HomeMy WebLinkAbout03 - Balboa Island FerryCITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. 3
June 26, 2007
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: City Manager's Office
Dave Kiff, Assistant City Manager
DKiff(a)city.newport- beach.ca.us or 949 - 644 -3002
SUBJECT: Ordinance No. 2007-: Franchise with Balboa Island Ferry; Lease
Agreementwith Balboa Island Ferry
ISSUE:
Should the City adopt an Ordinance entering into a franchise with the Balboa Island Ferry (BIF)
and enter into a new Lease Agreement with BIF to allow BIF to undertake repairs by extending
BIF's lease term ten years and adjusting the rent?
RECOMMENDATIONS:
1. Hold the 2ntl reading of Ordinance No. 2007- ` granting a Franchise to the Balboa
Island Ferry; and
2. Authorize the Mayor to execute a Lease Agreement with the Balboa Island Ferry. The
effective date of the Lease shall be the effective date of Ordinance No 2007-
DISCUSSION:
Background:
The State of California became the owner of the tidelands in the City of Newport Beach upon
the State's admission to the union in 1850. The City manages those tidelands pursuant to
various legislative grants from the State.
The Balboa Island Ferry (BIF), since 1938 operated by the Beek family, has leased a small
portion of these tidelands from the City, for the construction and maintenance of slips, docks,
ways and other appurtenances, all used in conjunction with the operation of a ferry which
transports persons and vehicles between terminals located near Agate Avenue on Balboa
Island and Palm Avenue on the Balboa Peninsula.
Current Lease. The current lease agreement (entered into October 25, 1988) expires on
September 30, 2013. BIF is also a franchisee pursuant to Ordinance No. 88 -33, in part because
the City Charter (Article XIII, §1300) requires that any provision of transportation services
requires a franchise. Further, §30900 of the California Streets and Highways Code grants cities
the right to issue franchises to toll ferries. Within the Lease Agreement and the Franchise, BIF
pays the City 6% of gross receipts (3% in the Lease and 3% in the Franchise). There is no fixed
minimum rent in the current Lease Agreement (nor in the Franchise).
Balboa Island Ferry
June 26, 2007
Page 2
Here are the last few years' payments from BIF to the City, according to the Preliminary FY
2007 -08 Budget Detail (page 12):
In 2005, BIF determined that the ramps used by its ferries needed to be replaced or rebuilt. In
order to properly amortize its construction costs for this repair, BIF requested a longer lease
term with the City. Per Council Policy F -7 (Income Properties) the City hired an appraiser to
look at the BIF operations — we hired Jim Netzer of Netzer & Associates. Netzer determined
that the fair market rent for the Balboa Island Ferry was six percent (6 %) of gross receipts (date
of value is September 30, 2006).
Earlier this year, fares at the Ferry went up — to $1 per passenger from $0.60 per passenger.
Cars with one occupant will pay $2, where they used to pay $1.50. The Ferry operator says that
these increases reflect hikes in fuel prices, as well as insurance and maintenance costs.
Proposed Lease and Franchise. After some negotiation, City staff and BIF agreed to the terms
and conditions of the attached Lease Agreement and franchise. The Lease Agreement would
allow BIF use of City property across Lower Newport Bay between the northerly end of Palm
Street on the Balboa Peninsula and the southerly end of Agate Avenue on Balboa Island, in
exchange for BIF's payment of the greater of 5% of its gross receipts or $70,000 1year (as
adjusted annually by the Consumer Price Index).
We believe it to be a fair trade -off with BIF to lower percentage rent from the appraiser's value
by 1% to gain a $70,000 base rent with a CPI adjustment, given the recent revenue history of
BIF. Further, the Ferry operators point out that:
• The proposed Lease premises are significantly smaller than the existing Lease's premises.
• New water quality regulations relating to the cleaning of the Ferries' hulls are an additional
expense.
The proposed ordinance for the franchise removes references to rent (consolidating all rent
information to the Lease) but continues to authorize operation of the BIF pursuant to the City
Charter and State law, and confers to BIF the right to operate on the same property as the
Lease, contingent upon BIF's compliance with the Lease provisions.
The new Lease also extends the term to 2032 and requires BIF to repair its ramps within a
reasonable period of time.
Given the BIF's history and relationship with the City, we recommend that the City Council
approve the ordinance authorizing the franchise and authorize the Mayor to execute the
attached Lease agreement.
Finance Committee referral. At the June 12, 2007 City Council meeting, Mayor Steve Rosansky
asked that the City Council's Finance Committee discuss the Lease Agreement and make a
a
2003 -04 Actual
$
84,666
2004 -05 Actual
$
66,945
2005 -06 Actual
$
67,620
2006 -07 Estimated
$
73,000
2007 -08 Proposed
$
71,534
In 2005, BIF determined that the ramps used by its ferries needed to be replaced or rebuilt. In
order to properly amortize its construction costs for this repair, BIF requested a longer lease
term with the City. Per Council Policy F -7 (Income Properties) the City hired an appraiser to
look at the BIF operations — we hired Jim Netzer of Netzer & Associates. Netzer determined
that the fair market rent for the Balboa Island Ferry was six percent (6 %) of gross receipts (date
of value is September 30, 2006).
Earlier this year, fares at the Ferry went up — to $1 per passenger from $0.60 per passenger.
Cars with one occupant will pay $2, where they used to pay $1.50. The Ferry operator says that
these increases reflect hikes in fuel prices, as well as insurance and maintenance costs.
Proposed Lease and Franchise. After some negotiation, City staff and BIF agreed to the terms
and conditions of the attached Lease Agreement and franchise. The Lease Agreement would
allow BIF use of City property across Lower Newport Bay between the northerly end of Palm
Street on the Balboa Peninsula and the southerly end of Agate Avenue on Balboa Island, in
exchange for BIF's payment of the greater of 5% of its gross receipts or $70,000 1year (as
adjusted annually by the Consumer Price Index).
We believe it to be a fair trade -off with BIF to lower percentage rent from the appraiser's value
by 1% to gain a $70,000 base rent with a CPI adjustment, given the recent revenue history of
BIF. Further, the Ferry operators point out that:
• The proposed Lease premises are significantly smaller than the existing Lease's premises.
• New water quality regulations relating to the cleaning of the Ferries' hulls are an additional
expense.
The proposed ordinance for the franchise removes references to rent (consolidating all rent
information to the Lease) but continues to authorize operation of the BIF pursuant to the City
Charter and State law, and confers to BIF the right to operate on the same property as the
Lease, contingent upon BIF's compliance with the Lease provisions.
The new Lease also extends the term to 2032 and requires BIF to repair its ramps within a
reasonable period of time.
Given the BIF's history and relationship with the City, we recommend that the City Council
approve the ordinance authorizing the franchise and authorize the Mayor to execute the
attached Lease agreement.
Finance Committee referral. At the June 12, 2007 City Council meeting, Mayor Steve Rosansky
asked that the City Council's Finance Committee discuss the Lease Agreement and make a
a
Balboa Island Ferry
June 26, 2007
Page 3
recommendation to the City Council. On Friday, June 15, 2007, the Finance Committee did so
and recommended (on a 3 -0 vote) that the Council approve the Lease Agreement per the terms
described in this staff report.
Submitted by:
Da Kiff, Assistant City anager
Attachments: Ordinance No. 2007 - Re: a Transportation Franchise for the Balboa Island Ferry
Lease Agreement City - Balboa Island Ferry
ORDINANCE NO. 2007
AN ORDINANCE OF THE CITY COUNCIL OF THE
CITY OF NEWPORT BEACH GRANTING A
FRANCHISE TO THE BALBOA ISLAND FERRY,
INC.
NOW THEREFORE, the City Council of the City of Newport Beach, California,
HEREBY ORDAINS as follows:
SECTION 1: The City Council finds:
A. The Balboa Island Ferry, Inc., a California corporation, ( "Grantee ") has
requested an extension of its current franchise agreement to continue
operating a toll ferry across Lower Newport Bay between Palm Street on
the Balboa Peninsula and Agate Avenue on Balboa Island;
B. The Balboa Island Ferry has operated continuously at this location for over
seventy (70) years, and operated under the last eighteen (18) years or so
under a franchise last granted by the City Council in September, 1988
( "1988 Franchise ");
C. The City Council has authority, pursuant to the provisions of Article XIII of
the City Charter of the City of Newport Beach and Section 30900 of the
Streets & Highway Code, to grant a franchise to any person authorizing
operation of a toll ferry;
D. The ferry would operate wholly within the boundaries of the City of
Newport Beach ( "City "). The route of the ferry does not constitute a part of
an extension of a state highway, and no part of the ferry route is within ten
(10) miles of a toll bridge in operation, or under construction, over any
body of water across which the ferry is to operate. It is not feasible to build
a bridge, tunnel, combination thereof, or other normal highway structure in
lieu of the use of the ferry;
E. The operation of the ferry is on a route classified as a public road within
the State and has not been designated as a route on the Interstate
System;
F. The proposed franchise is consistent with the various elements of the
General Plan of the City, the Land Use Plan of the Local Coastal Program,
and other ordinances, policies, and regulations adopted by the City;
G. The franchise authorizes a level of public service essentially identical to
that offered by Grantee during the preceding franchise term and, as such,
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does not constitute "development" as that term is defined in the Coastal
Act;
H. The City now intends to terminate the 1988 Franchise and grant this
franchise, which shall extend the term of the franchise; and
The City Council has fully complied with the provisions of the Charter of
the City of Newport Beach regarding the grant of franchises.
IT IS HEREBY ORDAINED that pursuant to the provisions of Article XIII of the
Charter of the City of Newport Beach and Section 30900 of the Streets &
Highways Code of the State of California, the City Council hereby terminates the
1988 Franchise and declares its intention to grant another franchise for the
operation of a toll ferry to the Grantee under the following terms and conditions:
SECTION 2: Grant of Franchise.
The City Council grants a franchise to the Grantee to operate a toll ferry for the
transportation of passengers, vehicles and freight across Lower Newport Bay
between the northerly end of Palm Street on the Balboa Peninsula and the
southerly end of Agate Avenue on Balboa Island.
The term of this franchise shall run concurrent with, and the operation of the ferry
shall comply with all the terms of the attached Lease Agreement, which shall be
dated as of the effective date of this Ordinance granting the franchise, and the
rights under this franchise shall terminate when that Lease Agreement
terminates. The rights granted by this franchise to operate upon City property
shall be contingent upon Grantee's compliance with the Lease Agreement
provisions.
SECTION 3: The Mayor shall sign and the City Clerk shall attest to the passage of
this ordinance. The City Clerk shall cause the same to be published once in the
official newspaper of the City, and it shall be effective thirty (30) days after its
adoption.
SECTION 4: This ordinance was introduced at a regular meeting of the City
Council of the City of Newport Beach, held on the _ day of 2007,
and adopted on the _ day of 2007, by the following vote, to wit:
AYES, COUNCILMEMBERS
NAYS, COUNCILMEMBERS
S
ABSENT COUNCILMEMBERS
P _ O-
ATTEST:
CITY CLERK
Draft, 6 -7 -07
LEASE AGREEMENT
This Lease Agreement ( "Agreement ") is entered into this day of
2007, by and between the City of Newport Beach ( "Lessor "), a municipal
corporation, and the Balboa Island Ferry, Inc., a California corporation, whose address
is 410 South Bay Front, Newport Beach, California 92662 ( "Lessee "). Lessee and
Lessor are each a "Party" and together the "Parties" to this Agreement.
RECITALS
A. Lessor is a municipal corporation duly organized and validly existing under the
laws of the State of California with the power to carry on its business as it is now
being conducted under the statutes of the State of California and the Charter of
City;
B. The State of California became the owner of tidelands on admission to the union
in 1850. Lessor manages those tidelands pursuant to various legislative grants
from the State. The State Lands Commission, which administers tidelands,
generally requires a trustee to negotiate leases on the basis of the current market
value of the parcel. Failure of a trustee to receive consideration approximating
the fair market value of leased tidelands could, under certain circumstances, be
considered a violation of Section 6 of Article XVI of the State Constitution (the
prohibition of gifts of public funds to private entities);
C. Lessor has, since 1938, leased a small portion of these tidelands to Lessee for
the construction and maintenance of slips, docks, ways and other
appurtenances, all to be used in conjunction with the operation of 2 to 5
ferryboats which transport persons, vehicles and freight between terminals
located near Agate Avenue on Balboa Island and Palm Street on Balboa
Peninsula (the "Ferry");
D. The unique nature of Lessee's business operations, as well as Lessee's long
history with the operations of the Ferry, are declared by the Lessor to be so
unique as to allow Lessor to enter into a new lease agreement with Lessee on a
sole- source basis;
E. Lessee and Lessor are currently parties to a lease agreement dated October 25,
1988, which expires on September 30, 2013 ( "1988 Lease "), and Lessee is also
a franchisee pursuant to Ordinance No. 88 -33 ( "1988 Franchise ");
F. Lessee and Lessor now intend to terminate the 1988 Lease and the 1988
Franchise, and enter into this Agreement and a new franchise, which shall
extend the term of the lease agreement to October 31, 2032, require Lessee to
rebuild and repair the ramps, docks and appurtenant improvements of the
Premises, and update certain provisions;
G. The new franchise, approved by the City Council pursuant to Ordinance No.
2007- and entered into concurrently herewith, shall grant Lessee the
right to operate the Ferry across Lower Newport Bay and to charge a toll to
patrons for use of the Ferry (hereinafter the "Franchise ");
H. In consideration for the extension of the lease term and the renewal of the
Franchise, Lessee has agreed to rebuild and repair the steel structures on the
ramps and appurtenant dock and other improvements in the amount of
$200,000,( Capital Improvements);
The operation of the Ferry is consistent with the trust imposed upon these
tidelands which require they be used for commerce, fishing, and navigation;
J. It is not feasible to build a bridge, tunnel, combination thereof, or other normal
highway structure in lieu of the use of the Ferry;
K. The operation of the Ferry is on a route classified as a public road within the
State and has not been designated as a route on the Interstate System;
L. The Ferry terminal facility is publicly owned, and the Ferry and Ferry terminal
facility provides substantial public benefits;
M. The Ferry does not operate in international waters;
N. The City Council has the authority to enter into a lease of tidelands or beachfront
property when, as is the case here, the property was under lease as of the
effective date of the Charter; and
O. This Agreement is consistent with provisions of the Land Use Plan of the Local
Coastal Program, the Circulation Element of the General Plan, and other
documents utilized by Lessor to evaluate the traffic impacts of impacting land
uses and proposed projects.
In consideration of the mutual promises and obligations contained in this Agreement,
the receipt and sufficiency of which are hereby acknowledged, Lessee and Lessor
hereby terminate the 1988 Lease and enter into this Agreement on the following terms
and conditions:
NOW THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Leased Premises
Lessor hereby leases to Lessee the property, and related improvements,
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depicted in Exhibit "A" (the "Premises "). The rights granted herein are subject to
the terms, covenants and conditions hereinafter set forth, and Lessee covenants,
as a material part of the consideration for this Agreement, to keep and perform
each and every term, covenant and condition of this Agreement.
2. Term
The term of the Agreement granted hereunder ( "Term ") shall commence on July
1, 2007 ( "Commencement Date "), and continue for a period of twenty -five (25)
years, to expire on July 31, 2032, unless terminated earlier as set forth herein.
3. Rent Payments
A. Base Rent. Base Rent shall be established at Seventy Thousand and
no1100 Dollars ($70,000.00) per year, and shall be adjusted annually, as
provided below.
Base Rent Adjustment. Upon the anniversary of the Commencement
Date, Base Rent shall be adjusted in proportion to changes in the
Consumer Price Index. Such adjustment shall be made by multiplying the
original Base Rent by a fraction, the numerator of which is the value of the
Consumer Price Index for the calendar month three (3) months preceding
the calendar month for which such adjustment is to be made and the
denominator of which is the value of the Consumer Price Index for the
same calendar month immediately prior to the Commencement Date. For
example, if the adjustment is to occur effective March 1, 2008, the index to
be used for the numerator is the index for the month of December, 2007
and the index to be used for the denominator is the index for the month of
December preceding the Commencement Date. The "Consumer Price
Index" to be used in such calculation is the Consumer Price Index, All
Urban Consumers (All Items), for Los Angeles - Riverside — Orange
County, CA, published by the United States Department of Labor, Bureau
of Labor Statistics (1982 -84 = 100). If both an official index and one or
more unofficial indices are published, the official index shall be used. If
said Consumer Price Index is no longer published at the adjustment date,
it shall be constructed by conversion tables included in such new index.
In no event shall the amount payable under this Agreement be reduced
below the Base Rent in effect immediately preceding such adjustment.
B. Percentage Rent. For the authorized use and occupancy of the Premises,
Lessee shall pay Lessor five percent (5 %) of the annual "Gross Receipts ",
as defined below, as Percentage Rent.
C. Percentage Rent Accounting and Payment. Within forty -five (45) days
after the end of each calendar quarter for the Term, Lessee shall furnish to
Lessor a statement in writing, certified by Lessee and a Certified Public
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Accountant to be correct, showing the total Gross Receipts made in, upon,
or from and /or otherwise attributable to the Premises for Ferry operations
during the preceding calendar quarter, and shall accompany each such
statement with the Percentage Rent payment for that calendar quarter.
D. Definition of Gross Receipts. "Gross Receipts" shall mean: all money,
cash receipts, assets, property or other things of value, including but not
limited to gross charges, tolls, sales, fees and commissions made or
earned by Lessee and /or all the assignees, sub - licensees, licensees, or
permittees of Lessee, collected from Ferry operations,without, except as
expressly provided below, deduction from gross receipts for any overhead
or cost or expense of operations, such as, but without limitation to
salaries, wages, interest, debt amortization, credit, collection costs,
discount from credit card operations, insurance and taxes. Each
installment or credit sale shall be treated as a sale for the full price in the
month during which such sale is made, irrespective of whether or when
Lessee receives payment therefor.
Gross Receipts shall not include, or if included there shall be deducted
(but only to the extent they have been included), the following:
Sales and use taxes, so- called luxury taxes, consumers' excise
taxes, gross receipts taxes, and other similar taxes now or in the
future imposed on the sale of services, but only if such taxes are
added to the selling price and collected from customers;
ii. Cash refunds made to customers in the ordinary course of
business; and
iii. Amounts paid to charge card or credit card issuers.
Gross Receipts shall be reported on the cash method.
Notwithstanding the foregoing, Lessee agrees to allow only that use
authorized in Section 7, and that any unauthorized use shall constitute a
breach of this Agreement and shall, at the option of Lessor, terminate this
Lease. In the event the Premises are used for uses other than that
specifically authorized in Section 7, then in addition to all other remedies
allowed by law or authorized elsewhere in this Agreement, Lessor shall be
entitled to receive from Lessee and Lessee shall be required to pay to
Lessor additional Percentage Rent calculated as One Hundred Percent
(100 %) of the gross receipts accountable to such unauthorized use,
whether for cash or credit, or otherwise, and including the value of all
consideration other than money received for that use. This amount shall
be retroactive to the commencement of such unauthorized use and shall
continue until the unauthorized use is abated. This additional rent
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payment shall be subject to the due date for the next Percentage Rent
payment and the provisions for delinquent payments. The parties agree
and understand that the collection and acceptance by Lessor of this
additional rent payment, shall not, in any way be deemed a waiver nor
estoppel of Lessor's right to require abatement of the unauthorized use or
at Lessor's option to pursue any other remedies available at law or equity.
E. Annual Statements of Gross Receipts and Rent Reconciliation. Within
forty-five (45) days after the end of each calendar year during the Term,
as it may be extended, Lessee shall furnish a written statement to Lessor,
certified by Lessee and a Certified Public Accountant to be correct,
showing the total Gross Receipts made in, upon, or from and/or otherwise
attributable to the Premises during the preceding calendar year (or
fractional year at the beginning of the Term if the Commencement Date is
other than the first day of the year), the Percentage Rent due and the
Percentage Rent paid. If Lessee has paid Lessor more Percentage Rent
than the Base Rent, Lessor shall retain any amount of the Percentage
Rent in excess of the Base Rent. If Lessee has paid Lessor less
Percentage Rent than the Base Rent, Lessee shall include, with its annual
statement, a payment to the Lessor equal to the difference between the
Base Rent and Percentage Rent.
F. Late Charge. A ten percent (10 %) late charge shall be added to any
payment required under this Agreement if not received by Lessor within
thirty (30) days following the due date. In addition, all unpaid fees shall
accrue interest at the rate of one and a half percent (1 % %) per month or
any portion of a month until paid in full.
G. Rent Payments Exclusive of Other Fees. Rent payments shall be in
addition to any other fee or fees required to be paid by Lessee, excepting
any future franchise fees.
H. Payment Procedure. All rent payments and others sums payable
pursuant to this Agreement shall be directed to:
City of Newport Beach
Cashiering Division
3300 Newport Blvd.
PO Box 1768
Newport Beach, CA 92658
or at such other place as Lessor may hereafter designate in writing.
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4. Production of Statement. Records and Audit
Lessee shall keep within the County of Orange (and shall require any permitted
subtenant to keep within the County of Orange) full, complete and proper books,
records and accounts of its daily Gross Receipts, both for cash and on credit.
Lessee agrees to make available for inspection by Lessor at the Premises, a
complete and accurate set of books and records of all sales of goods, wares, and
merchandise and revenue derived from the conduct of business or activity in, at
or from the Premises from which Gross Receipts can be determined. Lessee
shall also make available, upon Lessor's request, all supporting records. Lessee
shall retain and preserve for at least three (3) years all records, books,
bankbooks or duplicate deposit books and other evidence of Gross Receipts.
Lessor shall have the right, upon reasonable notice, during the Term and within
one hundred eighty (180) days after expiration or termination of this Agreement
to inspect and audit Lessee's books and records and to make transcripts to verify
the rent payments due to the Lessor. The audit may be conducted at any
reasonable time during normal business hours. Lessee shall cooperate with
Lessor in making the inspection and conducting the audit. Lessor shall also be
entitled, once during each calendar year, and once within one hundred eighty
(180) days after expiration or termination of this Agreement, to an independent
audit of Lessee's books of account, records, cash receipts, and other pertinent
data to determine Lessee's Gross Receipts. The audit shall be conducted at
Lessor's sole cost and expense by a certified public accountant designated by
Lessor. The audit shall be limited to the determination of Gross Receipts and
shall be conducted during usual business hours in a manner that minimizes any
interference with the conduct of Lessee's regular business operations. If the
audit concludes that there is a deficiency in the payment of any rent payment, the
deficiency shall become due and payable within twenty (20) days and if there is
an overpayment, Lessor shall refund the amount of the overpayment within
twenty (20) days. Lessor shall bear its costs of the audit unless the audit shows
that Lessee understated Gross Receipts by more than five percent (5 %), in which
case Lessee shall pay all Lessee's reasonable costs of the audit. Lessor shall
keep any information gained from such statements, inspections or audits
confidential to the maximum extent permitted by law. Lessor shall not disclose
financial information received in confidence and pursuant to this Agreement
except to carry out the purposes of this Agreement unless disclosure is required
(rather than permitted) by law. However, Lessor may disclose the results of any
audit in connection with any financing arrangements, the sale or transfer of
Lessor's interest in the Premises, pursuant to order of a court or administrative
tribunal, or to collect any outstanding rent payment.
In the event of any audit by Lessor in accordance with this Agreement, Lessee
may contest the results of Lessor's audit by performing a confirming audit within
thirty (30) days of receipt of Lessor's audit results and supporting evidence, using
an independent Certified Public Accountant reasonably acceptable to Lessor. If
Lessee's audit discloses that Lessor's audit was incorrect by more than twenty
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percent (20 %), then Lessor shall pay the cost of Lessee's contesting audit.
The acceptance by Lessor of any money paid to Lessor by Lessee as a rent
payment for the Premises, as shown by any statement furnished by Lessee, shall
not be construed as an admission of the accuracy of said statement, or of the
sufficiency of the amount of the rent payment.
5. Services for Citv
City employees in City vehicles in the course of duties related to City business
shall be permitted to use the Ferry without charge to City.
6. Utilities. Taxes and Assessments
Lessee shall pay, and discharge prior to delinquency, any and all charges for
water, gas, electricity, telephone, garbage disposal and other public services
furnished to the Premises, or occupants thereof.
Lessee shall pay, prior to delinquency, any and all possessory interest taxes,
property taxes, all taxes assessed against and levied upon fixtures, furnishings,
equipment, or improvements, such as piers, floats and ways, and all other
personal property of Lessee located on the Premises, real property taxes, and
fees and assessments which may at any time be imposed or levied by any public
entity and attributable to Lessee's use of the Premises. Lessor hereby gives
notice to Lessee, pursuant to Revenue and Tax Code Section 107.6 that this
Agreement may create a possessory interest which is the subject of property
taxes levied on such interest, the payment of which taxes shall be the sole
obligation of Lessee.
Lessee shall hold Lessor harmless from any and all loss, damage, or liability that
may result from the failure of Lessee to comply with the provisions of this
Section.
7. Use of the Premises
Lessee shall use the Premises solely for the continued operation of the Ferry
between Balboa Island and the Balboa Peninsula, as authorized in the
Franchise.. Lessee shall construct, maintain and operate piers, docks, landings,
slips, ramps gangways floats, piles and other facilities necessary for the
operation of the Ferry.
Lessee shall be entitled to tie up a ferryboat on each side of the ferry slip on
Balboa Island for storage and maintenance purposes. Sufficient clearance from
other docks shall be maintained to allow ferryboats to be safely maneuvered into
position to tie up on the sides of the slip.
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In addition, Lessee shall remove the ways as shown in Exhibit "B" within a
reasonable period of time.
Lessee shall not install decorations, or install any signs, lettering or advertising of
any type, or any other type of visual displays, on or about the Premises without
the prior written consent of Lessor, other than those existing at the
commencement of this Agreement.
Lessor shall maintain the existing restrooms at the Agate Street terminal for the
use of Ferry patrons and members of the general public. Lessee is granted
rights to perform minor maintenance of restrooms and /or restocking of restroom
supplies at Lessee's expense when Lessee believes that good customer service
demands rapid maintenance or restocking. Lessee is encouraged to contact
Lessor's General Services department whenever restroom is not in good order.
8. Permits and Licenses
Lessee, at its sole expense, shall obtain and maintain during the Term of this
Agreement, all appropriate permits, licenses and certificates that may be required
by any governmental agency in connection with the operation of its business.
9. Acceptance of Condition of Premises
Lessee shall accept the Premises in "as is" condition, with no warranty, express
or implied from the Lessor as to any latent, patent, foreseeable and
unforeseeable condition of the Premises.
10. Alterations or Construction of Improvements
Subject to Lessor's written approval as set forth below in this Section, and as
material consideration for the extension of the term of ferry operations under a
lease and franchise, Lessee shall obtain all required permits and commence to
rebuild and repair the steel structures which connect the floating docks to the
bulkheads such that the Capital Improvements are completed within five (5)
years of the commencement of this Agreement.
Lessee shall not alter existing improvements, nor construct new improvements,
on the Premises, unless:
A. Lessor has reviewed and approved all plans and specifications for the
work to be performed and issued all appropriate permits that are
preconditions to construction, including, but not limited to, any permits
required by the City's Public Works department;
B. Lessee has obtained all other permits required by law to be obtained prior
to construction, including, without limitation, permits or approvals required
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of the Coastal Commission, State Lands Commission and/or Army Corps
of Engineers; and
C. The proposed alteration and /or construction is consistent with the
limitations on use of the property imposed by this Agreement, as well as
any franchise, permit, license or other approval related to the use of the
Premises or operation of the Ferry.
Prior to the commencement of any work pursuant to this Section, Lessee shall
obtain insurance to be approved as to form and sufficiency by Lessor's Risk
Manager, and add Lessor to such insurance as an additional insured.
11. Reconstruction
Notwithstanding the provisions of Section 10, Lessee shall be entitled to
reconstruct improvements on the Premises that are damaged by fire, storm,
wind, wave or similar perils. Lessee shall commence reconstruction within sixty
(60) days from the date of the damage, and diligently pursue same to completion.
Lessee shall not be entitled to any abatement in rent or other form of
compensation from Lessor for loss of use of the Premises or improvements in the
event of damage or destruction of improvements unless the damage is caused
by the wrongful conduct of Lessor or its employees, officers or agents.
12. Maintenance and Repair
Lessee shall be responsible for maintenance of the Premises, including piers,
docks, landings, slips, ramps, gangways, floats and piles. Lessee shall also be
responsible for dredging within the Premises on an as- needed basis, or as
directed by Lessor. Lessee shall not be responsible for maintaining ways which
are outside the scope of the Premises. Unless otherwise required by federal,
state or local laws, Lessee shall not be required to obtain permits for
maintenance work.
13. Liens
Lessee shall not permit to be enforced against the Premises, any portion thereof
or any structure or improvement thereon, any mechanics, materialmens,
contractors or other liens arising from, or any claims for damages growing out of,
any work or repair, construction or alteration of improvements on the Premises.
Lessee shall give Lessor at least thirty (30) days prior written notice before
commencing construction of any kind on the Premises so that Lessor may post
appropriate notice of non - responsibility.
14. Lessor Paying Claim
Should Lessee fail to pay and discharge, when due and payable, any tax or
0
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assessment, or any premium or other charge in connection with any insurance
policy which Lessee is obligated to provide, or any lien or claim for labor or
material employed or used in the repair, alteration, construction, or maintenance
of improvements on the Premises, then Lessor may, after ten (10) days written
notice to Lessee and at its option, pay any such tax, assessment, lien, claim,
premium or charge, or settle or discharge any action, or satisfy and judgment
thereon. All costs and expenses incurred or paid by Lessor pursuant to this
paragraph, together with interest at the rate of ten percent (10 %) per annum from
the date of payment, shall be deemed to be considered as additional rent and
shall be paid by Lessee within ten (10) days after written notice that such
payments are due.
15. Standard of Care
Lessee agrees to perform all services required hereunder in a manner
commensurate with community professional standards.
16. Inspection
Lessor shall be entitled to inspect the Premises for compliance with the terms of
this Agreement, and for compliance with all applicable Federal, State and local
(including those of the City) government laws, statutes, ordinances, rules and
regulations. Lessor may exercise these inspection rights at any time without
notice.
17. Assignment/Transfers
Lessee shall not transfer or assign this Agreement, or any right or interest
created hereunder, or sublet the Premises or any portion thereof, unless and until
Lessee has obtained the prior written consent of Lessor. Lessor shall not
unreasonably withhold such consent, but Lessor reserves the right to condition
approval of any assignment, transfer or subletting, upon Lessor's determination
that the assignee, transferee or sublessee is as financially responsible as
Lessee, has the experience and ability to operate the Ferry as well as Lessee,
will agree to the terms and conditions of the franchise and other documents
pertaining to the operation of the Ferry, and will provide the same level of public
service as has been provided by Lessee. Should Lessee attempt to transfer,
assign or sublet Lessee's interest in this Agreement or the Premises, except as
provided in this Section, or should any of Lessee's rights under this Agreement
be sold or otherwise transferred, or should Lessee be adjudged insolvent or
bankrupt, then Lessor may, at its option, terminate this Agreement by giving thirty
(30) days written notice. Should Lessor consent to any transfer, assignment, or
subletting attempted without prior approval, that consent shall not constitute a
waiver of any of the restrictions in this Section and the same shall apply to each
subsequent attempt to transfer, assign or sublet this Agreement or the Premises.
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I
18. Bankruptcy
Lessee agrees that in the event all, or substantially all, of Lessee's assets are
placed in the hands of a receiver or trustee and remain so for a period of thirty
(30) days, or should Lessee make an assignment for the benefit of creditors or
be adjudicated bankrupt, or should Lessee institute any proceedings under the
Bankruptcy Act or similar law wherein Lessee seeks to be adjudicated bankrupt
or to be discharged of its debts, or seeks to effect a plan of liquidation or
reorganization, or should any involuntary proceedings be filed against Lessee
and not dismissed or stayed within sixty (60) days, then this Agreement or any
interest in and to the Premises shall not become an asset in any such proceeding
and, to the extent permitted by law, Lessor may declare this Agreement
terminated and take possession of the Premises and improvements.
19. Termination
Lessor may terminate this Agreement immediately, or take any action authorized
by law, in the event of a material breach and default as defined in Section 20.
Either Lessor or Lessee may terminate this Agreement upon thirty (30) days
notice to the other party if operation of the Ferry is rendered impossible or not
feasible due to a natural disaster, requirements imposed by a regulatory agency,
global warming or other force majeure event.
20. Defaults
The occurrence of any one or more of the following events shall constitute a
material default and breach of this Agreement by Lessee:
A. Vacation or abandonment of the Premises by Lessee;
B. The failure of Lessee to make any payment required by this Agreement
when such failure continues for a period of ten (10) days after written
notice that payment is due; or
C. The failure of Lessee to observe or perform any of the covenants,
conditions, or provisions of this Agreement, except for the default specified
in Section 20(B) above, where such failure continues for a period of twenty
(20) days after written notice of the noncompliance, provided, however,
that if the nature of Lessee's default is such that more than twenty (20)
days are reasonably required for its cure, then Lessee shall not be in
default if Lessee commenced the cure within twenty (20) days after written
notice and thereafter diligently pursues cure to completion.
21. Removal
Upon expiration of the Term of this Agreement, or earlier termination as provided
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in Section 19, Lessee shall surrender possession of the Premises to Lessor in
good condition and repair. Before surrendering possession, Lessee may, without
expense to Lessor, remove from the Premises all signs, furnishings and personal
property located on the Premises. If Lessee fails to remove any item of personal
property, Lessor may deem such items to be abandoned and the sole property of
Lessor, or remove and dispose of the items in which event the expense of
removal and disposition shall be borne by Lessee and become immediately due
and payable.
22. Indemnification
To the fullest extent permitted by law, Lessee hereby agrees to defend,
indemnify, and hold Lessor harmless from and against any and all liability, claims
damages, suits, penalties, actions, demands, judgments, losses, or expenses of
any kind or nature, including damage to any property and injury (including death)
to any person (collectively, "Claims "), arising out of or resulting in any way, in
whole or in part, from Lessee's use, maintenance, repair or occupation of the
Premises, or any acts or omissions, intentional or negligent, of Lessee or its
officers, agents or employees in the performance of their duties and obligations
under this Agreement, except to the extent such claims are caused by the sole
negligence or willful misconduct of Lessor, its officers, agents and employees.
23. Insurance
Without limiting Lessee's indemnification of Lessor, Lessee shall obtain, provide
and maintain at its own expense during the Term of this Agreement, a policy or
policies of liability insurance of the type and amounts described below and in a
form satisfactory to Lessor.
A. Certificates of Insurance. Lessee shall provide certificates of insurance
with original endorsements to Lessor as evidence of the insurance
coverage required herein. Insurance certificates must be approved by
Lessor's Risk Manager prior to commencement of performance or
issuance of any permit. Current certification of insurance shall be kept on
file with Lessor at all times during the Term of this Agreement.
B. Signature. A person authorized by the insurer to bind coverage on its
behalf shall sign certification of all required policies.
C. Acceptable Insurers. All insurance policies shall be issued by an
insurance company currently authorized by the Insurance Commissioner
to transact business of insurance in the State of California, with an
assigned policyholders' Rating of A (or higher) and Financial Size
Category Class VII (or larger) in accordance with the latest edition of
Best's Key Rating Guide, unless otherwise approved by Lessor's Risk
Manager.
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D. Coverage Requirements.
Workers' Compensation Coverage. Lessee shall maintain Workers'
Compensation Insurance and Employer's Liability Insurance for its
employees in accordance with the laws of the State of California.
In addition, Lessee shall require each subcontractor to similarly
maintain Workers' Compensation Insurance and Employer's
Liability Insurance in accordance with the laws of the State of
California for all of the subcontractor's employees. Any notice of
cancellation or non - renewal of all Workers' Compensation policies
must be received by Lessor at least thirty (30) calendar days (10
calendar days written notice of non - payment of premium) prior to
such change. The insurer shall agree to waive all rights of
subrogation against Lessor, its officers, agents, employees and
volunteers for losses arising from work performed by Lessee for
Lessor.
Liability Coverage. Lessee shall maintain commercial general
liability insurance and Protection and Indemnity insurance each in
an amount not less than Two Million Dollars ($2,000,000.00) per
occurrence for bodily injury, personal injury, and property damage.
If commercial general liability insurance or other form with a general
aggregate limit is used, either the general aggregate limit shall
apply separately to the activities to be performed under this
Agreement, or the general aggregate limit shall be at least twice the
required occurrence limit.
iii. Automobile Liability Coverage. Lessee shall maintain automobile
insurance covering bodily injury and property damage for all
activities of the Lessee arising out of or in connection with the
services to be performed under this Agreement, including coverage
for any owned, hired, non -owned or rented vehicles, in an amount
not less than Two Million Dollars and 00/100 Dollars
($2,000,000.00) combined single limit for each occurrence.
iv. Fire and Extended Coverage. Lessee shall maintain fire and
extended coverage insurance, together with insurance against
vandalism, theft and malicious mischief, on the improvements and
fixtures, alterations, trade fixtures, signs, equipment, personal
property and inventory on or upon the Premises from loss or
damage to the extent of their full replacement value.
E. Endorsements. Each general liability insurance policy shall be endorsed
with the following specific language:
13
i. Lessor, its elected or appointed officers, officials, employees,
agents and volunteers are to be covered as additional insureds with
respect to liability arising out of work performed by or on behalf of
Lessee.
ii. This policy shall be considered primary insurance as respects to
Lessor, its elected or appointed officers, officials, employees,
agents and volunteers as respects to all claims, losses, or liability
arising directly or indirectly from Lessee's operations. Any
insurance maintained by Lessor, including any self- insured
retention Lessor may have, shall be considered excess insurance
only and not contributory with the insurance provided hereunder.
iii. This insurance shall act for each insured and additional insured as
though a separate policy had been written for each, except with
respect to the limits of liability of the insuring company.
iv. The insurer waives all rights of subrogation against Lessor, its
elected or appointed officers, officials, employees, agents and
volunteers.
V. Any failure to comply with reporting provisions of the policies shall
not affect coverage provided to Lessor, its elected or appointed
officers, officials, employees, agents or volunteers.
vi. The insurance provided by this policy shall not be suspended,
voided, canceled, or reduced in coverage or in limits, by either party
except after thirty (30) calendar days (10 calendar days written
notice of non - payment of premium) written notice has been
received by Lessor.
F. Timely Notice of Claims. Lessee shall give Lessor prompt and timely
notice of any claim made or suit instituted arising out of or resulting from
Lessee's performance under this Agreement.
G. Additional Requirements.
i. All insurance shall be written on an occurrence -made form. A
claims -made form of insurance is prohibited under this Agreement;
and
ii. In the event Lessor's Risk Manager determines that (i) the Lessee's
activities in the Premises creates an increased or decreased risk of
loss to the Lessor, (ii) greater insurance coverage is required due to
the passage of time, or (iii) changes in the industry require different
14
coverages be obtained, Lessee agrees that the minimum limits of
any insurance policy required to be obtained by Lessee may be
changed accordingly upon receipt of written notice from the Risk
Manager,; provided that Lessee shall have the right to appeal a
determination of increased coverage by the Risk Manager to the
City Council within ten (10) days of receipt of notice from the Risk
Manager. Not more frequently than once every year, Lessee may
increase the insurance coverage as reasonably required by Lessor
so that at all times, the amount of liability and Premises damage
insurance coverage maintained by Lessee reasonably and fully
protects Lessor.
24. Hazardous Substances
A. From the date of execution of this Agreement and throughout the Term,
Lessee shall not use, store, manufacture or maintain any Hazardous
Substances on the Premises, except in the ordinary course of operating
and maintaining its ferry boats, docks and landings in accordance with
applicable law and regulations.
B. For purposes of this Agreement, the term "Hazardous Substance" means:
(i) any substance, product, waste or other material of any nature
whatsoever which is or becomes listed, regulated, or addressed pursuant
to the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq. ( "CERCLA "); the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; the
Resource Conversation and Recovery Act, 42 U.S.C. Section 6901 et seq.
( "RCRA "); the Toxic Substances Control Act, 15 U.S.C. Section 2601 et
seq.; the Clean Water Act, 33 U.S.C. Section 1251 et seq.; the California
Hazardous Waste Control Act, Health and Safety Code Section 25100 et
seq.; the California Hazardous Substance Account Act, Health and Safety
Code Sections 25330 et seq.; the California Safe Drinking Water and
Toxic Enforcement Act, Health and Safety Code Sections 25249.5 et seq.;
California Health and Safety Code Sections 25280 et seq. (Underground
Storage of Hazardous Substances); the California Hazardous Waste
Management Act, Health and Safety Code Sections 25170.1 et seq.;
California Health and Safety Code Sections 25501 et seq. (Hazardous
Materials Response Plans and Inventory); or the Porter - Cologne Water
Quality Control Act, Water Code Sections 13000 et seq., all as they, from
time -to -time may be amended, (the above -cited statutes are here
collectively referred to as "the Hazardous Substances Laws ") or any other
Federal, State or local statute, law, ordinance, resolution, code, rule,
regulation, order or decree regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous
waste, substance or material, as now or at any time hereafter in effect; (ii)
any substance, product, waste or other material of any nature whatsoever
15
as
which may give rise to liability under any of the above statutes or under
any statutory or common law theory, including but not limited to
negligence, trespass, intentional tort, nuisance, waste or strict liability or
under any reported decisions of a state or federal court; (iii) petroleum or
crude oil; and (iv) asbestos.
C. Notwithstanding any contrary provision of this Agreement, and in addition
to the indemnification duties of Lessee set forth in Section 22 in this
Agreement, Lessee agrees to indemnify, defend with counsel reasonably
acceptable to Lessor, protect, and hold harmless Lessor, its officials,
officers, employees, agents, and assigns from and against any and all
losses, fines, penalties, claims, damages, judgments, or liabilities,
including, but not limited to, any repair, cleanup, detoxification, or
preparation and implementation of any remedial, response, closure or
other plan of any kind or nature which the Lessor, its officials, officers,
employees, agents, or assigns may sustain or incur or which may be
imposed upon them in connection with the use of the Premises provided
under this Agreement, arising from or attributable to the storage or deposit
of Hazardous Substances. This Section is intended to operate as an
agreement pursuant to Section 107(e) of CERCLA, 42 USC Section
9607(e), and California Health and Safety Code Section 25364, to insure,
protect, hold harmless, and indemnify Lessor for any claim pursuant to the
Hazardous Substance Laws or the common law.
D. Lessor agrees that Lessor will not, and will not authorize any third party to
use, generate, store, or dispose of any Hazardous Substances on, under,
about or within the Premises in violation of any law or regulation. Lessor
and Lessee each agree to defend, indemnify and hold harmless the other
and the other's partners, affiliates, agents and employees against any and
all losses, liabilities, claims and /or costs (including reasonable attorneys'
fees and costs) arising from any breach of any representation, warranty or
agreement contained in this Section. This Section shall survive the
termination of this Agreement. Upon expiration or earlier termination of
this Agreement, Lessee shall surrender and vacate the Premises and
deliver possession thereof to Lessor on or before the termination date free
of any Hazardous Substances released into the environment at, on or
under the Premises that are directly attributable to Lessee.
25. Compliance with Laws
Lessee, at its sole cost, shall observe, perform, and comply with all laws,
statutes, ordinances, rules, and regulations promulgated by any governmental
agency, including all applicable zoning ordinances, building codes and
environmental laws. Lessee shall not occupy or use the Premises, or permit any
portion of the Premises to be occupied or used for any use or purpose that is
unlawful in part or in whole, or deemed by Lessor to be disreputable in any
16
ate.
manner or extra hazardous in any way.
26. Not Agent of Lessor
Neither anything in this Agreement nor any acts of Lessee shall authorize Lessee
or any of its employees, agents or contractors to act as agent, contractor, joint
venturer or employee of Lessor for any purpose.
27. No Third Party - Beneficiaries
Lessor and Lessee do not intend, by any provision of this Agreement, to create in
any third party, any benefit or right owed by one party, under the terms and
conditions of this Agreement, to the other party.
28. Notices
All notices and other communications required or permitted to be given under this
Agreement, including any notice of change of address, shall be in writing and
given by personal delivery, or deposited with the United States Postal Service,
postage prepaid, addressed to the parties intended to be notified. Notice shall be
deemed given as of the date of personal delivery, or if mailed, upon the date of
deposit with the United States Postal Service. Notice shall be given as follows:
To Lessor: Administrative Services Department
Revenue Division
Attention: Income Contract Administrator
City of Newport Beach
PO Box 1768
3300 Newport Boulevard
Newport Beach, CA, 92658
949 - 644 -3153
To Lessee: Mr, Seymour Beek
Balboa Island Ferry, Inc.
410 South Bay Front
Newport Beach, CA 92662
949 - 673 -1070
29. Entire Agreement/Amendments
A. The terms and conditions of this Agreement, all exhibits attached hereto,
and all documents expressly incorporated by reference, represent the
entire Agreement of the parties with respect to the subject matter of this
Agreement.
B. This written Agreement shall supersede any and all prior agreements, oral
17
a3
or written, regarding the subject matter between Lessee and Lessor.
C. No other agreement, promise or statement, written or oral, relating to the
subject matter of this Agreement, shall be valid or binding, except by way
of a written amendment to this Agreement.
D. The terms and conditions of this Agreement shall not be altered or
modified except by a written amendment to this Agreement signed by
Lessee and Lessor.
E. If any conflicts arise between the terms and conditions of this Agreement,
and the terms and conditions of the attached exhibits or the documents
expressly incorporated by reference, the terms and conditions of this
Agreement shall control.
F. Any obligation of the parties relating to monies owed, as well as those
provisions relating to limitations on liability and actions, shall survive
termination or expiration of this Agreement.
30. Waivers
The waiver by either party of any breach or violation of any term, covenant or
condition of this Agreement, or of any ordinance, law or regulation, shall not be
deemed to be a waiver of any other term, covenant, condition, ordinance, law or
regulation, or of any subsequent breach or violation of the same or other term,
covenant, condition, ordinance, law or regulation. The subsequent acceptance by
either party of any fee, performance, or other consideration which may become
due or owing under this Agreement, shall not be deemed to be a waiver of any
preceding breach or violation by the other party of any term, condition, covenant
of this Agreement or any applicable law, ordinance or regulation.
31. Costs and Attorneys' Fees
The prevailing party in any action brought to enforce the terms and conditions of
this Agreement, or arising out of the performance of this Agreement, shall not be
entitled to recover its attorneys' fees.
32. City Business License
Lessee shall obtain and maintain during the duration of this Agreement, a City
business license as required by the Newport Beach Municipal Code.
33. Applicable Law
This Agreement shall be construed in accordance with the laws of the State of
California in effect at the time of the execution of this Agreement. Any action
18
brought relating to this Agreement shall be adjudicated in a court of competent
jurisdiction in the County of Orange.
34. Interpretation
The terms of this Agreement shall be construed in accordance with the meaning
of the language used and shall not be construed for or against either party by
reason of the authorship of the Agreement or any other rule of construction which
might otherwise apply.
35. Time is of the Essence
Time is of the essence for this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in
duplicate on the date and year first written herein.
City of Newport Beach
A Municipal Corporation
Steve Rosansky, Mayor
ATTEST:
City Clerk
APPROVED AS TO FORM:
Aaron C. Harp,
Assistant City Attorney
19
Balboa Island Ferry,
a California corporation
By:
Name:
By:
Name:
2 S
OU
NNCI AGENDA
N0.
-��- 07
• CITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. 3
June 12, 2007
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: City Manager's Office
Dave Kiff, Assistant City Manager
DKifftaa)_city.newport- beach.ca.us or 949 -644 -3002
SUBJECT: Ordinance No. 2007 -_: Franchise with Balboa Island Ferry; Lease
Agreement with Balboa Island Ferry
ISSUE:
Should the City adopt an Ordinance entering into a franchise with the Balboa Island
Ferry (BIF). and enter. into a new Lease Agreement with BIF to allow BIF to undertake
repairs by extending BIF's lease term ten years and adjusting the rent?
• RECOMMENDATIONS:
1. Introduce Ordinance No. 2007- _ granting a Franchise to the Balboa Island
Ferry and pass to 2n4 reading; and
2. Authorize the Mayor to execute a Lease Agreement with the Balboa Island Ferry.
The effective date of the Lease Agreement shall be the effective date of
Ordinance No 2007-
DISCUSSION:
Background:
The State of California became the owner of the tidelands in the City of Newport Beach
upon the State's admission to the union in 1850. The City manages those tidelands
pursuant to various legislative grants from the State.
The Balboa Island Ferry (BIF), since 1938, has leased a small portion of these tidelands
from the City, for the construction and maintenance of slips, docks, ways and other
appurtenances, all used in conjunction with the operation of a ferry which transports
persons and vehicles between terminals located near Agate Avenue on Balboa Island
and Palm Avenue on Balboa Peninsula,
• Current Lease. The current lease agreement (entered into October 25, 1988) expires
Balboa Island Ferry
June 92, 2007
Page 2
on September 30, 2013. BIF is also a franchisee pursuant to Ordinance No. 88 -33, in
part because the City Charter (Article XIII, §1300) requires that any provision of
transportation services requires a franchise. Further, §30900 of the California Streets
and Highways Code grants cities the right to issue franchises to toll ferries. Within the
Lease Agreement and the Franchise, BIF pays the City 6% of gross receipts (3% in the
Lease and 3% in the Franchise). There is no fixed minimum rent in the current Lease
Agreement (nor in the Franchise).
Here are the last few years' payments from BIF to the City, according to the Preliminary
FY 2007 -08 Budget Detail (page 12):
2003 -04 Actual $ 84,666
2004 -05 Actual $ 66,945
2005 -06 Actual $ 67,620
2006 -07 Estimated $ 73,000
200708 Proposed $ 71,534
In 2005, BIF determined that the ramps used by its ferries needed to be replaced .or'
rebuilt. In order to properly amortize its construction costs for this repair, BIF requested
a longer lease term with the City. Per Council Policy F -7 (income Properties) the City
hired an appraiser to look at the BIF operations — we hired Jim Netzer of Netzer &
Associates. Netzer determined that the fair market rent for the,-Balboa Island Ferry was
six percent (6 %) of gross receipts (date of value is September 30, 2006). .
Proposed Lease and Franchise. After some negotiation, City staff and BIF agreed to
the terms and conditions of the attached Lease Agreement and franchise. The Lease
would allow BIF use of the City property across Lower Newport Bay between the
northerly end of Palm Street on the Balboa Peninsula and the southerly end of Agate
Avenue on Balboa Island, in exchange for BIF's payment of the greater of 5% of its
gross receipts or $70,000 1year. (as adjusted annually by the Consumer Price Index).
We believe it to be a fair trade -off with BIF to lower percentage rent from the appraiser's
value by 1% to gain a $70,000 base rent with a CPI adjustment, given the recent
revenue history of BIF.
The proposed ordinance for the franchise removes references to rent (consolidating all
rent information to the Lease) but continues to authorize operation of the BIF pursuant
to the City Charter and State law, and confers to BIF the right to operate on the same
property as the Lease, contingent upon BIF's compliance with the Lease provisions:
The new Lease also extends the term to 2032 and requires BIF to repair its ramps
within a reasonable period of time.
0)
1
•
Balboa Island Ferry
June 1$ 2007
Page 3
• Given the BIF's history and relationship with the City, we recommend that the City
Council approve the ordinance authorizing the franchise and authorize the Mayor to
execute the attached Lease agreement.
Submitted by:
(J,,V---,
Dave A!, , Assistant City Manager
Attachments: Ordinance No. 2007 - Granting a Transportation Franchise to the Balboa Island Ferry
Lease Agreement City - Balboa Island Ferry
•
ORDINANCE NO. 2007 -_
i
AN ORDINANCE OF THE CITY COUNCIL OF THE
CITY OF NEWPORT BEACH GRANTING A
FRANCHISE TO THE BALBOA ISLAND FERRY,
INC.
NOW THEREFORE, the City Council of the City of Newport Beach, California,
HEREBY ORDAINS as follows:
SECTIONA: The City Council finds:
A. The. Balboa Island Ferry, Inc., a California corporation, ("Grantee ") has
requested an extension of its current franchise agreement to continue
operating a toll ferry across Lower Newport Bay between Palm Street on
the Balboa Peninsula and Agate Avenue on Balboa Island;
B. The, Balboa Island Ferry has operated continuously at this location for over
seventy. (70) years, and operated under the last eighteen (18) years or so
under a franchise last granted by the City Council in September, 1988
{ "1988. Franchise ");
C. The City Council has authority, pursuant to the provisions of Article XIII of •
the City Charter of the City of Newport Beach and Section 30900 of the
Streets & Highway Code, to grant a franchise to any person authorizing
operation of a toll ferry;
D. The ferry would operate wholly within the boundaries of the City of
Newport Beach ("City "). The route of the ferry does not constitute a part of
an extension of a state highway, and no part of the ferry route is within ten
(10) miles of a toll bridge in operation, or under construction, over any
body of water across which the ferry is to operate. It is not feasible to build
a bridge, tunnel, combination thereof, or other normal highway structure in
lieu of the use of the ferry;
E. The operation of the ferry is on a route classified as a public road within
the State and has not been designated as a route on the Interstate
System;
F. The proposed franchise is consistent with the various elements of the
General Plan of the City, the Land Use Plan of the Local Coastal Program,
and other ordinances, policies, and regulations adopted by the City;
G. The franchise authorizes a level of public service essentially identical to • '
that offered by Grantee during the preceding franchise term and, as such,
• does not constitute "development" as that term is defined in the Coastal
Act;
H. The City now intends to terminate the 1988 Franchise and grant this
franchise, which shall extend the term of the franchise; and
I. The City Council has fully complied with the provisions of the Charter of
the City of Newport Beach regarding the grant of franchises.
IT IS HEREBY ORDAINED that pursuant to the provisions of Article XIII of the
Charter of the City of Newport Beach and Section 30900 of the Streets &
Highways Code of the State of California, the City Council hereby terminates the
1988 Franchise and declares its intention to grant another franchise for the
operation of a toll ferry to the Grantee under the following terms and conditions:
SECTION 2: Grant of Franchise.
The City Council grants a franchise to the Grantee to operate a toll ferry for the
transportation of passengers, vehicles and freight across Lower Newport Bay
between the northerly end of Palm Street on the Balboa Peninsula and the
southerly end of Agate Avenue on Balboa Island.
• The term of this franchise shall,run concurrent with, and the operation of:the ferry
shall comply with all the terms of the attached Lease Agreement, which shall be
dated as of the effective date of this Ordinance granting the franchise, and the
rights under this franchise shall terminate when that Lease Agreement
terminates. The rights granted by this franchise to operate upon City property
shall be contingent upon Grantee's compliance with the Lease Agreement
provisions.
SECTION 3: The Mayor shall sign and the City Clerk shall attest to the passage of
this ordinance. The City Clerk shall cause the same to be published once in the
official newspaper of the City, and it shall be effective thirty (30) days after its
adoption.
SECTION 4: This ordinance was introduced at a regular meeting of the City
Council of the City of Newport Beach, held on the _ day of 2007,
And adopted on the _ day of 2007, by the following vote, to wit:
AYES, COUNCILMEMBERS
NAYS, COUNCILMEMBERS
•
ATTEST:
CITY CLERK
ABSENT COUNCILMEMBERS •
11 TIMM
•
• own, 6-7-07
LEASE AGREEMENT
This Lease Agreement ( "Agreement ") is entered into this day of
2007, by and between the City of Newport Beach ( "Lessor"), a municipal
corporation, and the Balboa Island Ferry, Inc., a California corporation, whose address
is 410 South Bay Front, Newport Beach, California 92662 ( "Lessee "). Lessee and
Lessor are each a "Party" and together the "Parties" to this Agreement.
RECITALS
A. Lessor is a municipal corporation duly organized and validly existing under the
laws of the State of California with the power to carry on its business as it is now
being conducted under the statutes of the State of California and the Charter of
City;
B. The State of California became the owner of tidelands on admission to the union
in 1850. Lessor manages'those tidelands pursuant to various legislative grants
from the State. The State Lands Commission, which administers tidelands,
generally requires a trustee to negotiate leases on the basis of the current market
value of the parcel. Failure of a trustee to receive consideration approximating
• the fair market value of leased tidelands could, under certain circumstances, be
considered a violation of Section 6 of Article XVI of the State Constitution (the
prohibition of gifts of public funds to private entities);
C. Lessor has, since 1938, leased a small portion of these tidelands to Lessee for
the construction and maintenance of slips, docks, ways and other
appurtenances, all to be used in conjunction with the operation of 2 to 5
ferryboats which transport persons, vehicles and freight between terminals
located near Agate Avenue on Balboa Island and Palm Street on Balboa
Peninsula (the "Ferry");
D. The unique nature of Lessee's business operations, as well as Lessee's long
history with the operations of the Ferry, are declared by the Lessor to be so
unique as to allow Lessor to enter into a new lease agreement with Lessee on a
sole -source basis;
E. Lessee and Lessor are currently parties to a lease agreement dated October 25,
1988, which expires on September 30, 2013 ( "1988 Lease "), and Lessee is also
a franchisee pursuant to Ordinance No. 88 -33 ( "1988 Franchise ");
F. Lessee and Lessor now intend to terminate the 1988 Lease and the 1988
Franchise, and enter into this Agreement and a. new franchise, which shall
• extend the term of the lease agreement to October 31, 2032, require Lessee to
rebuild and repair the ramps, docks and appurtenant improvements of the
Premises, and update certain provisions;
G. The new franchise, approved by the City Council pursuant to Ordinance No.
2007- and entered into concurrently herewith, shall grant Lessee the
right to operate the Ferry across Lower Newport Bay and to charge a toll to
patrons for use of the Ferry (hereinafter the "Franchise ");
H. In consideration for the extension of the lease term and the renewal of the
Franchise, Lessee has agreed to rebuild and repair the steel structures on the
ramps and appurtenant dock and other improvements in the amount of
$200,000,( Capital Improvements);
The operation of the Ferry is consistent with the trust imposed upon these
tidelands which require they be used for commerce, fishing, and navigation;
J. It is not feasible to build a bridge, tunnel, combination thereof, or other normal
highway structure in lieu of the use of the Ferry;
K. The operation of the Ferry is on a route classified as a public road within the
State and has not been designated as a route on the Interstate System;
L. The Ferry terminal facility is publicly owned, and the Ferry and Ferry terminal
facility provides substantial public benefits;
M. The Ferry does not operate in international waters;
N. The City Council has the authority to enter into a lease of tidelands or beachfront
property when, as is the case here, the property was under lease as of the
effective date of the Charter; and
O. This Agreement is consistent with provisions of the Land Use Plan of the Local
Coastal Program, the Circulation Element of the General Plan, and other
documents utilized by Lessor to evaluate the traffic impacts of impacting land
uses and proposed projects.
In consideration of the mutual promises and obligations contained in this Agreement,
the receipt and sufficiency of which are hereby acknowledged, Lessee and Lessor
hereby terminate the 1988 Lease and enter into this Agreement on the following terms
and conditions:
NOW THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Leased Premises
Lessor hereby leases to Lessee the property, and related improvements,
•
e
depicted in Exhibit "A" (the "Premises "). The rights granted herein are subject to
• the terms, covenants and conditions hereinafter set forth, and Lessee covenants,
as a material part of the consideration for this Agreement, to keep and perform
each and every term, covenant and condition of this Agreement.
2. Term
The term of the Agreement granted hereunder ( "Term ") shall commence on July
1, 2007 ( "Commencement Date "), and continue for a period of twenty -five (25)
years, to expire on July 31, 2032, unless terminated earlier as set forth herein.
3. Rent Payments
A. Base Rent. Base Rent shall be established at Seventy Thousand and
no /100 Dollars ($70,000.00) per year, and shall be adjusted annually, as
provided below.
Base Rent Adjustment. Upon the anniversary of the Commencement
Date, Base Rent shall be adjusted in proportion to changes in the
Consumer Price Index. Such adjustment shall be made by multiplying the
original Base Rent by a fraction, the numerator of which is the value of the
Consumer Price Index for the calendar month three (3) months preceding
the calendar month for which such adjustment is to be made and the
• denominator of which is the value of the Consumer Price Index for the
same calendar month immediately prior to the Commencement Date. For
example, if the adjustment is to occur effective March 1, 2008, the index to
be used for the numerator is the index for the month of December, 2007
and the index to be used for the denominator is the index for the month of
December preceding the Commencement Date. The "Consumer Price
Index" to be used in such calculation is the Consumer Price Index, All
Urban Consumers (All Items), for Los Angeles - Riverside — Orange
County, CA, published by the United States Department of Labor, Bureau
of Labor Statistics (1982 -84 = 100). If both an official index and one or
more unofficial indices are published, the official index shall be used. If
said Consumer Price Index is no longer published at the adjustment date,
it shall be constructed by conversion tables included in such new index.
In no event shall the amount payable under this Agreement be reduced
below the Base Rent in effect immediately preceding such adjustment.
B. Percentage Rent. For the authorized use and occupancy of the Premises,
Lessee shall pay Lessor five percent (5 %) of the annual "Gross Receipts ",
as defined below, as Percentage Rent.
C. Percentage Rent Accounting and Payment. Within forty-five (45) days
after the end of each calendar quarter for the Term, Lessee shall furnish to
• Lessor a statement in writing, certified by Lessee and a Certified Public
3
Accountant to be correct, showing the total Gross Receipts made in, upon,
or from and/or otherwise attributable to the Premises for Ferry operations
during the preceding calendar quarter, and shall accompany each such
statement with the Percentage Rent payment for that calendar quarter.
D. Definition of Gross Receipts. "Gross Receipts" shall mean: all money,
cash receipts, assets, property or other things of value, including but not
limited to gross charges, tolls, sales, fees and commissions made or
earned by Lessee and /or all the assignees, sub - licensees, licensees, or
permittees of Lessee, collected from Ferry operations,without, except as
expressly provided below, deduction from gross receipts for any overhead
or cost or expense of operations, such as, but without limitation to
salaries, wages, interest, debt amortization, credit, collection costs,
discount from credit card operations, insurance and taxes. Each
installment or credit sale shall be treated as a sale for the full price in the
month during which such sale is made, irrespective of whether or when
Lessee receives payment therefor.
Gross Receipts shall not include, or if included there shall be deducted
(but only to the extent they have been included), the following:
i. Sales and use taxes, so- called luxury taxes, consumers' excise
taxes, gross receipts taxes, and other similar taxes now or in the
future imposed on the sale of services, but only if such taxes are
added to the selling price and collected from customers; •
ii. Cash refunds made to customers in the ordinary course of
business; and
iii. Amounts paid to charge card or credit card issuers.
Gross Receipts shall be reported on the cash method.
Notwithstanding the foregoing, Lessee agrees to allow only that use
authorized in Section 7, and that any unauthorized use shall constitute a
breach of this Agreement and shall, at the option of Lessor, terminate this
Lease. In the event the Premises are used for uses other than that
specifically authorized in Section 7, then in addition to all other remedies
allowed by law or authorized elsewhere in this Agreement, Lessor shall be
entitled to receive from Lessee and Lessee shall be required to pay to
Lessor additional Percentage Rent calculated as One Hundred Percent
(100 %) of the gross receipts accountable to such unauthorized use,
whether for cash or credit, or otherwise, and including the value of all
consideration other than money received for that use. This amount shall
be retroactive to the commencement of such unauthorized use and shall
continue until the unauthorized use is abated. This additional rent
•
4
payment shall be subject to the due date for the next Percentage Rent
• payment and the provisions for delinquent payments. The parties agree
and understand that the collection and acceptance by Lessor of this
additional rent payment, shall not, in any way be deemed a waiver nor
estoppel of Lessor's right to require abatement of the unauthorized use or
at Lessor's option to pursue any other remedies available at law or equity.
E. Annual Statements of Gross Receipts and Rent Reconciliation. Within
forty-five (45) days after the end of each calendar year during the Term,
as it may be extended, Lessee shall furnish a written statement to Lessor,
certified by Lessee and a Certified Public Accountant to be correct,
showing the total Gross Receipts made in, upon, or from and/or otherwise
attributable to the Premises during the preceding calendar year (or
fractional year at the beginning of the Term if the Commencement Date is
other than the first day of the year), the Percentage Rent due and the
Percentage Rent paid. If Lessee has paid Lessor more Percentage Rent
than the Base Rent, Lessor shall retain any amount of the Percentage
Rent in excess of the Base Rent. If Lessee has paid Lessor less
Percentage Rent than the Base Rent, Lessee shall include, with its annual
statement, a payment to the Lessor equal to the difference between the
Base Rent and Percentage Rent.
F. Late Charge. A ten percent (10 %) late charge shall be added to any
• payment required under this Agreement if not received by Lessor within
thirty (30) days following the due date. In addition, all unpaid fees shall
accrue interest at the rate of one and a half percent (1 Y2 %) per month or
any portion of a month until paid in full.
•
G. Rent Payments Exclusive of Other Fees. Rent payments shall be in
addition to any other fee or fees required to be paid by Lessee, excepting
any future franchise fees.
H. Payment Procedure. All rent payments and others sums payable
pursuant to this Agreement shall be directed to:
City of Newport Beach
Cashiering Division
3300 Newport Blvd.
PO Box 1768
Newport Beach, CA 92658
or at such other place as Lessor may hereafter designate in writing.
5
4. Production of Statement, Records and Audit
Lessee shall keep within the County of Orange (and shall require any permitted
•
subtenant to keep within the County of Orange) full, complete and proper books,
records and accounts of its daily Gross Receipts, both for cash and on credit.
Lessee agrees to make available for inspection by Lessor at the Premises, a
complete and accurate set of books and records of all sales of goods, wares, and
merchandise and revenue derived from the conduct of business or activity in, at
or from the Premises from which Gross Receipts can be determined. Lessee
shall also make available, upon Lessor's request, all supporting records. Lessee
shall retain and preserve for at least three (3) years all records, books,
bankbooks or duplicate deposit books and other evidence of Gross Receipts.
Lessor shall have the right, upon reasonable notice, during the Term and within
one hundred eighty (180) days after expiration or termination of this Agreement
to inspect and audit Lessee's books and records and to make transcripts to verify
the rent payments due to the Lessor. The audit may be conducted at any
reasonable time during normal business hours. Lessee shall cooperate with
Lessor in making the inspection and conducting the audit. Lessor shall also be
entitled, once during each calendar year, and once within one hundred eighty
(180) days after expiration or termination of this Agreement; to an independent
audit of Lessee's books of account, records, cash receipts, and other pertinent
data to determine Lessee's Gross Receipts. The audit shall be conducted at
Lessor's sole cost and expense by a certified public accountant designated by
Lessor. The audit shall be limited to the determination of Gross Receipts and
shall be conducted during usual business hours in a manner that minimizes any
• j
interference with the conduct of Lessee's regular business operations. If the
audit concludes that there is a deficiency in the payment of any rent payment, the
deficiency shall become due and payable within twenty (20) days and if there is
an overpayment, Lessor shall refund the amount of the overpayment within
twenty (20) days. Lessor shall bear its costs of the audit unless the audit shows
that Lessee understated Gross Receipts by more than five percent (5 %), in which
case Lessee shall pay all Lessee's reasonable costs of the audit. Lessor shall
keep any information gained from such statements, inspections or audits
confidential to the maximum extent permitted by law. Lessor shall not disclose
financial information received in confidence and pursuant to this Agreement
except to carry out the purposes of this Agreement unless disclosure is required
(rather than permitted) by law. However, Lessor may disclose the results of any
audit in connection with any financing arrangements, the sale or transfer of
Lessor's interest in the Premises, pursuant to order of a court or administrative
tribunal, or to collect any outstanding rent payment.
In the event of any audit by Lessor in accordance with this Agreement, Lessee
may contest the results of Lessor's audit by performing a confirming audit within
thirty (30) days of receipt of Lessor's audit results and supporting evidence, using
an independent Certified Public Accountant reasonably acceptable to Lessor. If
Lessee's audit discloses that Lessor's audit was incorrect by more than twenty
•
0
percent (20 %), then Lessor shall pay the cost of Lessee's contesting audit.
• The acceptance by Lessor of any money paid to Lessor by Lessee as a rent
payment for the Premises, as shown by any statement furnished by Lessee, shall
not be construed as an admission of the accuracy of said statement, or of the
sufficiency of the amount of the rent payment.
5. Services for City
City employees in City vehicles in the course of duties related to City business
shall be permitted to use the Ferry without charge to City.
6. Utilities, Taxes and Assessments
Lessee shall pay, and discharge prior to delinquency, any and all charges for
water, gas, electricity, telephone, garbage disposal and other public services
furnished to the Premises, or occupants thereof.
Lessee shall pay, prior to delinquency, any and all possessory interest taxes,
property taxes, all taxes assessed against and levied upon fixtures, furnishings,
equipment, or improvements, such as piers, floats and ways, and all other
personal property of Lessee located on the Premises, real property taxes, and
fees and assessments which may at any time be imposed or levied by any public
• entity and attributable to Lessee's use of the Premises. Lessor hereby gives
notice to Lessee, pursuant to Revenue and Tax Code Section 107.6 that this
Agreement may create a possessory interest which is the subject of property
taxes levied on such interest, the payment of which taxes shall be the sole
obligation of Lessee.
•
Lessee shall hold Lessor harmless from any and all loss, damage, or liability that
may result from the failure of Lessee to comply with the provisions of this
Section.
7. Use of the Premises
Lessee shall use the Premises solely for the continued operation of the Ferry
between Balboa Island and the Balboa Peninsula, as authorized in the
Franchise.. Lessee shall construct, maintain and operate piers, docks, landings,
slips, ramps gangways floats, piles and other facilities necessary for the
operation of the Ferry.
Lessee shall be entitled to tie up a ferryboat on each side of the ferry slip on
Balboa Island for storage and maintenance purposes. Sufficient clearance from
other docks shall be maintained to allow ferryboats to be safely maneuvered into
position to tie up on the sides of the slip.
DI
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In addition, Lessee shall remove the ways as shown in Exhibit "B" within a
reasonable period of time.
•
Lessee shall not install decorations, or install any signs, lettering or advertising of
any type, or any other type of visual displays, on or about the Premises without
the prior written consent of Lessor, other than those existing at the
commencement of this Agreement.
Lessor shall maintain the existing restrooms at the Agate Street terminal for the
use of Ferry patrons and members of the general public. Lessee is granted
rights to perform minor maintenance of restrooms and/or restocking of restroom
supplies at Lessee's expense when Lessee believes that good customer service
demands rapid maintenance or restocking. Lessee is encouraged to contact
Lessor's General Services department whenever restroom is not in good order.
Permits and Licenses
Lessee, at its sole expense, shall obtain and maintain during the Term of this
Agreement, all appropriate permits, licenses and certificates that may be required
by any governmental agency in connection with the operation of its business.
Acceptance of Condition of Premises
Lessee shall accept the Premises in "as is" condition, with no warranty, express
or implied from the Lessor as to any latent, patent, foreseeable and •
unforeseeable condition of the Premises.
Alterations or Construction of Improvements
Subject to Lessor's written approval as set forth below in this Section, and as
material consideration for the extension of the term of ferry operations under a
lease and franchise, Lessee shall obtain all required permits and commence to
rebuild and repair the steel structures which connect the floating docks to the
bulkheads such that the Capital Improvements are completed within five (5)
years of the commencement of this Agreement.
Lessee shall not alter existing improvements, nor construct new improvements,
on the Premises, unless:
A. Lessor has reviewed and approved all plans and specifications for the
work to be performed and issued all appropriate permits that are
preconditions to construction, including, but not limited to, any permits
required by the City's Public Works department;
B. Lessee has obtained all other permits required by law to be obtained prior
to construction, including, without limitation, permits or approvals required
•
8
of the Coastal Commission, State Lands Commission and/or Army Corps
• of Engineers; and
C. The proposed alteration and /or construction is consistent with the
limitations on use of the property imposed by this Agreement, as well as
any franchise, permit, license or other approval related to the use of the
Premises or operation of the Ferry.
Prior to the commencement of any work pursuant to this Section, Lessee shall
obtain insurance to be approved as to form and sufficiency by Lessor's Risk
Manager, and add Lessor to such insurance as an additional insured.
11. Reconstruction
Notwithstanding the provisions of Section 10, Lessee shall be entitled to
reconstruct improvements on the Premises that are damaged by fire, storm,
wind, wave or similar perils. Lessee shall commence reconstruction within sixty
(60) days from the date of the damage, and diligently pursue same to completion.
Lessee shall not be entitled to any abatement in rent or other form of
compensation from Lessor for loss of use of the Premises or improvements in the
event of damage or destruction of improvements unless the damage is caused
by the wrongful conduct of Lessor or its employees, officers or agents.
0 12. Maintenance and Repair
Lessee shall be responsible for maintenance of the Premises, including piers,
docks, landings, slips, ramps, gangways, floats and piles. Lessee shall also be
responsible for dredging within the Premises on an as- needed basis, or as
directed by Lessor. Lessee shall not be responsible for maintaining ways which
are outside the scope of the Premises. Unless otherwise required by federal,
state or local laws, Lessee shall not be required to obtain permits for
maintenance work.
13. Liens
Lessee shall not permit to be enforced against the Premises, any portion thereof
or any structure or improvement thereon, any mechanics, materialmens,
contractors or other liens arising from, or any claims for damages growing out of,
any work or repair, construction or alteration of improvements on the Premises.
Lessee shall give Lessor at least thirty (30) days prior written notice before
commencing construction of any kind on the Premises so that Lessor may post
appropriate notice of non - responsibility.
14. Lessor Paving Claim
• Should Lessee fail to pay and discharge, when due and payable, any tax or
9
assessment, or any premium or other charge in connection with any insurance
policy which Lessee is obligated to provide, or any lien or claim for labor or
material employed or used in the repair, alteration, construction, or maintenance •
of improvements on the Premises, then Lessor may, after ten (10) days written
notice to Lessee and at its option, pay any such tax, assessment, lien, claim,
premium or charge, or settle or discharge any action, or satisfy and judgment
thereon. All costs and expenses incurred or paid by Lessor pursuant to this
paragraph, together with interest at the rate of ten percent (10 %) per annum from
the date of payment, shall be deemed to be considered as additional rent and
shall be paid by Lessee within ten (10) days after written notice that such
payments are due.
15. Standard of Care
Lessee agrees to perform all services required hereunder in a manner
commensurate with community professional standards.
16. Inspection
Lessor shall be entitled to inspect the Premises for compliance with the terms of
this Agreement, and for compliance with all applicable Federal, State and local
(including those of the City) government laws, statutes, ordinances, rules and
regulations. Lessor may exercise these inspection rights at any time without
notice.
17. Assignment/Transfers •)
Lessee shall not transfer or assign this Agreement, or any right or interest
created hereunder, or sublet the Premises or any portion thereof, unless and until
Lessee has obtained the prior written consent of Lessor. Lessor shall not
unreasonably withhold such consent, but Lessor reserves the right to condition
approval of any assignment, transfer or subletting, upon Lessor's determination
that the assignee, transferee or sublessee is as financially responsible as
Lessee, has the experience and ability to operate the Ferry as well as Lessee,
will agree to the terms and conditions of the franchise and other documents
pertaining to the operation of the Ferry, and will provide the same level of public
service as has been provided by Lessee. Should Lessee attempt to transfer,
assign or sublet Lessee's interest in this Agreement or the Premises, except as
provided in this Section, or should any of Lessee's rights under this Agreement
be sold or otherwise transferred, or should Lessee be adjudged insolvent or
bankrupt, then Lessor may, at its option, terminate this Agreement by giving thirty
(30) days written notice. Should Lessor consent to any transfer, assignment, or
subletting attempted without prior approval, that consent shall not constitute a
waiver of any of the restrictions in this Section and the same shall apply to each
subsequent attempt to transfer, assign or sublet this Agreement or the Premises.
•
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18. Bankruptcy
• Lessee agrees. that in the event all, or substantially all, of Lessee's assets are
placed in the hands of a receiver or trustee and remain so for a period of thirty
(30) days, or should Lessee make an assignment for the benefit of creditors or
be adjudicated bankrupt, or should Lessee institute any proceedings under the
Bankruptcy Act or similar law wherein Lessee seeks to be adjudicated bankrupt
or to be discharged of its debts, or seeks to effect a plan of liquidation or
reorganization, or should any involuntary proceedings be filed against Lessee
and not dismissed or stayed within sixty (60) days, then this Agreement or any
interest in and to the Premises shall not become an asset in any such proceeding
and, to the extent permitted by law, Lessor may declare this Agreement
terminated and take possession of the Premises and improvements.
19. Termination
Lessor may terminate this Agreement immediately, or take any action authorized
by law, in the event of a material breach and default as defined in Section 20.
Either Lessor or Lessee may terminate this Agreement upon thirty (30) days
notice to the other party if operation of the Ferry is rendered impossible or not
feasible due to a natural disaster, requirements imposed by a regulatory agency,
global warming or other force majeure event.
• 20. Defaults
The occurrence of any one or more of the following events shall constitute a
material default and breach of this Agreement by Lessee:
A. Vacation or abandonment of the Premises by Lessee;
B. The failure of Lessee to make any payment required by this Agreement
when such failure continues for a period of ten (10) days after written
notice that payment is due; or
C. The failure of Lessee to observe or perform any of the covenants,
conditions, or provisions of this Agreement, except for the default specified
in Section 20(B) above, where such failure continues for a period of twenty
(20) days after written notice of the noncompliance, provided, however,
that if the nature of Lessee's default is such that more than twenty (20)
days are reasonably required for its cure, then Lessee shall not be in
default if Lessee commenced the cure within twenty (20) days after written
notice and thereafter diligently pursues cure to completion.
21. Removal
is Upon expiration of the Term of this Agreement, or earlier termination as provided
11
in Section 19, Lessee shall surrender possession of the Premises to Lessor in
good condition and repair. Before surrendering possession, Lessee may, without
expense to Lessor, remove from the Premises all signs, furnishings and personal • i
property located on the Premises. If Lessee fails to remove any item of personal
property, Lessor may deem such items to be abandoned and the sole property of
Lessor, or remove and dispose of the items in which event the expense of
removal and disposition shall be borne by Lessee and become immediately due
and payable.
22. Indemnification
To the fullest extent permitted by law, Lessee hereby agrees to defend,
indemnify, and hold Lessor harmless from and against any and all liability, claims
damages, suits, penalties, actions, demands, judgments, losses, or expenses of
any kind or nature, including damage to any property and injury (including death)
to any person (collectively, "Claims "), arising out of or resulting in any way, in
whole or in part, from Lessee's use, maintenance, repair or occupation of the
Premises, or any acts or omissions, intentional or negligent, of Lessee or its
officers, agents or employees in the performance of their duties and obligations
under this Agreement, except to the extent such claims are caused by the sole
negligence or willful misconduct of Lessor, its officers, agents and employees.
23. Insurance
Without limiting Lessee's indemnification of Lessor, Lessee shall obtain, provide •
and maintain at its own expense during the Term of this Agreement, a policy or
policies of liability insurance of the type and amounts described below and in a
form satisfactory to Lessor.
A. Certificates of Insurance. Lessee shall provide certificates of insurance
with original endorsements to Lessor as evidence of the insurance
coverage required herein. Insurance certificates must be approved by
Lessor's Risk Manager prior to commencement of performance or
issuance of any permit. Current certification of insurance shall be kept on
file with Lessor at all times during the Term of this Agreement.
B. Signature. A person authorized by the insurer to bind coverage on its
behalf shall sign certification of all required policies.
C. Acceptable Insurers. All insurance policies shall be issued by an
insurance company currently authorized by the Insurance Commissioner
to transact business of insurance in the State of California, with an
assigned policyholders' Rating of A (or higher) and Financial Size
Category Class VII (or larger) in accordance with the latest edition of
Best's Key Rating Guide, unless otherwise approved by Lessor's Risk
Manager.
•
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• D. Coverage Requirements.
i. Workers' Compensation Coverage. Lessee shall maintain Workers'
Compensation Insurance and Employer's Liability Insurance for its
employees in accordance with the laws of the State of California.
In addition, Lessee shall require each subcontractor to similarly
maintain Workers' Compensation Insurance and Employer's
Liability Insurance in accordance with the laws of the State of
California for all of the subcontractor's employees. Any notice of
cancellation or non - renewal of all Workers' Compensation policies
must be received by Lessor at least thirty (30) calendar days (10
calendar days written notice of non- payment of premium) prior to
such change. The insurer shall agree to waive all rights of
subrogation against Lessor, its officers, agents, employees and
volunteers for losses arising from work performed by Lessee for
Lessor.
ii. Liability Coverage. Lessee shall maintain commercial general
liability insurance and Protection and Indemnity insurance each in
an amount not less than Two Million Dollars ($2,000,000.00) per
occurrence for bodily injury, personal injury, and property damage.
If commercial general liability insurance or other form with a general
• aggregate limit is used, either the general aggregate limit shall
apply separately to the activities to be performed under this
Agreement, or the general aggregate limit shall be at least twice the
required occurrence limit.
iii. Automobile Liability Coverage. Lessee shall maintain automobile
insurance covering bodily injury and property damage for all
activities of the Lessee arising out of or in connection with the
services to be performed under this Agreement, including coverage
for any owned, hired, non -owned or rented vehicles, in an amount
not less than Two Million Dollars and 00 /100 Dollars
($2,000,000.00) combined single limit for each occurrence.
iv. Eire and Extended Coverage. Lessee shall maintain fire and
extended coverage insurance, together with insurance against
vandalism, theft and malicious mischief, on the improvements and
fixtures, alterations, trade fixtures, signs, equipment, personal
property and inventory on or upon the Premises from loss or
damage to the extent of their full replacement value.
E. Endorsements. Each general liability insurance policy shall be endorsed
• with the following specific language:
13
Lessor, its elected or appointed officers, officials, employees,
agents and volunteers are to be covered as additional insureds with •?
respect to liability arising out of work performed by or on behalf of
Lessee.
ii. This policy shall be considered primary. insurance as respects to
Lessor, its elected or appointed officers, officials, employees,
agents and volunteers as respects to all claims, losses, or liability
arising directly or indirectly from Lessee's operations. Any
insurance maintained by Lessor, including any self- insured
retention Lessor may have, shall be considered excess insurance
only and not contributory with the insurance provided hereunder.
iii. This insurance shall act for each insured and additional insured as
though a separate policy had been written for each, except with
respect to the limits of liability of the insuring company.
iv. The insurer waives all rights of subrogation against Lessor, its
elected or appointed officers, officials, employees, =agents and
volunteers.
V. Any failure to comply with reporting provisions of the policies shall
not affect coverage provided to Lessor, its elected or appointed
officers, officials, employees, agents or volunteers. •j
vi. The insurance provided by this policy shall not be suspended,
voided, canceled, or reduced in coverage or in limits, by either party
except after thirty (30) calendar days (10 calendar days written
notice of non - payment of premium) written notice has been
received by Lessor.
F. Timely Notice of Claims. Lessee shall give Lessor prompt and timely
notice of any claim made or suit instituted arising out of or resulting from
Lessee's performance under this Agreement.
G. Additional Requirements.
All insurance shall be written on an occurrence -made form. A
claims -made form of insurance is prohibited under this Agreement;
and
ii. In the event Lessor's Risk Manager determines that (i) the Lessee's
activities in the Premises creates an increased or decreased risk of
loss to the Lessor, (ii) greater insurance coverage is required due to
the passage of time, or (iii) changes in the industry require different
• j
14
coverages be obtained, Lessee agrees that the minimum limits of
• any insurance policy required to be obtained by Lessee may be
changed accordingly upon receipt of written notice from the Risk
Manager,; provided that Lessee shall have the right to appeal a
determination of increased coverage by the Risk Manager to the
City Council within ten (10) days of receipt of notice from the Risk
Manager. Not more frequently than once every year, Lessee may
increase the insurance coverage as reasonably required by Lessor
so that at all times, the amount of liability and Premises damage
insurance coverage maintained by Lessee reasonably and fully
protects Lessor.
24. Hazardous Substances
A. From the date of execution of this Agreement and throughout the Term,
Lessee shall not use, store, manufacture or maintain any Hazardous
Substances on the Premises, except in the ordinary course of operating
and maintaining its ferry boats, docks and landings in accordance with
applicable law and regulations.
B. For purposes of this Agreement, the term "Hazardous Substance" means:
(i) any substance, product, waste or other material of any nature
whatsoever which is or becomes listed, regulated, or addressed pursuant
• to the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq. ( "CERCLA "); the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; the
Resource Conversation and Recovery Act, 42 U.S.C. Section 6901 et seq.
( "RCRA "); the Toxic Substances Control Act, 15 U.S.C. Section 2601 et
seq.; the Clean Water Act, 33 U.S.C. Section 1251 et seq.; the California
Hazardous Waste Control Act, Health and Safety Code Section 25100 et
seq.; the California Hazardous Substance Account Act, Health and Safety
Code Sections 25330 et seq.; the California Safe Drinking Water and
Toxic Enforcement Act, Health and Safety Code Sections 25249.5 et seq.;
California Health and Safety Code Sections 25280 et seq. (Underground
Storage of Hazardous Substances); the California Hazardous Waste
Management Act, Health and Safety Code Sections 25170.1 et seq.;
California Health and Safety Code Sections 25501 et seq. (Hazardous
Materials Response Plans and Inventory); or the Porter - Cologne Water
Quality Control Act, Water Code Sections 13000 et seq., all as they, from
time -to -time may be amended, (the above -cited statutes are here
collectively referred to as "the Hazardous Substances Laws ") or any other
Federal, State or local statute, law, ordinance, resolution, code, rule,
regulation, order or decree regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous
waste, substance or material, as now or at any time hereafter in effect; (ii)
• any substance, product, waste or other material of any nature whatsoever
15
which may give rise to liability under any of the above statutes or under
any statutory or common law theory, including but not limited to
negligence, trespass, intentional tort, nuisance, waste or strict liability or •3
under any reported decisions of a state or federal court; (iii) petroleum or
crude oil; and (iv) asbestos.
C. Notwithstanding any contrary provision of this Agreement, and in addition
to the indemnification duties of Lessee set forth in Section 22 in this
Agreement, Lessee agrees to indemnify, defend with counsel reasonably
acceptable to Lessor, protect, and hold harmless Lessor, its officials,
officers, employees, agents, and assigns from and against any and all
losses, fines, penalties, claims, damages, judgments, or liabilities,
including, but not limited to, any repair, cleanup, detoxification, or
preparation and implementation of any remedial, response, closure or
other plan of any kind or nature which the Lessor, its officials, officers,
employees, agents, or assigns may sustain or incur or which may be
imposed upon them in connection with the use of the Premises provided
under this Agreement, arising from or attributable to the storage or deposit
of Hazardous Substances. This Section is intended to operate as an
agreement pursuant to: Section 107(e) of CERCLA, 42 USC Section
9607(e), and California Health and Safety Code Section 25364, to insure,
protect, hold harmless, and indemnify Lessor for any claim pursuant to the
Hazardous Substance Laws or the common law.
D. Lessor agrees that Lessor will not, and will not authorize any third party to •)
use, generate, store, or dispose of any Hazardous Substances on, under,
about or within the Premises in violation of any law or regulation. Lessor
and Lessee each agree to defend, indemnify and hold harmless the other
and the other's partners, affiliates, agents and employees against any and
all losses, liabilities, claims and /or costs (including reasonable attorneys'
fees and costs) arising from any breach of any representation, warranty or
agreement contained in this Section. This Section shall survive the
termination of this Agreement. Upon expiration or earlier termination of
this Agreement, Lessee shall surrender and vacate the Premises and
deliver possession thereof to Lessor on or before the termination date free
of any Hazardous Substances released into the environment at, on or
under the Premises that are directly attributable to Lessee.
25. Compliance with Laws
Lessee, at its sole cost, shall observe, perform, and comply with all laws,
statutes, ordinances, rules, and regulations promulgated by any governmental
agency, including all applicable zoning ordinances, building codes and
environmental laws. Lessee shall not occupy or use the Premises, or permit any
portion of the Premises to be occupied or used for any use or purpose that is
unlawful in part or in whole, or deemed by Lessor to be disreputable in any
16
• manner or extra hazardous in any way.
26. Not Agent of Lessor
Neither anything in this Agreement nor any acts of Lessee shall authorize Lessee
or any of its employees, agents or contractors to act as agent, contractor, joint
venturer or employee of Lessor for any purpose.
27. No Third Partv- Beneficiaries
Lessor and Lessee do not intend, by any provision of this Agreement, to create in
any third party, any benefit or right owed by one party, under the terms and
conditions of this Agreement, to the other party.
28. Notices
All notices and other communications required or permitted to be given under this
Agreement, including any notice of change of address, shall be in writing and
given by personal delivery, or deposited with the United States Postal Service,
postage prepaid, addressed to the parties intended to be notified. Notice shall be
deemed given as of the date of personal delivery, or if mailed, upon the date of
deposit with the United States Postal Service. Notice shall be given as follows:
• To Lessor: Administrative Services Department
Revenue Division
Attention: Income Contract Administrator
City of Newport Beach
PO Box 1768
3300 Newport Boulevard
Newport Beach, CA, 92658
949 - 644 -3153
To Lessee: Mr. Seymour Beek
Balboa Island Ferry, Inc.
410 South Bay Front
Newport Beach, CA 92662
949- 673 -1070
29. Entire Agreement/Amendments
A. The terms and conditions of this Agreement, all exhibits attached hereto,
and all documents expressly incorporated by reference, represent the
entire Agreement of the parties with respect to the subject matter of this
Agreement.
• B. This written Agreement shall supersede any and all prior agreements, oral
17
30.
31
32.
33.
or written, regarding the subject matter between Lessee and Lessor.
C. No other agreement, promise or statement, written or oral, relating to the �f
subject matter of this Agreement, shall be valid or binding, except by way
of a written amendment to this Agreement.
D. The terms and conditions of this Agreement shall not be altered or
modified except by a written amendment to this Agreement signed by
Lessee and Lessor.
E. If any conflicts arise between the terms and conditions of this Agreement,
and the terms and conditions of the attached exhibits or the documents
expressly incorporated by reference, the terms and conditions of this
Agreement shall control.
F. Any obligation of the parties relating to monies owed, as well as those
provisions relating to limitations on liability and actions, shall survive
termination or expiration of this Agreement.
Waivers
The waiver by either party of any breach or violation of any term, covenant or
condition of this Agreement, or of any ordinance, law or regulation, shall not be
deemed to be a waiver of any other term, covenant, condition, ordinance, law or
regulation, or of any subsequent breach or violation of the same or other term, • )
covenant, condition, ordinance, law or regulation. The subsequent acceptance by
either party of any fee, performance, or other consideration which may become
due or owing under this Agreement, shall not be deemed to be a waiver of any
preceding breach or violation by the other party of any term, condition, covenant
of this Agreement or any applicable law, ordinance or regulation.
Costs and Attorneys' Fees
The prevailing party in any action brought to enforce the terms and conditions of
this Agreement, or arising out of the performance of this Agreement, shall not be
entitled to recover its attorneys' fees.
City Business License
Lessee shall obtain and maintain during the duration of this Agreement, a City
business license as required by the Newport Beach Municipal Code.
Applicable Law
This Agreement shall be construed in accordance with the laws of the State of
California in effect at the time of the execution of this Agreement. Any action
18
brought relating to this Agreement shall be adjudicated in a court of competent
• jurisdiction in the County of Orange.
34. Interpretation
The terms of this Agreement shall be construed in accordance with the meaning
of the language used and shall not be construed for or against either party by
reason of the authorship of the Agreement or any other rule of construction which
might otherwise apply.
35. Time is of the Essence
Time is of the essence for this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in
duplicate on the date and year first written herein.
City of Newport Beach
A Municipal Corporation
Balboa Island Ferry,
a California corporation
• Steve Rosansky, Mayor By:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Aaron C. Harp,
Assistant City Attorney
•
19
Name:
B1
Name:
EXHIBIT "A"
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Balboa Island Ferry
OPTION 1 (ROSANSKY)
3. Rent Payments
A. (i) Base Rent. Base Rent shall be established at Seventy Thousand and no /100
Dollars ($70,000.00) per year, and shall be adjusted annually (by CPI).
Base Rent Adjustment. (SAME)
total rent paid (the higher of percentage rent or base rent whichever is applicable) for
each of the previous three years and dividinq by three. The resultant amount shall be
the new Base Rent for the remainder of the Lease Term as adiusted by the CPI per
Subdivision (ii). However, in the event that the amount of Base Rent derived from this
calculation is less than the initial Base Rent as adjusted by Subdivision (ii) the initial
Base Rent as adiusted by Subdivision 00 shall be the Base Rent for the remainder of the
Lease Term, adjusted by Subdivision (ii).
OPTION 2 (HENN)
3. Rent Payments
A. Base Rent. Base Rent shall be established at Seventy -Five Thousand and no /100
Dollars ($75,000.00) per year, and shall be adjusted annually (by CPI).
Base Rent Adjustment. (SAME)