ITEM TITLE:
#18-45 - Authorizing Lease Amendment No. 7 with Valdez Ocean Dock, Inc. dba Big State Logistics for Lot 3, Alaska Tideland Survey 564.
SUBMITTED BY: Nicole LeRoy, Community Development Planning Technician
FISCAL NOTES:
Expenditure Required: N/A
Unencumbered Balance: N/A
Funding Source: N/A
RECOMMENDATION:
Approve Resolution #18-45 Authorizing Lease Amendment No. 7 with Valdez Ocean Dock, Inc. dba Big State Logistics for Lot 3, Alaska Tideland Survey 564.
SUMMARY STATEMENT:
On June 1, 1976 the City of Valdez entered into a lease with Valdez Alaska Terminals, Inc. for 21 years with an additional six, five-year renewal options. The lease was assigned to Valdez Ocean Dock, Inc. dba Big State Logistics on July 7, 1997. Valdez Ocean Dock, Inc. has previously exercised four of six renewal options; one in 1997, one in 2002, one in 2007, and one in 2012. The lease expired May 31, 2017 and has been in holdover subject to all terms and conditions on a month to month basis since.
Valdez Ocean Dock, Inc. has requested to exercise renewal option five of six, commencing June 1, 2017 and ending May 31, 2022. The lease was due for reappraisal in 2017 and staff ordered an appraisal in August 2018.
In addition, the legal description has been updated from Parcel A, ATS 564 (18.16 acres) to Lot 3, ATS 564 to reflect a change in lease area. The lease area has decreased due to the approval of Resolution #17-26 authorizing an overlapping lease with the Valdez Fisheries Development Association, Incorporated for Lot 2 Alaska Tideland Survey 564.
This lease amendment accomplishes five changes:
First, it updates the lease area to reflect the new lease dimensions. Second, it reflects the changed rental value after staff ordered an appraisal per Paragraph 2 of the lease. The new amount will be $5,700.00 annually, calculated as 6% of the appraised value. Third, it will amend Paragraph 2 of the lease to state that if Big State Logistics wishes to extend the lease for another five year term at the expiration of this renewal in 2022, the calculation of fair rental value annually will be 7% of the appraised value at that time.
Valdez Municipal Code 4.08.010 formerly defined fair rental value as 6% of the appraised value but was amended in 2012 to define fair rental value as 10% of the appraised value. However, the percentage of the appraised value was not amended in Paragraph 2 of this lease at that time. After discussions with the Lessee, the Community Development Director and the City Manager, we have proposed the increase in rental fee to 7% of the appraised value at the renewal of this lease in 2022.
Fourth, it updates Paragraph 2 of the lease to reflect compliance with Valdez Municipal Code 4.08.100 which states that the LESSEE “shall be required to pay for any and all survey, appraisal or other costs incurred in connection with the application and lease process” and requires the Lessee to bear the cost of appraisal for the purposes for determining fair rental value.
Fifth, it authorizes renewal option five of six, commencing June 1, 2017 and ending May 31, 2022. Pending Council approval of this resolution, staff will work with the City Attorney and Valdez Ocean Dock, dba Big State Logistics to execute Lease Amendment No. 7.