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HomeMy WebLinkAbout14 AG. LEASING MCAS 07-15-02AGENDA REPORT NO. 14 07-15-02 MEETING DATE: JULY 15, 2002 150-50 TO: FROM: SUBJECT: WILLIAM HUSTON, CITY MANAGER REDEVELOPMENT AGENCY INTERIM AGRICULTURAL LEASING AT MCAS TUSTIN SUMMARY The City Council at a meeting on June 5, 2002 reviewed possible leasing activity at the former MCAS Tustin. As a follow-up, the purpose of this report is to present to the City Council a solicitation process and preliminary Business Plan for pursuing interim agricultural leasing activities on the subject property. RECOMMENDATION It is recommended that the City Council authorize staff to complete and prepare a Request for Proposal (RFP) for interim agricultural leasing on a portion of the former MCAS Tustin. FISCAL IMPACT Preliminary Fiscal Impacts are identified in the preliminary business plan that is attached to this report. Final fiscal impacts of specific leases would be determined in the future as they are authorized by the City Council. BACKGROUND AND DISCUSSION The City Council at their regular meeting of June 3, 2002 discussed the potential for interim leasing activities on a portion of the former Marine Corps Air Station, particularly leasing for interim agricultural uses. Staff agreed to return to the City Council with a proposed Business Plan and process for soliciting interim agricultural leasing on the subject property. While staffs evaluation of the potential for the interim farming on additional acres of the MCAS Tustin property will continue (and may be impacted by the City's need for secured property collateral in conjunction with a Letter of Credit pursuant to the SAUSD Settlement Agreement) approximately 273 acres of the former base property that has been conveyed to the City could be initially offered by the City as part of a first solicitation for agricultural leasing. The acreage to be offered is identified in Attachment I as two individual parcels. Respondents to an RFP solicitation therefore, would be able to respond with their interest in to one or both parcels. However, staff suggests that only one RFP be issued. Based on the City Council's previous direction that any solicitation should be a competitive process, staff is also preparing a list of those operators previously expressing an interest in agricultural leasing on the site for distribution of the RFP and will also send a copy to the local offices a number of agricultural industry organizations, the Western Growers Association, the United Agribusiness and California Farm Bureau Federation. Based upon additional research staff has completed, the majority of the ground water wells on the site have been abandoned which will require access to domestic IRWD water by any potential agricultural lessee. The cost of water would, therefore, be a significant factor in the type of agricultural crops that could be economically farmed on the property. The type of crops will also be impacted by the high salt levels on the site. The lack of available ground water pumping capability on the site will also likely moderate the anticipated lease rates that might be possible. The lease rates offered at El Toro ranged on average from $3,400 to $3,700 per gross acre which was primarily for strawberries and assumed availability of ground water wells. Accordingly, in preparation of a preliminary Business Plan for agricultural leasing, staff is conservatively only estimating an average lease rate of $2,500 a gross acre. Provisions of the City's Memorandum of Agreement with the Navy for the conveyance of property at the former MCAS Tustin impose certain future restrictions on the City including the need to reinvest all lease proceeds received by the City back into certain restricted activities on the property (i.e., infrastructure investment) for a minimum of seven years from the date of conveyance. A preliminary Business Plan for agricultural leasing is also attached (Attachment II) along with an outline of the RFP/Leasing Process and a preliminary time schedule (Attachment III). As indicated to the City Council on June 3, the City Attorney has asked that no actual leasing occur on the subject property until a letter of credit is secured pursuant to the SAUSD Agreement. However, upon direction from the City Council staff will prepare and distribute an RFP for interim agricultural leasing and proceed with drafting necessary lease documents. Christine Shingleton ~ Assistant City Manager Attachments ATTACHMENT I ./ W n- W .:' -. " ....... 7 ............ ~ ,'......':.:'..... ...... :": ......... : 7.'. ..... i~F" '"~,~'.~,..~,'...~...'.:,:'..,,~..=.'~.::~::'~ ..... ~;.:!:~:~:.::.: .~,. ................ "~ !'~ ~ '"x ........ ' ...... '~' ~:"," . !... :~:. . .f ./ . .....:;::.. ...... ~t-JYAblYbt "7~'..'7 '.- i .... . ~ . ~ . :: .~.,..: ...... · .... :: .......... ...~ ~ ::...:.,,.., ~:?.~ .. ,. : : ..... ,."/.j:'.' ' ..... ,'.;7, ...~... . . I': .' · .7':. ':""'::' .. ~ ' ?~" · ' ."~Z.~.'.'.'.....o~ :. ........ '?'. .... '."~".~-::'.:.'.:"' :.'::::.":':~..:':'.:....... ~. ~!~ ~ ,, · ....... .... -: -~ :.,~ · ......... ..... :~ ,~.;..~ '. ~ ...,.~ "' ........ .... '"' " ' ........ I.... ,~: ...... .,,.. t~: ~ . ..: .... :::,;:~.. ........ ~..~;;:.:~,:... ~:~:"=':: :~:, .' ..~ ~ ~¢:~ ~.~.~.~~" :.,_.~.:..,. ...::;~ ::' · ~.~:~ ~,, ~ ¥,'"' "':%':: ~ :. "....=.......~...:.~.. ",.:...,.~ : ..~ ~ :-..:~:.. 'L~'. ,.,' ...' .......... · ' ' x N ~ ' ': ' "~'"' ~. ........... ..... · ~ ....... ~";~" ' ' ~~,- , '* ' ~":': '?:: t "... ~ . ~ ,' . .,~ ~: '-., .... ~ ..'.'.. .. ~ ......'... ...i ..... ~.Z ..:' · ......... ' ..... ~.~.. .~ ...... : . -), . . i ..'.,'... ." ~ ":.'. .'. ' ~' ~ :'~: ........... ""~ ........ !'.'" '"~ '~ " · ~~ .' :'. ~ . ....... : ... ~ ,, ..' . ~.~ · .~ , · ~: ........ ':~ ............ ~ ,'7, ............... i .................... *".' ...... : ' ~ '" ~ '~.'.: .......;......".:a..... ........ ~ ~.' 't :" , . , . . Attachment II Preliminary Business Plan Interim Agricultural Leasing Former MCAS Tustin Assumptions An interim lease will govern all interim agricultural leasing. The initial lease term will be for two years. All lease documents will be reviewed and finalized by Kutak Rock, LLP for compliance with environmental deed obligations in Navy's deeds on the property and to protect the City's Section 330 environmental indemnification. The City will not provide utilities to support agricultural uses. Utilities such as water and electricity will need to be secured independently by any respondent. No permanent utility easements to agricultural sites will be granted. All interim leasing activities will be managed by JHTM & Associates, supervised by City Redevelopment staff. JHTM has been managing most property management/contractor activities at the former MCAS Tustin for the last 45 days approximately. JHTM will utilize staff that is currently operating these activities, with no increase in staffing expected. Protection of on-site facilities and assets at the former MCAS Tustin is of critical concern. In the past, access to the site was available on the weekends. Since the City has assumed ownership and leasing of the site, a gate guard is only available for limited hours on the week days. In the past, the Navy allowed the farm workers to simply walk onto the property (through the Village, past the Urban Regional Park, etc.). With the limited security t hat t he City n ow h as o n t he property, t he City could o pen itself to possible vandalism and theft if this happens again. The City also previously learned that many of the migrant workers drove to the site, but didn't have insurance or even a license to drive. When this happened the City police department recommended to the City's on-site security contractor that workers be made to park on the outside lot and be picked up and brought onto the property. Agricultural farmers also hold very long and early hours requiring independent access for early morning (5:00 a.m., etc.) work activities. Agricultural operations will require access to the site to a broader range of users and necessitate security screening and monitoring. Agricultural operators will be required to provide their own security to protect agricultural operations and will also be required to participate in the costs of the guard gate access and other security services. , Leasing will require legal support for document preparation, review and approval; Redevelopment project management staff effort, supervision and oversight; and general City overhead expenses. Attachment II Preliminary Business Plan Projected Annual Operating Income and Expenses Potential Operating Income2'6 Operating Expenses JHTM Oversight Review RFP Parcel 1 Parcel 2 Subtotal Kutak Rock/City Attorney Review RFP~ Lease draft review2 Final lease report and approval2 Insurance review2 Subtotal Security Contract Contribution Burns Contract 25% of guard gate costs 100% of guard costs of extended gate services3 10% of roving patrol costs 10% of equipment/supplies Subtotal Redevelopment Staff Program Manager4 Assistant City Manager4 Clerical typing5 Subtotal City Overhead (15% of gross expenses) Total Net Annual Operating Income $683,75O $ 8,000 10,000 10,000 $28,000 $ 4,000 7,000 5,500 5OO $17,000 $10,038 19,208 17,937 2,560 $49,743 $ 5,595 8,205 3,593 $17,393 $16,820 $128,956 $554,794 Assumes one RFP Assumes 2 leases (one 192.8 acre site and one 80.7 acre site) Assumes Monday-Friday additional gate services from 5 a.m. to 8 a.m. and Saturday services from 5 a.m. to 4 p.m. Assumes 104 hours at hourly rate plus benefits Assumes 25 hours typing by Administrative Secretary for RFP and agreements, bill processing and 75 hours of clerical support to Program Manager and Assistant City Manager plus benefits Assumes income of $2,500 per acre Attachment III Agricultural Leasing Tentative Request for Proposal/Leasing Process Task 1.1 Prepare RFP by August 16, 2002 The request for proposal will serve to introduce the property to potential respondents and will also elicit information needed to judge responses. The RFP will likely include the following: Site: A narrative description of the properties including relationship to Navy remediation program. Description of Terms/Conditions: A description of the potential terms and conditions of a ny interim leasing and the general business terms the City will require. Selection Process and Criteria: A description of the process timeline and criteria for selecting the successful respondent. Submission Requests: The materials and information required of prospective respondents. Specifically, respondents will be asked to submit a description of type of agricultural row crops proposed, and their past experience with agricultural leasing. Task 1.2 Release RFP by August 19, 2002 Task 1.3 Summarize and Evaluate Responses- September 23, 2002 through October 7, 2002 Following receipt of responses to the RFP, the City will evaluate submittals. Task 1.4 Select Preferred Agricultural Operator(s) - October 7, 2002 The City Council will select the preferred agricultural operator(s) based on the RFP responses and complete any necessary CEQA environmental documentation and authorize staff to enter into a Lease Agreement(s). Task 1.5 Complete and Execute Lease Agreement(s)- November 1,2002 Negotiate and complete Lease Agreement(s) with respondent to obtain all required insurances.