Memorandum 17-013 Icicle Seafoods Lease Lot 41 Homer Spit

Memorandum 17-013

TO:                         MAYOR BRYAN ZAK & HOMER CITY COUNCIL     

THROUGH:         PORT & HARBOR ADVISORY COMMISSION

FROM:                  KATIE KOESTER, CITY MANAGER

DATE:                    DECEMBER 15, 2016

SUBJECT:           RECOMMENDATION RE: NEW LEASE FOR ICICLE SEAFOODS

ICICLE SEAFOODS, INC., now owned by COOKE AQUACULTURE, INC.

In May 2016 the City became aware of the sale of Icicle Seafoods, Inc. to Cooke Aquaculture, Inc.  The City has had a long and collaborative relationship with Icicle, which has operated in the City in some capacity since the construction of Homer’s Harbor in the 1970’s.  The City Attorneys reached out to the new company to explain how a change in ownership affects the lease Icicle has with the City.  While the City looks forward to forging a new relationship with Cooke Aquaculture, the City denied an assignment of Icicle’s current lease to Aquaculture.   The City has adopted a strong policy against providing discounts on port and harbor services and cannot consent to an assignment that perpetuates lower rates for any one lessee. The City Attorney provided a current boilerplate lease to Cooke Aquaculture as the basis for a new long-term lease.

Over the course of the summer, the City Attorney has been working with City Staff and Cooke Aquaculture in preparing a draft lease.  As part of the lease procedure, the proposal must go before the Port and Harbor Advisory Commission for recommendations and then to City Council for approval.

It is my recommendation to City Council that a new lease with Cooke Aquaculture, dba Icicle Seafoods, be approved.  Cooke Aquaculture has provided sufficient information to the City to show that it’s a viable company and they agree to the City’s terms and conditions.  Below are some highlighted details of the draft lease:

2.01 Lease of Property: Lot 41, KPB 181-034-19, consists of 64,944 square feet.
3.01 Lease Term: New term is a 20-year lease, with two 5-year extensions to begin October 1, 2016 and expire September 30, 2046 with no options remaining.
4.01 Base Rent:  As per a recent appraisal from October 13, 2016, the annual base rent will be no more than $35,070.00.  Rent will be subject to annual CPI increases and 5-year appraisals.
4.05 Tenant to Pay for City Services: As is standard with all Homer Spit leases, Cooke Aquaculture shall pay for all services provided by the Port and Harbor, including but not limited to wharfage, crane use, and ice.
4.08 Outfall Line Connection Agreement: Cooke Aquaculture is not required to have access to the outfall line due to the City’s Fish Grinder Facility having limited outfall line connections.  They 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.

Recommendation

The City Manager and Port and Harbor Staff recommends approving Resolution 16-008, awarding Cooke Aquaculture, Inc., dba Icicle Seafoods a 20-year lease with two, five-year options for Lot 41, HOMER SPIT SUB AMENDED ADL 18009, with an annual base rent of $35,070.00, and authorizing the City Manager to move forward with lease negotiations and execute the appropriate documents; and

Fiscal Note:           Icicle Seafoods Annual Base Rent will be $35,070.00

Rates are adjusted annually per the Consumer Price Index