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HomeMy WebLinkAboutOrdinance No. 2162-2006~~~*~e .~/.~l»~ Suggested by: Administration CITY OF KENAI ORDINANCE NO. 2162-2006 AN ORDINANCE OF THE COUNCIL OF THE CITY OF KENAI, ALAS , AMENDING KMC 11.20.790 TO CHANGE THE ANNUAL MINIMUM RENTAL RA FOR SHORE FISHERIES LEASES TO $3,000. WHEREAS, it is in the best interest of the City of Kenai to red w the fees charged for the leases of tideland leases used primarily for shore fisheri at least every ten years, and, WHEREAS, it is in the best interest of the City of Kena}~to charge a fair rate which reflects the value of the property being leased, and, ~ WHEREAS, a rate of $3,000 annually reflects an ssumed value of $50,000 for a lease at 6% of market value, and, WHEREAS, it is in the best interest of the Ci of Kenai to set lease rates for shore fishery leases independent of the amount c arged by the State of Alaska for similar leases. NOW, THEREFORE, BE IT ORDAINE BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, that KMC 11.20.790 be nded as foliows: 11.20.?90 Tideland leas for shore fisheries. (a) The annual mini m[RENTAL] lease rate for tideland leases used primarily for shore fish ries shall be three [HUNDRED DOLLARS ($300.00)] thousand 3 000 per year. [HOWEVER, SHOULD THE STATE OF ALASKA ET AN ANNUAL LEASE RATE HIGHER THAN THREE HUNDRE DOLLARS ($300.00) FOR SIMILAR TIDELAND LEASES FOR S RE FISHERIES ON LAND OWNED BY THE STATE, THE CITY MAY AMEND THE ANNUAL RENTAL TO A RATE EQUAL TO THAT CHAR D BY THE STATE OF ALASKA.] At least 60 davs prior to shall revie~ the lease rate char ed. Any money owed pursuant to KMC 11.20.15 shall be in addition to the annual minimum set forth above. (b) ~ either KMC 11.20.160 nor KMC 11.20.620(a) shall apply to tidel d leases for shore fisheries. (c) The provisions of KMC 11.20.110 and KMC 11.20.130 requiring appraisals of tideland property shall not apply to leases of tidelands for shore fisheries. However, the survey provisions of KMC 11.20.110 are applicable to shore fishery leases. PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this 17~h day of May 2006. Ordinance No. 2162-2006 Page 2 of 2 PAT PORTER, MAYOR ATTEST: Carol L. Freas, City C1erk Introduced: May 3, 2006 Adopted: May 1'7, 2006 Effective: June 17, 2006 MEMORANDUM To: Ciry Council Thru: Rick Koch, City Manager From: Larry Semmens, Finance Director Date: Apri127, 2006 Subject: Shore Fishery Leases Ordinance 2162-2006 would set fhe lease rate for tideland leases~known as shore fishery teases at ~ $3,000 ~~er year, and would require council review at least every fen ye~rs. It would also remove fhe langua~e tying the 1ease rate to whatever the State of Alaska charges. Alaska bases its fee on die cost of administering the ~rogram, not on the value of the lease. The City of Kenai typically leases land at 6% of fair market value (FMV). FMV for Cidelands may be difficult to deCermine. The Kenai Peninsula Borough does not assess the property and has noC assigned parcel numbers to the individual properties. I talked to a fishing permit broker who told me that the leases are not appraised and the value is always a private inatter decided between the buycr and seller. She was not aware of an appraiser that could help with this determination. It is clear that there is value in the leases of tideland ~~roperty owned by the Ciry. The question is should the CiTy receive a reasonable return on the value? The value of the lease will fluctuate with Yhe price and volume of fish, so I considered using fish caught as the basis for the fee. The problem with this approach is that lease holders may have state leases in proximity Co our leases and it is not possible for them to keep track of which lease a fish was caught on. The simplest way to do this is to keep the flat fee structure, but raise it to a more appropriate level considering the value of the lease. I suggest ~3,000 annually because it is very unlikely that the value of one of Yhese leases would drop to less than $50,000. Mr. Kopp's memo suggests that the value is likely to be around $200,000. One of the owners told me he would be very pleased to sell at that price. If we assume the value is $50,000 or more, a fee of $3,000 is a reasonable return on Yhe assets owned by the citizens of Kenai. Due to the infrequenC renewal of these leases, a review of the lease rate prior to renewal is prudent. iVlosY other leased properties require appraisals every five years with Iease rates adjusted accordingly.