HomeMy WebLinkAbout02.11.1985 Item #I-4- CITY OF NEWPORT BEACH
Marine Department
February 11, 1985
TO: MAYOR AND CITY COUNCIL
FROM: Tideland Affairs Committee
SUBJECT: BASIN MARINE LEASE'
Recommendation:
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AGENDA ITEM: I-4
CY THE CITY COUNcil
CITY OF NEWPORT REACH
FEB 111985
If desired, approve the terms and conditions of the attached lease with
Basin Marine, Inc.
Background:
The City Council, on January 28, 1985, referred the Basin Marine, Inc.
lease to the Tideland Affairs Committee for them to review the following:
(a) The possibility of a shorter term lease, and
(b) The possibility of the City financing all or a portion of the
capital improvements proposed by the lessee.
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The Tideland Affairs Committee met on January 31, 1985 with the City
Attorney and Marine Department staff and reviewed the proposed lease in
relationship to the appraisal submitted by George Hamilton Jones, MIA,
dated March 15, 1982 and an up -date of fair rental value submitted by
Mr. Jones on May 2, 1984.
A second Tideland Affairs Committee meeting was held on Monday, February
4, and Mr. George Jones and Bill Hansen were present to answer questions
regarding the appraisal reports. The following information was discussed
during the two T.A.C. meetings:
1. The lease negotiations with Basin Marine, Inc., commit Basin
Marine to approximately $550,000 worth of capital improvements. These
include $200,000 of improvements to the water site of the lease, $200,000
for building improvements to the shop and hardware store, and $150,000
worth of improvements to equipment; i.e., travel lift, etc. These improve-
ments will be built to the lessee's specifications and approved by the City.
2. The primary reason for a 25 -year lease term is financial. Lenders
require a lease term of approximately 10 years in excess of the loan term.
This allows a lender a certain leasehold position, should the lessee default
on the loan. With a 25 -year lease term a loan for capital improvements
would be amortized over a 15 year period. Any lease term less than 25 years;
i.e., fifteen years, would require that the loan would have to be.airlortized
in a 5 year period.
Page 2 Basin Marine Lease
3. There are no distinct advantages to the City financing these
capital improvements and leasing back the improvements to the lessee.
The main advantage of a lease back provision is that it allows the lessee
a longer period to amortize the improvements. The primary disadvantage
to the City is that the City would be tying up public funds to a lessee's
specifications. Should the lessee's business fail, or the economic con-
ditions change, the City would have a major capital investment in improve-
ments that might not meet the City's future objectives for the site. In
addition, the State Boating and Waterways money on loan to the City to
rebuild the Balboa Yacht Basin Marina cannot be used for lessee improvements.
4. Mr. Jones explained that the Basin Marine, Inc. proposed lease is
consistent with recent leases with boatyards in the San Diego Port District,
Los Angeles Port District, Marina del Rey, Dana Point and Ventura. The
terms and conditions of the proposed lease protect the City by the escalation
clauses built into the lease; i.e., tying the minimum rent to the CPI
increases every four years, and by the City's ability to increase the
percentage rent schedule by re -appraisal on a ten year basis.
5. The Tideland Affairs Committee recommended that the City and Council
approve the terms and conditions of the lease for a 25 year period and
that staff meet with the lessee to review the possibility of a view corridor
being widened on the west side of the lease boundary, and that the block
wall fence around the lessee's parking facility be softened and opened to
encourage his business clientele to use this parking area versus the marina
parking. The staff will also review the entire landscape plan of the Balboa
Yacht Basin with the Tideland Affairs Committee at a future meeting.
Tideland Affairs Committee
Chairman, Mayor Pro Tem Ruth Elyn Plummer
Council Woman Evelyn Hart