City Council
Report
City Council Meeting: December 13, 2022
Agenda Item: 5.I
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To: Mayor and City Council
From: David Martin, Director, Administration
Subject: Approval of an Amended and Restated Lease for Heal the Bay Aquarium at 1600 Ocean Front Walk and Short-term License for a Heal the Bay Gift Shop at 322 Santa Monica Pier
Recommended Action
Staff recommends that the City Council:
1. Make a determination that the actions to execute an Amended and Restated Lease and License and waiver of certain Pier Leasing Guidelines as set forth in recommended actions #2 and #3 are exempt under CEQA guideline 15061(b)(3) and 15302.
2. Authorize the City Manager to negotiate and execute an Amended and Restated Lease and short-term License with Heal the Bay (Tenant) doing business as Heal the Bay Aquarium to incorporate provisions negotiated by the parties; and
3. Waive the Pier Leasing Guidelines competitive procurement requirement in granting the Lease and License.
Summary
Heal the Bay Aquarium (Aquarium) located at 1600 Ocean Front Walk is an aquarium and marine education center under the Santa Monica Pier. The upcoming demolition and replacement of the Pier Bridge will impact the Aquarium. To avoid further delay to the bridge reconstruction timeline and a closure or permanent relocation of the Aquarium, the City as Landlord and Heal the Bay as Tenant have discussed a conceptual agreement on measures to mitigate and substantially lessen the impacts on the Aquarium and costs to the City through an Amended and Restated Lease Agreement for its current facility under the pier, and a short-term License Agreement for a retail kiosk atop the pier. An Amended and Restated Lease would provide the Aquarium with a 5-year term and two 5-year extension options; expansion of its 2 of 6
premises to incorporate an area for the Aquarium’s life support equipment and backup generator; and other mitigations measures during the Pier Bridge reconstruction work.
In addition, the Aquarium’s lease rate would remain unchanged from current lease of $1 per year and 10% of gross sales from retail operations, excluding admission charges.
The City would also provide a short-term License Agreement to allow the Aquarium to relocate its gift shop to a vacant retail kiosk on the Pier at a monthly lease rate of $3,572.
Discussion
Originally established by UCLA in 1998, known then as the UCLA Ocean Discovery Center, Heal the Bay has operated the Aquarium since 2003. Home to approximately 900 aquatic animals that come directly from the Santa Monica Bay, the facility provides public programming, research, and educational activities dedicated to marine conservation, pollution prevention and educating the public to the urgent issues affecting the Bay’s ecosystem. Annually, the Aquarium hosts over 10,000 students as part of its field trip programming, over two thirds are from Title 1 schools, and attracts an additional 100,000 general visitors.
The Aquarium’s lease has been on a month-to-month holdover since 2018 in anticipation of the Pier Bridge Replacement Project, a Federally funded major capital improvement project. The Pier Bridge is located above and adjacent to the Aquarium.
The demolition and replacement of the Pier Bridge which connects Ocean and Colorado Avenues to the Santa Monica Pier will greatly impact the Aquarium. To avoid further delay to the bridge reconstruction timeline and a closure or permanent relocation of the Aquarium, the parties commenced good faith negotiations to identify alternatives and mitigation measures to substantially lessen the disruptions to the Tenant and costs to the City.
The major terms and conditions for Council’s consideration are summarized below.
1. Term/Extension: Initial 5-year term with two additional 5-year options to extend. 3 of 6
2. Premises: Expansion of the leased premises under the Pier to include approximately 3,405 sq ft under the Pier to incorporate areas Tenant has installed aquatic life support equipment consisting of pumps, filtration systems, etc. The City and Tenant also agree to an additional non-contiguous expansion of the leased premises for the Tenant’s backup generator, at the City’s discretion, within parking lot 1N at 1550 Pacific Coast Highway, directly north of the Pier.
Tenant will strive in good faith to relocate the generator prior to June 2023.
3. Procurement of Permits: Tenant at its sole cost will be required to procure all required permits, including Building & Safety permits and Coastal Development Permit(s) and all new and existing improvements shall meet applicable Codes.
4. Operations during Pier Bridge Reconstruction: Tenant may remain in place during construction. In addition to intermittent closures, it is anticipated the following areas may be closed in part or entirely during construction: office area, retail area, and patio. Construction is estimated to occur between 2025 and 2027.
a. If Tenant elects to maintain the aquarium animals in place, subject to as-is conditions both prior to and during construction. Tenant is responsible for the health and welfare of their animals and the City does not assume any responsibility for the animals.
b. City will accommodate the relocation of the Tenant’s office area to Suite I of the Carousel Building. No additional rent for the office space will be charged.
c. City will accommodate the relocation of the Tenant’s retail area to a vacant retail kiosk located at 322 Santa Monica Pier. Rent charged to Tenant for the retail area will be at the discretion of the City, but no less than the prior tenant’s rent.
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5. Waiver of Liability: Tenant will provide waiver of liability for the premises presently and during construction, except as to the negligent or willfully wrongful acts of the City and its contractors.
6. Temporary Wayfinding: During Pier Bridge reconstruction the City will provide temporary wayfinding to assist visitors to locate the Aquarium.
7. Mitigation During Construction: City will comply with any construction mitigation requirements in the Final Environmental Impact Report (EIR) for the Pier Bridge reconstruction project. The City will prepare an Adjacent Structure Monitoring Plan to mitigate vibration impacts during construction of the Pier Bridge.
If the Amended and Restated Lease and Short-Term License is approved and executed, Tenant anticipates they will make a minimum capital investment of $200,000 in addition to the $100,000 recently spent in leasehold improvements to the Aquarium.
Tenant also anticipates they will make a minimum capital investment of $50,000 - $75,000 for the temporary retail kiosk for facade upgrades and retail merchandising.
Deviation from Pier Leasing Guidelines
The Council-approved Pier Leasing Guidelines (Appendix A) provide the framework for fair and consistent leasing and licensing of City-owned property on the Santa Monica Pier. The Guidelines provide parameters and general policy on mix of uses, standards and terms, and tenant recruitment and selection. When substantive terms or process deviate from the Guidelines, Council has the authority to grant exceptions.
Two substantive elements deviate from the Guidelines:
1. Section 6-I and II of the Guidelines require leasing opportunities be subject to a competitive process, and
2. Section 6-IV advises that given there are so few leasing opportunities on the Pier, merchant diversity should be promoted and the award of multiple leaseholds and/or licenses to an individual tenant should be discouraged. 5 of 6
Staff concluded that waiving the competitive procurement process by extending the lease term for the Aquarium should be balanced against the City’s need to not delay the Pier Bridge reconstruction project. A competitive bid process, such as a Request for Proposal (RFP) can be a lengthy process which could negatively impact the timeline of the Pier Bridge Reconstruction and deadlines set by CalTrans. In this case, a competitive process would not necessarily result in a different tenant given the limited number of organizations with the technical and financial ability to run an aquarium of this size, nor would it result in additional revenue to the City as the lease rate for an aquarium and education facility for this location is $1 a year.
Section 6-IV calls for merchant diversity and discourages the award of multiple leaseholds and licenses to an individual tenant. In this case, Heal the Bay’s proposed second location would be a short-term license intended to replace the retail space that will be temporarily eliminated during the Pier Bridge reconstruction project. Following the reconstruction of the Pier Bridge, estimated to occur in 2027, the retail kiosk space will be made available for lease through an open and competitive process.
Commission Action
At the Pier Corporation board meeting on September 19, 2022, the Pier Corporation Board supported the proposal and approved forwarding to Council staff’s recommendation for approval.
Environmental Review
CEQA applies only to projects that have the potential for causing a significant effect on the environment. A project is not subject to CEQA under CEQA Guidelines Section 15061(b)(3) “where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment.” The proposed extension of the lease or license would not result in a physical environmental effect on the environment.
In addition, Section 15302 exempts Class 1 projects from CEQA, which include the “operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of 6 of 6
existing public or private structures [or] facilities, including streets, sidewalks, bicycle and pedestrian trails, and similar facilities”. The project consists of the extension of the Heal the Bay Aquarium lease and to expand the premises to incorporate existing life support equipment and generator outside of the current premises lease line. This lease extension would allow for continued operation of the Aquarium and would not necessitate the construction of new buildings or facilities that would result in a physical impact. Therefore, the project qualifies as a Class 1 exemption.
Financial Impacts and Budget Actions
There is no financial impact or budget action necessary as a result of the recommended actions for FY 2022-23. However, it is anticipated that the proposed License for the vacant kiosk will result in revenues in future years in the amount of $3,572/mo. Staff will adjust revenue budgets accordingly as part of the FY 2023-25 biennial budget process.
Prepared By: Elana Buegoff, Pier Administrator
Approved Forwarded to Council
Attachments:
A. Appendix A. Pier Leasing Guidelines