City of Homer

LEASE COMMITTEE

July 23, 2008 3:00 pm

Cowles Council Chambers

Meeting Synopsis

Session 08-04, a Meeting of the Lease Committee was called to order at 3 p.m. on July 23, 2008 by Port & Harbor Director Bryan Hawkins at the Homer City Hall Cowles Council Chambers located at 491 E. Pioneer Avenue, Homer, Alaska.

PRESENT: Regina Harville, Finance Director; Dotti Harness, Planning Department; Bryan Hawkins, Port & Harbor Director; Philip Alderfer, public committee member; John Velsko, member of the Port & Harbor Advisory Commission; Shelly Erickson member of the Economic Development Advisory Commission

STAFF: Bonnie Judge, Port & Harbor Administrative Clerk

APPROVAL OF AGENDA

VELSKO/ALDERFER APPROVE AGENDA AS WRITTEN.

No objection. Motion carried.

PUBLIC COMMENTS REGARDING ITEMS ON THE AGENDA

Kevin Hogan spoke about reviewing the minutes of the last meeting. He doesn’t agree with the minutes as they said he had spoke about the Executive Session item on the agenda. He didn’t believe that the Executive Session was an agenda item and that’s why he was talking about it. It also was not the case on the previous meeting either that there was a notice on the agenda that there was to be an Executive Session.

Mr. Hawkins asked Kevin where is he at, what page of the minutes? Kevin replied he was at the beginning of the minutes and that was the issue. The committee did go into Executive Session and later in the minutes under section C, there is a statement that Ms. Harvile said it was her understanding from the Executive Session that both proposals were given an extended period of time.

Kevin replied that when you go into Executive Session you have to notice what you are going to talk about before you go in and that was certainly not the case that you were talking about the proposals. The notice he recalled hearing about was that you were going to get advice from the city attorney for the reasons of Executive Session. You are supposed to say what you are going to talk about and limit it to that and that appears not to have been the case. Further on in the agenda there appears to be an item where I am asking for clarification based on those minutes on that subject. It was addressed in the Executive Session stating that the proposal I had presented was non-conforming.

He would like a detailed response to how it was non-conforming and he’d like the discussion to be public. Kevin goes on to say that unfortunately there doesn’t seem to be many of you here that were here then, and that maybe only two that were in the meeting are here now.

Further down in the agenda there is a short attachment with the excerpt from the policy and procedures manual. Kevin would like to draw attention that the prevailing authority on the lease evaluation criteria is 1808070 of the city code which takes precedence over policy manual whenever there is a conflict and he’d like to point out that you guys are the ones who are supposed to do the lease negotiating.

Mr. Hogan also replied that he appreciates the committee’s service.

Mr.Velsko thinks the committee is going to have a hard time addressing Mr. Hogan’s concerns because he isn’t sure that there was anybody there (were you there Phil?). Mr. Velsko said that he was there for the Executive Session and that no reason was given for the non-responsive comment and that he had taken over the meeting from Mr. Kilcher.

Mr. Alderfer replied that Mr. Hogan’s application came in and it was factually complete on him and what he was applying for but the qualifications and terms of his lease and what he was asking for to be let was not what the City was leasing on its RFP. His request was for additional land and rezoning and that wasn’t what the RFP read. Mr. Alderfer understood what Mr. Hogan was asking for and its not to say that it didn’t make sense but the request for consideration for his lease and what the city had said was being let were in conflict.

Ms. Harness questioned if the minutes were approved? Mr. Hawkins said yes. Ms. Harness also questioned if the previous comments should be on these minutes? Mr. Velsko replied they should, and that Mr. Hogan brought up the fact that his proposal was discussed in Executive Session and he didn’t think that was right and his comments will be reflected on the record for these minutes.

VISITORS- One visitor.

STAFF & COUNCIL REPORTS– None

PUBLIC HEARING – None

PENDING BUSINESS

A. Election of Chairman

Mr. Velsko nominated Ms. Erickson for Chairman. Ms. Erickson accepted the nomination and is now the Chairman of the Lease Committee. Mr. Velsko wanted to nominate Mr. Alderfer as the Vice Chairman. Mr. Alderfer appreciated the nomination but said he would prefer not to serve because he is in the middle of a run for the Alaska State House and that also brings up another question of whether you’d like him to vote on any sort of business for this committee. The Vice Chairman nomination goes to Mr. Hawkins.

NEW BUSINESS –

A. Request from Mr. Hogan in regards for clarification for action taken.

Mr. Hogan spoke saying that as he recalls the RFP the stated proposal could be for one or more lots and if so is that the reason the proposal was non-compliant? Now that Ms. Harville is here I’d like to get her reason why the proposal was non-compliant because it was her comments in the minutes that reflected that position.

Ms. Harville replied that she hasn’t been around for a while and was not prepared to discuss Kevin’s question.

Mr. Alderfer comments on the other issue and says Kevin, I think you reflected this in your comments, was that your lease proposal was in effect contingent on negotiations which were outside of this committee. So this committee was in the position of having to evaluate a request for a lease which might or not be put into effect based on negotiations that you are already in with the city. I think that this committee didn’t quite know how to evaluate that response to an RFP in light of other folks who were also asking for that same piece of land. If we get a request that says “I will perform if” from one applicant and another applicant says “I’m going to perform period”. That was a point of comparison which wasn’t anticipated by the RFP and was difficult for the committee to evaluate. That was the other issue in terms of the rezone and the contingency, and in light of having also received other proposals that didn’t have that same contingency in them. They were non-conforming and that’s what the notes say, one was clearly non-conforming and the other two were (don’t remember exactly what we said) but it’s reflected in the minutes. Everyone was given additional time.

Mr. Hogan asks was that an outline criterion that would make the proposal non-conforming and the fact that there was a contingency that was exercisable at my option.

Mr. Alderfer comments that the RFP didn’t say “give us a lease proposal with contingencies”. The RFP said we are making land available, here is what the zoning is, here is what we assume the intended use will be; now give us your ideals. Not to give us an ideal if, or an ideal maybe.

Ms. Erickson asks Mr. Hogan does that answer your question.

Mr. Hogan replies that he doesn’t want to get into a debate. He doesn’t necessarily agree, and he’d appreciate that if in the future there is an issue like this that it could be discussed in an open forum rather than behind closed doors.

Mr. Alderfer replies to that point that none of that discussion took place in Executive Session. The Executive Session was held to determine the degree to which the applicant’s confidential information, nature of their application and their response to an RFP were. Was the committee running the risk of violating any of their understandable rights of confidentiality in evaluating those proposals in open session? The committee relied on the opinion of the City Attorney to help them understand that question, because that was new and admittedly new for everybody.

Mr. Hogan asked when it was discussed in open session. He was there and he never heard it.

Mr. Velsko replies that he thinks Kevin is right, it probably shouldn’t have been discussed in Executive Session and that we should probably move on. The committee did hear from the City Attorney that the committee shouldn’t go into Executive Session at the drop of a hat.

Mr. Hogan would like to inform the committee that if he receives a detailed written response informing him of why the proposal was considered non-responsive then he will withdraw his lease application for lots 9A and 10A so that we can put this behind us. He did recall at the time that the committee asked which proposal either lot 9A or 10A he would prefer? He stated clearly that his preference was for a combination of 9 and 10. The committee was informed of his stand and of which proposal he wanted, but the fact that it was determined non-compliant and if that was the case there has to be the criteria mentioned which you evaluated as non-compliant. I know what went on and you guys know what went on, but let’s move on. It was not done properly, and when this RFP was let we all knew who it was going to, that it was a done deal and wasn’t discussed in public.

Mr. Alderfer replied just for the record when the RFP was let he personally had no ideal who that RFP was going to.

Mr. Hogan said that he knew who was getting the RFP.

Mr. Alderfer said that then Kevin had information that he didn’t and as a member of the committee he wants to make that clear.

Ms. Harness commented that does she understand that Kevin wants to withdraw his intent to or application to?

M. Hogan replied that he will withdraw intent once he receives a written response from the city for the reasons why it was declared non-responsive. Non-responsive is a specific term that we did not meet the criteria of the RFP and that’s the issue he has.

Mr. Velsko asked Mr. Hogan if he’d accept Mr. Alderfer’s explanation. If the committee could have the city staff draw up a letter to Mr. Hogan stating that it was outside the RFP proposal because of the contingency placed on it, would that be acceptable so we can move on?

Mr. Hogan replied not really. It seems as if I’m getting two different answers. It is supposed to take place in open session and you are supposed to vote on it and make a determination if this proposal is responsive or non-responsive. The committee made a decision that it was non-responsive without giving any reasons why it fell short of the criteria of the RFP.

Mr. Velsko replied that he was told that it was non-responsive and he didn’t feel as if it was appropriate to delve into it since they had already gone over it. Kevin could be very well right that the criteria they used was not right, but who knows.

Ms. Harville spoke saying that they were real careful about what they discussed in the Executive Session. They all received packets in front of them and looked at them and made the decision at the table on whether it was responsive or not. There was no decision made in the Executive Session except that they weren’t going to hold Executive Sessions anymore. The problem they had at that particular meeting was that they were sitting at the table worried about what we could talk about in public without taking and disclosing things about one applicant or another.

Mr. Wrede, City Manager spoke from the audience that he agreed with Kevin that anytime the city finds a RFP being non-responsive that they should explain to the applicant why they are non-responsive. Mr. Wrede believes that Kevin deserves an explanation. Mr. Wrede went on to say that he was wondering why they are even having the conversation because he thought that Kevin’s proposal clearly said that if he gets his lease on lot 12 then the other lease applications would go away.

Kevin replied that it had not been formally withdrawn and as a leasing company he could have multiple leases. Kevin said the thing that happened was that the process of this RFP determination artificially affected the market and the application for lot 12C and that he had stated that lots 9 and 10 was their preference.

Ms. Harness replied that it sounds like from the conservation that we should make a motion for you as chairman to issue a letter to Kevin indicating the reason why his proposal was considered or not considered and move on.

Chairman Erickson questions does the committee even have a copy to look at where it actually is non-compliant? Mr.Velsko states that he doesn’t think that anyone has a copy and goes on to say that is why you don’t go into Executive Session unless it’s for financial reasons. When an applicant submits a proposal they are entering into the public domain and their proposal would be deliberated in public.

A proposal was made to get the new City Attorney’s opinion and then if it comes back that we shouldn’t have done what we did as stated in the minutes then to write the letter to Mr. Hogan, apologize and move on.

Harness moved to submit a motion authorizing Mr. Alderfer and Chairman Erickson to work with city staff to issue a letter to Mr. Hogan clarifying why his proposal was non-responsive.

Motion passed no objection.

B. Alaska Marine Highway Lease for a Portion of Lot 48

Mr. Wrede joined the discussion regarding lease for a portion of Lot 48 for the Alaska Marine Highway System. The basis of this discussion with the lease committee involved Mr. Wrede standing and pointing out specific areas that he was referring to on a large chart. He also directed the committee to the memo that was in the packet and expressed hopes that the committee has had a chance to read the memo. He states that we have got ourselves in a little bit of a pickle with two prized tenants. Basically everything that Mr. Wrede referred to in his demonstration can be accessed in the memo.

The problem with AMHS is that they want to be rent free and to have a lease that is longer than what a normal lease would be. Is it in the public interest to give AMHS free rent and a longer lease? How bad do we want the Marine Highway System here in Homer and what do they mean to the local economy?

Chairman Erickson asked if AMHS would guarantee that they would keep Homer their home port if we provide this for them? Mr. Wrede replied that maybe we could make that a condition.

There was a lengthy discussion regarding the history of both the Coast Guard and the AMHS lots.

Mr. Velsko asked if the Coast Guard paid any money for their lease. He went on to say that you have a situation where you have somebody who is actually paying for a lease, and they are pretty good tenants versus AMHS who isn’t paying any money to the City.

Mr. Velsko isn’t sure that in the future, 50 years from now, that there will even be an AMHS the way the legislature is cutting funds on it.

A question was raised that with the huge surplus the State has now would it be to out of hand to ask for the AMHS for a $1000 a month?

Ms. Harness commented that it was the 50 year aspect that was so far reaching and that she didn’t know how the 50 year aligns with the arrangement with the Marine Ferry Terminal. She thought that it seems like the expiration dates should somewhat align.

Mr. Alderfer asked Mr. Hawkins what other commercial uses get bumped when the Tustamena and the Kennicott are in and how can we shift that traffic?

Mr. Hawkins replied that it came down to scheduling more than anything. We know the arrivals and departures of the Tustumena and the Kennicott as they are published two to three months in advance. We schedule around their arrivals and departures. Fuel barges deliver to Petro Marine. There is the occasional cruise ship, and other commercial vessels that need outside dock space for loading fuel. We have a lot of tug and barge traffic coming from Anchorage. Crowley is doing a lot of their staging work in Homer now. We are working around the Ferry schedule and it works because we have the DWD to move over to. We have been fortunate in that both docks have been booked.

Chairman Erickson asks if there is something that we have to do on this today or can we give ourselves a little bit of time to look for other alternatives? Can the Port and Harbor Commission and the EDC discuss this issue in their next meeting? In her opinion she thinks 50 years is a long time and that there is a lot up in the air. I’m not saying to put it off for 6 months, maybe give us 2 to 3 weeks to think and talk with the different committee’s and get their input and try to make it work for all of us.

Mr. Wrede responds saying that this has been going on for quite awhile. Mr. Wrede is looking for a recommendation. There is something on the City Council’s agenda for Monday night and it is just a conceptual thing, not a lease approval. Mr. Wrede is going to the Council to ask them conceptually what they think about the prospect of no rent for 50 years. That is a concession that the Marine Highway wanted me to make, and I told them that I am not able to do that, as it is beyond the scope of what I can do. I needed to talk to the Council and the Lease Committee to see if that is even in the ball park. If the Lease Committee had a recommendation right now about those two things then that would be helpful to the Council.

Chairman Erickson replied can we say that “yes” we are interested in working with them but we can’t be specific right now because we need to do a little bit more homework.

Ms. Harville makes a motion that the Lease Committee pursue allowing AMHS to use this land maybe contingent on tying all of these little pieces together somehow. To work on the language and try to work out a good deal for all especially since the language is not in the original lease.

Ms. Harness replies that she thinks what Mr. Wrede is asking for is a year amount, 20, 30 or 50 years.

Mr. Wrede replied that a 50 year term, rent free are decisions that the City Council has to make and that these are very big issues.

Mr. Velsko offered a motion that the Lease Committee direct the City Manager to a recommendation for the City Council, not to grant the AMHS a 50 year lease. The Lease Committee would like to see something more in the 20 to 25 year lease consistent with the lease policy.

Chairman Erickson excuses herself for an appointment at 4:05 pm.

Vice Chair Mr. Hawkins takes over the meeting.

Mr. Velsko clarfies his motion is to recommend to the City Manager in negotiations with the AMHS that we recommend a lease term not to exceed current City of Homer lease policy.

As a sidebar this allows Mr. Wrede to go to the City Council and say to them that the Lease Committee is uncomfortable with the 50 year lease.

Mr. Alderfer asks for a second.

Motion is seconded.

COMMENTS OF THE COMMITTEE

Mr. Alderfer speaks saying that he supports a longer lease term. If its 50 years or 80 years I’ve been a proponent of longer lease terms then this committee has been willing to endorse in the past. This is based only on my personal experience. I know that without a lease term that provides some degree of financial stability or at least a certainty that it is hard to make a commitment to an investment in equipment and expand a business and what not. I think what we have (or I’ve seen) develop on this section of the spit is smaller, less permanent buildings in part because we have not been willing to extend longer lease terms. That being said, I would not support a recommendation that we give the AMHS a blanket 50 year lease. I would like to see any length of lease tied to the duration that Homer is the home port for the Tustumenta and increased ship traffic for the Kennicott whether that is 2 years, 5 years or 25 years that we will provide you with rent free space as long as you make us the priority. I am a strong proponent of both the Coast Guard and the AMHS having as much space and doing as much as they want down on that section of town, but I’m not interested in extending any lease even for 20 years to an organization that is not going to make any commitment to the town . I would support a motion that would commit a lease to them as long as those areas are home ported, but I would not want to extend that lease to lot 45A because my guess is that having the ability to use that as dual use space I am perfectly content giving them preferential access during the times that they need that area for shipping.

I would vote no on that motion for those reasons because I think that the length of any lease, or any agreement needs to be tied to the length of time that Homer is the home port for the Tustumena. I would not want to see a lease on 45A preclude the Port from being able to use that for other purposes.

Mr. Velsko calls for a vote on the recommendation that the City Manager do not recommend a 50 year lease and to adhere to the current lease policy.

ROLL CALL VOTE: HARVILLE YES; HARNESS YES; VELSKO YES; HAWKINS YES; ERICKSON YES; ALDERFER NO.

VOTE IS: FIVE YES’S AND ONE NO.

Ms. Harness added that she likes the ideal of Mr. Alderfer tying the use with the length of the lease and the reason she voted yes was to give Mr. Wrede direction.

Mr. Wrede replied that now he can tell the City Council that the Lease Committee voted and that there was a motion that passed no to a 50 year lease and to adhere to the Lease policy. I can tell them that there were discussions about alternative ideals and that one ideal was to tie it to their commitment to Homer? How much is going to be invested? How many jobs are going to be created? What exactly is AMHS commitment to Homer?

C. POLICY AND PROCEDURES CRITERIA FOR EVALUATING PROPOSALS

Mr. Velsko commented that this pretty much is why we don’t have to reinvent the wheel. Walt can take this to the City Council with our recommendation that we are not in favor of a 50 year lease.

COMMENTS FROM THE AUDIENCE

Mr. Hogan commented that it was a good meeting. The discussion tonight emphasizes the importance of this committee. It is important that the Lease Committee should meet a little more often. In regards to AMHS he’d like to recommend that the Lease Committee look at utilizing the old un-removed dock that doesn’t have any use right now. He thinks that the Lease Committee is going to grow into a role of larger importance as time goes on

COMMENTS OF THE CITY STAFF-None

COMMENTS OF THE COUNCILMEMBER

Mr. Alderfer comments that there is one thing that he’d like the committee to take a look at and this will tie in with the discussion of the AMHS use. He thinks that there is a real hole in city lease policy as it relates not just to the RFP process for new leases but the way we decide to extend, renew or transfer existing leases. Based on personal experience he has had a number of opportunities this summer to have conversations with folks who are interested in the property that exists or sits on city leased land. He has seen first hand how difficult it has been for owners of properties to transfer those properties to a new buyer or a new business operator. We should be helping users more effectively streamline the process for transfer of leases and to address lease renewals to a new owner.

An example would be if you had 5 years left on your lease and you are trying to sell a business, or a building and you want to retire, or move. You have someone who wants to buy your business and has the money and inclination. The City is not in the position to say “here is what you do to get a 20 year lease or whatever”, or make that transfer happen. That is a hole in our lease process that I’d like to see the committee address. It may be that there isn’t that much work that has to be done. It could just be a form or a procedure or a schedule for this committee that we need to have. But when that particular question kills a real estate transfer we are not just hurting the business owner or the new owner we are hurting the City. I think that we should have procedures to simply and smoothly evaluate new requests for leases. I also think that it is equally important to have policies and procedures to figure out what to do with leases that are in force right now.

Mr. Alderfer makes a motion that the Lease Committee review the way an existing lease is transferred and to discuss perhaps expediting lease transfers and extensions to new business owners.

A case he is referring to happened to a potential business buyer who dropped out when an existing business owner couldn’t tell them what they could do with this thing in a couple of years once the existing lease was up.

COMMENTS OF THE CHAIR

Vice Chair Hawkins commented about the Main Dock issue regarding use of the old dock. He is the Facility Security Officer and the Main Dock is inside the security zone. There would be a security issue to have people or buildings out on the old dock.

In regards to the Ferry lease proposal there have been great comments right off the bat and everyone has come up with very good points. Vice Chair Hawkins also thanked everyone for their efforts.

ADJOURN

There being no further business to come before the Committee, Vice Chair Hawkins adjourned the meeting at 4:30 pm.

Bonnie Judge, Port and Harbor Administrative Clerk

Approved 10/9/08