City Offers 96% Rent Reduction for Its Facilties

Ever wish for a bigger place? Maybe an extra room for a home office or another bedroom for guests or family members or maybe you thought about going into business for yourself and need a prime location to execute your entrepreneurial dream.

Now’s your chance! The City of Los Angeles Department of Cultural Affairs in conjunction with the City Council and the Mayor is offering prime real estate for 4% of the going market rate. Yes, you can get a 16,700 square foot art gallery located at 4800 Hollywood Boulevard with new solar panels and a new freight elevator. They’ll even throw in $14,000 a year just in case you have trouble paying the $1,169 a month rent on the place. Don’t forget the utilities are included.

Maybe 16,700 square feet is more than you need? How about the Barnsdall Gallery Theater for $275 a month. It’s a 300 seat theater complete with all the equipment you need to put on your next performance, conference or cocktail party.

The information below was copied and pasted from City of Los Angeles Inter-Departmental Correspondence 0220-04635-000. I would have attached the pdf here but the file keeps crashing my program. (Please note the last page is missing as it is a table and just would not format well.)

Here’s a link to the report.


Date:November 22, 2010

To: Arts, Parks, Health and Aging Committee

From: Miguel A. Santana(\[ City Administrative Officerl\l”


On June 30, 2010, Council instructed the City Administrative Officer (CAO) and
the Department of Cultural Affairs (DCA) to form a working group to facilitate the drafting of a Request for Proposals (RFP) to transition 14 cultural art facilities to public-private partnerships. Six months funding in the amount of $365,000 was provided in the 2010-2011 adopted budget to ensure the facilities stayed open during the RFP process. The facilities were scheduled to be partnered on January 1, 2011. The working group met several times to discuss the partnering of the facilities and make recommendations concerning specifics of the RFP. During this time, an additional facility was added to the list of facilities for inclusion in proposed RFP, increasing .the number of facilities targeted for partnering to 15. Three public hearings have been held and the arts community has provided input to the proposal. The DCA issued its report on September 20, 2011 which incorporated comments from the various stakeholders. On September 28, 2010, DCA presented recommendations for issuing the RFP to the Arts Parks, Health and Aging Committee (Attachment 1).

At the public hearing on September 28, 2010, the Arts, Parks, Health and Aging
Committee requested that the CAD coordinate the issuance of the RFP. Additionally, this
Office was requested to address the concerns raised by the various departments and report back on the status of funding availability for operating the facilities for the balance of the fiscal year. CAO staff has met with the stakeholders in an attempt to resolve the outstanding issues.

The Department of Recreation and Parks (RAP) raised concerns regarding the nine facilities on RAP land and whether RAP would be required to fund the costs outlined in the DCA proposal. The facilities have been operated by DCA since the creation of the Department, however the governance and maintenance responsibilities are detailed in the operating agreements between the City and RAP. The Department of General Services (GSD) currently provides custodial services, building maintenance and repair as well as, security and utilities. RAP is responsible for exterior gardening, irrigation maintenance and landscaping. The proposed partnership agreements would not alter the operating agreements currently in place. However, because the facilities are on RAP land, the approval Board of Recreation and Parks is required for the proposed RFP and the execution of the leases. It should be noted that two of the facilities do not currently have operating agreements in place. Operating agreements should be drafted prior to the execution of the new partnership agreements.

GSD also had concerns regarding the terms of the proposed agreements. GSD
was asked to provide the fair market rental value for the various facilities and the yearly costs for operating the facilities. The rent proposed by the DCA was based on a sliding scale tied to a square footage range and identified the other costs to be assumed by the proposed contractor. However, GSD questioned whether the rents proposed created obligations for the City to provide a certain level of landlord services. The proposed rents when averaged between the 15 facilities, equal approximately four percent of the fair market rental value. This Office recommends that rent for each facility be four percent of the fair market rental value (Attachment 2).

GSD expressed concerns regarding the payment of utilities. It is recommended
that .Ianguage be added to the agreements that would require the contractor to manage utility costs and not exceed a baseline developed from historical usage. If the facilities utility kilowatt usage increase beyond 20 percent of the historical average, the City may elect to reduce the stipend provided to the Contractor. If the Contractor can demonstrate that the increased usage is the result of additional programming and activity at the facility, the stipend would not be reduced.
Funding for Continued Operations

GDS aliso expressed concern regarding the maintenance terms in the proposed
agreements ..DCA has proposed that the Contractor will be responsible for maintenance up to $5,000 and that the City would be responsible for all repairs over $5,000. It is recommended that Contractor shall be responsible for the maintenance of the interior of the building and of equipment installed by the City, including all repair work and preventive maintenance. In the event that more significant repairs would be required, DCA wiliincorporate requests for funding as part of the annual budget process. DCA would work with the Contractors and coordinate the submission of any requests for funding. There is no guarantee that a facility will receive funding for projects under these programs ..

In the 2010-11 Adopted Budget, it was projected that the facilities would be
partnered by January 1, 2011. DCA was provided funding in the amount of $365,000 to
continue the operation of the facilities through December 31, 2010. This Office was asked to identify funding to continue to operate the facilities until the RFP process is completed.

The Committee enquired about the feasibility of using Arts Development Fee
monies to fund operations on an interim basis. The City Attorney has indicated the use of Arts Development money is highly restricted and cannot be used for this purpose. Additionally, funding from General Obligation bonds cannot be used for these facilities because these funds can not be used for operations. Section 5.115.4 of the Los Angeles Administrative Code established the Arts and Cultural Facilities and Services Trust Fund. The Arts and Cultural Facilities and Services Trust Fund receives an amount equal to one percent of the total cost of all construction, improvement or remodeling work for each public works capital improvement project undertaken by the City. Monies collected through the City’s One Percent for the Arts would be eligible to be used for this purpose. The DCA receives approximately $50,000 a year from City capital projects. However, the funding is allocated to the DCA as part of their budget and is already allocated to arts programming.

DCA budgeted a total of $195,000 to provide a stipend for the proposed
contractors at the 15 facilities .. Currently, there are six facilities partnered out and these
providers have received the first portion of the annual allocation. If the facilities are partnered on March 1, 2011, the new Contractors would receive funding for one quarter. As a result of the delay in partnering the facilities and money set aside for one quarter funding, approximately $45,000 is available in savings to continue programming. There are currently no other resources to continue operation of the facilities past December 31, 2010. This Office is currently working with DCA to identify the funding level required to continue service until March 1,2010.

Outstanding Issue

The DCA proposal recommended that the facilities be leased in “as is” condition.
The City Attorney and GSD have expressed concerns about the requirements covering the
conditions of the facilities to be partnered. BOE staff has indicated absent a change of use in the facilities, there would be no significant code changes required. This Office is working with the City Attorney and GSD to clarify this issue. This item will need to be resolved prior to the issuance of the RFP.

Next Steps

CAO staff will continue to work with the City Attorney regarding the lease issue.
Once the issue is resolved, this Office will move the RFP through the various approval
processes. The RFP requires the approval of the RAP Board, City Council and Mayor. Once
the proper approvals have been obtained, this Office will release the RFP. DCA will be asked to convene the subject-matter expert panel to evaluate the Request for Proposals and return to the City Council for approval to partner the 15 facilities.


That the City Council receive and file this report

Fiscal Impact Statement

This report is submitted for informational purposes. There are no recommendations which
impact the General Fund.


Page 4

Department of Cultural Affairs

Partnership Terms

Attachment 1

DCA Proposal

Lease Term: A five year lease term with an option for Lease Term additional five years

Rent: Rent based on 4% of Fair Market Rent provided by GSD. Similar to CAD proposal, but is more evenly distributed based on actual square footage.

Water, Electricity, Gas (Utilities): City to pay for utilities, but will provide a
historical baseline that if contractors exceed by more than 20 percent, their stipend may be reduced.

Maintenance: The Contractors
will be responsible for basic maintenance issues; there will not be a $5,000 limit. Should additional funding be required, DCA will pursue funding options through the annual budget process.

Custodial: Contractor to pay

Trash: Contractor to pay

Security: Contractor to pay

Communication Services: Contractor to pay

Liability Insurance: Contractor would be required to obtain liability insurance.

Stipend: DCA would provide an annual stipend of $14,000 for the first five years of the

(here’s another link to the pdf, maybe it will work for some of you–EC!)

11 thoughts on “City Offers 96% Rent Reduction for Its Facilties

  1. Wow, what a bargain! It’s great to see that privatizing city services is such a good deal, especially when our tax dollars help to make it easier to sell off our assets. City council is just brimming with wonderful ideas.

  2. It’s shocking to witness how these decisions get made. If anyone still believes in democracy I suggest going to a city committee meeting and watch how fast agenda items get approved. Public comments seem to help slow the process down.

  3. truth be told, it will be interesting to see who these end up being partnered out to; if the agreements are with community non profits (the city considers everything
    non-governmental to be ‘private sector’, incl non-profits) then these deals are actually good and sustainable for the success of the non profit as it establishes itself. Center for the Arts Eagle Rock and Angels Gate Art Center in San Pedro are two facilities that were partnered out 10+ years ago that are now more independent, more active and innovative – thriving programmatically, despite the vagaries of grants and fundraising in this economy. reduced rents and stipends allow that to happen because meager budgets mean more money goes to programs with shoe string budgets. but again, it really depends on who the partners are and what their capacities are to handle and the scale of the facility. for sheer creativity and implementation, supported non-profits are the way to go.

  4. It’s far, far, far from a perfect system and it will take a while to actually get going, so we’ll see how it goes. I hope for the best.

  5. SK – The memo was sent to me as an attachment and the only way I could view it was to view it through gmail. Send me an email and I can forward the document to you edithabeyta(at)

    Maryam – Angels Gate Cultural Center (AGCC) and Center for the Arts, Eagle Rock (CFAER) are excellent examples of hardworking staff and facilities who operate with support from the City of Los Angeles. AGCC has their lease with Recreation and Parks and pays $1 a year to the City which includes utilities and other resources from the City. Basically they are subsidized with money from citizens of Los Angeles. CFAER was once a Department of Cultural Affairs (DCA) facility and has slowly underwent a transition from a publicly owned and operated site to being operated by a private non-profit. CFAER is also facing the implications of the RFP process. If this is passed there will be some things they will have to start paying for. Once again both of these organizations do excellent work but there are “partnerships” that have not been so successful such as the Los Angeles Theater Center (LATC) and the LA Convention Center to name a couple. Even the Hollyhock House at Barnsdall Park in its early days was completely trashed by the organization that was assigned as its caretaker.

    One of the interested parties for Barnsdall Art Park is the Wende Museum. At the November 23 committee meeting they went on record saying they will be bidding on Barnsdall which includes the gallery, the theater and the Junior Art Center. Local, contemporary community based arts programming replaced with cold war era Eastern European history. Prior interested organizations were MOCA and Cal-Arts.

    The DCA and the City Council would like us to believe this is all about the money and the City’s inability to fund DCA community arts facilities. In reality it is about privatizing public lands and resources and downsizing.

  6. I’m an art project. Can I move into that gallery soon? I’d be saving a few hundred dollars per month in rent, and could take the train to work. I don’t drink or smoke, and my husky physique would scare away the art thieves, if the light’s not too good – not many artists could claim that. At least not all three. How cool is that?

    I promise to show only local artists, preferably those with their own trucks and friends to install the art. I can paint and clean between the exhibitions, because I always have leftover white paint. I’ll even blog about it.

    We can even have an artist-in-residence program. We’ll just put up a couple shoji dividers. I have a spare futon and can totally talk my housemate into giving us a bed. We could set up a little concession area with a hot plate. It’ll be real cozy crash pad. And with that hot plate, we could make some hot sandwiches for art openings. Maybe some grilled cheese, reubens, and monte cristos.

    I’m even willing to pay someone to come in and teach kids art on the weekends. $20/hr cash for four hours. IRS doesn’t need to know about it. I’m a big junk collector, so ther’s your raw materials. The kids can make some crazy looking stuff. They can learn arc welding and how to use a hand saw – artistic and practical.

  7. Alienation, you seem to meet all the requirements but you didn’t mention if you had non-profit status? Would those sandwiches be vegan?

  8. I don’t feel like I’m profiting from being me!

    Vegan sandwiches would be a stretch. Maybe there’s a way to make vegan reubens with artificial pepper steak.

  9. I am recently retired from the City of los Angeles General Services Departments Asset Management Division. My experience tells me this is nuts and unworkable. Currently all the water at Barnsdall Park is on 2 meters. One is domestic and serves all buildings. The other serves irrigation. Who determines how much water is used at each building. Recreation and Parks pays that amount. GSD pays electric. Not all buildings on on individual meters.

    Will arrangements for “sub meters” to be installed? I see a really big problem here.

    Timothy Marxer

  10. Timothy, everyone except the people making the decisions can foresee the problems that will arise with a privatization scenario. The CAO’s office recommends that the City continues to pay the the utilities. Currently, the total electricity costs at Barnsdall are $128,000 a year.

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