City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: APRIL 18, 2023 FROM: GENERAL SERVICES DEPARTMENT WARD: 3 SUBJECT: SECOND AMENDMENT TO RIVERSIDE MUNICIPAL AIRPORT LEASE AGREEMENT WITH THE RIVERSIDE AIRPORT CAFÉ TO UPDATE PERCENTAGE MONTHLY RENTAL CALCULATION ISSUE:
Approve a Second Amendment to the Riverside Municipal Airport Lease Agreement with the Riverside Airport Café to update the Percentage Monthly Rental calculation.
RECOMMENDATIONS:
That the City Council:
Approve a Second Amendment to the Riverside Municipal Airport Lease Agreement with Riverside Airport Café, clarifying Section 9(d) of the Lease (“Percentage Monthly Rent”); and Authorize the City Manager or his designee to execute the Second Amendment to Riverside Airport Lease Agreement with the Riverside Airport Café, including making minor and non-substantive changes.
BACKGROUND:
On June 15, 2021, the City Council approved a Riverside Municipal Airport Lease Agreement (Agreement) for approximately 2,500 square feet of Terminal Building space with Leimamo Bishaw dba the Riverside Airport Café for a 10-year term with one five-year option to extend, in the minimum amount of $276,958.
On January 5, 2022, the City Council approved a First Amendment to the Lease Agreement for additional restaurant seating area, increasing rent for the Lease term by $28,500 to approximately $305,458.
The long-term lease for the Riverside Airport Café (Café), defines the Percentage Monthly Rental Calculation as an amount equal to 6.75% of the sum total of gross receipts identified from the sale of all food, beverages, gifts and miscellaneous items less the minimum monthly lease amount already paid. Confusion regarding the Percentage Monthly Rental calculation has resulted in the recommendation to update the Lease Agreement to reflect the intended language in the lease agreement associated with the calculation.
DISCUSSION:
The Lessor (City) desires to amend the Lease Section 9(d) Percentage Monthly Rent for purposes of clarification of the calculation method used for the Percentage Monthly Rent.
The current Agreement identifies the Percentage Monthly Rental as follows:
Challenges with current process are impacted by the Café’s Point of Sale (POS) system. The POS does not specify total gross receipts; rather, it indicates Net Sales. The recommended change in language would reduce confusion and align the language in the lease with the monthly POS printouts provided to the Airport to calculate Percentage Monthly Rental.
The Second Amendment to the Agreement will calculate the Percentage of Monthly Rental in a similar manner but will calculate the percentage using the Café’s Net Sales rather than Gross Receipts. The Percentage Monthly Rental remains at 6.75% of the sum total net sales (“Percentage Rental.”) with a calculation as follows: Lessee (Tenant) shall pay to City an amount equal to six and three quarters percentage (6.75%) of the sum total net sales (“Percentage Rental”). Sum total net sales shall be calculated as Lessee monthly total net sales minus the minimum monthly rental paid pursuant to section 9(a).
Sample calculation: $100,000.00 January total net sales $ -3,000.00 Minimum monthly rental (lease amount)
$ 97,000.00 Sum Total Net sales
$ 97,000.00 Sum Total Net Sales
.0675 Multiplied by 6.75%
$ 6,547.50 Percentage Rental Due on March 1
Total net sales shall include the total sales of all food, beverages, gifts and miscellaneous items which occurred during the calendar month or any portion thereof two months prior to the date of payment.
STRATEGIC PLAN ALIGNMENT:
This Lease Amendment contributes to Strategic Priority No. 3 Economic Opportunity and Goal No. 3.1 to facilitate partnerships and programs to develop, attract and retain innovative business sectors.
The Second Amendment to the Riverside Municipal Airport Lease Agreement also aligns each of the Cross-Cutting Threads as described below:
1. Community Trust - Approval of this lease Amendment will demonstrate the Airport’s commitment to the community by providing greater access to services and increasing job opportunities.
2. Equity - The Airport serves the entire community of the City of Riverside. The Airport’s multiple businesses, and more specifically the Riverside Airport Café, 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 allowed, and encouraged, to expand when opportunities present themselves.
4. Innovation – Approval of this Lease Amendment benefits both the Airport and the Airport Café as sharing part of the profits financially incentivizes the Tenant to grow their business and generate additional revenues.
5. Sustainability and Resiliency – Approval of this lease amendment will ensure that the Airport Café is billed correctly for percentage monthly rentals, furthering the Airport’s sustainability as a self-supporting enterprise fund.
FISCAL IMPACT:
The total fiscal impact of this agreement is unknown at this time as it will vary based on actual total net sales of the tenant. All revenues received as a course of this action will be deposited into the Airport Fund, Terminal Building Rental revenue account 0000530-346110.
Prepared by: Carl Carey, General Services Director Certified as to
Availability of funds: Edward Enriquez, Interim Assistant City Manager/Chief Financial Officer/Treasurer Approved by: Edward Enriquez, Interim Assistant City Manager/Chief Financial Officer/Treasurer Approved as to form: Phaedra A. Norton, City Attorney Attachment: Amendment
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