LEASE
COMMITTEE UNAPPROVED
REGULAR
MEETING MINUTES
APRIL
9, 2009
Session
09-03 a Regular Meeting of the Lease Committee was called to order on April 9,
2009 at 3:02 pm by Chair Shelly Erickson at the Homer City Hall Cowles Council
Chambers located at 491 E. Pioneer Avenue, Homer,
PRESENT:
SHELLY ERICKSON, ECONOMIC
DEVELOPMENT ADVISORY COMMISSION
JOHN VELSKO,
BRYAN HAWKINS,
RICK ABBOUD,
ABSENT: PHILIP ALDERFER, REGINA HARVILLE
(EXCUSED)
STAFF:
DEPUTY
Approval of the Agenda
Chair Erickson requested amending the agenda to address Item A, under New
Business before Item A under Pending Business.
There was no discussion.
The amended agenda was approved by consensus of the Committee.
Public Comments Regarding Items on the Agenda
Mr. Kevin Hogan, city resident and business owner commented on the Lease
Policy review and the topic length of leases. He requested the Committee
consider longer lease terms to allow businesses to recoup the full amount of capital
improvements. He recently learned that the Internal Revenue Service (IRS)
requires 39.5 years to amortize amounts that businesses would normally expend
for capital improvements on their leases. The current policy does not allow a
business to accomplish that at this time.
There were no further
comments.
Reconsideration
There were no items for reconsideration.
Approval of the Minutes
A.
Regular Meeting Minutes from February
12, 2009
Chair Erickson
requested a motion to approve or any changes or corrections to the minutes.
Port & Harbor Director
Hawkins noted a correction on page four, paragraph 8; in the motion to amend,
line 1, 9th word should read HOMER, not HARBOR.
Commissioner Velsko
noted a correction on page 7, paragraph 12, line 2 and 3 should read; He would
not support an exception. Strike “that.” The City should comply with the
existing codes and policies.
HAWKINS/VELSKO –
MOVED TO APPROVE THE MINUTES AS AMENDED.
There was no discussion.
VOTE. YES.
NON-OBJECTION. UNANIMOUS CONSENT.
Motion carried.
VISITORS
None.
STAFF Report/COUNCIL/Committee Reports
None.
Public Hearing
None.
Pending Business
A. Review
of Lease Policies –
1. Memo to Lease Committee from Staff
dated 3/12/09
2. Chapter 11- LENGTH OF LEASES/OPTIONS
3. Chapter 14 -ASSIGNMENTS
4. Lease Policy
Chair Erickson reviewed
from the minutes the sections that were to be discussed. She then commented on
a discussion held at the joint worksession of the Economic Development Advisory
Commission (EDC) and the Port & Harbor Advisory Commission (PHC) regarding
developing criteria to determine whether a lease should go through the proposal
process or to have the option to renew. She further wanted to circumvent the
possibility of any perceived favoritism.
City Manager Wrede
confirmed for Port & Harbor Director Hawkins that according to the Lease
Policy Chapter 11.2, Lease Renewals, the City Council could elect not to
require competitive bidding on a lease. He continued by stating he felt that
Chair Erickson was interested in establishing a criteria or guidance for
Council to determine which renewal measures up. It may get the politics out of
the process and make the renewal process smoother.
Chair Erickson
recommended reading through the paragraphs of the policy and address concerns
of the Committee or Staff.
The following
discussion covered adding to paragraph A to include economic impact of the
investment to the community. Emphasis should be more on revenues generated, and
number of local jobs added.
City Manager Wrede
recommended amending paragraph A to read; “financial investment, economic
impact such as number of employees anticipated, tax revenues, stimulation of
spin-off economic development and long term social and economic impact on the
property upon the termination of the lease. It shall also be related to a
lesser degree on the value and usefulness of improvements that the lessee will
make; lessee’s financing and the amortization requirements.
Mr. Hogan recommended
strong consideration be given to the IRS amortization schedule for capital
investment.
Mr. Velsko noted
that there was language already addressing amortization schedules in item A.
Mr. Hogan stated that leases over 30 years are treated as exceptional and
according to IRS schedules, to recoup full investment all leases would be
exceptional.
Further discussion
ensued on the percentage used for lease extensions; most of the existing leases
should becoming up for renewal soon; current lease standard is 20 years with 2
extensions equaling 30 years; establishing a 30 year lease standard; leases are
built on a case by case basis. There was a brief discussion on the standard
boilerplate lease and these can be changed for each specific lease.
Chair Erickson asked
for any recommendations for section D or E of Chapter 11.2. There was none. She
then asked for recommendations on section F.
Mr. Velsko
recommended striking “social” and “policy” in number seven under item F. He did
not feel it was appropriate in the Lease Policy. City Manager Wrede explained
the origins of that item. He additionally explained that the seven items were
used by council to determine if a lease should be sent out through the bidding
process. It is all subjective and not easy calls.
Chair Erickson
requested changes, additions or to leave as is and reminded the Committee that
there were numerous leases coming up for renewal so this policy needed to be
addressed now.
There was
extensive discussion on the pros and cons of sending leases out for proposal,
expired leases sent out to the RFP process, taking better control of the
expiration time on leases. There was a brief discussion on if a business is
trying to sell but only has a short time left on their lease in response to
Chair Erickson’s question regarding the Happy Face Restaurant.
In response, the City
Manager Wrede explained that the lease could be assigned and would have to go
through the same processes. It is tricky because you needed to protect the
public interest and assignments do not go through the bidding process. He held
the opinion that this section should be addressed by the Committee.
Chair Erickson
redirected the conversation back to item F, lease renewals, under Chapter 11.2
of the Lease Policy.
There was a brief exchange
of ideas on when to send a lease to RFP process.
Port & Harbor
Director Hawkins noted it would be convenient to have a list of potential or
upcoming lease expirations in the packet to know what is coming up. It was agreed
that would be a good thing to have.
Chair Erickson
requested input from City Manager Wrede regarding issues with Chapter 14,
Assignments.
City Manager Wrede
indicated that some of it was legal and some policy. It is cumbersome, as
stated by Mr. Alderfer at the last meeting, if you are selling and have a
buyer, and it takes a few months dealing with the City, which can put off a
potential buyer.
The processes are established
for a reason. In dealing with a 20-30 year lease, you want to proceed carefully.
There may be better processes.
He is not sure of
a better process in the case of the Happy Face Restaurant where they own the
building and the City owns the land. How can you RFP the land when there is a
building on it. There is the legal hang up.
Mr. Velsko
suggested that the City enter into an agreement contingent upon financing,
which can sometimes take months, the potential buyer can make an offer
contingent on receiving a 20-year lease. On the flipside, the City could enter
into an agreement with the owners to RFP the building and the property. The
City benefits by getting a new long-term lease and the owners sell their
building.
The City Manager
will look into that possibility. The owners and the City would have to agree on
the proposal for the building and the land use.
Further dialogue ensued
on the Happy Face Restaurant and if a potential buyer could extend the lease by
assignment; extension of options; public access to bid; best option for a new
owner would be a new lease; new lease may affect potential buyers financing;
assignments of leases must be carefully reviewed and cannot be automatic.
Additional
discussion included the possibility of the current lessee having to remove the
building, the options available to prospective buyers with the City willing to
work with the prospective buyers. Chair Erickson requested if any changes
should be made to Chapter 14 to make it more encouraging to new businesses.
Mr. Hogan
recommended the Committee review the successful assignments of leases and go
from there. He recommended the Fish Factory and Don Jose’s.
A brief discussion
of the assignment of previous leases good and bad ensued.
Chair Erickson
summarized there may be a problem getting financing on the Happy Face with such
a short time remaining on the lease. Mr. Velsko recommended that the longest
possible lease be extended to a potential new owner of the Happy Face. It was
noted that the City would be willing to help facilitate any sale of the
business but they still would need to follow the established protocol.
Discussion opened
up the process and time it would possibly take. Mr. Velsko described a possible
scenario for a new lease.
Further discussion
included possibly canceling the lease. Adding to the policy as a benefit when selling
business buyer automatically gets a new lease. Mr. Velsko then recommended no
assignments because a new owner would automatically get a long lease.
City Manager Wrede
will check with the City Attorney to see if releasing a RFP that includes the
building would be possible.
This overall could
be a benefit to the City since they could choose not to do this if they want
the existing operation to cease.
Chair Erickson
inquired about adding language to Chapter 14 regarding joint RFP and option to
start brand new lease when a seller has a buyer for the business.
City Manager Wrede
believes there is more to assignments than just transferring the remaining
years of the existing lease. He again stated he would confer with the City
Attorney.
Port & Harbor
Director Hawkins inquired if language was needed or a change to make the
process details clearer to prospective lessees. He believes it to be part of
customer service and keeping the process moving along. He was recommending that
Staff was to compile all the required information and the Lease Committee was
to review and make the recommendations to City Council. This should be in the
policy so prospective lessees would realize the time involved
Chair Erickson
would like to have the recommendations from the EDC and the PHC. Then review
and submit to Council. Mr. Velsko asked if another joint worksession should be
conducted between the EDC and the PHC. Chair Erickson commented that the work
was incomplete at the last worksession.
She would also
like to have to pending or upcoming leases on the agenda.
NEW BusinesS
A. Portion of Lot 48 RFP proposal(s)
currently occupied by Kachemak Port Services
Chair Erickson
requested a motion to discuss.
VELSKO/HAWKINS –
MOVED TO DISCUSS.
There was no
discussion.
The motion to
discuss was approved by consensus of the Committee.
Discussion ensued regarding
the review of the proposal received and the next steps required proceeding with
the leasing process. City Manager Wrede stated the next step is a
recommendation from the Lease Committee to City Council.
HAWKINS/ABBOUD –
MOVE THAT THE LEASE COMMITTEE RECOMMENDS THAT THE HOMER CITY COUNCIL APPROVE
THE PROPOSAL SUBMITTED BY KACHEMAK PORT SERVICES TO LEASE THE OFFICE SPACE THEY
OCCUPY IN THE CITY BUILDING LOCATED ON LOT 48 AND AUTHORIZE THE CITY MANAGER TO
ENTER INTO LEASE NEGOTIATIONS PROVIDED THAT ALL CODE REQUIREMENTS ARE
SATISFIED.
There was no
discussion.
VOTE. YES.
NON-OBJECTION. UNANIMOUS CONSENT.
Motion carried.
There was no
further discussion.
Informational Materials
A. Memo to City Manager, Walt Wrede,
regarding Fish Factory replat request
B. Memo
to City Council & City Mgr, Walt Wrede, regarding Homer Ent. /Sport Shed
lease
C. Memo
to Mayor Hornaday & City Council regarding 2009 Land Allocation Plan
D. Memo
to City Manager, Walt Wrede, regarding Kachemak Port Service lease – RFP
There was no
discussion.
Mr. Hogan
appreciates the Committee for the thoughtful deliberations on the Lease Policy
and feels they are moving in the right direction. There has been careful
thought, that council, statement is indiscernible to clerk to transcribe, they
move carefully and deliberately. It is good to see that the City has come to a
realization that a relationship between the landlord and tenant is a
partnership and not adversarial. There have been more adversarial relationships
in the past and he is glad to see changes.
COMMENTS OF THE
None.
Comments from the committee
None.
COMMENTS OF THE CHAIR
Chair Erickson
thanked everyone for attending and feels they are making some progress. The
next meeting is July 9, 2009. There may need to be a change in that date.
There being no further business to
come before the Committee, Chair Erickson adjourned the meeting at 4:17
p.m. The next Regular Meeting is scheduled for July 9, 2009 at 3:00 pm in
the City Hall Cowles Council Chambers located at 491 E. Pioneer Avenue, Homer,
Renee Krause,
Deputy City Clerk I
Approved: