Title
Introduction of Ordinance Approving a Third Amendment to the Long Term Sublease Between the City of Alameda and the US Department of Transportation Maritime Administration (MARAD). [Requires Four Affirmative Votes]. (Base Reuse 819099) [Not heard on November 7, 2017]
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Introduction of Ordinance Approving a Third Amendment to the Long Term Sublease Between the City of Alameda and the US Department of Transportation Maritime Administration
BACKGROUND
The City, as Successor in Interest to the Alameda Reuse and Redevelopment Authority (ARRA) entered into a twenty-year lease with the Department of Transportation Maritime Administration (MARAD) in May 2006 for layberth facilities located at Alameda Point Piers 1, 2, and 3. MARAD uses the facility for layberthing vessels enrolled in the Ready Reserve Force which are deployed for war time support services, disaster relief and other humanitarian efforts.
DISCUSSION
The long term lease details roles and responsibilities for operating the layberth facility and providing support services to the ship. The City’s port manager functions as the City’s “property manager” for the piers and ensures the condition and services are available to support the ships. MARAD has the responsibility to fund and notify the City when it needs to dredge the Federal channel that provides access to the piers. Since 2006, the City conducted three dredge events on behalf of MARAD. MARAD’s technical requirements dictate that the ships have at least 32-foot draft depth for its ships.
Over the past five years the City has been working with MARAD to address the rising cost of dredging and assisting in navigating regional regulatory restrictions for dredging in the San Francisco Bay. The City has worked tirelessly with Regional and MARAD headquarter staff to discuss various ways to reduce dredging costs to ensure they can remain in Alameda.
Last year, MARAD participated in a deployment drill for its ships. They were nearly unable to meet their mandatory timeframe for deployment because of the shoaling in the Channel. The ships had to pull out in high tide and drop anchor in order to demonstrate their ability to be deployed in a timely fashion.
When the City learned of MARAD’s dilemma to meet its goals, staff reintroduced the options discussed over the past five years. Staff convened a volunteer group of engineers to present an alternative to dredging accepted and performed around the world, to regional regulators which was denied. The City also submitted several proposals on behalf of MARAD with the regulators to try to reduce the cost of dredging and maintain a navigable channel for the MARAD ships.
All of the City’s efforts culminated with an appeal to the Directors of the Dredge Material Management Oversight’s - Long Term Management Strategy Board in December 2016. Staff from the City and MARAD, representatives from Congresswoman Barbara Lee’s office along with our engineering consultants explained the importance of MARAD to the City and the Region. Discussed was our desire to comply with their regulatory goals and advocated for flexibility. The Board allowed the City an unprecedented submittal of an eight-year Integrated Alternatives Analysis (IAA) for Disposal of Dredge Material plan with a 90% in-Bay disposal (the least expensive option) for the first dredge event.
For reasons that are unclear, MARAD did not budget for the dredge event. The current estimate for an initial dredge is approximately $4.5 million. In an unprecedented effort to keep a tenant at Alameda Point, the City has offered financial assistance to MARAD and has initiated a wetlands study to potentially create an additional dredge spoil disposal option in the future.
While the offers described above are still on the table, the term of the Lease has been modified. Instead of terminating in 2026, the lease is now a one year lease with the option of extending from year to year until 2026.
In addition, the number of ships at the pier has been reduced and therefore the rent has been adjusted. In January 2017, MARAD notified the City that they were going to move their larger ships out of Alameda because of their concerns about being able to deploy in a timely manner. Historically MARAD had seven to ten ships located on all three piers with an annual rent of $2,431,140. MARAD anticipates keeping approximately five of their smaller ships here until the dredging situation is resolved. The negotiated rent is $715 per ship/day with a minimum daily rate of $2,145 (3 ships), which results in a total annual rent of $1,304,875 for the five ships, but could be less if fewer MARAD ships remain at Alameda Point. This amendment and its corresponding reduction in rent would be effective starting October 1, 2017.
The amendment also includes a provision for the MARAD warehouse. When the MARAD lease was signed in 2006, the plan envisioned a MARAD “compound” near the piers. If the City developed the location where the MARAD warehouse is located (Building 168) the City is obligated to build a new warehouse for MARAD adjacent to the piers. This amendment removes the obligation to rebuild the warehouse for MARAD.
In response to the continued challenges of MARAD’s tenure at Alameda Point, staff has developed a two-pronged strategy related to the piers and MARAD’s commitment to Alameda. The first is to continue to work with MARAD to get a commitment of funding for some level of dredging and possibly cost-share the responsibility with MARAD. The second is to develop a market rate schedule for the piers and an aggressive marketing strategy for leasing the piers should MARAD choose to leave Alameda.
FINANCIAL IMPACT
Five ships at the proposed daily rate will generate $1,304,875 annually. The contractual minimum of three ships would generate $782,925 annually. In anticipation of fleet reduction, the City already considerably reduced its projected revenue in the current budget cycle from the MARAD pier lease.
With this amendment, the expected revenue reduction from the City’s current 2017-18 year budget is projected between $126,265 and $648,215. To counter the potential dramatic reduction in revenue, staff has been bringing all other lease renewals to fair market value. If cuts become necessary, staff will examine service cuts to landscaping, reduction in water usage, and reducing port management costs.
There is no impact to the General Fund from approving the lease amendment described above. The monies from the amended lease will be deposited into the Base Reuse Fund (Fund 858) and are restricted to the uses permitted under Economic Development Conveyance with the U.S. Navy.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action does not have any effect on the Municipal Code.
ENVIRONMENTAL REVIEW
There is no requirement for environmental review for amending a lease with BSY under the California Environmental Quality Act (CEQA). CEQA applies to discretionary approvals that have the potential for resulting in a direct or reasonably foreseeable indirect physical change in the environment. Public Resources Code § 21065. Since the lease amendment maintains the status quo uses on the premises for the length of the term and does not authorize or enable any development, the amendment would not result in any direct or reasonably foreseeable indirect physical change in the environment. As such, approval of the lease amendment does not constitute a project for purposes of CEQA.
Even if the amendment were determined somehow to constitute a project, the request is exempt from CEQA pursuant to the Class 1 (Existing Facilities) exemption (CEQA Guidelines § 15301) as well as the common sense exemption since it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment . . .” (CEQA Guidelines § 15061(b)(3)).
RECOMMENDATION
Introduce an Ordinance approving a third amendment to the long term Sublease between the City of Alameda and the US Department of Transportation Maritime Administration.
Respectfully submitted,
Jennifer Ott - Base Reuse Director
By,
Nanette Mocanu, Assistant Community Development Director
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibit:
1. 3rd Amendment to Sublease