TRANSMITTAL. COUNCIL DISTRICT The Mayor 15

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1 TO Eugene D. Seroka, Executive Director Harbor Department TRANSMITTAL DATE COUNCIL FILE NO. MAY FROM COUNCIL DISTRICT The Mayor 15 PROPOSED PERMIT AMENDMENTS TO ESTABLISH AN IMPROVEMENT SET-ASIDE ACCOUNT FOR NINE EAST BASIN/CERRITOS CHANNEL WILMINGTON MARINAS Transmitted for further processing and Council consideration. See the City, lifilsitrati 'fficer reotfil attached. ( Guerrero MAYOR V MAS:ABN: t CAO 649-d

2 REPORT from OFFICE OF THE CITY ADMINISTRATIVE OFFICER Date: May 12, 2016 CAO File No. Council File No Council District: 15 To: The Mayor From: Reference: Subject: Miguel A. Santana, City Administrative Officer Correspondence from the Harbor Department dated April 18, 2016; referred by the Mayor for report dated April 20, 2016 PROPOSED PERMIT AMENDMENTS TO ESTABLISH AN IMPROVEMENT SET-ASIDE ACCOUNT FOR NINE EAST BASIN/CERRITOS CHANNEL WILMINGTON MARINAS SUMMARY The Harbor Department (Port) Board of Harbor Commissioners (Board) requests approval of Resolution No authorizing nine proposed Permit Amendments to establish rental improvement set-aside accounts for nine marina operators (tenants). The respective Permits (Agreements) are between the Port of Los Angeles (POLA) and marina tenants located in the East Basin/Cerritos Channel in the Wilmington Marinas. For the five year term of the proposed Amendments, 25 percent of each tenant's monthly rental slip payment will be earmarked as credit and assigned to an Improvements Set Aside Account. Tenants will be able to request the credits in the Improvements Set Aside Account to offset rent payments upon completion of improvement projects in their respective marinas as approved by POLA pursuant to the process established by the Amendments. POLA estimates the 25 percent credit will equal approximately $250,000 annually. No actual monies will be paid back by the Port and the tenants will continue to pay their full rental obligation per month. All projects must be pre-approved by the Port. The Port anticipates that these investment credits will add to the marinas' asset value and enable the marina operators to improve the overall condition of the marinas. BACKGROUND In 2001, the Board approved nine 30-year lease Permits for the nine marina operators, retroactively from November 1995 to October The Permits required the marina operators to prepare and implement plans to operate, maintain, renovate and improve the infrastructures for the boatyard facilities, recreational vessel marinas and related activities consistent with the policies and regulations of the POLA and State of California (State) agencies for port and marina operations. A marina is defined as a boat basin that has docks, moorings, supplies and other facilities for small boats. Port regulatfoh's''atpcmthe tenants to occupy and, in some instances, live aboard vessels in various marina berthing areas on POLA property. Selective State agencies have oversight of California boating laws to ensure consistency in quality, appearance and access of the marinas throughout the State. The provisions for measuring the financial and physical infrastructure of the marinas on the POLA s Wilmington Marinas are contained in their respective Permits.

3 CAO File No PAGE 2 Below is a summary of the tenant names, permit numbers, property leased sizes, and proposed annual minimum rent: Permit No. Tenant California Yacht Marina, L.P. Island Yacht Anchorage I, Inc. Lighthouse Yacht Landing, Inc. Perel Marinas, Inc., dba** Pacific Yacht Landing Cerritos Yacht Anchorage, Inc. Yacht Haven Marina, Inc. Yacht Centre, Inc. Marina Ventures Partnership. dba**holiday Harbor Island Yacht Anchorage II, Inc. Annual Totals Size of Properties (Square Foot) Land: 82,231 Water: 387,705 Water: 27,907 Land: 30,465 Land: 24,388 Water: 67,011 Water: 197,192 Land: 62,700 Water: 82,350 Land: 29,812 Land: 52,532 Water: 257,650 Land: 97,480 Water: 467,166 Water: 171,513 Land: 62,180 Land: 0 (POLB)*** Water: 227,753 Proposed Annual Minimum Rent4 $ 138,800 8,091 39,784 95,898 37,283 89, ,498 58,111 16,876 $ 619,074 Annual Minimum Rent reflects the amount after rent adjustment, which is 75% of past 3-year average of Gross Receipts Revenue, db, doing business as" *** Port of Long Beach (POLB) * The Port states that the nine marinas currently occupy a total of acres of land and acres of water in the Wilmington Marina area. The nine marinas have a total of 1,434 boat slips, of which 87 are occupied by live-aboard residents. The marina sites operate under specified marina regulations, which are incorporated into the Permits to maintain and improve operational, developmental and appearance standards for the respective marinas and to attract desirable vessels. The Board s published annual rate of return on the projected land and water values is the basis for determining the rental rates used in calculating monthly minimum rent for the Permits. The Port receives a minimum monthly rent based on land and water acreage assessed values or shares a percentage of the tenants gross receipts from various marina activities, whichever is greater. The Port states that current compensation is based primarily on 20 percent of revenue collected from boat slip rentals, which is collected in lieu of minimum rent. The minimum rent for the Permits was originally based on Port and industrial property standards for land and water rates. PROPOSED PERMIT AMENDMENTS The Port is requesting approval of the proposed Permit Amendments to establish a rental set-aside account for the improvement of the Wilmington Marinas. The Port wants to create an incentive for their tenants to upgrade their marinas by providing the marina operators a 25 percent rent reduction credit or a percentage of their rent to be set aside for infrastructure improvements. Currently, the Port is providing tenants approximately 20 percent rental credit. The proposed Permit Amendments would reduce all the marinas minimum rents in proportion to the decline in actual economic performance and gross revenue receipts. The Port states that a decline in gross revenue is due in part to a decline in recreational boating and to the major channel widening and expansion of a "turning basin. The turning basin will allow cargo ships to turn and reverse their direction of travel to accommodate the larger vessels coming into POLA. According to the Port, many of its major modernization proposals and marina improvements were put on hold in As a result, the Wilmington Marinas have experienced deterioration, except for emergency and patchwork repairs.

4 CAO File No PAGE 3 The Port states that proposed provisions to the nine Permits will allow for up to a 25 percent reduction in rent from the current amounts. The 25 percent reduction will be credited to the respective tenants with the stipulation that the credited funding be used only for improvement projects pre-approved by the POLA. Compensation for the Permits is reviewed for readjustments every five-year period. The Port estimates that an annual amount up to $250,000 may be set aside as a credit from the marina operators proposed rental amounts to improve and renovate projects in the Wilmington Marinas. The Port believes that these incentives and credit investments will add to the marinas asset value and enable tenant operators to improve the general condition of the marinas and gradually result in an increase in boat slip fees and revenues to the Port. Each of the tenant s proposed improvement project must be pre-approved by the Port in accordance with the provisions of the Permit to receive the agreed upon rent credit. The term of this Amendment is for five years from the effective date of its approval. Except as amended, the Port states that all remaining terms and conditions of the Permits will remain in effect. The above referenced Resolution No , authorizing approval of the proposed nine Permit Amendments and this report incorporate revised information received from the Port subsequent to the initial request submitted. CITY COMPLIANCE ISSUES The City Attorney has approved the proposed Amendments to the Permits as to form and legality. Since the proposed Permits are property leases, the request is not subject to provisions of Charter Section The proposed Permits are in compliance with all applicable provisions of the City Ordinances and contracting requirements. Except as amended, the Port states that all remaining terms and conditions of the Permits will remain in effect. The Port Director of Environmental Management has determined that the proposed Amendments to the nine Permits are administrative activities to set aside and improve the use of existing facilities. Therefore, the proposed Amendments to the Permits are exempt from the California Environmental Quality Act (CEQA) in accordance with Article III Class 1(14) of the Los Angeles City CEQA Guidelines. RECOMMENDATION That the Mayor: 1. Approve Harbor Department (Port) Board of Harbor Commissioners Resolution No authorizing Permit Amendments to establish a rental set-aside account for nine individual marina operators (tenants) located in the East Basin/Cerritos Channel in Wilmington, as follows: (1) California Yacht Marina, L.P., (First Amendment to Permit No. 801); (2) Island Yacht Anchorage I, Inc., (Second Amendment to Permit No. 802); (3) Lighthouse Yacht Landing, Inc., (First Amendment to Permit No. 803); (4) Perel Marinas, Inc., dba Pacific Yacht Landing (Second Amendment to Permit No. 804); (5) Cerritos Yacht Anchorage, Inc., (First Amendment to Permit No. 805); (6) Yacht Haven Marina, Inc., (Second Amendment to Permit No. 806); (7) Yacht Centre, Inc., (Second Amendment to Permit No. 807); (8) Marina Ventures Partnership, dba Holiday Harbor (Second Amendment to Permit No. 808); and, (9) Island Yacht Anchorage II, Inc., (Second Amendment to Permit No. 825); and,

5 CAO File No. PAGE Return the proposed Permit Amendments to the Port for further processing, including Council consideration. FISCAL IMPACT STATEMENT The Harbor Department (Port) proposes to establish rental set-aside accounts for the nine marina operators (tenants) in the Wilmington Marinas. The set-aside accounts will authorize up to an estimated 25 percent in rental reduction credits or approximately $250,000 annually to each marina tenant to improve their respective nine marinas in the POLA. The Port states that the tenants can only request the rental credits from the set-aside accounts for approved and completed marina projects. No actual monies will be paid back by the Port and the tenants will continue to pay their full rental obligation each month. The estimated $250,000 annual set aside will be allocated or credited from the tenants percentage rent amount, with the stipulation that the credited funding be used only for improvement projects on the respective marina properties. All projects must be pre-approved by the Port. The Port anticipates that these investment credits will add to the marinas asset value and enable the marina operators to improve the overall condition of the marinas. There will be no impact on the City General Fund. All funds will be deposited in the Harbor Revenue Funds. TIME LIMIT FOR COUNCIL ACTION Pursuant to Charter Section 606, Process for Granting Franchises, Permit, Licenses and Entering into Leases, and the Los Angeles Administrative Code, Section 10.5, Limitation and Power to Make Contracts, unless the Council takes action disapproving a contract that is longer than five years within 30 days after submission to Council, the contract will be deemed approved. MAS:ABN:

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