Council Study Session

MINUTES CITY COUNCIL STUDY SESSION CITY OF MONTEREY Wednesday, August 27, 2014 4:00 - 6:00 p.m. COUNCIL CHAMBER, FEW MEMORIAL HALL OF RECORDS MONTEREY, CALIFORNIA Councilmembers Present: Councilmember Downey, Councilmember Haffa, Councilmember Selfridge, Councilmember Sollecito, Mayor Della Sala Absent: None City Staff City Manager, City Attorney, Assistant City Manager, Deputy City Present: Manager, Plans and Public Works, Chief of Planning, Engineering, and Environmental Compliance, Community Services Director, City Traffic Engineer, Principal Planner, Housing/Property Manager, Harbormaster, Administrative Analyst, Principal Engineer, Senior Engineer CALL TO ORDER Mayor Della Sala called the meeting to order at 4:01 p.m. He explained that Councilmember Haffa was finishing up at MPC, and would join the Study Session at approximately 4:30 p.m. PUBLIC COMMENTS Mayor Della Sala opened the floor for public comments. Mary Alice Cerrito Fettis, part owner of Fisherman’s Wharf Concession #33, read a letter aloud to Council regarding subtenancy of the concession, and gave a copy to Councilmembers. Having no further requests to speak, Mayor Della Sala closed public comment. STUDY SESSION 1. Receive Progress Report on Holman Highway Roundabout Design, Construction, and Outreach (Plans & Public Works - 813-08) Action: Received report City Traffic Engineer Deal introduced the item, discussed the current outreach effort in collaboration with TAMC, and presented a number of videos showing the flow of traffic through the future roundabout. He discussed the difficulties that construction will present, and shared the schedule for outreach efforts to the residential and business communities. Councilmember Downey complimented Media Assistant Eric Palmer and Ariana Green of TAMC on their well-done video. Responding to a question from Mayor Della Sala, City Traffic Engineer Deal said the project began in 1995 with the beginning of expansions at CHOMP, and that the original plan was to widen Holman Highway to four lanes. He said that the roundabout will move more traffic with two lanes than the formerly proposed four lanes, will save pine trees, and is projected to cost $8 million as opposed to $25 million. Councilmember Downey praised the project for solving the issue of the problematic right turn currently needed to access CHOMP from the highway. Mayor Della Sala opened public comment on the item. Having no requests to speak, Mayor Della Sala closed public comment.  City Council Minutes Wednesday, August 27, 2014 2. Receive a Report and Discuss Leasing Practices Requiring Policy Direction (Plans & Public Works - 704-10) Action: Received report, discussed Deputy City Manager, Plans and Public Works Pick introduced the item and said a lease could be seen now as a “sweetheart deal” but may have been entirely appropriate at the time it was signed. He said the City needs contemporary policies and an up-to-date lease template. Councilmember Haffa arrived at 4:28 p.m. Administrative Analyst Aldrete presented the staff report, reviewing eight leasing policies that staff chose as the most important. She and Rob Cord of Voit Real Estate Services answered Councilmembers’ questions. Councilmember Sollecito discussed the need for flexibility because of the importance of the City’s governmental responsibility. Councilmember Downey said that the City Charter requires a market rate. City Attorney Davi clarified that while the Charter does specify market rate, Council could decide on a specific use for a property that may not be the highest use. She said that once the use is selected, market rate for that use would be required. Councilmember Haffa asked how staff addresses fairness. Housing/Property Manager Marvin said that because some leases don’t expire until 2041, it would be difficult to address fairness across all leases at the same time. He said competitors having different cost structures is not unusual and that there are already different cost structures and subleases in place on Wharf I. For example, he said that a subtenant may pay a sublease that is higher than the ground lease. He said it would be appropriate to introduce a common area now instead of waiting until 2041. Mayor Della Sala opened public comment on the item. Dave Duvall, of Liberty Fish at Wharf I, read a letter aloud regarding the Liguori family history, saying any new lease should recognize the expenditures of the family over the years. He provided copies of his letter to Council. Mary Alice Cerrito Ferris, of Fisherman’s Wharf Concession #33, thanked staff for their time and energy. She said that Council has profoundly committed tenants on the Wharf. She requested that Council come up with a fair market rate and provide long enough terms to encourage tenants to invest into their businesses so they can stay fresh and exciting to customers. She said that a sublease with condition would be important to a concession as large as theirs. Pete Guglielmo, of Southern Cal Seafood at Wharf II, said that his is a viable company employing over 300 people in the county. He said they helped rejuvenate the historical aspect of fishing on Wharf II, and that it is a vital part of their operation to continue as a Wharf II tenant. Bill McCrone, of the Planning Commission, said he disagrees with staff regarding absolute triple-net. He said that every tenant at the Del Monte Center and Cannery Row pays absolute triple-net, and that it is the industry standard and especially for prime property such as the Wharf. He said that demographics at the Wharf are not good, and that sublessors at the Wharf act entitled to be there forever but just collect the difference between fair market rent and the modest rent that is paid to the City. He said he agrees with staff that leases should be for five to ten years, and said Council should create a template going forward. He suggested that Council base Common Area Maintenance (“CAM”) charges on the percentage of the Wharf that a tenant uses. 2 City Council Minutes Wednesday, August 27, 2014 Councilmember Downey thanked Commissioner McCrone for sharing his expertise as a real estate attorney, and asked if he thought Wharf pilings should be maintained by tenants. He said yes, and that pilings under the roadway should also be paid for by tenants via CAM charges. He said the only thing Council should be negotiating is how much to charge. Nelson Vega said that the policy direction is very comprehensive and long overdue. He said that some tenants have been at the Wharf for a long time, and suggested Council look at each individually, and what they have put into the building. He said that Council needs to be fair, make sure that the Wharf stays a destination, and ensure that there is a good tenant mix. He said that when leasing to non-profits, the City should make sure that tenants have “skin in the game,” and used the Monterey Bay Aquarium’s low rent as an example of what to avoid. Chris Shake asked Council if the Wharf is a public street. City Attorney Davi said it does not meet the definition of a street. Mr. Shake asked how a tenant would recoup their investment in five to ten years, and asked what the CAM charges would be. Administrative Analyst Aldrete said staff is working on the CAM charges, but wouldn’t have an answer before the September 16 meeting. Housing/Property Manager Marvin said the policy question is: Should the City charge CAM or not? He said the actual charge would come before Council for a decision, and would be negotiated with tenants. Councilmember Downey brought up a recently negotiated lease and asked why policy suggestions have since changed. Housing/Property Manager Marvin said that staff has moved from recommending black and white policies to ones that are more flexible going forward. Councilmember Downey argued that another point of view is that the more variety and competition there is, the more vibrant the Wharf will be. Housing/Property Manager Marvin said that there are different ways of looking at that question. He said that Commissioner McCrone takes a very conservative look at consolidation, preferring one owner per concession. He said that from a policy direction standpoint, staff is recommending that Council not establish a threshold. Councilmember Haffa said that from an economic point of view, the system works best with competition, creating vibrancy, diversity, and low prices. He said that concentration of ownership in a small space does not benefit the public. He said that the City has no policy on what would constitute a monopolistic presence on the Wharf, and requested that Council develop a policy so the City can be fair. City Attorney Davi agreed that there are fairness concerns in the application of a lack of policy, and it needs to be taken into consideration. Councilmember Haffa said he agreed with Mr. Shake that a tenant won’t invest a lot of money in a business for only a five year lease. He said his preference is for 10-20 year lease, depending on how much the business would invest. Mayor Della Sala agreed, and asked staff to take a look at the monetary threshold for a lease that would last longer than ten years and give their recommendation on September 16. He said he is not opposed to a ten year lease with two five-year options if investment is substantial and there is a preferred use of the building. Councilmember Downey said that in order to make a longer lease like that work, the City would need to have an agreement with the tenant on what improvements they would make and how much they would spend on them. Councilmember Haffa said that the City would need to have a way to enforce such agreements. Mayor Della Sala said there could be a provision that if the agreed-upon improvements are not done, the lease term would be shortened. Having no further requests to speak, Mayor Della Sala closed public comment. 3 City Council Minutes Wednesday, August 27, 2014 ADJOURNMENT Having no further business to come before the Council, Mayor Della Sala adjourned the meeting at 5:45 p.m. Respectfully Submitted, Approved, Clementine Bonner Chuck Della Sala Acting Senior Assistant City Clerk Mayor 4