Christian school lease: key decision for 2013

As I mentioned last week, a City Council decision on whether or not to restructure a 10-year-old ground lease on a city-owned site planned for a 1,200-student private Christian High School likely will be the elected panel’s most important judgment of the year.

Basically, if a lower-cost lease is not approved, the 99-year agreement with Yorba Linda Friends Church will go into default due to the inability of school officials to attract funds for construction from lending institutions based on current lease provisions.

However, if the council accepts new terms, school leaders have voiced confidence work can begin on amenities promised under a 2005 pact allowing city use of recreational and athletic facilities on the 32-acre site at Bastanchury Road and Casa Loma Avenue.

New lease terms are expected to be presented to the council at a Feb. 19 meeting, when the latest of three extensions to a default notice delivered to the church in April expires. 

Council could accept the terms or continue negotiations with counter-offers.  If council members reject the terms, they could explore several options, including bids from other parties that have reportedly expressed interest in the site for a private school or other use.

Church officials are proposing a new lease with “a two-stage rent structure.”  One part is a basic rent based on independent appraisals of the property’s fair market value.  Another part would be a per-student fee that would increase as the school’s enrollment grows.

Of course, a new lease should provide a cure for past-due rent, which totals more than $1 million since the last payment was made in September 2012.  The revenue loss negatively impacted both the past and current years’ city budgets, according to city officials.

Through June 30, 2012, school officials report spending $12.8 million on the project:  $4 million in lease payments to the city; $6.1 million for project management (architect, engineering, consulting, legal and plan check fees); and $2.7 million on actual site work.

Certainly, council members can’t ignore those expenditures when making a decision on new lease terms, especially since so much of the funding came from local residents who attend Yorba Linda Friends Church and Rose Drive Friends Church.

So, when will residents see construction activity on the site for the school that was originally proposed to open five or six years ago?  That depends on whether or not council members accept new lease terms or continue with negotiations.

Although school leaders have expressed optimism that lower rent and other provisions will result in favorable action from lenders, additional time will be needed to negotiate the details and further prepare the site for actual building.

First up will be the joint-use facilities.  Mel Malkoff, the church-hired consultant who has been working with city staff on a new lease, reported to council members that creation of “new public recreational amenities now, ahead of school buildings” will be the priority.

The amenities, he noted, will include a tot lot, play field, tennis and basketball courts, with associated parking, all open to the public, even during the high school’s building period.