Attachment 5
SUBJECT: LEASING OF CITY-OWNED REAL PROPERTY
POLICY NO.:
EFFECTIVE DATE: _________, 2024
BACKGROUND: The City of Hercules is owner of certain developed and undeveloped real property which is used for various municipal purposes. On occasion such property assets may be made available for lease.
PURPOSE: This policy is intended to establish a procedure for the leasing of City-owned real property.
POLICY: It is the City’s policy to manage its real estate assets so that municipal needs which rely on these assets may be properly implemented.
The City Manager shall periodically assess real estate not currently used for municipal purposes and determine the appropriate use of the property. Those properties not needed for either City or public use within the foreseeable future, may be made available for lease. The City shall optimize the lease rent from City-owned real estate based on relevant factors, including 1) an appraisal reflecting current market value when either a transaction or authorization to lease is presented, 2) prevailing economic conditions and market trends, and 3) any special benefits to accrue from the lease.
The City shall seek market value for the lease of its properties. Discounts less than market value will not be negotiated unless a particular need or special circumstance is recognized by Council Resolution setting forth the amount of the discount and the justification for the discount.
Procedure:
Approval Authority for Rental, Lease and Sublease Agreements Definitions. As used in this policy:
1.1.1 The term “lease” or “agreement” includes, where appropriate in the context, leases, subleases, rental agreements, and amendments to any of the foregoing.
1.1.2 The term “City Manager” includes the City Manager and the City Manager’s designee(s).
1.2 The approval and execution of leases of real property owned by the City and shall be approved by the City Council.
1.3 Approval of City Attorney. The City Attorney shall approve as to form all rental, lease, and sublease agreements, and all amendments to such agreements.
1.4 Risk Manager. The Risk Manager shall determine insurance requirements prior to execution of any lease documents.
2. Rental or lease of City owned property. All leases authorizing occupancy of City property for a period of more than six months shall be awarded to the highest responsible bidder, unless an alternative is justified based on the criteria established by this Policy.
2.1 Bid Procedures. For any lease authorizing occupancy of City property for a period of more than six months, the City Manager shall prepare an invitation to bid, which shall include a summary of the terms and conditions of the lease sufficient to enable bidders to bid solely on the basis of rents to be paid to the City. An advertisement for bid shall be published at least once a week for two consecutive weeks. The published notice shall state the time and place for the receiving and opening of sealed bids, and shall describe, in general terms the lease to be granted. All bids shall be presented under sealed cover. Whether or not bids are opened exactly at the time fixed in the public notice for opening bids, a bid shall not be received after that time. Any bid may be withdrawn at any time prior to the time fixed in the public notice for the opening of bids but only by written request filed with the City Manager. The request shall be executed by the bidder or by an authorized representative. The withdrawal of a bid does not prejudice the right of a bidder to file a new bid prior to the date and time set for the opening of bids. On the day named in the public notice, the City Clerk or designee shall publicly open the sealed bids. The City Manager may recommend to the City Council award of the lease to the bidder then determined to be the highest responsible bidder.
2.2 Failure of Bidder to Sign Agreement. A failure on the part of the successful bidder to sign and deliver the lease within thirty (30) days of receipt thereof and to provide the City with any bond or any evidence of insurance required thereunder may be treated as a refusal to execute if the City Manager so elects. If the City Manager deems it is in the best interest of the City, he or she may, on the refusal or failure of the successful bidder to execute the lease, recommend award to the second highest responsible bidder. If the second best responsible bidder fails or refuses to execute the lease, the City Manager may likewise recommend award to the third highest responsible bidder. Award to the second or third highest bidder is subject to City Council approval.
2.3. Rejection of Bids or No Bid Lease.
2.3.1 If the City Manager deems that the acceptance of any bid is not in the best interest of the City, the City Manager may reject all bids and advertise for new bids.
2.3.2 If the City Manager determines that it is in the best interest of the City, he or she may recommend to the City Council entering into a lease without bidding when one or more of the following conditions exist:
2.2.1. The bid process has failed to produce a highest responsible bidder;
2.2.2. The City proposes to lease the property to another governmental agency;
2.2.3. A firm and complete written offer for lease has been presented by or on behalf of a prospective renter, lessee, or sublessee, wherein the rent specified is at or above the fair market rate for comparable, similarly situated property, as determined by the City Manager;
2.2.4. The City proposes to lease the property to a nonprofit tax-exempt community civic or charitable organization; or
2.2.5. The City Manager finds and determines that special circumstances make the use of the bid procedure inappropriate.
3. Provision for Use of Third Party Agents.
The City Manager may at times utilize the services of a third party property management company to rent property owned by the City. The third party agents may assist the City in obtaining the market value rate for rents and in screening tenants. In the occurrence of the City acquiring property, the third party agents may assist in contracts for renting the property.