Placentia City Council
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TO: CITY COUNCIL
VIA: CITY ADMINISTRATOR
FROM: DEPUTY CITY ADMINISTRATOR / PUBLIC SERVICES AND INFRASTRUCTURE DATE: JUNE 21, 2022
SUBJECT: AMENDMENT NO. 2 TO COMPRESSED NATURAL GAS FUELING STATION
LEASE AGREEMENT WITH TRILLIUM USA
FISCAL
IMPACT: REVENUE: $75,000 ANNUAL BASE LEASE PAYMENT (100000-4711) $14,500 FY 22-23 ESTIMATED FUEL ROYALTY PAYMENT
(100000-4706)
SUMMARY:
On June 21, 2011, the City entered into a Lease Agreement with Trillium USA to maintain and operate the City's Compressed Natural Gas fueling station located at the City Yard. The Lease Agreement provides the City with an annual base lease and fuel royalty revenue stream and the City does not incur any maintenance or operational costs to operate the station. The term of the Lease Agreement was for a period of 10 years. On June 15, 2021, the City Council approved a one-year term extension for this Lease Agreement. Staff proposes to extend the lease term for one (1) additional year through June 30, 2023 to provide the City with additional time to consider other alternatives and the long-term viability of continuing to operate this station. No other terms of the existing Lease Agreement are changed, and the City will continue to receive its base lease revenue and royalty payments for the next year.
RECOMMENDATION:
It is recommended that the City Council take the following actions:
1. Approve a one-year term Lease Agreement extension through June 30, 2023 with Trillium USA to operate the City's CNG fuel station; and
2. Authorize the City Administrator and/or his designee to execute all necessary documents, in a form approved by the City Attorney; and
3. Authorize the City Administrator to administratively approve another 12 -month term extension in 2023, if needed, and provided no other sections of the agreement are amended.
1.h.
June 21, 2022
City Council Agenda
June 21, 2022
DISCUSSION:
The City has operated a Compressed Natural Gas (CNG) fueling station at its Corporation Yard since 2003. The City uses this fueling station to fuel its two CNG vehicles and it is open to the general public as well. Some of the customers that regularly use the fueling station include AT&T, Placentia-Yorba Linda Unified School District, City of Anaheim, and other utility companies. The CNG station requires a high-level of maintenance that exceeds the City's in-house capabilities.
On June 21, 2011, the City entered into an Agreement with Trillium USA ("Trillium") to operate the station on the City's behalf for a period of 10 years. Trillium completed a number of capital improvements to the station upon executing the lease with the City in 2011. The term of the Lease Agreement guarantees the City with $75,000 in a base annual lease payment along with an annual royalty payment equal to 4% of all non -preferential revenue generated annually. In Fiscal Year 2020-21, the City received a total of $14,130.50 in addition to the base lease revenue. The City does not incur any maintenance, repair, or other operational costs associated with this station.
On June 15, 2021, the City Council approved a one-year Lease term extension with Trillium which is set to expire on June 30, 2022. A proposed Lease term extension is provided to the City Council for its consideration to extend the term of the lease for an additional 12 months through June 30, 2023. The Lease term extension will provide the City with time to evaluate the continued viability of this CNG station and to weigh other possible alternatives, which could potentially include converting the station to an electric vehicle fast -charging station. No other terms of the Agreement are changed with this proposed Amendment. The annual base lease payment of $75,000 and the 4% fuel royalty will still apply should the City Council elect to extend the term of the lease one (1) additional year.
FISCAL IMPACT:
The annual base lease payment for the term extension shall amount to $75,000 along with a 4% fuel royalty for all non -preferential revenue generated for the next 12 months.
Prepared by:
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Lui6 Estevez U
Deputy City Administrator
Reviewed and approved:
Damien R. Arrula
City Administrator
Reviewed and approved:
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Jer(nifer Lampman
Director of Finance
Attachment:
Amendment No. 2 to CNG Station Lease Agreement with Trillium USA