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HomeMy WebLinkAbout2020-05-12; City Council; Resolution 2020-083RESOLUTION NO. 2020-083 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING GUIDELINES FOR CONSIDERING CITY LEASE RENT DEFERRAL REQUESTS AND APPROVING A CITY LEASE RENT DEFERRAL REQUEST FOR CHAPTERS CAFE WHEREAS, as a result of the COVID-19 pandemic, many city lease tenants are experiencing a decline in their businesses or have been required to temporarily close their Exhibit 1 businesses, in whole or in part, to comply with (a) executive orders, including California Executive Order N-33-20, (b) public health orders from the County of San Diego Public Health Officer, including prohibiting gatherings of 10 or more people and strongly discouraging non-essential gatherings of any size, and (c) all other applicable orders and directives associated with COVID- 19;and WHEREAS, as a result of the COVID-19 pandemic, on April 7, 2020, the City Council created the Ad Hoc City Council Economic Revitalization Subcommittee with the goal of identifying options for economic revitalization due to the COVID-19 emergency for consideration by the full City Council; and WHEREAS, based on recommendations from the Subcommittee, on April 21, 2020, the City Council approved the Economic Recovery and Revitalization Initiative, or ERRI. The ERRI included several measures to support COVID-19 economic response, recovery and revitalization, one of which includes city lessee relief (Resolution No. 2020-068); and WHEREAS, pursuant to the ERRI, staff is recommending that the City Council consider and approve a set of guidelines for considering all city lease rent deferral requests; and WHEREAS, the proposed guidelines in Attachment A are to be utilized by the city manager in considering and making recommendations to the City Council on all city lease rent deferral requests; and May 12, 2020 Item #4 Page 4 of 10 WHEREAS, the guidelines attempt to balance the need for immediate assistance for city tenants, most of whom are struggling with reduced business and closures, with the needs of the city in meeting its fiduciary and legal duties; and WHEREAS, the proposed program provides immediate relief to qualifying city tenants by deferring rent payments for up to a six-month period; and WHEREAS, all rent deferral recommendations from the city manager would need to be approved by the City Council and any rent deferrals granted would require an associated lease amendment or rent deferral agreement that would need to be approved by the City Council; and WHEREAS, the city manager recommends that Chapters Cafe be granted temporary deferral of rent payments for up to six months to be paid back over the balance of the remaining initial lease term, with no interest or late charges, unless the full amount of rent deferral is not repaid by the end of the initial lease term, in which case a 3% compounding interest charge would be applied to the balance of the amount due; and NOW, THEREFORE, ,BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. The above recitations are true and correct. 2. The City Council approves the guidelines in Attachment A for considering city lease rent deferral requests. 3. The City Council authorizes the city manager to negotiate and return to the City Council with a lease amendment or rent deferral agreement for approval that grants Chapters Cafe a temporary deferral of rent payments for up to six months to be paid back over the balance of the remaining initial lease term, with no interest or late charges, unless the full amount of rent May 12, 2020 Item #4 Page 5 of 10 deferral is not repaid by the end of the initial lease term, in which case a 3% compounding interest charge would be applied to the balance of the amount due. PASSED, APPROVED AND ADOPTED at a Regular Meeting ofthe City Council of the City of Carlsbad on the 12th day of May 2020, by the following vote to wit: AYES: NAYS: ABSENT: Hall, Blackburn, Bhat-Patel, Schumacher. None. None. MATT HALL, Mayor ATTEST: May 12, 2020 Item #4 Page 6 of 10 Attachment A GUIDELINES FOR CONSIDERING CITY LEASE RENT DEFERRAL REQUESTS The guidelines attempt to balance the need for immediate assistance for city tenants with the needs of the city in meeting its fiduciary and legal duties. The guidelines are to be utilized by the city manager in considering and making recommendations on all city lease rent deferral requests. All rent deferral recommendations from the city manager would need to be reviewed and approved by the City Council. All rent deferral requests granted would require an associated lease amendment or rent deferral agreement that would need to be approved by the City Council. Minimum Conditions Applicable to All Tenants Seeking Rent Deferral The city manager will analyze tenants independently and balance the following factors on a case- by-case basis in determining whether a recommendation to the City Council for rent deferral relief is appropriate: (1) The tenant is in good standing with the city and is expected to remain a tenant in good standing throughout the term of the lease deferral period. The criteria to determine whether a tenant is in "good standing" are: (i) maintenance of the leasehold in good condition, free of deferred maintenance; (ii) prompt payment history prior to March 4, 2020; (iii) compliance with the non-rent provisions of the current lease, including use provisions, insurance requirements, and regulatory permitting requirements; and (iv) maintenance of accurate financial records that are accessible to the city. (2) The tenant provides evidence demonstrating the need for the rent deferral was caused by the COVID-19 pandemic state of emergency. The evidence may include documents showing the tenant's business was closed or its business operations were modified because of COVID-19 public health orders and the closure or modification resulted in a significant decrease in gross revenues. (3) The long-term viability of the tenant's business. (4) The remaining term on the tenant's lease agreement. (5) Whether the tenant has applied for and received funds from a state or federal aid program for which the tenant qualifies (tena.nts who have applied for state or federal assistance are eligible, but may not also apply to the city for rent deferral to cover costs for which they have already received state or federal assistance). After considering the above factors, the city manager may recommend to the City Council approval of one of the following methods of rent relief: (1) Temporary deferral of rent payments for up to a six-month period to be paid back over a twelve-month period beginning in January of the next calendar year with no interest or late charges. If the full amount of rent deferral is not repaid within 12 months, a three May 12, 2020 Item #4 Page 7 of 10 Attachment A percent (3%) compounding interest charge will be applied to the balance of the amount due. (2) Temporary reduction in rent payments below the rent payment amounts specified in the lease for up to a six-month period fo be paid back over a twelve-month period beginning in January of the next calendar year with no interest or late charges. If the full amount of rent deferral is not repaid within 12 months, a three percent (3%) compounding interest charge will be applied to the balance of the amount due. (3) Temporary deferral of rent payments for up to a six-month period to be paid back over the balance of the remaining initial lease term with no interest or late charges. If the full amount of rent deferral is not repaid by the end of the initial lease term, a three percent (3%) compounding interest charge will be applied to the balance of the amount due. Rent deferral requests beyond 6 months, or from tenants who have already received a temporary rent reduction, will be evaluated by the city manager under these guidelines and a recommendation will be presented to the City Council for its review and consideration. May 12, 2020 Item #4 Page 8 of 10