Section 3.2 City of Salinas Regulations.
(a) Airport Rules and Land Use Plan Incorporated. The Salinas Municipal Airport Rules and Regulations (the "Rules") and the Salinas Municipal Airport Land Use Plan (the "Land Use Plan"), as those documents may be amended or superseded from time to time, are incorporated into this Lease by this reference. Lessee will comply fully with the Rules, and Lessee's use of the Premises will be consistent with the Land Use Plan.
(b) City of Salinas Municipal Code. Lessee agrees to comply with applicable provisions of the City of Salinas Municipal Code (the "City Code"), including but not limited to Chapter 4 (Public Property) and Chapter 37 (Zoning). Lessor agrees that the Premises are compliant with such provisions as of the date of this Lease. (c) Other Applicable Laws, Rules, and Regulations. Lessee further agrees to comply with all other applicable laws, rules, and regulations, for the use of the Premises and all other portions of the Airport, including any rules and regulations established by the Salinas City Council, the Salinas Airport Commission, and the Salinas Airport Manager.
Section 3.3 Federal Requirements.
(a) Subordination to Federal Agreements. This Lease is subordinate to the provisions and requirements of any existing or future agreement between the Lessor and the United States of America, relative to the development, operation, or maintenance of the Airport. (b) Non-Exclusive Right. It is understood and agreed that nothing herein contained shall be construed to grant or authorize the granting of an exclusive right within the meaning of 49 U.S.C. sections 40103 (e) and 47107(a)(4).
(c) Nondiscrimination.
(1) The Lessee for himself, his personal representatives, successors in interest, and assigns, as a part of the consideration hereof, does hereby covenant and agree that: no person on the grounds of race, color or national origin shall be excluded from participation in, denied the benefits of, or be otherwise subjected to discrimination in the use of said facilities; that in the construction of any improvements on, over, or under such land and the furnishing of services thereon, no person on the grounds of race, color, or national origin shall be excluded from participation in, denied the benefits of, or otherwise be subjected to discrimination; that the Lessee shall use the premises in compliance with all other requirements imposed by or pursuant to 49 C.F.R. Part 21 - Nondiscrimination in Federally Assisted Programs of the Department of Transportation – Effectuation of Title VI of the Civil Rights Act of 1964; 49 CFR Part 23 - 7 1378\19\2688697.1
Participation of Disadvantaged Business Enterprise in Airport Concessions; 49 CFR Part 26 - Participation By Disadvantaged Business Enterprises In Department Of Transportation Financial Assistance Programs and as said Regulations may be amended. (2) To the extent that Lessee provides any public services at the Premises, Lessee will furnish such public services on a reasonable and not unjustly discriminatory basis to all users and charge reasonable and not unjustly discriminatory prices for each unit or service, provided that the contractor may be allowed to make reasonable and nondiscriminatory discounts, rebates, or other similar types of price reductions to volume purchasers. The foregoing shall apply only to services provided at the Premises and shall not apply to or limit any services provided by Lessee elsewhere.
(3) The Lessee assures that it will comply with pertinent statutes, Executive Orders, and such rules as are promulgated to assure that no person shall, on the grounds of race, creed, color, national origin, sex, age, or handicap, be excluded from participating in any activity conducted with or benefiting from Federal assistance. This Provision obligates the Lessee or its transferee for the period during which Federal assistance is extended to the airport program, except where Federal assistance is to provide or is in the form of personal property or real property or interest therein or structures or improvements thereon. In these cases, the Provision obligates the party or any transferee for the longer of the following periods: (a) the period during which the property is used by the sponsor or any transferee for a purpose for which Federal assistance is extended or for another purpose involving the provision of similar services or benefits; or (b) the period during which the airport sponsor or any transferee retains ownership or possession of the property. In the case of contractors, this Provision binds the contractors from the bid solicitation period through the completion of the contract.
(d) Height Restrictions. The Lessee, by accepting this Lease Agreement, expressly agrees for itself, its successors, and assigns that it will not erect nor permit the erection of any structure or building nor permit object of natural growth or other obstruction on the land leased hereunder above a height as determined by the application of the requirements of 14 C.F.R. Part
77. In the event the aforesaid covenants are breached, the owner reserves the right to enter upon the land hereunder and to remove the offending structure or object or cut the offending natural growth, all of which shall be at the expense of the Lessee. (e) FAA Form 7460-1, Notice of Construction or Alteration. The Lessee agrees to comply with the notification and review requirements of 14 C.F.R. Part 77 in the event future construction of a building is planned for the leased premises or in the event of any planned modification or alteration of any present or future building or structure situated on the leased premises. This requires the submission of FAA Form 7460-1, Notice of Construction or Alteration, to the FAA.
(f) Interference. The Lessee, by accepting this Lease, agrees for itself, its successors, and assigns that it will not make use of the Leased premises in any manner that might interfere with the landing and taking off of aircraft or otherwise constitute a hazard. In the event the aforesaid covenant is breached, the owner reserves the right to enter upon the premises hereby Leased and cause the abatement of such interference at the expense of the Lessee. 8 1378\19\2688697.1
(g) Right of Flight. There is reserved to the Lessor, its successors and assigns, for the use and benefit of the public, a right of flight for the passage of aircraft in the airspace above the surface of the Leased Premises. This public right of flight shall include the right to cause in said airspace any noise inherent in the operation of any aircraft used for navigation or flight through said airspace or landing at, taking off from, or operating on the airport premises. (h) Development of Landing Area. The Lessor reserves the right to develop further or improve the landing area of the airport as it sees fit, regardless of the desires or views of the Lessee, and without interference or hindrance.
(i) Security. The Lessee will conform to airport and Federal Aviation Administration safety and security rules and regulations regarding use of the airport operations area, including runways, taxiways, and aircraft aprons by vehicles, employees, customers, visitors, etc. in order to prevent security breaches and avoid aircraft incursions and vehicle/pedestrian deviations; will complete and pass airfield safe driving instruction program when offered or required by the airport; and will be subject to penalties as prescribed by the airport for violations of the airport safety and security requirements.
(j) Facility Repairs. The Lessor reserves the right but shall not be obligated to the Lessee to maintain and keep in repair the landing area of the airport and all publicly owned facilities of the airport, together with the right to direct and control all activities of the (lessee, licensee, permittee, etc.) in this regard.
(k) War or National Emergency. This Lease and all its provisions are subject to whatever right the United States of America has affecting the control, operation, regulation, and taking over of the Airport or the exclusive or non-exclusive use of the Airport by the United States of America during the time of war or national emergency.
ARTICLE 4. OTHER COVENANTS
Section 4.1 Maintenance and Repair.
(a) Lessee's Maintenance and Repair Obligations. Except as otherwise specifically provided in this Lease Agreement, Lessee will be solely responsible for keeping the Premises clean and in good condition and repair, reasonable wear and tear excepted. Lessee shall maintain the Premises in an aesthetically pleasing manner, including, without limitation, removing debris on the Premises, replacing components that are broken or worn, refreshing painted surfaces associated with the Premises, ensuring the Premises is pest free, and preventing the accumulation of stored materials outside. Lessee will also be responsible for all damage or destruction of the Premises caused by any acts of Lessee or by Lessee's employees, agents, licenses, contractors, assignees, sublessees, guests, or invitees. Lessor shall, at its own cost and expense, be responsible to repair and maintain (i) the structural components of the Premises and Building including, but not limited to, the foundation, exterior walls, roof(s), windows, and floor structures, and (ii) the heating, airconditioning and ventilation systems serving the Premises and Building, and the plumbing, electrical, and other utility systems serving the Premises and Building. (b) Lessor's Right to Cure; Additional Rents. If, in the opinion of the Lessor’s Airport Manager, the Premises are not being properly maintained, the Airport Manager shall, after 9 1378\19\2688697.1
giving written notice to Lessee and after a reasonable time to cure, cause such repair and maintenance to be made. The cost of such maintenance or repair will be added to the rent, and will be due immediately upon invoice.
Section 4.2 Signs.
Lessee may post such signs as necessary and usual in the conduct of its business in and upon the Premises. Location, size, shape, and copy of all signs will be in accordance with the City Code and will be approved by Lessor's Airport Manager, Community Development Department, and Permit Center prior to installation. Subject to all requirements of the City Code and other applicable laws, approval will not be withheld unreasonably.
Section 4.3 Liens and Claims.
(a) Possessory Interest. Lessee acknowledges that this lease may create a real property possessory interest subject to taxation. Without limiting Lessee's obligation pursuant to this Lease to pay taxes, assessments, property-related fees, and other charges and impositions associated with the Premises, payment of real property taxes levied on such possessory interest will be the sole responsibility of Lessee, with no right of offset of rent, charges, or other fees due under this Lease.
(b) No Liens. Lessee will pay all taxes, assessments, property-related fees, and other charges and impositions that Lessee is obligated to pay under this Lease before the same becomes delinquent. Furthermore, Lessee will not permit or suffer any liens or encumbrances to be imposed upon the Premises, the Airport, or any building or structure thereon as a result of nonpayment of any obligation of Lessee. Neither will Lessee permit or suffer any lien, claim, or demand to be imposed upon the Premises, the Airport, or any building or structure thereon, arising from any work of construction, repair, restoration, or maintenance at or on the Premises by Lessee (except liens, claims, or demands suffered by or arising from the actions of Lessor). (c) Payment Bonds. To ensure the completion of works of improvement and to protect the Premises from liens prior to the commencement of any work of construction, repair, restoration, or maintenance at or on the Premises which exceeds Fifty Thousand and No/100 Dollars ($50,000.00) in cost, Lessee shall furnish to Lessor's Airport Manager, at no cost to Lessor, payment bonds approved as to form by the Lessor's City Attorney in the full amount of the total cost of the contract or contracts for the work.
(d) Contesting Charges. Notwithstanding anything to the contrary in this Section, with prior notice to Lessor, Lessee may contest any tax, assessment, fee, charge, imposition, claim, or demand for payment that may become a lien on Lessor's property if left unpaid, provided that nonpayment is permitted only during the pendency of any contest without the foreclosure of the lien or the imposition of any fine or penalty that could become a debt of Lessor. Lessee will prosecute any contest diligently and will provide such security as may be requested by, and acceptable, to Lessor to hold Lessor and Lessor's property free from liability. (e) Payment by Lessor. If Lessee fails to pay any amount required by this Section to be paid by Lessee, Lessor will have the right, but not the duty, on five (5) days prior written notice to Lessee, pay, discharge, or adjust such obligation for Lessee's benefit. On written demand 10 1378\19\2688697.1
from Lessor, Lessee will, as additional rent, reimburse Lessor within ten (10) days for the full amount expended by Lessor, together with interest from the date of payment at the lesser of ten percent (10%) or the maximum amount allowed by law.
Section 4.4 Right to Assign or Transfer.
(a) Limitation on Assignment, Subleasing, Encumbrance, or Transfer. Lessee will not sublease the Premises or otherwise encumber, assign or transfer this Lease, or any right or interest herein, to any of the buildings and improvements on the Premises, without the prior written consent of the Lessor, which shall not be unreasonably withheld, and no such assignment, sublease or transfer, whether voluntary or involuntary, by operation of law, under legal process or proceedings, or otherwise, shall be valid or effective without such prior written consent. (1) Lessee shall provide Lessor copy of written agreement between Lessee and Sublessee(s). The written agreement shall include the following provisions:
(A)Each Sublessee shall secure and maintain a Salinas Municipal Airport Use Permit and insurance coverage in types and amounts, and subject to such conditions as specified in the Permit.
(B) Each Sublessee shall indemnify, hold harmless, and defend (with counsel reasonably acceptable to Lessor) the Released and Indemnified Parties against any and all claims, actions, causes of action, liabilities, costs (including reasonable attorneys' fees), expenses, liens, judgments, damages, or civil or administrative fines (collectively, "Claims") caused by Sublessee's use of the Premises, including, without limitation, Claims for property damage, personal injury, or wrongful death; provided, however, that Lessee's indemnification obligation does not extend to Claims arising out of the Released and Indemnified Parties negligence or willful misconduct.
(b) Based Aircraft Reporting. Sublessee shall provide Lessee an accounting of Based Aircraft on an annual basis. The accounting shall include Year, Make, and Model of the Aircraft; name and phone number of registered owner.
(c) Change in Control. If Lessee is a corporation, unincorporated association, partnership, or other business entity, the transfer, assignment, or hypothecation of any stock or interest in the said entity, in the aggregate in excess of twenty-five percent (25%), transfer of the general partner or managing general partnership interest in a limited partnership, or transfer of the manager of a limited liability company, will be deemed an assignment within the meaning of this Lease. The following transfers are excepted from the provisions of this Subsection:
(1) Transfer or assignment of stock or interest to a shareholder or member of Lessee or an entity controlled by, under common control with, or controlling Lessee, or pursuant to a merger or sale of all or substantially all of the assets of Lessee, or any acquisition of a majority of the stock or equity of Lessee.
(2) Transfer or assignment of stock or interest to a spouse, child, or grandchild of a shareholder, member, or partner or to a trust for the benefit of the same. 11 1378\19\2688697.1
(3) The transfer or sale of stock for financing purposes (such a public offering, merger with SPAC, or Series A financing).
(4) The transfer or sale of stock on a public stock exchange. (d) Lessor's Option to Terminate. Notwithstanding any other provision in this Lease regarding default or termination, should Lessee attempt to make or suffer to be made any such encumbrance, assignment, sublease, or transfer in violation of this Section, or should any right or interest of Lessee hereunder or in or to the Premises be transferred or sold by or under a court order or legal process, or otherwise, then any of the foregoing events will be deemed a breach of this Lease, and thereupon Lessor may, at its option, terminate this Lease immediately by written notice to Lessee, or exercise other rights provided by law or in this Lease to be exercisable by Lessor in the event of any default or breach under this Lease. Should the Lessor consent to any such encumbrance, assignment, sublease, or transfer, such consent will not constitute a waiver of any of the restrictions of this Section, and the same will apply to each and every encumbrance, assignment, sublease, or transfer hereunder and shall be severally binding upon each and every encumbrancer, assignee, sublessee, transferee, and other successor in interest of Lessee. (e) Grounds for Withholding Consent. It is agreed and understood that Lessor may withhold Lessor's consent to any assignment, transfer, sublease, or encumbrance under the following circumstances:
(1) If a proposed assignee or sublessee will not covenant in writing to keep, perform, and be bound by each and all the covenants and conditions of this Lease and to assume any previously accrued obligations hereunder.
(2) If Lessee is in default under this Lease at such time in any respect. (3) If construction, repair, or demolition of improvements on the Premises is in progress or if said construction, repair, or demolishment is incomplete. (4) Until a determination has been made by Lessor that the assignee, transferee, or other successor in the interest of Lessee can pay rent and operate in accordance with the standards required by Lessor.
(5) Lessor is not satisfied, in its sole and absolute discretion, that Lessee is willing and able to discharge any proposed encumbrance. (6) Any other reasonable basis.
(f) Incorporation of Lease; Effect of Assignment. Any document that purports to assign, sublease, transfer, or encumber the Premises or any part thereof will incorporate directly or by reference all provisions of this Lease unless otherwise amended in writing. Upon any assignment or transfer approved by Lessor, Lessee will be relieved of any further obligations arising under this Lease after the effective date thereof. 12 1378\19\2688697.1
Section 4.5 Encumbrances of Leasehold Interests.
(a) Subject to Section 4.6, Lessee may encumber Lessee’s interest in the Premises to secure a loan from a federally insured institutional lender to construct the Tenant Improvements and any Additional Improvements, provided the unpaid balance of any such loan will not at any time exceed Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00) without the prior written consent of Lessor's City Council. Such encumbrance will be subject, however, to the following covenants and conditions:
(1) Any document evidencing the loan, or any security given for it must be filed with the Lessor’s City Clerk within ten (10) days after its execution. (2) Except as otherwise provided in this Section, any instrument securing the loan will be subordinate to this Lease and Lessor's interests in the Premises, the Airport, and all improvements thereon. In the event of any conflict between the provisions of this Lease and the provisions of such security instrument, the provisions of this Lease will control, and any person acquiring any interest in the Premises by foreclosure, trustee's sale, or any similar remedy, will acquire that interest subject to Lessee's obligations under this Lease. (3) If Lessee elects to terminate this Lease pursuant to Section 6.6 in the case of any casualty, Lessee will be obligated to disburse the proceeds of any insurance first to repay a loan secured by Lessee's interest in the Premises. The remaining proceeds, if any, will be paid to Lessor for such amounts, if any, due and owing to Lessor by Lessee under this Lease.
Thereafter, any proceeds remaining may be disbursed to Lessee. (b) To the extent that a loan secured by Lessee's interest in the Premises is reasonably necessary for Lessee to finance the Tenant Improvements and any Additional Improvements authorized by Lessor, and provided that the Lessor has approved such encumbrance pursuant to Section 4 and this Section, Lessor will not unreasonably withhold agreement to customary creditor protections, including by providing the lender notice and an opportunity to cure any breach of this Lease on Lessee's behalf prior to exercising any remedy hereunder that would threaten the lender's security.
Section 4.6 Right to Enter.
Lessor reserves the right by its officers, employees, agents, and contractors to enter the Premises upon prior notice at reasonable times (except in cases of emergency), (i) for any reason otherwise authorized under this Lease, including as allowed in Section 3.1; (ii) to inspect the Premises and to ensure compliance with this Lease; (iii) in furtherance of any maintenance obligation of Lessor; (iv) to post notices, including notices of non-responsibility for improvements, alterations, or repairs if and when Lessor desires to do so; and (v) whenever reasonably necessary in the interest of public health or safety.
Section 4.7 Abandonment.
Lessee may not abandon, vacate, or surrender the Premises during the Original Term or Rental Term, except as otherwise provided in this Lease. In the case of any unauthorized abandonment, the Lessor may reenter and relet the Premises. Mere failure to operate the Premises 13 1378\19\2688697.1
will not constitute abandonment, provided the Lessee continues to maintain the Premises and pay all rent and other obligations hereunder. Any belongings or other property left on the Premises following termination of this Lease or abandonment of the Premises will, at the option of Lessor, be deemed abandoned.
Section 4.8 Recording of Lease Forbidden.
Lessee will not record this Lease or a memorandum or abstract of it and will not cause or permit any other person to do the same on its behalf without express written permission from Lessor's Airport Manager.
Section 4.9 Licenses and Permits.
Lessee has obtained or will obtain at such time as may be necessary each and every approval, license, or permit as may be necessary to operate the Premises as contemplated hereunder.
ARTICLE 5. RISK MANAGEMENT
Section 5.1 Indemnification.
Lessee will indemnify, hold harmless, and defend (with counsel reasonably acceptable to Lessor) the City of Salinas, its elected and appointed officials, officers, employees, representatives, volunteers, and agents (hereinafter collectively the “Released and Indemnified Parties”) against any and all claims, actions, causes of action, liabilities, costs (including reasonable attorneys' fees), expenses, liens, judgments, damages, or civil or administrative fines (collectively, "Claims") caused by Lessee's use of the Premises, including, without limitation, Claims for property damage, personal injury, or wrongful death; provided, however, that Lessee's indemnification obligation does not extend to Claims arising out of the gross negligence or willful misconduct of the Released and Indemnified Parties.
Section 5.2 Insurance.
Lessee will provide insurance coverage in types and amounts and subject to such conditions as specified in Exhibit E.
Section 5.3 Reporting Damage.
Lessee will report any transaction or occurrence at or relating to the Premises for which Lessor may have significant exposure to liability. Such report will be made immediately by phone and within one (1) business day in writing to Lessor's Airport Manager or such other person as Lessor may designate in writing. The written report will describe the incident in reasonable detail, including a description of the nature of the damages and the identity and contact information (if available) of any witnesses. The report will also identify any insurance policy that may be available to cover the damage.
14 1378\19\2688697.1
Section 5.4 Disclaimer and Release; ADA Notice.
(a) General Release.
(1) Lessee agrees that this is a commercial lease negotiated in good faith and that it was provided a reasonable opportunity prior to entering into this Agreement to inspect the Premises and to conduct such due diligence as it, in its discretion, has deemed appropriate.
Lessee accepts the Premises subject to and as provided in this Lease in its current "as-is" condition, including all faults or defects, zoning conditions, or hazardous conditions known or unknown (if any). Lessor will not be liable to Lessee for, and Lessee hereby releases the Released and Indemnified Parties from any and all liability, whether in tort or in contract, for any injury, damage, or loss resulting from or attributable to the condition or status of the Premises. Lessee hereby waives and agrees not to commence any action, legal or administrative proceeding, cause of action, or suit in law or equity, of whatever kind or nature, directly or indirectly, against the Released Parties in connection with the Premises, this Lease or Lessee's use of the Premises pursuant to this Lease.
(2) Lessee, on its own behalf and of any other party claiming by or through Lessee, expressly waives the provisions of Civil Code Section 1542, which states:
A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.
Lessee's Initials: ______________
(3) Lessee acknowledges that the release set forth above is an integral part of this Lease, and that Lessor would not have agreed to enter into this Lease without it. The release shall survive the expiration and termination of this Lease. (4) Notwithstanding anything to the contrary herein, this Subsection shall not be construed to hold Released and Indemnified Parties harmless for liability for the breach of this Lease or for intentional and active fraud, willful misconduct, or negligence. (b) Bailee Release. It is hereby agreed and understood that Lessor in no way purports to be a bailee, and is therefore not responsible in any way for any damage to the property of Lessee or Lessee's contractors, agents, employees, guests, or invitees. (c) CASp Notice. Pursuant to Civil Code Section 1938, Lessor is required to advise Lessee of the following:
A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy 15 1378\19\2688697.1
of the lessee or tenant if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the premises.
(d) CASp Inspection. Lessee and Lessor mutually agree if either party obtains a CASp inspection, the cost of the CASp Inspection will be the responsibility of the Party who contracts the CASp inspector, and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the premises will be shared or divided based on the context or reason of the violation. In general, the Lessee is responsible for all costs and expenses of complying with federal, state, and local statutes, regulations, and guidelines imposing standards for accessibility applicable to the Premises with respect to the following:
(1) Violations arising from Lessee’s or Sublessee’s tenancy, occupancy; business operations, or change in existing use;
(2) Violations arising from Lessee’s or Sublessee’s improvements, maintenance, or modification to the Premise.
Lessee's failure to comply with such laws shall be subject to Lessee's obligations stated within this Lease, including, without limitation, in Section 5.1.
Lessor is responsible for all costs and expenses of complying with federal, state, and local statutes, regulations, and guidelines imposing standards for accessibility applicable to the Premises with respect to the following:
(3) Violations of access corridors up to but not including the Premise; (4) Violations within, about, on the Premise outside the responsibility of the Lessee.
(e) Assumption of Risks and Waiver. Lessee assumes all risks associated with the use of the Airport and Premises for aviation purposes, including, without limitation, risks (including without limitation any psychological risks) associated with noise, vibration, currents, and other effects of air, illumination, and fuel consumption. Lessee expressly waives any and all claims whatsoever against the Released and Indemnified Parties arising in any manner out of the normal operation of the Airport as an airport and waives any nuisance claim Lessee may have against another lessee or licensee of Airport property so long as the lessee or licensee is in full compliance with all applicable laws, as well as with its lease or license. Lessees within the scope of the foregoing waiver are intended beneficiaries of the waiver.
Section 5.5 Hazardous Substances.
(a) Notice of Releases. Pursuant to Health and Safety Code Section 25359.7, Lessee will notify Lessor in writing within a reasonable time after Lessee obtains knowledge of any material release of hazardous substances and of any hazardous substances that have come to be located beneath the Airport.
16 1378\19\2688697.1
(b) Removal of Hazards. Prior to the expiration of this Lease, Lessee will, at its sole expense, remove all items of personal property from the Premises, including but not limited to all flammable substances and hazardous materials and wastes (as defined by state and federal law) at the time of expiration of this Lease to the extent released or deposited by Lessee and to the extent the presence of which violates applicable Law. Lessee will have no liability or responsibility for removal of flammable substances or hazardous materials and wastes migrating to or beneath the Leased Premises or existing prior to the Effective Date. (c) Availability of Records. Lessee shall make available for inspection to the Lessor all records relating to the maintenance, release, mitigation, cleanup, and disposal of any hazardous substances on the Premises.
(d) Compliance with Applicable Laws. Lessee shall comply with all federal, state, and local laws and regulations relating to hazardous materials and wastes it uses, stores, releases or discharges on the Premises during the term of this Lease and shall timely comply with the orders of any governmental agencies relating thereto. Lessee will be responsible for meeting current stormwater pollution prevention best management practices, as identified by Lessor in Lessor’s Storm Water Pollution Prevention Plan, as it may be amended from time to time. Such practices include, without limitation:
(1) Providing a labeled and stocked spill kit on site;
(2) Proper storage and labeling of hazardous substances or components of potentially hazardous substances;
(3) Providing personnel with appropriate routine spill response training; (4) Keeping repair, construction, and maintenance appropriately covered from wet weather;
(5) Making appropriate use of drip pans, dry cleanup models, and spill and overflow protection; and
(6) Removing pollutants offsite as necessary or appropriate.
Lessee understands and agrees that failure to comply with such best practices may result in Lessee no longer being included by Lessor in Lessor’s participation in the general permit of the California State Water Resources Control Board concerning stormwater discharges. (e) Indemnification. Without limiting Lessee's indemnification obligations in any manner under this Lease, Lessee agrees to hold harmless, indemnify, and defend the Released and Indemnified Parties for any liability to the extent caused by Lessee's breach of this Section.
Section 5.6 Survival.
Lessee's duties under this Article survive the termination of this Lease. 17 1378\19\2688697.1
ARTICLE 6. DEFAULT AND TERMINATION
Section 6.1 Termination for Nonpayment of Rent or Other Charges.
Lessee's failure to pay rent or any other charge due to Lessor under this Agreement within ten (10) days of the due date for such payment will constitute an Event of Default. Upon the occurrence of such Event of Default, Lessor will provide Lessee with written notice of the default.
Unless the default is cured or waived within thirty (30) days of such notice, or unless the parties reach some other agreement in writing regarding payment of the amount due, the Lessor may take whatever action at law or in equity as may appear reasonably necessary to enforce performance or observance of any obligations, agreements, or covenants of the Lessee under this Lease, including without limitation, termination of this Lease. In the event of such default, the Lessor’s remedies shall be cumulative, and no remedy expressly provided for in this Lease, Article, or Section shall be deemed to exclude any other remedy allowed by law.
Section 6.2 Other Events of Default.
In the case of any Event of Default under this Lease other than as described in Section 6.1, Lessee will cure the default on thirty (30) days written notice from Lessor, provided that if a cure cannot reasonably be accomplished within such time, Lessee will commence a cure within thirty (30) days, and will diligently pursue a cure as quickly as reasonably possible. If the default is not timely cured, the Lessor may take whatever action at law or in equity as may appear reasonably necessary to enforce performance or observance of any obligations, agreements, or covenants of the Lessee under this Lease, including without limitation, termination of this Lease. In the event of such default, the Lessor’s remedies shall be cumulative, and no remedy expressly provided for in this Section shall be deemed to exclude any other remedy allowed by law.
Section 6.3 Future Expansion.
Lessor may, upon nine (9) months prior written notice, terminate this Lease in the event that it requires the Premises in connection with the future expansion or operation of the Airport.
Lessor will abate any rent due from Lessee accordingly and will pay Lessee the fair market value of the Tenant Improvements and any Additional Improvements constructed with Lessor's permission, less the amount of the Tenant Improvements Allowance (if any).
Section 6.4 Force Majeure.
(a) Termination by Lessor. Lessor may terminate this Lease, on such notice as is reasonable under the circumstances, due to an act of God, war, civil unrest, terrorism, the action of another government agency, or for otherwise for good cause not reasonably within Lessor's control, that would prevent Lessee's use of the Premises as contemplated under this Lease, and that gives rise to a need to regain possession of the Premises. Lessor will abate any rent due from Lessee accordingly and will pay Lessee the fair market value of the Tenant Improvements and any Additional Improvements constructed with Lessor's permission, less the amount of the Tenant Improvements Allowance (if any).
(b) Termination by Lessee. If, due to an act of God, war, civil unrest, terrorism, the action of another government agency, or for otherwise for good cause not reasonably within 18 1378\19\2688697.1
Lessee's control, Lessee can no longer use the Premises as contemplated under this Lease, Lessee may, upon three (3) months' written notice, terminate this Lease. Lessor will abate Lessee's rent during such period of notice and will refund any prepaid rent for the period following termination but will otherwise have no liability for any damages to Lessee.
Section 6.5 Insolvency.
Insolvency by Lessee will constitute an Event of Default under this Lease. Insolvency includes any circumstance in which Lessee has (i) made a general assignment for the benefit of creditors; (ii) filed any voluntary petition in bankruptcy, or suffered the filing of an involuntary petition by its creditors (provided that the filing of any involuntary petition in bankruptcy against Lessee will not constitute a breach of this lease unless and until there is an adjudication that Lessee is bankrupt); (iii) suffered the appointment of a receiver to take possession of all or substantially all of its assets; (iv) suffered the attachment or other judicial seizure of all or substantially all of its assets; (v) admitted in writing its inability to pay its debts as they come due; or (vi) made an offer of settlement, extension or composition to its creditors generally.
Section 6.6 Casualty.
(a) Lessor's Right to Restore. If the Premises are totally or partially damaged or destroyed by fire, earthquake, or other casualty, Lessor will have the right but not the obligation, to restore the Premises by repair or rebuilding. Lessor will provide Lessee a written notice within thirty (30) days following the date of such damage stating whether Lessor has elected to terminate this Lease or to repair the Premises. If Lessor fails to provide such timely notice, Lessee may, upon ten (10) days' prior written notice, terminate this Lease. If Lessor provides such timely notice and elects to repair or rebuild, and thereafter is able to commence such restoration within ninety (90) days from the date of damage and can demonstrate that the Premises can be restored within 180 days, this Lease shall remain in full force and effect. If Lessor is unable to restore the Leased Premises within this time, or if Lessor elects not to restore, then either party may terminate this Lease by giving the other written notice. Upon such election to terminate, the rent under this Lease will be due and payable only through the date of damage. If this Lease is not terminated, the rent due and payable under this Lease will be abated or reduced to the extent that the damage interferes with the Lessee's reasonable use of the Premises until such portion of the Premises is restored. (b) Lessee's Right to Terminate. Notwithstanding the provisions of Subsection (a), if the Premises are so damaged as to materially and adversely affect Lessee's ability to conduct its normal business operations, as reasonably determined by Lessee, Lessee will have the right at its option to terminate the Lease upon written notice to Lessor given within thirty (30) days following the date of such damage and rent under this Lease will be due and payable only through the date that such notice is given.
(c) No Obligation to Restore. If Lessor elects to repair and restore, Lessor will restore the Premises to substantially its condition to that prior to the occurrence of damage, provided that Lessor will not be obligated to repair or restore any alterations, additions, fixtures, equipment or improvements which have been installed by Lessee, whether or not Lessee has the right or obligation to remove the same or is required to leave the same on the Premises as of the expiration or earlier termination of this Lease, unless Lessee, in a manner satisfactory to Lessor, 19 1378\19\2688697.1
assures payment in full of all costs as may be incurred by Lessor in connection therewith. If there be any such alterations, fixtures, additions, equipment, or improvements installed by Lessee and Lessee does not assure or agree to assure payment of all costs of restoration or repair as aforesaid, Lessor will have the right to determine the manner in which the Premises will be restored so as to be substantially as the Premises existed prior to the damage occurring of this Lease as if such alterations, additions, fixtures, equipment or improvements installed by Lessee had not then been made or installed.
(d) No Liability for Loss or Interruption of Business. In no event will Lessor be responsible for any loss or interruption to Lessee’s business caused by damage or destruction to the Premises or during the repair or reconstruction thereof, regardless of the cause of damage or destruction or the extent of insurance coverage. The parties agree that the rights and obligations of the parties in the event of damage or destruction of the Premises will be governed by this Lease.
Section 6.7 Eminent Domain.
This Lease will terminate automatically if the entire Premises are acquired by eminent domain or sale in lieu of eminent domain. All compensation for the Premises will be payable to the Lessor, except that the Lessee will have the right to make a claim to the public agency acquiring the property for compensation for its Tenant Improvements and Additional Improvements, relocation expenses, and business losses, as allowed by law. If only a portion of the Premises is acquired by eminent domain or sale in lieu of eminent domain, Lessee may terminate this Lease on thirty (30) days prior written notice, provided that termination will be effective only after Lessee pays any rent, taxes, assessments, property related fees, or other charges due and owing to the date of the termination. Any compensation that would otherwise be payable to Lessee may be paid directly to any encumbrancer of Lessee's leasehold interest to the extent of such encumbrance.
Section 6.8 Remedies Cumulative.
Remedies provided under this Article for any Event of Default are cumulative with any other remedy that may be available to either party at law or in equity. For greater clarity, a termination resulting from future expansion (in compliance with Section 6.3), Force Majeure, casualty, or eminent domain will be deemed a no-fault termination and not an Event of Default, and remedies, therefore, will be limited as provided in this Article.
Section 6.9 Lease Termination
At the expiration or early termination of this Lease, Lessee shall surrender the Premises to Lessor in the condition required by this Lease. Prior to surrender: (a) Lessee shall remove all Alterations and Tenant Improvements constructed by Lessee and designated by Lessor to be removed and shall restore the Premises and the Building to the condition existing immediately prior to the installation of such Alterations and Tenant Improvements, normal wear and tear excluded; (b) Lessee shall remove all personal property and trade fixtures from the Premises and all of its signs from the Building; and (c) Lessee shall repair all damage caused by the installation or removal of any such Alterations, Tenant Improvements, personal property, signage or trade fixtures. Lessee shall deliver the Premises to Lessor in “clean and in good condition,” subject to reasonable wear and tear (consistent with Lessee’s repair and maintenance obligations under this 20 1378\19\2688697.1
Lease) and damage by casualty that is not required to be repaired by Lessee pursuant to this Lease.
Clean and good condition, for the purposes of this Lease, shall include the following: Carpets professionally steam cleaned, the floor (if applicable) to be mop clean, windows cleaned inside and out, broken, cracked, or missing windows repaired or replaced; all light fixtures and bulbs in operating conditions; walls are clean and free of stains, holes or other markings on wall and floors as a result of business operations are repaired; all doors are in good mechanical operating condition, the office space shall be fumigated for pests or Lessee in-lieu of fumigating the building Lessee can demonstrate through receipts participation in regular pest control; and water fixtures and valves are leak-free and operable. Electrical outlets and breaker boxes shall have appropriate covers/lids. Lessee shall be responsible for ensuring the building is surrendered to Lessor in a state of condition that does not present a safety hazard.
ARTICLE 7. MISCELLANEOUS PROVISIONS
Section 7.1 Notice.
Unless otherwise provided in this Lease, all notices required to be given under this Lease will be in writing and will be sent by (i) certified mail, postage prepaid, return receipt requested, (ii) express delivery or overnight courier service with a delivery receipt, (iii) personal delivery with a delivery receipt, or (iv) electronic mail with a copy delivered by one of the previous three methods, to the address of the parties shown as follows (or as either party may designate in writing):
If to Lessor: Airport Manager
Salinas Municipal Airport
30 Mortensen Avenue
Salinas, CA 93905
With a copy to:
City Attorney
City of Salinas
200 Lincoln Avenue
Salinas, CA 93901
If to Lessee: Archer Aviation Inc.,
190 W. Tasman Drive
San Jose, CA 95134
Attention: Legal Department & Bryan Bernhard
With a copy via email to:
[email protected]
Notice will be deemed given upon delivery if personally delivered or five (5) days following deposit in the mail if so deposited. Other methods of notice, including electronic mail, may be used to give notice if consented to in writing by the parties. 21 1378\19\2688697.1
Section 7.2 Venue and Applicable Law.
This Lease will be governed, construed, and interpreted according to the laws of the State of California, and in any legal proceeding necessary to interpret or enforce this Lease or any part of it, the parties agree to submit to the jurisdiction of and venue in, the courts of the State of California in the County of Monterey.
Section 7.3 Time.
Time is of the essence with respect to all obligations of the parties under this Lease.
Section 7.4 Third Party Beneficiaries.
This Lease is not intended to create, nor will it be in any way interpreted to create any thirdparty beneficiary rights except as expressly and unequivocally provided herein. For greater clarity, the Released and Indemnified Parties are intended beneficiaries of those provisions making reference to the same.
Section 7.5 Integration; Amendment.
This Lease contains the entire understanding of the parties relating to the subject matter hereof and supersedes other prior and contemporaneous oral and written agreements, understandings, and representations between the parties. No amendment to this Lease will be binding unless agreed to in writing and executed by both parties.
Section 7.6 Waiver.
No waiver of any provision of this Lease will constitute a continuing waiver of that provision or a waiver of any other provision. No waiver will be binding unless executed in writing by the party making the waiver.
Section 7.7 Interpretation.
(a) Neutral Interpretation. This Lease includes the contributions of both parties, each of which has had the opportunity to consult competent counsel, and the rule stated in Civil Code Section 1654 that an agreement be construed against its drafter will not apply to this Lease. (b) Severability. If any term or provision of this Lease is held by a court of jurisdiction to be invalid or unenforceable, the remaining terms of the Lease will be valid and enforceable except to the extent that the original intent of the parties would be frustrated thereby. (c) Headings. Headings contained in this Lease are for ease of reference only and will not alter the meaning of any provision hereof.
(d) Gender and Number. In this Lease, the masculine includes the feminine and neuter, and vice versa, and the singular includes the plural, and vice versa, as the context admits or requires.
22 1378\19\2688697.1
(e) Parties' Intent. Any rule of construction notwithstanding, this Lease will be construed in the manner that best effectuates its purposes to the fullest extent permitted under law.
Section 7.8 Attorneys' Fees and Costs.
Attorney's fees and costs will be available pursuant to Civil Code Section 1717 in any action between the parties arising out of this Lease. Attorney’s fees for in-house City Attorney staff, if awarded, shall be calculated at the market rate for civil litigation attorneys in the County of Monterey.
Section 7.9 Heirs, Successors, and Assigns.
This Lease, subject to the provisions as to assignment, transfer, and subleases, applies to bind the permitted representatives, heirs, executors, administrators, executors, and assigns of both parties.
Section 7.10 Conflicts of Interest.
To Lessee’s knowledge, no one affiliated with it having a prohibited conflict of interest pursuant to Government Code Section 1090 or the Political Reform Act (Government Code Section 87100, et seq.) has participated in the making of this Lease, and Lessee shall advise Lessor should it obtain knowledge of facts giving rise to such a conflict.
Section 7.11 Relationship Between the Parties.
The parties to this Lease are independent contractors, and no agency, joint venture, partnership, employee, co-employer, or similar relationship exists between them; accordingly, no party has the authority to bind the other.
Section 7.12 Brokers.
Each party represents that it has not dealt with any broker, agent, or other intermediary who is or may be entitled to be paid a commission or finder's fee in connection with this Lease.
Section 7.13 Multiple Originals.
This Lease may be executed in counterparts, each of which will be deemed an original.
Section 7.14 Signatures.
Each person executing this Lease represents and warrants that he or she is fully authorized to bind his or her respective party hereto.
[Signatures on Following Page]
23 1378\19\2688697.1
IN WITNESS WHEREOF, the parties have executed this Lease effective as of the Effective Date.
CITY OF SALINAS,
a California charter city and municipal
corporation
By: _____________________________
Name: Kimbley Craig
Title: Mayor
RECOMMENDED FOR APPROVAL
By: _____________________________
Name: Brett J. Godown, C.M., C.A.E.
Title: Airport Manager
APPROVED AS TO FORM
By: _____________________________
Name: Christopher A. Callihan or Rhonda
Combs
Title: City Attorney or Assistant City
Attorney
ATTEST
By: _____________________________
Name: Patricia M. Barajas
Title: City Clerk
ARCHER AVIATION INC.,
a Delaware Corporation
By: _____________________________
Name: Adam Goldstein
Title: Chief Executive Officer
A-1
1378\19\2688697.1
EXHIBIT A
Legal Description of the Premises
(Intentionally Left Blank)
B-1
1378\19\2688697.1
EXHIBIT B
Depiction of the Premises
30 Mortensen Avenue, Suite 170, Salinas CA, 93905
Approximately 1,000 sq. feet
Communication Room
C-1
1378\19\2688697.1
EXHIBIT C
Permitted Uses of the Premises
1. Research and development of aircraft and aerospace vehicles and service of equipment directly related to business operations.
2. Test Pilot Briefing, Pre & Post Flight Briefing
3. Storage and transfer of downloaded Flight Test Data Storage
4. Workspace for Flight Test Engineers, Pilots
D-1
1378\19\2688697.1
EXHIBIT D
Description of the Additional Improvements
Lessee shall be permitted to make the following alterations and improvements to the Premises (the “Additional Improvements”):
1. Painting of walls to match Archer themes.
2. Seating for up to 12 full-time employees.
3. Minor non-structural improvements to lounge and prep space for test pilots (room with millwork cabinets and sink).
4. Minor non-structural improvements to the Conference / Meeting Space
5. Access to and use of MPOE closet within space, Archer to install Server equipment:
o Archer IT to set up network and cabling inside MPOE and Office space (mostly wireless), also including access controls (card to be provided to the airport) o No restrictions for airport access sharing space.
6. Access to and ability to mount rooftop antenna (above office) through existing rooftop weather head. The antenna provides data communications between existing Archer operations on the property.
7. Access to and ability (pending further investigations and verification) to pull Cat6A cabling from the server location in MPOE to the exterior underground pull box located east of the terminal building by an existing communications tower o This allows for a hardline connection between the Archer flight test vehicle and corporate servers to download test data while the vehicle is in the Beta Charging station
o The plan is to extend a free air cable from the fence line to the vehicle as needed, no underground work or construction required on the secure airside
8. Removal, relocation, or modification of partition wall in main office space.
E-1
1378\19\2688697.1
EXHIBIT E
Insurance Requirements
A. Coverage shall be at least as broad as:
1. Commercial General Liability (“CGL”): Insurance Services Office (“ISO”) Form CG 00 01 covering CGL on an occurrence basis, including products and completed operations, property damage, bodily injury, and personal & advertising injury with limits no less than $1,000,000 per occurrence. If a general aggregate limit applies, either the general aggregate limit shall apply separately to this project/location (ISO CG 25 03 or 25 04) or the general aggregate limit shall be twice the required occurrence limit. Lessee shall maintain fire legal liability insurance on the leased property with extended coverage and debris-cleanup provisions in an amount not less than $1,000,000, and in any event that covers at least ninety percent (90%) of the actual cash value of all Improvements, Additional Improvements, and betterments in or on the Premises. Products and completed operations coverage is not required, provided that Lessee does not engage in manufacturing or providing other services at the Premises. Lessee is required to maintain employment practices coverage if it has or acquires any employees.
2. Workers’ Compensation: Workers’ Compensation insurance, if applicable due to Lessee having or acquiring employees, as required by the State of California, with Statutory Limits, and Employer’s Liability Insurance with limits of no less than $1,000,000 per incident for bodily injury or disease.
3. Personal Property: Property insurance against all risk of loss to any Lessee-owned or controlled property, including, without limitation, personal property at full replacement cost with no coinsurance penalty provision and naming the City of Salinas as a loss payee for the Improvements, Additional Improvements, and betterments. Any fire legal liability coverage maintained shall also name the City of Salinas as additional insured or as loss payee.
4. Automobile Liability: Insurance for any Lessee-owned or hired automobiles, and non-owned automobiles, with $1,000,000 for each occurrence for bodily injury and property damage. (This is required if Lessee is permitted to drive vehicles on any airport airside locations.)
5. Hangar-Keepers Liability: This is required if the owner has any aircraft of others in their care, custody, and/or control (such as storing a friend’s aircraft, managing a client’s aircraft, or etc.) $1,000,000 for each occurrence.
B. Other Insurance Provisions:
The insurance policies are to contain, or be endorsed to contain, the following provisions:
E-2
1378\19\2688697.1
(1) Additional Insured Endorsement - The liability policies shall include the City of Salinas, its elected and appointed officials, officers, employees, representatives, volunteers, and agents (hereinafter collectively the “City”) as Additionally Insured via endorsement.
(2) Waiver of Subrogation Endorsement - Lessee hereby grants to City of Salinas a waiver of subrogation which any insurer may acquire against City of Salinas, its officers, officials, employees, and volunteers, from Lessee by virtue of the payment of any loss.
Lessee agrees to obtain any endorsement that may be necessary to affect this waiver of subrogation, but this provision applies regardless of whether or not the City of Salinas has received a waiver of subrogation endorsement from the insurer. The Workers’ Compensation policy shall be endorsed with a waiver of subrogation in favor of the City of Salinas for all work performed by the Lessee, its employees, agents, and subcontractors (3) Primary and Non-contributing Coverage - All required insurance policies and all renewals thereof shall be primary and non-contributing; the required insurance policy shall be primary over any other insurance, deductible, or self-insurance maintained by the City and non-contributory with respect to the City.
(4) Cancellation - Required insurance policies shall not be canceled or the coverage reduced until a thirty (30) day written notice of cancellation has been served upon the City, except ten (10) days shall be allowed for non-payment of premium. (5) Broader Coverage/Higher Limits - If the Lessee or Permit Holder maintains broader coverage and/or higher limits than the minimums shown above, the Lessee or Permit Holder requires and shall be entitled to the broader coverage and/or higher limits maintained by the Lessee or Permit Holder. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City. (6) Acceptability of Insurers - Insurance is to be placed with insurers authorized to conduct business in the state with a current A.M. Best rating of no less than A: VII, unless otherwise acceptable to the City.
(7) Verification of Coverage – Lessee or Permit Holder shall furnish the City with original Certificates of Insurance, including an additional insured endorsement and all required amendatory endorsements (or copies of the applicable policy language affecting coverage required by this clause) and a copy of the Declarations and Endorsement Pages of the liability policies listing all policy endorsements to City before work begins.
However, failure to obtain the required documents prior to the work beginning shall not waive the Permit Holder’s obligation to provide them. The City reserves the right to require complete, certified copies of all required insurance policies, including endorsements, required by these specifications, at any time.
E-3
1378\19\2688697.1
(8) Special Risk or Circumstances - City reserves the right to modify these requirements, including limits, based on the nature of the risk, prior experience, insurer, coverage, or other special circumstances.
(9) Self-Insured Retentions - Self-insured retentions must be declared to and approved by the City of Salinas. At the option of the City, the Lessee shall provide coverage to reduce or eliminate such self-insured retentions with respect to the City, its officers, officials, employees, and volunteers; or the Lessee shall provide evidence satisfactory to the City guaranteeing payment of losses and related investigations, claim administration, and defense expenses. The policy language shall provide, or be endorsed to provide, that the self-insured retention may be satisfied by either the named insured or City of Salinas. (10) Sublessees, Contractors, and Subcontractors - Lessee shall require all sublessees, contractors, and subcontractors who perform work on the Premises to maintain general liability insurance in an amount of no less than $1 million combined single limit per occurrence which complies with all of the provisions in this Insurance section above, including providing an additional insured endorsement in favor of the City, and Lessee shall provide City with copies of such insurance certificates and endorsements at the initiation of any sublease between Lessee and a sublessee as well as upon request by the City.
Furthermore, before commencing or allowing the commencement of any work of improvement, Lessee shall ensure that all of its employees and/or all employees of any sublessees, contractors, and subcontractors are covered by workers’ compensation insurance.
E-4
1378\19\2688697.1
EXHIBIT F
Rental Schedule
Year Monthly Rent
Annual
Rent
1 $3,000.00 $36,000.00
2 $3,090.00 $37,080.00
3 $3,182.70 $38,192.40
4 $3,278.18 $39,338.17
5 $3,376.53 $40,518.32
6 $3,477.82 $41,733.87
7 $3,582.16 $42,985.88
8 $3,689.62 $44,275.46
9 $3,800.31 $45,603.72
Utilities 1st Year
Tenant Garbage Water/Sewer PG&E Janitorial Annual Monthly Rate Archer
Aviation $696.86 $522.65 $2,285.60 $2,656.79 $6,161.91 $513.49 Utilities and Custodial Annual
Costs Assessments
City of Salinas
Legislation Text
200 Lincoln Ave., Salinas,
CA 93901
www.cityofsalinas.org
File #: ID#23-765, Version: 1
Commitment of 2019, 2020, and 2021 Permanent Local Housing Allocation Program Funds Approve a Resolution authorizing the commitment of State of California Housing and Community Development Department Permanent Local Housing Allocation program funds for program years 2019, 2020, and 2021; and authorizing the Interim City Manager or designee to execute any required documents, forms, agreements, or amendments necessary to support the implementation of each funding commitment.
City of Salinas Page 1 of 1 Printed on 1/19/2024
powered by Legistar™
Page | 1
CITY OF SALINAS
COUNCIL STAFF REPORT
DATE: JANUARY 23, 2024
DEPARTMENT: COMMUNITY DEVELOPMENT
FROM: LISA BRINTON, DIRECTOR
THROUGH ROD POWELL, ASSISTANT DIRECTOR
BY: FRANCISCO BRAMBILA, ACTING PLANNING MANAGER
MARIA CAMBRON, COMMUNITY DEVELOPMENT ANALYST
TITLE: COMMITMENT OF 2019, 2020, AND 2021 PERMANENT LOCAL
HOUSING ALLOCATION PROGRAM FUNDS
RECOMMENDED MOTION:
A motion to approve a Resolution authorizing:
1. the commitment of State of California Housing and Community Development Department Permanent Local Housing Allocation program funds for program years 2019, 2020, and 2021; and
2. the Interim City Manager or designee to execute any required documents, forms, agreements, or amendments necessary to support the implementation of each funding commitment.
EXECUTIVE SUMMARY:
Commitment and timely expenditure of State’s Permanent Local Housing Allocation (PLHA) are prerequisites to the City’s continued eligibility to apply for receipt of its 2023 PLHA allocation.
Therefore, the commitment of the following specific allowable projects using remaining available PLHA funding from the City’s 2019, 2020, and 2021 is required. 2019: $200,000 to support the City of Salinas Emergency Motel Program 2020: $156,459 to establish a City of Salinas Accessory Dwelling Unit Program 2021: $500,000 to support predevelopment activities and costs associated with the development of City-owned parcel at Market and Division Streets 2021: $640,000 to support Community Housing Improvement Systems and Planning’s acquisition of land for a planned 100% affordable senior housing project at 98 Kip Drive
Page | 2
BACKGROUND:
In 2017, Governor Brown signed a 15-bill housing package specifically aimed at addressing the State’s housing shortage and increasingly high housing costs. As part of the bill, the State established an initial 5-year PLHA program utilizing supportive funding that originates from fees collected as part of all real estate transactions executed within the State. As such, annual PLHA funding allocations vary from year to year as its supportive revenue is dependent upon and subject to annual transactions associated with an ever-fluctuating real estate market. Thus far, the City has received a 2019 allocation of $1,006,847, a 2020 allocation of $1,564,592, and a 2021 allocation $1,722,182.
PLHA program funds are intended to fund housing-related projects and programs that assist in addressing the unmet housing needs of local communities. Based upon prior robust engagement and analysis, the City’s current PLHA Five-Year Plan includes varying annual percentage allocations of its annual allotment of PLHA funds within four (4) eligible activities:
Extremely low-, very low-, low-, or moderate-income affordable housing development Accessory Dwelling Unit (ADU) production
Matching Local or Regional Housing Trust Funds
Homeless Services Assistance
On December 29, 2023, HCD released its annual PLHA Notice of Funding Availability advising local jurisdictions of related regulatory and expenditure requirements associated with its annual application process and identifying an anticipated 2022 PLHA allocation of $863,162 for the City of Salinas. Formal release of a 2023 application has yet to occur but is expected in the near future.
To remain eligible to submit a PLHA application, recipient jurisdictions are required to demonstrate the balance of uncommitted/unspent funds from prior year funding is less than their anticipated 2022 allocation. Commitments proposed by staff will allow the City to comply with necessary application thresholds while also moving forward previously planned objectives, activities, and programs identified in the City’s PLHA 5-year Plan. Proposed commitments are as follows:
Salinas Emergency Motel Program (EMP)
HCD’s PLHA program grants an awarded jurisdiction with flexibility to respond to the immediate and long-term housing needs within its community. With this in mind, and in recognition of the fluid and ever-changing environment of homeless services funding, staff recommend committing $200,000 of the City’s 2019 allocation to the continued operations of the Salinas Emergency Motel Program (EMP). This commitment will allow the City to fully satisfy and comply with PLHA requirements for its 2019 PLHA allocation.
ADU Financing Program
The City is currently developing a new Accessory Dwelling Unit (ADU) financing program intended to support affordable housing development through qualified, forgivable loans or grants.
Page | 3
The proposed commitment of $156,459 of the City’s 2020 PLHA allocation will allow for the development of up to four (4) ADU units by qualifying low- to moderate income households.
Acquisition funding to support CHISPA’s development of a 100% affordable senior housing development.
The City continues to seek opportunities to provide affordable housing in its jurisdiction through various projects and partnerships. Staff are proposing a commitment of $640,000 of the City’s 2021 PHLA allocation to assist CHISPA in the acquisition of 98 Kip Drive from St. George Episcopal Church. Entitlement of the project is nearing completion and acquisition of the site will allow for the development of 36 affordable senior housing units through a 3% simple interest, 55- year loan and 55-year affordability covenant.
Predevelopment costs for Division and Market Street Properties To support future development on City-owned parcels at Division and Market Streets, staff are proposing a commitment of $500,000 of the City’s 2021 PLHA allocation to fund necessary predevelopment activities for a future 100% affordable housing development.
CEQA CONSIDERATION:
Not a Project. The City of Salinas has determined that the proposed action is not a project as defined by the California Environmental Quality Act (CEQA) (CEQA Guidelines Section 15378).
Because the proposed action and this matter have no potential to cause any effect on the environment, or because it falls within a category of activities excluded as projects pursuant to CEQA Guidelines section 15378, this matter is not a project. Because the matter does not cause a direct or foreseeable indirect physical change on or in the environment, this matter is not a project. Any subsequent discretionary projects resulting from this action will be assessed for CEQA applicability.
STRATEGIC PLAN INITIATIVE:
The approval of the resolution will support the City of Salinas Strategic Plan 2022-2025 Goal of Housing/Affordable Housing by committing PLHA funds to support the production of ADUs and affordable housing units.
DEPARMENT COORDINATION:
This agenda item and proposed activities and program are administered by the City’s Community Development Department (CDD) Housing and Community Development Division in coordination and consultation with the City’s Legal, Finance, and Public Works Departments.
FISCAL AND SUSTAINABILITY IMPACT:
There is no General Fund impact associated with this agenda item.
ATTACHMENTS:
Page | 4
Resolution
1 RESOLUTION NO. (N.C.S.)
A RESOLUTION APPROVING THE COMMITMENT OF FUNDS FOR THE
PERMANENT LOCAL HOUSING ALLOCATION PROGRAM FOR CALENDAR YEARS 2019, 2020, AND 2021 AND AUTHORIZING THE INTERIM CITY MANAGER
TO TAKE ACTION IN SUPPORT OF EACH FUNDING COMMITMENT
WHEREAS, in 2017, Governor Brown signed a 15-bill housing package specifically aimed at addressing the State of California’s housing shortage and high housing costs; and WHEREAS, the State of California (State) Department of Housing and Community Development (HCD) established an initial 5-year Permanent Local Housing Allocation (PLHA) program, starting in calendar year 2019, utilizing supportive funding that originates from fees collected as part of all real estate transactions within the State; and WHEREAS, the City of Salinas (City) has received a 2019 allocation of $1,006,847, a 2020 allocation of $1,564,592, and a 2021 allocation $1,722,182; and WHEREAS, on December 29, 2023, HCD released its 2023 PLHA Notice of Funding Availability (NOFA), advising local jurisdictions of related regulatory and expenditure requirements, and identifying an anticipated 2022 allocation amount of $863,162; and WHEREAS, to remain eligible to submit a PLHA application, recipient jurisdictions are required to demonstrate balance of uncommitted/unspent funds from prior year funding is less than the anticipated 2022 allocation; and
WHEREAS, to meet this requirement the City is proposing to commit $200,000 from 2019 to the City of Salinas Emergency Motel Program (EMP), $1,556,459 from 2020 to establish a City of Salinas Accessory Dueling Unit (ADU) Financing program, $640,000 from 2021 to support Community Housing Improvement Systems and Planning (CHISPA)’s acquisition of land for a planned 100% affordable senior housing project at 98 Kip Drive, and $500,000 from 2021 to fund predevelopment costs for properties currently owned by the City of Salinas through the Housing Successor Agency at Division and Market Streets; and
WHEREAS, with the total commitment of $1,496,459 from its 2019, 2020, and 2021 allocations, the City will satisfy its PLHA fund commitment requirement and enable submission of a 2023 NOFA application; and
WHEREAS, the City of Salinas has determined that the proposed action is not a project as defined by the California Environmental Quality Act (CEQA) (CEQA Guidelines Section 15378). Because the proposed action and this matter have no potential to cause any effect on the environment, or because it falls within a category of activities excluded as projects pursuant to CEQA Guidelines section 15378, this matter is not a project. Because the matter does not cause a direct or foreseeable indirect physical change on or in the environment, this matter is not a project. Any subsequent discretionary projects resulting from this action will be assessed for CEQA applicability.
2 NOW, THEREFORE, BE IT RESOLVED, that the Salinas City Council authorizes the commitment a total of $1,496,459 of State of California Housing and Community Development Permanent Local Housing Allocation program funds for calendar years 2019, 2020, and 2021 as outlined in this resolution; and
BE IT FURTHER RESOLVED that the City Council hereby authorizes the Interim City Manager or designee to execute any required documents, forms, agreements, or amendments necessary to support the implementation of each funding commitment.
PASSED AND APPROVED this 23rd day of January 2024, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
APPROVED:
______________________________
Kimbley Craig, Mayor
ATTEST:
_________________________
Patricia M. Barajas, City Clerk
City of Salinas
Legislation Text
200 Lincoln Ave., Salinas,
CA 93901
www.cityofsalinas.org
File #: ID#24-039, Version: 1
a. Public Employee Appointment - California Government Code Section 54957(b)(1), City Manager. b. Existing Litigation - California Government Code Section 54956.9, conference with legal counsel regarding, Dale Fors v. City of Salinas, Workers’ Compensation Appeals Board Case Number(s):
ADJ14550851; ADJ15956023.
c. Real Property Negotiations - California Government Code Section 54956.8, conference with real property negotiators Interim City Manager Jim Pia, City Attorney Christopher A. Callihan, and Community Development Director Lisa Brinton, to discuss the terms and sale of real properties located at 210 Salinas Street (APN TNPAPN 000142, Parking Lot 8); 122 Lincoln Avenue (APN 002245008000, Parking Lot 12), 128 Lincoln Avenue (APN 002245007000, Parking Lot 12), 118 Lincoln Avenue (APN 002245005000, Parking Lot 12), 120 Lincoln Avenue (APN 0022458006000, Parking Lot 12), 112 Lincoln Avenue (APN 002245004000, Parking Lot 12).
d. Anticipated Litigation - California Government Code Section 54956.9(d)(2), conference with legal counsel regarding significant exposure to litigation (one cases). e. Existing Litigation - California Government Code Section 54956.9(d)(1), conference with legal counsel regarding, California Department of Housing and Community Development v. Shangri-La Industries, LLC et al., Los Angeles County Superior Court Case No. 24STCV00629.
City of Salinas Page 1 of 1 Printed on 1/19/2024
powered by Legistar™