City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: MARCH 22, 2022 FROM: GENERAL SERVICES DEPARTMENT WARD: 3
SUBJECT: THIRD AMENDMENT TO EXTENSION AGREEMENT WITH PORT-A-PORT HANGAR LEASING TO INCLUDE ANNUAL CONSUMER PRICE INDEX ADJUSTMENTS TO RENTAL RATE ISSUE:
Approval of the Third Amendment to Extension Agreement with Port-A-Port Hangar Leasing to include annual Consumer Price Index adjustments to rental rate.
RECOMMENDATIONS:
That the City Council:
Approve the Third Amendment to Extension Agreement with Port-A-Port Hangar Leasing to include annual Consumer Price Index adjustments to rental rate; and Authorize the City Manager, or designee, to execute the Third Amendment to the Extension Agreement with Port-A-Port Hangar Leasing, including making minor and non-substantive changes.
BACKGROUND:
On November 27, 1984, the City of Riverside (City) entered into a 20-year Ground Lease Agreement (Agreement) with Port-A-Port Hangar Leasing (Port-A-Port) to develop approximately eight acres of land at the Airport for use as aircraft hangars for privately owned aircraft. Port-A-Port subsequently developed 72 hangars for lease or private ownership, providing all management responsibility for hangars and adjoining grounds’ maintenance, tenant attraction, reporting to Riverside County for personal property tax collection and responding to all tenant inquiries related to the Leased Area.
On July 17, 1997, City Council approved an Extension Agreement extending the term for 20 years, through December 31, 2017 with a subsequent First Amendment approved by City Council on December 7, 2009 to extend the term of the lease through December 7, 2026.
On September 13, 2016, City Council approved a Second Amendment to the Extension Agreement option for a 10-year extension of the lease through December 31, 2036.
DISCUSSION:
Riverside Municipal Airport currently manages approximately 140 ground and building leases. Each lease contains a provision for annual rent increases based on the May Consumer Price Index for All Urban Consumers (CPI-U) for the Riverside-San Bernardino-Ontario Metropolitan Statistical Area (“Index”), effective with the following August rental invoices.
At the time the Port-A-Port Leasing Agreement was originally approved, Riverside was included in the CPI-U Index for Los Angeles-Riverside-Orange County. The Third Amendment to the Extension Agreement updates the CPI-U to reflect the current Riverside-San Bernardino-Ontario Index and establishes the month of May for CPI-U review purposes.
Section 5 of the Lease Agreement entitled “Rental” shall be amended to include the following language:
“Beginning with the rental payment due on August 1, 2022, the monthly rental payment shall be adjusted each year, to reflect the percentage increase, if any, in the Consumer Price Index for All Urban Consumers (CPI-U) for the Riverside-San Bernardino-Ontario Standard Metropolitan Statistical Area (“Index”) published by the Bureau of Labor Statistics of the United States Department of Labor for most recent 12-month published index, based upon the corresponding increase, if any, in the Index as it stands on May of that year over the Index as it stood on May of the prior year, including utilities therefor, but excluding telephone and janitorial services, or two percent, whichever is greater.” Approval of the Third Amendment to the Extension Agreement with Port-a-Port will allow Riverside Municipal Airport to continue its goal of standardizing language across all Airport leases. This Amendment will also ease the burden on the City’s financial system by allowing for standardized CPI-U adjustments for Airport tenants.
STRATEGIC PLAN ALIGNMENT:
This Lease Amendment contributes to the Strategic Priority No. 5 High Performing Government and Goal No. 5.4 – achieve and maintain financial health by addressing gaps between revenues and expenditures and aligning resources with strategic priorities to yield the greatest impact.
This Lease Amendment aligns with the Cross-Cutting Threads of the City’s Strategic Plan as described below:
1. Community Trust - Approval of this Lease Amendment will demonstrate the Airport’s commitment to the community by making sound business decisions.
2. Equity - The Airport serves the entire community of the City of Riverside. The Airport’s multiple businesses, and more specifically Port-A-Port Leasing, provide equal access and opportunities for the City’s diverse community.
3. Fiscal Responsibility – Approval of the Lease Amendment demonstrates the importance placed on the Airport’s fiscal responsibility and ensuring Airport businesses are treated in a fair and balanced business manner.
4. Innovation – Approval of this Lease Amendment will ensure Port-A-Port Leasing is governed by the same financial responsibilities as other Airport tenants.
5. Sustainability and Resiliency – Approval of this request will allow Port-A-Port Leasing to further increase their business opportunity and ensure their financial stability and success based on the same annual percentage rate increases levied on all Airport tenants.
FISCAL IMPACT:
The total fiscal impact is estimated to be $1,045,600 over the term of the lease. All revenue received will be deposited into the Airport Fund, Airport Building & Ground Rental revenue account 0000530-346120.
Prepared by: Carl Carey, General Services Director Certified as to
Availability of funds: Edward Enriquez, Chief Financial Officer/Treasurer Approved by: Kris Martinez, Assistant City Manager Approved as to form: Phaedra A. Norton, City Attorney Attachment: Third Amendment to Extension Agreement, Port-A-Port Leasing Third Amendment Port-A-Port Hangar LeasingPage 2