HomeMy WebLinkAbout05/23/1994 Item #31Y
TO:
FROM:
SUBJECT:
-. So
SUPPLEMENTAL AGENDA
CITY OF NEWPORT BEACH
OFFICE OF THE CITY MANAGER
MAY 23, 1994
MAYOR AND CITY COUNCIL
ASSISTANT CITY MANAGER
C -.sa.5
cmr
MAY 2 31994
ACTION: If desired, approve amendments to previously approved lease
substituting CPI for Average Sales Value and requiring City to
credit Tidelands Fund in an amount equal to tax advantage.
BACKGROUND: The City Council previously approved the form of a new 50 year
lease for Beacon Bay and sent it to the State Lands Commission for approval. Their
staff raised several questions which required the negotiating teams for the City and the
residents to re- negotiate some provisions and to travel to Sacramento for face -to -face
negotiations. As a result, the staff of the State Lands Commission is prepared to
recommend approval of the lease and place it on the consent calendar for May 26,
1994 if the proposed amendments are approved by the City Council.
DISCUSSION: One proposed amendment is merely an accounting item to
forestall a precedent which might prove detrimental to other negotiations pending
before the State Lands Commission. It amounts to the City crediting $35,800 annually
to our state supervised Tidelands Fund. Currently, tideland expenditures exceed
revenues by approximately $1.2 million, so an additional $35,800 of revenue will have
little impact. The credit is compensation for the "tax advantage" granted to current
lessees. This amount reflects the additional property tax which some lessees will pay
if they sign the new lease. The State Lands Commission believed this credit
represented funds transferred to other governmental agencies such as schools which
have no tidelands obligations. The proposed transfer into our Tidelands Fund satisfies
this concern. Additionally, as properties are sold, this amount will steadily decrease
and eventually be eliminated.
The other amendment involves substituting a simple CPI calculation in place of
"Average Actual Sales Value" to calculate periodic rental increases. Originally, an
index was sought that tracked real estate values, and the method selected employed
the average of the last three homes sold in Beacon Bay.
Page 2
When this method was exposed to the marketplace, potential buyers and real estate
brokers complained loudly that it was (a) difficult to understand, (b) capricious, (c)
potentially discriminatory and (d) depressing interest and prices in Beacon Bay. The
basic complaint was that rental adjustments were held hostage to whatever high or
low priced homes most recently sold and that adjustments should fluctuate widely from
year to year. To combat this problem, the negotiating teams requested, and the State
Lands Commission staff approved replacing the method with a simple CPI increase.
The use of CPI may actually increase the City's income. White CPI does not normally
keep up with real estate values, it nevertheless rarely goes down. More importantly,
the large rental adjustments are based upon sale prices, and the simpler index will
create a more marketable lease which will result in higher overall rents to the City.
Attached are proposed wording regarding the tidelands credit and a table showing
how the amount is calculated. The rental adjustment index will be changed by
substituting standard CPI adjustment language for those portions of the original lease
dealing with "Average Actual Sales Value ".
RECOMMENDATION: Over six and a half years have been spent in the
negotiating of this lease. The lease provides for the many older, fixed income
residents while allowing the City to achieve full Fair Market Rental Value in the
shortest possible time. Approval of these amendments at this time will allow the new
lease to take effect on July 1, 1994 and immediately increase City revenues by
$350,000 annually. The new lease will promote turnover of homes in Beacon Bay to
the benefit of those eager to sell. Resales in Beacon Bay can generate an additional
one million dollars to the City. The proposed amendments are acceptable to the
Residents Association, and approval by the City Council is recommended.
enneth J. D lino
KJD:mb
Attachments
Distribution of Rents and Tax Advantage between Tidelands and Uplands*
Beacon Bay 5118/94 - Page 1
(lstyear)
Proportionate Proportionate
Annual Amort.
Tidelands
Effective
%
%
Rent
Rent
of PV of Tax
Tax
Lot No.
Net Rent
Tidelands
Uplands
Tidelands
Uplands
Advantage
Advantage
Waterfront Lots
A
$31,940
100%
0%
$31,940
$0
$0
$0
B
$22,270
10090
0%
$22,270
$0
$930
$93o
C
$22,480
100%
0%
$22,480
$0
$1,410
$1,410
1
$15,030
100%
0%
$15,030
$0
$2,080
$2,080
2
$17,950
100%
0%
$17,950
$0
$2,260
$2,260
3
$24,110
100%
0%
$24,110
$0
$1,890
$1,890
4
$21,260
100%.
0%
$21,260
$0
$2,610
$2,610
5
$28,840
100%
0 %
$28,840
$0
$1,620
$1,620
6
$34,260
100%
0%
$34,260
$0
$0
$0
7
$19,260
95%
5%
$18,297
$963
$3,230
$3,068
8
$43,480
50%
50%
$21,740
$21,740
$0
$0
9
$44,350
5%
95%
$2,217
$42,132
$0
$0
10
$33,540
0%
100%
$0
$33,540
$0
$0
11
$17,020
0%
100%
$0
$17,020
$3,200
$0
12
$22,190
0%
100%
$0
$22,190
$1,130
$0
13
$29,450
0%
100%
$0
$29,450
$0
$o
14
$19,690
0%
100%
$0
$19,690
$2,880
$0
15
$20,240
20%
80%
$4,048
$16,192
$2,980
$596
16
$16,480
95%
5%
$15,656
$824
$2,640
$2,508
17
$21,750
100%
0%
$21,750
$0
$2,420
$2,420
18
$16,480
100%
0%
$16,480
$0
$2,640
$2,640
19
$19,500
100%
0%
$19,500
$0
$2,880
$2,880
20
$17,910
100%
0%
$17,910
$0
$2,470
$2,470
21
$21,170
100%
0%
$21,170
$0
$1,180
$1,180
22
$37,880
100%
0%
$37,880
$0
$0
$0
ES 1
$31,920
100%
0%
$31,920
$0
$0
$0
ES 2
$29,220
100%
00/0
$29,220
$0
$0
$0
Waterfront
Subtotal:
$679,670
$475,928
$203,742
$40,450
$30,562
Beacon Bay 5118/94 - Page 1
Beacon Bay 5/18/94 - page 2
Distribution of Rents and Tax Advantage between
Tidelands and Uplands"
(lstyear)
Proportionate Proportionate Annual Amort.
Tidelands
Effective
%
%
Rent
Rent of PV of Tax
Tax
Lot No.
Net Rent
Tidelands
Uplands
Tidelands
Uplands Advantage
Advantage
Interior Lou
23
$6,297
0%
100%
$0
$6,297
$550
$0
24
$8,897
0%
100%
$0
$8,897
$390
$0
25
$6,977
5%
95%
$349
$6,628
$630
$31
26
$6,942
99%
1%
$6,873
$69
$710
$703
27
$7,102
100%
0%
$7,102
$0
$660
$660
28
$7,785
100%
0 %a
$7,785
$0
$740
$740
29
$15,470
0%
100%
$0
$15,470
$0
$0
30
$7,102
0%
100%
$0
$7,102
$580
$0
31
$10,515
30%
70%
$3,154
$7,361
$660
$198
32
$7,217
100%
0%
$7,217
$0
$620
$620
33
$7,307
I00%
0%
$7,307
$0
$650
$650
34
$8,490
100%
0%
$8,490
$0
$730
$730
35
$7,780
090
100%
$0
$7,780
$580
$0
36
$7,672
0%
100%
$0
$7,672
$590
$0
37
$15,005
5%
95%
$750
$14,255
$0
$0
38
$7,967
99%
1%
$7,887
$80
$0
$0
39
$11,557
100%
0%
$11,557
$0
$0
$0
40
$13,572
100%
0%
$13,572
$0
$0
$0
41
$7,300
0%
100%
$0
$7,300
$510
$0
42
$7,672
0%
100%
$0
$7,672
$590
$0
43
$13,232
090
100%
$0
$13,232
$0
$0
44
$7,787
0%
100%
$0
$7,787
$630
$0
45
$7,990
15%
85%
$1,198
$6,792
$660
$99
46
$8,492
0%
100%
$0
$8,492
$720
$0
47
$7,365
0%
100%
$0
$7,365
$610
$0
48
$9,305
0%
100%
$0
$9,305
$600
$0
49
$7,197
0%
100%
$0
$7,197
$620
$0
50
$7,240
0%
100%
$0
$7,240
$630
$o
51
$7,857
0%
100%
$0
$7,857
$110
$0
52
$13,927
0%
100%
$0
$13,927
$0
$0
53
$8,492
0%
100%
$0
$8,492.
$730
$0
54
$7,227
0%
100%
$0
$7,227
$500
$0
55
$12,865
0%
100%
$0
$12,865
$0
$0
56
$7,915
0%
100%
$0
$7,915
$470
$0
57
$7,427
0%
100%
$0
$7,427
$700
$0
58
$10,007
0%
100%
$0
$10,007
$0
$0
59
$12,175
0170
100%
$0
$12,175
$0
$0
60
$7,315
0%
100%
$0
$7,315
$660
$0
Beacon Bay 5/18/94 - page 2
*Effective Net Rents consider tax advantage. Discount rate for present value of annual
advantage is 6%. Rate for amortization of advantage was 7 %. Rent and advantage
figures are from 1018193 appraisal.
Beacon Bay 5/18/94 - Page 3
Distribution of Rena and Tax Advantage between Tidelands and
Uplands*
(1st year)
Proportionate
Proportionate
Annual Amon.
Tidelands
Effective
%
%
Rent
Rent
of PV of Tax
Tax
Lot No.
Net Rent
Tidelands
Uplands
Tidelands
Uplands
Advantage
Advantage
Interior Tots - continued
61
$8,482
090
100%
$0
$8,482
$720
$0
ES 3
$10,325
100%
090
$10,325
$0
$320
$320
ES 4
$6,322
100%
0%
$6,322
$0
$500
$500
ES 5
$11,415
85%
15%
$9,703
$1,712
$0
$0
ES 6
$6,310
0%
100%
$0
$6,310
$500
$0
ES 7
$6,057
0%
100%
$0
$6,057
$650
$0
ES 8
$6,455
0%
100%
$0
$6,455
$410
$0
Interior Lots
Subtotal:
$397,807
$109,592
$288,215
$19,930
$5,251
Add Waterfront
$679,670
$475,928
$203,742
$40,450
$30,562
Grand Total:
$1,077,477
$585,520
$491,957
$60,380
$35,814
% of Total:
100%
54%
46%
10090
59%
*Effective Net Rents consider tax advantage. Discount rate for present value of annual
advantage is 6%. Rate for amortization of advantage was 7 %. Rent and advantage
figures are from 1018193 appraisal.
Beacon Bay 5/18/94 - Page 3
of 00 month. No late payment charge applies to payments received by Lessor on or
before 5W. P.M. on the fifteenth (15th) day of the month for which the paymerit is made
('Grace Period') . If a rent payment, or any portion thereof, is received by Lessor after
00'ation of the Grace Period, Lessee shall pay Lessor a late payment charge equal to four
percent (4%) of each late payment or portion thereof. Rent payments shall be payable to
the City of Newport Beach and sent, or delivered, to the Finance Director at the address
specNW for service of notices. Rent shall be payable by Lessee to Lessor in such coin or
currency to the United States as at the time of payment is legal tender for public and private
debts. Lessor and Lessee agree that late charges specified in this paragraph represent a
fair and reasonable estimate of the cost lessor will incur by reason of any late payment by
Lessee. Any late or missed payment of rent constitutes a default pursuant to paragraph 13
of this Lease. Any failure by Lessor to declare a default and initlate termination of this
Lease due to a We or missed payment shall not be considered a waiver of the right of
Lessor to do so for that or any other late or gassed payment
C TRANSFERS.
A. Conditions Preoedent to Transfer. Lessee may transfer this Lease subject to the prior
written consent of Lessor, which consent shall not be unreasonably withheld, delayed or
conditioned. Lessor shall consent to any transfer when Lessee and the proposed transferee have
complied with the following:
(t) Lessee shall furnish Lessor with executed copies of each and every document used
to effect the transfer.
(2) Lessee or the proposed transferee shall pay to Lessor a transfer fee of one hundred
dollars ($100.00);
(3) Lessee shall execute a Termination of Leasehold Interest' for recordation; and
(4) The proposed transferee shall execute a new lease and execute a "Memorandum
of Lease' for recordation. which tease shall be identical to this Lease and have a term equal
to the remaining term of this Lease at the time of the transfer.
B. Transfer Inlonnation. The parties to any non- exempt transfer of this Lease shall pro-Me
Lessor with all infom>ation relevant to a determination of the total consideration paid for the transfer.
as well as an documents which are relevant to the total consideration paid for the transfer. Lessee
M91- 1e13r1.V? 1 "120/94
situated parcels most recently transferred. Exempt transfers, as defined in Paragraph
3-B(3), shy not be used to calculate Average Actual Sales Value rent
(3) 'CPI' shall mean the Consumer Price Index - Los Angeles Anaheim- Riverside Area.
Ail Urban Consumers, All Items, published by the United States Department of Labor,
8urreau of Labor Statistics (1982.1984 =100). If the 1982 -1984 base of said Consumer Price
Index should hereafter be changed, then the new base stall be converted to the 1982 -1984
base and the base as so converted shall be used. In the event that the Consumer Price
Index a clad and ubfishe'shall cease to be published. then the successor "
Index Shan be used vravided thatan aoororztiate cornrersion-[rom ltd irr ex to the
(4) 'Current Lessee' shall mean the person or persons who, as of April 1, 1994 (the
'Cut -off 00tel, was or were the Lessee under the Preexisting Lease.
(5) 'Deterred Rent shall mean the total rent that a Current Lessee would have paid
had this Lease been executed on the Effective Date, through and including the date on
which this Lease was first executed, less the rent actually paid pursuant to the Pre-existing
L.easP— together with interest at the rate of eight percent (8%) per annum calculated on the
balance due at the end of each Lease Year or portion thereof.
(6) 'Effective Date" shall mean July 1, 1994.
(7) 'Execution Date' shall mean the date when this Lease is executed by Lessee.
(8) Initial Rent' shall mean the " ffg� net rent for the Leased Land as determined
by the appraisal of George Hamilton Jones, with due consideration to the leasehold
advantage created by the Pre - existing Lease, all as shown on Exhibit C attached hereto
and Incorporated herein by reference.
(9) 'Person' shall mean any natural person or natural person(s) and does not include
any corporation, association, or business entity in any form except a financial institution or
other bona fide tender acting in the capacity of a lender or an utter vivos or living trust.
(10) 'Pre-exlstirig Lease shall mean the Lease for the Leased Land which was effective
on January 1, 1988, and would, absent this Lease, expire on December 31, 2005.
(11) 'Transferred` shall mean any sale, assignment, sublease or other transaction. other
than an exempt transfer as defined in Paragraph 3.B(3), pursuant to whiter the right to
possession of the premises and the right to sign a new lease identical to this Lease is
transferred to another person.
B. Rental Payments.
Lessee shall pay annual rent in the sum of
payable at the rate of ($ ) per month. Lessee shall
also pay. it applicable, deterred rent in the sum of
Upon execution of this lease. Rent shall - stall not (circle one) be adjusted every
seven (7) years after the date of transfer in accordance with the provisions of Paragraph 3.8(4).
Annual rent, deferred rent, and periodic adjustments are based upon the following:
Ker- isrrrr.vz 3 oerzorvn
7K DIVE . ACTING IN THIS BUTAtF A
STATE LANDS C61aI'..M HAi KRW CERTRIED,
VAT THE NOEIED IS A WHOLE, TRUE AND CORRECT
COPY ���QQQ��� lTff EWIOMAt AECORD COPY, CONSISTING
OF PARTS, ON FILE IN THE OFFICE OF
THE ATE RANDS COMMISSION; THAT SAID
COPY HAS BEEN COMPARED BY THE UNDER-
SIGNED WITH THE ORIGINAL AND IS A COR-
RECT TRANSCRIPT THEREFROM.
IN WmAS WHEREOF, THE UMTEISIWIED
HAS ElEMIED TMS CFk11H0ATE AND
AFFM THE SEAL OF THE STA LAND
Cp1N64 'Syl J= 14"-' ON OF
is It#
MINUTE ITEM
fits Calendar Item No.
was os MMule Rem
CALENDAR ITEM �• by the State
Com by a vote orb '
C42 to atits_ri
m
A 70 05126/94
G 09 -02.6
S 35 Fossum
Grimes
A. Scott
J. Smith
REVIEW OF CITY OF NEWPORT BEACH
PROPOSED LEASES INVOLVING
GRANTED FILLED TIDE AND SUBMERGED LANDS - BEACON BAY
PARTY:
City of Newport Beach
Attn: Kenneth q. Delino
Deputy City Manager
3300 Newport Boulevard
Newport Beach, California 92658 -8915
BACKGROUND
The StateLands Commission, by its adoption of Minute
Item #27 at its meeting of May 28, 1981, approved, among other
things, a form of lease and schedule of rents to allow the City
of Newport Beach to lease certain filled tide and submerged lands
in Newport Beach for residential use. Of 72 lots to be leased by
the City, 38 lots consisted partially or entirely of filled tide
and submerged lands granted to the City by the California
Legislature (see Exhibit A).
The subject leases were specifically authorized by the
California Legislature pursuant to Chapter 74, Statutes of 1978.
SEC. 1. (g) of Chapter 74 authorizes leases for a maximum of
50 years. However, at the time of the Commission's 1981
approval, and because of a condition in the City Charter, the
form of the leases submitted by the City provided for a term of
25 year. Subsequently, on November 3, 1967 and November 3, 1992,
the City, pursuant to its charter, held elections at which the
majority of voters authorized leasing the property for up to
50 years, thereby providing for the maximum term authorized by
the Legislature.
The City subsequently entered into negotiations with the
homeowners (current tenants) to allow for termination of the
existing 25 -year leases and entering into new 50 -year leases.
The proposed new leases are modified as to form and process for
rent calculation from the current leases.
-1_
CALENDAR PAGE 192
11MINUTE PAGE
E
0
CALENDAR ITEM NO. C42 (CONT'D)
The City hired an appraiser, George Hamilton Jones, M.A.I.,
to conduct an appraisal of the Fair Market Rental Value and to
calculate Net Rent for the lots. The Net Rent is the Fair Market
Rent adjusted to reflect certain improvement costs and proration
of the value of the current homeowners' leasehold advantage. A
copy of the proposed lease form and the appraisal, dated
October 3, 1993, are on file in the Office of the State Lands
Commission in Sacramento, and are incorporated herein by
reference.
Staff has reviewed the appraisal and found it to.be
comprehensive, complex and exhaustive. The rental rates for the
existing leases, as well as Fee Lot Value, Fair Market Rental
Value, Existing Contract Rent and First Year Effective Net Rent
are shown on attached Exhibit B.
The new leases initially proposed by the City adopted a
rather complicated rent formula which" took the Fair Market Rental
Value of a new 50 year lease as appraised by Jones and adjusted
that amount for various "advantages" held by the current lease
holders. .Those advantages include a reduction for value
attributable to the lower current leasehold rental rates and what
is termed a tax advantage based on taxes paid reflecting current
lease contract values. The City approved those proposed lease
forms and rental schedules last year. A summary of the major
lease impacts is provided in the attached memo from the Deputy
City Manager regarding City Council Agenda Item f8, dated
June 28, 1993 (Exhibit C).
An additional change from the existing lease form is the
provision that rents could theoretically go down if the formula
proposed to determine future rents, using certain future lease
sales, reflects a lower rate. While this is considered unlikely,
it should be noted that the existing leases provide (in
paragraph 4. (d)) for the "greater" amount of either the base
rental or the calculated rents following a lease sale.
Staff believes that neither the statutory trust created by
Chapter 74, nor Public Trust principles, allow the trustee local
government to consider the property tax impact as a means of
lowering the return to the trust.
While neither the tax advantage nor the provision for
eliminating the "greater" provision in the rental rate is likely
to involve substantial sums and the City believes these sums will
be more than compensated for by future lease sales and
ICALENDAR PAGE 192.1
IMINUTE PAGE
0 0
CALENDAR ITEM N0. C42 (CONT'D)
•
recalculations of rent based thereon, the staff of the Commission
urged the City to renegotiate the "tax advantage" and provision
for possible lowering of rents based on averaging of future sales
prices. The City and homeowners went back to the table and have
resubmitted a new lease which eliminates the average of future
sales for calculating 7 year rent reviews and instead adopts a
Consumer Price Index escalator. The new lease will also ensure
that the Tidelands Trust Account will not lose revenue based upon
use of the tax advantage formula. The City has agreed that any
reduced rental amount for tideland parcels impacted by the tax'
advantage discount will be covered by a deposit or credit
transfer to the Trust Account by the City (see Exhibit D).
In the opinion of the staff, the actions taken by the City
as trustee for the statewide public, with the above
modifications, are based upon reasonable administrative and
business judgments and the leases are comprehensive and equitable
and adequately protect the public interest. Furthermore, staff
believes, while the lease and its consideration do not
necessarily reflect Commission practice as to provisions or means
of rent calculation, based upon the above modifications and the
additional provisions of the lease, the lease provides for
. acceptable terms as to both form of lease and range of
consideration and therefore submits it to the Commission with a
recommendation for approval.
OTHER PERTINENT INFORMATION:
_ Pursuant,to the Commission's delegation of authority and the
State CEQA`Guidelines (14 Cal. Code Regs. 15061), the staff has
determined that this activity is exempt from the requirements of
the CEQA as a categorically exempt project. The project is
exempt under Class 1, 14 Cal. Code Regs. 15301.
Authority: P.R.C. 21084 and 14 Cal. Code Regs. 15300.
AS 884:
N/A
EXHIBITS:
A. Location /Site Map.
B. Summary of Values and Rents.
C. City Memorandum.
D. Recalculated Distribution of Rents and Tax Advantage
between Tidelands and Uplands.
E. City of Newport Beach Council Approval.
CALENDAR PAGE 192.2
MINUTE PAGE
0 0
IT I8 RECOMMENDED THAT THE
1. FIND THAT THE ACTIVITY IS EXEMPT FROM THE REQUIREMENTS OF
THE CEQA PURSUANT TO 14 CAL. CODE REGS. 15061 AS A
CATEGORICALLY EXEMPT PROJECT, CLASS 11 MAINTENANCE OF
EXISTING FACILITIES, (14 CAL. CODE BEGS. 15301).
FIND THAT IN ACCORDANCE WITH CHAPTER 74, STATUTES OF 1978,
THE CITY OF NEWPORT BEACH MAY ENTER INTO LEASES OF CERTAIN
DESCRIBED FILLED AND RECLAIMED TIDE AND SUBMERGED LANDS FOR
A PERIOD NOT TO EXCEED 50 YEARS.
3. APPROVE THE CITY OF NEWPORT BEACHES PROPOSED FORM OF LEASE
AND THE RANGE OF CONSIDERATION AS REFLECTED IN THE RENTAL
RATES AND PROVISIONS FOR RATE ADJUSTMENT AS PROVIDED IN THE
REVISED LEASE AND SUBMITTALS, SUBJECT TO THE CITY'S
AGREEMENT TO GUARANTEE THAT THE TIDELANDS TRUST FUND BE
COMPENSATED AT FULL FAIR RENTAL VALUE, WITH NO TAX ADVANTAGE
DISCOUNT FOR PROPERTY RENTAL CALCULATION IMPACTING TRUST
PROPERTY, AS SHOWN ON EXHIBIT D.
-4=
Ask
ICALENDAR PAGE 192.3
MINUTE PAGE
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TIDELAND AREAS
CU
MAP OF BEACON BAY
EXHIBIT A
G -09 -02.6
EXHIBIT B - 1 OF 3
SUMMARY OF SALIENT FACTS AND CONCLUSIONS - continued
SUMMARY OF VALUE INDICATIONS:
Uarnaunhced Fair Market
Lot No. Fee Lot Value Rental Value
Water Front Lots
A
8
C
1
2
3
4
s
�6
7
8
9
10
11
12
13
`a*
15
16
17
18
19
20
21
22
ES 1
ES 2
7-';
$1,330.000
$1,200.000
$1,031,000
$947,000
$1,131,000
$1,263,000
$1,318,000
$1,341.000
$086,000
$1,210.000
$1,177,000
$1,298,000
51.342,000
51.122,000
$1,100,000
51,100000
$1,243,000
$1,265,000
$1.067,000
S1.067,000
$2,067,000
$1,243,000
51,147.000
51,058,000
SIM6,000
$1,037,000
$1,037,000
$31,563,000
$48,520
$43,320
S37,560
534,200
$41,640
$46,920
$49,120
$50,120
$51,680
$44,800
$43,480
$47,840
549,600
541,280
$40,400
$40,400
$43:640
$46,520
$39,080
$39,080
539,080
$45,640
542.320
$38,760
$37,880
$37,880
$37,880
$1,160.640
Existing
Contract
Rent
$23,125.08
$12,506.85
$16,625.04
$8,020.80
$8,825.40
$14,875.08
$10,458.96
520,01204
525,000.00
$10,631.52
$43,750.00
$42,500.04
524,999.96
$9,020.52
$14,250.00
523,625.00
$10,31256
$10.836.47
$8.508.48
$16,250.04
$8,508.48
$10,070.02
$8.727.84
$13,625.04
$41,250.00
$28,749.96
$24,625.00
$489,640.18
(1st year)
Effective
Net Rent
$31,940.00
$22,270.00
$22,480.00
$15,030.00
$17.950.00
$24,110.00
$21,260.00
$28,840.00
$34,260.00
$19,260.00
$43,480.00
544,350.00
$33,540.00
$17,020.00
$22,190.00
529,450.00
$19,690.00
$20,240.00
$16.480.00
$21,750.00
$16,480.00
$19,500.00
$17,910.00
S21,170.00
$37,880.00
$31,920.00
$29,220.00
$679.670.00
CALENDAR PAGE 192.
MINUTE PAGE
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0
• EXHIBIT B - 2
OF 3 .
.
SUMMARY OF SALIENT FACTS AND CONCLUSIONS - continued
Existing .
(1st Year)
Unencumbered
Fair Market
Contact
Effective
Lot No.
Fee Lot Value
Rental Value
Rent
Net Rent
Interior Lott
23
$478,000
514,487
52,782.32
$6,297.00
24
5501,000
$15,237
S6,12S.04
$8,897.0D
2S
$309,000
$15,537
$3,399.12
$6,977.00
26
$511,000
$15,612
$3,417.72
56,942.00
27
5519,000
S15,912
$3,436.44
$7,102.00
28
5542000
SIC775
$4,137.72
$7,785.00
29
$518,0DD
515,650
$15,375.00
515,470.00
30
55101000
$15,462
$3,551.16
57,102.00
31
$517,000
$15,725
$8,750.00
$10,515.00
32
$S7AoDD
$15,837
$3,588.48
$7,217.00
33
$528,000
SIC137
$3,607.08
$7,307.00
34
5589,000
$18,200
54,454.64
SBA90.00
35
$5591000
$17,000
$3,77628
$7,780.0D
36
$548,000
WAR
$3,795.00
$7,672.00
37
$517,000
$15,725
$14,625.00
$15,005.00
•
38
5520.000
515,837
- S3,780.36
$7,967.00
39
S528.OD0
$16,137
$9,125.04
$11,557.00
40
$588,000
5181162
$11,133.60
$13,572.00
41
5511000
$15,500
53,719.64
57,300.00
42
5548,000
$16,662
$3.795.00
17,672.00
-a
$556,000
Sl_¢qt962
$11,250.00
$13,23200
44
5558,000
$17,037
$3,83210
$7.787.00
.45
$565.000
$17,300
$4,056.84
$7.990.00
46
Mow
$18,162
$4,454.64
$8,492.00
47
5539.000
$16,475
$3,45936
$7.365.00
48
5551,000
$16,775
$6,24996
$9.305.00
49
S=000
$15,837
$3,551.16
57,197.00
50
$573.000
$15,950
$3,569.76
$7,240.00
51
5520.000
$15,837
$3,780.36
$7,857.00
52
$528,000
S16.137
$12,750.00
$13,927.00
53
MOOD
$18,162
54,479.00
$8.492.00
54
smwo
$15,987
$3.344.88
$7,227.00
55
$559,000
$17,075
$10,625.04 _
$32.865.00
56
$567.000
$17,375
$3,603.96
57,915.00
57
$546,000
$16,737
$3,551.16
57,427.00
58
552$000
$16.137
54750.00
$10.007.00
59
SSLSA00
$16,025
SlW25.0D
$12,175.0D
60
$533.000
516325
$3,533.88
57,315.00
CALENDAR PAGE 192.6
MINUTE PAGE
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0
I
i
0 EXHIBIT B - 3 OF 30
SMAARY OF SALIENT FACTS AND CONCLUSIONS - continued
Unw=unbemd Fairldatket
Lot No. Fee Lot Value Rental Value
Interior lots - continued
S8,482.00
61
$588,000
$18,162
ES 3
$474,000
$14,225
ES 4
$467,000
$13,962
E4 5
$470,000
$14,075
ES 6
$468,000
$14,000
ES 7
$461,000
$13,737
ES 8
$471,000
$13,925
Subtotallnc:
$23,786,000
$724,637
Subtotal W.F.:
$31,563,000
$1,160,640
GrandTotalt:
$55,349,000
$1,885,277
Existing (lstYear)
Contract Effective
Rent Net Rent
$4,436.16
S8,482.00
$9,750.04
$10,325.00
$3,021.96
$6,322.00
$10,000.08
$11,415.00
52,982.96
$6,310.00
$7,966.04
$6,057.00
$3,118.08
$6,455.00
5254,617.16 $397,807.00
$489,640.18 $679,670.00
$744,257.34 $1,077.477.00
0
0
' oW
CALENDAR PAGE 992.7
MINME PAGE
EXHIBIT E - 1 OF
SUPPLEMENTAL AGENDA
CITY OF NEWPORT BEACH
OFFICE OF THE CITY MANAGER
MAY 231 1994
TO: MAYOR AND CITY COUNCIL
FROM: ASSISTANT CITY MANAGER
SUBJECT: BEACON BAY
ACTION: If desired, approve amendments to previously approved lease
substituting CPI for Average Sales Value and requiring City to
credit Tidelands Fund in an amount equal to tax advantage.
BACKGROUND: The City Council previously approved the form of a new 50 year
lease for Beacon Bay and sent it to the State Lands Commission for approval. Their
staff raised several questions which required the negotiating teams for the City and the
residents to re- negotiate some provisions and to travel to Sacramento for face -to -face
negotiations. As a result, the staff of the State Lands Commission is prepared to
recommend approval of the lease and place it on the consent calendar for May 26,
1994 if the proposed amendments are approved by the City Council.
DISCUSSION: One proposed amendment is merely an accounting item to
forestall a precedent which might prove detrimental to other negotiations pending
before the State Lands Commission. It amounts to the City crediting $35,800 annually
to our state supervised Tidelands Fund. Currently, tideland expenditures exceed
revenues by approximately $1.2 million, so an additional $35,800 of revenue will have
little impact. The credit is compensation for the "tax advantage" granted to current
lessees. This amount reflects the additional property tax which some lessees will pay
if they sign the new lease. The State Lands Commission believed this credit
represented funds transferred to other governmental agencies such as schools which
have no tidelands obligations. The proposed transfer into our Tidelands Fund satisfies
this concern. Additionally, as properties are sold, this amount will steadily decrease
and eventually be eliminated.
•
0
The other amendment involves substituting a simple CPI calculation in place of
"Average Actual Sales Value" to calculate periodic rental increases. Originally, an
index was sought that tracked real estate values, and the method selected employed
the average of the last three homes sold in Beacon Bay.
CALENDAR PAGE 192.1
MINUTE PAGE
• Page 2
EXHIBIT E - 2 OF 19
When this method was exposed to the marketplace, potential buyers and real estate
brokers complained loudly that it was (a) difficult to understand, (b) capricious, (c)
potentially discriminatory and (d) depressing interest and prices in Beacon Bay. The
basic complaint was that rental adjustments were held hostage to whatever high or
low priced homes most recently sold and that adjustments should fluctuate widely from
year to year. To combat this problem, the negotiating teams requested, and the State
Lands Commission staff approved replacing the method with a simple CPI increase.
The use of CPI may actually increase the City's income. While CPI does not normally
keep up with real estate values, it nevertheless rarely goes down. More Importantly,
the large rental adjustments are based upon sale prices, and the simpler index will
create a more marketable lease which will result in higher overall rents to the City.
Attached are proposed wording regarding the tidelands credit and a table showing
how the amount is calculated. The rental adjustment index will be changed by
substituting standard CPI adjustment language for those portions of the original lease
dealing with "Average Actual Sales Value ".
. RECOMMENDATION: Over six and a half years have been spent in the
negotiating of this lease. The lease provides for the many older, fixed income
residents while allowing the City to achieve full Fair Market Rental Value in the
shortest possible time. Approval of these amendments at this time will allow the new
lease to take effect on July 1, 1994 and immediately increase City revenues by
$350,000 annually. The new lease will promote turnover of homes in Beacon Bay to
�= the benefit of t#6se eager to sell. Resales�n Beacon Bay can generate an additional
one million dollars to the City. The proposed amendments are acceptable to the
Residents Association, and approval by the City Council is recommended.
A ino
KJD:mb
Attachments
CALENDAR PAGE 192.14
MINUTE PAGE