Agenda Item   

AGENDA STAFF REPORT

 

                                                                                                                        ASR Control  18-001009

 

MEETING DATE:

10/20/20

legal entity taking action:

Board of Supervisors

board of supervisors district(s):

2

SUBMITTING Agency/Department:

County Executive Office   (Approved)

Department contact person(s):

Thomas A. Miller (714) 834-6019 

 

 

Stacy Blackwood (949) 923-3743

 

 

Subject:  Balboa Yacht Club Lease Agreement

 

      ceo CONCUR

County Counsel Review

Clerk of the Board

Concur

Approved Agreement to Form

Discussion

 

 

4/5 Vote

 

 

 

    Budgeted: Yes

Current Year Cost: N/A

Annual Cost: N/A

 

 

 

    Staffing Impact:

No

# of Positions:

Sole Source: No

    Current Fiscal Year Revenue: $88,896

  Funding Source: Other: 100% (Lease Rents)

County Audit in last 3 years: No

 

 

    Prior Board Action: 10/29/1996 #11, 8/28/1984 #40

 

RECOMMENDED ACTION(S):

 

 

1.

Find that the proposed project is categorically exempt from the provisions of the California Environmental Quality Act (CEQA), Class 1 (Existing Facilities) pursuant to Section 15301.

2.

Approve the lease agreement with Balboa Yacht Club commencing on the first day of the month after approval for a 30-year term.

 

 

 

 

 

 

SUMMARY:

 

Approval of the new lease agreement for property currently leased to Balboa Yacht Club will allow for the continued operation of the facility, which is partially located on filled-in County tidelands in the Newport Bay.

 

 

 

 

 

 

BACKGROUND INFORMATION:

 

On August 28, 1984, the Board of Supervisors (Board) approved a Lease Agreement (Current Lease) with Balboa Yacht Club (BYC) for BYC’s use of County tidelands in conjunction with its fee-owned property for yacht club operations, including a clubhouse, dry boat storage and limited public parking. The Current Lease commenced on September 1, 1984, with a 15-year term.

 

On October 29, 1996, the Current Lease was amended to extend the term for an additional 30 years beyond the original 15 year term, to expire on August 31, 2029.  The amendment also required BYC to increase the minimum number of hours for marine-oriented educational and recreational public service programs from 200 to 275 hours per year.

 

The majority of the BYC clubhouse, parking and waterfront is situated on property owned in fee by BYC. Two smaller portions of the BYC improvements are on City of Newport Beach (City) filled-in tidelands and County filled-in tidelands.  BYC recently completed refurbishments of their facilities including: expansion of the upper deck outside lounge area, refurbishment of the first floor reception, restaurant seating areas, improvement of an exterior stairway, storage areas and completion of Americans with Disabilities Act accessibility improvements at an estimated cost of $6 million.  These improvements were funded by a 15-year loan from Farmers & Merchants Bank secured against BYC’s fee-owned property, not hypothecated against the Current Lease.  Without an extension of the lease term, the Current Lease will terminate before the loan is fully amortized and paid off; therefore, BYC has requested to extend the term of the Current Lease beyond the anticipated loan end date of 2034. 

 

The rent for the County tidelands was last adjusted in October 2017, to a monthly rental amount of $7,408. A rent analysis was completed by County Executive Office Real Estate on August 9, 2018, which determined that the current monthly rent of $7,408 was comparable to the rent of similar properties with similar uses in the area and was an appropriate rent rate for the lease.  The leasehold is bordered by the BYC’s fee-owned property and City tidelands; therefore, is not marketable for lease to another party.  In this case competitive proposals would be futile and would not produce any advantage to the County due to the fact that the leasehold is not marketable to other parties; thus, competitive bidding is not required.  See also, Meakins v. Steveland, Inc., 68 Cal.App.3d 490, 498 (1977).  However, the lease must still be at fair market value, which has been established by the aforementioned rent analysis.

 

A new lease (New Lease) is proposed that supersedes the Current Lease and sets a lease term end date 30 years after Board approval.  The proposed new lease will begin at the existing monthly rent of $7,408.  The New Lease includes provisions for rent adjustments every three years based on the proportional change in the Consumer Price Index. The New Lease also provides for a reappraisal of BYC’s rent every 10 years to determine the fair market rent for the County tideland area.  The procedure for reappraisal of rent will involve the County and BYC agreeing on the appraiser’s scope of work and sharing the cost of the appraisal equally.  At no time will the reappraised rent be assessed at less than the previous month's rent.

 

The proposed New Lease also increases public service programs for marine-oriented education and recreation from 275 hours to 300 hours per year and increases junior sailing instruction programs from five weeks to seven weeks.  Additionally, the New Lease updates the insurance clauses and coverage amounts and brings all lease clauses up to current County standards.

 

Compliance with CEQA: The proposed project is categorically exempt (Class 1) from provisions of CEQA pursuant to Section 15301 of the CEQA Guidelines because the proposed project consists of the lease of existing facilities involving no improvements or expansion.

 

 

FINANCIAL IMPACT:

 

Approval of the New Lease will result in continued revenue to the County of $7,408 per month for the first three years. The rent shall be automatically adjusted every three years from the Rent Commencement Date according to changes in the Consumer Price Index.  Revenue for this item is recognized in the Newport Tidelands Fund 106 FY 2020-21 Budget and will be included in the budget for future fiscal years.

 

 

 

STAFFING IMPACT:

 

N/A

 

 

REVIEWING AGENCIES:

 

OC Community Resources

 

ATTACHMENT(S):

 

Attachment A - Summary of Lease
Attachment B - Location Map
Attachment C - Lease Agreement
Attachment D - Conveyance Questionnaire