Memorandum 16-012 Harbor Enterprise (Petro 49) Lease Renewal

Memorandum 16-012

TO:                       MAYOR BETH WYTHE & HOMER CITY COUNCIL

FROM:                  PORT & HARBOR ADVISORY COMMISSION

DATE:                   DECEMBER 22, 2015

SUBJECT:           HARBOR ENTERPRISE LEASE RENEWAL RECOMMENDATION

The purpose of this memorandum is to amend Memorandum 15-011, which originally gave the Lease Committee and Port and Harbor Advisory Commission’s recommendations relating to the Harbor Enterprises leases.  Memorandum 15-011 was submitted to the City Council at their regular meeting on January 26, 2015 and included three separate lease recommendations, but was accompanied by a resolution pertaining to only one of the recommendations, not the one specific to Harbor Enterprises.  Resolutions 16-013 and 16-014, along with this supporting memorandum, resolve the issue.

Background

On November 21, 2014, Petro 49, dba Harbor Enterprises, submitted a request to the City Manager asking for two new, long-term leases as both their Homer Spit leases for the Coal Point lot and Lot 8-E-1 (30 Acres lease) will be expiring December 1, 2018.

The Lease Committee reviewed the request on December 3, 2014 and concluded that the Coal Point lease should be extended for another 20 years, with two 5-year options, under a new long-term lease.  This recommendation was determined based on Petro 49’s track record, investment in infrastructure, the services it provides to the community and the port and Harbor, and the jobs, revenue, and taxes it generates.  The other leased lot, near the Deep Water Dock, is recommended by the Lease Committee that it go through the RFP process when the current term expires.  The committee bases their recommendation for a RFP process on several reasons:

The Lease Policy states a preference for putting leased parcels out for RFP when they expire so that other businesses have an opportunity to benefit from leasing these properties and the City has a chance to secure the highest and best use of the land.  Since the Coal Point parcel is being recommended for renewal without competitive bidding, providing this lot for RFP seemed to be the best course of action.
The City has an interest in promoting competition where possible, including at the port and harbor.
The existing lease calls for Petro 49 to engage in a second phase of site development, which is constructing another tank and a petroleum delivery pipeline to serve vessels at the Deep Water Dock.  This expansion is a significant improvement and long-term business opportunity and the City would like to gauge the level of interest and see what types of proposals are submitted.

Per the City of Homer’s Property Management Policies, after the Lease Committee has reviewed and made recommendations on Spit lease proposals, the Port and Harbor Advisory Commission shall supply their recommendations, along with the Lease Committee’s, to City Council.  At their meeting on December 17, 2014, the commission reviewed the proposal and recommends the following: 

MOVED TO SUPPORT THE RECOMMENDATIONS OF THE LEASE COMMITTEE.

Recommendation

The Lease Committee and Port and Harbor Advisory Commission recommend that the Homer City Council adopt Resolution 16-014, approving the City enter into a new 20 year-term lease with two 5-year options to renew with Harbor Enterprises (dba Petro 49) lease for the Coal Point lot and authorizes the City Manager to execute the appropriate documents; and Resolution 16-013, approving that at the expiration of the lease for Lot 8-E-1 Homer Spit #6 on December 1, 2018 with Harbor Enterprises (dba Petro 49), the property will be advertised for lease in a RFP, and authorizes the City Manager to execute the appropriate documents.