The 1932 building, which once housed the Palo Alto Medical Clinic and is listed on the National Register of Historic Places, has long been envisioned by city officials as a perfect site for a history museum or another "public facility." But as city officials learned Tuesday night, June 19, turning this dream into reality may require private investors to lease offices at the museum.
The Palo Alto History Museum, a nonprofit group raising money to launch the museum, asked the City Council's Finance Committee for permission to sublease part of the building at 300 Homer Ave. to a for-profit organization. The move is driven by the project's financial needs. The group needs to raise more than $6 million and has already acquired about $4.5 million, board members told the committee.
The group hopes to get another $800,000 or so through the "Federal Historic Tax Credit" program, which provides tax credits to private entities as an incentive to rehabilitate historic structures. This would leave another $800,000 that the group would raise by other means, a goal that members said they believe they can accomplish in the next nine or 10 months.
But the federal program comes with a bundle of strings attached, including a requirement that the project generate profits and bring a 3 percent return on investment. To meet this requirement and to give itself some financial breathing space, the group urged the committee to back away from the city's current position, which calls for the building to be occupied solely by nonprofit organizations.
The committee's four members deferred the decision on allowing for-profit businesses to lease space, though they unanimously supported the Palo Alto History Museum's proposal to pursue the tax-credit program.
Margaret Feuer, a board member of the Palo Alto History Museum, highlighted the group's recent fundraising efforts but noted that times are tough for nonprofits. The group has already received about $560,000 in grants, Feuer said. But having no building and, hence, no programs, makes acquiring funds particularly difficult, she said.
"We all know nonprofits face funding challenges," Feuer said. "This is really the reason we ask you to allow us to rent to a for-profit entity. That would give us a cushion to fall back on."
If the group were to succeed in launching the museum, it would complete a job nearly a decade in the making. The city bought the Roth in 2000 and sought proposals from local nonprofits to occupy it. The Palo Alto History Museum proposed in 2003 to restore and preserve the dilapidated structure, and the council accepted the proposal. Since then, the council extended its option agreement with the group several times and approved $150,000 to repair leaks and drainage problems in the building.
Last year, the museum group's latest contract expired, and the city extended it until the end of 2013. As a condition, the group had to submit a business plan within the first six months of the year. By presenting its plan Tuesday night, the group met its condition.
Council members, for their part, reasserted their commitment to the project, though they stopped short of approving the museum group's entire request.
"I want the History Museum to succeed, and I want it to go forward," Vice Mayor Greg Scharff said. "I think it will be a great thing for Palo Alto."
But Scharff and other council members voiced major concerns about the proposal on corporate renters. One major issue is zoning. The site is zoned "public facility," which does not allow most for-profit office uses. Senior Assistant City Attorney Cara Silver said some uses, including cafes and restaurants, could be developed at the site through a conditional-use permit. But corporate offices of the sort envisioned by the group would likely require a zone change, Silver said.
The committee agreed to delay its decision to give city staff and the museum group's consultant more time to analyze the zoning issues.
Despite the unresolved financing issues, the complicated project has seen a recent surge of momentum. The Historic Resources Board and the Planning and Transportation Commission both voted to support the museum, which would include gallery space, staff offices, a community meeting room, a gift shop, a café, an archive-storage space, and offices for future subtenants.
Local resident Crystal Gamage attended Tuesday's meeting and urged the committee to support the Palo Alto History Museum.
"It's an important step for the city, and it will reflect on our history," Gamage said. "You want the best museum possible."
Gail Wooley, former mayor and current vice president of the Palo Alto History Museum, said that while the process of getting a historical tax credit is complex, it's "worth the effort" for the city. She noted that while the city hasn't pursued this financing mechanism in the past, many local developers, including Charles "Chop" Keenan and Roxy Rapp, have gone through this process as they rehabilitated historic buildings downtown.
"It's an opportunity to make a public-private partnership, which makes it possible to bring in private money for a public benefit," Wooley said.
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