Palo Alto officials on Monday took a firm stance against a two-decade-old provision in the city's lease of Cubberley Community Center, a covenant that requires the city to pay the school district $1.8 million annually in exchange for the school district's promise not to sell some of its property in the city. School officials are loath to give up the revenue, however, and negotiations over a new lease are heading into the final stretch as the current lease nears its expiration date at the end of this year.

The covenant not to develop was adopted in 1989 with the idea of giving the cash-strapped school district a much-needed injection of funds while keeping the district from selling off five school sites. With the district no longer suffering from plummeting enrollment and sagging revenues and with all five sites now in use (Jordan and JLS middle schools and the Ohlone, Garland and Greendell campuses), the City Council agreed on Monday with City Manager James Keene's assessment that the circumstances prompting the covenant no longer exist and therefore it should be eliminated.

The covenant was part of a broader agreement between the city and the school district, which allows the city to lease from the school district 27 acres in the 35-acre south Palo Alto community center that was once a high school. Today, Cubberley houses an eclectic collection of tenants and amenities, including artist studios, child care providers, athletic playing fields, a theater and the local campus of Foothill College.

School and city officials are now working on a new lease. A 2013 report from a broad committee of community stakeholders recommended development of a vision in which Cubberley would be shared by the city and school district and an assessment to determine the best long-term uses for the sprawling center on Middlefield Road.

But as Keene noted on Monday, the covenant remains a subject of disagreement between him and his counterpart on the school side, Superintendent Kevin Skelly.

"The superintendent and I have been exploring different ideas and options, but I think we're really reaching a sticking point as it relates to continuance of the covenant not to develop in the lease," Keene said.

From the council's perspective, the issue is simple: Conditions that made the covenant useful no longer apply. Accordingly, it should be scrapped. That was also the recommendation of the community advisory committee, which voted 18-0 to remove the covenant from the new agreement.

"I see no public-policy reason why anyone would expressly agree to do something for which they're no longer receiving the intended benefit or result," Keene said Monday.

The council overwhelmingly supported Keene's position.

"I don't see how anyone can explain to our voters, most of whom are voters in the city and the school district, why the city should be paying for something that has no value," Councilman Larry Klein said. "It really makes no sense."

But he and his colleagues all acknowledged that the city and the school district have a shared interest in Cubberley and said he hopes the negotiations proceed in good faith.

Instead of simply giving money to the school district, as is current practice, Keene and the council agreed that the covenant funds should instead be spent on fixing up Cubberley, an endeavor that according to staff estimates could cost as much as $18 million. Councilman Marc Berman joined Keene and the rest of his colleagues in championing this approach.

"I look at ending the covenant not to develop as ending an agreement that's obviously obsolete at this point and investing it in the community," Berman said.

Members voted 9-0 to make the elimination of the covenant one of the guidelines for negotiating a new lease. Other guidelines include eliminating the annual consumer price index increases; exploring a potential reconfiguration of the 8 Cubberley acres owned (not leased) by the city; and eliminating language that allows the school district to buy the city's portion of the community center. The only issue that council members split on was whether to eliminate an option clause that allows the school district to buy back Ventura Community Center in south Palo Alto from the city. The council ultimately voted 5-4 to support eliminating the clause, with Vice Mayor Liz Kniss and council members Karen Holman, Gail Price and Greg Schmid dissenting.

Council members also asked Keene to attempt to complete negotiations by this summer, a deadline driven by Skelly's recent announcement that he will be stepping down by June 30. Councilman Pat Burt, who proposed the tighter timeline, argued that both sides have been holding on to their positions for a long time and that nothing will change between now and the end of the year. The council voted 7-2 to support Burt's proposal, with Klein and Schmid dissenting.