HomeMy WebLinkAboutSS3 - Negotiation of Income Property LeasesStudy Session Agenda Item 3
City of Newport Beach
Office of the City Manager
DATE: May 10, 1999
TO: Mayor and Members of the City Council
FROM: Dave Kiff, Assistant to the City Manager
SUBJECT: Negotiation of Income Property Leases
The City has a number of income property leases that are either approaching the
end of the lease term, or have already expired. The status of each is as follows:
AMERICAN LEGION: The original lease, signed in 1940, was extended both in
1951 and 1976. The current lease terminates in March 2000. The 1.54 -acre site
consists of the American Legion building, a paved area that hosts 53 parking
spaces and 45 dry dock spaces, and a marina with 46 boat slips. The current
lease requires the Legion pay the City $300 /month for the building, $1,700 /year
for the parking spaces, 40% of the gross revenues on the marina slips, and 50%
of the gross revenue from the dry boat storage. On August 25, 1997, the City
Council directed staff to begin renegotiation of the American Legion lease.
Lease revenue for FY 98/99 is estimated at $105,000.
MARINAPARK: Marinapark Mobile Home Park was acquired by the City in 1919
and used as a visitor's campground until 1945, when it was converted to a travel
trailer park. In 1955, the City converted the property to its present use, a mobile
home park. New lease agreements were signed in 1973 and in 1985. The
current lease term expires in March 2000. Marinapark has sixty mobile home
spaces. On February 22, 1999, the Newport City Council directed staff to send a
letter to the State Lands Commission indicating the City's position that the
tidelands boundary aligned with the boundaries on the adjacent private parcels.
As such, Marinapark was not in tidelands and therefore Marinapark's residential
land use was not at issue. To date, State Lands Commission has not responded
to the City's letter. Lease revenue for FY 98/99 is estimated at $585,000.
GIRL SCOUT HOUSE: The City approved the first lease with the Girl Scout
Council in 1947. The lease required the Girl Scouts to construct a building on the
City's site, at an annual lease of $1. The lease was renewed every ten years
after the original lease expired until 1987 when the lease was extended until
March 2000. The lease rate has remained at $1 per year. The 3,500 square foot
building contains a large meeting room, a fully equipped kitchen,
bathroom /shower facilities, storage space, a small office space, and parking.
CORONA DEL MAR CONCESSION: Under an agreement with the State of
California, the City controls and manages two concession and equipment rental
stands at the Corona Del Mar State Beach. Historically, the City contracts with
independent operators to sell light food, sundries, and beach supplies. The
current operator, Kilmer Enterprises, is on a month -to -month lease since his
previous five -year term expired in January 1997. The State of California
Department of Parks and Recreation has indicated their goal of enhancing the
concession operation to provide more comprehensive visitor services as well as
higher revenue potential. Lease revenue for FY 98/99 is estimated at $85,000.
RUBY'S BALBOA PIER RESTAURANT: In 1981, the City approved a
concession ten year agreement with Ruby's Restaurant to operate a restaurant
and take -out window on Balboa Pier. In 1992, they were granted a five -year
extension, which terminated in March 1997. Staff negotiated a new lease
agreement with Ruby's that increased the lease rate, implemented a refuse fee,
and permitted other services and increased restaurant space. The City Finance
Committee approved the lease provisions in July 1997, but due to the
complexities of the lease language, staff has continued to work toward finalizing
the contract. Doug Cavanaugh, Ruby's owner, has recently indicated he would
like to reopen lease negotiations. Lease revenue for FY 98/99 is estimated as
$70,000.
In the past, staff reported to the City Council Finance Committee for issues
related to income property. The Committee provided policy direction regarding
lease negotiations. Since the City no longer has Council Committees, staff is
requesting guidance on how to proceed with the negotiation of these five
significant leases.
RECOMMENDATION:
♦ Appoint a City Council Ad -Hoc Committee to provide policy direction for
income property lease negotiations; OR
♦ Direct staff to report back to the full City Council on a regular basis as to the
status of the lease negotiations; OR
♦ Appoint a Councilmember to work directly with staff for income property lease
negotiations.