DATE: November 14, 2023
SUBJECT:
Title
ORDINANCE GRANTING AMENDMENT NO. 1 TO LEASE WITH SAN DIEGO REFRIGERATED SERVICES, INC., RESOLVING A LEASE INTERPRETATION DISPUTE BY REMOVING CERTAIN REVENUE SHARING OBLIGATIONS OF THE DISTRICT AND, IN EXCHANGE, EXTENDING THE FINAL OPTION TERM BY THREE YEARS
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EXECUTIVE SUMMARY:
San Diego Refrigerated Services, Inc. (SDRS), leases warehouse space from the District on its Tenth Avenue Marine Terminal pursuant to a Lease which commenced in 2015 and expires in 2036, inclusive of options (Clerk Doc. No. 64269) (Lease). The District and SDRS dispute the interpretation of certain Lease provisions covering District crediting SDRS related to cargo which SDRS handles for another District-tenant, Dole Fresh Fruit Company (Dole Revenue Sharing). To resolve this Lease interpretation dispute, staff recommends the Board approve Amendment No. 1 (Attachment A) to the Lease which removes District’s Dole Revenue Sharing obligation and, in exchange, extends the final Lease term option by three years.
RECOMMENDATION:
Recommendation
Adopt an Ordinance granting Amendment No. 1 to Lease with San Diego Refrigerated Services, Inc., resolving a Lease interpretation dispute by removing certain revenue sharing obligations of the District and, in exchange, extending the final option term by three years.
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FISCAL IMPACT:
This action does not have a fiscal impact.
Compass Strategic Goals:
This agenda item supports the following Strategic Goal(s).
• A thriving and modern maritime seaport.
• A Port with a comprehensive vision for Port land and water uses integrated to
• A financially sustainable Port that drives job creation and regional economic vitality.
• Not applicable.
DISCUSSION:
San Diego Refrigerated Services, Inc. (SDRS), leases warehouse space from the District on its Tenth Avenue Marine Terminal pursuant to a Lease which commenced in 2015 and expires in 2036, inclusive of options (Clerk Doc. No. 64269). The District and SDRS dispute the interpretation of certain Lease provisions covering District crediting SDRS related to cargo which SDRS handles for another District-tenant, Dole Fresh Fruit Company (Dole Revenue Sharing). To resolve this Lease interpretation dispute, staff recommends the Board approve Amendment No. 1 to the Lease (Attachment A) which removes District’s Dole Revenue Sharing obligation and, in exchange, extends the final Lease term option by three years. If approved by the Board, execution of Lease Amendment No. 1 will be contingent on the parties also executing a settlement agreement waiving and releasing any claims related to Dole Revenue Sharing for prior years.
General Counsel’s Comments:
The Office of the General Counsel has reviewed and approved this agenda, proposed resolution, and proposed lease aamnedment as to form and legality.
Environmental Review:
The proposed Board action, including without limitation, ordinance granting Amendment No. 1 to Lease with San Diego Refrigerated Services, Inc., resolving a Lease interpretation dispute by removing certain revenue sharing obligations of the District, in exchange, extending the final option term by three years, does not constitute a project under the definition set forth in California Environmental Quality Act (CEQA) Guidelines Section 15378 because there is not a potential to result in a direct or indirect physical change in the environment. Therefore, the proposed Board action is not subject to CEQA and no further action under CEQA is required.
The proposed Board action complies with Sections 21 and 35 of the Port Act, which allow the Board to pass resolutions; and to do all acts necessary and convenient for the exercise of its powers. The Port Act was enacted by the California Legislature and is consistent with the Public Trust Doctrine. Consequently, the proposed Board action is consistent with the Public Trust Doctrine.
The proposed Board action does not allow for development, as defined in Section 30106 of the California Coastal Act, or new development, pursuant to Section 1.a. of the District’s Coastal Development Permit Regulations. The proposed Board action does not involve physical improvements and would clarify an existing financial arrangement. Therefore, issuance of a Coastal Development Permit or an exclusion finding is not required.
Diversity, Equity, and Inclusion Program:
This agenda sheet has no direct DEI impact on District workforce or contract reporting at this time.
PREPARED BY:
Simon M. Kann
Assistant General Counsel,
Office of the General Counsel
Attachment(s):
Attachment A: Lease Amendment No. 1