Consideration and Approval of Contracts: MOONSHOT Master Lease Agreement and MOONSHOT Agreement for Services (as amended and restated)

MOONSHOT provides services for the City of Flagstaff for business incubation and acceleration and for business development services at the City business Incubator and Accelerator buildings located at N. Gemini Drive adjacent to Buffalo Park. This contractual relationship is outlined in a Master Lease Agreement and an Agreement for Services. This contracts have been in place since 2019, although the relationship as a whole has existed for longer with differing models. MOONSHOT has been successful in bringing the two facilities to increased occupancy and continues to provide services that generate jobs and entrepreneurial success for the businesses who locate there. 

Per the Master Lease Agreement, MOONSHOT serves as rental agent and manages the subleases of building suites. Per the Agreement for services, MOONSHOT provides business development services along with administration and reporting. The existing agreements will expire December 31, 2023, unless renewed. 

Amendments:

The Master Lease Agreement has been amended to:

• Renew the lease for a five-year term
• Require lease rates for building suites to increase by 2% annually
• Clarify that tenants are required to pay a fee equal to 6% of the lease rate for use of the common areas
• Clarify the City's alcohol policy related to use of the buildings
• Provide for a 2% annual increase in compensation to MOONSHOT for providing rental management services 
• Add language related to specialty equipment and protective requirements and the addition of language requiring the City Facilities Team to be made aware of high specialty equipment that could impact the electrical system
• Provide administrative clarifications in the form of sublease agreement for consistency and disclosure.

The  Agreement for Services as been revised to:

• Renew the agreement for a five-year term
• Provide for a 2% annual increase in compensation to MOONSHOT.

The City pays MOONSHOT $60,000 per year for serving as rental agent, this compensation now will increase by 2% annually. MOONSHOT pays $25,000 per year to City for use of a building suite. The City pays MOONSHOT $208,000 per year for business development, administration and reporting services, this compensation now will increase by 2% annually.  

The City receives all revenues from the Incubator and Accelerator buildings.  There is an added 2% annual escalation on all building suite lease rates to better align with City of Flagstaff policy. 

Last fiscal year the Incubator and Accelerator generated $464,686 in revenue from leases and conference room rentals. This was approximately $60,000 above the anticipated revenues for the facilities in FY23. These revenues are then used to pay the Master Lease Agreement and Service Agreement under consideration today, as well as for maintenance and debt service on the buildings. Funds required above the revenues received are paid for by BBB - Economic Development funding. There is no general fund contribution for this Master Lease and Service Agreement. Currently staff believes that we will meet or exceed last year's revenue based on occupancy. 
 

Priority Based Budget Key Community Priorities and Objectives
Carbon Neutrality Plan
Regional Plan

Yes, Council approved the Master Lease Agreement and Services Agreement in on December 4, 2018.

Council may approve the renewal as proposed with minor changes. This leads to continuity of improved services. 

Council may choose to reject the minor changes and staff will negotiate with MOONSHOT regarding that direction. This may lead to continuity of services without improvements or MOONSHOT may choose not to proceed. 

Council may reject the renewal which will terminate the relationship and end services of this type until, and if, new options are put in place. 

MOONSHOT, formerly known as the Northern Arizona Center for Entrepreneurship and Technology (NACET), has been the City's partner in managing the Business Incubator and Business Accelerator since they opened. They are an important partner in the  City's economic gardening strategy. In recent years they have revamped their services and delivered an even higher level of service than in the past. The facilities generally have occupancy rates of 70% and higher across the campus as a whole. In 2022 MOONSHOT businesses in the campus reported $42,960,680 in generated revenue and 356 jobs retained or created.

The intention of the facilities and MOONSHOT's services is to provide small and developing businesses with a place to incubate and accelerate in a strong facility, with support services provided by experts in business development, and with other companies in the space to network with. Businesses are intended grow and then, after reaching revenue targets and stability, move into the commercial real estate market. The facilities were built in partnership with the US Economic Development Administration who still governs the use of the facilities. They may only be used for the purposes allowed in the grant and those relate to business development and innovation. No general government uses or non-business uses are permitted at this time. 

 

This Master Lease and Service Agreement provides a significant benefit to small businesses working to launch in Flagstaff.

Small business are a significant portion of the Flagstaff and national economy.

MOONSHOT has been providing services successfully in accordance with the agreements over the past five years. 

The City uses a contracted provider such as MOONSHOT to bring additional expertise and capacity into community Economic Development efforts. 

The economic landscape is challenging in some ways with high costs and staffing issues. Small businesses are an important part of Flagstaff's economic landscape and provide jobs and prosperity to residents. This relationships provides support for those businesses and manages the City's facilities effectively for the public.