Sausalito reduces rent for arts center

The Sausalito City Council has voted to reduce the rent paid by the Sausalito Center for the Arts by nearly half.

The council voted 3-2 at its meeting on Sept. 17 to direct staff to amend the city’s lease with the nonprofit, which rents a city-owned building at 750 Bridgeway. The monthly rent will be $6,000, reduced from $11,095.25.

“If we charge the SCA $11,000 or even $8,000, we’ll be pretty much guaranteed that we’ll either put them out of business or make them so anemic that they will fail on their own,” Mayor Ian Sobieski said. “I think art is intrinsic to the brand of Sausalito. It’s part of our quality. It’s who we are. It’s what brings us together. It’s worth fighting for.”

The city bought the former Bank of America building for nearly $2.3 million in 2020. It entered a five-year lease agreement — with an option of an additional five years — with the Sausalito Center for the Arts in August 2022.

Councilmember Janelle Kellman voted against the rent adjustment because she felt the conversation was premature and that the city needed to pass a formal leasing policy first. She added that the center’s business model needs to be rehabilitated.

Councilmember Jill Hoffman also voted against the lower rent because she felt the city needs a clear policy. Hoffman also said it was economically unsound to lose money on the property, and the center does not have a viable business model.

In February, the City Council voted to keep the center’s rent from increasing from $4,029 to $11,095 per month for a six-month period. When the lease was negotiated in 2022, the initial rent was set around $11,000, but city leaders gave the center 18 months to raise more funds.

City staff recommended a monthly rent of $8,058.50. In a letter to the City Council, the center requested a flat rent of $6,000 a month beginning Jan. 1, 2025, until the lease expires.

The center’s 2024 income is projected to be around $250,000, according to the letter. Shiva Pakdel, executive director of the center, said that to date the center has held 44 events and brought an average of 1,000 people a week to the area. She said the center is becoming well known in the Bay Area.

“Now we have the momentum, and we have a plan to grow,” said Pakdel.

Pakdel said the center recently started a membership program that might bring in around $15,000 a year. She added that the goal for grants and donations is $100,000 annually.

Dan Christ, the center’s treasurer, said the $11,000 rent would “wipe out” any profits the art center could make, meaning the center could not reinvest in the organization. He said that on top of the cost of maintenance, the base rent is too high.

“It simply is an overbearance of expense to be committed to,” Christ said.

Zapata said while deferring the rent increase might have saved the center $42,403.50, it cost the city an equal amount in revenue. Currently, the nonprofit generates $48,350 in lease revenue for the city. The city borrowed money to buy the building and c owes an average of $157,306 in annual debt payments until 2035, according to a staff report.

The city receives $24,000 a year from the Bank of America for maintaining the automatic teller machine, which can go toward the debt payments, according to Zapata.

Chad Hess, the financial director for the city, said the $11,000 rent would cover the entire debt — principal and interest — while other scenarios, around $4,000 and $6,000 a month, would still cover all of the interest and a “good portion” of the principal loan expenses.

Vice Mayor Joan Cox pointed out that when the initial lease was negotiated, the center had been anticipating sharing the space — and the rent — with a co-tenant, but the plans fell through.

“So is it fair to say that the circumstances have significantly changed since the lease was initially negotiated with SCA?” said Cox.

Tom Anderson of Sausalito said he supports the rent amendments because the center is a good use for the space and brings a lot of visitors to the area. He said the center’s exhibits and programs bring revenue to nearby businesses.

“Please keep in mind that the SCA is still a startup,” said Anderson. “Its operation needs the support from the city and the council to keep the level of programming up.”

Lorna Newlin, a Sausalito artist, said she supports the lower rent. She used the empty storefronts in the area as a cautionary example of market-rate rents.

“They have done so much for this town and it’s hard to be an artist, believe me,” said Newlin. “This is a jewel.”

Included in the lease amendments is a requirement that the city is responsible for capital improvements, and the city’s participation on the center’s board of directors will increase to three members.

“This is not just about the economics, it’s about the heart,” said Steven Woodside, a candidate for City Council, in support of the art center.

The proposed lease changes will go to the center’s board and then to City Council for final approval.