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ITEM 4.a. TOWN OF FOUNTAIN HILLS STAFF REPORT Meeting Date: 6/30/2026 Meeting Type: Town Council Special Meeting Submitting Department: Administration / Economic Development & Tourism Prepared by: Amanda Jacobs, Economic Development Director Staff Contact Information: Phone: 480-816-5104 Email: ajacobs@fountainhillsaz.gov Request to Town Council Regular Meeting (Agenda Language) CONSIDERATION AND POSSIBLE ACTION: Relating to Resolution 2026-18, a Lease Agreement between the Town of Fountain Hills and Fountain Hills and Lower Verde River Valley Museum and Historical Society Staff Summary (background) Background The Town of Fountain Hills and the Fountain Hills and Lower Verde River Valley Museum (Museum) entered into a lease agreement on August 16, 2001 (Attachment 1). The agreement expires on August 15, 2026. Key provisions of the existing agreement include: • Approximately 5,000 square feet of Town-owned space was leased to the Museum at a nominal rate of $1 per year for 25 years (total rent collected: $25). • The Town contributed $210,000 toward exhibits, displays, lighting, and permanent improvements at the inception of the lease. • Throughout the lease term, the Town has paid for building maintenance and utilities, including water, gas, electricity, sewer, trash removal, and base cable television service (excluding telephone and equipment costs). • Over the past 25 years, the Town and Museum have maintained a longstanding partnership focused on preserving and interpreting the community’s history. Current Considerations As the current lease approaches expiration, the Town must evaluate future occupancy of the facility in a manner consistent with Arizona law, sound fiscal stewardship, and the Town’s fiduciary responsibilities. Town staff and representatives of the Museum began discussions regarding a new lease in November 2025. Through recent discussions, the parties have negotiated a proposed lease agreement for the period of August 16, 2026, through June 30, 2027. Under the proposed agreement, the Museum will pay rent for the use of the facility (Attachment 2, Section 3 – Rent) and provide specified public benefits and services to residents and visitors (Attachment 2, Section 6 – Public Benefits). The proposed lease term will allow the Museum to continue operations without interruption while providing both parties additional time to evaluate the Museum’s long-term operational and financial sustainability, assess the measurable public benefits provided to the community, and consider potential future occupancy arrangements. The proposed structure is intended to help ensure that any future agreement is supported by adequate consideration and complies with applicable provisions of the Arizona Constitution, including the Gift Clause. Staff believes the proposed lease provides an appropriate interim framework that balances the Town’s interest in preserving local history and culture with its obligation to protect public resources and ensure legal compliance. Additionally, the Museum Board approved the draft lease as written at their board meeting on Thursday, June 24. Related Ordinance, Policy or Guiding Principle The lease agreement supports the Town's General Plan, specifically by maximizing economic development opportunities in Fountain Hills and supporting strong public/private partnerships to strengthen the community, ensuring long-term viability, and improving the Town's quality of life. As well as the Town's Strategic Plan, specifically Targeted Collaborative Economic Development. Risk Analysis If the lease agreement is not approved, the Museum will no longer be able to operate effective January 1, 2027, and will need to begin the 90-day deaccession and transition process. Recommendation(s) by Board(s) or Commission(s) N/A Staff Recommendation(s) Staff recommends approval. Suggested Motion MOVE TO APPROVE Resolution 2026-18, Approving a Lease Agreement between the Town of Fountain Hills and Fountain Hills and Lower Verde River Valley Museum and Historical Society FISCAL IMPACT Fiscal Impact: $10,500 from September 1, 2026 - June 30, 2027 to the General Fund. Budget Reference: N/A Funding Source: N/A ATTACHMENTS 1. 6.30.26 - Special Session Museum Lease 2. Res 2026-18 Lease between FH and Museum