Web Packet 02-21-12 - the City Council

STAFF REPORT
DATE:
February 21, 2012
TO:
City Council
FROM:
Ken Hiatt, Community Development and Sustainability Director
Anne Brunette, Property Management Coordinator
SUBJECT:
First Amendment to Pole Line Parking Lot Lease
Recommendation
Approve the attached resolution authorizing the City Manager to enter into the First Amendment
to the Lease with Davis Industrial Group to reset the rent and allocate the rent to the
maintenance, administrative and General Fund as described in this report.
Fiscal Impact
The fiscal impact of this amendment reduces the rent from $1,157.56 to $800 per month with a
1% inflator for the remaining five years of the lease. This amendment is a more accurate
reflection of the current market rent than the previous rent which was tied to the Consumer Price
Index. The current rent is going to the General Fund. The parking lot is maintained by programs
7245/lighting and 7252/parking for an annual cost of approximately $3,000/year. As part of this
amendment a portion of the rent will be directed to program 3216 (20%) which administers the
lease agreement including staff time on this amendment and $3,000 will be split between
programs 7245 and 7255 for maintenance with the balance of the rent going to the General Fund.
Council Goal(s)
Infrastructure
Maintain and improve current infrastructure to meet community needs now and into the future.
Guiding Principles:
Maintain and enhance infrastructure through reduced costs, greater efficiencies, and
partnerships.
Capitalize on and/or share existing resources.
Background and Analysis
Sudwerks was constructed prior to the Pole Line Road overcrossing construction. When the Pole
Line Road overcrossing was constructed the City needed to acquire additional land adjacent to
Sudwerks restaurant. As part of the acquisition the parties agreed to construct the overcrossing
on piers instead of a retaining wall to allow more light, air circulation and views. The Purchase
and Sales Agreement called for the City to construct a parking lot under the overcrossing and
lease the parking lot to Sudwerks property owner (Davis Industrial Group). The parking lot lease
agreement was entered into on June 23, 1997 with a commencement date of October 1, 1996.
The original rent was set at $800/month with a Consumer Price Index adjustment made every
sixth year during the term. The restaurant has seen a significant decline in business the last three
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Davis Ind. Group lease amendment
years and requested that the city reset the rent back to the original $800/month. There are no
other users who would pay rent for this parking lot. Therefore, it is in the best interest of the city
to maintain the relationship with the restaurant.
The City is responsible for the maintenance of the parking lot. The City spends approximately,
$3,000/year to maintain the lot. As part of this staff report staff is directing that a portion of the
rent cover the cost of maintenance ($3,000/year); lease administration ($1,920/year) and the
remainder ($4,680/year) going to the General Fund. The rent will include a 1% inflator. Staff
will be renegotiating the lease prior to its expirations on September 31, 2016
Attachments
1. Resolution
2. First Lease Amendment
3. Letter
4. Original Lease
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Davis Ind. Group lease amendment
RESOLUTION NO. 12-XXX, SERIES 2012
RESOLUTION AUTHORIZING THE CITY MANAGER TO ENTER INTO THE FIRST
LEASE AMENDMENT WITH DAVIS INDUSTRIAL GROUP
WHEREAS, the City of Davis and Davis Industrial Group, entered into a lease agreement on
June 23, 1997 with a commencement date of October 1, 1996 to lease the parking lot under the
Pole Line Road overcrossing for use by Sudwerks restaurant customers; and
WHEREAS, the parking lot primarily serves the Sudwerks restaurant which has seen declining
sales in the last five years; and
WHEREAS, originally the lease agreement between the City and Club was for $800/month with
a CPI inflator applied each sixth year of the lease: and
WHEREAS, the CPI inflation has exceed the revenue percentage of the restaurant and the city
desires to reset to the original rent rate beginning on October 1, 2011 with a 1% inflator.
NOW, THEREFORE, BE IT RESOLVED that: the City Council authorizes the City Manager to
enter into and if necessary make minor modifications, after consultation with the City Attorney,
to the First Amendment to the Lease Agreement with Davis Industrial Group.
PASSED AND ADOPTED by the City Council of the City of Davis this 21st day of February,
2012 by the following vote:
AYES:
NOES:
Joseph F. Krovoza
Mayor
ATTEST:
Zoe S. Mirabile, CMC
City Clerk
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Davis Ind. Group lease amendment
Attachment 2
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO THE LEASE (“Amendment”) is made on this 21st day of
February, 2012 between THE CITY OF DAVIS, a public body corporate and politic (“Landlord”) and
Davis Industrial Group, a general partnership (“Tenant”) agree as follows:
Whereas, Landlord and Tenant entered into a lease on June 23, 1997 with a commencement date of
October 1, 1996 to allow tenant to use the parking lot under the Pole Line Road Overcrossing; and
Whereas, Landlord and Tenant have mutually determined that the inflator rate used for the rent is not
appropriate at this time; and
Therefore, Landlord and Tenant wish to amend the lease to reset the rent to $800/month beginning on
October 1, 2011 with a 1% inflator applied annually on October 1st of each year.
Except as specifically modified by this First Amendment, all terms and provisions of the Lease
shall remain unchanged and continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment in duplicate with an
effective date of February 21, 2012.
TENANT:
Davis Industrial Group, a general Partnership
By ________________________
By ________________________
Its ________________________
Its ________________________
By ________________________
By ________________________
Its ________________________
Its ________________________
By ________________________
Its ________________________
LANDLORD: CITY OF DAVIS, a municipal
corporation of the state of California
ATTEST:
______________________
(City Clerk)
________________________
Steve Pinkerton, City Manager
APPROVED AS TO FORM:
______________________
(City Attorney)
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