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SR-08-12-2014-8ACity Council Meeting: August 12, 2014 Agenda Item: 8 ~A To: Mayor and City Council From: Martin Pastucha, Director of Public Works /Airport Director Subject: Santa Monica Airport Leasing Guidelines Recommended Action Staff recommends that the City Council approve the attached Leasing Guidelines for the leasehold and license management of properties at the Santa Monica Airport (Airport or SMO). Executive Summary The Santa Monica Airport Leasing Guidelines (SMO Leasing Guidelines) set forth the general policy objectives and practices for leasing and licensing for all properties currently situated at the Airport. The parameters provided are intended to promote standardized, equitable, efficient, and transparent management of the tenant recruitment, selection, and negotiation process, as well as identify the standards of performance that are expected of the Airport tenants. If Council approves these proposed guidelines, staff will administer them and approve leases that are consistent with them; leases not conforming to the proposed guidelines would require Council approval. These guidelines were formulated based on: Council's direction to staff at its meeting on March 25, 2014; the legal obligations and legal constraints presently associated with the Airport land and its uses; environmental and remediation requirements; concerns about compatibility with surrounding neighborhoods; and the viability of the Airport Fund to remain independent from General Fund subsidies. Background Santa Monica Airport is located on 227 acres, closely surrounded by single - family residential neighborhoods. The Airport consists of 187 acres of land currently designated and used for aviation activities and 40 acres currently used for other purposes compatible with airport activities. As of the date of these guidelines the Airport facilities are comprised of approximately 114 non - aviation and 11 aviation leases as well as 186 license agreements for airplane hangars and aircraft parking areas (tie- downs). 1 The current Non - Aviation Airport Property leasing guidelines were approved by Council at its December 5, 2000 meeting. A major objective of those leasing guidelines was to provide leasing opportunities for the local arts community, which was being forced out of the City by new development and rising land values. Through the years artists have occupied various spaces at the Airport. In recent years the City undertook an extensive visioning process for the future of the Airport property. Among other things, that process was intended to identify any opportunities for the Airport's future, short of closure, that would be more compatible with surrounding neighborhoods and to identify improvements to the infrastructure that might benefit the community. Most recently, at the March 25, 2014 meeting Council provided direction to staff that, upon expiration, current leases may be renewed for three years with unlimited one -year renewals at the City's option. The direction to staff was to develop leasing guidelines sensitive to the environment, to neighbors' concerns and to remediation needs; and, once adopted, to apply the guidelines in assessing applications for lease renewals. Council also directed staff to consider the former Light Manufacturing and Studio District zoning standards as a model and to evaluate options regarding fuel sales at the Airport. Presently, use of the non- aviation Airport property is diverse and comprised of a museum, technical offices, artist day studios, educational facilities, contractor facilities, architectural offices, law offices, film related businesses, and general office space. Aviation use leases include flight schools, aviation service providers, hangars, and Fixed Based Operators (FBOs). All Airport leases will expire on or before June 30, 2015. Staff from various City departments collaborated in engaging a qualified appraiser and auditors to establish future lease rates that will be applied to all new leases on the Airport in 2015. Prior to negotiating new leases with existing tenants staff will ensure that the tenants have met their obligations under their current lease agreements. 2 Discussion The proposed Guidelines contain new policies and practices for leasing and licensing of Airport properties (Attachment A). They would supersede the current guidelines and become effective upon the date of Council's adoption. The Guidelines identify programs that mitigate, as much as possible, environmental impacts to the community, and maintain the viability of the Airport Fund independent from General Fund subsidies while the legal constraints on the City's authority to control the Airport and Airport usage is resolved. The new Guidelines have been developed with the following objectives: 1. Establish practices and procedures for evaluating potential leasehold interests, and for lease management and administration. 2. Foster uses and practices that are sensitive to the environment and protect the health of Airport neighbors and users and protect the City from future environmental exposure. 3. Maintain compatibility of uses of non - aviation airport property with Santa Monica Airport operations and, consistent with applicable law, promote use of the aviation property in a manner compatible with the adjacent residential community. 4. Continue to provide opportunities for arts, education, and culture, including, but not limited to, the Artist Space Program administered in conjunction with Cultural Affairs Division. 5. Serve as the framework for achieving and maintaining a viable, sustainable Airport Fund that is independent from the General Fund and other subsidies. 6. Incorporate within these Guidelines the City's rights, legal obligations and legal constraints that relate to the Airport, the aviation leases and the use of the Airport. To ensure that the leasing program achieves its objectives it shall be managed in a manner consistent with the following standards: 1. Term: The lease term may be month -to- month, or year -to -year for up to three - years. However, the initial term of leases approved under these guidelines shall expire by June 30, 2018. After that date, annual renewals may be granted pursuant to these guidelines at City's discretion. Leases longer than three years 3 are outside the purview of these guidelines and therefore require Council approval. 2. Allowable Uses: To the extent allowed by law, uses would be aviation, arts /cultural, creative space, professional, theaters, museum, educational, professional offices and other uses that are low intensity and serve the adjacent community while implementing standards that are sensitive to the environment. 3. Environmental Responsibility: New lessee requests shall be reviewed to assess potential negative effects on the environment. The Airport may require environmental studies or testing as appropriate and necessary, and any needed remediation shall be performed prior to establishment of new uses. Lessees seeking renewal or extended leases will also be responsible for any environmental contamination, resulting from their prior use, as a condition to a renewed or extended lease. At the time of the application, an assessment of the proposed use will be conducted, and appropriate insurance and /or remediation requirements will be incorporated into the lease based on proposed usage. 4. Right of Refusal: The Airport may refuse a lease application if it determines that the proposed use may create a high intensity use and /or expose the City to additional environmental exposure, or otherwise poses an unacceptable potential for harm to the public health and welfare or the environment. The majority of the Airport revenue is derived from leases. To help support the Airport's fiscal self- sufficiency, all rents, fees, and charges on the Airport must reflect fair market value for both aviation and non - aviation properties. Fair market rents for individual buildings on non - aviation airport properties and prevailing market rents for aviation properties will be appraised in the as -is condition quantified in the spring 2014 appraisal. Rental rates for new or renewed leases of airport properties will be set as Ifell o 1. Rates: All new and renewed leases will be leased at Market Rate based on the appraisal commissioned by the City in 2014. The initial lease rates will be adjusted by the change in the Consumer Price Index (CPI) to stay accurate with market conditions as new /renewed leases arise. 2. Renewals: For tenants who have three year leases, and who wish to be considered for lease extensions, would need to contact City staff in writing, no more than one year or less than 60 days before the lease terminates, to request the one -year lease extension. The City at its own discretion will approve or disapprove the one year extension for that year or any year thereafter. 3. Percentage Rent Provision: In addition to a base rent, the City may elect to require that certain leases include a percentage rent provision, which can be differentiated by categories of sales. The City, as Landlord, shall have the right to 4 audit tenant's financial records to ascertain that the gross sales figures reported by the tenant are accurate. 4. Existing Tenants: All existing airport tenants in good standing that are current in rent payments, not otherwise in default of their current agreements, and agree to abide by the rules of the Airport as stipulated in Section 5 "Performance Standards" of the guidelines, will be offered the opportunity to retain use and occupancy of their currently leased premises subject to the "Term" provisions. 5. Whole Building Leases: Whole building leases may, at the City's discretion, be subject to public Requests for Proposals intended to optimize leasehold occupancy and the self - sustainability of the airport 6. Sub - Leases: Assignment or subletting of leases or space sharing is prohibited without the written consent of the City, and granting or withholding consent will be conditioned on express standards and conditions set forth in the lease. 7. Lease and License Areas: Operation and improvements to lease and license areas are subject to the City's standard regulatory rules, review and approval process. 8. Triple Net Leases: Unless otherwise specified, tenants shall pay all property taxes and assessments (including Possessory Interest Tax), insurance, and utilities. 9. Commercial Operations Permit (COP): Prospective tenants proposing to use the Santa Monica Airport to engage in an activity that requires a business license from the City, are required to acquire a commercial operations permit issued by the City Manager. All COPS will be presented to the Airport Commission for their recommendation and comment prior to City Manager's approval. 10.Annual Adjustments: All leases will be subject to annual CPI adjustment on their anniversary month. 11. Appraisals: Properties will be appraised for fair market rental rates at three year intervals. Independence from General Fund Subsidies All Airport leases expire on or before June 30, 2015. Whatever the Airport's future, it is a City asset used by members of the public. And, to support its core public services, it must be self- sustaining as an enterprise and not dependent upon alternate funding. Given that the Airport's future is presently unknown and that it may take years until the City's legal authority is clarified by the courts, lease revenues at the Airport must be maintained to promote the Airport's ongoing self- sufficiency, avoid future subsidies from 5 the General Fund, and repay the General Fund, which has historically subsidized the Airport. General Fund subsidies, as of June 30, 2013, reached $13.6 million. In contrast, during fiscal year 2013 -14, the Airport Fund remained free of additional General Fund subsidies due in part to the adoption of the new landing fee structure that became effective August 1, 2013. Leasing is the Airport Fund's main revenue source. Revenue from current leases comprises approximately 63% of total Airport revenues, which is the largest component of the Airport Fund. The percentage of lease revenue contributing to the Airport Fund's total revenue will increase after July 1, 2015 with the addition of properties that will revert back to the City of Santa Monica. Atlantic Aviation and Gunnell Properties manage two of these properties. Both are located on Donald Douglas Loop North and were established under a 30 year development agreement, which currently provides a land lease rental rate to the Airport. As the development agreements expire, the lease revenue for these properties will significantly increase as a result of new rental agreements with prospective tenants, which include improvements on the properties. Use of Low Intensity Zoning Regulations Council suggested the use of the former Light Manufacturing and Studio District (LMSD) zoning standard as a model for the Guidelines. Some community members and the Airport Commission recommended LMSD as a viable solution in drafting the Airport's guidelines with the belief that LMSD satisfies the current federal obligations for the Airport. However, staff has significant concerns about the legality of this approach. LMSD's only permitted aviation use is for aircraft parts other than engines. Staff doubts that this sole aviation use will satisfy the City's current federal obligations. Nonetheless, the former LMSD standards may be useful, later, for planning future use of the Airport land. V Environmental Concerns and Impacts on the Community At Council's direction to evaluate options regarding fuel sales at the Airport, staff has been in contact with major fuel providers to find alternative solutions to current aviation fuels available throughout the aviation industry today capable of reducing the environmental impact to the community. Although some community members believe that the City can cease allowing the sale of fuel altogether, it is staff's opinion that such action would most likely lead to litigation. It is uncertain when an alternative to 100 low lead (100LL) Avgas will become available in the industry. 100LL is the standard fuel used by piston engine aircraft and has been in the center of controversy due to the low levels of tetraethyl lead contained in the fuel. Although the federal government has provided funding to find an unleaded alternative to this fuel, staff's research revealed that it will be a long and timely process until a replacement fuel to 100LL makes its way to common use. Staff has continued their efforts and found approved alternatives to 100LL available in the market today. Currently, only a handful of aviation fuel manufacturers have an unleaded aviation fuel alternative that can be used by most piston engine aircraft based at the Airport. The unleaded fuel requires operators to acquire an approved Supplemental Type Certificate (STC) from the Federal Aviation Administration (FAA) prior to utilizing the fuel and it also requires that the Airport build the appropriate infrastructure (i.e. fuel tanks) to support the storage and dispensing of the fuel. Also, there is a 100 octane very low lead (100VLL) alternative fuel that can replace the 100LL and can be used by the entire mix of aircraft using the Airport. This fuel does not require an STC prior to dispensing nor does it require additional infrastructure. The 100VLL fuel uses approximately 20- 30% less tetraethyl lead than the maximum allowed for standard 100LL fuel. Staff is currently in talks with fuel manufacturers to determine the timeline of availability of these fuels. Once commercially available, fuel service providers at the Airport would be required to offer unleaded avgas and 100VLL in lieu of 100LL. 7 The proposed Guidelines also address a replacement fuel for JetA, the common fuel for reducing the turbine engine aircraft. The Guidelines propose that once an alternative fuel (e.g. biofuel) becomes available in the industry, fuel service providers at SMO will be required to sell a blended biofuel in lieu of JetA. Staff conducted research in the areas of biofuel, specifically blended biofuels (usually up to 50/50 blends), that could be used by all turbine engine aircraft without the requirement of an STC from the FAA. Studies have shown that biofuels, even at a 50/50 blend, could reduce ultra -fine particulars by as much as 60 %. Furthermore, on June 4, 2013 United Airlines announced that they have executed an agreement with AltAir for delivery of 5 million gallons of biofuel sometime in 2014 for United Airline's operations out of Los Angeles International Airport. Staff is currently in talks with biofuel manufacturers, including AltAir, to determine biofuels' environmental benefits and timeline of availability to the industry of such biofuels. Because of these recent developments, staff is confident that biofuels could be made available at SMO in the future. Offering alternative aviation fuels would be an incremental step in the City's effort to mitigate Airport impacts on the community, and it would avoid litigation as to whether the City has a federal obligation in providing fuel available for all aircraft currently using the Airport. Additional provisions in the proposed guidelines that would address impacts on neighbors and the environment are as follows: 1. Flight schools will be requested to use newer type of aircraft that are quieter or use Federal Aviation Administration approved noise reduction technologies and leasing preference would be given to those that do. 2. Flight schools and tenants of the Airport will be requested to avoid pattern operations during certain hours (i.e. weekends, holidays, nights) and leasing preference would be given to those that do. 3. Fixed Based Operators will be required to provide annual inspection reports to the City that show the condition of the existing underground fuel tanks, to make repairs and remediate leaks, and to install any new tanks above ground. 4. Fixed Based Operators, maintenance facilities, and flight schools will have one year to replace existing gas or diesel - powered vehicles used to perform their n primary functions (i.e. fleet vehicles, Ground Power Units, aircraft tugs, etc.) with alternative fuel vehicles (i.e. CNG, Electric, etc.) Environmental Analysis The leasing guidelines identify the types of airport leases that will be within the authority of the City Manager to administer and approve. There is no issuance of a lease involved, nor do any of the guidelines commit the Manager to approve certain leases, or limit the Manager's discretion to impose mitigation measures, adopt alternatives, or deny a lease application altogether. Further, these guidelines do not limit the City Council's full leasing authority going forward, nor do they commit the Council to lease or not lease any property in the future. Because the City Council's action to approve the guidelines does not commit the City to a definite course of action on a project, it does not involve a project "approval" within the meaning of CEQA Guidelines section 15352(a). In addition, the approval of the guidelines is not a "project" under CEQA pursuant to CEQA Guidelines section 15378(b)(2), which excludes "general policy and procedure making." Finally, even if the guidelines may be viewed as an activity that will ultimately involve the issuance of a lease, there is no possibility that their approval may have a significant effect on the environment given that they do not commit the City to any course of action and are so general as to make the evaluation of particular impacts too speculative for review. Consequently, even if the guidelines were to constitute a CEQA project, their approval is subject to the common sense exemption pursuant to CEQA Guidelines section 15061(b)(3). Commission Action Staff presented an overview of the objectives and standards of the proposed leasing guidelines to the Airport Commission during their meeting on July 28, 2014 for consideration and comment. The Commission did not provide a formal recommendation or feedback regarding these guidelines. M Financial Impacts & Budget Actions There is no immediate financial impact or budget action necessary as a result of the recommended action. Prepared by: Stelios Makrides, Airport Manager Approved: i Martin Pastucha Director of Public Works /Airport Director Forwarded to Council: Rod Gould City Manager Attachments: A — Proposed Santa Monica Airport Leasing Guidelines 10 ATTACH M ENT A Approved by the Airport Commission: Approved by City Council: _ SANTA MONICA AIRPORT LEASING GUIDELINES The Santa Monica Airport Leasing Guidelines ( "Guidelines ") provide the framework for fair and consistent leasing and licensing of City -owned properties a t the Santa Monica Airport. The Guidelines provide parameters and general policy on allowed uses, standards and terms, and tenant recruitment and selection. They reflect the general intent and goals of the City of Santa Monica ( "City'), at the time they were approved and do not convey any right upon anyone, or impose any obligation on the City. INTRODUCTION Santa Monica Airport is one of the oldest single- runway, general aviation airports in the country. It is located on 227 acres, bordered on three sides by single- family residential neighborhoods. The Airport consists of 187 acres currently designated for aviation related activities and 40 acres currently designated for compatible "non- aviation" uses — specifically commercial activities that do not depend or rely on the airport for their business. As of the date of these guidelines there are approximately 11 aviation leases, 186 licenses for airplane hangars and aircraft parking areas (tie- downs) and 114 non - aviation leases and licenses on the Airport. Aviation uses include flight schools, aviation service providers, hangars, and Fixed Based Operators. Non - aviation uses are diverse, and include restaurants, museum, theatre, arts studios, and creative and general office uses. Lease and license revenue accounts for 63% of total annual Airport revenues and supports the Airport's goal of achieving financial self- sufficiency, reduction in future subsidies from the General Fund; and the repayment of the principal of past General Fund subsidies. Historically, the Airport's operation and maintenance has been subsidized by the General Fund. As of June 30, 2013, the Airport has a principal debt obligation to the General Fund of $13.6 million. All Airport leases expire on or before June 30, 2015. Whatever its future, the airport and its property remains a City asset. These leasing guidelines take into account Council's direction on March 25, 2014, the legal obligations and constraints relating to the airport, the aviation leases and the use of the airport, and the purpose for which airport leases have been developed, as specified below. 1 1. PURPOSE OF THESE LEASING GUIDELINES These guidelines have been developed to: I. Establish practices and procedures for evaluating potential leasehold interests, and for lease management and administration. II. Foster uses and practices that are sensitive to the environment and protect the health of Airport neighbors and users and protect the City from future environmental exposure. III. Maintain compatibility of uses of non - aviation airport property with Santa Monica Airport operations and, consistent with applicable law, promote use of the aviation property in a manner compatible with the adjacent residential community. IV. Continue to provide opportunities for arts, education, and culture, including, but not limited to, the Artist Space Program administered in conjunction with Cultural Affairs Division. V. Serve as the framework for achieving and maintaining a viable, sustainable Airport Fund that is independent from the General Fund and other subsidies. VI. Incorporate within these guidelines the City's rights, legal obligations and legal constraints that relate to the airport, the aviation leases and the use of the airport. 2. MANAGEMENT STRUCTURE Leasing and licensing at the Airport is the responsibility of the City of Santa Monica Airport Division in coordination with the City's Economic Development Division. 3. GENERAL LEASING STANDARDS To ensure a program that achieves the purposes described above, the leasing program at the Airport shall be managed in a manner consistent with the following standards: Term: The lease term may be month -to- month, or year -to -year; for up to three - years. However, the initial term of leases approved under these guidelines shall expire by June 30, 2018. After that date, annual renewals may be granted pursuant to these guidelines at City's discretion. Leases longer than three years are outside the purview of these guidelines and therefore require Council approval. II. Allowable Uses: To the extent allowed by law, uses would be aviation, arts /cultural, creative space, professional, theaters, museum, educational, professional offices and other uses that are low intensity and serve the adjacent community while implementing standards that are sensitive to the environment. 2 III. Environmental Responsibility: New lessee requests shall be reviewed to assess potential negative effects on the environment. The Airport may require environmental studies or testing as appropriate and necessary, and any needed remediation shall be performed prior to establishment of new uses. Lessees seeking renewal or extended leases will also be responsible for any environmental contamination, resulting from their prior use, as a condition to a renewed or extended lease. At the time of the application, an assessment of the proposed use will be conducted, and appropriate insurance and /or remediation requirements will be incorporated into the lease based on proposed usage. IV. Right of Refusal: The Airport may refuse a Tease application if it determines that the proposed use may create a high intensity use and /or expose the City to additional environmental exposure, or otherwise poses an unacceptable potential for harm to the public health and welfare or the environment and it's within the City's legal constraints presently associated with the Airport land and its uses 4. RATES AND RENEWALS Rents, fees and charges on the Airport shall ref e ct fair market value for both aviation and non - aviation properties. Fair market rents for individual buildings on non - aviation airport properties and prevailing market rents for aviation properties will be appraised in the as -is condition quantified in the spring 2014 appraisal. Rental rates for new or renewed leases of airport properties will be set as follows: I. Rates: All new and renewed leases will be leased at Market Rate based on the appraisal commissioned by the City in 2014. The initial appraisal lease rates will be adjusted by the change in the Consumer Price Index (CPI) as to stay accurate to market conditions as new /renewed leases arise, and until the next market study is conducted. II. Renewals: For tenants who have three (3) year leases, and who wish to be considered for lease extensions, would need to contact City staff in writing, no more than one year or less than 60 days before the lease terminates, to request the one -year lease extension. The City at its own discretion will approve or disapprove the one year extension for that year or any year thereafter. III. Percentage Rent Provision: In addition to a base rent, the City may elect to require that a lease include a percentage rent provision, which can be differentiated by categories of sales. The City, as Landlord, shall have the right to audit tenant's financial records to ascertain that the gross sales figures reported by the tenant are accurate and that the appropriate percentage rent amount is paid. 3 IV. Existing Tenants: All existing airport tenants in good standing that are current in rent payments, not otherwise in default of their current agreements, and agree to abide by the rules of the Airport as stipulated in Section 5 "Performance Standards" below, will be offered the opportunity to retain use and occupancy of their currently leased premises subject to the "Term" provisions prescribed in Section 3.1 of this report. V. Whole Building Leases: Whole building leases may, at the City's discretion, be subject to public Requests for Proposals intended to optimize leasehold occupancy and the self - sustainability of the airport.. VI. Sub - Leases: Assignment or subletting of leases or space sharing is prohibited without the written consent of the Landlord. Landlord's granting or withholding consent will be subject to express standards and conditions set forth in the lease. VII. Lease and License Areas: Operation and improvements to lease and license areas are subject to the City's standard regulatory rules, review and approval process. VIII. Triple Net Leases: Unless otherwise specified, tenants shall pay all property taxes and assessments (including Possessory Interest Tax), insurance, and utilities. IX. Commercial Operations Permit (COP): Prospective tenants proposing to use the Santa Monica Airport to engage in an activity that requires a business license from the City, are required to acquire a commercial operations permit issued by the City Manager. All COPS will be presented to the Airport Commission for their recommendation and comment prior to City Manager's approval. X. Annual Adjustments: All leases will be subject to annual CPI adjustment on their anniversary month. XI. Appraisals: Properties will be appraised for fair market rental rates at three year intervals. 5. PERFORMANCE STANDARDS All lessees shall use the airport and any airport property in a manner that is compatible with Santa Monica Airport operations and with the adjacent residential uses; to encourage activities that complement adjacent residential and commercial uses; and to establish practices that are sensitive to the environment and protect the City from future environmental exposure. i. Flight Schools & Flying clubs Existing flight schools and flying clubs will be provided the opportunity to renew 4 their leases and preference will be given to prospective tenants that abide by the following performance standards: a. All flight schools and flying clubs will be requested to use newer type aircraft that are quieter (i.e. light sport) or use Federal Aviation Administration approved noise reduction technologies in reducing their noise footprint. b. All flight schools and flying clubs will be requested to avoid performing pattern operations at Santa Monica Airport during weekends, holidays, and evening hours. Ii. Fixed Based Operators (FBOs) Existing FBOs will be provided the opportunity to renew their leases and prospective FBOs to obtain a lease if they abide by the following environmental standards. All FBOs will be required to minimize their environmental impact by performing the following improvements to current or as applicable proposed facilities: a. Ground Power Units (GPU) used to power jet aircraft on the ramp must be performed by CNG or electric power vehicles, or by in- ground wiring. FBOs will have 1 year from the signing of the lease to meet this requirement. b. All new fuel tanks constructed must be above ground. c. Annual inspection reports will be provided to the Airport that shows the condition of the existing underground tanks. d. All diesel- or gas - powered vehicles and equipment used by the FBOs to perform their primary functions, such as fleet vehicles and equipment, must be powered by alternative fuels (i.e. CNG, Electric, etc.). FBOs will have 1 year from the signing of the lease to meet this requirement. e. Hangars must be used only for the storage of aircraft and auxiliary equipment. f. Biofuels will be sold in lieu of 1etA and 100 Very Low Lead and aviation unleaded fuels will be sold in lieu of 100 Low Lead as soon as these fuels are approved and commercially available. Ill. Aviation Maintenance Facilities Maintenance facilities will be required to minimize their environmental impact by ensuring that all vehicles used inside the Airport Operations Area (AOA) are powered by alternative fuels. IV. Hangars a. Hangars that have a land lease agreement with the City will be on a month to month tenancy under a City approved lease agreement which will be updated as deemed necessary by the City. b. Hangars must be used only for the storage of aircraft and auxiliary 5 equipment. c. No subleasing is allowed. d. The City will request hangar owners to avoid from performing pattern operations at Santa Monica Airport during weekends, holidays, and evening hours. V. Tenants shall respond to Landlord's written inquiries regarding any complaints or issues, including postings on social media sites related to Tenant's operations. Tenant will provide an action plan for improvement if so requested by the Landlord. VI. As applicable, the above requirements may be incorporated in leases, licenses and other agreements. In addition, the City may add to any Lease or License further or different or additional operational and performance standards as the airport concludes are appropriate to the particular Tenant's operation. 6. MAINTENANCE AND TENANT IMPROVEMENTS All leaseholders shall be responsible for maintaining their facilities in attractive and safe condition, in compliance with applicable building and life safety codes and all applicable environmental laws, ordinances, regulations and standards. Airport facilities will be inspected prior to new or extended leasehold occupancy and refurbished, by the City or tenant (at the City's election), to a decent, safe and sanitary condition appropriate for use. If tenant makes improvements to the facility as a mutually agreed upon condition of a lease, the City must first review and approve the proposed design and scope of work. All necessary building permits must be obtained and the work must be inspected for compliance with applicable code(s). Appropriate rental credits for the approved work performed may be negotiated as part of the lease. Any Tenant Improvement Credit that exceeds two months' worth of tenant monthly rent must be approved by the Airport Director. 7. TENANCY RELATIONSHIPS Each tenant or licensee will be responsible for interior maintenance and repair at its sole expense, and the City generally will retain responsibility for maintenance and repair of roofs, building exteriors, landscaping and common use parking for all Airport - managed leaseholds unless otherwise specified in the lease or license. Tenants who lease whole buildings from the City will be responsible for any and all maintenance, repair and improvements including roofs, building equipment and exteriors of the facilities as well as interior maintenance and repairs. 8. TENANT RECRUITMENT All City -owned buildings appropriate and suitable for leasing may be subject to a public procurement and solicitation process to identify prospective tenants and licensees whose financial and professional experience, and products and /or services are consistent with the Leasing Standards set forth herein. 6 All prospective tenants must submit a Lease or License Application to the City. Information contained in the Lease Application shall describe the proposed use for the available space; provide information about the respondent; provide references; describe in detail the financial capability of the respondent to perform; and set forth preliminary terms and conditions. Upon confirmation that the proposed tenancy is consistent with: General Leasing Standards; verification of references and credit history; mutual preliminary concurrence in proposed lease terms and conditions; and approval of a Commercial Operations Permit, a lease agreement will be prepared for review by the City Attorney and execution by the prospective tenant before being referred to the City Manager for approval. Leases for terms greater than terms specified in these guidelines require Council approval. Staff may cooperate with commercial real estate brokers who are authorized to negotiate leases on behalf of prospective tenants. Recruitment for artist day studios will adhere to the criteria set forth by the Cultural Affairs Division of Community and Cultural Services Department. The Airport and Cultural Affairs work together to maintain the list and update financial qualifications. Candidate tenants for available Artist Day Studio space are required to file Program applications for screening purposes, and qualifying artists are selected only from the screened waiting list. 9. LEASE APPROVALS & DELEGATION OF AUTHORITY The City Manager has the authority to negotiate and execute leases with terms of three years or less on terms consistent with these Leasing Guidelines. To be valid, such leases must be on the basis of written agreements prepared and approved as to form by the City Attorney. Leases for terms of occupancy greater than three years or otherwise outside the parameters established by these guidelines will be negotiated by City staff under the direction of the City Manager and will require City Council approval. 10. GENERAL PROVISIONS These guidelines may be altered by the City at any time, in its sole discretion, and shall not create any right or reliance interest for any person. These guidelines are intended to be consistent with, and subject to all requirements of law applicable to the City's operation of the airport, and shall not be interpreted or construed to conflict with or to violate any such provision of law. 7