SR-03-24-2015-3A�Wm City Council
City of
Santa monien,
Agenda
To: Mayor and City Council
From: Andy Agle, Director of Housing and Economic Development
Subject: Verizon Store License Agreement
Staff recommends that the Council authorize the City Manager to negotiate and execute
• limited -term license agreement with Verizon Wireless, a New York -based company, for
• term of 21 years to grant the use of a small portion of the public right -of -way for a fagade
feature at 1322 Third Street and charge an annual fee of $1,020 with an escalator of
10 percent every five years.
Executive Summary
The Architectural Review Board (ARB) has approved a storefront fagade and sign plan
for a new retail tenant, Verizon Wireless, at 1322 Third Street Promenade. The building
is listed on the City's Historic Resources Inventory. The ARB approval includes a minor
encroachment of 24 feet into the public right -of -way at 1322 Third Street Promenade in
order to allow for a new fagade treatment to protectively cover the historic fagade.
The Public Works Department has approved the encroachment into the
public right -of -way. In order to facilitate the encroachment condition, Verizon is required
to enter into a limited -term license agreement and pay an annual fee of $1,020 with an
escalator. The 21 -year period would coincide with Verizon's lease at 1322 Third Street
Promenade.
Discussion
Verizon Wireless (Verizon) will be opening a new retail store at 1322 Third Street
Promenade (see Attachment A). The building is listed on the City's Historic Resources
Inventory as a contributor to a potential district. Verizon submitted an application before
the Architectural Review Board (ARB) for approval of building design, colors, materials,
and signs (Attachment B). The ARB approved the application at a public hearing on
January 5, 2015, subject to conditions. The staff report's analysis stated, in part, that:
"The fagade design is intended to provide a contemporary retail identity along the ground
1
floor fagade while respecting the integrity of the multi- tenant building listed on the City's
Historic Resources Inventory."
Verizon's approved retail fagade will extend into the public right -of -way, encompassing a
total area of 24 square feet (each area is one -foot wide by twelve -feet long at the base of
the building fagade, on either side of the entrance door). The use of the public right -of -way
as proposed has been approved by the Public Works Department. If the proposed terms
and authorization to enter into the license Agreement are approved, construction of the
new fagade would begin in late spring 2015.
The license agreement is proposed for the specific purpose of protecting
a historic resource. Verizon proposes to retain the original historic fagade underneath
a new fagade treatment that is reflective of the company's image and branding. A license
agreement is required because the new fagade treatment would extend one -foot into the
public right -of -way. In the event the fagade is removed, the license agreement would
be terminated. Similarly, if the fagade is significantly altered, a new license agreement
would need to be considered.
The proposed surface license fee of $1,020 annually would increase by ten percent every
five years. Staff recommends a license Agreement term of 21 years to coincide with
Verizon's lease term for the property. In addition to specifying the fee amount and term,
the license agreement would contain maintenance and insurance requirements and
preserve existing rights of entry for the City. A security deposit would also be required in
the event the City needs to remove the improvements.
In determining value for the proposed license agreement, staff reviewed the license terms
and appraisal methodology used for valuing the license agreements and use of public
right -of -way for two other businesses: King's Seafood (now "The Water Grill ") at
1401 Ocean Avenue and the Travelodge Hotel (now known as "The Shore Hotel ") located
at 1515 -1525 Ocean Avenue and 1530 Second Street, respectively. The King's Seafood
agreement, which granted use of 490 square feet on the public right -of -way on
2
Ocean Avenue for purposes of accommodating ADA access and landscaping treatment,
was approved by Council on February 26 2013. The term of the license is ten years with
two five -year options. The Travelodge agreement, which granted the use of a subsurface
right -of -way for a utility easement and air rights for a pedestrian bridge over
First Court Alley, was approved by Council on December 8, 2009 and has a term of
seventy -five years due to the extensive subterranean and above -grade construction
required of the development.
In both cases, the value of the license area is derived from an appraisal of the public
right -of -way value based on the fair market value of the property, with a discount applied
due to use restrictions, limitations, and encumbrances associated with the rights -of -way.
Staff used an appraisal produced for the City by Buss - Shelger Associates
dated February 9, 2015. A discounted land value of $567 per square foot was determined
based on recent comparable land values in the area with a twenty- percent discount
applied due to development limitations. The appraiser calculated an annual ground lease
payment based on the proposed license area.
Environmental analysis
The proposed project is exempt from CEQA pursuant to Section 15061 (b) (3).
i
Financial Impacts & Budget Actions
Authorizing the execution of the license Agreement would generate an annual fee of
$1,020 with a 10 percent increase every five years. Revenues would be received
beginning in FY 2015 -16 and deposited into account 01263.409250. The appraisal cost
would be reimbursed by Verizon.
Prepared by: Jennifer Taylor, Economic Development Administrator
l)
Andy Agle, Director
Housing and Economic Development
Attachments:
Forwarded to Council:
Elaine M. Polachek
Interim City Manager
A: 1322 Third Street Promenade Site Plan
B: 1322 Third Street Promenade Store Design Plan
7
e nY'�cxx :asra V- •VL5ljj
393 -:9
Im
0
u
v
O
n
0
Ll
� c
p
o'm 0
_^
e$
•
.o
O.N
`
e
a
N
ii
e
c
O,
j
n
V
a 99
pq e
Rio E
4ai -k3 Y6Y $ #Y # YEg t
IRS
1
L
ill gig$ g Lgg� x P
l p4 9 9,F s R H
AY
W
r
Y
U
W
Hae ei °3.399
ry
F- ] § -is -. � 5vE� °�E i C C ..� £G J Ce n
E
av r asssnaeee.arRZessesa3;� � � O .0 S o�xi �I nIn
o, 4,9 €i�iS:SF'se §Er § =�$ A � o � o �( P� � $e ° s �
.s;od._�.,e,.n.,..� „9� 1 � ao%nou°. �aa Wig» i I; i §
Reference:
Agreement No. 10041
(CCS)