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Resolution No. 2007-06
SUBSTITUTE Suggested by: Administration CITY OF KENAI RESOLUTION NO. 200'7-05 A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALASKA APPROVING THE LEASE FORM FOR LEASES OF AIRPORT LAND OUTSIDE OF THE AIRPORT RESERVE. WHEREAS, the Kenai Municipal Airport is the owner and lessor of a significant amount of property within the City of Kenai; and, WHEREAS, the City of Kenai has undergone as supplemental planning assessment in order to update airport operations including: planning, finances, accounting, management, and leasing; and, WHEREAS, as part of the supplement planning process airport Land was divided into the Airport Reserve and land outside of the Airport Reserve; and, WHEREAS, those two areas have different rules governing leasing; and, WHEREAS, the procedures for the leasing of airport land outside of the Airport Reserve lands is contained in KMC 21.1.5; and, WHEREAS, KMC 21.15.160(a)(3) states the lease form for land outside of the airport reserve should be approved by the city council by resolution. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, that the lease form for land outside of the Airport Reserve as sho~m on Attachment A is hereby approved by the City Council. PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this 4th day of April, 2007. PAf PORTER, MAYOR ATTEST: ~~ r ~; Carol L. Freas, City Clerk >~~\ :_` theee~of,/ ~Nn~ s~ "(/ifla9e tvit~t a Past, Gc°~ Lvitti a Future" 210 Fidalgo Avenue, Kenai, Alaska 99611-7794 Telephone: (907) 283-7535 /Fax: (907) 283-3014 www.ci.kenai.ak.us MEMORANDUM TO: Mayor Porter and the Kenai City Council FROM:(~~ Cary R. Cn~aves, City Attorney DATE: March 15, 2007 RE: KEDS Airport Lease Comments On March 5, 2007, Rick Koch, Larry Semmens, Rebecca Chronkite and I met with Rick Baldwin and Jason Carroll regarding comments the KEDS group had on the proposed airport leases (both in the reserve and outside of it). Their comments were very helpful and we appreciate the time they took to review and comment on the lease forms. Some of the suggestions have been adopted and are contained in the substitution resolutions. The changes are indicated by the legislative format. Some of the comments did not result in changes. We wanted to provide the Council with a summary of the KEDS comments so you could be familiar with them. L Comments and Changes to the Non-Airport Reserve Land Lease Form (Resolution No. 2007-OS). A. The word "natural" was added before material in Paragraph D.5 in the Third line to reflect the intent is to restrict removal of such things as sand and gravel, etc. B. The second paragraph in Paragraph D. 18 was deleted. That paragraph required lessees to remove buildings on the property at the end of the lease period that the city did not want. The comment was that the clause created a "negative salvage value" in the buildings (i.e. an additional business cost in removing the buildings). They thought that additional costwould be a disincentive for business owners to invest in leased property. C. Part of the first sentence of Paragraph D. 31(a) was deleted. That sentence limited the lessee from mortgaging the leased premises to situations where the financhig money would be used on the property itself The KEDS representative thought that unfairly limited a business owner from using the capital from his investment and discouraged investment in city property. Under the old language an owner of a building on city leased land could not mortgage the premises to use the capital for a different use. Under that provision a lessee couldn't mortgage the building and leasehold interest to acquire capital to start a different business or to pay for catastrophic medical expenses. 2. Comments and Changes to the AirporC Reserve Land Lease Form (Resolution No. 2007- 06). A. The KEDS representatives had a concern that Article II (a)(2) would limit seasonal businesses at the airport because it required businesses Co operate "uninterrupted by any period of closure over 15 consecutive days or 30 aggregate days within any I2-month period." The administration thought the phrase in the first sentence qualifying that requirement by stating, "Unless the City approves otherwise in writing" adequately provided for situations where the city could consent in writing for seasonal operation of a business. B. The phrase "or order of public authority" was added to the last sentence of Article II (a)(2) at the request of the KEDS representatives. That part of the paragraph deals with excused periods from the continuous operation requirement. C. Article II(c)(3) prohibits "outside storage on the Premises ofjunk, salvage aircraft or vehicle parts..." The KEDS representatives thought the limitation of storage of "salvage aircraft" within the airport reserve might limit business opportuiuties at the airport. That phrase was not removed because of the administration's concern over the storage of savage parts at the airport. It was felt an aircraft salvage operation might be a better fit outside of the airport reserve. D. In Article II (c)(5) the word "natural" was added before material as a limitation on what could he removed from Che leased premises. The change was recommended by the KEDs representatives. E. A concern was expressed about the penalty provision in Article IV (f). That section imposes a late payment penalty of 10%. The penalty provision was left in because it is required in the City Code. R The phrase "or in the case of a lease renewal or extension the beginning date of the original lease" was added to Article V(a)(1) to make it clear that a lessee who renews or extends a lease does not have to pay the city for the improvement helshe has made on the property. The change was requested by the KEDS representatives. G. The phrase "for the purpose of interim or permanent financing or refinancing of the Lessee's improvements on the Premises and for no other purpose" was removed per the request of the KEDS representatives. That phrase would limit mortgaging of the leased premises to situations where the money would be used on the premises. A similar requirement was removed from the non-airport reserve lease form also. The requirement was thought to impose a limitation on use of capital that could discourage business development at the airport. H. Language was added to clarify the indemnification language of Article X(a) (1). The added language provides that the indemnification requirement must be "resulting from or arising out of any aces of commission or omission by the Lessee, his/her agents, employees, customers, invitees arising out of the Lessee's occupation or use of the premises demised or privileges granted, and to pay all costs connected therewith. I. The KEDS representatives had some concerns over the $1,000,000.00 commercial. automobile coverage requirement in Article X(b)(2). The administration felt that requirement was reasonable and did not change it. J. The KEDS representatives had eoncems over the ability of the city to increase the insurance requirements of lessees at intervals of five years in Article X(b)(6). They felt it might discourage investment because is might be used unreasonably. The administration felt the limiting language in the section that pegged any increase to "the risks relative to the Lessee's operations, any insurance guidelines adopted by the City and any change in applicable law" adequately protected lessee from arbitrary increases in the insurance requirements. K. Paragraph XII(c)(2) was removed. It is the same "negative salvage issue" that occurred in the non-airport reserve leases regarding the requirement of lessees to remove any buildings not wanted by the city at the end of the lease term. L. In Article XIV(b}(1) the term "appraised value" was substituted for "aggregate cost" in determining the value of improvements on the property. The KEDS representatives thought allowances should be made for a lessee making his own improvements rather than contracting it out. In that situation the "appraised value" of the improvement would be higher that the "aggregate cost." The administration agreed that the better measurement was "appraised value." M. In Article XIV (b) the exclusion of financing costs was removed at the request of the KEDS representatives because that is a real cost of construction. It also was not needed once the term "aggregate cost" was changed to "appraised value." N. Article XIV (e) was deleted and replaced with amended language taken from Paragraph D. 18 of the non-airport reserve lease form. The change was made because of the KEDS representatives concernthat the "negative salvage value" of requiring lessees to remove building from the property at the end of the lease term would deter investment on airport property. O. There was also concern regarding the lease extension provision in KMC 27.10.090(d)(2). That section allows a lessee to apply for a lease extension of one year per $25,000 of additional investment. There was a concern that, for example, a $100,000 investment could not be amortized over the allowed four- year extension. However, the investment could also be amortized over the remaining lease term in addition to the four year investment so that concern may be somewhat mitigated. P. The KEDS representatives also wondered if it would be possible to allow a Lessee to negotiate the right of renewal at the expiration of the lease. The current airport land rules do not grant lessees a right of renewal. Instead they may apply for a lease renewal, but there is no guarantee it will be granted. The suggested change could be done with a code change simIlar to Ordinance 2219-2007. That ordinance was proposed by Councilor Ross and is up for a public hearing on April 4, 2007. It would allow a lessee to negotiate the right to purchase non-airport reserve property at fair market value after completion of the required development. These comments are taken from my notes of the March 5`h meeting. It is certainly possible that some comments or concerns did not get recorded in my notes. We encouraged Rick Baldwin and Jason Carroll to attend the April 4`h meeting to speak to the council about their conceills. Please let me know if you have any comments, suggestions or questions. ATTACHMENT A LEASE OF AIRPORT LANDS - (Outside the Kenai Municipal Airport Reserve)' THIS AGREEMENT, entered into this day of ; 300_, by and between the CITY OF KENAl, 210 Pidalgo Avenue, Kenai, Ala J<a~9611 7794,; nhome-rule municipal corporation of Alaska, hereinafter called "Crty aril ,individually, whose address is ;'hereinafter called "Lessee". That the City, in consideration of Che payments of the rents :and performance of all the covenants herein contained by the Lessee, does hereby demise and lease #o the Lessee the following described property in the Kenai Recording District, Third Judicial Dish~ct, State of Alaska; to wit: Lot, Block ,according to Plat No. A. PURPOSE: The Puzpose for which-the Lease is issued is: B. TERM: Tl3e term of this Lease rs for years, commencing on the _ day of 200_ to the day of Jrine,_ C. REN'T'AL PAYMENT: Subject to the terms of General Covenant No. J of this Lease, rental €or the above-described lai3rl shall be payable as follows: 1. The annual rental. rate shall be 8%n of the fair mailcet value (as set forth and defined in General Covenant No. 9) of the demised premises. The rental effective , 200_, shall be $ pee`year, plus applicable sales tax, based on a value of $ , subject to redetermination pursuant to General Covenant No. 9. 2. ~ Annual renC for Che fiscal year beginning July 1 and ending June 30 shall be payable in advance on or before the first day of July of each year. If the annual rent exceeds $2,400, then the Lessee may opt at the time of the execution hereof or at the beginning of each new Lease year to pay rent in equal monthly installments, payable in advance on or before the first day of July and on or before the first of each month thereafter. LEASE OF KENAI AIRPORT LANDS Lessor: OUTSIDE THE AIRPORT RESERVE -Page 1 of 18 Lessee: Rental for any period that is less Chan one (1) year shall be prorated based on the rate of the last fall year. 4. In addition to the rents specified above, subject to General Covenant No. 9, Lessee agrees to pay to the appropriate parties all levies, assessments, and charges as hereinafter provided: (a) Taxes peilaining to the leasehold interest of the Lessee. (b) Sales tax now enforced or Levied in the future cornpuccd upon rent payable in monthly installments whether rent is paid on a monthly or yearly basis. (c) Lessee agrees to pay all taxes and assessments levied in the futur-e~by the City of Kenai., as if Lessee was considered the legal owner of record-afthe leased property. (d) Interest at the rate of eight percent (8%9)'per annum and ten uercent (10%) penalties of any amount of money owed under tl~i Leasc bvhich is not paid on or before the date it becomes due. (e) Repayment of for Crry constructed improvements pursuant to KMC 21.15.130. Repa}nnent shall be madein yearly payments of plus $%znterest owing on the unpaid balance. The Lessee may pay the entire remaining balance earlier than due. D. GENERALtCOVENANTS: 1. RISES: Except as provided herein, any regular use of Lands or facilities without the written consent of the City-is<~prohibited. This prohibition shall not apply to use of areas designated by the City ~Qr specified public uses, such as passenger terminals, automobile parking areas, and streets. 2 USES NOT CONTEMPLATED PROHIBITED: The promotion or operation of any part.or kind of business or commercial enterprise, other than as specifically set forth herein, upon, in or above airport Lands, without the written consent of the City is prohibited. 3. ASSIGNMENT OR SUBLETTING: Lessee with City's prior written consent, which will not be unreasonably denied, may assign, in whole or in part, its rights as Lessee hereunder. LEASE OP KENAI AIRPORT LANDS Lessor: OUTSIDE THE AIRPORT RESERVE -Page 2 of 18 Lessee: Any assignee of part or all of the leased premises shall assume the duties and obligations of the Lessee as to such part or all of the leased premises. No such assignment, however, will discharge Lessee from its duties and obligations hereunder. 4. COSTS AND EXPENSES: Costs and expenses incident to this lease, including but not limited to recording costs, shall be paid by Lessee. 5. TREATMENT OF DENIISF.: The Lessee agrees to keep t}ie premises clean and in good order at its own expense, allowing no damage, waste,;i~or destruction thereof, nor removing any natural material therefrom, without written permission of the City. At the expiration of the term fixed, or any sooner determinaCion of the Lease, the Lessee will peaceably and quietly quit and surrender the premises to the City. 6. PAYMENT OF RENT: Checks, bank drafts, or postal mone~+ orders shall be made payable to the City of Kenai and delivered to the City Adm~a~istration Building, 210 Fidalgo Avenue, Kenai, Alaska 99611. 7. CONSTRUCTION APPROVAL AND STAN'DA~2DS: Building construction shall be neat and presentable and compatible with its uses`and surroundings. Prior to placing of fill material and/or construction of buildings on a leased area, the Lessee shall submit a plan of proposed development of property fo the~ity, which shall be approved in writing for all permanent improvements. 8. DEFATJLT RIGIIT OE ENTRY: Should default be made in the payment of any portion of the rent or fees wherrdue, or m an}i'of the covenants or conditions contained in the Lease or in any regulations now or hereinaftei`in force, then in such event the City shall by written notice give Lessee thirty, (30) days to cure such default or defaults, after which if the default is not cured, the City may terminate the Lease, reenter and take possession of the premises, and==remove all persons therefrom. 9. RENTESCALATION: In the event this Lease is for a term in excess of five (5) years`; t}te amount of rents or fees specified herein shall be subject to redetermination for increase or decrease based on~the percentage rate (set in C1 above) of fair market value. At each five (5) year interval,the City will have the fair market value determined by a qualified independent appraiser.'No increase or decrease in the amount of rents or fees shall be effective, until after thirty (30) days written notice. Fair Market Value is defined as "the highest price estimated in terms of money which a property will bring if exposed for sale on the open market allowing a reasonable period of time to find a purchaser who buys with knowledge of all the uses to which it is adapted and for which it is capable of being used." This Fair Muket Value will be based on the condition of the land on the date of this Lease plus the value of improvements, if any, made by the City subsequent to the date of this Lease which would affect the value of the property. LEASE OF KENAI AIRPORT LANDS Lessor: _ OUTSIDE THE AIRPORT RESERVE- Page 3 of 18 Lessee: 10. LEASE UTILIZATION: I,cased lands shall be utilized for purposes within the scope of the applicaflon as approved (made a part of this Lease and attached hereto), the terms of the Lease, the terms of the deed under which the land was granted to the City (and any releases pertinent thereto), in conformity with the ordinances of the City and Borough, with Kenai Airport Regulations, and in substantial conformity with the comprehensive plan. Utilization or development for other than the allowed uses shaft constitute a violation of the Lease and subject the Lease to cancellation at any time. Failure Co substantiallycbmplete Che development plan of the land, consistent with the proposed use and term~of the Lease, shall constitute grounds for cancellation. 11. CONDITION OF PREMISES: The prerniseselemised herein a~-e unimproved and are leased on an "as is, where is" basis. I2. UNDE'RLYING TITLE: The interests trans red, or conveyed by this Lease are subject to any and all of the covenants, terms, or conditions contained in the inst7-uments conveying title or other interests to the City. 13. RIGHT OF INSPECTION: City shall have the right at all reasonable times to enter the premises, or any part thereof, for the purposes of inspection. 14. INDEMNIFICATION AND INSURANCE: Lessee covenants to indemnify, defend, save and hold the City, its elected and appointed officials, agents and employees harmless from all actions; suits, liabilities, or damage, or liability of any nature, kind or character, including costs, expenses and attorney' fees resulting from or arising out of any acts of commission ar omission by the Lessee, his agents, employees, customers, invitees, or arising from or out of~the Lessee's occupation, or use of the premises demised, or privileges granted, and to pay all costs connected therewith. Lessee, at the'expense of Lessee, shall keep in force, during the term of this agreement, insurance issued by_res~onsible insurance companies authorized to do business in Alaska, in forms, kinds and amounts as determined and directed by the City for the protection of City andlor Lessee„_ Insurance requirement hereunder shall be subject to the sole determination of the City. All policies or endorsements thereto shall in all cases where possible name City as Additional Named Itasured thereunder and shall contain a waiver of subrogation against the City. All insurance shall be by a company/corporation cun-ently rated "A-" or better by A.M. Best. Upon approval by City of all insurance required, in the forms, kinds and amounts directed to be procured, Lessee shall deliver all policy originals or duplicate originals and endorsements thereto to the City for incorporation within this agreement as attachment thereto. In any event, Lessee is not to commence to exercise any of the rights and privileges granted LASE OF KZ;NAI AIRPORT LANDS Lessor: ____ OUTSIDI/ TI~f? AIRPORT RPSBRVI; -Page 4 oP 18 Lessee: under this agreement until such time as all insurance directed and required to be fiirnished by Lessee is in full force and effect. Lessee expressly understands and ab ees that any insurance protection furnished by Lessee hereunder shall in no way limit its responsibility to indemnify and save harmless Lessor under the provisions of this a~~cement. No policy of insurance shall be cancelled or amended with respec~to the City without thirty (30) days written notice by registered or certified mail to City by the insurance company. Until otherwise directed in writing by the City Manager, Lessee sft~ll provide certificates of insura~lce within thirty (30) days of the date hereof as follows: (a) Commercial General Liability, including all operations, property damage, products and completed operations, and personal injury and death, broad- form conh-aetual, with aper-occurrence limit of not less than $? ,000,000 combined single limit. If this lease authorizes theS.essee to engage in the sale or the commercial dispensing or storage of aviation fuel, the policy must not exclude coverage of the Lessee's fuel handling activities. This policy must name the City as an addtYi~nal insured. (b) Commercial Automobile Coverage with not less than $1,000,000 combined singly limit per,occurrence. This insurance must cover all awned, Erred, and non-ownedmotor vehicles used by Lessee. (c) Workers Compensation insurance. The Lessee will provide and maintain, €or all eipployees, coverage as required under AS 23.30.045, and, where appacable, any offer statutory obligations. The policy must waive subrogation against the City. Notwithstanding anything to the contrary, if Lessee fails or neglects to secure required insurance or if said policy or policies are terminated, altered, or changed in any manner not acceptable to the City then and in that event this lease may be cancelled and terminated, without penalty, on five (5) days written prior notice to Lessee. The City may approve aself-insurance program in lieu of the insm-ance requirements in this section, if the City finds in its sole discretion that such self-insurance program adequately protects the City. The typical amount of insurance coverage required is subject to review and adjustment at the discretion of the City at each five (5) year renegotiation of the tease. LEASE OF KENAI AIRPORT LANDS Lessor: OUTSIDE THE AIRPORT RESERVE -Page 5 o'f 18 Lessee: I5. COLLECTION ON UNPAID MONIES: Any or all rents, charges, fees, or other consideration which are due and unpaid at the expiration of voluntary or involuntary termination or cancellation of this Lease, shall be a charge against the Lessee and Lessee's property, real or personal, and the City shall have such lien rights as are allowed by law. 16. EASEMENT GRANTS RESERVED: City reserves the right to grant anc control easements in or above the land leased. No such grantor easement will?be made that will mv-easonably interfere with the Lessee's use of the land, and Lessee shall have fret access and use of any and all parking and loading rights, rights of ingress and egress riow or hereafter appertaining to the Leased premises. 17. LEASE SUBORDINATE TO FINANCING REQUIREMENTS: Lessee agrees that City may modify this Lease to meet revised requirements for Federal 6r State grants, or to conform to the requirements of any revemie bond covenant. However, the modification shall neither act to reduce the rights or prlvrleges grunt~fl the Lessee by this Lease, nor act to cause the Lessee financial loss. 18. SURRENDER ON TERMINATION: Lessee shad, on the last day of the term of this Lease or upon any earlier termination of this Lease, sun~ender and deliver upon the premises into the possession and use of Ciiy withou fraud or delay in good order, condition, and repair, except for reasonable wear and tear slur restoration or renewal, free and clew- of all lettx by the City in writrng, and free and.~lear of all 1 by and for loans to City. Upon the end of the to renewal, or any earlier termination thereof, title equipment shall automatically vest in City with repair, replacement, s and occupancies unless expressly permitted ;nsand encumbrances other than those created m of this Lease, including any extension or o the buildings, improvements and building ut requirement of any deed, conveyance, or bill of sale thereon. However, if City should re;quir~ any such document in confirmation hereof, Lessee shall execute, a~lrnowledge, and deliver the same and shall pay any charge, tax, and fee asserted or imposed by~any and all governmental units in connection herewith. [PROVIDED, FIOWEVER, THAT LESSEE SHALL RETAlNi TITLE TO AND REMOVE FR9M THE PREMISES AT THE LESSEE'S SOLE EXPENSE, ANY BUILDING, OTI~,R IlVIPRO~?EMENT, OR BUILDING EQUIPMENT THAT THE CITY HAS DETERMINED IN WRITING TO THE LESSEE'S: I) HAS EXCEED ITS USEFUL LIFE; 2) IS DAMAGED BF.,XOND REASONABLE REPAIR; 3) IS A HINDRANCE TO THE FUTURE USE OF THE PREMISES; AND 4) IS OF NEGLIGIBLE VALUE.] 19. AIRCRAFT OPERATIONS PROTECTED: (a) There is hereby reserved to the City, its successors and assigns, for the use u~d benefit of the public, a right of flight for the passage of aircraft in the airspace above the surface and all improvements approved by the Crty of the premises LEASE OE KENAI AIRPORT LANDS Lessor: OUTSIDE THE AIRPORT RESERVE-Page 6 of 18 Lessee: herein conveyed, together with the right to cause in said airspace such noise as may be inherent in the operation of aircraft, now or hereafter used for navigation of or flight in the air, using said airspace for landing at, talang off from, or operating on the Kenai Airport. (When the City approves plans for improvements pursuant to paragraph 7, the City Co the extent of those improvements releases the easement here expressed.) (b) The Lessee by accepting this conveyance expressly representatives, successors, and assigns, that it will not ere erection of any structure or object, nor pcimit the conveyed hereunder, which would be an airport o' established under the Federal Aviation Administi•. amended. In the event the aforesaid covenantis b right to enter on the land conveyed hereunder and structure or object, and to cut the offending tree, a expense of the Lessee or its heirs, successors, or ;roes-for itself, its nor permit the my U-ees on the land within the standards ation, Patt 77, as ched, the City reserves the remove the offendine which shall be at the 20. RIGHT TO ENJOYMENT AND PEACEABLE J'OSSESSIOiVT: City hereby agrees and covenants that the Lessee, upon paying rent and performing other covenants, terms, and conditions of this Lease, shall have the [fight to quietly and peacefully hold, use, occupy, and enjoy the said leased premises, except that any;nconveniencecaused by public works projects in or about the leasehold premises shall not be`construed as a denial of the tight of quiet or peaceable possession. - 21. LESSEE TO PAY TAXES: Lessee shall pay all lawful taxes and assessments which, doting the Cerm hereof may become a lien upon or which may be levied by the State, Borough, City, or anyrother tax levying body, upon any taxable possessory right which Lessee may have ~tioa' to the property by reason of its use or occupancy or the Corms of this lease, provided however, that nothing herern curtained shall prevent Lessee from contesting any increase to such tax or assessment through procedures outln2ed in State statutes. '22. SPECIAL SERVICES: Lessee agrees to pay the City a reasonable charge for any special services or facilities not provided for herein if requested by Lessee in writing, and if the City agrees to provide such services or facilities. 23. `"~ NO PARTNERSffiP 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 business on the demised premises; and it is expressly understood and agreed that the relationship between the pasties hereto is, and shall at all times remain landlord and tenant. LEASP. OF KENAI AIRPORT LANDS Lessor: OUTSIDE THE AII2PORT RESERVE -Page 7 of 1$ Lessee: 24. DEFAULT BANKRUPTCY, ETC.: If the Lessee shall make any assignment for the benefit of creditors or shall be adjudged a bankrupt, or if a receiver is appointed for the Lessee or Lessee's assets, or any interest under this Lease, and if the appointment of the receiver is not vacated within thirty (30) days, or if a voluntary petition is filed tinder Section 18(a) of the Bankruptcy Act by the Lessee, then and in any event, the City may, upon giving the Lessee thirty (30) days' notice, terminate this lease. 25. NONDISCRIMINTATION: The Lessee, for himself, his hems, personal representatives, successors in interest, and assigns, as a pu-t of the consideration hereof, does hereby covenant and as -ee as a covenant running with the land, that: (a) No person on the grounds of race, eolorz or national originshall be excluded from participation in, denied the benefits ©f, or be otherwise subjected to discrimination in the use of said facilities; (b) In the construction of any im~rovenients ofi, over or under such land and the furnishing of services thereon, no person onthe grounds of race, color, or national origin shall be excluded from participation, denied the benefits of, or otherwise be subjected to di§crimination; (c) The Lessee shall use the prerriises in compliance with all other requirements imposed by or pursuant to Tit]e 49, Code of Federal Regulations, Department of Transportation, Subtitle A, Office of the Secretary, Part 21, Nondiscnmmation mFederally assisted Programs of the Department of Transportation-Effectuation of Title I of the Civil Rights Act of 1964, acrd as said Regulations maybe amended: (d) ~n the event facilities are constructed, maintained, or otherwise operated on the said;property-described in this Lease, for a purpose involving the provision of similar scryices or benefits, the Lessee shall maintain and operate such facilities and services in compliance with all other requirements imposed pursuant to Titre 49, Code of Federal Regulations, Department of Transportation, 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 said Regulations may be amended. 26. PARTIAL INVALIDITY: II any term, provision, condition, or part of this Lease is deciu-ed 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 such declaration was not made. LEASE OF KENAI AIRPORT LANDS Lessor: OUTSIDE TIIE AIRPORT RESERVE-Page H of 18 Lessee: 27. MODIFICATLONS: No lease may be modified orally or in any manner other than by an agreement in writing, signed by all parties in interest or their successors in interest. Any such modification shall require Council approval. 28. WARRANTY: The City does not warrant that the property which is the subject of this Lease is suited for the use authorized herein, and no guarantee is given or implied that it shall be profitable or suitable to employ the property to such use. 29. RIGHT TO ADOPT RU'LI;S: City reserves the rigl enforce reasonable rules and regulations governing the demised premises and facilities used in connection therewith. Except incases of emergency hereafter adopted or amended by the City shall become applicable uryless I thirty (30) days notice of adoption or amendment thereof. 30. NON-LIABILITY: City shall nat`l deprivation of possession, or of Lessee's right hereunder,' right or authority as provided in this or the preceding sect terminate the whole or any portion of the leasehold estate reason of the exercise of such rights or authority, unless-the exercise thereof shall sointerfere with Lessee's use and occupancy of the leasehold estate as to consUt~te a terminationin whole or in part of this lease by operation of law in accordance with the lames of the State of Alaska and of the United States made applicable to the states. 31. FINANCING:-- (a) ~FOI3 THE PURPOSE QF INTERIM OR PERMANENT FINANCING OR REFINANCING FROM TIME TO TIME OF TFIE IMPROVEMENTS TO BE PLACED UPON THE LEASED PREMISES, AND FOR NO OTHER PURPOSE,] Lessee, after-giving written notice thereof to the City, may encumber by mortgage, deed of trust, assignment or other appropriate instrument, Lessee's interest in the leased premises and in and to this Lease, provided such encmnbrance pertains only to such leasehold interest and does not pertain to or create any intefest in City's title to the leased premises. If such mortgage, deed of trust, or assignment shall be held by a bank or other established lending or financiaiinstitution (which terms shall include an established insurance company and qualified pension or profit sharing trust) and such institution shall acquire the Lessee's interest in such Lease as a result of a sale under said encumbrance pursuant to a foreclosure or other remedy of the secured party, or through airy transfer in lieu of foreclosure, or through setClement of or arising out of any pending or contemplated foreclosure notion, such lending institution shall have the privilege of transferring its interest in such Lease to a nominee or a wholly owned subsidiary corporation with the prior consent of the City, provided, however, such to adopt, amend, and .d the public areas io rule or regulation ssee'as been given for any diminution of mt of the exercise of any such shall Lessee be entitled to LEASE OF KENAI AIRPORT LANDS Lessor: OLTSIDE THE AIRPORT RESERVE -Page 9 of 18 Lessee_ transferee shall assume all of the covenants and conditions required to be performed by Che Lessee (including payment of any monies owed by Lessee Co the City under the Lease), whereupon such lending institution shall be relieved of any further liability under such Lessee from any default after such transfer. Such lending institution or the nominee or wholly owned subsidiary corporation to which it may have transferred such Lease, or any other lending institution which may at ally time acquire such lease shall be relieved of any further liability under such lease from and after a transfer of such lease. (b) A leasehold mortgagee, beneficiary of a deed of trustmr security assignee, shall have and be subrogated to any and all rights of the Lesseewith respect to the curing of any default hereunder by Lessee. (c) If the holder of any such mortgage, or the beneficiary of any such deed of trust, or the security assignee shall give the City before any default shall have occurred in the Lease, a written notice containing thename and post office address of such holder, the City shall thereafter give tQ'such holder a copy of each notice of default by the Lessee at the same time as any notice of ~lcfault shall be given by the City to the Lessee, and,~Cbe City will not thereafter accept any surrender or enter into any modilicationof this Lease without the'prior written consent of the holder of any first mortgage, beneficial interest under a first deed of bust, or security assignee, in this Lease. (d} If, by reason ofany defauh of the Lessee, either this lease or any extension thereof shall be terminated at the e(e~tion of the City prior to the stated expiration therefor, the City wrll enter into a new Lease with flee leasehold mortgagee for the remai nder of the term, effective as of the date of such termination, at the rent and ~ddi€honal retitrates, and on the terms herein contained, subject to the following conditions: (I) Such mogagee, beneficiary or security assignee shall make written request to the City for such new Lease within twenty (20) days after the date of~such termination and such written request shall be accompanied by ,,a payment to the City of all sums then due to the City under this Lease. (2) Such mortgagee, beneficiary, or security assignee, shall pay to the City, at the time of the execution and delivery of such new lease any and all sums due thereunder in addition to those which would at the time of the execution and delivery thereof be due under this Lease but for such termination, and in addition thereto, any reasonable expenses, including legal and attorneys' fees, to which the City shall have been subjected by reason of such default. LEAST OP KENAI AIRPORT LANDS Lessor: C~tJTSIllE THE AII2PORT RESERVE -Page 10 of 18 Lessee: (3) Such mortgagee, beneficiary, or security assignee shall, on or before the execution and delivery of such new Lease, perform ali the other conditions required to be performed by the Lessee to the extent that the Lessee shall have failed to perform such conditions. (e) If a lending institution or its nominee or wholly ownedsubsidiary corporation shall hold a mortgage, deed of trust, or similar security interest hl and to this Lease and shall thereafter acquire a leasehold estate;'derived either from such instruments or from the City, and if such institution, nominee, or corporation shall desire to assign this Lease or any new Lease obtained finm.the City (other than to a nominee or Co a wholly owned subsidiary cohporation aspermitted by the above provisions) to an assignee who wiii undertalea to perform and observe the conditions in such Lease required to he performed by the Lessee, the City shall not unreasonably withhold its consent to such assignment and assumption, and any such lending institution, nominee, or~ubsidiary shall be relieved of any further liability under such Lease from and after such assignment. If the proposed assignor shall assert that the City is unreasonably withholding its consent to any such proposed assignment, such dispute shall be resolved by arbihation. 32. Lessee agree that each shall comply with all WASTE: City and regulations concerning hazardous chemicals and other hazardous materials; and shall properly store, transfer and use all hazardous chemicals and other hazardous materials and not create any environmental hazards on the lands leased herein. Should~any h~ardaus cherriicals~or hazardous materials of any kind or nature whatsoever, or hazardous wastesto be released by Lessee upon the subject lands during the term of this lease, Lessee shall immediately report such release to the City Manager or other appropriate Gity official and to any other agency as may be required by law, and Lessee shall, at its own cost, assess, contain and cretin up such spilled materials in the most expedient manner allowable by aw. City and Lessee agree to hold harmless and indemnify the other from, and to assume till duties, respiinsibilities and liabilities at the indemnifying party's sole cost and expense (for payment of penalties, sanctions, forfeitures, Losses, costs or damages), for responding to any action, notice, claim, order, summons, citation, directive, litigation, investigation or proceeding which is related to (i) failure to comply with any Local, state or federal statutes, regulations or ordinances pertaining to hazardous chemicals, hazardous materials, hazardous wastes, or any environmental conditions or matters as may now or hereafter be in effect, and (ii) any environmental conditions that arise out of or are in any way related to the condition of the property or activities conducted by the party thereon, unless the environmental conditions are LEASE OF KENAI AII2PORT LANDS Lessor. OUTSIDE TIC AIRPORT RESERVE-Page I 1 of 18 Lessee: caused by the other party. The indemnifications of this paragraph specifically include reasonable costs, expenses and fees incurred in connection with any investigation of property conditions or any clean up, remediation, removal or restoration work required by any governmental authority. As used herein, "hazardous chemicaP' means a chemical that is a physical hazard or a health hazard. As used herein, "hazardous materiaP' means a material or suhstari~e, as defined in 49 C.F.R. 171.8, and any other substance determined by the federal government, the State of Alaska or City of Kenai, to pose a significant health and safety hazard. As used herein, "hazardous waste" means a hazm•dous-waste as ic~ntified by the Environmental Protection Agency under 40 C.F.R. 261, and 2ny otlrer hazardous waste a~ defined by i]re federal government, the State of Alaska or City of Kenai. The covenants and obligations descrt~`ed in this article shall survive the termination of this lease. 33. COMPLIANCE WlI'FI LAWS: Lessee shall comply with all applicable laws, ordinances, and regulations of public authorities now or hereafter in any manner affecting the leased premises or the sidewalks, alleys, streets, and ways adjacent thereto or any buildings, structures, fixtures and improvements or Che use thereof, whether or not any such laws, ordinances, and regulations whtekt may be hereafterenacted~involve a change of policy on the part of the governmental body enacting the same: Lessee agrees to hold City financially harmless: (a) From the consequences of any violation of such laws, ordinances, and/or regulatiarrs; and (b) From all claims'for damages on account of injuries, death, or property damage resulting from such violation. (c)_~ Lessee further agrees it will not permit any unlawful occupation, business, or trtde to be conducted on said premises or any use to be made thereof contrary to any law, ordinance, or regulation as aforesaid with respect thereto, including zoning ordinances, rules and regulations. 34. CARE OF PREMISES: Lessee, at its own cost and expense shall keep the leased premises, all improvements which at any time during the term of this Lease may be situated thereon, and any and all appurtenances thereunto belonging, in good condition and repair during the entire teen of this Lease. LEASE OF KENAI AIRPORT LANDS Lessor: ___.__ OUTSIDE THE AII2PORT RESERVE, -Page 12 of 18 Lessee: 35. SANITATION: The Lessee shall comply with all regulations or ordinances of the City that are promulgated for the promotion of sanitation. The premises of the lease shall be kept in neat, clean, and sanitary condition, and every effort shall be made to prevent the pollution of water. 36. LESSEE'S OBLIGATION 'CO REMOVE LIENS: Lessee will noC permit any liens including, but not limited to, mechanics', laborers', or materialmen'sliens obtainable or available under Che then existing laws, to stand against the leased premises or improvements for any labor or material furnished to Lessee or claimed to have been furnished Co Lessee or to the Lessee's agents, contractors, or sublessees, in connection with work of any character performed or claimed to have been performed on said premises or improvements by or at the direction or sufferance of Lessee, provided, however, Lessee shall have the right o provrde a~~ond as contemplated by Alaska law and contest the validity or amount ofany such lien or claimed lien. On final determination of such lien or such claim for lien, Lessee will immediately pay any judgment rendered with all proper costs and charges anZl hall have such lien released or judgment satisfied at Lessee's own expense. 37. CONDEMNATION: In the event the leap shall be condemned and taken for apublic or aquasi-public use, or compensation arising frmn such condarnnati such abatement in rent payable during the term other adjustments as Che parties may agree upo circumstances. If the City and .essee are unal aw2u-d has been paid into Court, uponwhat dig adjustments are just and equitable, the` dispute 38. shall be premises or any part thereof 'n upon payment of any award ih division of the proceeds, y extension of the termhereof, and such- eingjust and equitable under all the agree within thirty (30) days after such an annual abatement in rent, and other be determined by arbitration. To protect the position of any subtenant(s) hereafter properly obtaining any interests in the leasehold estate granted Lessee hereunder, City agrees thatin the event flf the cancellation, termination, expiration, or sun-ender of this Lease (the ground leasc)> the City will accept the Subtenant, its successors and assigns, as its Lessee for. a period equal-to the full unelapsed portion of the teen of the sublease, including any extensions of renewals thereof, not exceeding fl1e teem of this Lease, upon the same covenants and conditions therein contained, to the extent that said covenants and conditions are not inconsistent with'dny of the terms and conditions of this Lease, provided such subtenant shall make full and complete'atonement to the Ciry for the balance of the term of such sublease so as to establish direct pgvity of estate and conk-act between the City and the subtenant with the same force and effect as though such sublease was originally made directly between the City and such subtenant; and further provided such subtenant agrees to comply with ali the provisions of the ground lease and all the terms of any mortgage, deed of trust, or security assignment to which such leasehold estate is subject, except the payment of rent under the ground lease and the payment of any debt service under any such mortgage, deed of trust, or security assignment. LEASE OF KL~NAI AIRPORT LANDS Lessor: OUTSIDE. T7IE AIRPORT RESERVE -Page 13 of 18 Lessee: 39. 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 a~-e provided for herein. 40. GOVERNING LAW: This indenture of Lease shall be governed in all respects by the laws of the State of Alaska. 41. NOTICES: (a) Any notices required by this Lease shall be in writing aad shall be deemed to be duly given only if delivered personally or mailed by certified or registered mail in a prepaid envelope addressed Co the parties at the address set fozth in the opening parap -aph of this lease unless such ad<Iress'has been changed p~suant to sub-paragraph (b) hereafter, and in that case~shall to the most recent address so changed. Any notice so mailed shall be deemed deliveredon the date iC is deposited in a U.S. general or branch post office. The City shall also mail a copy of any notice given In the Lessee, by registered or certified mail, to any leasehold lender (moregagee, beneficiary of a deed of trust, security assignee) who shall have given the~ity notice of such mortgage, deed of Crust, or security asstgnment. (b) Any such addresses may be changed by an appropriate notice in writing to all other prties.affected provided such change of address is given to the other parties by the means outlined in paragraph (a) above at least fifteen (15) days prior to.tYle gibing of Cl?eparticular notice in issue. 42. RIGT-ITS OFMt~RTGAGEE OR LIEN HOLDER: L7 the event of cancellation pr forfeiture of a lease for cause, the holder of a property recorded mortgage, deed of trust, conditional assignment or collateral assignment will have the option to acquire the Lease for the unexpired term thereof, subject to the terms and conditions as in Che original lease. 43. ENTRY AND RE-ENTRY: In the event that the Lease should be terminated as hereinbefore provided, or by summary proceedings orotherwise, or in the event that the demised lands or any part Chereof should he abandoned by the Lessee during said term, the Lessor or its agents, servants, or representatives may, immediately or any time ChereaFCer, re-enter, and resume possession of said lands or such part thereof, and remove atl persons and property therefrom, either by summary proceedings or by a suitable action or proceeding at law without being liable for any damages therefore. No re-entry by the Lessor shall be deemed an acceptance of a surrender of the Lease. LEASE OF KENAI AII2PORT LANDS Lessor: OUTSIDE THE AIRPORT RESERVE - Pa~*e 14 of 18 Lessee: _ 44. RETENTION OF RENTAL: In the event that the Lease should be terminated because of any breach by the Lessee as herein provided, the rental payment last made by the Lessee shall be retained by the Lessor as partial or total liquidated damages for said breach. 45. WRLTTEN WA1VE'R: The reoeiptoSrent by the of any breach of the Lease by the Lessee, or any defau,it on the pair of t or performance of any of the conditions or covenants of the Lease shall waiver of any provisions of the Lease. No failure on the part of the Lzt covenanC or provision therein contained, nor any waiver of any right th unless in writing, shall discharge or invalidate such covenants or px~vi of the Lessor to enforce the same in the event of any subscei by the Lessor, of any rent or any other sum of money after the the term therein demised, or after the giving of the Lessor of at termination, shall not reinstate, continue, or extend the resultar destroy, or in any manner impair the efficacy of any such notii been given thereunder by the Lessor to the Lessee prior to the lrnowledge observance be deemed to be a to enforce any 7eTer by the Lessor, s, or affect the r7ght or in any manner, of eunder to effect such 'erm therein demised, or of termination as may have ;ceipt;of any such sum of money or other consideration, unless so agreed to in writing and signed by the Lessor. 46. BUILDING AND~ZONING CODESh: Leased lands shall be utilized in accordance with the building and zoning ordinances and rules'and regulations of said authority. Failure to do so shall constitute default. __ ..._ 47. FIREPROTECTION: 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 promaigate~ and enforced by the Ciry for fire protection within the area wherein the leased,premises are located. 48. PERSONAL USE OF MATERIALS: All. coal, oil, gas and other minerals and all depo&its of stone or gravel valuable for extraction or utilization are excepted from the operation of a surface Lease. Specifically, the Lessee of the surface rights shall not sell or remove for use elsewhere any"timber, stone, gravel, peat moss, topsoil or any other matei7al valuable for buiiding,or commercial purposes; provided, however, that material required for the development of the leasehold may be used if its use is first approved by the City Manager. 49. MUTUAL CANCELLATION: Leases in good standing may be cancelled in whole or in part at any time upon mutual written agreement by Lessee and the City Council. 50. UNLAWFUL USE PROI-III3ITED: Lessee shall not allow the leasehold premises to be used for an unlawful purpose. LEASE OP KENAI AIRPORT LANDS Lessor: OUTSIDE THE AIRPORT RESERVE -Page 15 of 18 Lessee: 51. APPROVAL OF OTHER AUTHORITIES: The issuance by the City of leases does not relieve the Lessee of responsibility of obtaining licenses or permits as may be required by duly authorized Borough, State or Federal agencies. 52. REOiTEST TO PURCHASE: If the tract of land proposed to be sold is leased land where the lease sets forth a development schedule, the Lessee may request the sale of said land at not less than fair market value. The current Lessee obtains the rigt~I to requesC a sale only after, to the satisfaction of the City Manager, completed development,as~ defiled in the development schedule that has been incorporated into the lease agreemenC: The decision whether or not to sell the property rests within the sole discretion of the City. 53. NOTICE OF CONSTRUCTION: Lessee agrees to notify tale City in writing three days prior to commencing any construction proJeet valued in excess of $1;{100.00 upon the property. Lessee agrees to assist in the posting of'a notice of non-responsibility and maintenance of the notice upon the property during construction. Lessee agrees ChaC in the event of the Lessee's failure to notify the City as provided above; Lessee shall indemnify the City against any materialmen's liens as defined in AS 34.35.050 which arise as a result of consU-uction upon the premises. IN WITNESS WHEREOF, the par[~es horet4 have hereunto set their hands, the day and year stated in the individual acknowledgments belov~. LESSOR: CITY OF KENAI By: By: (If Lessee is a Corporation) ATTEST: Rick R. Koch City Manager LESSEE: LEASE OF KENAI AIRPORT LANDS Lessor. ___ OUTSIDE THE AIRPORT RESERVE -Page 16 of 18 Lessee: Name Title STATE OF ALASKA ) ss. THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY Chat on this _ day of , X00_, Names Tile: , of , being personally known to me or having produced satisfactory evidence of identification, appeared before me and acknowledged the voluntary and author~Ledexecution of tIle foregoing instrument on behalf of said corporation. i .Notary Public for Alaska My Commission Expires: STATE OF ALASKA _) )ss. THIl2D JUDICIAL DISTRICT J~ THIS IS TO CERTIFY that on this - flay~of , 200_, RICK. R KOCH, City Manager of the City o£_Kenai, Alaska, being personally known to me or having produced satisfactory evidence of identification, appeared before me and acknowledged the voluntary and ~ized execution of the foxegor~aginstrument on behalf of said City. Notary Public for Alaska My Commission Expires: LEASE OF KENAI AIRPORT LANDS Lessor: OUTSIDE THE; AIRPORT RESERVE -Page 17 of 18 Lessee: Approved as to lease form by City Attorney: Approved by Finance Director: Lease approved by Council on Carol Freas, City Clerk U:AMy Docmne~tsVAirporhLFASB PORM for Airprn'r Lands Outside [he Airport Resewe.doc " LEASE OF I~ENAI AIl2PORT LANDS Lessor: OUTSIllE'rHE AII2PORT RESERVE-Page 18 of 18 Lessee: