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Cq<�FOAa�P CITY COUNCIL STAFF REPORT
DATE: December 16, 2015 CONSENT AGENDA
SUBJECT: Palm Springs Air Museum Lease Amendment to Accommodate
Improvements and Expansion
FROM: David H. Ready, City Manager
BY: Department of Aviation
SUMMARY
This item considers a request by the Palm Springs Air Museum seeking the
reimbursement for long-term capital leasehold improvements of a new road and aircraft
apron, a boundary easement to accommodate the improvements, and concession fee
abatement for a new public restaurant.
RECOMMENDATION:
1. Approve amendment No. 3 to the Palm Springs Air Museum lease No. A3613
with rental credits not to exceed $205,000, for road and aircraft apron leasehold
improvements, a boundary easement to accommodate the improvements, and
concession fee abatement for a new restaurant.
2. Authorize City Manager to execute all necessary documents.
STAFF ANALYSIS:
In November 1995, the Palm Springs Air Museum commenced with a land lease at the
Airport for a term of 40 years. The purpose of the lease was for the construction and
operation of an aviation museum on a ten-acre parcel of Airport land adjacent to N.
Gene Autry Trail.
Today, the Air Museum serves as one of the main attractions in Palm Springs with a
world-class aviation war history-themed venue. Attendees pay an entry fee to
experience war history through an array of static aircraft, a medley of World War II and
Vietnam-era memorabilia, and military related art. Dozens of private special events
occur throughout the year by businesses that look for a unique theme and setting.
ITEM NO. r
City Council Staff Report
December 16, 2015— Page 2
Palm Springs Air Museum Lease Amendment
The existing Air Museum facility complex consists of three large aircraft storage hangars
with office space, adjacent aircraft parking apron, and several public vehicle lots
including a temporary parking area under a short-term license agreement from the
Airport.
As the basis of their rebate request, the Palm Springs Air Museum has unveiled a plan
that constructs one additional 20,000-square-foot temperature-controlled aircraft
storage hangar to accommodate the growing demand for its aircraft display and special
events. Also included in the planned facility expansion is a full restaurant open to the
public, expanded aircraft apron, and new public roadway. The current leasehold
boundary is adequate to accommodate the hangar and aircraft apron improvements, but
the new road and associated retention basin do overlap onto vacant Airport property
and an easement will be required to address the lease boundary protrusion.
As depicted in the drawings below, the proposed new road would be perpendicular to
Gene Autry and favors the south boundary of the leasehold with some overlap onto
Airport property. Abutting this road segment on the diagram's right side are
approximately 15 acres of Airport's prime vacant land. This new road is an improvement
that will benefit possible future new aviation development on the site.
T Road Improvements
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City Council Staff Report
December 16, 2015— Page 3
Palm Springs Air Museum Lease Amendment
Museum Proposed Road Ad acent Airport Property
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At its meeting of September 16, 2015, the Airport Commission reviewed the overall
museum expansion plans and a capital improvement reimbursement arrangement using
rent abatements toward the actual construction costs associated with the street and
aircraft apron. The cost estimates provided by the Air Museum for these two project
elements is $205,000. The proposed capital improvement reimbursement arrangement
would be in the form of ongoing consecutive monthly leasehold rent abatements until
the Airport obligation is retired.
In addition to the rent abatement, there is also a requested adjustment to the Airport fee
structure on a permanent basis. As part of the proposed project, the Air Museum is
planning an additional full-service aviation themed restaurant. In order to make this
portion of the expansion economically viable for the Museum, they are asking for a
permanent abatement of the current 10% fee on gross sales of food service. The 10%
concession fee for sales generated by the original smaller restaurant will not be abated.
03
City Council Staff Report
December 16, 2015- Page 4
Palm Springs Air Museum Lease Amendment
The proposal was presented to the City Council on October 7, 2015, as an informational
item. Staff received direction to proceed with further negotiations with the Palm Springs
Air Museum and develop the appropriate amendment to the agreement as presented
with this report.
FISCAL IMPACT:
Under the current lease agreement, the Airport receives a combination of revenue from
the Air Museum, including revenue from the admission fee, a percentage of the gift
shop sales, and revenue from the food and beverage sales. In 2015, nearly $38,000 in
annual revenue was generated from the Air Museum to the Airport. Of that amount,
approximately $9,800 was from the existing restaurant facility.
To reimburse the Museum for a portion of the described capital costs, not to exceed
$205,000, would require an estimated six years of all lease abatements. Going forward,
beyond the rebate amount, the new full-service restaurant 10% concession fee would
not be required under this amendment. These amounts will be reduced from the
Airport's annual revenue projections.
The benefit to the Airport would accrue from having the new entrance road constructed
off of Gene Autry to support future development of the adjacent Airport property. The
total project improvements estimated by the Palm Springs Air Museum are
$2,500,000.00.
Thomas Nolan, A.A.E. David H. Ready, Es
Executive Director, Airport City Manager
Attachments:
Lease Amendment No. 3 to the Palm Springs Air Museum Lease No. A3613
City Council Staff Report of October 7, 2015
04
AMENDMENT NO. 3 TO LEASE NO. A3613
AIR MUSEUM AND LEASE AGREEMENT
AT PALM SPRINGS INTERNATIONAL AIRPORT
THIS THIRD AMENDMENT ("Amendment") to Lease Agreement No. A3613 is
made and entered into this _ day of December, 2015, by and between the City of
Palm Springs, a California charter city and municipal corporation, ("Landlord"), and the
Palm Springs Air Museum, Inc., a California non-profit public benefit corporation
("Tenant").
RECITALS
A. Landlord owns and operates an airport known as the Palm Springs
International Airport, located in the City of Palm Springs, County of Riverside, State of
California ("Airport"). Landlord and Tenant entered into Lease Agreement No. A3613,
effective November 29, 1995, Amendment No. 1 to said Lease Agreement on
December 2, 1998, and Amendment No. 2 to said Lease Agreement on February 2,
2005. The Lease Agreement and its Amendments are collectively referred to as the
"Agreement."
B. Pursuant to the terms of the Agreement, the Landlord leases a portion of
the Airport ("Demised Premises") to Tenant to construct, operate, and maintain an Air
Museum.
C. Tenant desires to construct, operate, and maintain certain additional
facilities in furtherance of its museum use of the Demised Premises, including an
additional 20,000 (approximately) square foot "hanger" for exhibit and display space and
an 8,100 (approximately) square foot restaurant. In addition, Tenant desires to design,
construct, and provide near the southwestern corner of the Demised Premises: (1) an
aircraft apron tarmac expansion to accommodate additional aircraft parking, and (2) a
retention basin. The Tenant has also requested the Landlord authorize Tenant (1) to
enter the adjoining airport property directly to the south of the existing property line to
design and construct a public road that would serve the Demised Premises as well as
other property owned by the Landlord to the south of the Demised Premises, and (2) to
enter Airport property to the west of the aircraft apron tarmac described above on the
Demised Premises to provide an access over Airport Property to such tarmac area.
The facilities and improvements described in this Recital C are collectively referred to in
this Amendment No. 3 as the "Improvements."
D. Tenant also desires Landlord to pursue regulatory approvals for a future
second aircraft entry/exit gate to the new aircraft apron tarmac expansion referenced as
part of the Improvements in Recital C.
Page 1 of 4
05
E. Tenant also desires to ultimately develop a full service restaurant space
on the Demised Premises for independent operation by a sub-lessee of Tenant as a
potential aviation themed restaurant attraction, which will require significant financial
investment. Tenant has requested that the 10% service fee on gross sales made in,
upon or from the Demised Premises with respect to any food and beverage sales
(excluding third party catering for special events or convention receptions), as otherwise
required pursuant to Section 3.2(a)(ii) of the Agreement (as amended), be waived for a
full service restaurant site on the Demised Premises.
F. Landlord and Tenant recognize that the Improvements will enhance the
Demised Premises and the Airport, and will improve the overall utility and usefulness of
the Demised Premises. The abatement of certain portions of Tenant's rental obligations
to partially offset the costs of the Improvements is fair and reasonable.
G. The parties wish to amend the Agreement to expressly allow for additional
facilities and Improvements on and adjacent to the Demised Premises and modify
certain provisions thereof as provided in this Amendment No. 3.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and for other good and valuable considerations, Landlord and Tenant agree to amend
the Agreement as provided herein.
AGREEMENT
Section 1. Section 1.6 of the Agreement is amended to read:
1.6 Use of Demised Premises. The Demised Premises and improvements to be
installed by tenant may be utilized for an Aviation Museum may include items (a)
through (k) listed below. Further, the demised Premises and improvements shall
include rent free space for the Civil Air Patrol in an amount comparable to the space
occupied as of October 21, 1998.
(a) Static as well as rotational display of airworthy aircraft;
(b) A "theater of the air" interior to the Museum hangers;
(c) Gift Shop;
(d) Snack Bar;
(e) Aircraft restoration facility;
(d) Office use related to the Museum operations;
(f) Special events coordinated with the Director of Aviation;
(g) Parking for (display) aircraft with a minimum stay of one week;
(h) Museum hangers
(i) Restaurant
Q) Retention basin
(k) Aircraft apron tarmac
(1) Second aircraft entry/exit gate to Airport taxiway (subject to regulatory approvals)
Page 2 of 4
06
Section 2 Section 3.2(a)(ii) of the Agreement is amended to read:
"(ii) The product of ten percent (10%) times the
gross sales made in, upon or from the Demised Premises with respect to any food and
beverage sales except that this provision shall not apply to: (1) third party catering for
special events or convention receptions, where food is prepared off-site; or (2) full-
service stand-alone restaurants independently operated by a sub-lessee of Tenant."
Section 3 Section 3.10 is added to the Agreement to read:
3.10. Temporary Rent Abatement for Specified Improvements. Rental
payments due to Landlord from Tenant as provided in Section 3.2 of the Agreement, as
amended, and in Sections 1 and 2 of Exhibit "D" of the Agreement, as amended, shall
be abated and credited as payment of rent otherwise required to be paid by Tenant, for
the purpose of assisting Tenant in the installation and construction of the aircraft apron
tarmac, retention basin, and public street improvements as described and depicted on
Exhibit "G" to this Agreement. The public street improvements shall be constructed to
city local street standards and the plans, specifications, and construction contracts for
the improvements shall be reviewed and approved by the City Engineer of the City of
Palm Springs prior to commencement of construction; connection of the new public
street to Gene Autry Trail (State Highway 111) shall also be subject to review and
approval of, and issuance of permits by, Caltrans. Abatement and credit shall
commence upon the earlier of the City Engineer's final acceptance of completion of (a)
the aircraft apron tarmac project, or (b) the public street improvements and the basin.
Rent abatement and credit associated with the aircraft apron tarmac project shall not
exceed $55,000 and the rent abatement and credit associated with the public street
improvements and retention basin projects shall not exceed $150,000. Notwithstanding
the commencement of rent abatement and credit, Tenant shall continue to provide a
monthly report of revenues otherwise due to Landlord under this Agreement. Rent
abatement and credit shall cease once the total rent abatement and credit either equal
the construction contract amounts or the maximum amounts specified in this Section
3.10, whichever amount is less. Once rent abatement and credit ceases under the
provisions of this Section 3.10, the Tenant shall resume all rental payments as provided
in this Agreement.
Section 4 Except as otherwise provided in this Amendment, all terms and conditions
of the Agreement shall remain in full force and effect and performance of services under
the Agreement shall be governed by the provisions of the Agreement.
[SIGNATURES ON NEXT PAGE]
Page 3 of 4
07
IN WITNESS WHEREOF, the parties have executed and entered into this Amendment
No. 3 as of the date first written above.
ATTEST: CITY OF PALM SPRINGS,
a California charter city and
municipal corporation
By: By:
James Thompson, David H. Ready,
City Clerk City Manager
APPROVED AS TO FORM:
By:
Douglas Holland,
City Attorney
PALM SPRINGS AIR MUSEUM, INC.,
a California non-profit public benefit
corporation
By: By:
Signature (notarized) Signature(notarized)
Name: Name:
Page 4 of 4
08
EXHIBIT "G"
SPECIFIED IMPROVEMENTS ELIGIBLE FOR RENT ABATEMENT
Road Improvements
v.. 3
Apron Tarmac
Import materials to fill area, compact and finish grade for a new apron tarmac area
extending beyond the existing fence line.
Retention Basin
Construct new retention basin beyond the existing fence line at the southwest corner of
the Demised Premises to intercept and collect increased stormwater runoff generated
by additional parking facilities.
Public Road Improvements
Construct new public street improvements to City and Caltrans standards subject to
approved plans and permits located to the south of the Demised Premises, and as
generally shown hereon. Access will be limited to right turn access only, no traffic
signal.
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'FO°"�P CITY COUNCIL STAFF REPORT
DATE: October 7, 2015 NEW BUSINESS
SUBJECT: Palm Springs Air Museum Lease Amendment for Expansion
FROM: David N. Ready, City Manager
BY: Department of Aviation
SUMMARY
This item considers a request by the Palm Springs Air Museum seeking the
reimbursement for road and aircraft apron leasehold improvements, a boundary
easement to accommodate the improvements, and a concession fee abatement for a
new restaurant.
RECOMMENDATION:
1. Discussion of request by Palm Springs Air Museum; direct staff as appropriate.
STAFF ANALYSIS:
In November 1995, the Palm Springs Air Museum commenced with a land lease at the
Airport for a term of forty years. The purpose of the lease was for the construction and
operation of an aviation museum on a ten-acre parcel of land adjacent to Gene Autry
Drive.
Today, the Air Museum serves as one of the main attractions for the entire Coachella
Valley with a world-class aviation war history-themed venue. Attendees experience war
history through an array of static aircraft, art, and a medley of World War II and
Vietnam-era relics that memorialize these historic events. The Air Museum facility
complex includes three large hangars with office space, an adjacent aircraft apron, and
several public parking lots, including a temporary parking area under a short-term
license agreement.
The Palm Springs Air Museum has unveiled a plan that constructs an additional 20,000-
square-foot temperature-controlled aircraft storage hangar to accommodate the growing
demand. This planned facility expansion would include a full restaurant open to the
public, expanded aircraft apron, and new public roadway. The current leasehold
boundary is adequate to accommodate the hangar and aircraft apron improvements,
ITEM NO. Lb _
10
City Council Staff Report
October 7. 2015 - Page 2
Palm Springs Air Museum Lease Amendment
however, the new road and associated retention basin do overlap onto airport vacant
property. An easement will be sufficient for addressing this lease boundary protrusion,
As depicted in the drawing below, the proposed road is perpendicular to Gene Autry
and favors the south boundary of the leased property with some overlap onto Airport
property. Abutting this road segment on the diagram's right is the Airport's prime vacant
land of approximately 15 acres. This new road is an improvement that will benefit future
new aviation development on this vacant piece of property.
Road Improvements
20
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New Manger Apm Tamac Prapaty Lae _
At its meeting of September 2015, the Airport Commission voted in favor of
recommending the overall museum expansion plans and the Airport's reimbursement
arrangement through rent abatement for actual construction costs associated with the
street and aircraft apron. The cost estimates obtained by the Air Museum for these two
elements is approximately $205,000. The proposed reimbursement arrangement would
be in the form of ongoing annual leasehold rent abatements, monthly, until the full
construction amount is retired (approximately 6-7 years.) In addition, the Air Museum
requested an ongoing abatement of the 10% concession fee for the sales generated by
the new restaurant. The Airport Commission voted to recommend this request to City
Council as well.
YY
City Council Staff Report
October 7, 2015- Page 3
Palm Springs Air Museum Lease Amendment
The exhibit below identifies the adjacent airport property that will become accessible
with the proposed road improvements.
Museum Proposed Road Ad'acent Air ort Pro ert
c.
s•
If City Council agrees to the Air Museum's request, staff will work with the City Attorney
to prepare a revised lease agreement and easements reflecting these changes. The
agreements will be returned to the City Council for final review and approval.
FISCAL IMPACT:
Under the current lease agreement, the Airport receives a combination of fixed rental
and a percentage from sales. In 2015, nearly $38,000 in annual revenue was
generated. To reimburse the requested capital costs, not to exceed $205,000, would
require approximately six to seven years of lease abatements.
Under this scenario, a benefit to the Airport would accrue from having the new
entrance/road constructed off of Gene Autry, and amortized over several years - which
would support future development of the adjacent Airport property.
12
City Council Staff Report
October 7, 2015—Page 4
Palm Springs Air Museum Lease Amendment
With regard to the ongoing 10% sales concession abatement requested on the new
restaurant, the long-term loss of revenue to the Airport is not knowable at this time. The
Air Museum's request is based on its anticipated overall project investment of $2.5
million and increased operational costs.
Thomas No n, A.A.E. David H. Ready, Esq.,
Executive Director, Airport City Manager
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