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AGENDA
Transportation Committee Regular Meeting
5:30 PM - Monday, January 9, 2017
Council Conference Room, 7th Floor, City Hall – 1055 S. Grady Way
1. Extension of Boeing Lease for Parcels 760 & 770
a) AB - 1829 Transportation Systems Division Division recommends approval of a land lease
of the 760 and 770 West Perimeter Road parcels to The Boeing Company, and approve
the lease extension for 5/31/2030 with a possibility for two 10 year extensions. Annual
leasehold revenue generated would be $108,563.68.
2. Emerging Issues in Transportation
AB - 1829
City Council Regular Meeting - 09 Jan 2017
SUBJECT/TITLE: Boeing Lease Amendment 9
RECOMMENDED ACTION: Council Concur
DEPARTMENT: Transportation Systems Division
STAFF CONTACT: Jim Seitz, Transportation Systems Director
EXT.: 7245
FISCAL IMPACT SUMMARY:
756 Building: $2,965.68 per year
760 Building: $10,710 per year
760 Parcel: $37,569 per year
770 Parcel: $57,319 per year
Total: $108,563.68 per year in rental income
Rates are subject to increase over the term of the lease at 3 year intervals
SUMMARY OF ACTION:
The Boeing Company currently has an existing lease for buildings and land on the airport (LAG-10-001). Via
Lease Amendment 4 (addendum 04-13) Boeing leased the adjoining parcels at 760 West Perimeter Road and
770 West Perimeter Road. The amendment leasing these two parcels commenced on August 15, 2013, and is
set to expire on August 14, 2018. Boeing has recently completed a large tenant improvement on those two
parcels and has five 737 MAX airplanes parked at this location. The area was intended for use as a temporary
parking site for the MAX while the aircraft is in the Federal Aviation Administration certification process.
With the production rate for the 737 expected to increase in the coming years, Boeing has indicated its
interest in leasing these two parcels over the long term. Under the terms of the master lease, the initial
expiration date of this amendment would be May 31, 2030. A provision of that master lease also provides for
two possible term extensions of 10 years each. At its longest, the lease of the 760 and 770 parcels would not
expire until May 31, 2050.
EXHIBITS:
A. Issue Paper
B. Boeing Lease Amendment 9
STAFF RECOMMENDATION:
Authorize the Mayor and City Clerk to execute Boeing Lease Amendment 9 to LAG-10-001.
AGENDA ITEM #1. a)
PUBLIC WORKS DEPARTMENT
M E M O R A N D U M
DATE:January 4, 2017
TO:Armondo Pavone, Council President
Members of the Renton City Council
VIA:Denis Law, Mayor
FROM:Gregg Zimmerman, Public Works Administrator
STAFF CONTACT:Jim Seitz, Transportation Director, extension 7245
SUBJECT:Boeing Lease Amendment 9
ISSUE:
Should Council authorize the Mayor and City Clerk to execute Boeing Lease Amendment
9 to LAG-10-001?
RECOMMENDATION:
Authorize the Mayor and City Clerk to execute Boeing Lease Amendment 9 to
LAG-10-001.1
BACKGROUND:
The Boeing Company (Boeing) has an existing lease for buildings and land on the airport
(LAG-10-001). The leased areas include Apron A that is adjacent to the Cedar River,
Apron B that is adjacent to the old Chamber of Commerce building and parking lot in the
southwest corner of the airport and Apron C which is located north of the control tower
on the west side of the airport.
The initial term of the master lease with Boeing expires on May 31, 2030. The lease has
a provision for two 10-year additional terms that may be exercised at Boeing’s request.
The maximum term of the master lease expires on May 31, 2050.
1 Lease Amendment 8, which addresses rent adjustments, is currently being circulated for internal
approvals at Boeing. It may be approved after Lease Amendment 9. The out of order approval will not
affect the substance of either amendment.
AGENDA ITEM #1. a)
Armondo Pavone, Council President
Members of the Renton City Council
Page 2 of 3
January 4, 2017
Via Lease Amendment 4 (addendum 04-13) Boeing leased the adjoining parcels at 760
West Perimeter Road (760 Parcel) and 770 West Perimeter Road (770 Parcel) on
Apron C. The amendment leasing these two parcels was short-term commencing on
August 15, 2013 and set to expire on August 14, 2018. Lease Amendment 9 will extend
Boeing’s lease of Parcels 760 and 770 to May 31, 2030, plus two 10-year additional
terms that may be exercised at Boeing’s option.
Boeing has recently completed a significant tenant improvement on those two parcels
and has five 737 MAX airplanes parked at the location. The area was intended for use as
a temporary parking site for the MAX while the aircraft undergoes the Federal Aviation
Administration (FAA) certification process.
With the production rate for the 737 expected to increase in the coming years, Boeing
would like to continue leasing these parcels long-term.
The lease for the 760 parcel is the subject of a still open FAA Part 16 complaint filed by
ProFlight Aviation (ProFlight). The Part 16 complaint alleges, among other things, that
the City unfairly leased the parcel to Boeing when it should have leased the parcel to
Pro-Flight. The FAA has indicated that it will provide a decision on the Part 16 complaint
in January 2017. The FAA has granted itself a number of extensions that have delayed
the decision for many months. It is possible that another extension may be granted that
delays the decision even longer.
The Part 16 complaint is an important factor because complaints that are not resolved
per the FAA’s decision can have ramifications for future airport grant funding. The FAA
has the ability to deny future Airport Improvement Program (AIP) grants to airports that
have unresolved complaints. The airport needs these grants for upcoming projects such
as the Taxiway Alpha Rehabilitation Project and the Seaplane Base Launch Ramp Repair
Project. Both of these projects are expected to cost millions to complete.
While Boeing and the City believe the Part 16 complaint will ultimately be resolved in
the City’s favor, both parties understand there is a risk the FAA may order corrective
action be taken, which could force the City to expend funds and/or cause the City to
lose grant funding as a result of the lease granted to Boeing. To allow Boeing to solidify
its long term plans for the 760 and 770 Parcels, Boeing has agreed to indemnify the City
against such risks. Specifically, Boeing has agreed that it “shall fully indemnify and hold
harmless the [City] for the amount of damages and costs [the City] incurs and/or
funding it loses by reason of Boeing’s lease of the 760 and/or 770 Parcels and a FAA or
court finding that such lease causes Landlord to be out of compliance with the Grant
Assurances.” Boeing also agreed to “…fund the [City’s] defense [of FAA complaints and
challenges], including but not limited to, reimbursement of the Landlord’s actual,
reasonable, documented, out of pocket costs resulting from the use of city staff and
AGENDA ITEM #1. a)
Armondo Pavone, Council President
Members of the Renton City Council
Page 3 of 3
January 4, 2017
resources to defend, as well as attorney’s fees and costs for independent counsel,
selected by the Landlord’s attorney.”
In addition to the indemnification and defense obligations, Boeing agrees to cooperate
with the City to cure conditions specified by the FAA. To the extent the parties cannot
agree upon a cure, both the City and Boeing have options to terminate the lease to
protect from ongoing costs/damages caused by an unfavorable FAA finding. As added
protection for the City against risks associated with a long term lease, Boeing also
agreed to clarify that the City is not required by the lease to subsidize the operation of
the Airport from the City’s general fund in the event grant funding and user charges are
inadequate to cover its costs.
The lease of the two parcels and the two buildings located on the parcels will provide
$108,563.68 per year in revenue to the airport. In addition, the terms of the master
lease call for periodic rental rate adjustments every three years.
AGENDA ITEM #1. a)
AMENDMENT NO. 9 TO LEASE AGREEMENT LAG‐10‐001
(City of Renton to The Boeing Company)
THIS AMENDMENT No. 9 to Lease Agreement LAG‐10‐001 (“Amendment No. 9”) is entered into
as of ______________________, 2017, by the City of Renton, a Municipal Corporation
(“Landlord”) and The Boeing Company, a Delaware corporation (“Tenant”) and amends that
certain lease agreement LAG‐10‐001 dated June 1, 2010, as amended to the date hereof (the
“Lease”).
RECITALS:
1. WHEREAS, Tenant currently leases the 760 and 770 parcels on Apron C, through 2018,
by Addendum 4‐13 to LAG 10‐001 (“Master Lease”); and
2. WHEREAS, the term of Addendum 4‐13 ends on August 14, 2020; and
3. WHEREAS, Tenant’s lease of the subject parcels was the subject of a Part 16 Complaint,
Federal Aviation Administration (“FAA”) Docket # 16‐15‐03, for which no decision has
been received to date; and
4. WHEREAS, one of the issues alleged in the Part 16 Complaint was the classification of
Apron C on the Airport Layout Plan as General Aviation and Tenant’s use as something
other than General Aviation; and
5. WHEREAS, Renton Municipal Airport (hereinafter “RMA”) is currently working on its
Airport Master Plan update; and, as part of that process, the Airport Layout Plan will be
updated; and
6. WHEREAS, notwithstanding the Parties’ view that Tenant’s use of Apron C is consistent
with the current Airport Layout Plan, the updated Airport Layout Plan is expected to
address the classification of Apron C to clarify the permissibility of Tenant’s use; and
7. WHEREAS, the process of updating the Airport Master Plan and the Airport Layout Plan
will not be complete until late 2017; and
8. WHEREAS, the Landlord must obtain FAA acceptance and approval of the Airport Master
Plan and the Airport Layout Plan; and
9. WHEREAS, the Landlord obtained the RMA through the Surplus Property Act of 1944;
and
AGENDA ITEM #1. a)
LAG‐10‐001
AMENDMENT NO. 9
Page 2 of 8
10. WHEREAS, the RMA qualifies for Airport Improvement Program (hereinafter “AIP”) grant
funding; and
11. WHEREAS, the FAA administers the AIP grant funding; and
12. WHEREAS, as a condition of receiving AIP grant funding, prospective grantees must
agree to comply with the Grant Assurances, pursuant to 49 USC §47107 et seq., as
amended; and
13. WHEREAS, to seek and obtain AIP grant funding, the Landlord must agree that it will
comply with the Grant Assurances; and
14. WHEREAS, Tenant now seeks to extend the term of the lease of the 760 and 770 Parcels
to have a termination date that coincides with its Master Lease LAG 10‐001; and
15. WHEREAS, Tenant has asked the Landlord to award it a long term lease before the
Airport Master Plan and Airport Layout Plan are completed and submitted to the FAA
for review and approval; and
16. WHEREAS, Tenant’s request is made in order to permit Tenant to maintain its current
and forecasted production schedule of the Boeing 737 program; and
17. WHEREAS, Tenant acknowledges that its lease of the 760 and 770 Parcels could be
determined by the FAA to be out of compliance with the Grant Assurances; and
18. WHEREAS, Tenant acknowledges and understands that the Landlord’s leasing of the 760
and/or 770 Parcels to Tenant might put AIP grant funding for RMA at risk and that
without funding from the FAA, projects at the RMA would either need to be funded by
other means or would not be undertaken; and
19. WHEREAS, Tenant acknowledges that Landlord funds the RMA with an enterprise fund
through grants, user fees and other user/rent charges so that Landlord’s municipal
general fund does not subsidize the Airport’s operation; and
20. WHEREAS, Tenant acknowledges that if Landlord were to lose adequate funding to
maintain or improve the RMA to a condition required for Landlord to operate its
business, Landlord would not be required to subsidize the RMA’s operation from its
general fund and could terminate or modify the Master Lease if it were unable to obtain
sufficient funding necessary to operate the Airport in a condition required for Tenant’s
business; and
AGENDA ITEM #1. a)
LAG‐10‐001
AMENDMENT NO. 9
Page 3 of 8
21. WHEREAS, the FAA decision on the Part 16 Complaint is scheduled for January 11, 2017;
and
22. WHEREAS, the Parties acknowledge that there could be a reconsideration of the
decision on the Part 16 Complaint or there could be another Part 16 Complaint lodged
with the FAA that challenges the Landlord’s leasing of Parcels 760 and 770 to Tenant;
and
23. WHEREAS, the Parties acknowledge that, as an alternative to a Part 16 Complaint, an
aggrieved party can file a Part 13 Complaint (14 CFR 13.1, et seq.) with the FAA;
NOW, THEREFORE, IN CONSIDERATION OF THE TERMS AND CONDITIONS HEREIN CONTAINED
AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF
WHICH IS HEREBY ACKNOWLEDGED, LANDLORD AND TENANT AGREE TO AMEND THE LEASE AS
SET FORTH BELOW:
WITNESSETH:
Definitions. The “Master Lease” means lease LAG‐10‐001 but excludes the amendments to
LAG‐10‐100. “Lease” means the Master Lease and Amendments Nos. 1, 2, 3, 4, 5, 6, 7, and 8 to
the Master Lease. All terms used in this Amendment No. 9 that are defined in the Lease are
used here as they are there defined.
Recitals. Landlord and Tenant confirm the accuracy of the statements set out in Recitals 1
through 23, inclusive and agree that such statements form the basis for the agreements set out
in this Amendment No. 9.
Landlord and Tenant agree to amend the Lease, in the following respects:
A. Paragraph 1.b., added in Amendment #4, entitled “Landlord’s Right to Continue Leasing the
760 & 770 Parcels” is replaced in its entirety with “Intentionally Omitted” and is of no
further force and effect.
B. Paragraphs 3.c. and 3.c.1 of the Lease (added in Amendment No. 4) are amended to read as
follows:
3.c. Term for the 760 and 770 Parcels: The lease of the 760 and 770 Parcels shall
expire on May 31, 2030, subject to Tenant’s right to extend the lease term for such
Parcels as set out in Section 3.c.1.
AGENDA ITEM #1. a)
LAG‐10‐001
AMENDMENT NO. 9
Page 4 of 8
3.c.1. Option to Extend Term for the 760 and 770 Parcels: Tenant shall have the
right to extend the lease term of the 760 and 770 Parcels for up to two (2) ten (10)
year terms as provided in Section 3.b of the Lease. Tenant may exercise its rights to
extend the Lease for all other parcels pursuant to Section 3.b without extending the
term for the 760 and 770 Parcels. However, Parcels 760 and 770 are leased together
as an indivisible group and Tenant cannot extend the term for one parcel without
extending the term of the other. All other parcels subject to this Lease are leased
together as a separate indivisible group. Tenant may not extend the term of the 760
and 770 Parcels without also extending the term of the Lease for all other parcels.
C. A new Section 31 shall be added to the Lease as follows:
31. Agreements related to grant funding:
31.a. In the event the FAA determines that the lease of the 760 and/or 770
Parcels by the Landlord to Tenant has caused the Landlord to be out of
compliance with the Grant Assurances, Tenant agrees that it will cooperate with
and assist Landlord in remedying the condition(s) specified by the FAA as placing
Landlord out of compliance. It is understood between the Parties that it may be
possible to cure a lack of compliance cited by the FAA (if any) without amending
or terminating the long‐term lease of the 760 and/or 770 Parcels. However, if
Tenant and Landlord do not agree upon a cure that remedies the condition
specified by the FAA as placing Landlord out of compliance with the Grant
Assurances, Tenant shall fully indemnify and hold harmless the Landlord for the
amount of damages and costs Landlord incurs and/or funding it loses by reason
of Boeing’s lease of the 760 and/or 770 Parcels and a FAA or court finding that
such lease causes Landlord to be out of compliance with the Grant Assurances.
To the extent the condition can be cured by Tenant vacating the 760 and 770
Parcels and the Parties cannot agree upon another cure, Tenant may mitigate its
indemnification liability under this Section 31.a by terminating its occupancy and
lease of the 760 and 770 Parcels. To exercise such termination option, Tenant
shall deliver written notice of such termination to Landlord. The termination of
the Lease with respect to the 760 and 770 Parcels shall be effective on the date
specified in such notice (the “760‐770 Termination Date”). If the 760‐770
Termination Date is less than one (1) year from the date on which such notice is
delivered (the “One‐Year Notice Date”), Tenant shall pay to Landlord a
termination fee equal to the rent that otherwise would have been payable by
Tenant for the 760 and 770 Parcels for the period beginning on the 760‐770
AGENDA ITEM #1. a)
LAG‐10‐001
AMENDMENT NO. 9
Page 5 of 8
Termination Date and ending on the One‐Year Notice Date. Such fee shall be
due and payable thirty (30) days following Tenant’s delivery of such termination
notice to Landlord.
31.b. In the event that there is either a Part 13 Complaint or a Part 16
challenge (by way of a request for reconsideration or appeal of the current Part
16 Complaint (FAA Docket 16‐15‐03) or a new Part 16 Complaint) due to
Landlord having granted Tenant a long term lease of the 760 and/or 770 Parcels,
Tenant will fund the Landlord’s defense, including but not limited to,
reimbursement of the Landlord’s actual, reasonable, documented, out of pocket
costs resulting from the use of city staff and resources to defend, as well as
attorney’s fees and costs for independent counsel, selected by the Landlord’s
attorney. Such reimbursement shall be limited to amounts that were reasonably
incurred in the Landlord’s defense. For purposes of this section, “out of pocket
costs” shall include staff time (including in‐house counsel) at staff’s rate of pay
including benefits.
31.c. The foregoing notwithstanding, Landlord may terminate or amend the
lease of Parcels 760 and 770 pursuant to the terms provided in this Lease,
including but not limited to those provisions for termination or amendment in
Sections 2.c and 15.c. However, Landlord may not unilaterally terminate the
lease due to a finding that the lease of Parcels 760 and 770 cause the Landlord to
be out of compliance with the Grant Assurances unless Landlord reasonably
determines that the remedies and protections provided for in Sections 31.a and
31.b are insufficient to protect the Landlord or the operation of the Airport from
ongoing damage, losses, and/or expenses that are incurred or likely to be
incurred as a result of such finding. Moreover, the Parties agree that the
Landlord is not required to maintain or improve the Airport to support Tenant’s
business if adequate funding for such maintenance or improvements is not
available without subsidy from the Landlord’s general fund.
D. Miscellaneous:
1. This Amendment No. 9 will be effective immediately upon execution and delivery by the
parties.
AGENDA ITEM #1. a)
LAG‐10‐001
AMENDMENT NO. 9
Page 6 of 8
2. This Amendment No. 9 may be executed in multiple counterparts, each of which shall be
deemed an original, but all of which, together, shall constitute but one and the same
instrument.
3. This Amendment No. 9 shall be governed by the laws of the State of Washington,
without reference to its choice of law rules.
4. This Amendment No. 9 supersedes any prior agreements, negotiations and
communications, oral or written, with respect to the extension of the term of the lease
of the 760 Parcel and the 770 Parcel under the Lease and contains the entire agreement
between, and the final expression of, the Landlord and Tenant with respect to such
extension. No subsequent agreement, representation, or promise made by either party,
or by or to an employee, officer, agent or representative of either party shall be of any
effect unless it is in writing and executed by the party to be bound thereby.
5. As amended by this Amendment No. 9, the Lease continues in full force and effect in
accordance with its terms. On and after the date of this Amendment No. 9 , the Lease
shall be deemed amended by this Amendment No. 9 and all references in the Lease to
“this Agreement” “this Lease” “herein” “hereof” and the like shall be deemed to be
references to the Lease as amended by this Amendment No. 9.
[The remainder of this page is blank; signatures follow below.]
AGENDA ITEM #1. a)
LAG‐10‐001
AMENDMENT NO. 9
Page 7 of 8
Executed by Landlord and Tenant as of the date first written above.
The Boeing Company CITY OF RENTON
a Delaware corporation a Municipal Corporation
___________________________ ________________________
Denis Law
Mayor
ATTEST:
Title
________________________
Jason Seth
City Clerk
____________________
Date
Approved as to legal form
________________________
City Attorney
AGENDA ITEM #1. a)
LAG‐10‐001
AMENDMENT NO. 9
Page 8 of 8
ACKNOWLEDGEMENT
STATE OF WASHINGTON )
) §
COUNTY OF KING )
On this _________ day of _____________________, 2017, before me, the undersigned notary
public in and for the State of Washington, duly commissioned and sworn, personally appeared
_____________________________________________________ to me known to be the
________________________ of THE BOEING COMPANY, a Delaware corporation, the party
that executed the foregoing instrument, and acknowledged said instrument to be the free and
voluntary act and deed of said party, for the uses and purposes therein mentioned, and on oath
stated that he/she was duly authorized to execute the same.
WITNESS my hand and official seal hereto the day and year in this Certificate first above
written.
Signature:
Notary Public in and for the State of Washington
Notary (print name)
Residing at
My appointment expires:
AGENDA ITEM #1. a)