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16 - COX FIELD GROUND LEASEItem No. 16 memorandum TO: Mayor & City Council FROM: John Godwin, City Manager SUBJECT: COX FIELD GROUND LEASE DATE: February 1, 2016 BACKGROUND: For the last few months I have worked with the airport advisory board to revise, modernize, and streamline the existing base ground lease document. This lease is used to provide spaces at Cox Field for construction of privately owned and operated aircraft hangars. The board reviewed a draft in December, and adopted a final version prepared and recommended by city staff at its January meeting. STATUS OF ISSUE: The attached ground lease for hangar construction, use, and maintenance is shorter than the older version, yet contains additional restrictions to help ensure appropriate airport related uses and proper levels of maintenance. This new document is wholly consistent with the new lease policy adopted by the council in October, and is unanimously recommended for approval by the airport advisory board. BUDGET: NA. RECOMMENDATION: Approve new ground lease document. AIRPORT GROUND LEASE AGREEMENT THE STATE OF TEXAS § COUNTY OF LAMAR § KNOW ALL MEN BY THESE PRESENTS This Lease Agreement (AGREEMENT) is made by and between the City of Paris, Texas, a home rule municipal corporation (LESSOR) and (LESSEE). For and in consideration of the construction of a new airplane hangar(s) and related improvements, as further described herein, and for the payment of monthly ground lease rental to LESSOR, LESSOR does hereby lease, rent, and let unto LESEE that portion of Cox Field real property as described in Exhibit A, attached hereto and made a part hereof. LESSEE hereby leases said real property from LESSOR subject to the terms, covenants, and conditions state below, and shall have the right and privilege to construct and maintain certain improvements of said property. LESSEE accepts property "as is." Except to the extent provided herein and subject to the provisions hereof, LESSEE shall have and hold the leased premises, together with all rights, privileges, easements, appurtenances, and immunities belonging to or in any way appertaining to said leased premises, including, but not limited to, any and all easements, rights, title and privileges of LESSOR now or hereafter existing in, to, or under said leased premises, and additionally LESSEE shall be permitted to use in common with others all streets and other rights of ingress and egress and all runways, taxiways and designated aprons which are or may hereafter be provided at the Airport. LEASE TERMS: 1. Subject to the provisions contained herein, LESSEE shall pay to LESSOR an annual ground lease payment of $0.20 per square foot, to be paid in advance, beginning on the commencement date of this lease and continuing regularly thereafter during the term of this lease and any extensions thereof. At its sole option, LESSEE may prepay any of the rental installments. 2. Rental rates maybe adjusted by LESSOR at the end of each five -year lease period, computed according to the Consumer Price Index (CPI) for Dallas -Fort Worth, Texas, or other rates prevailing in the Paris area for similar facilities. 1 3. Should LESSEE fail to make payments in a timely manner, a late penalty of 10% shall be assessed beginning on the tenth calendar day after the due date. Should payments remain past due for more than thirty (30) days, AGREEMENT is in default and may be terminated, as provided herein below. 4. In order to encourage development of the Airport by providing sufficient time for investors to amortize their investments, the term of this AGREEMENT shall be forty (40) years. This lease may be extended by Lessee for an additional five (5) year period, provided all requirements of this agreement have been met; Lessee owes no taxes, fees, or penalties to the City of Paris; and LESSEE makes known its desire to extend the lease no later than six months before expiration of the AGREEMENT. IMPROVEMENTS: 5. LESSEE shall have the right at any time and from time to time during the term of this lease, to erect, maintain, alter, remodel, reconstruct, rebuild and replace buildings and other improvements on the leased premises, and correct and change the contour of the leased premises as necessary. 6. The full expense of any such construction, reconstruction, demolition, or any change, alteration or improvements shall be borne and paid by LESSEE. 7. No new structure or other improvement, nor any material addition to, or alteration of, any building or structure shall be commenced unless and until plans, specifications, and proposed location(s) have been submitted to and approved by LESSOR. Said plans and specifications shall be prepared by LESSEE, at its own expense, at least thirty (30) days prior to the planned commencement of such project. 8. LESSOR shall, in a timely manner, review and approve the plans or note in writing any required changes or corrections that must be made to the plans. Any required changes or corrections must be made and the plans resubmitted to LESSOR within thirty (30) days after the corrections or changes have been noted. Failure of LESSOR to object to such resubmitted plans and specifications within thirty (30) days shall constitute LESSOR's approval of the changes. 9. Minor changes in work or materials not affecting the general character of the building project, minor repairs and alterations as may be necessary to continue the structures and improvements already placed in a useful state of operation, and changes and alterations that may be required by an authorized public official having authority or jurisdiction over such structures or improvements in order to comply with legal requirements, shall not require submission to and approval by LESSOR of plans and specifications. 10. The approval by LESSOR of any plans and specifications refers only to the conformity of such plans and specifications to the general architectural plan for the leased premises and compliance with all applicable codes and ordinances, and such approval shall not be withheld unreasonably. Such plans and specifications are not approved for architectural or engineering design, and by approving such plans and specifications LESSOR assumes no liability or responsibility therefor or for any defect in any structure constructed from such plans or specifications. 11. Construction of improvements shall be conducted in full conformance with the City's Building Codes and other pertinent ordinances, including the payment of all building inspection fees or other fees associated with construction, and with Federal Aviation Administration and Texas Department of Transportation standards and requirements. 12. Any and all improvements constructed shall be consistent with the purposes provided for in this AGREEMENT and contribute to furthering the City of Paris's Airport Master Plan or airport development objectives. 13. LESSEE shall require all contractors and sub - contractors to maintain general commercial liability and workers' compensation insurance, or in lieu thereof provide such coverage itself. 14. All improvements shall be substantially complete within eighteen (18) months of execution of AGREEMENT. Failure to timely complete construction of the hangar shall be considered a breach of the lease agreement and subject the tenant to all customary remedies for such breach, including termination. In the event that construction has commenced, but will not be completed in a timely manner, LESSEE may apply to LESSOR for an extension of time, said application to include an approved construction timing plan. LESSOR is under no obligation to grant the extension in the absence of the valid excuse, but such extension will not be unreasonably withheld. 15. LESSEE shall provide as -built plans to LESSOR for all improvements made during the term of this AGREEMENT. 16. LESSEE shall not erect, paint upon, attach, exhibit or display in, on, or about said leased premises any sign without the prior written consent of LESSOR. 17. All permanent building and improvements placed upon the leased premises by LESSEE shall become the ad property of LESSEE, and will be classified for ad valorem tax purposes as property belonging to LESSEE; provided, however, that LESSOR shall not have the right to alter or destroy any of such improvements except through authorized condemnation procedures, and LESSEE shall have the full and peaceful use and enjoyment thereof during the primary term of this lease. All permanent improvements shall become the property of LESSOR upon the termination of the initial forty (40) year period of AGREEMENT, without compensation to LESSEE. MAINTENANCE & USE 18. LESSEE shall, at its own cost and expense at all times during the term of AGREEMENT, to keep and maintain property and facilities in good condition and repair, reasonable wear and tear alone excepted, complying with all fire, building, and property maintenance codes and zoning regulations now in force, or that may be hereafter enacted with regard to the use of the airport premises, maintaining roofs and walls free from leaks and damage, painting as necessary to prevent and retard rusting and to enhance appearance as the original finishes deteriorate, and maintaining property clear of clutter, junk, weeds and high grass. 19. LESSEE shall conduct its operation and maintain the leasehold in such a manner as to be free of environmental contamination, and shall neither fuel nor defuel any aircraft inside any hangar. 20. LESSEE shall not cause or permit any use or activity that would create a hazardous condition for aircraft operating at the airport. 21. LESSEE shall pay or cause to be paid all charges for water, gas, electricity, sewer, cable, and any and all other utilities used on the leased premises throughout the term of AGREEMENT, including connection fees. 22. The primary purpose for which the leased premises have been leased is for the development and construction of an airplane hangar to be used for the storage of airplanes and related aeronautical equipment and other items of personal property pertaining to that use and owned by the LESSEE. In addition to the provisions and limitations set forth below, LESSEE shall have the right to use the leased premises for lawful purposes of private use only which are related to aviation or the aviation industry, in conformance with the requirements of the City's master plan, and in such a manner so as not to materially and adversely affect the development and improvement, operation, or maintenance of the airport. 23. No hangar shall be used as a residence or shall be used for residential purposes. However, such facilities as a sink, bathroom, or associated features to provide for periodic temporary overnight stays or social uses within a portion of the hangar shall be permitted. 24. No commercial activity is authorized unless it is first approved by the Paris City Council. 25. LESSEE shall at no time use or permit the use of leased premises in a manner contrary to federal, state, or local laws, ordinances, rules, or regulations. 26. LESSOR possesses the right to periodically inspect improvements and in no case less often than annually, accompanied by LESSEE, to ensure all use requirements, including those relating to use, are being met. 27. LESSEE shall be responsible for all taxes, if any, including without limit sales, use and excise taxes, ad valorem taxes or other similar taxes, taxes on personal property, and other charges of every description which are levied on or assigned against the leased premises, which maybe assessed upon the hangar and other improvements, or any other equipment or property associated with the hangar. 28. LESSEE may, at any time and from time to time, encumber the leasehold interest, by deed of trust, mortgage or other security instrument, without obtaining the consent of LESSOR, but no such encumbrance shall constitute a lien on the fee title of LESSOR, and the indebtedness secured thereby shall at all times be and remain inferior and subordinate to all the conditions, covenants and obligations of this lease and to all of the rights of the LESSOR hereunder. INDEMNITY & INSURANCE: 29. LESSEE COVENANTS AND AGREES TO INDEMNIFY AND DOES HEREBY INDEMNIFY, HOLD HARMLESS AND DEFEND CITY, ITS OFFICERS, AGENTS, SERVANTS AND EMPLOYEES, FROM AND AGAINST ANY AND ALL CLAIMS OR SUITS FOR PROPERTY DAMAGE OR LOSS AND /OR PERSONAL INJURY, INCLUDING DEATH, TO ANY AND ALL PERSONS, OF WHATSOEVER KIND OR CHARACTER, WHETHER REAL OR ASSERTED (INCLUDING, WITHOUT LIMITATION, REASONABLE FEES AND EXPENSES OF ATTORNEYS, EXPERT WITNESSES AND OTHER CONSULTANTS) ARISING OUT OF OR IN CONNECTION WITH, DIRECTLY OR INDIRECTLY, THE NEGLIGENT OR OTHERWISE WRONGFUL ACTS OR OMISSIONS OF LESSEE, ITS AGENTS, SERVANTS, CONTRACTORS, OR EMPLOYEES IN CONNECTION WITH THE DESIGN, CONSTRUCTION OR INSTALLATION OF THE IMPROVEMENTS, INCLUDING BUT NOT LIMITED TO INJURY OR DAMAGE TO CITY PROPERTY. SUCH INDEMNITY SHALL SURVIVE THE TERM OF THIS AGREEMENT. THERE IS NO JOINT ENTERPRISE BETWEEN LESSOR AND LESSEE. 30. During the period of construction of any building or other improvement on the leased premises and at all times thereafter during the lease term, LESSEE shall keep the improvements insured against loss or damage by fire, with extended coverage endorsement or its equivalent, in such responsible insurance companies as LESSEE shall select and LESSOR shall approve, and in amounts not less than 80% of the fair insurable value of the buildings and other improvements. 31. In the event any building or improvement constructed on the leased premises is damaged by fire or any other casualty, regardless of the extent of such damage or destruction, LESSEE shall within one year from the date of such damage or destruction commence the work of repair, reconstruction or replacement of damage or destroyed building or improvement and prosecute the same with reasonable diligence so that the building, to the extent originally constructed by LESSEE, shall be restored to substantially the condition it was in prior to the happening of the casualty, provided, however, that if the commencement, construction or completion of said repair, reconstruction or replacement work shall be prevented or delayed by reason or war, civil commotion, acts of God, strikes governmental restrictions or regulations, or interferences, fire or other casualty, or any other reason enumerated or not, the time for commencing or completing, or both, of the construction of said building, as the case may be, shall automatically be extended for the period of each such delay. 32. LESSEE shall maintain, during the life of AGREEMENT, general liability coverage with minimum limits for damages resulting from bodily injury or death of $250,000 per person and $500,000 per occurrence, and $100,000 per occurrence for property damage, or a combined single limit of $500,000, or in such other amounts mutually agreed upon to fully and reasonably protect both LESSEE ad LESSOR. LESSOR shall be named as an additional insured with a waiver of subrogation in favor of LESSOR. All costs of such insurance shall be borne by LESSEE. Such insurance policy or policies must be issued by a reputable provider licensed to write such policies in the State of Texas. DEFAULT & TERMINATION: 33. Should LESSEE default in the performance of any covenant or condition in AGREEMENT, and such default is not corrected within thirty (30) days after receipt of written notice from LESSOR to LESSEE, LESSOR may declare AGREEMENT, and all rights and interest created by it, to be terminated. Upon LESSOR electing to terminate, AGREEMENT shall cease and come to an end as if that were the day originally fixed herein for the expiration of the term hereof. LESSOR, its agent or attorney, may resume possession of the premises and release LESSEE of all liability or relet the same for the remainder of the term at the best rent LESSOR, its agent or attorney may obtain for the account of LESSEE, who shall make good any deficiency 34. Any termination of this lease as herein provided shall not relieve LESSEE from the payment of any sum or sums that shall then be due and payable to LESSOR hereunder, or any claim or damages then or theretofore accruing against LESSEE hereunder, and any such termination shall not prevent LESSOR from enforcing the payment of any such sum or sums or claim damages by any remedy provided for by law or from recovering damages from LESSEE for any default thereunder. No termination shall relieve LESSEE of the obligation to deliver and perform on all outstanding obligations and requirements prior to the effective date of the termination. 35. In the event of the failure on the part of LESSEE upon termination of AGREEMENT to immediately remove from the leased premises all property owned by it, LESSOT may effect such removal and store such property at LESSEE's expense. 36. LESEE shall pay and discharge all reasonable costs, attorney's fees, and expenses that may be incurred by LESSOR in enforcing the covenants and conditions of AGREEMENT. 37. Notwithstanding the foregoing, no failure to perform or delay in performance which is caused by any war, civil disorder, or other national emergency or which is due to an intervening act of God shall be deemed an event of default during the pending force majeure event. 38. Tenants of hangars which are built by LESSEE as consideration for a long -term ground lease shall be given the right -of- first - refusal for the lease of such hangar upon the termination or expiration of the initial lease, the rental rate for such hangars to be determined as set out herein. RESERVED TO LESSOR: 39. Nothing herein contained shall be construed to grant or authorize the granting of an exclusive right except as to the premises leased herein. 40. LESSOR reserves the right to further develop or improve the landing area of the airport as it sees fit, regardless of the desires or view of LESSEE, including the temporary closing of the airport, and the granting of an exclusive right. 41. The parties agree that LESSOR has not waived its sovereign immunity by entering into and performing its obligations under this AGREEMENT. 42. LESSOR will maintain and keep in repair the landing area of the airport and all publicly owned facilities of the airport, together with the right to direct and control all activities of LESSEE in this regard. 43. During a time of war or national emergency, LESSOR shall have the right to lease the landing area or any part thereof to the United States Government for military use, and, if such lease is executed, the provisions of this instrument insofar as they are inconsistent with the provisions of the lease to the Government shall be suspended. 44. LESSOR reserves the right to take any action it considers necessary to protect the aerial approaches of the airport against obstruction, together with the right to prevent LESSEE from erecting, or permitting to be erected, any building or other structure on or adjacent to the airport which, in the opinion of the LESSOR, would limit the usefulness of the airport or constitute a hazard to aircraft. 45. During the final 180 days of the term of AGREEMENT, LESS SOR shall have the right to erect and maintain on or about the leased premises customary signs advertising the premises for sale or lease. 46. This lease shall be subordinate to the provisions of any existing or future agreement between LESSOR and the United States, relative to the operation or maintenance of the airport, the execution of which has been or may be required as a condition precedent to the expenditure of Federal funds for the development of the airport. 47. Holding over by LESSEE of the airport premises after the expiration of this Agreement shall operate and be construed as a tenancy from day to day at a rental rate computed from the rental rate then prevailing under this lease. 48. LESSOR may, at its option, and following a ninety (90) day written notice period, terminate AGREEMENT as to the land, the hangar building, or any parts thereof, which may be necessary in the event LESSOR desires to use the property, or any portion thereof, for any governmental purpose as determined by LESSOR, such as but not limited to, extension of runways or taxiways, utility or drainage improvements, or the expansion of existing buildings or the erection of other airport facilities. If LESSOR so terminates all or a portion of AGREEMENT, LESSOR shall pay to LESSEE 2.5% of the total construction costs of all improvements multiplied by the number of years remaining in the lease term. 49. Nothing herein contained shall be construed to deny the LESSOR its right to condemn the leased property through its power of eminent domain. In the event of condemnation of all or any portion of the leased premises, the leasehold interest of LESSEE shall be deemed to include all rights under this lease including, but not limited to, the right to occupy the improvements placed on the leased premises. MISCELLANEOUS 50. The undersigned officers and /or agents of the parties hereto are the properly authorized officials and have the necessary authority to execute this AGREEMENT on behalf of the parties hereto, and each party hereby certifies to the other that any necessary resolutions or other acts extending such authority have been duly passed and are now in full force and effect. 51. This Agreement represents the entire and integrated agreement between LESSOR and LESSEE and supersedes all prior negotiations, representations and /or agreements, either written or oral. This Agreement may be amended only by written instrument signed by both LESSOR and LESSEE. 52. If any clause, paragraph, section or portion of this AGREEMENT shall be found to be illegal, unlawful, unconstitutional or void for any reason, the balance of the AGREEMENT shall remain in full force and effect and the parties shall be deemed to have contracted as if said clause, section, paragraph or portion had not been in the Agreement initially. 53. This AGREEMENT is executed by the parties hereto without coercion or duress and for substantial consideration, the sufficiency of which is hereby acknowledged. 54. Waiver by either party or any breach of this AGREEMENT, or the failure of either party to enforce any of the provisions of this Agreement, at any time, shall not in any way affect, limit or waive such party's right thereafter to enforce and compel strict compliance of the AGREEMENT. 55. This AGREEMENT shall be drafted equally by all parties hereto. The language of all parts of this AGREEMENT shall be construed as a whole according to its fair meaning, and any presumption or principle that the language herein is to be construed against any party shall not apply. Headings in this AGREEMENT are for the convenience of the parties and are not intended to be used in construing this document. 56. This AGREEMENT maybe executed in a number of identical counterparts, each of which shall be deemed an original for all purposes. 57. This AGREEMENT shall not be assigned without the written consent of LESSOR, which shall not be unreasonably withheld, conditioned or delayed. Any amendment to this AGREEMENT shall be in writing and signed by all parties to the AGREEMENT. 58. The rights and remedies provided by the AGREEMENT are cumulative, and the use of anyone right or remedy by LESSOR shall not preclude or waive any right to use any or all other remedies. 59. Where the terms of this AGREEMENT require that notice in writing be provided, such notice shall be deemed delivered three (3) days following the deposit of the notice in the United States mail, postage prepaid, and sent by certified mail, return receipt requested and properly addressed as follows: Lessor: City of Paris P. O. Box 9037 Paris, TX 75461 -9037 Lessee: 60. This AGREEMENT shall be binding upon, and inure to the benefit of, the parties of this Lease and their respective heirs, executors, administrators, legal representatives, successors, and assigns when permitted by this Agreement. 61. This AGREEMENT shall be construed under, and in accordance with the laws of the State of Texas, and all obligations of the parties created by this Lease are performable in Lamar County, Texas. EXECUTED on this day of , 20_, to be effective , 20 THE CITY OF PARIS, TEXAS LESSEE City Manager ATTEST: City Clerk APPROVED AS TO FORM: City Attorney STATE OF TEXAS COUNTY OF LAMAR This instrument was acknowledged before me on the day of , 20, by Notary Public, State of Texas STATE OF TEXAS COUNTY OF LAMAR This instrument was acknowledged before me on the day of , 20, by Notary Public, State of Texas