Fort Walton Beach Council agenda — 08-03-09 special council-budget review — reading text

There are four types of property owned by the city: Vacant land; property leased long term to commercial users such as the land leased to the Cumulus Radio group on Hollywood Blvd.; property leased by non -profit groups such as the Science Museum; and property that is owned and used by the city. Staff focused on vacant land and buildings leased to non -profit entities as the commercial leases are either long term and/ or leased at market rates; and land the city uses was not taken into consideration. Staff identified two areas that required addressing before the city could adequately manage the leasing or selling of city properties: 1. Because the monitoring and management of leases lay in four separate departments control was fragmented and uniform application of pricing and internal consistency suffered. All leases are now centralized into the Finance Department. 2. As there was no uniform application to lease municipal property, each request was left to its own varying perception of municipal purpose to be considered. A letter sufficed for an application without any description of how the entity provided a municipal purpose. A standard form using the City Attorney' s guidelines has been developed and will be required of all potential lessees, regardless if they are already a lessee seeking to exercise their option to renew. This way, the City Council may weigh each application based on the City' s standards, and not those of the applicants. The application is complete and attached to this memorandum. Vacant Land There is very little vacant land remaining within the city at all, and most of what remains is unusable due to it being jurisdictional wetlands, leased far into the future, or unusable due to size constraints. Land the city owns was considered on a case by case basis and it was found that CC Memo City Owned Properties 23- vacant land owned by the city is problematic due to wetland and contamination conditions and thus virtually unusable for any realistic purpose. There are several sites that are still under review to determine the extent of wetland jurisdiction and accessibility. Once staff has a clear idea of what properties may be permitted for usage, each will be brought to the City Council for consideration. Non -Profit Leases There are currently fifteen properties leased by non -profit groups and six (6) of them have leases that have already expired or will expire this year. On properties on which the lease has expired, the city has retained the tenants on a month to month basis as recommended by the City Attorney. In all cases, services of a certified real estate appraiser would be required before a fair market value could be established and the property marketed. The expiring leases are: 1. Emerald Coast Science Center. 139 Brooks Street. A science /educational facility. Lease expired 3/ 23/ 09. Originally leased on 5/ 25/ 95. Rent $ 1, 000 per year and city provides all maintenance. Financial support from facility users. Leased area contains 5, 949 sq. ft. Estimated fair market rental value per EDC between $ 10 and $ 13 per sq. ft., or $ 59,490 — $77, 337 per annum. 2. Kiwanis Club Boy Scout Hut. 55 Ferry Road. Boy Scout Activities. Lease expired May 30, 2009. Originally leased on 2/ 10/ 87 for ten years, lease renewed on 6/ 1/ 99 for ten years. Rent 1. 00 per year and lessee performs maintenance.. Group pays utilities and is self sustaining. - Leased area contains 984 sq. ft. No real use as a residential dwelling. Estimated fair market value for sale of property is between $ 35, 000 and $ 55, 000 based on Property Appraiser figures. 3. Okaloosa County Extension Services. 127 Hollywood Blvd. Okaloosa County and University of Florida offer public programs in agriculture, family and consumer sciences, horticulture and marine science.Lease expires 11/ 25/ 09. Originally leased on 11/ 26/ 74 to be renewed annually by city manager. Rent $ 1. 00 per year and lessee performs maintenance. Leased area contains 2, 340 sq. ft. Property represents interlocal cooperation to provide services to the public at a reasonable expense. An updated interlocal agreement is recommended. 4. Hi steppers — 17 Industrial Street. Performing arts and entertainment. Five year lease expired 6/ 1/ 09. Originally leased to PASARDA, assigned to Highsteppers on 10/ 10/ 06. Rent 100 per year to increase to $ 200 per year in second five year lease term option and $ 300 per year in third five year lease term option, and lessee performs maintenance. Group pays utilities and is self sustaining. - Leased area contains 4,400 sq. ft. Estimated fair market rental value per EDC is $ 5. 00 to $ 6. 00 per sq. ft., or between $ 22,200 and $ 26, 640 per annum. 5. Playground Gem and Mineral Society. 17 First Street. Promotes mineralogy hobbies. Last leased on l l /1 / 99 for ten years, lease expires 10/ 30/ 09. Rent $ 1. 00 per year and lessee performs maintenance. Group pays utilities and is self -sustaining. Leased area contains 885 sq. ft. CC Memo City Owned Properties 24- Estimated fair market rental value per Property Appraiser' s assessment is $ 3. 50 to $ 4. 50 per sq. ft., or between $3, 100 and $ 4, 000 per annum. 6. Playground Amateur Radio Club. 17 First Street. Provides amateur radio usage. Last leased on 8/ 1/ 99 for ten years, lease expires 7/ 30/ 09. Rent $ 1. 00 per year and lessee performs maintenance. Group pays utilities and is self sustaining. - Leased area contains 1, 054 sq. ft. Estimated fair market rental value per Property Appraiser' s assessment is $ 3. 50 to $ 4. 50 per sq. ft., or between $ 3, 700 and $ 4, 750 per annum. Discussion All of these properties have been leased to a particular non -profit group for many years and most if not all, have presumed that the property would or could be leased indefinitely at the non- market rate based on the notion that each provides a municipal purpose. It is therefore important to determine what exactly constitutes an organization performing a municipal or public purpose. In determining a municipal purpose, the City Council must make appropriate legislative findings to justify permitting the use of municipal property by private entities. The City Attorney has provided staff with a document ( attached) detailing the legal background of municipal purpose and describing the guidelines to determine what constitutes a municipal purpose. To summarize, there are two guidelines the City Council should follow when making legislative findings to permit the long tern use of public property. B. Is the use to be provided on the property essential to the health, morals, safety, protection or welfare of the City? Or C. Is the use to be provided on the property related to the health, morals, safety, protection or welfare of the City? If A, then it could be a tax exempt, gratuitous lease, if also: 1. Leaseholder is a not -for -profit corporation; 2. Corporation has no stockholders; 3. Profits accrue to the benefit of the public; 4. Services may be restricted to specific groups. If B, then the City Council has more discretion to determine the value for the lease. In either situation the City Council should make legislative findings regarding: 1. The City' s future use for the property; 2. Why the property should not be disposed of by sale and placed on the tax rolls; 3. Who will benefit from the services provided on the property; 4. What benefit the City may receive from the service provided on the property; 5. If an essential service why the City cannot provide said service; 6. Other findings that support the provision of services, type of lease, benefits to City residents, etc. For some time it has been the practice of the city to make publicly owned property available to organizations at a deeply reduced rent on the basis that they are non -profit organizations. Those CC Memo City Owned Properties 25- leases were more of a benevolent action to provide space to any organization that requested the space with the only requirement that they be non -profit. However, except for a few occasions, there does not appear that there was an attempt at declaring what municipal purpose was served; and without any clear finding by the City Council that they actually provide a service that otherwise the city would be required to either fund or provide. While they may benefit a select portion of the community, they may not provide a service enjoyed by the community as a whole. Recommendation The non -profits, whose leases are expired, or about to expire, have each expressed a desire to remain at their respective locations with the same rents and same terms of lease — in most cases five ( 5) years. It would be unfair to simply terminate the leases without several factors being taken into consideration: 1. Completion of the application to utilize municipal property, upon which the City Council will rely to make an objective decision as to what degree the proposed lessee meets the municipal purpose guidelines; 2. Give public notice and inform the potential lessee that a public hearing will be conducted at which the lease will be considered; 3. If already a lessee, should the entity be found by the City Council that it does not fulfill a municipal purpose, it be given a year to eighteen months to locate a new facility or secure alternative funding. CC Memo City Owned Properties 26-  Ppl ' City of Ft. Walton Beach Request for Lease or Extension of Lease of City Property You are requesting that the City Council grant your organization a gratuitous lease of municipal property at non -market rates on the basis that the organization provides a municipal purpose. A municipal purpose is defined by Florida Law as those activities essential to the health, morals, protection, and welfare of the municipality. The use by a private entity must be one that could properly be performed or served by an appropriate governmental unit, or which is demonstrated to perform a function or serve a purpose which would otherwise be a valid subject for the allocation of