and Maintenance Costs for the Project:

O&M	2011	2012	2013	2014	2015	2016	Total
Uses
Start Up
On-going
Sources (itemize)

Operation and Maintenance Notes:

There are no new O&M expenses as a result of this 100% privately funded project.  Center Art is contributing $50,000 per year for maintenance of the children’s playground they are funding as one of the public benefits of this agreement.  The Adopted 2011 and Endorsed 2012 Operating Budget assumes the labor expenses related to landscape maintenance and basic cleaning in the existing Fun Forest South area.  The maintenance obligations related to the new Center Art project will be managed to fit within the existing resources for this purpose.   

Periodic Major Maintenance Costs for the Project: 

Estimate capital cost of performing periodic maintenance over life of facility.  Please identify major work items, frequency.

Major Maintenance Item	Frequency	Cost	Likely Funding Source
TOTAL

Funding sources for replacement of project: 

Major maintenance costs will be funded by Center Art, and the Department will not assume responsibility for any project replacement expenses during the course of the lease.

What is the financial cost of not implementing the legislation?

If this agreement is not approved and the Chihuly exhibition does not go forward, the City will forego the financial benefits outlined above, including:

· $350,000 (increasing to $500,000) in annual base rent.

· Loss of additional tax revenues to the City.

· Loss of additional tax revenue to the State and King County.

· $1,000,000 capital contribution and $50,000 a year in annual maintenance for a children’s playground.

Does this legislation affect any departments besides the originating department?

No.

What are the possible alternatives to the legislation that could achieve the same or similar objectives?

The City considered multiple alternatives through a public RFP process and determined that this proposal was the most beneficial to the City.  No alternatives were identified that would provide the same level of benefits to the City and the public.

Is the legislation subject to public hearing requirements?

No.

Other Issues:

None.

List attachments to the fiscal note below: