That the City Council approve and authorize the City Manager to execute Amendment No. 1 to the Land Lease Agreement with Orange County Head Start to extend the term of the lease for City-owned property at 1060 West Lambert Road through June 30, 2038.

At its Regular Meeting of June 5, 2023, the City Council approved a five-year lease extension with Orange County Head Start (OCHS) for City-owned property located at 1060 West Lambert Road, with a term starting on July 1, 2023 and ending on June 30, 2028.  The OCHS program is a federally funded program that provides preschool and other child care services to more than 150 families throughout Orange County, including 50 La Habra families at the facility. An additional 50 La Habra families are provided services at locations closer to the parents' place of employment. OCHS services are provided to over 1,100 children annually from low-income families at no cost.

Under the current lease agreement with the City, OCHS is responsible for the portable classrooms that they own at the site, which includes maintenance, utilities, and conditions of the site. OCHS staff have informed the City that the current facility is in need of extensive repairs, including replacing the existing portable buildings at the site and performing other improvements to the foundations of the portable buildings.  As a federally funded program, OCHS has an opportunity to apply for one-time funding to replace the modular building and perform the necessary repair work that would allow for continued child care services at the Lambert location. Staff was advised that the repairs are expected to cost over $2 million and requires a Notice of Federal Interest (NOFI) and a long-term lease to ensure OCHS's commitment to financial responsibility and long-term planning. 

If approved by Council, the proposed amendment to the lease agreement will be consistent with the terms of the lease agreement previously approved by Council in June 2023, in that it will require a monthly lease payment to the City that will increase 3% annually on July 1st each year through June 30, 2038.  Additionally, OCHS will remain responsible for all maintenance, repair, and operations of their facilities and will be required to provide proof of insurance, indemnifying the City at all times. Lastly, the use of the site is restricted for the sole purpose of operating a Head Start Preschool Program serving La Habra residents, and must remain in use consistent with and in support of a preschool.

Staff recommends approval of Amendment No. 1 to the Lease Agreement with Orange County Head Start to extend the term of the lease to fifteen years, commencing July 1, 2023 and ending June 30, 2038, so that OCHS may apply for federal funding to make the repairs they deem necessary to continue providing child care services to La Habra families at the site located at 1060 W. Lambert Road, La Habra, CA.

If approved, this amendment to the land lease agreement will require Orange County Head Start to pay the City (General Fund) $1,100 per month, with a three percent increase on July 1st of each year through the end of the lease term on June 30, 2038.  The total value of this lease to the City's General Fund is approximately $250,000 over the term of the agreement.