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10 -132 Redwood Shores Child Care Report, 11/13/00 Page 2 of 7 5. million or 80 percent of the project construction cost to acquire its interest in the improvements and child-care usage requirements. . The City's advance financing will essentially allow the developer to a) amortize development and construction costs over 20 years, b) at the City's option, be subject to a demand for payment after ten years, c) include the equivalent of interest at the State of California's Local Agency Investment Fund ("LAIF") rate plus 1.5 percentage points, d) be pre-payable by the developer at any time without penalty. The City financing is non-transferable and will be due and payable upon sale of the building. Pursuant to the site lease, a "Base Rental Rate" will be established for the office space at $4.50/month, triple net, to increase annually at the Bay Area consumer's price index. Fifty percent of the office rents in excess of the Base Rental Rate will be payable to the City. The City will have an easement from the owner of the adjacent hotel site, in perpetuity, for access to utilities and egress. . The proposed project is located outside the boundaries of the GID 1-64 and as such is exempt from paying the GID 1-64 facility fee of $7.501 square foot of developed area ($112,500). 4. 6. 7. Background Max Keech, a part owner of a site adjacent to the City's water tank "A" parcel, proposed to develop and own a 150-space child care facility on the City's parcel. Mr. Keech's adjacent parcel is in development as a 95-room residential suite hotel. Mr. Keech proposed that access to the child care facility be through the hotel site, and, with respect to the City's parcel, to pay for all site preparation, to deal with any issues of toxic remediation and to build and initially own a 10,000 square foot 150- space child care facility. Mr. Keech proposed that the City lease the site to him for 49 years at a nominal rate of $1,000 annually, with three 10-year renewal options. In addition, he asked the City to provide the equivalent of long-term financing in an amount not to exceed $3.2 million, to be repaid over 20 years at the LAIF rate. At its last meeting on this matter, the Council authorized staff to negotiate with Mr. Keech an agreement to develop an acceptable facility. Discussion Because of State childcare facility licensing requirements, child care is an area- intensive use and cannot be developed through private resources as efficiently (as measured by rent yielded per developed square foot) as can other commercial uses. It is also limited in the rental rate it can pay and still attract paying clients. Mr. Keech's proposal that the City subsidize the development of a childcare facility, by providing use of the land at a nominal rate and long-term financing at a below-