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HomeMy WebLinkAbout2017-49 - Adjusting the Rent Charged for Commerical Uses Located Upon TidelandsRESOLUTION NO. 2017-49 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, CALIFORNIA, ADJUSTING THE RENT CHARGED FOR COMMERCIAL USES LOCATED UPON TIDELANDS WHEREAS, pursuant to the 1978 Beacon Bay Bill, as amended, ("Beacon Bay Bill") the City of Newport Beach ("City') acts on behalf of the State of California as the trustee of tidelands located within the City's limits, including Newport Harbor ("Tidelands"); WHEREAS, Section 1(b) of the Beacon Bay Bill authorizes the City to allow third -parties to use the Tidelands for commercial purposes for a term not to exceed fifty (50) years; WHEREAS, the City allows commercial Tidelands uses to operate upon the Tidelands under either a permit or a lease; WHEREAS, the Beacon Bay Bill, California Constitution Article 16, Section 6, Newport Beach Municipal Code ("NBMC") Section 17.60.060(D), NBMC Section 17.60.020(E), and City Council Policy F -7(D) require that the rent received by the City from third parties using the Tidelands be based in part upon an appraisal, and reflective of the fair market value related to such uses; WHEREAS, NBMC Section 17.060.060(D) vests the City Council with the exclusive discretion to determine fair market value rent based in part upon the findings of a City -selected appraiser; WHEREAS, City Council Policy F -7(E) requires that, whenever less than the fair market value is received, the City make specific findings setting forth the reasons thereof including, but not limited to, findings that the uses serve to promote the goals of the City or that the uses provide an essential or unique service to the community that might not otherwise be provided were full market value required; WHEREAS, on October 23, 2012, the City Council adopted Resolution No. 2012- 91 and Resolution No. 2012-92 approving a model lease template, model permit, and rent schedule for large commercial marinas located upon Tidelands; WHEREAS, on November 13, 2012, the City Council adopted Resolution No. 2012-96, which amended Resolution Nos. 2012-91 and 2012-92 to re -define large commercial marinas, adjust the rent phase-in schedule, correct scrivener's errors and revise the market adjustment date; WHEREAS, on November 13, 2012, the City Council adopted Resolution No. 2012-97 approving a model lease template and model permit template for commercial uses located upon Tidelands; WHEREAS, on November 13, 2012, the City Council adopted Resolution No. 2012-98 setting fair market value rent for commercial uses located upon Tidelands; WHEREAS, on November 26, 2013, the City Council adopted Resolution No. 2013-88, which, among other things, amended Resolution No. 2012-98 to reclassify certain homeowners' associations slips from commercial to residential; Resolution No. 2017-49 Page 2 of 3 WHEREAS, following the adoption of the various resolutions related to commercial uses located upon Tidelands, the City Council and staff continued to seek and receive input from Tidelands users regarding possible improvements designed to protect and enhance Newport Harbor and other Tidelands; WHEREAS, at the City's request, George Hamilton Jones, Inc. conducted an appraisal to determine fair market value rent for commercial Tidelands uses and, thereafter, prepared appraisal reports dated April 7, 2016 and July 12, 2017 (collectively, "Appraisal Reports"); WHEREAS, the City Council reviewed the Appraisal Reports and they are part of the record in this matter; and WHEREAS, the City Council finds this resolution is a successor resolution to Resolution No. 2012-91, Resolution No. 2012-92, Resolution No. 2012-96, Resolution No. 2012-97, Resolution No. 2012-98, and Resolution No. 2013-88 (collectively, "Commercial Tidelands Resolutions"). NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: Section 1: The City Council hereby sets rent, rental phase-in, and associated adjustments for commercial Tidelands users as provided in the attached Commercial Tidelands Rent Calculations For Commercial Uses Located Upon Tidelands, which is incorporated herein by reference. Except as to the uses specifically set forth in Section 3 of this resolution, the City Council finds, pursuant to the Beacon Bay Bill, California Constitution Article 16, Section 6, NBMC Section 17.60.060(D), NBMC Section 17.60.020(E), and City Council Policy F -7(E), that the rental rates, phase-in, and adjustments contained in the attached Commercial Tidelands Rent Calculations For Commercial Uses Located Upon Tidelands constitute fair market value rent. This finding is made by the City Council in its exclusive discretion but is based on the information contained in the Appraisal Reports and on the other documents and testimony contained in the record for this matter. Section 2: The City Council does hereby repeal any portion of the Commercial Tidelands Resolutions that conflict with the rental amounts, rental calculation methods, associated rental adjustments, and rental phase-in provided in the attached Commercial Tidelands Rent Calculations For Commercial Uses Located Upon Tidelands. Section 3: The City Council sets the rental rates, phase-in, and adjustments contained in the attached Commercial Tidelands Rent Calculations For Commercial Uses Located Upon Tidelands for Shipyards, Yacht Club Guest Slips, and Free Public Access Docks (not associated with a restaurant) at less than fair market value. Pursuant to City Council Policy F -7(E)(6), the City Council finds charging less than fair market value rent for these specific uses promotes the goals of the City to further marine -related services and activities. More specifically, the City Council finds charging less than fair market value rent for these uses promotes public recreation facilities and marine services to the general public, furthers the policies and objectives of the Beacon Bay Bill, and allows for continued operation and improved accessibility to the public. Thus, the charging of less than fair market value rent for these uses of the Tidelands is a matter of state-wide concern that benefits the citizens of the State of California. Resolution No. 2017-49 Page 3 of 3 Section 4: The Recitals provided above are true and correct and incorporated into the operative part of this resolution. The City Council also incorporates, where appropriate, the findings made in the Commercial Tidelands Resolutions into this resolution. Section 5: Except as expressly modified by this resolution, all provisions, terms, and covenants set forth in the Commercial Tidelands Resolutions shall be unchanged and shall remain in full force and effect. Section 6: The City Council finds the setting of rent for commercial Tidelands uses is not subject to the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Alternatively, the City Council finds the setting of rent for commercial Tidelands uses is entitled to a Class 1 Categorical Exemption pursuant to CEQA Regulation Section 15301 because the rent contemplates the continued use of existing facilities, with no expansion of the proposed use. Further, the City Council finds the setting of rent for commercial Tidelands uses is entitled to a Statutory Exemption pursuant to CEQA Regulation Section 15273(a)(1) because the rent established by the City Council will be used to meet operating expenses within the Tidelands. Section 7: If any section, subsection, sentence, clause or phrase of this resolution is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this resolution. The City Council hereby declares that it would have passed this resolution, and each section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid or unconstitutional. Section 8: This resolution shall take effect immediately/ upon its adoption City Council, and the City Clerk shall certify the vote adoptinglthe�lution. , ADOPTED this 25th day of July, 2017. ATTEST: owl r n / Leilani I. Brown City Clerk APPROVED AS TO FORM: CITYA Y'S OFFICE I— a� City Attorney Mayor Attachment: Commercial Tidelands Rent Calculations For Commercial Uses Located Upon Tidelands Commercial Tidelands Rent Calculations For Commercial Uses Located Upon Tidelands Beginning on the date a lease or permit is first effective (i.e., the date a lease is executed by all parties or a permit is issued by the City), a Commercial Marina Operator shall pay to the City, on a monthly basis, Rent (as defined below). Rent. The "Rental Rate" for each category of commercial Tidelands use is as follows: Commercial Use Category Rent Per Square Foot Large Commercial Marinas $ 1.17 Medium Commercial Marinas $ 0.89 Small Commercial Marinas $ 0.76 Shipyards $ 0.38 HOA marinas/docks for non-members' use greater than 30,000 sf $ 1.17 13,000 sf to 30,000 sf $ 0.89 less than 13,000 sf $ 0.76 Yacht Club Guest Slips $ 0.38 Free Public Access Docks (not associated with a restaurant $ Vessel Rental Facility Boat Rentals $ 0.76 Sport Fishing Charters $ 0.76 Restaurants' guest slips $ 0.38 Vessel Charters $ 0.76 All Others $ 0.76 For a term year beginning March 1, 2017, and thereafter, monthly Rent shall equal the then applicable Rental Rate, rounded to the nearest cent, times the Premises square footage as set forth in this resolution (i.e., if the Rental Rate is $1.17 and the Premises is 10,000 square feet the annual Rent would be $11,700). To the extent a Premise contains two (2) or more commercial Tidelands uses, the Rent shall be apportioned according to the use and the Premises occupied by the use (i.e., if half (1/2) of a Premises is operated as a Vessel Rental Facility and the other half (1/2) as a Small Commercial Marina the half (1/2) of the Premises used as a Vessel Rental Facility shall pay the applicable Vessel Rental Facility rent and the half (1/2) operated as a Small Commercial Marina shall pay the applicable Small Commercial Marina rent). Unless otherwise provided in this resolution, a commercial Tidelands use which provides complimentary (free of charge) public access slips to the general public (on a 24/7 basis or during normal operating hours) shall be exempt from the payment of Rent to the City for use of the Premises occupied by the complimentary public access slips. 2. Rental Phase -In Period. Rent will be set in accordance with a two (2) period phase-in procedure with the first phase-in billed in October 2017, for Rent due on November 1, 2017. The second phase- in billed in July 2018, for Rent due on August 1, 2018. Rent shall be fully phased -in beginning on August 1, 2018. An example of the two (2) period phase in procedure is provided below: Commercial Use Category Ramp -Up Period November 2017 July 2018 Large Commercial Marinas $ 0.76 $ 1.17 Medium Commercial Marinas $ 0.62 $ 0.89 Small Commercial Marinas $ 0.49 $ 0.76 Shipyards $ 0.38 $ 0.38 HOA marinas/docks for non-members' use greater than 30,000 sf $ 0.76 $ 1.17 - 13,000 sf to 30,000 sf $ 0.62 $ 0.89 - less than 13,000 sf $ 0.49 $ 0.76 Yacht Club Guest Slips $ 0.38 $ 0.38 Free Public Access Docks (not associated with a restaurant $ - $ - Vessel Rental Facility (Boat Rentals) $ 0.49 $ 0.76 Sport Fishing Charters $ 0.49 $ 0.76 Restaurants' guest slips $ 0.38 $ 0.38 Vessel Charters $ 0.49 $ 0.76 All Others $ 0.49 $ 0.76 Rent Adjustments. A. Annual Rent Adjustment. Beginning on March 1, 2019, Rent may be adjusted on the first day of March each permit/lease year to reflect an increase in the cost of living, as indicated by the Consumer Price Index described below. Rent may be adjusted if the Consumer Price Index for the Los Angeles — Orange County - Riverside Area, All Urban Consumers, All Items ("Index"), as published by the United States Department of Labor, Bureau of Labor Statistics ("Bureau"), increases over the Base Period Index. The initial "Base Period Index' shall be the Index for the calendar month which is four (4) months prior to the month of the permit/lease effective date, thus November. The initial Base Period Index shall be compared with the Index for the same calendar month for each subsequent Lease Year ("Comparison Index"). The Comparison Index used for a given year's adjustment calculation will become the Base Period Index for purposes of the next annual Rent adjustment calculation. If the Comparison Index is higher than the Base Period Index, then Rent for the next Lease Year shall be increased by the amount of such percentage change. Should the Bureau discontinue the publication of the above Index, or publish same less frequently, or alter same in some other manner, then the parties shall adopt a substitute Index or substitute procedure which reasonably reflects and monitors consumer prices. The example CPI adjustment shown in the table below assumes that the Rental Rate in 2017 is one dollar and seventeen cents ($1.17) per square foot. In the actual calculation and subsequent years, the Rental Rate will be adjusted annually, as set forth above, and may vary from what is provided in the table below. Commercial Use Category Ramv-UD Period November 2017 July 2018 March 2019' Large Commercial Marinas $ 0.76 $ 1.17 $ 1.19 Medium Commercial Marinas $ 0.62 $ 0.89 $ 0.90 Small Commercial Marinas $ 0.49 $ 0.76 $ 0.78 Shipyards $ 0.38 $ 0.38 $ 0.39 HOA marinas/docks for non- members' use greater than 30,000 sf $ 0.76 $ 1.17 $ 1.19 - 13,000 sf to 30,000 sf $ 0.62 $ 0.89 $ 0.90 - less than 13,000 sf $ 0.49 $ 0.76 $ 0.78 Yacht Club Guest Slips $ 0.38 $ 0.38 $ 0.39 Free Public Access Docks (not associated with a restaurant $ - $ - $ - Vessel Rental Facility (Boat Rentals) $ 0.49 $ 0.76 $ 0.78 Sport Fishing Charters $ 0.49 $ 0.76 $ 0.78 Restaurants' guest slips $ 0.38 $ 0.38 $ 0.39 Vessel Charters $ 0.49 $ 0.76 $ 0.78 All Others $ 0.49 $ 0.76 $ 0.78 'Assumes 2% inflation. B. Market Adjustment of Rent and Other Fees and Charges. At the Market Adjustment Date, the Rental Rate may be adjusted, in the City's sole and absolute discretion, to reflect the then -current fair market value, as such value shall be determined by an appraisal to be conducted in accordance with the provisions of this section. If applicable, the Rental Rate determined by the appraisals shall commence on March 1 of the year following the appraisals (i.e., the Rental Rate determined by the appraisals following March 1, 2026 shall be effective March 1, 2027). If applicable, the City shall retain one (1) independent MAI appraiser to conduct a harbor -wide appraisal of commercial uses. All MAI appraisers selected pursuant to this subsection shall have at least ten (10) years' experience appraising Tidelands in the Southern California area. 4. Definitions. Unless otherwise provided, the terms provided in the NBMC shall apply to this resolution. The singular of any term also includes the plural. A. Base Rent and Rent, unless otherwise provided, means the annual rent charged on a square footage basis for the use of the Premises. B. City means the City of Newport Beach. C. Guest Slip means a "slip", as defined in NBMC Section 17.01.030(0)(8), or any successor statute, that is provided, with or without charge, for the use of the patrons while visiting the business. D. Home Owners' Association ("HOA") means an organization of homeowners of a particular residential subdivision, condominium or planned unit development. E. Large Commercial Marina(s) means a "marina" as defined in NBMC Section 17.010.030(J)(3) or any successor statute, which occupies more than thirty thousand square feet (30,000 so of Tidelands and Private Waterways. F. Market Adjustment Date means March 1, 2026 and every tenth (10th) anniversary year thereafter. G. Medium Commercial Marina(s) means a "marina" as defined in NBMC Section 17.01.030(J)(3) or any successor statute, which occupies between thirteen thousand square feet (13,000 so and thirty thousand square feet (30,000 so of Tidelands and Private Waterways. H. Percentage Rent means rent which is determined each calendar year and shall be calculated by multiplying the rental rate, as indicated in the tables above, by the total sales made in, upon, or from the Premises and/or otherwise attributable to the Premises for the calendar year. For each calendar year that Percentage Rent exceeds Base Rent, the Tidelands user shall pay to City the Percentage Rent less the Base Rent paid to the City for that calendar year. I. Premises means those Tidelands which are subject to the applicable permit/lease and are more particularly described and depicted in the applicable permit/lease, excluding any Private Waterways and improvements. J. Private Waterways means privately owned submerged lands. K. Shipyards means "marine sales and services, uses and vessels" as defined in NBMC Section 17.01.030(J)(5), or any successor statute. L. Small Commercial Marina(s) means a "marina" as defined in NBMC Section 17.01.030(J)(3) or any successor statute, which occupies less than thirteen thousand square feet (13,000 so of Tidelands and Private Waterways. M. Sport Fishing Charter means a business that charters vessels for use by seven (7) or more persons to sport fish outside of Newport Harbor. N. Tidelands means certain tidelands and submerged land (whether filled or unfilled), located in the City of Newport Beach, County of Orange, State of California granted to the City of Newport Beach, as trustee, by the State of California, pursuant to the Tidelands Grant. O. Tidelands Grant means uncodified legislation related to the State of California's grant of certain rights in the Tidelands to the City of Newport Beach, including, without limitation, the Beacon Bay Bill (Chapter 74 of the Statutes of 1978, as amended [citations omitted]). P. Vessel Charter Business is a business that provides a vessel (including professional captain and crew) which has been hired or leased by the owner, directly or through an authorized representative, to any person for a voyage in exchange for the payment of money, the receipt of something of value, or the forgiveness of a debt. Q. Vessel Rental Facility(ies) (Boat Rentals) means a person that rents or leases vessels to another person for a period of less than twenty-four (24) consecutive hours in exchange for the payment of money, the receipt of something of value, or the forgiveness of a debt. R. Yacht Club(s) means an organization operating from a fixed location, comprised of a private membership, and principally engaged to promote, coordinate or facilitate boating and yachting.