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Home My WebLink About2022-09-08 Airport Commission Packet KENAI AIRPORT COMMISSION REGULAR MEETING SEPTEMBER 8, 2022 – 6:00 P.M. KENAI CITY COUNCIL CHAMBERS 210 FIDALGO AVE., KENAI, AK 99611 *Telephonic/Virtual Information Page 2* http://www.kenai.city 1. CALL TO ORDER a. Pledge of Allegiance b. Roll Call c. Agenda Approval 2. SCHEDULED PUBLIC COMMENT (Public comment limited to ten (10) minutes per speaker) 3. UNSCHEDULED PUBLIC COMMENT (Public comment limited to three (3) minutes per speaker; thirty (30) minutes aggregated) 4. APPROVAL OF MEETING SUMMARY a. August 11, 2022…………………………………………………………………………Pg. 3 5. UNFINISHED BUSINESS 6. NEW BUSINESS a. Discussion/Recommendation – Recommending the Kenai City Council Approve a Special Use Permit to Corvus Airlines, Inc. d/b/a Ravn Alaska LLC for 1,200 Square Feet of Warm Storage of a De-Ice Vehicle. ......................................................... Pg. 6 b. Discussion/Recommendation – Recommending the Kenai City Council Adopt Resolution No. 2022-XX - Amending the Kenai Municipal Airport (ENA) Aircraft Parking Fees Effective June 1, 2022………………………………………………..Pg. 13 c. Discussion/Recommendation – Recommending the Kenai City Council Enact Ordinance No. 3311-2022 - Determining that Real Property Described as Lot 5, Block 1, Gusty Subdivision Addition No. 1, According to Plat No. 83-126 KRD, City-Owned Airport Land Located Outside the Airport Reserve, is not Needed for a Public Purpose, Waiving KMC 22.05.095 Methods of Sale or Disposal and Authorizing the Sale of the Property to Aaron Swanson DBA As Forever Business Plaza LLC………………Pg. 16 d. Discussion/Recommendation – Recommending the Kenai City Council Enact Ordinance No. 3312-2022 - Determining Lot 4, Block 1, Gusty Subdivision Addition No. 1 Amended is not Needed for a Public Purpose and Approving the Execution of a Lease with an Option to Purchase between the City of Kenai and Aaron Swanson for the Property…………………………………………………………………………….Pg. 68 1 7. REPORTS a. Airport Manager b. City Council Liaison…………………………………………………………………..Pg. 143 8. NEXT MEETING ATTENDANCE NOTIFICATION – October 13, 2022 9. COMMISSIONER COMMENTS AND QUESTIONS 10. ADDITIONAL PUBLIC COMMENT 11. INFORMATION ITEMS a. July 2022 Enplanement Report………………………………………………….....Pg. 146 12. ADJOURNMENT Join Zoom Meeting https://us02web.zoom.us/j/88374638926 Meeting ID: 883 7463 8926 Password: 377154 OR Call: (253) 215-8782 or (301) 715-8592 Meeting ID: 883 7463 8926 Password: 377154 **PLEASE CONTACT US IF YOU WILL NOT BE ABLE TO ATTEND THE MEETING** MEGHAN -- 283-8231 OR, ERICA -- 283-8281 2 KENAI AIRPORT COMMISSION REGULAR MEETING AUGUST 11, 2022 – 6:00 P.M. KENAI CITY COUNCIL CHAMBERS CHAIR GLENDA FEEKEN, PRESIDING MEETING SUMMARY 1. CALL TO ORDER Chair Feeken called the meeting to order at 6:00 p.m. a. Pledge of Allegiance Chair Feeken led those assembled in the Pledge of Allegiance. b. Roll was confirmed as follows: Commissioners Present: Commissioners Absent: G. Feeken, , P. Minelga, J. Bielefeld, J. Caldwell, J. Daily, J. Zirul D. Pitts Staff/Council Liaison Present: Airport Manager E. Conway, Administrative Assistant E. Brincefield, Council Liaison Baisden A quorum was present. c. Agenda Approval MOTION: Commissioner Zirul MOVED to approve the agenda and Commissioner Caldwell SECONDED the motion. There were no objections; SO ORDERED. 2. SCHEDULED PUBLIC COMMENT – None. 3. UNSCHEDULED PUBLIC COMMENT – None. 4. APPROVAL OF MEETING SUMMARY a. May 12, 2022 MOTION: Commissioner Caldwell MOVED to approve the meeting summary of May 12, 2022 as presented. Commissioner Zirul SECONDED the motion. There were no objections; SO ORDERED. b. June 9, 2022 MOTION: Commissioner Caldwell MOVED to approve the meeting summary of June 9, 2022 as presented. Commissioner Zirul SECONDED the motion. There were no objections; SO ORDERED. 5. UNFINISHED BUSINESS – None. 3 ____________________________________________________________________________________ Airport Commission Meeting Page 2 of 3 August 11, 2022 6. NEW BUSINESS a. Discussion/Recommendation – Recommending the Kenai City Council Approve the Fifth Amendment to City of Kenai Municipal Airport Restaurant Concession Agreement, Authorizing the City Manager to Extend the Restaurant Concession Agreement in the Kenai Municipal Airport for an Additional Year. MOTION: Commissioner Zirul MOVED to recommend Council approve a Fifth Amendment to the Kenai Municipal Airport Restaurant Concession Agreement. Commissioner Caldwell SECONDED the motion. It was noted that Brothers Café requests a third and final extension to their Restaurant Concession Agreement. UNANIMOUS CONSENT was requested. VOTE: There were no objections; SO ORDERED. 7. REPORTS a. Airport Manager – Airport Manager Conway reported on the following: • Enolanements are down 4% for July 2022 from 2021; • Parking revenue is up 28% for July from 2021; • My Alaskan Gifts Special Use Permit expires at the end of August; • Received two design proposals for terminal landscape design. b. City Council Liaison – No report. 8. NEXT MEETING ATTENDANCE NOTIFICATION – September 8, 2022 9. COMMISSIONER COMMENTS AND QUESTIONS Commissioner Bielefeld noted that the dock at the float plane needs new rope. Commissioner Caldwell asked about progress removing beetle kill; Airport Manager Conway stated that they are working on grant funds for beetle kill removal. Concerns were expressed about snow removal during the upcoming winter season. 10. ADDITIONAL PUBLIC COMMENT – None. 11. INFORMATION ITEMS a. April 2022 Enplanement Report b. May 2022 Enplanement Report c. June 2022 Enplanement Report 12. ADJOURNMENT There being no further business before the Commission, the meeting was adjourned at 6:12 p.m. Meeting summary prepared and submitted by: 4 ____________________________________________________________________________________ Airport Commission Meeting Page 3 of 3 August 11, 2022 ________________________ Meghan Thibodeau Deputy City Clerk 5 www.KenaiAirport.com “Serving the Greater Kenai Peninsula” 305 N. WILLOW ST. SUITE 200 KENAI, ALASKA 99611 TELEPHONE 907-283-7951 FAX 907-283-3737 Memo To: Airport Commission Through: Eland Conway – Airport Manager From: Erica Brincefield - Assistant Date: August 22, 2022 Subject: Ravn Alaska, LLC. – Special Use Permit Corvus Airlines, Inc, d/b/a Ravn Alaska, LLC is requesting a special use permit to use 1,200 square feet of warm storage for storage of a De-ice vehicle. The special use permit will be effective for seven months beginning October 1, 2022 to April 30, 2023. The monthly fee will be $1,200 plus applicable sales tax. Ravn Alaska, LLC has submitted the Special Use Permit application and paid the $100 application fee. Ravn Alaska, LLC is current in all fees owed to the City and a current Certificate of Insurance is on file. Does Commission recommend Council approve the Special Use Permit to Corvus Airlines, Inc, d/b/a Ravn Alaska, LLC? Attachment 6 Special Use Permit – Ravn Alaska, LLC – 2022/2023 Warm Storage Page 1 of 5 SPECIAL USE PERMIT The CITY OF KENAI (City), for the consideration, and pursuant to the conditions set out below, hereby grants to CORVUS AIRLINES, INC, d/b/a RAVN ALASKA, LLC (PERMITTEE) the non- exclusive right to use 1,200 square feet of area as described below: Tract A FBO Subdivision consisting of approximately 1,200 square feet in an area described as Warm Storage 1. and as further shown in the attached Exhibit A. 1. TERM. This special use permit shall be for approximately seven (7) months from October 1, 2022 to April 30, 2023. 2. PERMIT FEES. The Permittee shall be charged a monthly permit fee of $1,200 plus applicable sales tax. The Permittee shall pay the City the permit fee by the 10th day of the preceding month. Checks, bank drafts, or postal money orders shall be made payable to the City of Kenai and delivered to the City Hall, 210 Fidalgo Avenue, Kenai, Alaska 99611. In addition to the permit fee specified above, the Permittee agrees to pay to the appropriate parties all levies, assessments, and charges as hereinafter provided: A. Sales tax nor enforced, or levied in the future, computed upon the permit fee payable in monthly installments whether said fee is paid on a monthly or yearly basis; B. All necessary licenses and permits; all lawful taxes and assessments which, during the term hereof may become a lien upon or which may be levied by the State, Borough, City, or by any other tax levying body, upon any taxable possessory right which Permittee may have in or to the Premises by reason of its use or occupancy or by reason of the terms of this Permit, provided however, that nothing herein contained shall prevent Permittee from contesting any increase in such tax or assessment through procedures provided by law. C. Interest at the rate of eight percent (8%) per annum and penalties of ten percent (10%) of any amount of money owed under this Special Use Permit which are not paid on or before the due date. D. Costs and expenses incident to this Special Use Permit, including but not limited to recording costs. E. Annual Special Use Permit Application fee of $100.00 plus applicable sales tax. 3. USE. The use by the Permittee of the Premises is limited to the purpose of Storage for De- ice Vehicle. This use is subject to City, Borough, and State laws and regulations and the 7 Special Use Permit – Ravn Alaska, LLC – 2022/2023 Warm Storage Page 2 of 5 reasonable administrative actions of the City for the protection and maintenance of the Premises and of adjacent and contiguous lands or facilities. Use of the Premises is subject to the following conditions: A. Permittee shall use the Premises only for storage of one de-ice vehicle. B. The premises shall be returned to its current condition prior to the end of the term of this Special Use Permit. 4. INSURANCE. Permittee shall secure and keep in force adequate insurance, as stated below, to protect City and Permittee. Where specific limits are stated, the limits are the minimum acceptable limits. If Permittee’s insurance policy contains higher limits, the City is entitled to coverage to the extent of the higher limits. A. Garage Liability or Commercial General Liability Insurance, including Premises, all operations, property damage, personal injury and death, broad-form contractual, with a per-occurrence limit of not less than $1,000,000 combined single limit. The policy must name the City as an additional insured. B. Worker’s Compensation Insurance with coverage for all employees engaged in work under this Permit or at the Premises as required by AS 23.30.045. Permittee is further responsible to provide Worker’s Compensation Insurance for any subcontractor who directly or indirectly provides services to Permittee under this Permit. C. Commercial Automobile Coverage with not less than $1,000,000 combined single limit per occurrence. This insurance must cover all owned, hired, and non-owned motor vehicles the Permittee uses for snow moving and storage activities to, from, or on the Premises. The policy must name the City as an additional insured. D. All insurance required must meet the following additional requirements: i. All policies will be by a company/corporation currently rated “A-” or better by A.M. Best. ii. Permittee shall submit to the City proof of continuous insurance coverage in the form of insurance policies, certificates, endorsements, or a combination thereof, and signed by a person authorized by the insurer to bind coverage on its behalf. iii. Permittee shall request a waiver of subrogation against City from Permittee’s insurer and the waiver of subrogation, where possible, shall be provided at no cost to City. iv. Provide the City with notification at least 30 days before any termination, cancellation, or material change in insurance coverage of any policy required hereunder. 8 Special Use Permit – Ravn Alaska, LLC – 2022/2023 Warm Storage Page 3 of 5 v. Evidence of insurance coverage must be submitted to City by October 1, 2022. The effective date of the insurance shall be no later than October 1, 2022. vi. This insurance shall be primary and exclusive of any other insurance carried by the City of Kenai. This insurance shall be without limitation on the time within which the resulting loss, damage, or injury is actually sustained. 5. INDEMNITY, DEFEND, AND HOLD HARMLESS AGREEMENT. The Permittee shall fully indemnify, hold harmless, and defend the City of Kenai, its officers, agents, employees, and volunteers at its own expense from and against any and all actions, damages, costs, liability, claims, losses, judgments, penalties, including reasonable Attorney’s fees of or for liability for any wrongful or negligent acts, errors, or omissions of the Permittee, its officers, agents or employees, or any subcontractor under this Permit. The Permittee shall not be required to defend or indemnify the City for any claims of or liability for any wrongful or negligent act, error, or omission solely due to the independent negligence of the City. If there is a claim of or liability for the joint negligence of the Permittee and the independent negligence of the City, the indemnification and hold harmless obligation shall be apportioned on a comparative fault basis. Apportionment shall be established upon final determination of the percentage of fault. If any such determination is by settlement, the percentage of fault attributed to each party for purposes of this indemnification provision shall only be binding upon the parties included in the settlement agreement. “Permittee” and “City” as used in this article include the employees, agents, officers, directors, and other contractors who are directly responsible, respectively, for each party. The term “independent negligence of the City” is negligence other than in the City’s selection, administration, monitoring, or controlling of the Permittee. 6. PERMITTEE’S OBLIGATION TO PREVENT AND REMOVE LIENS. Permittee will not permit any liens, including mechanic’s, laborer’s, construction, supplier’s, mining, or any other liens obtainable or available under existing law, to stand against the Premises or improvements on the Premises for any labor or material furnished to Permittee or to any related entity or claimed entity. The Permittee shall have the right to provide a bond as contemplated by State of Alaska law and contest the validity or amount of any such lien or claimed lien. Upon the final determination of the lien or claim for lien, the Permittee will immediately pay any judgment rendered with all proper costs and charges and shall have such lien released or judgment satisfied at Permittee’s own expense. 7. PERSONALTY. Permittee shall remove any and all personal property, including all vehicles, from the Premises at the termination of this Permit. Personal property placed or used upon the Premises and not removed upon termination of this Permit will be removed and/or impounded by the City. Property removed or impounded by the City may be redeemed by the owner thereof only upon the payment to the City of the costs of removal plus a storage fee of $25 per day. The City of Kenai is not responsible for any damage to or theft of any personalty of Permittee or its customers. 8. FORBEARANCE. Failure to insist upon a strict compliance with the terms, conditions, and/or any requirement herein contained, or referred to, shall not constitute or be construed as a waiver or relinquishment of the right to exercise such terms, conditions, or requirements. 9 Special Use Permit – Ravn Alaska, LLC – 2022/2023 Warm Storage Page 4 of 5 9. TERMINATION, DEFAULT. This Permit may be terminated by either party hereto by giving 30 days advance written notice to the other party. The City may terminate the Permit immediately, or upon notice shorter than 30 days, to protect public health and safety. The City may also terminate this Permit immediately, or upon notice shorter than 30 days, due to a failure of Permittee to comply with conditions and terms of this Permit, which failure remains uncured after notice by City to Permittee providing Permittee with a reasonable time period to correct the violation or breach. 10. NO DISCRIMINATION. Permittee will not discriminate on the grounds of race, color, religion, national origin, ancestry, age, or sex against any patron, employee, applicant for employment, or other person or group of persons in any manner prohibited by federal or State law. Permittee recognizes the right of the City to take any action necessary to enforce this requirement. 11. ASSIGNMENT. Permittee may not assign, by grant or implication, the whole any part of this Permit, the Premises, or any improvement on the Premises without the written consent of the City. Unless the City specifically releases the Permittee in writing, the City may hold the Permittee responsible for performing any obligation under this permit which an assignee fails to perform. 12. ASSUMPTION OF RISK. Permittee shall provide all proper safeguards and shall assume all risks incurred in its activities on the Premises and its exercise of the privileges granted in this Permit. 13. NO JOINT VENTURE. The City shall not be construed or held to be a partner or joint venturer of Permittee in the conduct of its business or activities on the Premises. 14. SURVIVAL. The obligations and duties of Permittee under paragraphs 5 and 6 of this Permit shall survive the cancellation, termination, or expiration of this Permit. 15. AUTHORITY. By signing this Permit, Permittee represents that is has read this agreement and consents to be bound by the terms and conditions herein and that the person signing this Permit is duly authorized by the business to bind the business hereunder. CITY OF KENAI Corvus Airlines, Inc. dba Ravn Alaska, LLC By: ____________________________ By: _______________________________ Paul Ostrander Date: Dallas Anthony Date: City Manager Director of Airports 10 Special Use Permit – Ravn Alaska, LLC – 2022/2023 Warm Storage Page 5 of 5 ACKNOWLEDGMENTS STATE OF ALASKA ) ) ss THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this ____day of _________, 2022, the foregoing instrument was acknowledged before me by Paul Ostrander, City Manager of the City of Kenai, Alaska, an Alaska home rule municipality, on behalf of the City. Notary Public for Alaska My Commission Expires: STATE OF ALASKA ) ) ss THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this ____day of _________, 2022, the foregoing instrument was acknowledged before me by Dallas Anthony, Director of Airports of Corvus Airlines, Inc. dba Ravn Alaska, LLC, an Alaska limited liability company, on behalf of the company. Notary Public for Alaska My Commission Expires: ATTEST: APPROVED AS TO FORM: Scott Bloom, City Attorney 11 www.KenaiAirport.com “Serving the Greater Kenai Peninsula” 305 N. WILLOW ST. SUITE 200 KENAI, ALASKA 99611 TELEPHONE 907-283-8281 FAX 907-283-3737 Memo To: Kenai Municipal Airport, Airport Commission Through: Eland Conway – Airport Manager From: Erica Brincefield – Assistant Date: September 1, 2022 Subject: Resolution XX-2022-Amending Airport Aircraft Parking Fees In accordance with Kenai Municipal Code, Airport § 6.05.070(c), the Kenai Municipal Airport (ENA) began strict enforcement of Transient Aircraft Parking Fees in the Summer of 2021. Aided by flight tracking programs, the Airport has captured use of transient aircraft parking aprons that had historically been missed. While strict enforcement of apron usage fees has not drawn any significant attention, four regular operators questioned a discrepancy between historical charges and recent charges: Iliamna Air Taxi, Kroger Co., Lake and Peninsula Airlines, and Curtis Glenn—all were satisfied with the Airport’s response, and remitted payment accordingly. Airport Administration noted the interest of the four operators, considered their time on ground, surveyed other airport rates & fee structures with similar users, and determined that the current ENA fee structure does not consider quick-turn aircraft operations. By dividing the existing fees below, the Airport is refining its structure of fair and reasonable fees. Airport administration believes that dividing the fee structure in half adequately balances the Federal Aviation Administration’s principles and Grant Assurance that the Airport “maintain a fee and rental structure that in the circumstances of the airport makes the airport as financially self-sustaining as possible,” the use of transient parking aprons by revenue generating operations as well as non-revenue generating operations, and still capturing revenue, historically, not captured—In good faith. The Airport is proposing the following amendments to the City of Kenai Schedule of Rates, Charges and Fees Effective July 1, 2022: -transient, 4,001 – 12,500 lbs. 0-12 hrs. $25.00 -transient, 4,001 – 12,500 lbs. per day12-24 hrs. $50.00 -transient, 12,501 – 100,000 lbs. 0-12 hrs. $50.00 -transient, 12,501 – 100,000 lbs. per day12-24 hrs. $100.00 Does Commission recommend Council Adopt a Resolution Amending Airport Aircraft Parking Fees? Attachments 13 Sponsored by: Administration New Text Underlined; [DELETED TEXT BRACKETED] CITY OF KENAI RESOLUTION NO. 2022-XX A RESOLUTION AMENDING THE KENAI MUNICIPAL AIRPORT (ENA) AIRCRAFT PARKING FEES EFFECTIVE JUNE 1, 2022. WHEREAS, the Principles Applicable to Airport Rates and Charges in the Federal Aviation Administration (FAA) Policy Regarding Airport Rates and Charges state Rates, fees, rentals, landing fees, and other service charges (‘‘fees’’) imposed on aeronautical users for aeronautical use of airport facilities (‘‘aeronautical fees’’) must be fair and reasonable, and Airport proprietors must maintain a fee and rental structure that in the circumstances of the airport makes the airport as financially self-sustaining as possible; and, WHEREAS, Assurances of Airport Sponsors accepting funds under the provisions of Title 49, U.S.C., subtitle VII, as amended, will maintain a fee and rental structure for the facilities and services at the airport which will make the airport as self-sustaining as possible under the circumstances existing at the particular airport, taking into account such factors as the volume of traffic and economy of collection; and, WHEREAS, in accordance with Kenai Municipal Code, Airport § 6.05.070(c), a person parking an aircraft in a designated transient aircraft parking area shall pay the fees set forth in the City’s schedule of rates, charges and fees adopted by the City Council. WHEREAS, on June 1, 2022, City Council adopted Resolution 2022-39 amending the comprehensive schedule of rates, charges, and fees to incorporate changes included in the FY 2023 budget; and, WHEREAS, the City of Kenai Schedule of Rates, Charges and Fees Effective July 1, 2022, does not consider quick-turn aircraft operations; and, WHEREAS, by dividing the existing transient aircraft parking fees ENA is refining its structure of fair and reasonable fees, and recognizing aircraft operators using the transient aircraft parking areas less than 12 hours per occurrence; and, WHEREAS, Airport Administration surveyed other airport rates & fees structures with similar users; and, WHEREAS, at a regular meeting on Thursday, September 8, 2022, the ENA Airport Commission reviewed this resolution recommended __________ by City Council; and, WHEREAS, amending the Airport’s Transient Aircraft Parking Fees is in the best interest of the City. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA: Section 1. That Airport Fees be amended as follows: APX – Airport Regulations Aircraft Parking Fees 6.05.070 (c) -transient, under 4,000 lbs. 0 - 4 hrs. FREE 6.05.070 (c) -transient, under 4,000 lbs. over 4 hrs. $5.00 6.05.070 (c) -transient, 4,001 - 12,500 lbs. 0-12 hrs. $25.00 6.05.070 (c) 6.05.070 (c) 6.05.070 (c) -transient, 4,001 – 12,500 lbs. [per day] 12-24 hrs. -transient, 12,501 – 100,000 lbs. 0-12 hrs. -transient, 12,501 – 100,000 lbs. [per day] 12-24 hrs. $50.00 $50.00 $100.00 14 Resolution No. 2022-XX Page 2 of 2 New Text Underlined; [DELETED TEXT BRACKETED] 6.05.070 (c) -transient, 100,001 lbs. per day $250.00 Section 2. That this Resolution takes effect immediately upon passage. PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, THIS 21st DAY OF SEPTEMBER, 2022. ___________________________________ Brian Gabriel Sr., Mayor ATTEST: ___________________________________ Michelle M. Saner, MMC, City Clerk 15 MEMORANDUM TO: Airport Commission FROM: Max Best, Interim Planning Director DATE: August 23, 2022 SUBJECT: Recommending the City Council Approve Ordinance No. 3311-2022 - Determining that real property described as Lot 5, Block 1, Gusty Subdivision Addition No. 1, City-owned airport land located outside the airport reserve, is not needed for a public purpose and authorizing the sale of the property to Aaron Swanson, dba as Forever Business Plaza LLC The City has received a request to purchase the above City-owned leased land outside the Airport Reserve with substantial constructed leasehold improvements. Aaron Swanson, dba Forever Business Plaza, LLC, is the current lessee of Lot 5, Block 1, Gusty Subdivision Addition No. 1, 11568 Kenai Spur Highway, which was obtained by transfer on April 27, 2022. The current use is for an office building and includes substantial recent improvements to the building made by the Lessee. The 99-year lease term expires on October 10, 2082 and is in good standing. On January 16, 1984, the Federal Aviation Administration (FAA), released the property for sale for other than airport purposes, allowing the property to be sold at fair market value. All revenues from the sale would be deposited in the Airport Land Sale Permanent Fund for use in the development, improvement, and operation of the Kenai Municipal Airport as required by the Deed of Release. Resolution No. 2018-12 amended the City’s Policy for sale of specific Airport Land Lots and the subject property is one of the properties addressed in the policy. The policy did not provide for the sale of any specific property, but only a method for such sale, subject to the Ordinances of the City of Kenai. The policy was is in effect until July 6, 2021. Any specific sale must be separately approved by the City Council, which may approve or disapprove any such sale, in its sole discretion. Administration recommends sale of the property under the same terms and conditions established by Resolution No. 2018-12 to encourage responsible growth and development to support a thriving business community. Aaron Swanson, dba Forever Business Plaza, LLC, requests to purchase the property at fair market value of the land excluding lessee-constructed improvements as determined by an appraisal and a minimum new investment in the construction 16 Page 2 of 2 of new permanent improvements on the premises equal to 25% of the fair market value of the land within three (3) years of sale. Aaron Swanson, dba Forever Business Plaza, LLC, submitted a good-faith deposit and the City ordered an appraisal to be performed on the property as-if vacant. The fair market value of the property of $135,000 was determined by an appraisal performed by MacSwain Associates, LLC on May 18, 2021. Based on the amount of the appraisal, Aaron Swanson, dba Forever Business Plaza, LLC, to invest a minimum of $33,750 in the construction of new permanent improvements on the premises. Pursuant to Kenai Municipal Code 22.05.040 application review, notice of the application was posted in the Peninsula Clarion and stated competing applications may be submitted for the parcel within 30 -days to the City. The 30 -day window from publication ends on August 29, 2022, and to-date, no competing applications have been submitted to the City. The parcel is within the Central Mixed Use (CMU) Zone. Pursuant to KMC 14.20.125, the purpose of the CMU Zone is established to provide a centrally located area in the City for general retail shopping, personal and professional services, entertainment establishments, restaurants and related businesses. The use of the existing structure is consistent with the zone. The Imagine Kenai 2030 Comprehensive Plan outlines goals, objectives, and action items for the City, including the following supporting this application: Objective Q- 4: Promote the siting and design of land uses that are in harmony and scale with surrounding uses. Objective LU-2: Promote the infill of existing, improved subdivision lots Does the Commission recommend Council enact Ordinance 3311-2022? Thank you for your consideration. Attachments: Draft Ordinance No. 3311-2022 11568 Kenai Spur Highway aerial map City of Kenai Land Competitive Purchase Application from Aaron Swanson Resolution No. 2018-12 Plat of Gusty Subdivision Addition No. 1 Amended Deed of Release Appraisal Report, Lot 5, Block 1, Gusty Subdivision 17 Sponsored by: Administration New Text Underlined; [DELETED TEXT BRACKETED] CITY OF KENAI ORDINANCE NO. 3311-2022 AN ORDINANCE DETERMINING THAT REAL PROPERTY DESCRIBED AS LOT 5, BLOCK 1, GUSTY SUBDIVISION ADDITION NO. 1, ACCORDING TO PLAT NO. 83-126 KRD, CITY-OWNED AIRPORT LAND LOCATED OUTSIDE THE AIRPORT RESERVE, IS NOT NEEDED FOR A PUBLIC PURPOSE, WAIVING KMC 22.05.095 METHODS OF SALE OR DISPOSAL AND AUTHORIZING THE SALE OF THE PROPERTY TO AARON SWANSON DBA FOREVER BUSINESS PLAZA LLC. WHEREAS, the City of Kenai received a quitclaim deed from the Federal Aviation Administration (FAA) on December 1, 1963, to nearly 2,000 acres of land subject to certain restrictions, including that no property shall be used, leased, sold salvaged, or disposed of for reasons other than for airport purposes; and, WHEREAS, the City of Kenai received a deed of release from the Federal Aviation Administration (FAA) on January 16, 1984, for Gusty Subdivision Addition No.1, subject to certain reservations and conditions, that protect the Airports continued use for airport purposes; and, WHEREAS, the City has received a request to purchase Lot 5, Block 1, Gusty Subdivision Addition No. 1, according to Plat No. 83-126, from the current Lessee; and, WHEREAS, KMC 22.05.110 – Determination as to need for public purpose, provides that the City Council, may determine whether land is no longer needed for public purpose; and, WHEREAS, the Property is leased to Aaron Swanson, dba Forever Business Plaza, for private commercial use and is not needed for a public purpose; and, WHEREAS, Resolution No. 2018-12 amended the City’s Policy for sale of specific Airport Land Lots and the subject property is one of the properties addressed in the policy; and, WHEREAS, Resolution No. 2018-12 did not authorize the sale of these lands but only a method for sale; and, WHEREAS, Resolution No. 2018-12 had a sunset of July 6, 2021 however the prior, now deceased lessee, was unable to take advantage of the policy timely; and, WHEREAS, the sale of this property under the same terms and conditions established by Resolution No. 2018-12 is in the best interest of the City and Airport and encourages new development and/or improvements to the property; and, WHEREAS, all provisions of KMC 22.05.100 - Sale procedure, shall be followed; and, WHEREAS, the provision of KMC 22.05.095, Methods of Sale or Disposal, are hereby waived in recognition of the City’s prior policy regarding the parcel and unique circumstances of the prior lessee and is in best interest of the City; and, WHEREAS, at their regular meeting on September 14, 2022, the Planning and Zoning Commission reviewed the sale application and recommended ______ by the City Council; and, 18 Ordinance No. 3311-2022 Page 2 of 3 New Text Underlined; [DELETED TEXT BRACKETED] WHEREAS, at their regular meeting on September 8, 2022, the Airport Commission reviewed the sale application and recommended ______ by the City Council. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, AS FOLLOWS: Section 1. Form: That this is a non-code ordinance waiving KMC 22.05.095 – Methods of Sale or Disposal. Section 2. Statement of Ownership: That the City of Kenai is the owner of Lot 5, Block 1, Gusty Subdivision Addition No.1, according to plat 83-126 KRD, (the Property). Section 3. Public Purpose and Best Interest Findings: That the Property is not needed for future public municipal or airport purposes. Under the Airport Layout Plan, the Property is designated for non- aviation commercial or light-industrial uses. The sale of the Property is in the best interests of the City and Airport, as it serves a purpose of continuing commercial growth and investment in the City. Section 4. Authorization of Sale: That the Kenai City Council hereby authorizes the City Manager to sell the City-owned lands described as Lot 5, Block 1, Gusty Subdivision Addition No. 1, according to Plat No. 83-126, under the procedures and terms established for the sale of lands, as set forth in KMC 22.05.100 et seq. and subject to the following additional essential terms and conditions of sale [under the Policy for Sale of Specific Airport Leased Lands approved by City of Kenai Resolution No. 2018-12]: a) The sale will be made through a negotiated sale to Aaron Swanson, dba Forever Business Plaza LLC, for a sum not less than fair market value of the land excluding lessee-constructed improvements as determined by an appraisal and a minimum new investment in the construction of new permanent improvements on the premises equal to 25% of the fair market value of the land within three (3) years of sale. Section 5. Title: That title shall be conveyed by quitclaim deed. Any instrument conveying title to the Property shall include the conditions covenants and reservations as described Deed of Release, recorded in Book 227, Page 416 and 417 KRD. Section 6. Proceeds of Sale: That should a sale of the Property be finalized, all revenues from the sale shall be deposited in the Airport Land Sale Permanent Fund for use in the development, improvement, and operation of the Kenai Municipal Airport and as otherwise required in the Deed of Release dated December 12, 1984. Section 7. Severability: That if any part or provision of this ordinance or application thereof to any person or circumstances is adjudged invalid by any court of competent jurisdiction, such judgment shall be confined in its operation to the part, provision, or application directly involved in all controversy in which this judgment shall have been rendered, and shall not affect or impair the validity of the remainder of this title or application thereof to other persons or circumstances. The City Council hereby declares that it would have enacted the remainder of this ordinance even without such part, provision, or application. Section 8. Effective Date: That pursuant to KMC 1.15.070(f), this ordinance shall take effect 30 days after enactment. ENACTED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, THIS 21ST DAY OF SEPTEMBER, 2022. ___________________________________ Brian Gabriel Sr., Mayor ATTEST: 19 Ordinance No. 3311-2022 Page 3 of 3 New Text Underlined; [DELETED TEXT BRACKETED] ___________________________________ Michelle M. Saner, MMC, City Clerk Approved by Finance: SB, Acting Introduced: September 7, 2022 Enacted: September 21, 2022 Effective: October 21, 2022 20 •':;'-c &uity IEIW.IWKA 'v CITY OF KENAI Sponsored by: Mayor Brian Gabriel Vice Mayor Tim Navarre Council Member Henry Knackstedt RESOLUTION NO. 2018-12 A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, APPROVING AN AMENDED POLICY FOR THE SALE OF TEN SPECIFIC CITY-OWNED AIRPORT FUND LEASED LANDS OUTSIDE THE AIRPORT RESERVE WITH SUBSTANTIAL CONSTRUCTED LEASEHOLD IMPROVEMENTS. WHEREAS, the City of Kenai received a Quitclaim Deed through the Federal Aviation Administration (FM) on December 1, 1963, to nearly 2,000 acres of land subject to certain restrictions, including that no property shall be used, leased, sold, salvaged, or disposed of for reasons other than for Airport purposes; and, WHEREAS, in 2016, the City identified ten specific leases on Airport lands, as identified on Attachment A, that were, or were intended to be outside the Airport Reserve in the very near future, on which the lessees had constructed substantial improvements; and, WHEREAS, the ten leased properties have been, or are available to be released for sale by the FM; and, WHEREAS, the City Council passed Resolution No. 2016-32, approving and adopting a policy for ten specific Airport owned leased lands on July 6, 2016 to provide an equitable and uniform purchase procedure for the current lessees to purchase the specific ten Airport-owned parcels; and, WHEREAS, since the policy was adopted, none of the current lessees subject to the policy have elected to purchase the property they lease from the City; and, WHEREAS, Administration formed a working group of City staff involved in land management to evaluate and develop recommendations related to the City 's land sale and lease program to encourage growth, development, and a thriving business community through reasonable and responsible land policies and practices; and WHEREAS, an alternative whereby the net present value of the leasehold is partially offset by the economic benefits provided by existing thriving businesses in the City such as job creation, economic activity, and stimulation of the business climate meets these goals; and, WHEREAS, a third alternative that encourages investment in existing businesses on these leaseholds meets these goals as well ; and, WHEREAS, it is in the best interest of the City, Airport and lessees to approve an amendment to the temporary policy that provides alternative methods for the sale of these properties consistent with a City-wide land management approach. 24 Resolution No. 2018-12 Page 2 of 3 NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA: Section 1. That the following policy adopted for the specific ten City-owned leased lands as identified on Attachment A attached hereto shall be amended as follows: POLICY FOR SALE OF SPECIFIC AIRPORT LEASED LANDS Purpose: To implement a policy regarding the sale of Airport owned property outside the Airport reserve currently leased with substantial leasehold improvements. This Policy is intended to provide an equitable and uniform purchase procedure for the current Lessees to purchase the specific ten Airport owned parcels identified in Attachment A. Disclaimer: This Policy does not provide for the sale of any specific property, but only a method for such sale, subject to the Ordinances of the City of Kenai. Any specific sale must be separately approved by the City Council, which may approve or disapprove any such sale, in its sole discretion. It is intended that this Policy remain in effect [FOR A PERIOD OF NO MORE THAN FIVE YEARS] until July 6, 2021, however, it is recognized by the City Council and Administration, and should be recognized by any affected Lessee, that the City Council of Kenai may amend, modify, or rescind this Policy, or applicable City Ordinances which could affect this Policy, at any time. Sale Conditions: A. If a sale is approved by the City Council of any one of the ten specified leased properties, the sales price acceptable to the City shall be one of the following alternatives: i. 125% of [A] the fair market value of the [RAW] land excluding lessee-constructed improvements as determined by an appraisal[.t...ru:i ii. The fair market value of the land excluding lessee-constructed improvements as determined by an appraisal for properties in which minimum development requirements have been met according to the following calculation: Value of Improvements greater than or equal to four times the Appraised Fair Market Value of the Land : or, iii. The fair market value of the land excluding lessee-constructed improvements as determined by an appraisal and a minimum new investment in the construction of new permanent improvements on the premises equal to 25% of the fair market value of the land within three (3) years of sale. 8. In order for such sale to occur subject to this Policy, the following conditions must be met: New Text Undertined; [DELETED TEXT BRACKETED] 25 Page 2 of 2 Resolution No. 201a~12 The second added alternative allows for a sale of the land at fair market value with required minimum new investment in the construction of new improvements such as storefront improvements, building remodels, or parking lot improvements equal to 25% of the fair market valµe of the land within three years of sale. For example, land appraised at $100,000 would require new investment equal to $25,000. Resolution No. 201S.:12 also makes minor changes to the policy to cfarify appraisal instructions and conditions that must be met in order for a sale to occur so that the policy is consistent with .the City Code ancf land practices. In particular, City land appraisals are performed with the assumption thatthe land is vacant and unencumbered by the lease, lands deeded to the City by the FAA must be released for sale, and land must be determined as not needed for a public purpose. Like the prior Resolution in 2016, this Resolution does not authorize the sale of any property, but instead establishes a · methodology for sale should the lessee desire to purchase the property and Council determine that it is in the City's best interest to sell the property, 28 MACSWAIN ASSOCIATES LLC 4401 Business Park Boulevard, Suite 22, Anchorage, Alaska 99503 APPRAISAL REPORT Kenai Lot: 25,663± SF (0.59± Acre) Lot 5, Block 1, Gusty Subdivision Kenai, Alaska \ Date of Value: May 16, 2022 File No. 22-3698 Submitted To: Ryan Foster, Planning Director City of Kenai 210 Fidalgo Avenue Kenai, AK 99611 N Kenai Spur Highway Lot 5 25,663 SF (0.59 Acre) Cohoe Avenue 33 MacSwain Associates LLC 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska 4401 Business Park Blvd., Suite 22 Anchorage, Alaska 99503 Phone: 907-561-1965 Fax: 907-561-1955 s.macswain@macswain.com June 15, 2022 Ryan Foster, Planning Director City of Kenai 210 Fidalgo Avenue Kenai, AK 99611 Re: Kenai Lot: 25,663± SF (0.59± Acre) Lot 5, Block 1, Gusty Subdivision Kenai, Alaska Dear Mr. Foster: We have prepared an Appraisal Report of the above-referenced lot located in Kenai, Alaska. The appraised parcel contains 25,663± square feet or 0.59± acre. At the request of the client, we disregard the improvements and land lease and appraise only the subject land. The type of value estimated is market value. The property rights appraised is the fee simple estate. The report is prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP). Based on the data, reasoning, and analysis that follows, the market value of the appraised property, as of May 16, 2022, is estimated as follows. ONE HUNDRED THIRTY FIVE THOUSAND DOLLARS $135,000 Your attention is directed to the Assumptions Limiting Conditions of this report located in the addendum. We also direct your attention to the Statement of COVID-19 in the addendum. We hope the appraisal report assists your evaluation of the properties. If you have any questions regarding this report, please contact this office. Respectfully submitted, Steve MacSwain, MAI State of Alaska Certificate No. 42 34 MacSwain Associates LLC 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska Appraiser Certification The undersigned certifies that to the best of their knowledge and belief: ➔ The statements of fact contained in this report are true and correct. ➔ The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions. ➔ We have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved. ➔ We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. ➔ MacSwain Associates, LLC previously performed services as an appraiser on the subject property in September 2021. ➔ Our engagement in this assignment was not contingent upon developing or reporting predetermined results. ➔ Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. ➔ The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. ➔ The reported analyses, opinion, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. ➔ The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. ➔ Dwayne Roberts with MacSwain Associates, LLC inspected the appraised property on May 16, 2022. Steve MacSwain, MAI has previously inspected the property. ➔ Dwayne Roberts provided significant real property appraisal assistance to the person signing this certification. ➔ As of the date of this report, Steve MacSwain, MAI, is a certified General Real Estate Appraiser in the State of Alaska and has completed the education requirements through June 2023. 35 MacSwain Associates LLC 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska ➔ As of the date of this report, Steve MacSwain, MAI has completed the Standards and Ethics Education requirements for Designated Members of the Appraisal Institute. ➔ As of the date of this report, Steve MacSwain, MAI has completed the continuing education requirements for Designated Members of the Appraisal Institute. ➔ As of the date of this report, Steve MacSwain, MAI is a certified General Real Estate Appraiser in the State of Alaska and has completed the education requirements through June 2023. 6/15/22 Steve MacSwain, MAI State of Alaska Certificate No. 42 Date 36 MacSwain Associates LLC 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska Table of Contents Title Page Transmittal Letter Appraiser Certification Table of Contents Appraisal Summary 1 Chapter 1: Definition of the Appraisal Problem 5 Chapter 2: Kenai Area Analysis and Industry Outlook 9 Chapter 3: Neighborhood Description and Analysis 15 Chapter 4: Site Description and Analysis 17 Chapter 5: Highest and Best Use Analysis 21 Chapter 6: Land Valuation - Sales Comparison Approach 22 Addendum Assumptions and Limiting Conditions Statement on COVID-19 Short Form Agreement Appraiser Qualifications 37 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 1 Appraisal Summary Value Type: Market value Property Type: Commercial Property Rights Appraised: Fee simple estate Location: North side of Kenai Spur Highway between Coral Street and Main Street Loop Road, Kenai, Alaska Legal Description: Lot 5, Block 1, Gusty Subdivision Tax Parcel No: 043-270-15 Physical Address: 11568 Kenai Spur Highway Property Owner: City of Kenai (per KPB) Zoning: Central Mixed-Use District (CMU) Site Description: Nearly-rectangular shaped lot containing 25,663 square feet or 0.59± acre Topography: Level and near grade with surrounding streets and properties Frontage/Exposure: 120± feet of Kenai Spur Highway frontage and 105± feet of Cohoe Avenue frontage Access: Access via paved ingress/egress from Kenai Spur Highway on southern boundary and Cohoe Avenue, a gravel road on northern boundary Utility Service: All public utilities available Soil and Subsurface Conditions: Based on observations of surrounding development, soils appear to be suitable for development. Hazardous Substances: None observed or known, parcel is appraised as if “environmentally clean” Wetland Designation: None Flood Hazard Restrictions: Zone D, an area of undetermined, but possible flood hazard Easements and Restrictions: 20-foot utility easement along north boundary 38 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 2 Sale/Lease History: The leasehold interest was assigned from Mary Jane Doyle and Carolyn Lucille Doyle to Don Moffis and Joann Doyle in 2019. No details of this transaction were provided. Highest and Best Use: Commercial Extraordinary Assumption: None Hypothetical Condition: None Date of Property Inspection: May 16, 2022 Effective Appraisal Date: May 16, 2022 Date of Report: June 15, 2022 Market Value Estimate: $70,000 ($2.78/SF) 39 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 3 Subject Property Photographs Date: May 16, 2022 Taken By: Dwayne Roberts Northeast view of property from Kenai Spur Highway North view of property from Kenai Spur Highway --------------------------------- 40 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 4 Subject Property Photographs Date: May 16, 2022 Taken By: Dwayne Roberts Southwest view of property from Cohoe Avenue South view of property from Cohoe Avenue 41 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 5 Chapter 1: Definition of the Appraisal Problem We prepare an Appraisal Report that analyzes a 25,663± square foot (0.59± acre) lot in Kenai, Alaska. At the request of the client, we disregard the improvements and appraise only the subject land. The type of value estimated is market value. The report is intended to comply with the Uniform Standards of Professional Appraisal Practice (USPAP). Market value City of Kenai Assist with a potential sale of the property City of Kenai May 16, 2022 May 16, 2022 June 15, 2022 The appraised property is an improved lot owned by the City of Kenai. At the request of the client, we disregard the improvements and appraise only the land. The subject property is located on the north side of Kenai Spur Highway between Coral Street and Main Street Loop Road in Kenai, Alaska. The subject’s physical address is 11568 Kenai Spur Highway and identified as Parcel ID 043-270-15 by the City of Kenai. Overview Value Type Client Intended Use of Appraisal Report Intended User of Appraisal Report Property Inspection Date Effective Appraisal Date Date of Report Identification of Real Estate Appraised 42 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 6 The type of value estimated is market value. Market value is defined as follows. The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: a. buyer and seller are typically motivated; b. both parties are well informed or well advised, and acting in what they consider their own best interests; c. a reasonable time is allowed for exposure in the open market; d. payment is made in terms of cash in US dollars or in terms of financial arrangements comparable thereto; and e. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. 1 We estimate the market value of the fee simple estate, which is defined as follows. Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.2 Per DNR records, the legal description is as follows: Lot 5, Block 1, Gusty Subdivision, Kenai Recording District, Third Judicial District, State of Alaska. 1 Appraisal of Real Estate, Fifteenth Edition (2020), by the Appraisal Institute, p. 49. 2 Appraisal of Real Estate, Fifteenth Edition (2020), by the Appraisal Institute, p. 60. Definition of Market Value Property Rights Appraised Legal Description 43 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 7 Public Records indicate the owner of the appraised property is as follows. City of Kenai 210 Fidalgo Avenue, Suite 200 Kenai, AK 99611 The table below summarizes the historical KPB property assessment for the appraised property. KPB Historical Assessed Value (043-270-15) The leasehold interest was assigned from Mary Jane Doyle and Carolyn Lucille Doyle to Don Moffis and Joann Doyle in 2019. No details of this transaction were provided. This Appraisal Report develops the sales comparison approach to estimate market value. Neither the cost nor the income capitalization approach reflects market behavior for vacant land. Qualitative techniques are used to measure differences between the comparable sales and the subject. The appraisal report is a summary of the appraisers’ data, analyses, and conclusions with supporting documentation retained on file. Dwayne Roberts of MacSwain Associates, LLC performed the inspection of the appraised property and assisted Steve MacSwain, MAI with data collection and analysis. Steve MacSwain, MAI administered the appraisal process, reviewed draft appraisals, and concurred with an opinion of value. Preparation of this report encompassed the following scope of work that concluded with an opinion of market value. ➔ Inspected the appraised property on May 16, 2022; ➔ Discussed the property with Ryan Foster, Planning Director with the City of Kenai; Property Owner Assessed Value Year Land Improvements Total 2022 $105,300 ($4.10/SF) N/A $105,300 2021 $126,400 ($4.93/SF) N/A $126,400 2020 $120,400 ($4.69/SF) N/A $120,400 Three Year Sale History Report Type and Methodology Scope of Appraisal 44 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 8 ➔ Reviewed KPB assessor map 043-270-15; ➔ Reviewed plat 83-126; ➔ Reviewed City of Kenai’s Official Zoning Map and zoning codes; ➔ Gathered data from the KPB Assessor’s office and State of Alaska Recorder’s office regarding ownership, assessments, and general property information; ➔ Interviewed Kenai real estate Brokers, agents, and property owners regarding land sales; ➔ Interviewed Kenai market participants regarding current commercial and light industrial land market conditions, trends, and expectations; ➔ Gathered and confirmed information on comparable land sales; ➔ Inspected the primary comparable sales we relied upon in our comparative analysis; and ➔ Applied the sales comparison approach to arrive at a market value indication. We have collected and analyzed market and economic data that projects real estate trends and activity for similar vacant parcels. Discussions with Brokers and analysis of similar property sales indicate that a period of approximately 6-9 months prior to our effective date of value is a reasonable exposure period. Exposure Time 45 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 9 Chapter 2: Kenai Area Analysis and Industry Outlook The appraised property is located in Kenai, Alaska. A demographic and economic summary of the Kenai Peninsula Borough (KPB) and City of Kenai follows. The reader is referred to the map below and on following pages that illustrate the location and assist in the description and analysis. We note that due to lack of funding, the KPB ceased economic and financial publications. Kenai Location Map The Kenai Peninsula Borough is comprised of the Kenai Peninsula and Cook Inlet including areas northeast of the Alaska Peninsula. The borough also includes portions of Chugach National Forest, Kenai Wildlife Refuge, Kenai Fjords National Park, Lake Clark National Park, and Katmai National Park. Encompassing 24,800 square miles, there are 16,000± square miles (65%) of land and 8,700± square miles (35%) of water. Three distinct communities and population centers are established within the Borough. Seward is located at the terminus of the Seward Highway on the Gulf of Alaska coast, Kenai/Soldotna are located on Cook Inlet and surrounding the mouth of the Kenai River, and Homer is located at the terminus of the Sterling Highway on Cook Inlet and Kachemak Bay. A large portion of the Borough Overview Kenai Peninsula Borough Summary Kenai Soldotna Anchorage N r1jNM Cook Inlet 46 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 10 population is scattered along the road systems rather than in identifiable cities or communities. Population Together, Kenai, Soldotna, Nikiski, Salamatof, and Kasilof have the largest population base in the Borough with an estimated 17,000± residents in 2019. Population within the Kenai census area is 7,056 residents and has remained flat over the past two decades. Similarly, surrounding communities have experienced population stability. Employment Borough employment is characterized as relatively diverse with no single dominant industry, with the exception of government. The five industry categories that have the highest economic influence, based on total wages, within the borough are Federal, State, and local government (29%) trade, transportation, and utilities (17%), education and health services (16%), natural resources and mining (11%), leisure and hospitality (6%), and manufacturing (6%). Supporting employment sectors include construction (5%), professional and business services (4%), and financial activities (4%). The table below indicates 2018 Borough wages by industry. KPB Total Wages by Industry (2018) Source: Alaska Department of Labor and Workforce Development, Research and Analysis Section, January – December 2018 KPB WORKERS BY INDUSTRY (2018) Natural Resources and Mining 11% Constructlon 5% Manufacturing 6% Trade, Transportation, and Utllltl es 17% Other/Unclassified '" ■nd Businen Stirvices "" Leisure and Hospitality 6% Education and Health Services 16% 47 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 11 Similar to most rural Alaska economies, government is one of the key employment factors. Leisure and hospitality (tourism) remains as a driving economic force of the Kenai Peninsula Borough’s economy. Both residents and non-residents utilize the Peninsula for its vast fishing, camping, sightseeing, and other recreational opportunities. The visitor industry is cyclical with most activity occurring during summer months. However, sales in the visitor industry are an important source of municipal revenues as both city and borough government use collected sales taxes to support government operations. The oil and gas industry is scattered throughout the Peninsula. Natural gas endeavors marked increases in new exploration projects in Kenai, on the Westside of Cook Inlet as well as lower Kenai Peninsula between Clam Gulch and Ninilchik. However, negative aspects of the industry exist that include closing oil platforms due to poor production levels. Overall, the outlook for Kenai Peninsula Borough’s oil and gas industry is continued steady natural gas exploration and production with stagnant oil efforts. Capital investment in storage development, reserves replacement, and pipeline infrastructure are necessary and pressure exploration cost and development upward. Location Map Kenai is located on the western coast of the Peninsula, and is often associated with Soldotna, which is located 11± miles to the southeast. These two cities have become known as the “twin cities”, sharing an City of Kenai Summary Kenai Cook Inlet Soldotna Kenai River N 48 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 12 integrated economy, while maintaining their independence. Kenai is a home rule city with a population of 7,056. In the summer months, the area benefits from with tourists fishing the Kenai River. Kenai is also the center for the oil and gas industry on the Peninsula, providing services and supplies for Cook Inlet’s oil and natural gas drilling and exploration. Nikiski, which lies north of Kenai, has two refineries established to process oil from the Cook Inlet oil platforms and the Swanson River oil fields. There are numerous oil field support businesses located in the area as well as the refineries. Kenai has the largest airport on the peninsula, the Kenai Municipal Airport, which has regular scheduled flights to/from Anchorage and other communities in the region. The Nikiski industrial district located north of Kenai extends along the shore of Cook Inlet for 1.5± miles and one-mile inland. Despite the relatively small area, the value of industrial development exceeds $1 billion. The Agrium, Inc. nitrogen plant, Tesoro Alaska refinery and former ConocoPhillips LNG export plant are the principal industrial development. The LNG plant ceased operations in 2011, and reopened for intermittent natural gas shipments until 2015. The plant was sold to Andeavor in 2018 for $10M±, a significantly below market price. Agrium merged with PotashCorp in 2018, forming a new company called Nutrien, who currently owns the former Agrium plant. In 2014, Homer Electric Association began generating its own power at the Nikiski Combined Plant, producing 80 megawatts of power. In addition, HEA purchased the Bernice Lake Power Plant from Chugach Electric Association for $12M±. These facilities are primary employers in Nikiski and account for nearly 10% of KPB total employment. As Nikiski remains a hub for power generation in the Kenai Peninsula, we do not anticipate major change to the Nikiski industrial district in the near term. The potential Alaska LNG Project is on the horizon, with optimism remaining on the Kenai Peninsula for eventual construction. The project entails a gas processing plant on the North Slope, an 800-mile gas pipeline and a liquefaction facility in the Nikiski area. Tentatively, the total project cost is estimated at $45B±. To date, 570± acres have been acquired in Nikiski to develop the project. The City of Kenai passed a resolution in December 2018, giving unanimous support to the LNG project; however, this joint venture between the State of Alaska and private oil and gas industry appears to have stalled, with no definite timetable for development. In 2012, ENSTAR Natural Gas Company began injecting natural gas into their new storage facility in Kenai. The Cook Inlet Natural Gas Storage Alaska facility (CINGSA) is Alaska’s first independent gas 49 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 13 storage facility with 11 billion cubic feet of capacity. The project cost is estimated at $160M±. Although most oil and gas fields in the Cook Inlet Basin are well past their peak, annual production has not declined significantly in the past decade. Moreover, smaller independent oil companies are prospecting in the Cook Inlet basin with the intent of using new technology to enhance production profitability. However, the maturing life-cycle of oil and gas production has caused attrition in smaller businesses that support this industry. More importantly, this economic trend has created a market imbalance for industrial and commercial real estate. For example, we observed several smaller industrial or commercial properties that are vacant or abandoned because of contraction in the oil and gas industry. Recent capital investments made by larger energy companies have helped revitalize Kenai Peninsula’s oil and gas sector. Natural gas prices gradually recovered into summer 2014 from their lows in early 2012. Late 2014 to early 2015 saw another downturn in natural gas prices before a mid-2016/17 recovery. After briefly spiking in 4th quarter 2018, natural gas prices trended downward into 2020, where they reached record low prices in March, and again in July due to lack of demand driven by the COVID-19 pandemic. Prices made a slight recovery in the second half of 2020, but continue to remain much lower than the 20-yaer average. If demand for natural gas from Asia and the Lower 48 recovers, additional capital investment in the Kenai Peninsula will become more viable. Expressed in the table below is the U.S. Average Natural Gas Price over the past ten-year period, which has experienced significant volatility. Historical Natural Gas Price ($/MMBTU) Source: macrotrends $5.50 $5 $4.50 $4 $3.50 $3 $2 .50 $2 2012 2014 2016 2018 2020 50 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 14 Optimism has been created by renewed investment in the Kenai Peninsula. Sale activity remains relatively scarce with assemblage, expansion, or special-purpose use representing the principal components of demand. Short-term uncertainty will likely continue to dampen the Kenai economy, which benefits from anglers and sightseeing tourism. Travel restrictions, and decreasing demand linked to the COVID-19 virus are slowly recovering from 2021 with cautious optimism for continued recovery in 2022. After analysis, we determined that industrial and commercial property values have been relatively stable over the past decade, but have declined from the 1980s peak. Conclusion 51 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 15 Chapter 3: Neighborhood Description and Analysis The appraised land is located just south of the Kenai Municipal Airport and southwest of the Kenai Business District. This chapter will focus on the supply and demand factors of these neighborhoods, which affect the valuation process. Kenai Neighborhood Map The subject neighborhood is bound by the Kenai Airport to the north, the Kenai Spur Highway to the south and east, and the Kenai Business District to the northeast. The Kenai Business District is the commercial core of Kenai. Development includes many types of commercial and industrial uses including big box retailers, strip and enclosed malls, restaurants, convenience stores, small businesses, and airport-related businesses. The Kenai Airport was recently remodeled modernizing the terminal building. Lowes, which was constructed in 2008, closed in 2011. After eight years of vacancy, the property sold to U-Haul in 2019. This City-owned, public-use airport contains a 7,855- foot asphalt paved runway, as well as an additional gravel runway and seaplane basin. Currently, scheduled flight service to Anchorage is available on both Ravn Alaska and Grant Aviation. Development in Overview Neighborhood Description N Kenai Airport Subject Kenai Business District 52 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 16 the immediate neighborhood consists of both aviation and non-aviation related uses. The zoning map below assists in visualizing neighborhood zoning districts. The immediate neighborhood is zoned Central Mixed-Use established to provide a centrally located area in the City for general retail shopping, personal and professional services, entertainment, restaurants, and related businesses. This district is also intended to accommodate a mixture of residential and commercial uses. The CMU Zone shall be designed to encourage pedestrian movement throughout the area. Building and other structures within the district should be compatible with one another and the surrounding area Zoning Map To summarize, the Kenai Business District is the commercial core of Kenai. The neighborhood is well-located and benefits from its proximity to the Kenai Spur Highway, as well as the airport and other commercial districts in the area. The outlook for the neighborhood is favorable as it continues to be a good commercial district for Kenai Summary Light Industrial Airport Light Industrial N Suburban Residential Conservation General Commercial Central Mixed-Use Appraised Parcel 53 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 17 Chapter 4: Site Description and Analysis Analysis of land describes the characteristics that enhance or detract from its utility or marketability. The site description and analysis is based on our property inspection and review of plat 83-126, aerial, Borough and other mapping. The plat map below and aerial mapping on the following pages assist in the description and analysis of the parcel that follows. Plat 83-126 Location: North side of Kenai Spur Highway between Coral Street and Main Street Loop Road, Kenai, Alaska Physical address: 11568 Kenai Spur Highway, Kenai, Alaska Shape and Land Area: Nearly-rectangular shaped lot containing 25,663 square feet or 0.59± acre Access: Access via paved ingress/egress from Kenai Spur Highway on southern boundary and Cohoe Overview Site Description N Subject Kenai Spur Highway Cohoe Avenue Main Street Coral Street t NS:.18. 54 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 18 Avenue, a gravel road on northern boundary Zoning: Central Mixed-Use District (CMU) Frontage and Exposure: 120± feet of Kenai Spur Highway frontage and 105± feet of Cohoe Avenue frontage Easements and Restrictions: 20-foot utility easement along north boundary Public Utilities: All public utilities available Topography: Level and near grade with surrounding streets and properties GIS Aerial Map (Kenai Peninsula Borough) Soil Conditions: Soils mapped as urban lands, and appear suitable for construction based on surrounding development Wetland Designation: None Flood Hazard: Zone D, an area of undetermined, but possible flood hazard per FEMA N Subject 55 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 19 Environmental Conditions: The existence of any hazardous material or other type of environmental contamination, which may or may not be present on the property, was not observed by the appraisers nor do the appraisers have any knowledge of the existence of such substances. Our value conclusion assumes that the property is free of environmental and hazardous contaminants. Site Utility: The subject site’s positive attributes include good location, size, and access near the Kenai Airport and Downtown Kenai. Overall, physical character makes the site well suited for commercial development. 56 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 20 Chapter 5: Highest and Best Use Analysis Highest and best use is a market-driven concept rather than a subjective conclusion based on the experience of the appraiser or a property owner’s wishes. Economic incentive is the motivation that has a market-effect on the productivity or profitability of the land. The Dictionary of Real Estate Appraisal (Seventh Edition) defines highest and best use as follows. The reasonably probably use of a property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. A property’s highest and best use as vacant may differ from that as improved. It is the appraiser’s responsibility to analyze each scenario; then identify, explain, and justify the conclusion of each type of use. Per client instructions, the subject property is analyzed as though vacant. Determination of a property’s most profitable use requires analyzing all feasible alternatives. The criteria for testing potential uses as though vacant are legally permissible, physically possible, financially feasible, and maximally productive. The following highest and best use analysis is the foundation of the appraisal process for the subject properties. Physical Possibility: The appraised parcel contains 25,663 square feet or 0.59± acre fronting the Kenai Spur Highway. Frontage measures 120± feet, which enhances access, exposure, and development potential. Demand along the Kenai Spur Highway commercial corridor is high when compared to alternative interior commercial locations. Highway frontage and linkage to alternative commercial locations in Kenai are positive characteristics. Legal Permissibility: Although the appraised property is within the City of Kenai, zoning regulations do not generally apply to current ownership because the property remains in restricted status. The subject parcel is zoned Central Mixed Use (CMU) which encourages commercial-type development in a centrally located area in the City of Kenai, primarily for shopping, personal and professional services, entertainment services, entertainment establishments and restaurants and related businesses. The CMU district is also intended to accommodate a mixture of residential and commercial uses, and designed in a manner that encourages pedestrian movement throughout Overview Highest and Best Use Analysis As If Vacant 57 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 21 the area. Although certain industrial use are allowed., most within the CMU zone require a conditional use permit to ensure compatibility with surrounding land uses. We are not aware of any recorded plat restrictions that may affect development potential of the subject property. Financial Feasibility: Physically possible uses permitted are all financially viable. Financially feasible commercial uses include restaurants (both dining and fast food), hotel/motel, retail, and office use. Other commercial uses are possible, which may offer greater risk and lack economic feasibility. In conclusion, the Commercial neighborhood’s location, existing land use trends, and physical characteristics all support commercial development, which we consider to by the highest and best use. The subject’s physical characteristics, surrounding land use, CMU zoning, location, access, etc., encourage commercial development. Based on these factors, the highest and best use, as vacant, is for commercial development. Highest and Best Use: Commercial Highest and Best Use As Though Vacant 58 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 22 Chapter 6: Land Valuation - Sales Comparison Approach The sales comparison approach is a systematic procedure of estimating the subject’s market value by comparing it directly to property sales afforded similar physical and economic character. The approach is founded on the principle of substitution, theorizing value is a function of a knowledgeable investor’s (buyer) intent to pay no more for a specific property than the cost of acquiring an alternative property offering similar utility (economic satisfaction). The sales comparison approach is the best approach for valuing vacant land. Our sales search focused on vacant land with similar physical and economic character to the subject, located in the immediate neighborhood. In order to facilitate a comparative analysis, we expanded our search to include commercial and light industrial properties in other Kenai neighborhoods. These criteria produced five sales that transpired in from 2016 to 2022. The primary land sales we relied upon are listed in the table below. Additional details of the comparables are retained on file. Summary of Primary Land Sales No. Location Zone Sale Date Sale Price Size (SF) $/SF 1 Northeast corner of Trading Bay Road and Main Street Loop CMU 5/22 $300,000 114,497 $2.62 2 Northwest corner of Kenai Spur Highway and Main Street Loop Road (east) CMU 1/20 $605,000 121,091 $5.00 3 Southwest corner of Kenai Spur Highway and S. Forest Drive CG 2/19 $455,000 219,107 $2.08 4 Northeast corner of Kenai Spur Highway and Coral Street CMU 8/18 $180,000 35,851 $5.02 5 Northwest corner of Kenai Spur Highway and Main Street Loop Road (west) CMU 8/16 $170,400 28,520 $5.97 North side of Kenai Spur Highway between Coral Street and Main Street Loop Road (Subject) CMU -- -- 25,663 -- -- Overview Comparative Market Analysis 59 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 23 The elements of comparison that have the greatest influence on market behavior and the price paid for similar land in Kenai is location and physical character, including clearing/grading, frontage/access, and size. Importantly, the subject lot has highway frontage with very good exposure and access. We use a qualitative comparison technique that rates elements of comparison as superior, inferior, or similar. Comparable Land Sales Map Land Sale 1 Land Sale 1 is the May 2022 sale located on the northeast corner of Trading Bay Road and Main Street Loop Road. Northeast of the subject, the irregular-shaped parcel consists of 114,497 square feet. All public utilities are available in the immediate neighborhood. Topography is generally level, and the parcel is partially cleared and developed with a retail strip mall. Zoning is CMU, Central Mixed- Use. The sale was between the City of Kenai and former land lessee who purchased the land underlying the improvements. The sale price of $300,000 indicates a unit value of $2.62 per square foot. By comparison, this sale lacks highway frontage, and no improvements were included in the sale. Conversely, its good corner location with Elements of Comparison N Subject 3 Kenai Spur Highway Kenai Municipal Airport 4 2 1 5 60 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 24 frontage near the Kenai Airport and within the Kenai Commercial Core. Overall, Land Sale 1 is rated inferior, indicating a unit value greater than $2.62 per square foot for the appraised land. Land Sale 2 Land Sale 2 is the January 2020 sale located on the northwest corner of Kenai Spur Highway and Main Street Loop Road (east), proximate to the Commercial Core of Kenai. Located 1.3± road miles south of the subject, the nearly rectangular-shaped parcel consists of two totaling 121,091 square feet. All public utilities are available in the immediate neighborhood. Topography is generally level, and the parcel is cleared and developed with a motel. Zoning is CMU, Central Mixed-Use. The sale was between the City of Kenai and former land lessee who purchased the land underlying the improvements. The sale price of $605,000 indicates a unit value of $5.00 per square foot. By comparison, this sale is inferior for size, and similar to the subject for location with highway frontage near the Kenai Commercial Core. Overall, Land Sale 2 is rated similar, indicating a unit value approximating $5.00 per square foot for the appraised land. Land Sale 3 Land Sale 3 is the February 2019 sale located on the southwest corner of Kenai Spur Highway and S. Forest Drive, west of the Kenai Commercial Core. This location is 2.2± road miles southwest of the subject. The nearly rectangular-shaped lot contains 219,107± square feet. All public utilities are available in the immediate neighborhood. Topography is generally level, and the property was cleared and leveled at the time of sale. The property is zoned CG, General Commercial. Originally listed for $499,000, the property sold after 132 days of market exposure. The sellers previously purchased the property in 2007 for $175,000, and subsequently cleared the site. The price appreciation is attributed to passage of time, as well as value added due to clearing and leveling. The 2019 sale price of $455,000 indicates a unit value of $2.08 per square foot. By comparison, this sale is rated inferior for size differential and location. Land Sale 3 is rated inferior, indicating a unit value greater than $2.08 per square foot for the appraised land. 61 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 25 Land Sale 4 Land Sale 4 is the August 2018 sale located at the northeast corner of Kenai Spur Highway and Coral Street, just outside of the Airport Reserve. This location is adjacent to the subject. The irregular-shaped site contains 35,851± square feet. The site is cleared and improved with a commercial building. All public utilities are available in the immediate neighborhood. Zoning is CMU, Central Mixed-Use. Per the plat, no direct Kenai Spur Highway access is permitted, although curb cuts allow for direct physical access. The sale was between the City of Kenai and former land lessee who purchased the land underlying the improvements. The sale price of $180,000 indicates a unit value of $5.02 per square foot. By comparison, this sale has good corner location with highway frontage proximate to the Commercial Core. Land Sale 4 is slightly inferior for size, superior for corner location, and similar in terms of physical character and access. Thus, Land Sale 4 is rated similar, indicating a unit value approximating $5.02 per square foot for the appraised land. Land Sale 5 Land Sale 5 is the August 2016 sale located on the northwest corner of Kenai Spur Highway and Main Street Loop Road (west) just south of the Airport Reserve and the Commercial Core. The property is located near the subject with similar access and frontage. The nearly rectangular-shaped lot contains 28,520± square feet. All public utilities are available in the immediate neighborhood. The property is cleared and zoned CMU, Central Mixed Use. The property was purchased from the City of Kenai by the land lessee, who owned two small commercial structures on the property. The sale price of $170,400 was based on a 2015 appraisal, with a 20% premium paid. Land Sale 5 is similar in size and superior for location and access indicating a unit value less than $5.97 per square foot for the appraised land. 62 22-3698 – Lot 5, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 26 Presented below is a rating grid and analysis of the land sales used in comparative analysis. Land Sale $/SF Rank Net Adjustment 5 $5.97 Superior  Subject -- -- -- -- -- -- 4 $5.02 Similar -- -- 2 $5.00 Similar -- -- 1 $2.62 Inferior  3 $2.08 Inferior  The comparable land sales indicate a value range from $2.08 to $5.97 per square foot. Land Sale 5 is rated superior indicating a unit value less than $5.97 per square foot. Conversely, Land Sales 1 and 3 are rated inferior indicating a unit value greater than $2.62 per square foot. Land Sales 2 and 4 are rated similar indicating a unit value approximating $5.00 per square foot. After comparative analysis and making the necessary adjustments, we conclude with a market value between $5.00 and $5.50 per square foot, which develops the following indicators. 25,663 SF × $5.00/SF = $128,315 25,663 SF × $5.50/SF = $141,147 Based on the preceding analysis, the market value of the appraised land, as of May 16, 2022, is estimated as follows. Market Value Estimate $135,000 (R) Estimated 6 to 12 months Reconciliation of Comparative Market Analysis Marketing and Exposure Time 63 22-3698 – Lot 5, Block 1, Gusty Subdivision Addition No. 1, Kenai, Alaska MacSwain Associates LLC Assumptions and Limiting Conditions This appraisal is subject to the following assumptions and limiting conditions. ➔ No responsibility is assumed for the legal description provided or for matters pertaining to legal or title considerations. Title to the property is assumed to be marketable unless otherwise stated. ➔ The property is appraised free and clear of all liens or encumbrances unless otherwise stated. ➔ The information furnished by others is believed to be reliable, but no warranty is given for its accuracy. ➔ All maps, plot plans, and other illustrative material are believed to be accurate, but are included only to help the reader visualize the property. ➔ It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for obtaining the engineering studies that may be required to discover them. ➔ It is assumed the property is in full compliance with all applicable federal, state, and local environmental regulations and laws unless the lack of compliance is stated, described, and considered in the appraisal report. ➔ It is assumed the property conforms to all applicable zoning, land use regulations, and platting restrictions unless the nonconformity is identified, described, and considered in the appraisal report. ➔ Possession of this report, or a copy thereof, does not carry with it the right of publication. ➔ The appraisers, by reason of this appraisal, is not required to give consultation or testimony or to be in attendance in court with reference to the property in question unless arrangements have been previously made. ➔ Neither all nor any part of the contents of this report shall be disseminated to the public through advertising, public relations, news, sales, or other media without the prior written consent and approval of the appraisers. ➔ The existence of any hazardous material or other type of environmental contamination, which may or may not be present on the property, was not observed by the appraisers nor do the appraisers have any knowledge of the existence of such substances. However, the presence of these substances may affect the value of the property. Therefore, the client is urged to retain an environmental assessment for discovery and evaluation. 64 22-3698 – Lot 5, Block 1, Gusty Subdivision Addition No. 1, Kenai, Alaska MacSwain Associates LLC Statement of COVID-19 This appraisal was performed following public awareness that COVID-19 was affecting residents in the United States. At the time of the appraisal, COVID-19 is having widespread health and economic impacts. The effects of COVID-19 on the real estate market in the subject neighborhood are not yet measurable based on reliable data. The analysis and value opinion in this appraisal are based on the data available to the appraisers at the time of the assignment and apply only as of the effective date indicated. No analysis or opinions contained in this appraisal should be construed as predictions of future market conditions or value. 65 MacSwain Associates LLC 4401 Business Park Boulevard, Suite 22, Anchorage, Alaska 99503 Appraiser: Steve MacSwain, MAI Member of Appraisal Institute - No. 5700 State of Alaska, Certified General Real Estate Appraiser - No. 42 Professional Experience: 1986 to Present - MacSwain Associates LLC 1976 to 1986 - Appraisal Company of Alaska - President 1970 to 1975 - Real Estate Services Corporation – Appraiser 1969 to 1970 - State of Alaska Department of Highways - Right of Way Agent Real estate appraiser and consultant of all property types throughout Alaska including commercial, industrial, subdivisions and special-purpose properties. Appraisals have been performed for financing, leasing, insurance, condemnation, taxation, property damages, investment analysis, and buy-sell decisions. Appraisals include valuation of both real property and business enterprises. Professional experience totals 49 years. Life-long Alaskan resident of Alaskan Native descent. Education: Bachelor of Business Administration, Finance (1969), University of Alaska Fairbanks Appraisal Education: The following is a list of completed appraisal courses and seminars. 2021 – Cool Tools: New Technology for Real Estate Appraisers by the Appraisal Institute 2021 – Desktop Appraisals (Bifurcated, Hybrid) and Evaluations by the Appraisal Institute 2021 – Hot Topics & Myths in Appraiser Liability by LIA Administrators & Insurance Services 2020 – Uniform Standards of Professional Appraisal Practice – Update by the Appraisal Institute 2019 – How Tenants Create or Destroy Value: Leasehold Valuation and its Impact on Value –by the Appraisal Institute 2017 – Appraising Environmentally Contaminated Properties by the Appraisal Institute 2017 – Residential & Commercial Valuation of Solar by the Appraisal Institute 2017 – Right of Way Acquisition for Pipeline Projects by the International Right of Way Association 2015 – Litigation Appraising: Specialized Topics and Applications by the Appraisal Institute 2015 – Business Practices and Ethics by the Appraisal Institute 2013 – Complex Litigation Appraisal Case Studies by the Appraisal Institute 2013 – Uniform Appraisal Standards for Federal Land Acquisitions (Yellow Book) by the Appraisal Institute 2012 – Appraisal Curriculum Overview by the Appraisal Institute 2010 – Reviewing Appraisals in Eminent Domain by the International Right of Way Association 2010 – Commercial Appraisal Engagement and Review Seminar for Bankers and Appraisers by the Appraisal Institute 2009 – The Appraiser as an Expert Witness: Preparation and Testimony by the Appraisal Institute 2009 – Attacking and Defending an Appraisal in Litigation by Whitmer Education 2008 – Uniform Standards of Professional Appraisal Practice by the Appraisal Institute 2007 – Business Practices and Ethics by the Appraisal Institute 2007 – Eminent Domain Law for Right of Way Professionals by the International Right of Way Association 2007 – Appraisal Review for Federal Aid Programs by the International Right of Way Association 2007 – Analyzing Operating Expenses by the Appraisal Institute 1969-2006: Numerous appraisal classes pertaining to principles, income capitalization, cost analysis, sale comparison approach, and highest and best use analysis by the Appraisal Institute, Society of Real Estate Appraisers, International Right-of-Way Association, International Association of Assessing Officers, and Marshall Valuation Service 66 Membership and Organizations: Member of Appraisal Institute – No. 5700, International Right of Way Association (IRWA), and Building Owners and Managers Association (BOMA) Public Service: Past Chairman of the State Board of Certified Appraisers Past Member of Board of Equalization, Municipality of Anchorage, National Experience Review Committee of the Appraisal Institute, and Regional Ethics and Counseling Panel of the Appraisal Institute Past President of Alaska Chapter 57 of the Appraisal Institute Significant Assignments: è Appraised Pacific Spaceport Complex-Alaska (PSCA) land and facilities for Alaska Aerospace Corporation on Kodiak Island. è Appraised proposed LNG Pipeline, a FERC-regulated 860-mile pipeline transporting liquefied natural gas. è Appraised the Trans-Alaska Pipeline System, a FERC-regulated 800- pipeline that transports crude oil from Prudhoe Bay to Valdez, for TAPS ownership. è Appraised remote lands (65,000± acres) owned by three Native corporations damaged by the Selendang Ayu grounding and subsequent oil spill. è Appraised Calais Company, Inc., a real estate holding company consisting of 39 commercial parcels in Anchorage. è Principal real estate consultant and expert witness for all lands affected by the Exxon Valdez oil spill. Project involved over 2,000,000 acres of remote land and nearly 2,000 private property owners. è Appointed as a representative of a three-member panel that analyzed and valued over 1,000,000 acres and 8,000 parcels for the Mental Health Lands Settlement. è Contract assessor for the North Slope Borough, Kodiak Island Borough, City of Nome, and the City of Valdez. è Represented Seibu Alaska, Inc. (Alyeska Resort and Alyeska Prince Hotel) in preparing of their property tax appeal with the Municipality of Anchorage that resulted in a $65 million reduction in assessed value. è Appraised submerged tideland parcels and wetlands parcels located in Womens Bay on Kodiak Island for the purpose of an exchange between Koniag, Inc. and U.S. Fish and Wildlife Service. è Appraised Common Carrier Pipeline right-of-ways leased and operated by BP Transportation Alaska and ConocoPhillips Alaska. è Appraised 3,600 acres consisting of the former Adak Naval Air Station and Submarine Base conveyed to the City of Adak and the State of Alaska. Expert Witness Experience: Steve MacSwain, MAI is qualified as an expert witness in both the United States Federal Court and the State of Alaska Superior Court. Steve has testified as an expert witness in State and Federal courts. In addition, Steve has testified as expert witness in numerous Alaskan municipal tax courts, public hearings, and depositions on matters related to real property. Arbitrator Experience: Appointed a Master by the Superior Court of Alaska and Municipality of Anchorage to serve as an arbitrator in determining just compensation. State of Alaska Ucenae #: APRG42 Effecti~: 61812021 Expires: 06/30/2023 Department of Commerce, Community, and Economic Development Division of Corporations, Business, and Professional Licensing Board of Certified Real Estate Appraisers Licensee : STEVEN JAMES MACSWAIN License Type : Certified General Real Estate Appraiser Status : Active Relationships No relat ionships fo und . Commissioner: Julie Anderson Designations No designations found . 67 MEMORANDUM TO: Airport Commission FROM: Max Best, Interim Planning Director DATE: July 17, 2022 SUBJECT: Recommending the City Council Approve Ordinance No. 3312-2022 – Approving the Lease with a Sale option of 11536 Kenai Spur Highway to Aaron Swanson On June 28, 2022, staff received a competitive Lease with Sale Purchase Option application pursuant to KMC 22.05.095(i) for 11536 Kenai Spur Highway, Lot 4, Block 1, Gusty Subdivision Addition No. 1 Amended, from Aaron Swanson. The proposed use of the parcel, which is currently vacant, is to construct a Pita Pit restaurant. 11536 Kenai Spur Highway is a 24,829 square foot (.57 ac.) cleared lot south of the baseball fields with 120’ of Kenai Spur Highway frontage. The Lot has additional access from Cohoe Avenue. City water and sewer is available. This parcel is located outside the Airport Reserve. The parcel is within the Central Mixed-Use District (CMU). Per KMC 14.20.125, the purpose of the CMU Zone is intended to provide for a centrally located area in the City for general retail shopping, personal and professional services, entertainment establishments, restaurants and related businesses. Pursuant to Kenai Municipal Code 22.05.040 application review, notice of the application was posted in the Peninsula Clarion and stated competing applications may be submitted for the parcel within 30 -days to the City. The 30-day window from publication ended on August 29, 2022, and no competing applications were submitted to the City. The recently adopted City of Kenai Land Management Inventory and Recommendations lists the property as not needed for a public purpose and recommends disposal for lease or sale. Funds from the sale will benefit the Airport fund. The property is deed restricted with covenants and conditions that protect the ongoing operation of the airport. The Imagine Kenai 2030 Comprehensive Plan outlines goals, objectives, and action items for the City, including the following supporting this application: Objective Q- 4: Promote the siting and design of land uses that are in harmony and scale with surrounding uses. 6868 Page 2 of 2 Objective Q-14: Continue to foster a compact, intensive mix of private and public uses in the downtown core area. Objective ED-1: Promote projects that create workforce development opportunities. Objective LU-2: Promote the infill of existing, improved subdivision lots. Please review the attached materials. Does the Commission recommend Council approve Ordinance 3312-2022? Attachments: Draft Ordinance No. 3312-2022 City of Kenai Lease of City Owned Lands with Option to Purchase 11536 Kenai Spur Highway aerial map City of Kenai Land Competitive Purchase Application from Aaron Swanson Plat of Gusty Subdivision Addition No. 1 Amended Deed of Release Appraisal Report, Lot 4, Block 1, Gusty Subdivision 6969 Sponsored by: Administration New Text Underlined; [DELETED TEXT BRACKETED] CITY OF KENAI ORDINANCE NO. 3312-2022 AN ORDINANCE DETERMINING LOT 4, BLOCK 1, GUSTY SUBDIVISION ADDITION NO. 1 AMENDED IS NOT NEEDED FOR A PUBLIC PURPOSE AND APPROVING THE EXECUTION OF A LEASE WITH AN OPTION TO PURCHASE BETWEEN THE CITY OF KENAI AND AARON SWANSON DBA FOREVER BUSINESS PLAZA LLC. FOR THE PROPERTY. WHEREAS, Kenai Municipal Code 22.05.095(b)(2)(iv) provides for a land lease in which the lease is subject to competition through the lease application review process and which contains an option to purchase once the minimum development requirements have been met for the fair market value of the land excluding permanent improvements made by the lessee; and, WHEREAS, on June 28, 2022, Aaron Swanson submitted an application for a lease of City owned properties with the option to purchase, described as Lot 4, Block 1, Gusty Subdivision Addition No. 1 Amended; and, WHEREAS, the Applicant’s application states the intention is to construct a Pita Pit restaurant, with initial construction being site preparation and a temporary building; and, WHEREAS, the proposed development would be mutually beneficial and would conform with the Kenai Municipal Code for zoning and Kenai's Comprehensive Plan; and, WHEREAS, the City of Kenai did not receive a competing lease application within thirty (30) days of publishing a public notice of the lease application from Aaron Swanson; and, WHEREAS, the property has been released by the Federal Aviation from its Deed Restriction and is available for sale or lease; and, WHEREAS, the property is no longer needed for a public purpose for airport uses and is suitable for private development; and, WHEREAS, at their regular meeting on September 14, 2022, the Planning and Zoning Commission reviewed the lease application and recommended_______ by the City Council; and, WHEREAS, at their regular meeting on September 8, 2022, the Airport Commission reviewed the lease application and recommended ________ by the City Council; and, WHEREAS, funds from the lease and sale will benefit the Airport Fund. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, AS FOLLOWS: Section 1. Form: This is a non-code ordinance. Section 2. That a Lease with an option to purchase City owned lands described as Lot 4, Block 1 Gusty Subdivision Addition No. 1 Amended is approved as attached hereto and the City Manager is authorized to execute a lease with an option to purchase between the City of Kenai, Lessor, and Aaron Swanson DBA Forever Business Plaza, Lessee, as follows: 70 Ordinance No. 3312-2022 Page 2 of 2 _____________________________________________________________________________________ New Text Underlined; [DELETED TEXT BRACKETED] The lease or sale shall be subject to the reservations and covenants as contained in Federal Aviation Administration Deed of Release, Book 227, Page 416, Kenai Recording District; Section 3. That the Council determines that the property is no longer needed for a public purpose by the airport and is available for lease or sale. Section 4. Any sale will be made at fair market value of the land only, as determined by a professional appraiser from an appraisal made not more than one year prior to the date of sale. Any sale will be conveyed through a quitclaim deed. Further Council authorization is not required for a sale; however, completion of all required improvements is required prior to sale. All proceeds from the sale will be deposited in the Airport Land Sale Permanent Fund. Section 5. The following improvements are required to be completed within two years of execution of the lease, and the option to purchase cannot be made until the improvements are completed: Section 6. Severability: That if any part or provision of this ordinance or application thereof to any person or circumstances is adjudged invalid by any court of competent jurisdiction, such judgment shall be confined in its operation to the part, provision, or application directly involved in all controversy in which this judgment shall have been rendered, and shall not affect or impair the validity of the remainder of this title or application thereof to other persons or circumstances. The City Council hereby declares that it would have enacted the remainder of this ordinance even without such part, provision, or application. Section 7. Effective Date: That pursuant to KMC 1.15.070(f), this ordinance shall take effect 30 days after enactment. ENACTED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, THIS 21ST DAY OF SEPTEMBER, 2022. ___________________________________ Brian Gabriel Sr., Mayor ATTEST: ___________________________________ Michelle M. Saner, MMC, City Clerk Introduced: September 7, 2022 Enacted: September 21, 2022 Effective: October 21, 2022 71 LEASE OF CITYLANDS Page 1 of 30 CITY OF KENAI LEASE OF CITY OWNED LANDS WITH OPTION TO PURCHASE THIS LEASE AGREEMENT entered into this ________ day of ___________, 20__, by and between the CITY OF KENAI, 210 Fidalgo Avenue, Kenai, Alaska 99611-7794, and _____________________________________, whose address is ________________________ __________________________________ (“Lessee”). DEFINITIONS For the purposes of this Lease the following terms are defined in KMC 22.05.005 (effective as of the date of execution of the lease) as follows: 1. “Amendment” means a formal change to a lease of lands other than a lease extension or renewal. 2. “Annual rent” means an amount paid to the City annually according to the terms of the lease and Kenai Municipal Code. 3. “Assignment” means the transfer of all interest in a lease from one person or entity to another. 4. “City” means the City of Kenai, its elected officials, officers, employees or agents. 5. “Consumer Price Index (CPI)” means the annual CPI for all urban consumers (CPI-U) for Anchorage, Alaska. 6. “Existing lease” means a lease with at least one (1) year of term remaining. 7. “Expiring lease” means a lease with less than one (1) year of term remaining. 8. “Fair market value” means the most probable price which a property should bring in a competitive and open market as determined by a qualified independent appraiser, or the value as determined by the latest appraisal adjusted by the change in Consumer Price Index from the date of the latest appraisal. 9. “Lease extension” means extending the term of an existing lease. 10. “Lease rate percent” means a percentage that when applied to the fair market value of land establishes a rate of rent commensurate with rental rates prevalent in the local area as determined by a qualified real estate appraiser. 11. “Lease renewal” means a new lease of property currently under an existing or expiring lease to an existing lessee or a purchaser. 12. “Market analysis” means an analysis of data collected from other land leases to determine whether a market adjustment in either fair market value or lease rate percentage reflects the market. 13. “Permanent improvement” means a fixed addition or change to land that is not temporary or portable, including a building, building addition, retaining wall, storage tank, earthwork, fill material, gravel, and pavement, and remediation of contamination for which the applicant is not responsible and excluding items of ordinary maintenance, such as glass replacement, painting, roof repairs, door repairs, plumbing repairs, floor covering replacement, or pavement patching. 72 LEASE OF CITYLANDS Page 2 of 30 14. “Professional estimate of the remaining useful life of the principal improvement” means an estimate of the number of remaining years that the principal improvement will be able to function in accordance with its intended purpose prepared by a qualified real estate appraiser, engineer, or architect licensed in Alaska. 15. “Qualified independent appraiser” means a general real estate appraiser certified by the State of Alaska under AS 08.87. 16. “Site development materials” means materials used for preparing a lease site for building construction or to provide a firm surface on which to operate a vehicle or aircraft, including geotextile, fill, gravel, paving, utilities and pavement reinforcement materials. 17. “Site preparation work” means work on the leased premises to include clearing and grubbing, unclassified excavation, classified fill and back fill, a crushed aggregate base course and utility extensions. ARTICLE I PREMISES LEASED A. PREMISES: In consideration of Lessee’s payment of the rents and performance of all the covenants of this Lease, the City leases to the Lessee, and the Lessee leases from the City, the following described property (“Premises”) in the Kenai Recording District, Third Judicial District, State of Alaska ; to wit: Description of Lease Property B. NO WARRANTY: Except as may be provided in this Lease, the City makes no specific warranties, expressed or implied, concerning the condition of the Premises including, survey, soils, wetlands, access, and suitability or profitability for any use including those authorized by this Lease, its environmental condition, or the presence or absence of Hazardous Substances in, on, and under the surface. The Lessee takes the Premises on an “as is” basis and without warranty, subject to any and all of the covenants, terms, and conditions affecting the City's title to the Premises. ARTICLE II RIGHTS AND USES A. AUTHORIZED USES: 1. USE OF PREMISES: The City authorizes the Lessee to use the Premises for the following purposes only: List authorized uses and limitations 2. B. RIGHTS RESERVED TO THE CITY: 73 LEASE OF CITYLANDS Page 3 of 30 2. EASEMENTS: The City reserves the right to make grants to third parties or reserve to the City easements or rights of way through, on, or above the Premises. The City will not grant or reserve any easement or right of way that unreasonably interferes with the Lessee’s authorized uses of the Premises. 3. INGRESS, EGRESS AND INSPECTION: The City reserves the right of ingress to and egress from the Premises and the right to enter any part of the Premises, including buildings, for the purpose of inspection or environmental testing at any time. Except in the case of an emergency, all inspections and environmental testing will be coordinated with the Lessee to minimize interference with the Lessee’s authorized uses of the Premises. 4. RIGHT OF FLIGHT [Include for FAA Restricted Land only]: There is hereby reserved to the City, its successors and assigns, for the use and benefit of the public, a right of flight for the passage of aircraft in the airspace above the surface of the Premises. This public right of flight will include the right to cause in the airspace any noise inherent in the operation of any aircraft used for navigation or flight through the airspace or landing at, taking off from, or operation on the Airport. The lease or sale shall be subject to the reservations and covenants as contained in Federal Aviation Administration Deed of Release, Book 227, Page 416, Kenai Recording District; C. PROHIBITED USES: Unless specifically authorized by this Lease or an amendment to this Lease, the following are prohibited: 1. Any use of the Premises other than those authorized in this Lease. 2. Any use of the Premises that is in violation of a City Ordinance. 3. The outside storage on the Premises of junk, non-operational support equipment, unused or damaged equipment or material, or solid waste or debris unless allowed pursuant to a conditional use permit under KMC 14.20. 4. The disposal on the Premises of waste, including any Hazardous Substance, slash, overburden, and construction waste. 5. The stripping, wasting, or removing any material from the Premises without the prior written approval of the City. 6. [Include for FAA Restricted Land only]Erecting structures or allowing growth of natural objects that would constitute an obstruction to air navigation, or allowing any activity on the Premises that would interfere with or be a hazard to the flight of aircraft, or interfere with air navigation or communication facilities, serving 74 LEASE OF CITYLANDS Page 4 of 30 the Airport. 7. Any use or activity that is prohibited by applicable law or regulation. ARTICLE III TERM & HOLDOVER A. TERM: The initial term of this Lease is for __________ years, from the 1st day of ________________, 20__, to the 30th day of _______________, 20__. B. HOLDOVER: If the Lessee holds over and remains in possession of the Premises after the expiration, cancellation or termination of this Lease, the holding over will not operate as an extension of the term of this Lease, but only creates a month-to-month tenancy, regardless of any rent payments accepted by the City. The Lessee's obligations for performance under this Lease will continue during the month-to-month tenancy. The City or Lessee may terminate the Lessee’s holdover with ten days’ advance written notice. ARTICLE IV RENTS AND FEES A. RENT: The initial rent for the Premises is $________.00 per year, as established by the City pursuant KMC 22.05.060 and as subject to annual adjustment on July 1 of each year under Article V of this Lease, plus applicable sales tax. The rent shall be payable annually in advance of the first day of each year of the term of this Lease. All payments required by this Lease must be made in U.S. dollars. If the annual rent exceeds $2,400, the Lessee may, upon written notice to the City, choose to pay the rent in equal monthly installments, payable in advance on or before the anniversary date of the term of this Lease and thereafter at monthly intervals. No conversion of the payment schedule from annual to monthly shall result in the City receiving less rent than it would have received had the conversion not taken place. 1. Rent Credit: A rent credit may be applied for a maximum of five years of lease payments as provided in KMC 22.05.070 (as effective at the time this lease is executed). Once the work is completed and value determined, a credit will be applied to the lease payments, prorated as necessary for the successive five years. B. RENT PRORATED: Rental for any period less than one year shall be prorated on the basis of the rent payable under this Lease in last full year previous to the prorating. C. ADDITIONAL RENT: In addition to the rent specified in (a) of this Article, Lessee agrees to pay to the appropriate parties all levies, assessments, and charges as follows: 1. Taxes pertaining to the leasehold interest of the Lessee. 75 LEASE OF CITYLANDS Page 5 of 30 2. Sales tax now enforced or levied in the future, computed upon rent payable in monthly installments whether the Lessee pays rent under this Lease on a monthly or annual basis. 3. All taxes and assessments levied in the future by the City, as if Lessee was the legal owner of record of the Premises. D. PAYMENTS: The Lessee shall make checks, bank drafts, or postal money orders payable to the City of Kenai and deliver payments to City of Kenai, Finance Department, 210 Fidalgo Avenue, Suite 200, Kenai, Alaska 99611-7794 or any other address the City may designate in writing to the Lessee. E. INTEREST: Beginning the day after payment is due, all unpaid rents, charges, and fees required under this Lease will accrue interest at the rate of eight percent (8.0%) per annum. Interest on disputed amounts will not be charged to the Lessee if the dispute is resolved in the Lessee’s favor. F. LATE PAYMENT PENALTY: In addition to any interest payable under Provision (E) of this Article, each time the Lessee fails to pay any rent or fee by the date required in this Lease, the City will charge, and the Lessee shall pay, an administrative penalty of ten percent (10.0%) of the amount due and unpaid. G. COURTESY BILLINGS: Lessee acknowledges that any billing statement issued by the City is provided only as a courtesy. The Lessee is obligated to pay all rents and fees when due, regardless of whether or not the Lessee receives a billing statement from the City. H. LIEN AGAINST LESSEE: Any rent, charge, fee, or other consideration which is due and unpaid at the expiration, termination, or cancellation of this Lease will be a lien against the Lessee’s property, real or personal. I. PAYMENT OF CITY’S COSTS: The Lessee will pay all reasonable actual expenses, costs, and attorney fees City may incur, with or without formal action, to enforce, defend, or protect this Lease or City's rights under this Lease, including any expense incurred with respect to environmental compliance, bankruptcy or any proceeding that involves the Lessee, the Lease, the Premises, or improvements or personal property on the Premises. The Lessee will make payment within 30 days of the date of each notice from City of any amounts payable under this provision. J. PAYMENT FOR SPECIAL SERVICES: Lessee agrees to pay the City a reasonable fee for any special services or facilities the City agrees to perform, which the City is not otherwise obligated by this Lease to provide and which the Lessee requests from the City in writing. ARTICLE V ADJUSTMENT OF RENT AND FEES 76 LEASE OF CITYLANDS Page 6 of 30 A. RENT OR FEE ADJUSTMENT: The City shall adjust rent or fees payable by the Lessee under Article IV or other provisions of this lease on July 1 of each year of the lease as proved in KMC 22.05.060 (as effective at the time this lease is executed) and shall make any other adjustments to rent as allowed for in KMC 22.05.060. No rent or fee change shall be effective until 30 days after the date of the City’s written notice to the Lessee. If the Lessee believes that any changed rent exceeds the fair market rent for the Premises, the Lessee may appeal a rent change to the City as provided in KMC 22.05.060. ARTICLE VI ASSIGNMENT & SUBLETTING A. INVALID WITHOUT CITY’S CONSENT: The Lessee may not assign, sublet, or grant a security interest in, by grant or implication, the whole or any part of this Lease, the Premises, or any improvement on the Premises without the written consent of the City. Any proposed assignment, sublease, or security interest must be written and must be submitted to the City bearing the original, notarized signature of all parties. The Lessee may submit unsigned draft documents for the City’s conceptual review. However, the City’s conceptual approval of a draft document may not be construed as the City’s consent to any assignment, sublease, or security interest. All provisions in this Lease extend to and bind the assignees and sub-lessees of the Lessee. B. NO WAIVER OF CONSENT: The City’s consent to one assignment, sublease, or security interest will not waive the requirement for the Lessee to obtain the City’s consent to any other assignment, sublease, or security interest. C. ASSIGNEE / LESSEE OBLIGATIONS: An assignment must include a provision stating that the assignee accepts responsibility for all of the assignor’s (Lessee’s) obligations under this Lease, including environmental liability and responsibility. However, unless the City specifically releases the Lessee in writing, the City may hold the Lessee responsible for performing any obligation under this lease which an assignee fails to perform. D. OCCUPANCY BEFORE CITY CONSENT: An assignee or sub-lessee may not occupy the Premises before the City consents to the assignment or sublease in writing. E. CONFLICT OF PROVISIONS: In the event of a conflict between this Lease and an assignment or a sublease, the terms of this Lease control. F. LESSEE NOT RELIEVED OF OBLIGATIONS: The City’s consent to any sublease does not relieve or otherwise alter the Lessee’s obligations under this Lease. G. SECURITY ASSIGNMENTS AND FINANCING: 1. Subject to the requirements of (A) of this Article VI, the Lessee may assign a security interest in this Lease. The security interest may be in the form of a mortgage, deed of trust, assignment or other appropriate instrument, provided 77 LEASE OF CITYLANDS Page 7 of 30 a. the security interest pertains only to the Lessee’s leasehold interest; b. the security interest does not pertain to or create any interest in City's title to the Premises; and c. the documents providing for the security interest are approved and acceptable to the City. 2. If the assignment of a security interest to which the City has consented shall be held by an established lending or financial institution, including a bank, an established insurance company and qualified pension or profit sharing trust, and the lending institution acquires the Lessee's interest in this Lease as a result of a foreclosure action or other remedy of the secured party, or through any transfer in lieu of foreclosure, or through settlement of or arising out of any pending or contemplated foreclosure action, the lending institution may transfer its interest in this Lease to a nominee or a wholly owned subsidiary corporation with the prior written consent of the City, provided, the transferee assumes all of the covenants and conditions required to be performed by the Lessee (including payment of any monies owed by Lessee to the City under the lease). In the event of such a transfer, the lending institution shall be relieved of any further liability under this Lessee. 3. A holder of a security interest in this Lease consented to by the City shall have, and be subrogated to, any and all rights of the Lessee with respect to the curing of any default of this Lease by Lessee. 4. A holder of a security interest consented to by the City that takes possession of this Lease shall not be released from the obligations and liabilities of this Lease unless the holder assigns its leasehold estate to an assignee who is financially capable and otherwise qualified to undertake to perform and observe the conditions of this Lease and the City consents to the assignment. The City’s consent will not be unreasonably withheld. ARTICLE VII MAINTENANCE, SNOW REMOVAL & UTILITIES A. MAINTENANCE: 1. At no cost to the City, the Lessee will keep the Premises and all improvements on the Premises clean, neat and presentable, as reasonably determined by the City. 2. At no cost to the City, the Lessee will provide for all maintenance and services at the Premises as may be necessary to facilitate the Lessee's compliance with this Lease and the Lessee’s use of the Premises. 78 LEASE OF CITYLANDS Page 8 of 30 3. The Lessee shall comply with all regulations or ordinances of the City that are promulgated for the promotion of sanitation. At no cost to the City, the Lessee shall keep the Premises in a clean and sanitary condition, and control activities on the Premises to prevent the pollution of water. 4. B. SNOW REMOVAL: 1. At no cost to the City, the Lessee is responsible for snow removal on the Premises. The Lessee shall dispose of snow in an off-Premises location approved or provide suitable snow storage within the boundaries of the Premises in accordance with all applicable federal and state laws. 2. Lessee shall not deposit snow in right-ow-ways, easements, roads or on City property without written approval of the City.. 3. Lessee agrees to not allow an accumulation of snow on the Premises that would cause interference with adjoining leaseholders or the public. C. UTILITIES: Unless specifically provided otherwise in this Lease, the Lessee shall, at no cost to the City, provide for all utilities at the Premises necessary to facilitate the Lessee's use of the Premises. ARTICLE VIII OPERATIONS A. OPERATIONS: The Lessee will ensure that the Lessee, its employees, guests, contractors, sub-lessees, and vendors that perform any activity or function authorized under this Lease shall do so in a manner that ensures the safety of people, the protection of public health and the environment, and the safety and integrity of the Premises. B. LESSEE'S CONTROL AND RESPONSIBILITY: 1. The Lessee will assume full control and sole responsibility as between Lessee and City for the activities of the Lessee, the Lessee's personnel and employees, and anyone else acting by, on behalf of, or under the authority of the Lessee. 2. The Lessee will immediately notify the City of any condition, problem, malfunction or other occurrence that threatens the safety the public or City employees, harm to public health or the environment, or the safety or integrity of the Premises. 79 LEASE OF CITYLANDS Page 9 of 30 C. RADIO INTERFERENCE: The Lessee will discontinue the use of any machine or device that interferes with any government-operated transmitter, receiver, or navigation aid until the cause of the interference is eliminated. D. PARKING: The Lessee will provide adequate vehicle and equipment, parking space on the Premises for Lessee’s business or activities. ARTICLE IX ENVIRONMENTAL PROVISIONS A. HAZARDOUS SUBSTANCE: 1. The lessee will conduct it business and/or operation on the Premises in compliance with all environmental laws and permits. If hazardous substances are handled on the Premises, the Lessee agrees to have properly trained personnel and adequate procedures for safely storing, dispensing, and otherwise handling Hazardous Substances in accordance with all applicable federal, state and local laws. 2. Lessee will promptly give the City notice of proceeding to abate or settle matters relating to the presence of a Hazardous Substance on the Premises or from Lessee’s operations on the Premises. The Lessee will allow the City to participate in any such proceedings. B. ENVIRONMENTAL INDEMNIFICATION: If Contamination of the Premises or other property by a Hazardous Substance occurs from the Lessee’s operations on the Premises the Lessee will indemnify, defend, and hold the City harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities, or losses, including, but not limited to, sums paid in settlement of claims, attorney’s fees, consultant fees, and expert fees, which arise during or after the term of this Lease as a result of such Contamination. This indemnification of the City by Lessee includes, but is not limited to, costs incurred in connection with any investigation of site conditions or any cleanup, remediation, removal, monitoring, or restorative work required by any federal, state, or local governmental agency because of a Hazardous Substance being present in the soil or groundwater or under the Premises or other properties affected by the Contamination. C. REMEDIATION: 1. In the event of a Hazardous Substance spill on the Premises, the Lessee will immediately notify the City and the Alaska Department of Environmental Conversation and act, promptly, at its sole expense, to contain the spill, repair, any damage, absorb and clean up the spill area, and restore the Premises to a condition satisfactory to the City and otherwise comply with the applicable portions of any environmental law. 80 LEASE OF CITYLANDS Page 10 of 30 2. In addition to any notices required by this Lease, the Lessee will immediately notify and copy the City in writing of any of the following: a. Any permit, enforcement, clean up, lien, removal or other governmental or regulatory action instituted, completed, or threatened pursuant to an Environmental Law. b. Any claim made or threatened by any person against the Lessee or arising from the Lessee’s operations authorized by this Lease, relating to damage, contribution, compensation, loss or injury resulting, from, or claimed to result from any Hazardous Substances in, on, or under the Premises; or c. Any report made by, or on behalf of, the Lessee to any environmental agency arising out of or in connection with any Hazardous Substances in, on, or removed from the Premises, including any complaints, notices, warnings, or asserted violations. 3. Remediation and restoration of the contaminated area must meet all applicable state and federal regulations and must meet the requirements of all governing regulatory authorities. D. ENVIRONMENTAL AUDIT: The Lessee will provide the City with all investigative data, test results, reports, and any other information gathered or analyzed as part of or in relation to any Environmental Assessment, characterization or audit on the Premises that Lessee performs or causes to be performed after the starting date of this Lease. The Lessee will submit the data, result, report or information to the City within 60 days following the date on which it becomes available to the Lessee. E. RELEASE OF LESSEE: The City releases the Lessee from liability to the City for Contamination and the presence of Hazardous Substances that existed prior to the commencement date of this lease unless caused or materially contributed to by the Lessee. F. SURVIVAL OF OBLIGATIONS: The obligations and duties of the City and Lessee under Article IX of this lease shall survive the cancellation, termination or expiration of this lease. ARTICLE X INDEMNIFICATION & INSURANCE A. INDEMNIFICATION: 1. The Lessee will indemnify, save harmless, and defend the City, its officers, agents, and employees from and against any and all liabilities, losses, suits, administrative actions, claims, awards, judgments, fines, demands, damages, 81 LEASE OF CITYLANDS Page 11 of 30 injunctive relief or penalties of any nature or kind to the full extent of the loss or obligation for property damage, personal injury, death, violation of any regulation or grant agreement, or any other injury or harm resulting from or arising out of any acts or commission of or omission by the Lessee, Lessee’s agents, employees, customers, invitees or arising out of the Lessee’s occupation or use of the premises demised or privileges granted, and to pay all costs connected therewith. This indemnification of the City by the Lessee shall include sums paid in settlement of claims, attorney fees, consultant fees, expert fees, or other costs and expenses, directly or indirectly arising from, connected to or on account of this Lease as it relates to the Lessee, the Lessee’s activities at or relating to the Premises, or any act or omission by the Lessee, or by any of Lessee’s officers, employees, agents, contractors or sub-lessees. These indemnity obligations are in addition to, and not limited by, the Lessee’s obligation to provide insurance, and shall survive the expiration or earlier termination of this Lease. 2. The Lessee shall give the City prompt notice of any suit, claim, action or other matter affecting the City to which Paragraph 1, above, may apply, together with a copy of any letter by an attorney on behalf of a complainant, any complaint filed in court, and any notice or complaint by any regulatory agency. The City shall have the right, at its option, to participate cooperatively in the defense of, and settlement negotiations regarding, any such matter, without relieving the Lessee of any of its obligations under this provision. 3. As to any amount paid to others for personal injury or property damage with respect to which an act or omission of the City is a legal cause, notwithstanding Paragraph 1 of this section, the Lessee and the City shall reimburse each other according to the principles of comparative fault. If liability to a third party is subject to apportionment according to comparative fault under this provision, the Lessee and the City shall seek in good faith to achieve non-judicial agreement as to apportionment of fault as between themselves. This apportionment of liability between the City and the Lessee shall not be construed to affect the rights of any person who is not a party to this Lease. B. INSURANCE: At no expense to the City, the Lessee will obtain and keep in force during the term of this Lease, insurance of the type and limits required by this provision. Where specific limits are set, they will be the minimum acceptable limits. If the Lessee’s policy contains higher limits, the City will be entitled to coverage to the extent of the higher limits. At the time insurance in obtained by the Lessee, all insurance shall be by a company/corporation rated “A-” or better by A.M. Best. The following policies of insurance are required with the following minimum amounts: 1. Commercial General Liability, including Premises, all operations, property damage, products and completed operations, and personal injury and death, broad-form contractual, with a per-occurrence limit of not less than $1,000,000 combined single limit. If this lease authorizes the Lessee to engage in the sale 82 LEASE OF CITYLANDS Page 12 of 30 or the commercial dispensing or storage of aviation fuel, the policy must not exclude of Lessee’s fuel handling activities. This policy must name the City as an additional insured. 2. Commercial Automobile Coverage with not less than $1,000,000 combined single limit per occurrence. This insurance must cover all owned, hired, and non-owned motor vehicles used by the Lessee. 3. Workers Compensation Insurance. The Lessee will provide and maintain, for all employees, coverage as required under AS 23.30.045, and, where applicable, any other statutory obligations. The policy must waive subrogation against the City. 4. The Lessee will provide the City with proof of insurance coverage in the form of an insurance policy or a certificate of insurance, together with proof that the premiums have been paid, showing the types and monetary limits of coverage secured. All insurance required by this provision must provide that the City be notified at least 30 days prior to any termination, cancellation, or material change in the insurance coverage. 5. If the Lessee's insurance coverage lapses or is canceled, Lessee will immediately, upon written notice by the City, halt all operations on the the Premises. The Lessee will not resume operations until the City receives evidence that the Lessee has obtained current insurance coverage meeting the requirements of this Lease. 6. The City may, at intervals of not less than five years from the beginning date of the term of this Lease and upon written notice to Lessee, revise the insurance requirements required under this Lease. City’s determination to revise the insurance requirements will be based on the risks relative to the Lessee's operations, any insurance guidelines adopted by the City, and any applicable law. 7. If the Lessee subleases all or any portion of the Premises under the provisions of this Lease, the Lessee will require the sub-lessee to provide to the insurance coverage required of the Lessee under this Article X. ARTICLE XI LAWS & TAXES A. COMPLIANCE WITH LAW: Lessee shall comply with all applicable laws, ordinances, and regulations of public authorities now or hereafter in any manner affecting the Premises or the sidewalks, alleys, streets, and ways adjacent to the Premises, or any buildings, structures, fixtures and improvements or the use thereof, whether or not any such laws, ordinances, and regulations which may be hereafter enacted involve a change of policy on the part of the governmental body enacting the same. Lessee agrees to hold City financially harmless: 83 LEASE OF CITYLANDS Page 13 of 30 1. From the consequences of any violation of such laws, ordinances, and/or regulations; and 2. From all claims for damages on account of injuries, death, or property damage resulting from such violation. B. UNLAWFUL ACTIVITY: The Lessee shall not permit any unlawful use, occupation, business, or trade to be conducted on the Premises contrary to any law, ordinance, or regulation, including zoning ordinances, rules and regulations. C. LICENSES AND PERMITS: The Lessee will obtain all necessary licenses and permits, pay all taxes and special assessments lawfully imposed upon the Premises, and pay other fees and charges assessed under applicable law. Nothing in this Lease prevents the Lessee from challenging any taxes or special assessments to the appropriate authority. D. LITIGATION: The Kenai Municipal Code, including regulations promulgated thereunder, and the laws of the State of Alaska will govern in any dispute between the Lessee and City. If a dispute continues after exhaustion of administration remedies, any lawsuit must be brought in the courts of the State of Alaska, in Kenai, Alaska. E. LESSEE TO PAY TAXES: Lessee shall pay all lawful taxes and assessments which, during the term of this Lease may become a lien upon or which may be levied by the State, Borough, City, or any other tax levying body, upon any taxable possessory right which Lessee may have in or to the Premises or improvements on the Premises by reason of its use or occupancy or the terms of this Lease provided, however, that nothing in this provision shall prevent Lessee from contesting any increase in a tax or assessment under any applicable law, ordinance, or regulation. F. PARTIAL INVALIDITY: If any term, provision, condition, or part of this Lease is declared by a court of competent jurisdiction to be invalid or unconstitutional, the remaining terms, provisions, conditions, or parts shall continue in full force and effect as though the declaration had not been made. ARTICLE XII LEASE TERMINATION A. CANCELLATION: The City may, after 30 days’ written notice to the Lessee, cancel this Lease and recover possession of the Premises if any of the following violations occur, unless the violation is cured within the 30 days: 1. The Lessee fails to pay when due the rents, additional rents, charges, or other sums specified in this Lease, including any increases made under this Lease. 84 LEASE OF CITYLANDS Page 14 of 30 2. The Lessee's check for payment of any sum due under this Lease is returned for insufficient funds. 3. The Lessee uses or authorizes the use of the Premises for any purpose not authorized by this Lease. 4. The Lessee fails to fully perform and comply with any provision in this Lease. 5. The Lessee violates a provision of Kenai Municipal Code applicable to this Lessee. 6. The court enters a judgment of insolvency against the Lessee. 7. A trustee or receiver is appointed for the Lessee's assets in a proceeding brought by or against the Lessee, or the Lessee files a voluntary petition in bankruptcy. 8. Failure by the Lessee to comply with any land development or permanent improvement construction required by this Lease. B. ENTRY AND RE-ENTRY: In the event that the Lease should be terminated in accordance with this Article XII, or by summary proceedings or otherwise, or upon the Lessee’s abandonment of the Premises or a portion of the Premises, the City or its agents, servants, or representatives may, immediately or any time thereafter, re-enter, and resume possession of the Premises or portion thereof, and remove all persons and property therefrom, without being liable for any damages therefore. No re-entry by the City shall be deemed an acceptance of a surrender of the Lease. C. CONTINUING OBLIGATIONS UNTIL PREMISES VACATED: The Lessee will continue to pay City rent after the expiration, termination, or cancellation of this lease and to abide by the lease obligations, including providing proof of insurance coverage, through the date Lessee relinquishes possession of and completely vacates the Premises. City will consider the Premises completely vacated if the Lessee has 1. Remediated any environmental contamination for which the Lessee is responsible; 2. Restored the Premises to a neat and clean physical condition acceptable to the City. D. REASONABLE CURE: 1. In the case of a violation that cannot be reasonably cured within 30 days, a notice of cancellation issued by the City to the Lessee under this Article is 85 LEASE OF CITYLANDS Page 15 of 30 stayed if, within the 30-day notice period, the Lessee begins and continues expeditious action to cure the violation. The City will determine if a violation cannot be reasonably cured within 30 days and what constitutes expeditious action. 2. In the case where, in City’s sole determination, Lessee’s violation is considered an imminent threat topublic health or safety, or the environment, City will direct the Lessee to stop the activity immediately and may reduce the period to cure the violation, or the City may correct the violation pursuant to (E) of this Article. E. RIGHT OF CITY TO PERFORM: 1. If, after 30 days following notice the Lessee fails or refuses to perform any action required by this Lease, the City will have the right, but not the obligation, to perform any or all such actions required by this Lease at the sole expense of the Lessee. The City will not take action if the Lessee begins and continues expeditious action to perform any action required by this Lease that cannot be reasonably completed within 30 days. The City will, at its sole discretion, determine what constitutes expeditious action and if an action cannot be reasonably performed in 30 days. The City will submit to the Lessee an invoice for the expenses incurred by the City in the performance by the City of any required action. The Lessee will pay the amount of each invoice within 30 days from issuance. 2. If Lessee fails or refuses to perform any action that has been deemed an imminent threat the City will have the right, but not the obligation, to perform any or all such actions required to expeditiously correct the imminent threat. Lessee shall reimburse the City for any cost, including legal fees and administrative costs reasonably incurred by the City in acting to correct the imminent threat violation. F. WAIVER: A waiver by the City of any default by the Lessee of any provision of this Lease will not operate as a waiver of any subsequent default. If the City waives a default, the City is not required to provide notice to the Lessee to restore or revive any term or condition under this Lease. The waiver by the City of any provision in this Lease cannot be enforced or relied upon unless the waiver is in writing and signed on behalf of the City. The City's failure to insist upon the strict performance by the Lessee of any provision in this Lease is not a waiver or relinquishment for the future, and the provision will continue in full force. 86 LEASE OF CITYLANDS Page 16 of 30 G. NATIONAL EMERGENCY: If the federal government declares a national emergency, neither party may hold the other liable for any inability to perform any part of this Lease as a result of the national emergency. H. SURRENDER ON TERMINATION: Except as provided otherwise in this Article XII, Lessee shall, on the last day of the term of this Lease (including any extension or renewal thereof) or upon any earlier termination of this Lease, surrender and deliver up the premises into the possession and use of City without fraud or delay in good order, condition, and repair, except for reasonable wear and tear since the last necessary repair, replacement, restoration or renewal, free and clear of all lettings and occupancies unless expressly permitted by the City in writing, and free and clear of all liens and encumbrances other than those created by and for loans to City. I. OWNERSHIP AND DISPOSITION OF IMPROVEMENTS: 1. Ownership of Permanent Improvements: Permanent improvements on the Premises, excluding Site Development Materials, constructed, placed, or purchased by the Lessee remain the Lessee’s property as long as this Lease remains in effect, including any period of extension or holdover with the consent of the Lessor. 2. Disposition of Site Development Materials: The Lessee acknowledges that, once placed by the Lessee, the removal from the Premises of Site Development Materials can damage the Premises, adversely affect surface water drainage patterns, and destabilize adjacent structures. When placed on the Premises by the Lessee, Site Development Materials, including building pads, parking areas, driveways, and similar structures: a. become a part of the realty and the property of the City of Kenai; b. unless otherwise directed by the Lessor, must be maintained by the Lessee throughout the term of this Lease, including any extensions and periods of holdover; and c. may not be removed by the Lessee without the prior written approval of the Lessor. 3. Disposition of Personal Property and Permanent Improvements Other Than Site Development Materials: a. Unless the Lessor otherwise directs as provided below, when this Lease expires, terminates, or is cancelled and is neither extended nor followed by a successive lease, the departing Lessee may do one or more of the following: 87 LEASE OF CITYLANDS Page 17 of 30 i. remove Lessee-owned Permanent Improvements from the Premises, remediate any Contamination for which the Lessee is responsible, and restore the Premises to a clean and neat physical condition acceptable to the Lessor within 60 days after the expiration, cancellation, or termination date of this Lease; ii. with written approval from the Lessor, sell Lessee-owned Permanent Improvements to the succeeding lessee, remove all personal property, remediate, any Contamination for which the Lessee is responsible and leave the Premises in a clean and neat physical condition acceptable to the Lessor within 60 days after notice from the Lessor that the Lessor has approved an application for a lease of the Premises by another person or such longer period specified in the notice, but in no event more than 180 days after the expiration, termination, or cancellation date of this Lease; iii. elect to have the Lessor sell Lessee-owned Permanent Improvements at public auction as provided below, remediate any Contamination for which the Lessee is responsible, and restore the premises to a clean and neat physical condition acceptable to the Lessor. If the Lessor sells Permanent Improvements under this Paragraph for removal from the Premises, the departing Lessee's obligation under this Paragraph continues until the Premises are remediated and restored to a clean and neat physical condition acceptable to the Lessor after the improvements have been removed. b. If the departing Lessee elects to have the Lessor sell Lessee-owned Permanent Improvements at public auction per this Section, the Lessee shall, within 30 days after the expiration, cancellation, or termination of this Lease: i. submit to the Lessor a written request and authorization to sell the Permanent Improvements by public auction; ii. provide to the Lessor an executed conveyance document transferring clear title to the Permanent Improvements to the successful bidder at the public auction, along with authorization to the Lessor, as agent for the Lessee for purposes of the sale only, to endorse the name of the successful bidder on the conveyance document upon receipt of payment of the successful bid price; and 88 LEASE OF CITYLANDS Page 18 of 30 iii. before the date of the public auction, remove all personal property, remediate any Contamination for which the Lessee is responsible and leave the Premises in a neat and clean physical condition acceptable to the Lessor. c. When selling Lessee-owned Permanent Improvements at public auction for the departing Lessee, the Lessor will establish the terms and conditions of the sale. The Lessor shall pay the Lessee any proceeds of the sale of the Permanent Improvements, less the administrative costs of the public auction and any financial obligation the Lessee owes to the Lessor under this Lease. Payment will be made within a reasonable time after the Lessor completes the sale transaction and receives the proceeds, but not to exceed 60 days. If all or a portion of the Permanent Improvements do not sell at public auction, the Lessee will remove those Permanent Improvements, remediate any Contamination for which the Lessee is responsible and restore the Premises to a clean and neat physical condition acceptable to the Lessor within 60 days after the auction. d. If the Lessee shows good cause to the Lessor and if it is not inconsistent with the best interest of the City of Kenai, the Lessor will grant an extension of time that is sufficient to allow the Lessee to remove or sell Lessee-owned Permanent Improvements, remediate any Contamination for which the Lessee is responsible and to restore the Premises to a clean and neat physical condition acceptable to the Lessor. e. The Lessor will, by written notice, direct the departing Lessee to remove Lessee-owned Permanent Improvements from the Premises, to remediate, consistent with applicable law, any Contamination for which the Lessee is responsible and to restore the Premises to a clean and neat physical condition acceptable to the Lessor if the Lessor determines in writing: i. that the continued presence of the Permanent Improvements on the Premises are not consistent with any written City program or plan required for compliance with applicable federal, state, or local law; ii. that the continued presence of the Permanent Improvements on the Premises is not in the best interest of the City of Kenai; or iii. that the Permanent Improvements present a hazard to public health or safety. 89 LEASE OF CITYLANDS Page 19 of 30 f. The departing Lessee to whom the Lessor has issued direction under Paragraph e of this Section shall comply with the Lessor's direction within 60 days after issuance of the direction and at no cost to the Lessor. If the departing Lessee shows good cause to the Lessor, continues to work diligently to comply with Lessor’s direction, and if it is not inconsistent with the best interest of the City of Kenai, the Lessor will allow in writing a longer period that is sufficient to allow the Lessee to comply with the Lessor’s direction. A departing Lessee who fails to comply with a direction issued by the Lessor under Paragraph e of this Section, shall, within 30 days of being billed by the Lessor, reimburse the Lessor for any costs reasonably incurred by the Lessor, including legal fees and administrative costs, to enforce the Lessor’s direction or to remove and dispose of unremoved Lessee-owned improvements, remediate any Contamination for which the Lessee is responsible and restore the Premises. g. If the departing Lessee does not timely remove or sell the Lessee-owned Permanent Improvements on the Premises in accordance with the requirements of this Section, any remaining Permanent Improvements and any remaining personal property of the departing Lessee will be considered permanently abandoned. The Lessor may sell, lease, demolish, dispose of, remove, or retain the abandoned property for use as the Lessor determines is in the best interest of the City of Kenai. The departing Lessee shall, within 30 days after being billed by the Lessor, reimburse the Lessor for any costs reasonably incurred by the Lessor, including legal and administrative costs, to demolish, remove, dispose, clear title to, or sell the abandoned property and to remediate and restore the Premises. h. After the expiration, termination, or cancellation of the Lease, including any holdover, the departing Lessee loses all right to occupy or use the premises without the express or implied consent of the Lessor. Except as the Lessor notifies the departing Lessee otherwise in writing, the Lessor consents to the departing Lessee's continued use and occupancy of the Premises to diligently accomplish the requirements of this Section. Until the departing Lessee relinquishes possession of and completely vacates the Premises and notifies the Lessor in writing that it has relinquished and vacated the Premises, the departing Lessee shall perform the following as if the lease were still in effect, i. pay rent to the Lessor; ii. maintain the premises; iii. provide the Lessor with evidence of each insurance coverage, if any, required under the Lease; and 90 LEASE OF CITYLANDS Page 20 of 30 iv. cease using the premises other than to diligently accomplish the requirements of this Section, and to comply with the other requirements of the Lease. i. A departing Lessee will not be considered to have relinquished possession and completely vacated the Premises until i. the departing Lessee has: (a) remediated, consistent with applicable law, any Contamination for which the Lessee is responsible; and (b) restored the Premises to a clean and neat physical condition acceptable to the Lessor; and ii. either (a) removed all of the Lessee's Permanent Improvements and personal property from the premises or sold the Permanent Improvements and personal property to a succeeding Lessee under the provisions of this Lease; or (b) transferred title to the Lessee's Permanent Improvements and personal property that remain on the premises to the Lessor. ARTICLE XIII GENERAL COVENANTS A. COSTS AND EXPENSES: Costs and expenses incident to this lease, including but not limited to recording costs, shall be paid by Lessee. B. CARE OF THE PREMISES: The Lessee shall keep the Premises clean and in good order at the Lessee’s own expense, allowing no damage, waste, nor destruction thereof, nor removing any material therefrom, without written permission of the City. At the expiration of the term fixed, or any earlier termination of the Lease, the Lessee will peaceably and quietly quit and surrender the premises to the City. E. CONSTRUCTION APPROVAL AND STANDARDS: Any building construction on the Premises by the Lessee must be compatible with its surroundings and consistent with the uses authorized under this Lease, as determined by the City. The Lessee must obtain the City’s written approval before placing fill material, beginning any land development, or constructing 91 LEASE OF CITYLANDS Page 21 of 30 or demolishing any improvements on the Premises, and before beginning any alterations, modifications, or renovation of existing structures on the Premises. The Lessee must submit to the City detailed drawings of the proposed development, alteration, modification, or renovation, together with specifications or any other information the City reasonably requires. [Include for FAA Restricted Land only]Further, the Lessee will submit to City evidence of the Lessee’s compliance with Federal Aviation Administration regulation 14 CFR Part 77. E. LEASE SUBORDINATE TO CITYFINANCING REQUIREMENTS: Lessee agrees that City may modify this Lease to meet revised requirements for Federal or State grants, or to conform to the requirements of any revenue bond covenant. However, the modification shall not act to reduce the rights or privileges granted the Lessee by this Lease, nor act to cause the Lessee financial loss. F. RIGHT TO ENJOYMENT AND PEACEABLE POSSESSION: City hereby agrees and covenants that the Lessee, upon paying rent and performing other covenants, terms, and conditions of this Lease, shall have the right to quietly and peacefully hold, use, occupy, and enjoy the Premises, except that the following shall not construed as a denial of the right of quiet or peaceable possession: 1. Any inconvenience caused by public works projects in or about the Premises; and 2. Any other entries by the City on the Premises reserved or authorized under other provisions of this Lease. G. NO PARTNERSHIP OR JOINT VENTURE CREATED: It is expressly understood that the City shall not be construed or held to be a partner or joint venture of Lessee in the conduct of the Lessee’s activities or business on the Premises. The relationship between the City and the Lessee is, and shall at all times remain, strictly that of landlord and tenant, respectively. H. DISCRIMINATION: The Lessee will not discriminate on the grounds of race, color, religion, national origin, ancestry, age, or sex against any patron, employee, applicant for employment, or other person or group of persons in any manner prohibited by federal or state law. The Lessee recognizes the right of the City to take any action necessary to enforce this provision, including actions required pursuant to any federal or state law. 92 LEASE OF CITYLANDS Page 22 of 30 I. [Include for FAA Restricted Land only]AFFIRMATIVE ACTION: If required by 14 CFR Part 152, subpart E, the Lessee will undertake an affirmative action program to insure that no person will be excluded from participating in any employment activities offered by the Lessee on the grounds of race, creed, color, national origin, or sex. No person may be excluded on these grounds from participating in or receiving the services or benefits of any program or activity covered by subpart E. The Lessee further agrees that it will require its sub- organization(s) provide assurance to the City to the same effect that they will also undertake affirmative action programs and require assurances from their sub-organization(s) as required by 14 CFR, Part 152, subpart E. Tenant shall use the premises in compliance with all other requirements imposed by or pursuant to title 49, code of Federal Regulations, DOT, Subtitle A, Office of the Secretary, Part 21, Nondiscrimination in Federally-Assisted programs of the Department of Transportation- Effectuation of Title VI of the Civil Rights Act of 1964, and as the Regulation may be amended. J. INTEGRATION, MERGER, AND MODIFICATION: This Lease sets out all the terms, conditions, and agreements of the parties and supersedes any previous understandings or agreements regarding the Premises whether oral or written. No modification or amendment of this Lease is effective unless in writing and signed on behalf of the City and the Lessee. K. RIGHT TO ADOPT RULES: City reserves the right to adopt, amend, and enforce reasonable rules and regulations governing the City, including the Premises. The City shall not be liable to Lessee for any diminution or deprivation of possession, or of Lessee's rights under this Lease, on account of the exercise of the City’s authority reserved under this provision. Furthermore, the Lessee shall not be entitled to terminate the whole or any portion of the leasehold estate created under this Lease, by reason of the exercise of the City’s authority reserved under this provision, unless the exercise thereof so interferes with Lessee's use and occupancy of the Premises as to constitute a termination, in whole or in part, of this Lease by operation of law under the laws of the State of Alaska and of the United States made applicable to the states. L. LESSEE'S OBLIGATION TO PREVENT AND REMOVE LIENS: Lessee will not permit any liens including, but not limited to, mechanics', laborers', or materialmen's liens obtainable or available under the then existing laws, to stand against the Premises or improvements on the Premises for any labor or material furnished to Lessee or claimed to have been furnished to Lessee or to the Lessee's agents, contractors, or sub-lessees, in connection with work of any character performed or claimed to have been performed on the Premises or improvements by or at the direction or sufferance of Lessee. Provided, however, the Lessee shall have the right to provide a bond as contemplated by Alaska law and contest the validity or amount of any such lien or claimed lien. Upon a final determination of the lien or claim for lien, the Lessee will immediately pay any judgment rendered with all proper costs and charges and shall have such lien released or judgment satisfied at Lessee's own expense. M. CONDEMNATION: In the event the Premises or any part thereof shall be condemned and taken for a public or a quasi-public use, then upon payment of any award or compensation 93 LEASE OF CITYLANDS Page 23 of 30 arising from the condemnation or taking, the City and the Lessee shall make a good faith effort to agree upon 1. the division of the proceeds; 2. the abatement in rent payable during the term or any extension of the term of this Lease; and 3. other adjustments as the parties may agree upon as being just and equitable under all the circumstances. If, within thirty days after the award has been paid into Court, the City and Lessee are unable to agree upon what division, abatement in rent, and other adjustments as are just and equitable, the dispute shall be determined by arbitration. N. SUCCESSORS IN INTEREST: This Lease shall be binding upon and shall inure to the benefit of the respective successors and assigns of the parties hereto, subject to such specific limitations on assignment as are provided for in this Lease. O. NOTICES: 1. Any notices required by this Lease must be in writing and must be delivered personally or mailed by certified or registered mail in a prepaid envelope. A mailed notice a. must be addressed to the respective party at the address written on the first page of this Lease or to the latest address designated in accordance with (2) of this Provision (O); and b. shall be deemed delivered on the date it is deposited in a U.S. general or branch post office. 2. The City or the Lessee may, from time to time, designate a new address at which they will receive notices by providing the other party with written notice at least 15 days prior to the effective date of the change. An address change notice must be delivered according to the procedure set out in (1) of this Provision (O). P. RETENTION OF RENTAL: In the event the City terminates this Lease because of any breach by the Lessee, the City shall retain any unused balance of the rental payment last made by the Lessee City as partial or total liquidated damages for the breach. Q. FIRE PROTECTION: The Lessee will take all reasonable precautions to prevent, and take all necessary action to suppress destructive or uncontrolled fires and comply with all laws, regulations, and rules promulgated and enforced by the City for fire protection. 94 LEASE OF CITYLANDS Page 24 of 30 R. PERSONAL USE OF MATERIALS: No interest in coal, oil, gas or any other mineral, or in any deposit of stone or gravel valuable for extraction or utilization is included in the Premises or in the rights granted by this lease. The Lessee shall not sell or remove from the Premises for use elsewhere any timber, stone, gravel, peat moss, topsoil or any other material valuable for building or commercial purposes. S. APPROVAL OF OTHER AUTHORITIES: The granting of this lease by the City does not relieve the Lessee of the responsibility to obtain any license or permit as may be required by federal, state, or local law. T. EXECUTION BY THE PARTIES: This Lease is of no effect unless signed by the Lessee, or a duly authorized representative of Lessee, and an authorized representative of the City. U. CAPTIONS: The captions of the provisions of this Lease are for convenience only and do not necessarily define, limit, describe, or construe the contents of any provision. V. RIGHTS OF CONSTRUCTION: This Lease is intended to make public property available for private use, while at all times protecting the public interest to the greatest extent possible. Following the rule that transfers of interest in public property are to be strictly construed in favor of the public property landlord, all rights granted to the Lessee under this Lease will be strictly construed, and all rights of the City and the protections of the public interest will be liberally construed. W. LESSEE ACKNOWLEDGEMENT: The Lessee acknowledges that the Lessee has read this Lease and fully understands its terms, that the Lessee has been fully advised or has had the opportunity of advice by separate legal counsel, and voluntarily executes this Lease. Lessee also acknowledges and agrees that the rule of interpretation under which a document is construed against the drafter will not apply to this Lease. X. APPROVAL BY LESSOR: Any approval required of the Lessor by this Lease will not be unreasonably withheld. The Lessor’s approval does not waive the Lessee's legal responsibility or liability to comply with all applicable federal and state laws and regulations. ARTICLE XIV SURVEY, IMPROVEMENTS AND PERFORMANCE BOND A. SURVEY: The Lessee is solely responsible, at its sole expense, to confirm or establish the physical location of the boundaries of the Premises prior to beginning any construction thereon, including clearing grubbing, back-filling and environmental sampling. Any survey of the Premises shall be performed by a Land Surveyor registered in the State of Alaska. The Lessee shall furnish the City with a copy of the plat of any survey performed on the Premises by, or on behalf of, the Lessee. B. IMPROVEMENTS: 95 LEASE OF CITYLANDS Page 25 of 30 1. REQUIRED IMPROVEMENTS: At no cost to the City, Lessee agrees to complete land development and construction of Permanent Improvements including ____________________________________________________, by no later than ____________________________, with an aggregate cost of at least $__________________, excluding financing costs. In addition to the as- built drawings required by this Lease, the Lessee must submit to the City written evidence that the Lessee has completed the land development and constructed improvements on the Premises with an aggregate cost or investment of not less than $_____________. The evidence of cost must be submitted to the City within sixty days of the completion of the development and improvements, but by no later than ________________. a. Costs considered toward the aggregate cost of permanent improvements include building construction, design, labor, materials, materials shipping, permits, equipment, soil testing, environmental baseline report, and environmental assessment directly related to the construction; premises and as-built surveys; site preparation, including excavation, geotextile fabric, filling, grading, fill material, gravel, and pavement, remediation of environmental contamination (unless Lessee caused or Materially Contributed To the Contamination); and utility connection costs. b. The cost of Permanent Improvements excludes: 1. work performed by the City and not reimbursed by the Lessee; and 2. work performed by the Lessee and reimbursed by the City. 2. FAILURE TO COMPLETE IMPROVEMENTS: If the Lessee fails to complete the required construction within the time allowed under (b)(1) of this Article, including any extensions granted, the City will execute against and the Lessee will forfeit, any bond or other guarantee given by the Lessee and, as applicable, City will: a. initiate cancellation of the lease; or b. reduce the term of the lease to a period that is consistent with the portion of the required construction timely completed. 3. APPEARANCE: When completed, all improvements on the Premises must be neat, presentable, and compatible with the authorized use of the Premises under this Lease, as determined by the City. 96 LEASE OF CITYLANDS Page 26 of 30 4. CITY APPROVAL REQUIRED: The Lessee must first obtain the City’s written approval before beginning any land development, construction or demolition of any improvements on the Premises, or before beginning any alterations, modifications, or renovation of existing structures on the Premises. The Lessee must submit to the City detailed drawings of the proposed development, alteration, modification, or renovation. [Include for FAA Restricted Land only]Further, the Lessee will submit to City evidence of the Lessee’s compliance with the FAA regulation 14 CFR Part 77. 5. CITY APPROVAL WITHHELD: The City’s approval of any construction, alteration, modification, or renovation will not be withheld unless a. the Lessee fails to demonstrate adequate financial resources to complete the project; b. the project plans, specifications, and agency approvals are incomplete; c. the proposed project would result in a violation of an applicable ordinance, regulation, or law; d. the proposed project would interfere with or is incompatible with the safety, security, maintenance, or operations of the City; e. [Include for FAA Restricted Land only]the proposed project is inconsistent with the Airport Master Plan; f. the proposed project is inconsistent with the terms of the lease, zoning ordinances, or the City’s Comprehensive Plan; g. the project plans do not make sufficient provision for drainage, vehicle, and equipment parking, or for snow storage; or h. the proposed project does not conform to generally recognized engineering principles or applicable fire or building codes. 6. DEMOLITION: Prior to any demolition of any structure(s) on the Premises, Lessee will deliver to City a written scope of work that, at a minimum, lists the structure(s) that are to be demolished and the timeframe for demolition and removal of the debris from the Premises. City will review Lessee’s scope for demolition and issue Lessee written approval for the work to be done. 7. BUILDING SETBACK: No building or other permanent structure may be constructed or placed in violation of the City’s setback requirements. 97 LEASE OF CITYLANDS Page 27 of 30 8. AS-BUILT DRAWINGS: Within sixty days after completion of construction or placement of improvements upon the Premises, the Lessee will deliver to the City a copy of an as-built drawing, acceptable to the City, showing the location and dimensions of the improvements, giving distances to all Premises’ boundaries. If the Lessee constructs underground improvements, the Lessee will appropriately mark the surface of the land with adequate surface markers. The type, quantity, and distance between such markers will be subject to approval of the City. 9. DAMAGE TO IMPROVEMENTS: If Lessee’s improvements on the Premises are damaged or destroyed, Lessee will cause the improvements to be repaired or rebuilt, and restored to normal function within two years following the damage or destruction. If the Lessee fails to timely rebuild or restore the improvements, the City may, at its sole discretion, either reduce the term of this Lease commensurate with the estimated value of the Lessee’s remaining, fully functional improvements on the Premises, or cancel this Lease. 10. DAMAGE NEAR EXPIRATION: If Lessee’s improvements are damaged to the extent that more than 50% of the space is unusable and the damage occurs within five years of the expiration of the term of this Lease, Lessee may remove the damaged improvements, restore the Premises and terminate this Lease. C. PERFORMANCE BOND (Optional): Prior to beginning the construction of permanent improvements required under (1) of this Article, the Lessee shall submit to the City a performance bond, deposit, or other security in the amount of $_______________. The form of the bond or other security shall be subject to the City’s approval. D. SURRENDER ON TERMINATION: Lessee shall, on the last day of the term of this Lease or upon any earlier termination of this Lease, surrender and deliver upon the premises into the possession and use of City without fraud or delay in good order, condition, and repair, except for reasonable wear and tear since the last necessary repair, replacement, restoration or renewal, free and clear of all lettings and occupancies unless expressly permitted by the City in writing, and free and clear of all liens and encumbrances other than those created by and for loans to City. Upon the end of the term of this Lease, including any extension or renewal, or any earlier termination thereof, title to the buildings, improvements and building equipment shall automatically vest in City without requirement of any deed, conveyance, or bill of sale thereon. However, if City should require any such document in confirmation hereof, Lessee shall execute, acknowledge, and deliver the same and shall pay any charge, tax, and fee asserted or imposed by any and all governmental unites in connection herewith. E. NOTICE OF CONSTRUCTION: The Lessee agrees to notify the City in writing three days prior to commencing any construction project valued in excess of $1,000.00 on the Premises. The Lessee agrees to assist in the posting of a notice of non-responsibility and maintenance of the notice on the Premises during construction. Lessee agrees that in the event the Lessee fails to notify the City as required by this Provision (f), the Lessee shall 98 LEASE OF CITYLANDS Page 28 of 30 indemnify the City against any materialmen's liens as defined in AS 34.35.050 which arise as a result of construction on the premises. ARTICLE XV OPTION TO PURCHASE A. At any time during the term of this Lease after construction of the minimum improvements required in Article XIV, the Lessee may purchase the property from the City for fair market value as determined by an appraisal made by a licensed professional appraiser within one year of the purchase. No lease payments or other payments to the City prior to the purchase will be credited towards the purchase price. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands, the day and year stated in the individual acknowledgments below. LESSEE: LESSOR: City of Kenai By: By: Lessee Name Date Paul Ostrander Date Its: Director Its: City Manager ACKNOWLEDGMENTS STATE OF ALASKA ) ) ss. THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this ____ day of _________, 20__, Name: Lessee Name, Director, of____________________________________, being personally known to me or having produced satisfactory evidence of identification, appeared before me and acknowledged the voluntary and authorized execution of the foregoing instrument on behalf of 99 LEASE OF CITYLANDS Page 29 of 30 said corporation. Notary Public for Alaska My Commission Expires: STATE OF ALASKA ) ) ss. THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this ____ day of _________, 20__, Paul Ostrander, City Manager of the City of Kenai, Alaska, being personally known to me or having produced satisfactory evidence of identification, appeared before me and acknowledged the voluntary and authorized execution of the foregoing instrument on behalf of said City. Notary Public for Alaska My Commission Expires: ATTEST: ____________________________ Jamie Heinz, City Clerk SEAL: Approved as to Lease Form: _________________________ Scott Bloom, City Attorney AFTER RECORDING RETURN TO: 100 LEASE OF CITYLANDS Page 30 of 30 City of Kenai 210 Fidalgo Avenue Kenai, AK 99611 101 Proposed Use and Improvements Proposed Use (check one): D Aeronautical IEI Non-Aeronautical Type of Land Use: IEI Commercial D Residential D Industrial D Public/Institutional D Tidelands D Other Do you plan to construct new or additional improvements? (if Yes, answer next 3 questions) DYES C NO 1. What is the estimated value of the improvement? ~ 300,~oo 2. What is the type of improvement?~uilding ~and D Other: 3 . What are the dates construction is estimated to commence and be completed? (Generally within two years) Estimated Start Date: ~~S .\~ \ \ Estimated Completion Date: ~W'l'~c '2..0 '2--3:- If you do not plan to construct new improvements, how does the proposed use benefit the community? 'N(A Describe the proposed business or activity intended: ~\\o.-'"JC> ~ls-~e.s..\~"'"c.· .. ~ How does the proposed purchase benefit the City of Kenai and support a thriving business, residential, recreational, or cultural ".°mmunity? ('l"c.-kS ..,,._ "\''\"',4,-~~ .(:'..,-~'<>':'\..._s, ~oef-\~ v.A-;l.L_ ~~"~"''~ "'"~~,~·\ov-J (\.""\.~l°'-/~vJ-0~~0<~""~1{S u..J\~'tv-.. ~ . Submitting an application to purchase does not give the applicant a right to purchase or use the land requested in the application. If the land is sold in a competitive public sale set in response to this Competitive Land Purchase Application to anyone other than the applicant , the application fee and any deposit m~~ ~ l~praisal or subdivision will be refunded in total to the applicant. If the land is so ld to the appl icant , any deposit, after de u t ng t ity's expenses , will be credited to the purchaser at closing . ' Signature: I)~ I Date: ~(1--%' { '2..D'V'Z- , v Print Name: Aaron Swanson Title: owner For City Use Only: Date Application Fee Received : r,., I i elz.t- Account: 0 General Fund ~Airport Fund Date Appl.ication Determined Complete: Method of Sale (check one): 30-Day Notice Publication Date: 0 Public Auction 0 Over-the-Counter City Council Ordinance : 0 Leased Land with Option to Purchase Account Number: 104 MACSWAIN ASSOCIATES LLC 4401 Business Park Boulevard, Suite 22, Anchorage, Alaska 99503 APPRAISAL REPORT Kenai Lot: 25,144± SF (0.58± Acre) Lot 4, Block 1, Gusty Subdivision Kenai, Alaska \ Date of Value: May 16, 2022 File No. 22-3697 Submitted To: Ryan Foster, Planning Director City of Kenai 210 Fidalgo Avenue Kenai, AK 99611 N Kenai Spur Highway Lot 4 25,144 SF (0.58 Acre) Cohoe Avenue 108 MacSwain Associates LLC 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska 4401 Business Park Blvd., Suite 22 Anchorage, Alaska 99503 Phone: 907-561-1965 Fax: 907-561-1955 s.macswain@macswain.com June 15, 2022 Ryan Foster, Planning Director City of Kenai 210 Fidalgo Avenue Kenai, AK 99611 Re: Kenai Lot: 25,144± SF (0.58± Acre) Lot 4, Block 1, Gusty Subdivision Kenai, Alaska Dear Mr. Foster: We have prepared an Appraisal Report of the above-referenced vacant lot located in Kenai, Alaska. The appraised parcel contains 25,144± square feet or 0.58± acre. The type of value estimated is market value. The property rights appraised is the fee simple estate. The report is prepared in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP). Based on the data, reasoning, and analysis that follows, the market value of the appraised property, as of May 16, 2022, is estimated as follows. ONE HUNDRED TEN THOUSAND DOLLARS $110,000 Your attention is directed to the Assumptions Limiting Conditions of this report located in the addendum. We also direct your attention to the Statement of COVID-19 in the addendum. We hope the appraisal report assists your evaluation of the properties. If you have any questions regarding this report, please contact this office. Respectfully submitted, Steve MacSwain, MAI State of Alaska Certificate No. 42 109 MacSwain Associates LLC 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska Appraiser Certification The undersigned certifies that to the best of their knowledge and belief: ➔ The statements of fact contained in this report are true and correct. ➔ The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions. ➔ We have no present or prospective interest in the property that is the subject of this report, and no personal interest with respect to the parties involved. ➔ We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. ➔ MacSwain Associates, LLC previously performed services as an appraiser on the subject property in September 2021. ➔ Our engagement in this assignment was not contingent upon developing or reporting predetermined results. ➔ Our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. ➔ The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. ➔ The reported analyses, opinion, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. ➔ The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. ➔ Dwayne Roberts with MacSwain Associates, LLC inspected the appraised property on May 16, 2022. Steve MacSwain, MAI has previously inspected the property. ➔ Dwayne Roberts provided significant real property appraisal assistance to the person signing this certification. ➔ As of the date of this report, Steve MacSwain, MAI, is a certified General Real Estate Appraiser in the State of Alaska and has completed the education requirements through June 2023. 110 MacSwain Associates LLC 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska ➔ As of the date of this report, Steve MacSwain, MAI has completed the Standards and Ethics Education requirements for Designated Members of the Appraisal Institute. ➔ As of the date of this report, Steve MacSwain, MAI has completed the continuing education requirements for Designated Members of the Appraisal Institute. ➔ As of the date of this report, Steve MacSwain, MAI is a certified General Real Estate Appraiser in the State of Alaska and has completed the education requirements through June 2023. 6/15/22 Steve MacSwain, MAI State of Alaska Certificate No. 42 Date 111 MacSwain Associates LLC 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska Table of Contents Title Page Transmittal Letter Appraiser Certification Table of Contents Appraisal Summary 1 Chapter 1: Definition of the Appraisal Problem 5 Chapter 2: Kenai Area Analysis and Industry Outlook 9 Chapter 3: Neighborhood Description and Analysis 15 Chapter 4: Site Description and Analysis 17 Chapter 5: Highest and Best Use Analysis 20 Chapter 6: Land Valuation - Sales Comparison Approach 22 Addendum Assumptions and Limiting Conditions Statement on COVID-19 Short Form Agreement Appraiser Qualifications 112 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 1 Appraisal Summary Value Type: Market value Property Type: Commercial Property Rights Appraised: Fee simple estate Location: North side of Kenai Spur Highway between Coral Street and Main Street Loop Road, Kenai, Alaska Legal Description: Lot 4, Block 1, Gusty Subdivision Tax Parcel No: 043-270-14 Physical Address: 11536 Kenai Spur Highway Property Owner: City of Kenai (per KPB) Zoning: Central Mixed-Use District (CMU) Site Description: Nearly-rectangular shaped lot containing 25,144 square feet or 0.58± acre Topography: Partially cleared with some spruce and birch trees, lot is nearly level and at grade with surrounding streets and properties Frontage/Exposure: 120± feet of Kenai Spur Highway frontage and 105± feet of Cohoe Avenue frontage Access: Access via Cohoe Avenue, a gravel road on northern boundary. No improved access from Kenai Spur Highway Utility Service: All public utilities available Soil and Subsurface Conditions: Based on observations of surrounding development, soils appear to be suitable for development. Hazardous Substances: None observed or known, parcel is appraised as if “environmentally clean” Wetland Designation: None Flood Hazard Restrictions: Zone D, an area of undetermined, but possible flood hazard Easements and Restrictions: 20-foot utility easement along north boundary Sale/Lease History: No known sales or leases in the previous three years 113 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 2 Highest and Best Use: Commercial Extraordinary Assumption: None Hypothetical Condition: None Date of Property Inspection: May 16, 2022 Effective Appraisal Date: May 16, 2022 Date of Report: June 15, 2022 Market Value Estimate: $110,000 ($4.37/SF) 114 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 3 Subject Property Photographs Date: May 16, 2022 Taken By: Dwayne Roberts Northeast view of property from Kenai Spur Highway South view of property 115 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 4 Subject Property Photographs Date: May 16, 2022 Taken By: Dwayne Roberts Southeast view of Cohoe Avenue frontage (property on the right) Southeast view of Kenai Spur Highway frontage (property on the left) 116 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 5 Chapter 1: Definition of the Appraisal Problem We prepare an Appraisal Report that analyzes a 25,144± square foot (0.59± acre) vacant lot in Kenai, Alaska. The type of value estimated is market value. The report is intended to comply with the Uniform Standards of Professional Appraisal Practice (USPAP). Market value City of Kenai Assist with a potential sale of the property City of Kenai May 16, 2022 May 16, 2022 June 15, 2022 The appraised property is a vacant lot owned by the City of Kenai. The subject property is located on the north side of Kenai Spur Highway between Coral Street and Main Street Loop Road in Kenai, Alaska. The subject’s physical address is 11536 Kenai Spur Highway and identified as Parcel ID 043-270-14 by the City of Kenai. Overview Value Type Client Intended Use of Appraisal Report Intended User of Appraisal Report Property Inspection Date Effective Appraisal Date Date of Report Identification of Real Estate Appraised 117 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 6 The type of value estimated is market value. Market value is defined as follows. The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: a. buyer and seller are typically motivated; b. both parties are well informed or well advised, and acting in what they consider their own best interests; c. a reasonable time is allowed for exposure in the open market; d. payment is made in terms of cash in US dollars or in terms of financial arrangements comparable thereto; and e. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. 1 We estimate the market value of the fee simple estate, which is defined as follows. Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.2 Per DNR records, the legal description is as follows: Lot 5, Block 1, Gusty Subdivision, Kenai Recording District, Third Judicial District, State of Alaska. 1 Appraisal of Real Estate, Fifteenth Edition (2020), by the Appraisal Institute, p. 49. 2 Appraisal of Real Estate, Fifteenth Edition (2020), by the Appraisal Institute, p. 60. Definition of Market Value Property Rights Appraised Legal Description 118 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 7 Public Records indicate the owner of the appraised property is as follows. City of Kenai 210 Fidalgo Avenue, Suite 200 Kenai, AK 99611 The table below summarizes the historical KPB property assessment for the appraised property. KPB Historical Assessed Value (043-270-15) No known sales or leases in the previous three years. This Appraisal Report develops the sales comparison approach to estimate market value. Neither the cost nor the income capitalization approach reflects market behavior for vacant land. Qualitative techniques are used to measure differences between the comparable sales and the subject. The appraisal report is a summary of the appraisers’ data, analyses, and conclusions with supporting documentation retained on file. Dwayne Roberts of MacSwain Associates, LLC performed the inspection of the appraised property and assisted Steve MacSwain, MAI with data collection and analysis. Steve MacSwain, MAI administered the appraisal process, reviewed draft appraisals, and concurred with an opinion of value. Preparation of this report encompassed the following scope of work that concluded with an opinion of market value. ➔ Inspected the appraised property on May 16, 2022; ➔ Discussed the property with Ryan Foster, Planning Director with the City of Kenai; ➔ Reviewed KPB assessor map 043-270-14; ➔ Reviewed plat 83-126; Property Owner Year Land Improvements Total 2022 $105,300 ($4.10/SF) N/A $105,300 2021 $126,400 ($4.93/SF) N/A $126,400 2020 $120,400 ($4.69/SF) N/A $120,400 Assessed Value Three Year Sale and Lease History Report Type and Methodology Scope of Appraisal 119 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 8 ➔ Reviewed City of Kenai’s Official Zoning Map and zoning codes; ➔ Gathered data from the KPB Assessor’s office and State of Alaska Recorder’s office regarding ownership, assessments, and general property information; ➔ Interviewed Kenai real estate Brokers, agents, and property owners regarding land sales; ➔ Interviewed Kenai market participants regarding current commercial and light industrial land market conditions, trends, and expectations; ➔ Gathered and confirmed information on comparable land sales; ➔ Inspected the primary comparable sales we relied upon in our comparative analysis; and ➔ Applied the sales comparison approach to arrive at a market value indication. We have collected and analyzed market and economic data that projects real estate trends and activity for similar vacant parcels. Discussions with Brokers and analysis of similar property sales indicate that a period of approximately 6-9 months prior to our effective date of value is a reasonable exposure period. Exposure Time 120 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 9 Chapter 2: Kenai Area Analysis and Industry Outlook The appraised property is located in Kenai, Alaska. A demographic and economic summary of the Kenai Peninsula Borough (KPB) and City of Kenai follows. The reader is referred to the map below and on following pages that illustrate the location and assist in the description and analysis. We note that due to lack of funding, the KPB ceased economic and financial publications. Kenai Location Map The Kenai Peninsula Borough is comprised of the Kenai Peninsula and Cook Inlet including areas northeast of the Alaska Peninsula. The borough also includes portions of Chugach National Forest, Kenai Wildlife Refuge, Kenai Fjords National Park, Lake Clark National Park, and Katmai National Park. Encompassing 24,800 square miles, there are 16,000± square miles (65%) of land and 8,700± square miles (35%) of water. Three distinct communities and population centers are established within the Borough. Seward is located at the terminus of the Seward Highway on the Gulf of Alaska coast, Kenai/Soldotna are located on Cook Inlet and surrounding the mouth of the Kenai River, and Homer is located at the terminus of the Sterling Highway on Cook Inlet and Kachemak Bay. A large portion of the Borough population is scattered along the road systems rather than in identifiable cities or communities. Overview Kenai Peninsula Borough Summary Kenai Soldotna Anchorage N 121 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 10 Population Together, Kenai, Soldotna, Nikiski, Salamatof, and Kasilof have the largest population base in the Borough with an estimated 17,000± residents in 2019. Population within the Kenai census area is 7,056 residents and has remained flat over the past two decades. Similarly, surrounding communities have experienced population stability. Employment Borough employment is characterized as relatively diverse with no single dominant industry, with the exception of government. The five industry categories that have the highest economic influence, based on total wages, within the borough are Federal, State, and local government (29%) trade, transportation, and utilities (17%), education and health services (16%), natural resources and mining (11%), leisure and hospitality (6%), and manufacturing (6%). Supporting employment sectors include construction (5%), professional and business services (4%), and financial activities (4%). The table below indicates 2018 Borough wages by industry. KPB Total Wages by Industry (2018) Source: Alaska Department of Labor and Workforce Development, Research and Analysis Section, January – December 2018 Similar to most rural Alaska economies, government is one of the key employment factors. Leisure and hospitality (tourism) remains as a driving economic force of the Kenai Peninsula Borough’s economy. 122 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 11 Both residents and non-residents utilize the Peninsula for its vast fishing, camping, sightseeing, and other recreational opportunities. The visitor industry is cyclical with most activity occurring during summer months. However, sales in the visitor industry are an important source of municipal revenues as both city and borough government use collected sales taxes to support government operations. The oil and gas industry is scattered throughout the Peninsula. Natural gas endeavors marked increases in new exploration projects in Kenai, on the Westside of Cook Inlet as well as lower Kenai Peninsula between Clam Gulch and Ninilchik. However, negative aspects of the industry exist that include closing oil platforms due to poor production levels. Overall, the outlook for Kenai Peninsula Borough’s oil and gas industry is continued steady natural gas exploration and production with stagnant oil efforts. Capital investment in storage development, reserves replacement, and pipeline infrastructure are necessary and pressure exploration cost and development upward. Location Map Kenai is located on the western coast of the Peninsula, and is often associated with Soldotna, which is located 11± miles to the southeast. These two cities have become known as the “twin cities”, sharing an integrated economy, while maintaining their independence. Kenai is a home rule city with a population of 7,056. In the summer months, the area benefits from with tourists fishing the Kenai River. Kenai is also the center for the oil and gas industry on the Peninsula, providing City of Kenai Summary Kenai Cook Inlet Soldotna Kenai River N 123 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 12 services and supplies for Cook Inlet’s oil and natural gas drilling and exploration. Nikiski, which lies north of Kenai, has two refineries established to process oil from the Cook Inlet oil platforms and the Swanson River oil fields. There are numerous oil field support businesses located in the area as well as the refineries. Kenai has the largest airport on the peninsula, the Kenai Municipal Airport, which has regular scheduled flights to/from Anchorage and other communities in the region. The Nikiski industrial district located north of Kenai extends along the shore of Cook Inlet for 1.5± miles and one-mile inland. Despite the relatively small area, the value of industrial development exceeds $1 billion. The Agrium, Inc. nitrogen plant, Tesoro Alaska refinery and former ConocoPhillips LNG export plant are the principal industrial development. The LNG plant ceased operations in 2011, and reopened for intermittent natural gas shipments until 2015. The plant was sold to Andeavor in 2018 for $10M±, a significantly below market price. Agrium merged with PotashCorp in 2018, forming a new company called Nutrien, who currently owns the former Agrium plant. In 2014, Homer Electric Association began generating its own power at the Nikiski Combined Plant, producing 80 megawatts of power. In addition, HEA purchased the Bernice Lake Power Plant from Chugach Electric Association for $12M±. These facilities are primary employers in Nikiski and account for nearly 10% of KPB total employment. As Nikiski remains a hub for power generation in the Kenai Peninsula, we do not anticipate major change to the Nikiski industrial district in the near term. The potential Alaska LNG Project is on the horizon, with optimism remaining on the Kenai Peninsula for eventual construction. The project entails a gas processing plant on the North Slope, an 800- mile gas pipeline and a liquefaction facility in the Nikiski area. Tentatively, the total project cost is estimated at $45B±. To date, 570± acres have been acquired in Nikiski to develop the project. The City of Kenai passed a resolution in December 2018, giving unanimous support to the LNG project; however, this joint venture between the State of Alaska and private oil and gas industry appears to have stalled, with no definite timetable for development. In 2012, ENSTAR Natural Gas Company began injecting natural gas into their new storage facility in Kenai. The Cook Inlet Natural Gas Storage Alaska facility (CINGSA) is Alaska’s first independent gas storage facility with 11 billion cubic feet of capacity. The project cost is estimated at $160M±. Although most oil and gas fields in the Cook Inlet Basin are well past their peak, annual production has not declined significantly in the past 124 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 13 decade. Moreover, smaller independent oil companies are prospecting in the Cook Inlet basin with the intent of using new technology to enhance production profitability. However, the maturing life-cycle of oil and gas production has caused attrition in smaller businesses that support this industry. More importantly, this economic trend has created a market imbalance for industrial and commercial real estate. For example, we observed several smaller industrial or commercial properties that are vacant or abandoned because of contraction in the oil and gas industry. Recent capital investments made by larger energy companies have helped revitalize Kenai Peninsula’s oil and gas sector. Natural gas prices gradually recovered into summer 2014 from their lows in early 2012. Late 2014 to early 2015 saw another downturn in natural gas prices before a mid-2016/17 recovery. After briefly spiking in 4th quarter 2018, natural gas prices trended downward into 2020, where they reached record low prices in March, and again in July due to lack of demand driven by the COVID-19 pandemic. Prices made a slight recovery in the second half of 2020, but continue to remain much lower than the 20-yaer average. If demand for natural gas from Asia and the Lower 48 recovers, additional capital investment in the Kenai Peninsula will become more viable. Expressed in the table below is the U.S. Average Natural Gas Price over the past ten-year period, which has experienced significant volatility. Historical Natural Gas Price ($/MMBTU) Source: macrotrends 125 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 14 Optimism has been created by renewed investment in the Kenai Peninsula. Sale activity remains relatively scarce with assemblage, expansion, or special-purpose use representing the principal components of demand. Short-term uncertainty will likely continue to dampen the Kenai economy, which benefits from anglers and sightseeing tourism. Travel restrictions, and decreasing demand linked to the COVID-19 virus are slowly recovering from 2021 with cautious optimism for continued recovery in 2022. After analysis, we determined that industrial and commercial property values have been relatively stable over the past decade, but have declined from the 1980s peak. Conclusion 126 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 15 Chapter 3: Neighborhood Description and Analysis The appraised land is located just south of the Kenai Municipal Airport and southwest of the Kenai Business District. This chapter will focus on the supply and demand factors of these neighborhoods, which affect the valuation process. Kenai Neighborhood Map The subject neighborhood is bound by the Kenai Airport to the north, the Kenai Spur Highway to the south and east, and the Kenai Business District to the northeast. The Kenai Business District is the commercial core of Kenai. Development includes many types of commercial and industrial uses including big box retailers, strip and enclosed malls, restaurants, convenience stores, small businesses, and airport-related businesses. The Kenai Airport was recently remodeled modernizing the terminal building. Lowes, which was constructed in 2008, closed in 2011. After eight years of vacancy, the property sold to U-Haul in 2019. This City-owned, public-use airport contains a 7,855-foot asphalt paved runway, as well as an additional gravel runway and seaplane basin. Currently, scheduled flight service to Anchorage is available on both Ravn Alaska and Grant Aviation. Development in the immediate neighborhood consists of both aviation and non-aviation related uses. Overview Neighborhood Description N Kenai Airport Subject Kenai Business District 127 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 16 The zoning map below assists in visualizing neighborhood zoning districts. The immediate neighborhood is zoned Central Mixed-Use established to provide a centrally located area in the City for general retail shopping, personal and professional services, entertainment, restaurants, and related businesses. This district is also intended to accommodate a mixture of residential and commercial uses. The CMU Zone shall be designed to encourage pedestrian movement throughout the area. Building and other structures within the district should be compatible with one another and the surrounding area Zoning Map To summarize, the Kenai Business District is the commercial core of Kenai. The neighborhood is well-located and benefits from its proximity to the Kenai Spur Highway, as well as the airport and other commercial districts in the area. The outlook for the neighborhood is favorable as it continues to be a good commercial district for Kenai Summary Light Industrial Airport Light Industrial N Suburban Residential Conservation General Commercial Central Mixed-Use Appraised Parcel 128 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 17 Chapter 4: Site Description and Analysis Analysis of land describes the characteristics that enhance or detract from its utility or marketability. The site description and analysis is based on our property inspection and review of plat 83-126, aerial, Borough and other mapping. The plat map below and aerial mapping on the following pages assist in the description and analysis of the parcel that follows. Plat 83-126 Location: North side of Kenai Spur Highway between Coral Street and Main Street Loop Road, Kenai, Alaska Physical address: 11536 Kenai Spur Highway, Kenai, Alaska Shape and Land Area: Nearly-rectangular shaped lot containing 25,144 square feet or 0.58± acre Access: Access via paved ingress/egress from Kenai Spur Highway on southern boundary and Cohoe Avenue, a gravel road on northern boundary Overview Site Description N Subject Kenai Spur Highway Cohoe Avenue Main Street Coral Street 129 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 18 Zoning: Central Mixed-Use District (CMU) Frontage and Exposure: 120± feet of Kenai Spur Highway frontage and 105± feet of Cohoe Avenue frontage Easements and Restrictions: 20-foot utility easement along north boundary Public Utilities: All public utilities available Topography: Partially cleared with some spruce and birch trees, lot is nearly level and at grade with surrounding streets and properties. GIS Aerial Map (Kenai Peninsula Borough) Soil Conditions: Soils mapped as urban lands, and appear suitable for construction based on surrounding development Wetland Designation: None Flood Hazard: Zone D, an area of undetermined, but possible flood hazard per FEMA N Subject 130 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 19 Environmental Conditions: The existence of any hazardous material or other type of environmental contamination, which may or may not be present on the property, was not observed by the appraisers nor do the appraisers have any knowledge of the existence of such substances. Our value conclusion assumes that the property is free of environmental and hazardous contaminants. Site Utility: The subject site’s positive attributes include good location, size, and access near the Kenai Airport and Downtown Kenai. Overall, physical character makes the site well suited for commercial development. 131 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 20 Chapter 5: Highest and Best Use Analysis Highest and best use is a market-driven concept rather than a subjective conclusion based on the experience of the appraiser or a property owner’s wishes. Economic incentive is the motivation that has a market-effect on the productivity or profitability of the land. The Dictionary of Real Estate Appraisal (Seventh Edition) defines highest and best use as follows. The reasonably probably use of a property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity. A property’s highest and best use as vacant may differ from that as improved. It is the appraiser’s responsibility to analyze each scenario; then identify, explain, and justify the conclusion of each type of use. Per client instructions, the subject property is analyzed as though vacant. Determination of a property’s most profitable use requires analyzing all feasible alternatives. The criteria for testing potential uses as though vacant are legally permissible, physically possible, financially feasible, and maximally productive. The following highest and best use analysis is the foundation of the appraisal process for the subject properties. Physical Possibility: The appraised parcel contains 25,144 square feet or 0.58± acre fronting the Kenai Spur Highway. Highway frontage measures 110± feet, which enhances access, exposure, and development potential. Demand along the Kenai Spur Highway commercial corridor is high when compared to alternative interior commercial locations. Highway frontage and linkage to alternative commercial locations in Kenai are positive characteristics. Legal Permissibility: Although the appraised property is within the City of Kenai, zoning regulations do not generally apply to current ownership because the property remains in restricted status. The subject parcel is zoned Central Mixed Use (CMU) which encourages commercial-type development in a centrally located area in the City of Kenai, primarily for shopping, personal and professional services, entertainment services, entertainment establishments and restaurants and related businesses. The CMU district is also intended to accommodate a mixture of residential and commercial uses, and designed in a manner that encourages pedestrian movement throughout the area. Although certain industrial use are allowed., most within the CMU zone require a conditional use permit to ensure compatibility with Overview Highest and Best Use Analysis As If Vacant 132 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 21 surrounding land uses. We are not aware of any recorded plat restrictions that may affect development potential of the subject property. Financial Feasibility: Physically possible uses permitted are all financially viable. Financially feasible commercial uses include restaurants (both dining and fast food), hotel/motel, retail, and office use. Other commercial uses are possible, which may offer greater risk and lack economic feasibility. In conclusion, the Commercial neighborhood’s location, existing land use trends, and physical characteristics all support commercial development, which we consider to by the highest and best use. The subject’s physical characteristics, surrounding land use, CMU zoning, location, access, etc., encourage commercial development. Based on these factors, the highest and best use, as vacant, is for commercial development. Highest and Best Use: Commercial Highest and Best Use As Though Vacant 133 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 22 Chapter 6: Land Valuation - Sales Comparison Approach The sales comparison approach is a systematic procedure of estimating the subject’s market value by comparing it directly to property sales afforded similar physical and economic character. The approach is founded on the principle of substitution, theorizing value is a function of a knowledgeable investor’s (buyer) intent to pay no more for a specific property than the cost of acquiring an alternative property offering similar utility (economic satisfaction). The sales comparison approach is the best approach for valuing vacant land. Our sales search focused on vacant land with similar physical and economic character to the subject, located in the immediate neighborhood. In order to facilitate a comparative analysis, we expanded our search to include commercial and light industrial properties in other Kenai neighborhoods. These criteria produced five sales that transpired in from 2016 to 2022. The primary land sales we relied upon are listed in the table below. Additional details of the comparables are retained on file. Summary of Primary Land Sales No. Location Zone Sale Date Sale Price Size (SF) $/SF 1 Northeast corner of Trading Bay Road and Main Street Loop CMU 5/22 $300,000 114,497 $2.62 2 Northwest corner of Kenai Spur Highway and Main Street Loop Road (east) CMU 1/20 $605,000 121,091 $5.00 3 Southwest corner of Kenai Spur Highway and S. Forest Drive CG 2/19 $455,000 219,107 $2.08 4 Northeast corner of Kenai Spur Highway and Coral Street CMU 8/18 $180,000 35,851 $5.02 5 Northwest corner of Kenai Spur Highway and Main Street Loop Road (west) CMU 8/16 $170,400 28,520 $5.97 North side of Kenai Spur Highway between Coral Street and Main Street Loop Road (Subject) CMU -- -- 25,144 -- -- Overview Comparative Market Analysis 134 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 23 The elements of comparison that have the greatest influence on market behavior and the price paid for similar land in Kenai is location and physical character, including clearing/grading, frontage/access, and size. Importantly, the subject lot has highway frontage with very good exposure and access. We use a qualitative comparison technique that rates elements of comparison as superior, inferior, or similar. Comparable Land Sales Map Land Sale 1 Land Sale 1 is the May 2022 sale located on the northeast corner of Trading Bay Road and Main Street Loop Road. Northeast of the subject, the irregular-shaped parcel consists of 114,497 square feet. All public utilities are available in the immediate neighborhood. Topography is generally level, and the parcel is partially cleared and developed with a retail strip mall. Zoning is CMU, Central Mixed-Use. The sale was between the City of Kenai and former land lessee who purchased the land underlying the improvements. The sale price of $300,000 indicates a unit value of $2.62 per square foot. By comparison, this sale lacks highway frontage, and no improvements were included in the sale. Size differential and location are inferior to the subject. Overall, Land Sale Elements of Comparison N Subject 3 Kenai Spur Highway Kenai Municipal Airport 4 2 1 5 135 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 24 1 is rated inferior, indicating a unit value greater than $2.62 per square foot for the appraised land. Land Sale 2 Land Sale 2 is the January 2020 sale located on the northwest corner of Kenai Spur Highway and Main Street Loop Road (east), proximate to the Commercial Core of Kenai. Located 1.3± road miles south of the subject, the nearly rectangular-shaped parcel consists of two totaling 121,091 square feet. All public utilities are available in the immediate neighborhood. Topography is generally level, and the parcel is cleared and developed with a motel. Zoning is CMU, Central Mixed-Use. The sale was between the City of Kenai and former land lessee who purchased the land underlying the improvements. The sale price of $605,000 indicates a unit value of $5.00 per square foot. By comparison, this sale is superior for access, inferior for size, and similar to the subject for location with highway frontage near the Kenai Commercial Core. Overall, Land Sale 2 is rated superior, indicating a unit value less than $5.00 per square foot for the appraised land. Land Sale 3 Land Sale 3 is the February 2019 sale located on the southwest corner of Kenai Spur Highway and S. Forest Drive, west of the Kenai Commercial Core. This location is 2.2± road miles southwest of the subject. The nearly rectangular-shaped lot contains 219,107± square feet. All public utilities are available in the immediate neighborhood. Topography is generally level, and the property was cleared and leveled at the time of sale. The property is zoned CG, General Commercial. Originally listed for $499,000, the property sold after 132 days of market exposure. The sellers previously purchased the property in 2007 for $175,000, and subsequently cleared the site. The price appreciation is attributed to passage of time, as well as value added due to clearing and leveling. The 2019 sale price of $455,000 indicates a unit value of $2.08 per square foot. By comparison, this sale is rated inferior for size differential and location. Land Sale 3 is rated inferior, indicating a unit value greater than $2.08 per square foot for the appraised land. 136 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 25 Land Sale 4 Land Sale 4 is the August 2018 sale located at the northeast corner of Kenai Spur Highway and Coral Street, just outside of the Airport Reserve. This location is adjacent to the subject. The irregular-shaped site contains 35,851± square feet. The site is cleared and improved with a commercial building. All public utilities are available in the immediate neighborhood. Zoning is CMU, Central Mixed-Use. Per the plat, no direct Kenai Spur Highway access is permitted, although curb cuts allow for direct physical access. The sale was between the City of Kenai and former land lessee who purchased the land underlying the improvements. The sale price of $180,000 indicates a unit value of $5.02 per square foot. By comparison, this sale has good corner location with highway frontage proximate to the Commercial Core. Land Sale 4 is slightly inferior for size, superior for corner location, physical character and access. Thus, Land Sale 4 is rated superior, indicating a unit value less than $5.02 per square foot for the appraised land. Land Sale 5 Land Sale 5 is the August 2016 sale located on the northwest corner of Kenai Spur Highway and Main Street Loop Road (west) just south of the Airport Reserve and the Commercial Core. The property is located near the subject with superior access and frontage. The nearly rectangular-shaped lot contains 28,520± square feet. All public utilities are available in the immediate neighborhood. The property is cleared and zoned CMU, Central Mixed Use. The property was purchased from the City of Kenai by the land lessee, who owned two small commercial structures on the property. The sale price of $170,400 was based on a 2015 appraisal, with a 20% premium paid. Land Sale 5 is similar in size and superior for location and access indicating a unit value less than $5.97 per square foot for the appraised land. 137 22-3697 – Lot 4, Block 1, Gusty Subdivision, Kenai, Alaska MacSwain Associates LLC 26 Presented below is a rating grid and analysis of the land sales used in comparative analysis. Land Sale $/SF Rank Net Adjustment 5 $5.97 Superior  4 $5.02 Superior  2 $5.00 Superior  Subject -- -- -- -- -- -- 1 $2.62 Inferior  3 $2.08 Inferior  The comparable land sales indicate a value range from $2.08 to $5.97 per square foot. Land Sales 2, 4, and 5 are rated superior indicating a unit value less than $5.00 per square foot. Conversely, Land Sales 1 and 3 are rated inferior indicating a unit value greater than $2.62 per square foot. After comparative analysis and making the necessary adjustments, we conclude with a market value between $4.00 and $4.50 per square foot, which develops the following indicators. 25,144 SF × $4.00/SF = $100,576 25,144 SF × $4.50/SF = $113,148 Based on the preceding analysis, the market value of the appraised land, as of May 16, 2022, is estimated as follows. Market Value Estimate $110,000 (R) Estimated 6 to 12 months Reconciliation of Comparative Market Analysis Marketing and Exposure Time 138 22-3697 – Lot 4, Block 1, Gusty Subdivision Addition No. 1, Kenai, Alaska MacSwain Associates LLC Assumptions and Limiting Conditions This appraisal is subject to the following assumptions and limiting conditions. ➔ No responsibility is assumed for the legal description provided or for matters pertaining to legal or title considerations. Title to the property is assumed to be marketable unless otherwise stated. ➔ The property is appraised free and clear of all liens or encumbrances unless otherwise stated. ➔ The information furnished by others is believed to be reliable, but no warranty is given for its accuracy. ➔ All maps, plot plans, and other illustrative material are believed to be accurate, but are included only to help the reader visualize the property. ➔ It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for obtaining the engineering studies that may be required to discover them. ➔ It is assumed the property is in full compliance with all applicable federal, state, and local environmental regulations and laws unless the lack of compliance is stated, described, and considered in the appraisal report. ➔ It is assumed the property conforms to all applicable zoning, land use regulations, and platting restrictions unless the nonconformity is identified, described, and considered in the appraisal report. ➔ Possession of this report, or a copy thereof, does not carry with it the right of publication. ➔ The appraisers, by reason of this appraisal, is not required to give consultation or testimony or to be in attendance in court with reference to the property in question unless arrangements have been previously made. ➔ Neither all nor any part of the contents of this report shall be disseminated to the public through advertising, public relations, news, sales, or other media without the prior written consent and approval of the appraisers. ➔ The existence of any hazardous material or other type of environmental contamination, which may or may not be present on the property, was not observed by the appraisers nor do the appraisers have any knowledge of the existence of such substances. However, the presence of these substances may affect the value of the property. Therefore, the client is urged to retain an environmental assessment for discovery and evaluation. 139 22-3697 – Lot 4, Block 1, Gusty Subdivision Addition No. 1, Kenai, Alaska MacSwain Associates LLC Statement of COVID-19 This appraisal was performed following public awareness that COVID-19 was affecting residents in the United States. At the time of the appraisal, COVID-19 is having widespread health and economic impacts. The effects of COVID-19 on the real estate market in the subject neighborhood are not yet measurable based on reliable data. The analysis and value opinion in this appraisal are based on the data available to the appraisers at the time of the assignment and apply only as of the effective date indicated. No analysis or opinions contained in this appraisal should be construed as predictions of future market conditions or value. 140 MacSwain Associates LLC 4401 Business Park Boulevard, Suite 22, Anchorage, Alaska 99503 Appraiser: Steve MacSwain, MAI Member of Appraisal Institute - No. 5700 State of Alaska, Certified General Real Estate Appraiser - No. 42 Professional Experience: 1986 to Present - MacSwain Associates LLC 1976 to 1986 - Appraisal Company of Alaska - President 1970 to 1975 - Real Estate Services Corporation – Appraiser 1969 to 1970 - State of Alaska Department of Highways - Right of Way Agent Real estate appraiser and consultant of all property types throughout Alaska including commercial, industrial, subdivisions and special-purpose properties. Appraisals have been performed for financing, leasing, insurance, condemnation, taxation, property damages, investment analysis, and buy-sell decisions. Appraisals include valuation of both real property and business enterprises. Professional experience totals 49 years. Life-long Alaskan resident of Alaskan Native descent. Education: Bachelor of Business Administration, Finance (1969), University of Alaska Fairbanks Appraisal Education: The following is a list of completed appraisal courses and seminars. 2021 – Cool Tools: New Technology for Real Estate Appraisers by the Appraisal Institute 2021 – Desktop Appraisals (Bifurcated, Hybrid) and Evaluations by the Appraisal Institute 2021 – Hot Topics & Myths in Appraiser Liability by LIA Administrators & Insurance Services 2020 – Uniform Standards of Professional Appraisal Practice – Update by the Appraisal Institute 2019 – How Tenants Create or Destroy Value: Leasehold Valuation and its Impact on Value –by the Appraisal Institute 2017 – Appraising Environmentally Contaminated Properties by the Appraisal Institute 2017 – Residential & Commercial Valuation of Solar by the Appraisal Institute 2017 – Right of Way Acquisition for Pipeline Projects by the International Right of Way Association 2015 – Litigation Appraising: Specialized Topics and Applications by the Appraisal Institute 2015 – Business Practices and Ethics by the Appraisal Institute 2013 – Complex Litigation Appraisal Case Studies by the Appraisal Institute 2013 – Uniform Appraisal Standards for Federal Land Acquisitions (Yellow Book) by the Appraisal Institute 2012 – Appraisal Curriculum Overview by the Appraisal Institute 2010 – Reviewing Appraisals in Eminent Domain by the International Right of Way Association 2010 – Commercial Appraisal Engagement and Review Seminar for Bankers and Appraisers by the Appraisal Institute 2009 – The Appraiser as an Expert Witness: Preparation and Testimony by the Appraisal Institute 2009 – Attacking and Defending an Appraisal in Litigation by Whitmer Education 2008 – Uniform Standards of Professional Appraisal Practice by the Appraisal Institute 2007 – Business Practices and Ethics by the Appraisal Institute 2007 – Eminent Domain Law for Right of Way Professionals by the International Right of Way Association 2007 – Appraisal Review for Federal Aid Programs by the International Right of Way Association 2007 – Analyzing Operating Expenses by the Appraisal Institute 1969-2006: Numerous appraisal classes pertaining to principles, income capitalization, cost analysis, sale comparison approach, and highest and best use analysis by the Appraisal Institute, Society of Real Estate Appraisers, International Right-of-Way Association, International Association of Assessing Officers, and Marshall Valuation Service 141 Membership and Organizations: Member of Appraisal Institute – No. 5700, International Right of Way Association (IRWA), and Building Owners and Managers Association (BOMA) Public Service: Past Chairman of the State Board of Certified Appraisers Past Member of Board of Equalization, Municipality of Anchorage, National Experience Review Committee of the Appraisal Institute, and Regional Ethics and Counseling Panel of the Appraisal Institute Past President of Alaska Chapter 57 of the Appraisal Institute Significant Assignments: è Appraised Pacific Spaceport Complex-Alaska (PSCA) land and facilities for Alaska Aerospace Corporation on Kodiak Island. è Appraised proposed LNG Pipeline, a FERC-regulated 860-mile pipeline transporting liquefied natural gas. è Appraised the Trans-Alaska Pipeline System, a FERC-regulated 800- pipeline that transports crude oil from Prudhoe Bay to Valdez, for TAPS ownership. è Appraised remote lands (65,000± acres) owned by three Native corporations damaged by the Selendang Ayu grounding and subsequent oil spill. è Appraised Calais Company, Inc., a real estate holding company consisting of 39 commercial parcels in Anchorage. è Principal real estate consultant and expert witness for all lands affected by the Exxon Valdez oil spill. Project involved over 2,000,000 acres of remote land and nearly 2,000 private property owners. è Appointed as a representative of a three-member panel that analyzed and valued over 1,000,000 acres and 8,000 parcels for the Mental Health Lands Settlement. è Contract assessor for the North Slope Borough, Kodiak Island Borough, City of Nome, and the City of Valdez. è Represented Seibu Alaska, Inc. (Alyeska Resort and Alyeska Prince Hotel) in preparing of their property tax appeal with the Municipality of Anchorage that resulted in a $65 million reduction in assessed value. è Appraised submerged tideland parcels and wetlands parcels located in Womens Bay on Kodiak Island for the purpose of an exchange between Koniag, Inc. and U.S. Fish and Wildlife Service. è Appraised Common Carrier Pipeline right-of-ways leased and operated by BP Transportation Alaska and ConocoPhillips Alaska. è Appraised 3,600 acres consisting of the former Adak Naval Air Station and Submarine Base conveyed to the City of Adak and the State of Alaska. Expert Witness Experience: Steve MacSwain, MAI is qualified as an expert witness in both the United States Federal Court and the State of Alaska Superior Court. Steve has testified as an expert witness in State and Federal courts. In addition, Steve has testified as expert witness in numerous Alaskan municipal tax courts, public hearings, and depositions on matters related to real property. Arbitrator Experience: Appointed a Master by the Superior Court of Alaska and Municipality of Anchorage to serve as an arbitrator in determining just compensation. 142 Kenai City Council - Regular Meeting Page 1 of 3 August 17, 2022 Kenai City Council - Regular Meeting August 17, 2022 ꟷ 6:00 PM Kenai City Council Chambers 210 Fidalgo Avenue, Kenai, Alaska **Telephonic/Virtual Information on Page 3** www.kenai.city Action Agenda A. CALL TO ORDER 1. Pledge of Allegiance 2. Roll Call 3. Agenda Approval 4. Consent Agenda (Public comment limited to three (3) minutes per speaker; thirty (30) minutes aggregated) *All items listed with an asterisk (*) are considered to be routine and non-controversial by the council and will be approved by one motion. There will be no separate discussion of these items unless a council member so requests, in which case the item will be removed from the consent agenda and considered in its normal sequence on the agenda as part of the General Orders. B. SCHEDULED PUBLIC COMMENTS (Public comment limited to ten (10) minutes per speaker) 1. "Introduction to Executive Director" Peter Evon, Executive Director of the Kenaitze Indian Tribe. C. UNSCHEDULED PUBLIC COMMENTS (Public comment limited to three (3) minutes per speaker; thirty (30) minutes aggregated) D. PUBLIC HEARINGS 1. ENACTED WITHOUT OBJECTION. Ordinance No. 3300-2022 - Increasing Estimated Revenues and Appropriations in the General Fund FY22 Budget– Police Department and Accepting Grants from the United States Department of Justice and Alaska Municipal League Joint Insurance Association (AMLJIA) for the Purchase of Ballistic Vests. (Administration) 2. ENACTED WITHOUT OBJECTION. Ordinance No. 3301-2022 - Increasing Estimated Revenues and Appropriations in the General Fund FY22 Budget – Police Department and Accepting a Grant from the Alaska High Intensity Drug Trafficking Area (AK HIDTA) for Drug Investigation Overtime Expenditures. (Administration) 3. ENACTED WITHOUT OBJECTION. Ordinance No. 3302-2022 - Increasing Estimated Revenues and Appropriations in the Water and Sewer Special Revenue and Wastewater Treatment Plant Improvements Capital Project Fund and Authorizing a Construction Agreement and Purchase Order for the Sludge Press Replacement Project. (Administration) 4. ENACTED WITHOUT OBJECTION. Ordinance No. 3303-2022 - Increasing Estimated Revenues and Appropriations in the Water Sewer Special Revenue Fund for Operational Chemical Costs in Excess of Budgeted Amounts. (Administration) 143 Kenai City Council - Regular Meeting Page 2 of 3 August 17, 2022 5. ADOPTED WITHOUT OBJECTION. Resolution No. 2022-61 - Authorizing the City Manager to Extend the Restaurant Concession Agreement in the Kenai Municipal Airport for an Additional Year. (Administration) E. MINUTES 1. *Special Meeting of July 26, 2022. (City Clerk) 2. *Regular Meeting of August 3, 2022. (City Clerk) F. UNFINISHED BUSINESS 1. ENACTED WITHOUT OBJECTION AS AMENDED BY SUBSTITUTE. Ordinance No. 3298- 2022 - Enacting Kenai Municipal Code Chapter 14.30 - Floodplain Management, within Title 14 - Planning and Zoning, to Regulate Land Use within the Flood Plain and Authorizing the City to Participate in the National Flood Insurance Program. (Administration) [Clerk's Note: At the Meeting of August 3, 2022 this Ordinance was Postponed to this Meeting; a Motion to Enact is on the Floor.] • Substitute Ordinance No. 3298-2022 - Enacting Kenai Municipal Code Chapter 14.30- Floodplain Management, Within Title 14-Planning and Zoning, to Regulate Land Use within the Flood Plain and Authorizing the City to Participate in the National Flood Insurance Program. (Administration) G. NEW BUSINESS 1. *Action/Approval - Bills to be Ratified. (Administration) 2. *Ordinance No. 3304-2022 - Increasing Estimated Revenues and Appropriations in the Airport Special Revenue and Airport Improvements Capital Project Funds for Kenai Municipal Airport Disadvantage Business Enterprise Program Updates. (Administration) 3. *Ordinance No. 3305-2022 - Conditionally Granting Certain Foreclosed City-Owned Properties Described as Lots 8 & 11, Block 9 and Lot 4, Block 10, Mommsen’s Replat of Additions No. 1 & 2 (Parcel Numbers 03910211, 03910208 and 03910304) to Central Peninsula Habitat for Humanity, Inc. for Construction of Housing. (Administration) 4. APPROVED WITHOUT OBJECTION. Action/Approval - Purchase Orders Over $15,000. (Administration) H. COMMISSION / COMMITTEE REPORTS 1. Council on Aging 2. Airport Commission 3. Harbor Commission 4. Parks and Recreation Commission 5. Planning and Zoning Commission 6. Beautification Committee 7. Mini Grant Steering Committee I. REPORT OF THE MAYOR J. ADMINISTRATION REPORTS 144 Kenai City Council - Regular Meeting Page 3 of 3 August 17, 2022 1. City Manager 2. City Attorney 3. City Clerk K. ADDITIONAL PUBLIC COMMENT 1. Citizens Comments (Public comments limited to five (5) minutes per speaker) 2. Council Comments L. EXECUTIVE SESSION M. PENDING ITEMS N. ADJOURNMENT O. INFORMATION ITEMS 1. Purchase Orders Between $2,500 and $15,000 The agenda and supporting documents are posted on the City’s website at www.kenai.city. Copies of resolutions and ordinances are available at the City Clerk’s Office or outside the Council Chamber prior to the meeting. For additional information, please contact the City Clerk’s Office at 907-283-8231. Join Zoom Meeting OR https://us02web.zoom.us/j/89147261394 Dial In: (253) 215-8782 or (301) 715-8592 Meeting ID: 891 4726 1394 Passcode: 407724 Meeting ID: 891 4726 1394 Passcode: 407724 145 July Enplanement Report Month RAVN ALASKA GRANT AVIATION Kenai Aviaiton Total 2022 2021 Change from 2021 January 2,882 1,764 4,646 3,389 1,257 February 3,122 1,573 4,695 3,112 1,583 March 3,438 1,911 5,349 4,127 1,222 April 3,430 1,720 5,150 4,035 1,115 May 3,661 1,909 51 5,621 4,464 1,157 June 4,268 2,448 44 6,760 5,953 807 July 6,162 2,682 52 8,896 9,259 -363 August 0 10,035 September 0 6,500 October 0 5,596 November 0 5,803 December 0 5,571 Totals 26,963 14,007 147 41,117 67,844 6,778 Terminal - Vehicle Parking Revenues July FY21 $16,295 FY22 Total $202,020 FY22 $20,847 FY23 YTD $20,874 Ravn 6,162 69.27% Grant 2,682 30.15%Kenai Aviation 52 0.58% July 2022 6,760 0 2500 5000 7500 10000 12500 15000 17500 20000 22500 Vehicle Parking Revenues FY22 FY23 146