HomeMy WebLinkAboutAtt B - ContractsAttachment B
CITY OF NEWPORT BEACH
CHARTER UPDATE COMMISSION STAFF REPORT
Agenda Item No. 2
March 2, 2010
TO: HONORABLE MEMBERS OF THE CHARTER UPDATE COMMISSION
FROM: Administrative Services Department
Tracy McCraner, Administrative Services Director
949-644-3123, tmccraner@newportbeachca.gov
Dick Kurth, Deputy Administrative Services Director
949-644-3124, dkurth@newportbeachca.gov
SUBJECT: CHARTER SECTION 420 — RESTRICTIONS ON LONG-TERM
CONTRACTS AND LEASES
RECOMMENDATION:
Recommend to the City Council to amend Charter Section 420 in order to extend any
contract or lease term to 30 years from 25 years (Alternative 1).
DISCUSSION:
Attached is a "white paper" with relevant background information and suggested
alternatives for the Commission to consider.
Submitted by:
Tracy McCraner,
Administrative Services Director
Dick Kurth
Deputy Administrative Services Director
Attachments: Section 420 White Paper
Charter Section 420
Charter Section 420
Section 420. Contracts. Restrictions.
The City Council shall not have the power to make or authorize any contract or lease
or extension thereof for a longer period than twenty-five years unless said contract,
lease or extension be approved by a majority of the qualified electors of the City voting
on such question at any election. A contract, lease or extension for a longer period shall
be valid without such approval if it provides for the acquisition by the City at the end of
such period of the real or personal property so leased or contracted for. This Section
shall not apply to any franchise granted pursuant to the provisions of this Charter or to
any contract for the furnishing, or acquisition of the products, commodity or services of
any public utility.
Restrictions on Long -Term Contracts and Leases
(Charter Section 420)
Statement of the Issue
Should the twenty-five year limit on City Council contract authority be modified by the addition of one
exception and the elimination of another?
Relevant Background
Section 420 reads as follows:
Section 420. Contracts. Restrictions. The City Council shall not have the power to make or authorize
any contract or lease or extension thereof for a longer period than twenty-five years unless said
contract, lease or extension be approved by a majority of qualified electors of the City voting on such
question at an election. A contract, lease or extension for a longer period shall be valid without such
approval if it provides for the acquisition by the City at the end of such period of the real or personal
property so leased or contracted for. This Section shall not apply to any franchise granted pursuant to
the provisions of this Charter or to any contract for the furnishing, or acquisition of the products,
commodity, or services of any public utility.
Although the intent and wording of this section are generally clear, it is problematic in that:
a) It draws no clear distinction as to which side a given transaction the City might be on (lease or
lessor, for example);
b) The twenty-five year threshold is now inconsistent with most long-term arrangements;
c) It offers an exception for public utilities that does not seem to be necessary.
Alternatives
1. Update the Section to include some or all of the modifications proposed below.
2. Eliminate the Section, leaving the Charter silent on the matter, thereby relying on the Municipal
Code to establish such restrictions.
3. No change.
Proposed Revision
Staff believes it is appropriate for the Charter to include constraining parameters for long-term leases
and contracts, but that the specifics of the current wording need to be updated. To that end, the
proposed revision below accomplishes five things:
1. Makes two minor clerical changes.
2. Changes the basic limit to 30 years from 25.
3. Eliminates the exception at the end for public utilities.
4. Draws a distinction between situations where the City is the Lessee or the Lessor in one
situation, thereby pointing out the fact that the rest of the Section should apply either way.
5. Adds a special provision for long-term real property leases.
Section 420. Contracts. Restrictions. The City Council shall not have the power to make or authorize
any contract, e -r lease or extension thereof for a longer period than tWeRty five thirty years unless said
contract, lease or extension be is approved by a majority of qualified electors of the City voting on such
question at an election. A contract, lease or extension for a longer period shall be valid without such
approval if it provides for the acquisition by the City at the end of such period of the real or personal
property so leased or contracted for.
The thirty year limit specified above shall be fifty-five years if the City becomes lessor of long-term
assets such as land or structures, so long as the net proceeds of such lease are dedicated exclusively to
the replacement or major renovation of other City facilities.
This Section shall not apply to any franchise granted pursuant to the provisions of this Charter. erre aRY