After years of neglect, Berkeley has begun requiring nonprofit organizations renting buildings from the city to undertake and pay for long-deferred maintenance and capital improvements. About one dozen nonprofits have entered into lease negotiations with the Parks, Recreation and Waterfront department over the past few years. While a few of those leases have been signed, many have dragged on for two to four years and are still unsigned.
The nonprofits are facing a combined estimated repair budget of more than $2 million for their leased buildings – and some of them say they cannot afford to pay for the repairs. These deferred maintenance costs are separate from the more than $25.5 million needed to repair city-owned and occupied buildings and facilities.
All the leased facilities are located in city parks and rented by nonprofits such as the Berkeley Art Center, TheaterFIRST, the Youth Musical Theater Company, Ala Costa Services, Bay Area Outreach and Recreation Program, the Berkeley Paddle and Rowing Club, The Berkeley Yacht Club, and the Berkeley Lawn Bowling Club.
Two of the nonprofits, the Berkeley Art Center and the Berkeley Lawn Bowling Club, have been in buildings that were built specifically for their organizations almost 50 years ago. Others, such as the rowing club and the Youth Musical Theater Company, took over dilapidated shells of buildings and made them into usable spaces.
All the nonprofits paid highly subsidized rent in the past, ranging from about zero to $5,000 per year. Some of the nonprofits also received grants from the city, which sometimes more than covered their rent. As part of the current negotiations, the city is offering the nonprofits even lower rent in exchange for significant capital outlays to repair the structures.
“This is a situation that benefits everybody,” said Matthai Chakko, spokesman for the city of Berkeley. “The nonprofits get leases for extremely low rates, and the city gets a property that is being maintained and, in many cases, improved.”
For example, Chakko said, the Youth Musical Theater Company is paying $300 a year in rent at its facility at 2925-2945 Bolivar Dr. and is putting in $74,000 in improvements over its five-year lease.
Jennifer Boesing, producing artistic director at the YMTC, said the company has actually completed about $135,000 in improvements — more than the city required — and is very pleased with its new space.
“These were gutted, useless buildings and we made them into usable rehearsal and design shop space,” she said. “We had to raise a lot of money, but it was worth it because the potential of having our own space was so exciting.”
But the new lease requirements — and the need to quickly raise significant funding for repairs — has been challenging for many of the other small, often volunteer-run organizations.
Berkeley “is putting the burden of maintaining city facilities on small, nonprofit organizations,” said the board member of one of these groups, who asked to remain anonymous as his group is still negotiating with the city. Berkeley “is taking a heavy-handed and mean-spirited approach” to groups that ”contribute to the mosaic of community-oriented organizations that make Berkeley a better place to live,” he said. “The city should be fostering them rather than trying to put the financial squeeze on them.”
Berkeley city councilman and mayoral candidate Laurie Capitelli said the situation reflects how badly Berkeley has been neglecting its infrastructure needs.
“The reality is that we as a community have been doing this [deferring maintenance] for 50 years,” he said. “It’s not just the buildings leased to nonprofits: it’s the parks, the streets, the gutters, the Rose Garden, the pier. We do not put the resources in our infrastructure to stay even.”
Isabelle Gaston, a critic of the current city government and a candidate for the District 6 City Council seat, is more blunt. “I believe the city has been a slumlord, allowing all these buildings to be neglected and to fall apart,” she said. “The nonprofits are saying ‘why should we pick up the tab after you guys completely ignored your responsibility?’”
The deferred maintenance issue is also “tied to the fact that Berkeley has been spending a larger and larger share of its funds on employee and pension costs,” said Sophie Hahn, who is running for the District 5 council seat. “There’s not a lot left for maintenance.” She adds that some of the revenues raised by Measure F, passed in 2014 to increase funding for Berkeley’s parks, actually goes to pay for salaries instead.
One of the first groups to go through the new leasing process was Actors Ensemble, which had leased space in Live Oak Theater since 1978.
“For many years, there was no formal agreement between the city and us: the situation was legally unclear,” said Jerome Solberg, a board member and past president of Actors Ensemble. “Every so often the city would come to us with an agreement, but it would always fall apart for some reason or another, and it was never resolved.”
But in 2012, the negotiations took on a more serious tone and Actors Ensemble became the first casualty of the new leasing policy. The all-volunteer group, which bills itself as “the longest producing company in Berkeley,” could not afford to pay for a new roof and ADA-compliant bathrooms and lost the space it had leased for almost 40 years. The city put out a Request for Proposal, looking for tenants who could make the improvements. The lease went to TheaterFIRST, which is now in the process of installing the ADA-compliant bathrooms at an estimated cost of $50,000, according to board president Bonnie Stiles. TheaterFIRST pays no rent for the first three years of its lease and then $500 a month in the fourth year. In the fifth year, the rent increases 4% and the city also takes 5% of the net box office. The group is happy to have a permanent home, said Stiles.
Actors Ensemble is now occasionally renting the space from TheaterFIRST and has also started producing plays at the outdoor amphitheater in John Hinkel Park.
“That was working out OK, but now the city has informed us it wants to have a meeting to talk about new and improved arrangements for the renting of the park,” Goldberg said. “Hopefully those discussions will go well, but it does raise some level of paranoia.”
The Berkeley Art Center, also in Live Oak Park, is still in negotiations with the city and looking at estimated deferred maintenance costs of almost $211,000. Their building was found to be in “poor” condition by city inspectors. It requires a new roof, upgraded heating and electrical systems, and more. The city is also asking the group to pay for repairs to the wooden bridge running over the creek and to their building, which the group claims is also used by pedestrians not going to the art center.
“Our board has spent countless hours going over this lease since it was first presented to us in 2013,” says board president Marianna Stark. Many provisions in the lease are unclear, Stark said, and the city is not answering the board’s concerns.
One of the many sticking points is the term of the lease: the city has offered a 10-year lease with a five-year renewal option, but Stark says most major art funders want a 20-year lease to make sure their investment lasts.
The Berkeley Art Center first moved into its building in 1967 and stayed there until 1978, according to a February letter sent to the city council by Jennifer Lovvorn, the chair of the Civic Arts Commission. Berkeley paid for BAC’s staff and operating costs out of the city’s general fund. The city-funded organization shut down in 1977 after the passage of Proposition 13, but then a group of private citizens started a non-profit and resurrected BAC in 1978. Berkeley waived the rent and contributed $17,000 a year, said Lovvorn. Admission has always been free.
In recent years, Berkeley has been contributing $60,000 a year to BAC; in 2016 the city awarded the arts group an additional $20,000 grant to hire a development director who could raise funds for the capital improvement campaign. Still, BAC officials are concerned about their ability to meet the capital costs. The organization works hard to raise the rest of its $200,000 operating budget and finding another $250,000 to $300,000 will be a challenge, Stark said.
“This is why imposing a lease on BAC when we are providing services to city residents and visitors on a break-even shoestring budget is so onerous,” said Stark. “Unlike a theater or yacht club, we don’t have a business model to bring in revenue. We fundraise to pay our $200,000 – $210,000 operating expenses that the city’s allocation doesn’t cover. We have no cushion or rainy day fund.”
The Berkeley Rowing Club is one of the few that recently completed lengthy negotiations and signed a 15-year lease. The initial cost estimate for repairs had come in at close to $250,000, while the group’s gross receipts never exceed $30,000 per year, said Mike Smith, an attorney who is on the rowing club’s board and who headed up the negotiations.
After getting over the initial sticker shock of the deal, the group realized that since many of their members are contractors they could undertake the improvements for less than the city consultants had estimated. The negotiated lease allows the repairs to be spread out over the 15 years of the lease.
Before the new lease, the club paid $4,700 a year in rent. After they signed, the rent was reduced to $300 a year with a provision that it increase $100 a year after that. At the end of their 15-year lease, the rowing club will be paying $1,700 a year in rent.
“At this point, the lease could end up being a bonus for us,” Smith said. Requiring nonprofits to repair the leased buildings is just “a practical reality,” he added. “The parks department and the city don’t have the resources to begin to touch the magnitude of the capital deficit and the deferred maintenance they face.”
Long-time community activist Barbara Gilbert agrees. “In Berkeley, everyone wants the city’s money,” she said. But Berkeley has $500 million in unfunded infrastructure projects and another $500 million in unfunded employee benefits, with no plan for how those shortfalls will be dealt with. “I would like to see a plan of how we will deal with this” $1 billion shortfall, she said. “Otherwise, the city could go bankrupt in 20 years.”
Live Oak Theater plan calls for a ‘true community facility‘ (12.03.12)