2007-06-06 Special CC PacketCITYOFALAMEDA•CALIFORNIA
SPECIAL MEETING of THE CITY COUNCIL
WEDNESDAY - - - JUNE 6, 2007 - - - 7:01 P.M.
Location: cAti_g_gyppll_ghmper!, City Hall, corner of Santa Clara
Avenue and Oak Street.
Public Participation
Anyone wishing to address the Council on agenda items or business
introduced by the Council may speak for a maximum of 3 minutes per
agenda item when the subject is before the Council. Please file a
speaker's slip if you wish to speak.
1. ROLL CALL - City Council
2. AGENDA ITEM
2 -A. Recommendation to review and approve Asset Management
Guidelines for Tidelands Leasing. (Development Services)
3. ADJOURNMENT - City Council
Beverly J M yor
CITY O F ALAM E DA
MEMORANDUM
To: Honorable Mayor and
Members of the City Council
From: Debra Kurita
City Manager
Date: June 6, 2007
Re: Review and Approve Asset Management Guidelines for Tidelands Leasing
BACKGROUND
Staff is actively engaged in discussions related to renegotiation of several Tidelands
leases. The pending expiration of these existing long -term leases creates an opportunity
for the City to negotiate the new leases at market rates. Additionally, the outcome of this
process may assist the City in achieving a number of its waterfront- related development
objectives, including:
• Foster a vibrant mixed -use pedestrian friendly Waterfront environment.
• Physically and visually reconnect the community to the waterfront.
• Improve public access through and around the waterfront district.
• Preserve the unique history and environment of the area.
• Encourage development in the area that is sensitive to the character of Alameda.
In preparation for these negotiations, staff has developed proposed asset management
guidelines that will serve as the foundation of future Tidelands lease discussions.
DISCUSSION
The issues related to the discussion of the future management of the City's Tidelands
assets can be divided into the interests of either the City or the lessee:
The City's interests are to:
1. Protect the long term property interest that reverts to the City at lease termination,
thereby recovering at the end of the lease an asset that has been well- conserved, well -
constructed and well- maintained;
2. Meet its stewardship and fiduciary responsibilities regarding management of City -
owned Tidelands assets by managing property in the best long -term interest of the
community and generating lease revenues to maintain and augment these assets;
Re: Agenda Item 2 -A
06 -06 -07
Honorable Mayor and
. Members of the City Council
June 6, 2007
Page 2
3. Increase the level and quality of public benefits, such as public open space, and public
services without increasing public cost. In addressing this interest, any increase in cost
to the General Fund for development and maintenance of new open space or other
public infrastructure should be offset with new General Fund revenues.
In most cases, the current lessees have benefited from 40 to 50 year term leases at very
low rates, with little or no specific performance requirements. Consequently, the lessees
are interested in:
1. Continuing their long -term interest in the property with little or no change in terms;
2. Gaining extended Tong -term contracts that maximize the value of the asset, allowing for
leverage of lease terms for financing;
3. Controlling revenue - producing property without performance requirements, regulations
for revenue sharing, and maintenance obligations.
Since these interests are in direct conflict, staff has developed proposed guidelines to
facilitate discussions with lessees who request new and early lease renewals. While only
one long -term lease is actually expiring within the next year, other lessees have requested
early extensions of their leaseholds to support major renovations, obtain financing, or
ensure long -term control over the leased area in order to support future development
plans.
Given the requests for early lease renewals, staff recommends developing negotiation
guidelines. The proposed guidelines are:
1. Ensure market -rate lease terms reflecting transactions for comparable waterfront
properties (unless the lessee is required to reconstruct or construct
improvements);
2. Require full disclosure of balance sheets and financials for property ( "open book"
process);
3. Establish full disclosure of tenant identity and investors;
4. Require profit sharing and percentage rent consideration;
5. Establish procedures for re- appraisal of rent to market;
6. Consider modification to market rent only as an offset for development
investment and only when those investments meet strict performance
requirements and are actually made;
7. Require regular maintenance and compliance with design guidelines;
8. Require public access and, where appropriate, development and maintenance of
waterfront bay trails;
9. Require maintenance of specific capital reserve accounts.
Honorable Mayor and
Members of the City Council
The Council may also consider:
June 6, 2007
Page 3
a. Not renewing some leases and utilizing the property for other purposes;
b. Advertising the expiring lease opportunities to allow others to bid;
c. Allowing the leases to expire;
d. Negotiating leases that require improvements that meet some other community
goals.
Finally, at the same time lessees are asking to renew and extend their leases at current
terms, they are also seeking to preserve their existing lease terms for the remainder of the
original lease period. It is in those lessee's interest to secure extensions to their leases at
the same terms as the current leases. After 40 or 50 years, these beneficial terms are
significant. By seeking extensions, the tenants are essentially confirming the remaining
leases have declined in value because the terms are too short for a lender, and not
substantial enough to support capital investments.
Staff recommends that existing leases be brought to market rates as extensions are
requested and negotiated. These modifications would become the basis for an asset
management strategy and provide opportunities for new waterfront community benefit
revenues and subsequent asset development.
RECOMMENDATION
Review and approve the asset management guidelines for Tidelands leasing.
Respectfully sub fitted,
Leslie A. Little
Development Services Director
LAL: rr