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RESOLUTION AUTHORIZING THE CITY MANAGER TO EXECUTE A LEASE AGREEMENT WITH PACIFIC BOAT SERVICES INC. AT 4911 BUCKLEY COVE WAY
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RECOMMENDATION
It is recommended that the Stockton City Council adopt a Resolution:
1. Authorizing the City Manager to execute a twenty-five (25) year lease with Pacific Boat Service, Inc. for property located at 4911 Buckley Cove Way (known as Ladd’s Marina).
2. Authorizing the City Manager, or designee, to take all appropriate actions to carry out the purpose and intent of this Resolution.
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Summary
This action will authorize the City Manager to execute a twenty-five (25) year lease with the option of an additional twenty-five (25) year extension, not to exceed a cumulative lease term of 50 years, with Pacific Boat Services, Inc. (attached as Exhibit I to the Resolution) for the property located at 4911 Buckley Cove Way in Stockton, also known as Ladd’s Marina (Attachment A - Vicinity Map).
DISCUSSION
Background
The property located at 4911 Buckley Cove Way is under the City’s stewardship, granted by the State Lands Commission (Chapter 1700, Statutes of 1965) in furtherance of navigation, commerce, and fisheries. The land may be leased by the City so long as the use of the land continues to fall within the guidelines of water navigation, recreation, and/or commerce that supports such activities. The property is adjacent to Buckley Cove Park, Buckley Cove Public Boat Launch, Riverpoint Boating and RV Resort, Stockton Sailing Club, and the Brookside neighborhood. Within the property is a marina with 110 boat slips in a well-protected cove with 80 covered berths, as well as water access for boat service haul out, service yard, and multiple repair services. Ladd’s Stockton Marina Inc. (Ladd’s) currently holds the lease with the City and operates the marina.
Present Situation
The City received written notice that the current operators of Ladd’s did not wish to extend its existing lease beyond June 30, 2021. As a result, the City issued an RFP (No. PUR 20-045 - Attachment B) on February 11, 2021, with the intent to identify qualified companies with the experience to lease the property for the purpose of operating and managing a marina. Two (2) proposals were received on March 18, 2021. A selection panel including representatives from Economic Development, Downtown Stockton Marina, and Public Works Department reviewed and scored the proposals based on qualifications, proposed business plan, and financial offer. Pacific Boat Services Inc. was selected as the best candidate to lease and improve the property.
Pacific Boat Services was established in 2003 by Ramon Mata as a detailed boating workshop. Over time, Pacific Boat Services expanded to include additional services such as mechanical, canvas, and brokerage. Since then, Pacific Boat Services has successfully continued marine service in the Stockton region.
The property is being leased in an “As Is” condition. As proposed in the posted RFP, substantial capital investment is necessary for revitalization and restoration of the Marina. The capital investment schedule by Pacific Boat Services is estimated to begin as soon as the new lessee moves into the property, which is planned for July 2021. Based on the estimated timeline presented by Pacific Boat Services, the City anticipates some improvements to be completed within ninety (90) days from the move-in date, while larger projects will be completed within the first five (5) years. The total investment by the lessee is estimated to be over $1.7 million, as referenced on the schedule by Pacific Boat Services (Attachment C).
Following are the key terms of the proposed lease agreement:
1. Term will be for 25 years initially, with the option to extend an additional 25 years.
2. Phase 1, consisting of the first six (6) years, will include a monthly lease payment of $1,500 with an annual increase of five percent (5%) every year until the start of Phase 2.
3. Phase 2, consisting of years seven (7) to fifteen (15), the City will receive five percent (5%) of all monthly marina operation gross revenues or the minimum monthly rent of $3,000, whichever is greater.
4. Phase 3, consisting of years sixteen (16) to twenty-five (25), the City will receive six percent (6%) of all monthly marina operation gross revenues or the minimum monthly rent of $5,000, whichever is greater.
5. Lessee will revitalize and restore Ladd’s Marina within the first five (5) years.
6. Lessee will participate in the cost to dredge the water inlet to this property at one-third (1/3) of cost, up to $500,000; payment may be made to the City for such amount during the initial term.
Staff conducted research to compare lease terms with surrounding marinas and determined that the proposed lease with Pacific Boat Services is in line with the findings.
Pursuant to Stockton Municipal Code Section 3.68.040, all contracts for services involving an expenditure of $75,000 or more shall be awarded by the City Council. The following findings support the use of the RFP process for contracting with a firm to lease and manage the Marina:
1. Due to the specific nature of the project and industry, use of the RFP process is appropriate since it relies on evaluation of a service provider’s established professional experience, conduct, and performance as it relates to lease and management of the Marina.
2. The project involves a specialized field, and its success requires an experienced professional who has successfully implemented and performed such operations.
PUBLIC NOTICE
As required, a “Notice of Intent to Grant or Lease Real Property Interest” in accordance with the provisions of Article V, Section 510, of the Charter of the City of Stockton was advertised in The Record on June 2, 2021.
FINANCIAL SUMMARY
The terms of the monthly lease payments will be administered in three (3) phases:
Phase 1 - City will receive a monthly lease payment of $1,500 for the first six (6) years of the lease with an annual five percent (5%) payment escalation.
Phase 2, - Beginning in year seven (2027) and continuing through the fifteenth year (2036), City will receive five percent (5%) of all monthly marina operation gross revenues that will be generated by the lessee, or the minimum monthly rent of $3,000; whichever is greater.
Phase 3 - Will begin in year sixteen and continue through the end of the initial lease agreement term (2046). In Phase 3, the City will receive six percent (6%) of all monthly marina operation gross revenues that will be generated by the lessee, or the minimum monthly rent of $5,000; whichever is greater.
Monthly lease proceeds will be deposited into HTE Account No. 010-1750-362.10-02 (Tyler Munis Account No. 6050-000-461000-100-000-10-60-000-000-).
Attachment A - Vicinity Map
Attachment B - PUR 20-045
Attachment C - Pacific Boat Service Proposed Schedule