Memorandum 16-130 Global Sustainable Fisheries of Alaska Lease Lots 9-A and 10-A

Memorandum 16-130

TO:                       MAYOR BETH WYTHE & HOMER CITY COUNCIL  

THROUGH:         PORT & HARBOR ADVISORY COMMISSION

FROM:                  CITY LEASE STAFF

DATE:                   JULY 20, 2016

SUBJECT:           GLOBAL SUSTAINABLE FISHERIES OF ALASKA (GSFA) LEASE PROPOSAL

On June 5, 2016 the City received a lease application from Global Sustainable Fisheries of Alaska (GSFA) for two lots on the corner of Fish Dock Road and Homer Spit Road: Lot 10-A – 0.53 acres or 23,087 sq. ft., and Lot 9-A – 0.52 acres or 22,651 sq. ft.  This area is zoned Marine Industrial and is listed as available in the City’s Land Allocation Plan for leasing; these two lots have been advertised in the past for Request for Proposals with no competitive bids received.  Additionally, the Port and Harbor Advisory Commission considers this area ideal for fish processing businesses and encourages long-term leases for such purposes.

GSFA has applied for an Economic Adjustment Program grant in the amount of $1.6 million from the U.S. Department of Commerce and Economic Development Administration (EDA) to build a 10,780 square foot, single-story fish processing facility and, using flash-freezing technology, will export frozen fish to Japan and the Lower 48.  If successful, this program could revolutionize seafood production and would certainly broaden Homer’s economic opportunities.  The City Manager has reviewed this grant application with the understanding that the City’s involvement as co-applicant is limited to the land ownership and a 20-year lease with two, 5-year options to renew.  Once the grant is awarded to GSFA, the City Manager will present to Council a resolution and a co-applicant agreement that would support the City’s involvement as co-applicant (strictly as the lessor of the land).

Members of GSFA have met with the City Manager and Port Director to go over the details of their proposal, and their lease application has been reviewed by City Lease Staff.  Staff has been working with GSFA to complete all necessary letters of support to EDA as part of the grant application and to compile the necessary documents for their lease proposal to the City.  Upon review of the GSFA application at their June 21, 2016 meeting, Lease Staff agreed to the long-term lease request and for a recommendation to be made to City Council via Resolution 16-xxx for their approval to lease Lot 9-A and 10-A to GSFA.  This lease is contingent upon GSFA receiving the EDA grant, which they expect to be awarded in September 2016 with the goal to be operational for the 2017 fishing season.   The grant requires a DRAFT lease agreement, so it’s imperative that the City is prepared to sign a lease when/if the grant is awarded.  In the event that the grant is not awarded to GSFA, the lease would be null and void.

Below are the details of the DRAFT lease:

2.01 Lease of Property and 4.01 Base Rent

The annual lease fee is calculated at $ 0.79 per sf for a total of $36,133 per year.  This includes Lot 9-A and Lot 10-A, Homer Spit Replat 2006, for a total of 45,738 square feet.  After the grant is awarded to GSFA, the lease rate will be confirmed with a current appraisal and adjusted to meet the appraised value if needed.

3.01 Lease Term

GSFA has requested a minimum 20-year lease, with two 5-year extensions.

4.08 Outfall Line Connection Agreement

GSFA is not required to have access to the outfall line due to the City’s Fish Grinder Facility having limited outfall line connections.  GSFA will be required to bring their fish waste by tote to the facility where it will be properly disposed of per the City’s general permit.

6.02 Required Improvements

GSFA is to build a 10,780 square foot, single-story fish processing facility.  The construction is scheduled to begin within a year of the signing of the lease and operational within two-years of signing.

7.05 Liens

Staff is working with GSFA to furnish the required bond.

Number of employees

GSFA expects to hire, train, and certify 12 full-time employees.

Employee Accommodations

GSFA understands that employee housing can be a challenge and that long-term use of Recreational Vehicles is not allowed in the Marine Industrial District.  Staff has recommended that the facility provide some overnight caretaker accommodations.

Recommendation

Lease Staff recommends approving Resolution 16-xxx, awarding Global Sustainable Fisheries of Alaska a 20-year lease with two, five-year options for Lot 9-A and Lot 10-A, HOMER SPIT REPLAT 2006, with a base rent of $36,133.00 per year (to be confirmed with a current appraisal and adjusted to meet the appraised value if needed), and authorizing the City Manager to move forward with lease negotiations and execute the appropriate documents.  This lease is contingent upon GSFA receiving a $1,600,000.00 grant from the U.S. Department of Commerce and Economic Development Administration.

Attached:                 Global Sustainable Seafoods of Alaska Lease Application & Proposal

                                        Resolution 16-086 Awarding GSFA 20-year Lease for Lots 9-A & 10-A

Fiscal Note:             Base lease will be $36,133.00 annually.  Appraisal will be completed September 2016 to adjust rent rate, and is adjusted annually to keep pace with the Consumer Price Index.