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HomeMy WebLinkAbout2012 Review FLS Lease CM OF SEBASTIAN HOME OF PELICAN ISLAND AGENDA TRANSMITTAL Subject: Agenda No. Preliminary Review Department Origin: Revised Lease Between the City of Sebastian and Administrative S 0j Fisherman's Landing Sebastian, Inc. City Attorney: /,moil,— City Clerk: Apr rove; of Submittal by: Date Submitted: 19 SEP 12 ��/ i ,, Council Date: 26 SEP 12 Al in -r, ity Manager Exh',its: Lease and Exhibits EXPENDITURE REQUIRED: AMOUNT BUDGETED: APPROPRIATION REQUIRED: N/A At This Time N/A At This Time N/A At This Time SUMMARY In July 2010, the City of Sebastian (City) and Fisherman's Landing Sebastian (FLS) entered into a lease agreement whereby FLS would manage, operate and control the parcels purchased with funds received from the Stan Mayfield Working Waterfront Grant. These parcels were 1540 Indian River Drive (Hurricane Harbor Restaurant) and 1532 Indian River Drive (Dabrowski Parcel — Actual Working Waterfront). In January 2011, the lease was modified at the request of the City. The purpose of the lease modification was to expedite improvements to the Hurricane Harbor facility; thereby, immediately addressing the blighted conditions that existed at the site. As a result of the January 2011 lease modifications, the City provided renovation funds to FLS and the eatery, fish market and some of the museum components were open to the public by August 2011. By the end of the September 2011, it was apparent that the eatery portion of the project was operating outside the scope of the management plan. Significant public input was received. Ultimately the City was put on formal notice by the State of Florida that because of the eatery's scope of operations, the covenants of the grant were in violation. The City quickly responded to the State's warning. Meetings were conducted and written notices were sent to the City's tenant and subtenants concerning the operations that were outside the scope of the management plan. By mid October 2011, the subtenant operating the eatery provided voluntary notice that they would cease operation at 1540 Indian River Drive. This action brought the City into compliance with the State. However, that action left potions of the management plan's goals incomplete. To date, the fish market and working waterfront portions of the project continue to be in operation within the parameters of the grant covenants. The City's continued goal is to implement the management plan in its entirety. The solution that best accomplishes this is to create a plan whereby the City manages and controls the operations at 1540 Indian River Drive, while FLS manages and controls operations at the working waterfront (1532 Indian River Drive). To make this plan feasible, certain elements in the current lease arrangement must be renegotiated, as FLS has a made a financial investment in the property the City now wishes to manage directly. In an effort to move this project forward, City staff and FLS have negotiated a new lease that bifurcates management of the properties in exchange for the City renovating the historic fish house. The purpose of this item being placed on your agenda is to provide opportunity for the Council to publicly consider this proposed solution. If Council is supportive, the new lease can be submitted to the State for review and approval and then returned to Council and FLS for approval at the local level. Staff estimates that final adoption of the proposed new lease could occur sometime in October 2012. Also note, in an effort to further ensure that operations at the working water front do not get out of conformance, the Business Plan has been modified. A copy of the revised Business Plan has been made an exhibit in the new lease. The State will also be required to review/approve the Business Plan if the lease is changed. The full lease and all exhibits is provided to Council under a separate cover. RECOMMENDATION Staff recommends that City Council accept the conditions in the new lease and submit the document to the State for their consideration. CONDITIONS OF THE NEW LEASE In considering the new lease, Council should be aware of the changes and financial obligations that the agreement proffers. Below is an executive summary of the paragraphs considered most important: PARAGRAPH #1 - This paragraph terminates all other agreements with FLS. Further, it states that the City will assume the sublease between FLS and Indian River Seafood, Inc. (IRS). This action leaves the City the right to renegotiate terms with IRS, but does stipulate that pro-rated pre-paid rent credits will be applicable to the new lease negotiated between the City and IRS. Lastly, while the City would be in a position to renegotiate with IRS, staff notes that IRS has been a good business partner and has entitlement under their current lease to operate the fish market and eatery. PARAGRAPH #2 - This paragraph leases 1532 Indian River Drive to FLS. It also designates the southern 1/3 of the parking lot to FLS for their exclusive use for working waterfront purposes. This paragraph also permits FLS to use restroom facilities at 1540 Indian River Drive. This action relieves the need to construct additional public restrooms for activities at 1532 Indian River Drive. PARAGRAPH #3 - This paragraph outlines the proposed activities that will occur at the site. It specifically mentions that FLS will use the property for commercial fishing docks, off-loading of fish products, aquaculture, fundraising and special events. The agreement permits FLS to conduct up to six (6) fund raising special events, without any additional City authorization, as follows: ➢ Permits use of the outside area of 1540 Indian River Drive; ➢ Requires submittal of an Event Plan that provides for public safety considerations; ➢ Allows consumption of beer/wine at special events; and, ➢ Permits the playing of live or recorded music at special events. PARAGRAPH #4 — Recognizes the submerged land lease and switches the responsibilities to pay the annual renewal fees to the City. PARAGRAPH #5 - Establishes the term of the lease to be 21 years. The previous lease term was ten years. PARAGRAPH #6 - Establishes rent at $1 per month. The previous lease had a "free lease" provision. PARAGRAPH #7 - Speaks to the purpose behind keeping lease payments to a minimum. The intent of the business plan is to return revenue that is created at the site, into the site. This way other capital improvements can be made and the mission of FLS can be funded. This paragraph also ensures that visitors are not charged and provides a process to vet any unforeseen ventures with the State, should the City and FLS not agree on possible future uses of the parcel. PARAGRAPH #8 - This paragraph has the biggest financial impact for the City. This paragraph is also the core concept in moving the project forward. In exchange for the rights for the City to manage 1540 Indian River Drive (and keep all rent generated therein), paragraph #8 commits the City to funding and completing the renovation of the fish house. The agreement states that upon execution of the lease, the City will appropriate construction funds. As of September 18, 2012, an initial engineering estimate for construction was $325,000. This amount has been placed in the FY 13 CIP. The agreement also requires the City to complete reconstruction within two years. Should the City approve this lease, staff will apply for grant fund from FIND to help offset the costs. FLS have been informed of our intent to apply for grant funding. PARAGRAPH#9-This paragraph provides for operational adherence to the management plan. Paragraph #10—The section requires FLS to pay for utilities, while allowing them use of the dumpster at 1540 Indian River Drive for non-perishable items. PARAGRAPH #11 - Insurance requirements are provided in this section. Essentially, the City shall provide all insurance that protects its interests. FLS shall provide worker's compensation insurance and a City waiver for any injury that may result to FLS members as a result of conducting their business functions. PARAGRAPH #16.D - In an effort to ensure that there is (1) general public parking; (2) parking for operations at 1540 Indian River Drive; and, (3) parking for FLS operations, this paragraph provides FLS the ability to tow vehicles if non-FLS parking occurs in their portion of the parking lot.