8L
Date: December 16, 2025
To: Honorable Mayor and Members of the City Council
From: Craig Bilizerian, Public Works Director
By: Chuck Schaich, Policy & Resources Specialist | [email protected] Subject: Supplemental Material #1 for Agenda Item 8L
DISCUSSION
Subsequent to the publication of the agenda item, the Second Amendment to the Goldsworthy Desalter Site Lease Agreement has been revised to clarify that the CPI adjustment is compounded annually and to incorporate a Fair Market Adjustment provision. The revised agreement is attached for Council review and consideration.
ATTACHMENT
1. Second Amendment to Goldsworthy Desalter Site Lease Agreement (Revised)
1 1
4 1
2 2
SECOND AMENDMENT
TO GOLDSWORTHY DESALTER SITE LEASE AGREEMENT
(C2021-164)
THIS SECOND AMENDMENT to the Goldsworthy Desalter Facilities (“Desalter”) Site Ground Lease Agreement (C2021-164) is made and entered into as of December 16, 2025 (the effective date), by and between the CITY OF TORRANCE (the “CITY” or “Landlord”), a municipal corporation, and the WATER REPLENISHMENT DISTRICT OF SOUTHERN CALIFORNIA, a water replenishment district formed under Division 18, of the California Water Code (“WRD” or “Tenant”), which are referred to collectively as the “Parties” and individually as “Party”.
RECITALS:
A. The CITY and WRD entered into an agreement for a facilities site ground lease in 1999 for the siting of a brackish groundwater desalter, known as the “Goldsworthy Desalter”, a brackish well and ancillary facilities at the City Services Facility (City Yard) located at 20500 Madrona Avenue. The Desalter was subsequently completed and became operational in late 2001.
B. In late 2021, the CITY and WRD negotiated a new facilities site ground lease agreement (C2021-164) effective on January 1, 2022, that increased the lease payments to the CITY to market rates based on rental appraisal performed by Klabin Company, a firm with extensive experience in real estate appraisals and commercial/industrial lease rental rates. This new agreement was for an initial term of ten (10) years and provided for two (2) five-year extensions.
C. The 2022 facilities site ground l ease agreement increased the monthly rental lease rate to a market rate of $0.45 per square foot for a monthly rental lease payment to the City of $9,509, based on a leasehold area of approximately 21,132 square feet.
D. The agreement provides for an adjustment to Base Rent every three years beginning with the first adjustment three years from the commencement date of the lease based on the three-year compounded increase in the Consumer Price Index for Urban Areas (CPI-U) for the Los Angeles-Orange County Statistical Area. At end of the first three years of the lease (January 1, 2022, through December 31, 2024), the CPI-U increased by 11.06%, and the monthly rent payment to the City increased to $10,561 effective January 2025 for the current leasehold area of 21,132 square feet.
E. WRD, in conjunction with the CITY, is planning a major expansion to the Goldsworthy Desalter that will approximately double its capacity to remediate and clean up a brackish groundwater plume in the local West Coast Groundwater Basin. The expansion will require an additional leasehold area of approximately 16,591 square feet in the City Yard and the CITY wishes to lease this additional area to WRD to accommodate the expansion of the Goldsworthy Desalter. The precise size of the additional leased area will be determined once the project is complete. The rental payment for this additional lease area is waived until the Goldsworthy Expansion is completed, but no longer than January 1, 2027, whichever occurs first.
F. In order for WRD to qualify for financing for the noted expansion, the State Revolving Fund (“SRF”) requires that the Parties hereto agree to extend the existing term of the Goldsworthy Desalter Site Lease Agreement to comply with the SRF requirement of having the lease extend throughout the repayment period of 30 years. 2 ATTACHMENT 1
2 4
1 2
2 AGREEMENT:
NOW THEREFORE, the Parties agree as follows:
Landlord and Tenant hereby acknowledge that the foregoing Recitals are true and correct, and the terms, provisions and conditions hereinafter set forth and in consideration of mutual covenants and obligations of the parties hereafter agree as follows:
1. Paragraph 3, entitled “Term” is amended to read in its entirety as follows:
“3. Term . The initial term of this Lease shall be ten (10) years duration from January 1, 2022, through December 31, 2031, and will be subject to renewal for five (5) additional five- year (5) extension periods, subject to the written mutual agreement by both Parties, for a total of thirty-five (35) years. The Lease and the Grant of Easement would automatically terminate, if for unforeseen reasons, the Goldsworthy Desalter Project is permanently taken out of service and is no longer in operation.
This lease shall terminate without further notice at the expiration of the term of this Lease and any applicable extensions. Any holding over by Tenant after the expiration of the term (other than as may be required to remove Tenants property and facilities from the Leased Premises in accordance with the Lease) shall not constitute a renewal or extension and shall not give Tenant any rights in or to the Lease Premises or any part thereof except as expressly provided in this Lease. In the 35th year of the Lease, the Parties shall engage in good faith negotiations to extend the Lease for additional periods of time as agreed upon both Parties. The lease extension will be accomplished by a written Amendment to the Lease and Lease Term, executed by both Parties.
Notwithstanding any other provision in this Lease, Tenant may terminate this Lease upon three (3) years’ written notice to the Landlord before the end of the initial ten (10) year term, or the end of each of the five (5) five-year (5) extensions. Upon such notice of termination and prior to the end of the Lease as terminated, Tenant, at its own cost, shall restore the Leased Premises to condition existing prior to Effective Date of this Lease. The Landlord shall allow Tenant full and unrestricted access to enter the Leased Premises to remove all equipment and other items of personal property owned by the Tenant. Should Tenant fail to remove property within 365 days of the Agreement termination date, Tenant agrees that said property shall be deemed abandoned. The Landlord shall not, thereafter be liable to the Tenant as a bailee. Any reasonable costs incurred by the Landlord for the removal and disposal of said property shall be billed to, paid by Tenant, and shall be considered a legal debt to the Landlord. Any enhancement to restore the Leased Premises site to other than the original conditions will be the Landlord’s responsibility. It is understood under this Lease that any facility builds for the use of the Landlord that affects the return of real property to original conditions will remain in-place.
2. Paragraph 4, entitled “Base Rent”, is hereby amended to read in its entirety as follows:
“4 Base Rent - Tenant agrees to pay Landlord rent for the use and occupancy of the premises for the current leased area at the Desalter location identified as Parcels A, B and C in the leasehold agreement C2021-164, which became effective on January 1, 2022, in accordance with the Lease Payment Schedule shown in Exhibit D. The monthly rent for the first three (3) years of the lease (January 1, 2022, through December 31, 2024) is set at nine thousand five hundred and nine dollars ($9,509). The valuation of fair market rent was determined by an appraisal performed for the City by the Klabin Company for the Transit Terminal Site, (Exhibit E) which is the same class of commercial/industrial property 3 3
4 1
2 2
as the Goldsworthy site. The first monthly rental lease payment (“Base Rent”) of nine thousand five hundred and nine dollars ($9,509) shall be made payable no later than thirty (30) days from receipt of the City’s rent invoice.
Effective January 1, 2025 the monthly Base Rent payment increased to ten thousand five hundred and sixty-one dollars ($10,561) for next three (3) year period of the lease (January 1 , 2025 through December 31, 2027) based on the cumulative change in the CPI-U Index for the prior three-year period (January 1, 2022 through December 31, 2024) of
11.06%.Subsequent rental lease payments shall be made payable monthly no later than thirty (30) days from receipt of City’s invoice for rent. . The Landlord will invoice the Tenant thirty (30) days in advance of the payment due date. The Parties agree that failure of the Landlord to provide an invoice is not a breach of the Lease. Additionally, the Parties agree failure of the Landlord to provide an invoice does not excuse Tenant’s obligation to pay rent on or before the rental due date . Further, the Parties agree that the failure to pay rent for 90 days will be subject Tenant to Default pursuant to Paragraph 22.
Tenant agrees to pay Landlord an additional amount of rent for the use and occupancy of the additional leased parcels needed to accommodate the expansion of the Desalter, which are identified as Parcels D and E in Exhibits G and H. The rental payment for these two additional leased parcels is waived until Goldsworthy Desalter Expansion is completed, but no later than January 1, 2027, whichever occurs first.
3.“5 Base Rent Adjustment - The Base Rent will be adjusted every three (3) years (“Rental Adjustment Period”) during the term of the lease beginning with the first adjustment three years from the commencement date of the lease agreement and every three years thereafter (Rental Rate Term). The base rental rate will be adjusted on, and commencing with the beginning of the fourth, seventh, tenth, thirteenth, sixteenth, nineteenth, twenty- second, twenty-fifth, twenty - eighth, thirty - first and thirty-fourth year of the lease (“Adjustment Date”). Such adjustments will be calculated in accordance with the total cumulative three-year (3) change in the Consumer Price Index for Urban Areas (CPI-U) for the Los Angeles-Orange County Statistical Area from the beginning of the Adjustment Period to the last month of the three (3) year Rental Adjustment Period. The CPI-U shall not exceed (capped at) five percent for any year during the Rental Adjustment Period and shall not be less than 0%. For the avoidance of doubt, CPI-U cannot go below 0%, for any single year or for any three (3) year Rental Adjustment period, which means that the Base Rent cannot be decreased below 0% due to a negative CPI-U in any single year or during the term of any three (3) year Rental Adjustment Period. If the CPI-U for any year is above the five percent cap during the Rental Adjustment Period, it will be set five percent for purpose calculating the CPI-U adjustment for the three-year Rental Adjustment Period.
Fair Market Adjustment (Third Option Period). Notwithstanding the foregoing CPI-U adjustments, the Base Rent shall be subject to a Fair Market Value adjustment prior to the commencement of the third (3rd) five-year option period, which begins on January 1, 2042.
The Landlord shall obtain, at its sole cost, an MAI-certified real estate appraisal to determine the Fair Market Rental Rate for comparable industrial/utility use properties within the South Bay submarket. Said appraisal shall be completed no later than six (6) months prior to January 1, 2042.
The Base Rent effective January 1, 2042 shall be adjusted to the Fair Market Rental Rate as determined by said appraisal and shall thereafter remain subject to the triennial CPI-U adjustments set forth in this Section for the remainder of the Lease term and any extensions. 4 4
4 1
2 2
In the event Tenant disputes the Landlord’s appraisal, Tenant may, at its sole cost, obtain a second MAI-certified appraisal within thirty (30) days of receipt of the Landlord’s appraisal.
If the two appraisals differ by more than ten percent (10%), the Parties shall jointly select a third MAI-certified real estate appraiser within fifteen (15) days. The average of the two closest appraisals shall establish the Fair Market Rental Rate. The cost of the third appraisal shall be shared equally between the Parties.
4. In all other respects not modified by this SECOND AMENDMENT, the Agreement dated January 1, 2022, by and between the CITY and WRD, is hereby ratified and reaffirmed and remains in full force and effect.
CITY OF TORRANCE WATER REPLENISHMENT
DISTRICT
A municipal corporation OF SOUTHERN CALIFORNIA
A Water Replenishment District formed
Under division 18 of the California
Water Code
George K. Chen, Mayor Joy Langford, President
Board of Directors
ATTEST: ATTEST:
Rebecca Poirier, MMC Vera Robles DeWitt, Secretary
City Clerk Board of Directors
APPROVED AS TO FORM: APPROVED AS TO FORM:
PATRICK Q. SULLIVAN
City Attorney
By: By:
Tatia Y. Strader Leal Trejo APC
Assistant City Attorney District Counsel
5