Palo Alto entered the final stretch in its long journey to creating a new history museum on Monday, when the City Council approved the parameters for a long-term lease with a nonprofit that has been trying to launch the project for more than 15 years.

The council also asked staff to hash out the final details with the Palo Alto Museum over the next three months, a request that could pave the way for construction to begin early next year. The museum would occupy the Roth Building at 300 Homer Ave., a city-owned building that was once owned by Palo Alto Medical Foundation and that has fallen into disuse and disrepair.

Once the lease is in place, Palo Alto Museum will begin the long-deferred work of rehabilitating the 1932 building designed by renowned architect Birge Clark and making it suitable for the new facility. The project has a price tag of $12.3 million, with about $3.9 million coming from a city program that allows builders to buy development rights by providing funds that help restore historical buildings. The balance will be paid for through a combination of impact fees that are designated for parks and community centers, $300,000 in grants from Santa Clara County, a $1 million contribution from the city's general fund and about $2 million in funds raised by the nonprofit.

Rich Green, president of Palo Alto Museum, said it's become almost impossible for the nonprofit to raise money for the project without the assurances that a long-term lease would bring. The nonprofit, he said, is still looking to raise $8 million for museum operations.

"What we're talking about now is rehabilitation of a city-owned building and we've done everything we can toward that goal," Green said. "Now that we have no written assurance of moving into that building, our fundraising has come to a stop."

While the project has at times struggled to win political and popular support over its tumultuous history, the Monday discussion marked a major turning point, with most of the council enthusiastically backing the conversion of a dilapidating asset into a museum commemorating local history. Mayor Tom DuBois, a longtime supporter of the project, urged staff to move quickly to finalize the deal and suggested that further delays will only add to the museum costs.

"We do have a rich history beyond tech, but even the tech history is truly astounding," DuBois said, citing Fairchild Semiconductor's invention of the first commercial transistor in Palo Alto. "I think the fact that we don't have a museum is a really missed opportunity for us to tell our story — the good and the bad."

Vice Mayor Pat Burt agreed and noted that the deal will bring two significant benefits to the building: a restoration of a city-owned asset and the creation of a museum operated by a nonprofit at no cost to the city. He pointed to Avenidas, the senior services nonprofit that operates out of a city-owned building on Bryant Street, as a model for the museum project.

"Many cities pay for and staff at their own expense senior centers, history museums and the like," Burt said. "In this case, we'll be able to outsource all those functions and derive the benefits of both having such a museum and having a more valuable city-owned asset of this building."

The only council member who strongly opposed the project was Greg Tanaka, who objected to the proposed 40-year term of the lease and the rate of $1 per month that the city would be charging the nonprofit. The museum, he argued, should be required to pay market rate for occupying a prime downtown location.

"What we have to think about is, 'Do we want to be investing in the past, the history, or do we wanting to be investing in the future?'" Tanaka asked.

Council members also reached a near-consensus Monday on most of the outstanding issues in the lease negotiation. They voted to require a security deposit of only $10,000 for the construction project, well short of the $150,000 initially proposed by staff and in line with a request from Palo Alto Museum. They also clarified that the museum will be responsible for the long-term maintenance of the facility and for paying $15,000 to ensure that the project complies with the city's prevailing wage requirements. And they agreed to reimburse the permit and processing fees for the project, which total about $100,000.

While the council generally agreed that turning the rundown building into a usable community space is generally a good move, some members urged a more cautious approach on the long-term lease with Palo Alto Museum. Council member Eric Filseth requested that staff create a contingency plan in case the museum can't meet its obligations to pay for operations. Council member Alison Cormack, who otherwise supported the council's direction, voted against a provision to reduce the security deposit and to reimburse permit fees. She also opposed the council majority's direction for staff to return within 90 days with a draft lease — a deadline that City Manager Ed Shikada noted may not be entirely within the city's control in a two-party negotiation.

"We are making an enormous investment in an asset that we had let deteriorate — and that is a big change in policy from when we bought it. … Who knows what this is going to look like in 40 years? … This is a time to be careful and thoughtful," Cormack said.