SR-03-27-1979-11FTO:
FROM:
SUBJECT
Santa Monica, Califor( 3, March 6, 1979
Mayor and City Council H F
Staff MAR 2 7 1979
Aircraft Fueling Facility, Recommendation to Lease
Introduction
The aircraft fueling facility at Santa Monica Airport
has been operated by the City with great success over
the years. The net profit from the fueling facility
last year has been reported to be $68,000 by the
Airport Director. Newly instituted safety and
environmental protection regulations necessitate
extensive upgrading of the facilities at this time.
The cost of this upgrading has been estimated at
approximately $84,000.
Background
The City staff has been seeking methods by which income
from aircraft fueling operations can be maximized.
After receiving no bids from suppliers of aviation
fuels under the present condition wherein the City
operates the facilities, efforts were made to attract
interest from sources that could both operate and supply
the facility. All known major aircraft petroleum
suppliers were contacted with the proposal that they
lease the facilities, accomplish the needed upgrading
of the equipment and operate the retail sales enterprise.
As a result of these contacts, we have negotiated a
proposed lease (attachment A) with OASIS PETRO ENERGY
CORP. OASIS,under the proposed lease,would supply
petroleum products, accomplish the upgrading and operate
I F
MAR 2 7 1979
Mayor and City Council
March 6, 1979
Page Two
the retail facility
Basically,the proposed lease
would make the accomplishment of the upgrading the
responsibility of the lessee at the total maximum
cost to the City of $75,000. This $75,000
would be amortized against lease income during
the first three years of the lease. Under the lease
terms, the City would be guaranteed a minimum'of
$100,000 net annually (less the total of $75,000 noted
above during the first 3 years). The leasehold is proposed
to be a 3 year lease with two 5 year options.
A feature of the proposed agreement is that the lessee
will offer employment to three present City employees
involved in the fueling facilities. These three
positions could thenceforth be eliminated from the
Airport budget. The lessee will agree to purchase
three City owned fuel dispensing vehicles if the first
five -year option is exercised.
Alternatives
A. City could close the aircraft fueling facility in
order to avoid liability under new safety and
environmental regulations which require approximately
$84,000 to be spent in upgrading.
B. City could spend the $84,000 and continue to
operate under the present organization. Income under
this plan could be estimated at a net of approximately
$65,000 annually (less amortization of $84,000 noted above).
Mayor and City Council
March 6, 1979
Page Three
C. City could lease the facility for $100,000 per
year net rental proceeds with an obligation to
allow $25,000 per year for each of the first
three years of the lease to amortize the
upgrading which would be accomplished by the lessee.
A clause reserving the City's right to terminate
the agreement if airport use is changed has been
included (Article 25). The City would additionally
be able to reduce staff at the airport by a minimum
of three positions under this alternative.
Recommendation
The airport commission has recommended approval of a
lease arrangement similar to alternative "C"
Staff recommends that the City Council adopt the policy
outlined under alternative "C" and authorize the City
Manager to execute the attached lease agreement with
OASIS PETRO ENERGY CORPORATION.
Prepared by:
Attachment - Lease
Administrati
L E A S E
AND AVIATION FUELING OPERATIONS AGREEMENT
THIS AGREEMENT entered into this 19th day of March
1979, between CITY OF SANTA MONICA, a municipal corporation,
hereinafter called "CITY ", and OASIS PETRO ENERGY CORPORATION,
hereinafter called "OASIS ".
W I T N E S S E T H:
CITY, in consideration of the covenants and conditions
herein contained, does hereby lease to OASIS the CITY -owned
and operated aircraft fueling facility at the Santa Monica
Municipal Airport, which operation includes the area designated
as Parcel A on City of Santa Monica, Department of Engineering
Drawing No. 4024 -A, a copy of which is attached hereto, marked
EXHIBIT A, and made a part hereof. Said premises includes
six - 10,000 gallon underground aircraft fuels storage tanks,
complete with dispensing equipment.
The term of this lease shall be for three (3) years from
April 1, 1979 to March 31, 1982, with two (2) - five (S) year
options. (See Article 2.)
This lease is made by CITY and OASIS on the following
conditions, terms and covenants, to wit:
Article 1. RENT: OASIS shall pay to CITY as rent for
said premises the sum of $72,000.00 per year, payable monthly
in advance on the first day of each and every month of this
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Lease, commencing April 1, 1979, except that the rent in the
amount of $6,000.00 for the first month shall be paid, in
advance, upon the date the lease is signed. The term "Contract
Year" used in this lease agreement shall mean the period from
April lst of a given year through March 31st of the subsequent
calendar year.
Article 2. OPTIONS - CONSUMER PRICE INDEX:
(a) The rent amount under Article 1 hereof shall
be adjusted, effective April 1, 1982, upon the adoption of the
first five -year option as follows:
Rent shall be adjusted annually, effective April 1, each
contract year by the percentage increase in the Consumer Price
Index for Urban Wage Earners and Clerical Workers, revised,
1967 =100, for Los Angeles- Anaheim -Long Beach as published
by the Federal Bureau of Labor Statistics between February
of the previous calendar year and February of the current
calendar year, plus one percent (1 %). In no event shall the
rent for any contract year be lower than the most recent prior
contract year.
(b) At the expiration of this Lease, OASIS may
elect, if not at the time in default, to extend the term of
this Lease for two (2) separate additional periods of five
(5) years each, upon the same terms, covenants and conditions
herein contained. Lessee must exercise said option on or
before the sixtieth (60th) day preceding the expiration of
this Lease or of any subsequent option period, and must give
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written notice of the exercise of such option.
Article 3. AIRPORT FEE: OASIS, during the term of this
Lease shall promptly pay to CITY, by the 15th day of each
month, four cents ($.04) per gallon airport fee on all aviation
fuels, oils and solvents sold by OASIS at the airport during the
preceding month. OASIS will furnish CITY a- detailed monthly report
accompanying the airport fee payment, detailina the previous
months' sales.
Article 4. GUARANTEED ANNUAL INCOME: OASIS hereby guaran-
tees to CITY a minimum $100,000.00 from the aggregate sums
of Airport Fees and rent as defined in Articles 1 and 3 above.
If any deficiency shall exist between the annual guarantee
of $100,000.00 and the aggregate rent and airport fees paid
during any contract year, such deficiency shall be paid by
OASIS to CITY within thirty (30) calendar days from the end
of said contract year.
Article 5. AIRCRAFT FUELING TRUCKS: Included in and
a part of this Lease agreement are three (3) CITY -owned aircraft
fueling trucks, namely: #263 - (1200 gal. Chevrolet Truck),
#262 - (1200 gal. Chevrolet Truck) and #751 - (2400 gal. Ford
Jet Fuel Truck). OASIS agrees to maintain all fuels dispensing
equipment, fueling vehicles and all demised premises in good
operating condition. On April 1, 1982, if option number one
as defined in Article 2 is exercised, these trucks shall be
purchased from the CITY for cash by OASIS for the then fair
market value of such vehicles.
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Article 6. GUARANTEE OF ADEQUATE SERVICE:
Oasis guarantees to maintain the aircraft fueling service
at Santa Monica'Municipal Airport which service shall, be equal to or
better than that furnished by CITY. Reasonable determinations under
thisrSection shall be made by CITY.
Article 7. EMPLOYEES: OASIS agrees to offer to all present
employees, namely: two (2) Airport Attendants II, and one (1)
Airport Attendant I, employment with OASIS at their current rate of
pay.
Article 8. UTILITIES: OASIS shall pay for all utilities
supplied to said premises on a pro -rata basis.
Article 9. SUB - RENTALS: OASIS shall not assign this Lease
or sublet the premises covered hereunder, without prior written
approval from the CITY.
Article 10. IMPROVEMENTS:
(a) OASIS shall not call upon CITY to make any improvements
or repairs to said premises, but agrees to accept said premises in
their present condition, and agrees at its own expense to keep
the same in as good condition and repair as they now are or may
hereafter be placed, reasonable wear and tear and damage by the
elements or other casualty excepted; and OASIS waives any and
all rights under Section 1941 and 1942 of the Civil Code of the
State of California.
(b) In return for OASIS's agreement under paragraph
(a) of this Article to take the premises in an as -is condition
and, further, in return for OASIS's agreement to upgrade the
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fueling facility so that it meets industry and governmental
safety and environmental standards, the City shall pay to OASIS
the maximum sum of $75,000. This sum shall be payable in three
(3) annual installments of $25,000 each with the first installment
being due and payable by.the CITY to OASIS on April 30, 1980.
The second annual installment of 33 -1/3% shall be due and payable
by the CITY to OASIS on April 30, 1981 and the third installment
of 33 -1/3% shall be payable to OASIS by CITY on April 30, 1982,
except that should the CITY fail to renew this Lease or should
this lease be terminated for any reason other than default by
OASIS, the sums owing by the CITY hereunder shall immediately
become due and payable. It is further agreed that OASIS may
fund the above installments by offseting the Airport fees required.
by Article 3 hereof against said installments as Airport fee
obligations are incurred under said Article 3.
(c) All improvements shall become the property of
the CITY, CITY shall have the right to direct OASIS to make
further improvements necessary for compliance with applicable
laws and standards, and to approve all improvements before and
after installation.
Article II. MAINTENANCE.. OASIS shall maintain said
premises in a good, sanitary and clean condition and shall
not commit, suffer or permit any waste on said premises or any
acts to be done thereon in violation of any law or ordinance,
and not to use or permit the use of said premises for any
illegal purpose.
Article 12. ALTERATIONS. OASIS agrees that no alterations
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or additions shall be made on or to said premises without
the written consent of CITY.
Article 13. INDEMNITY: OASIS agrees to hold CITY harmless
from any loss or damage arising out of the use of said premises
by OASIS, its agents, servants or guests. OASIS shall maintain
public liability, property damage (including vehicles noted
in Article 5 above) and product liability insurance in an
amount and form satisfactory to the City Attorney of CITY -
and shall list CITY as "additional insured."
Article 14. ATTORNEY'S FEES: OASIS agrees to pay CITY
all costs and expenses, including attorney's fees in a reason-
able sum, in any action brought by CITY to recover any rent
due and unpaid hereunder or for the breach of any of the
covenants or agreements contained in this lease, or to recover
possession of said premises whether such action progresses
to judgment or not.
Article 15. TERMINATION: OASIS, at the expiration of
this lease, or any sooner termination hereof, agrees to quit
and surrender possession of said premises. (See Par. 2 Re:
Options.)
Article 16. REGULATIONS:
OASIS hereby agrees to abide
by all current and future airport regulations, (noise or
otherwise) and hereby waives any and all damages that might
accrue from these regulations.
Article 17. GOVERNMENT RIGHT: This lease and all the
provisions hereof shall be subject to the paramount rights
of the United States Government now has or in the future may
have or acquire affecting the control, operation, regulation
and taking over of the Airport for the exclusive or nonexclusive
use of the Airport by the United States during the time
of war or national emergency.
Article 18. CONDEMNATION: In the event of condemnation
of any or all of the leased premises, any award shall be paid
to CITY, except that any portion of the award attributed to
improvements, equipment or facilities which OASIS is entitled
to remove shall be paid to OASIS. It is the intention of
this paragraph that OASIS shall not receive any payment or
award for the rental value in excess of any advance rent paid
hereunder, if any, or the unexpired term remaining at the
time of condemnation.
Article 19. USE OF ROOF: CITY reserves the use of the
roof of the West Wing of the Fueling Building for aircraft
navigational aids, i.e. Rotating Beacon Tower.
Article 20. NOTICES: All notices that may be required
given under this Lease may be served by certified mail, postage
prepaid, addressed to the parties as follows:
CITY: City of Santa Monica
1685 Main Street
Santa Monica, California 90401
OASIS: Oasis Petro Energy Corporation
5995 Sepulveda Blvd.
Culver City, California 90230
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1
Article 2i. OIL STORAGE: OASIS is gi_nted the use of
one (1) stall in CITY's Equipment Building (adjacent to fueling
facility) for case and drum oil storage.
Article 22. INVENTORY: OASIS will take over and reimburse
CITY at CITY's cost all petroleum products on hand, inventoried
on date OASIS assumes fueling operation.
Article 23. FIXED BASE OPERATORS: OASIS will supply all
petroleum products to the Fixed Base Operators under the same
exclusive agreement that is now in effect with the CITY.
Article 24. PREMISES: Included in this Lease agreement is
the aircraft fuels dispensing area fuels office, and equipment
used in aircraft fueling operation.
Article 25. CHANGE OF AIRPORT USE: Should the CITY or any
other governmental authority alter the land use or other regula-
tions concerning the Santa Monica Airport on which the leased pre-
mises are located, such that it becomes impractical or infeasible
to operate an airport at the above location, either party may
terminate this Lease or any options hereunder upon the delivery
of six months' written notice to the other party. At the expira-
tion of said six (6) months this Lease shall terminate and be of
no further force and effect. At such time OASIS shall be
entitled to the return of any advance rental payments which
might cover any period after termination of Lease, and OASIS
shall be entitled to remove any equipment or facilities which
are not deemed part of the real property. Neither party shall
demand any other payment of any kind whatsoever upon termination
under this Article, except as provided under Article 10, paragraph
"b" of the Lease as amended.
IN WITNESS WHEREOF the parties hereto have hereunto set
their hands and seals on the day and year first above written.
CITY OF SANTA MONICA
a municipal corporation
By:
City Manager
ATTEST:
,City Clerk
SEAL
OASIS PETRO ENERGY CORPORATION
By:
Finn Moller, President
Tariq Kadri, Secretary
SEAL
APPROVED AS TO FORM:
City Attorney
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Agenda item 11 -F: Presented at this time was a recommendation to lease
the aircraft fueling facility at Santa Monica Airport to Oasis Petro
Energy Corporation pursuant to Council discussion at the meeting of
February.27, 1979. A member of the public, Mike McGregor, requested
delay of the decision until the airport lawsuit is settled. After
discussion, Councilmember Scott moved to approve a three -year lease
of the Aircraft Fueling Facility at Santa Monica Airport to Oasis Petro
Energy Corporation by award'of Contract No. 3201(CCS). Second by
Mayor Pro Tempore Cohen.
Council Vote: Unanimously approved 7 -0
CITY COUNCIL MEETING - MARCH 27, 1979