TO TRANSMITTAL Eugene D. Seroka, Executive Director Harbor Department 0V 1 7 2016 FROM The Mayor DATE 0150-10826-0000 COUNCIL FILE NO. COUNCIL DISTRICT 15 PROPOSED FIFTH AMENDMENT TO PERMIT NO. 560 WITH VOPAK TERMINAL LOS ANGELES, INCORPORATED Transmitted for further processing and Council consideration. See the City Administrative Officer report attached. MAS:ABN:10170033t CAO 649-d Ana Guerrero YOR
REPORT from OFFICE OF THE CITY ADMINISTRATIVE OFFICER Date: To: November 16, 2016 The Mayor CAO File No. 0150-10826-0000 Council File No. Council District: 15 From: Miguel A. Santana, City Administrative Officer Reference: Subject: Correspondence from the Harbor Department dated September 23,2016; referred by the Mayor for report dated September 27, 2016 PROPOSED FIFTH AMENDMENT TO PERMIT NO. 560 WITH VOPAK TERMINAL LOS ANGELES, INCORPORATED RECOMMENDATIONS That the Mayor: 1. Approve the Harbor Department (Port) Board of Harbor Commissioners Resolution Number 16-7993 authorizing the proposed Fifth Amendment Permit No. 560 with Vopak Terminal Los Angeles Inc. and Order No. 16-7211 under Permit 560 to reset compensation; and, 2. Return the document to the Port for further processing, including Council consideration. SUMMARY The Harbor Department (Port) Board of Harbor Commissioners (Board) request approval of Resolution No. 16-7993 authorizing the proposed Fifth Amendment (Amendment) with Vopak Terminal Los Angeles, Inc. (Vopak) and the corresponding Order No. 16-7221 (see Attachment) under Permit No. 560 to reset compensation for the following actions: Reset the lease periods retroactively from August 2013 forward to August 2018; Pay compensation from August 2013 through December 2015 at a rate of $3,215,064 annually; Pay compensation increases of 15 percent starting In January 2016 for $3,692,843 annually, based on the Port s leasing policy, which requires a minimum 10 percent rate of return (ROR) on the market value of Port of Los Angeles (POLA) waterfront land and backland properties; and, Adjust Consumer Price Index (CPI) compensation rates annually based upon a maximum, up to three percent, beginning in August 2016 through August 2018. The Port anovys jvppak the use of POLA property for the operation of a marine liquid bulk terminal. Vopak entered a 30-year lease permit with the Port from 1993 to 2023, for property acreage at Berths 187-191 in Wilmington. The Permit requires that the compensation is reset every five years,
CAO File No. 0150-10826-0000 PAGE 2 for the annual land rent and other applicable charges pursuant to Tariff No. 4 (General Rules and Regulations Manual). In 2010, the Port and Vopak entered into negotiations on the possible relocation of Vopak within the POLA. According to the Port, the prolonged negotiations impacted and delayed the compensation reset, which occurs every five years, because of the discussions of the uncertainty of the scope and timing of the relocation site. In 2015, the Port and Vopak agreed that Vopak would remain at its current location. The proposed Amendment will reinstate the compensation reset schedule, which had been frozen and not paid, because of the prolonged negotiations. The Port states that the scheduled retroactive and future payments will be reinstated from August 2013 through August 2018 as stated in the abovementioned actions. The Port states that the proposed compensation reset will increase the rent on the land for Vopak by approximately 13 percent. In addition, the proposed Amendment will include CPI adjustments Into the Permit, consistent with the Port s leasing policy, from August 2016 through August 2017, and each year thereafter during the remaining term of the lease permit. The above referenced Resolution No. 16-7993 authorizing the proposed Amendment and Order and this report incorporate revised information received from the Port subsequent to the initial request submittal. Pursuant to Charter Section 606, unless the Council takes action of disapproving the proposed Resolution within 30 days after submission to the Council, the document will be deemed approved. The City Attorney has approved the Resolution and Amendment as to form and legality. BACKGROUND Vopak s parent company is one of the world's leading independent tank storage companies and operates a global network of terminals handling bulk liquid products. The Port initially consolidated permits for three liquid bulk terminals, including associated storage facilities and lands, into Permit 560.The previous four Amendments to Permit 560 implemented the following actions: First Amendment: Add a land parcel and corresponding adjustment to compensation; Second Amendment: Add subsurface pipeline right-of-way and increase compensation; Third Amendment: Increase the Permit 30 years and add two berths and preferential right to use Berths 187-191, with compensation based on Tariff charges; and, Fourth Amendment: Add subsurface pipeline right-of-way and increase compensation. FISCAL IMPACT STATEMENT The proposed Amendment for Vopak will include an Order resetting compensation under the Permit for the five-year period from August 2013 through August 2018 that will increase guaranteed compensation to $3,692,843, retroactively to January 1, 2016. The Port states that Vopak pays all applicable charges under the Tariff for the Port of Los Angeles. Total compensation from Vopak to the Port was approximately $5,717,566 in 2015. MAS:ABN:10170033 Attachment
ATTACHMENT ORDER NO. An Order of the Board of Harbor Commissioners of the City of Los Angeles ("City") flkinti the compensation to be paid by VOPAK TERMINAL LOS ANGELES INC. ('Tenant7), pursuant to Permit No. 660 '( Permit"), for iho five-year period commencing August 3Q 2013 and ending August 29, 2018 WHEREAS, Permit No. 6G0 as amended, was granted to VOPAK TERMINAL LOS ANGELES INC. (under its former name of Wilmington Liquid Bulk Terminals, Jne.)for a term of thirty (30) years, pursuant to Order No. 0173, and WHEREAS. Permit No. 560 provides that the compensation to be paid by Tenant under Permit No. 560 for the use of the subject premises -shall be subject to re adjustment every five (5) years following the first five-yon; period of the permit tentt in accordance vwl. the terms-and procedures described therein; WHEREAS, the Board of Hnrboi Commissioners of the City of Los Angeles and Tenant have agreed on compensation to be paid by Tenant during the five (5) year period commencing August 30, 2013 and ending August 29 2018; NOW, THEREFORE, IT IS HEREBY ORDERED by the Board of Harbor Commissioners of the City of Los Angebs as follows: Section 1. T he compensation to do paid by Tenant during the five '5) yerr period commencing August 30, 2013 and ending August 29. 2018 is as follows' 1 For the period commencing August 30,2013 through December 31, 2015, the compensation shall be Eighl Hundred Three Thousand Sevan Hundred and Sixty-Six Dollars ($803,766) per quarter, payable in advance, plus at1 tolls and charges pursuant to Port of Los Angeles Tariff No, 4.; 2. For the period commencing January 1,2010 through August 29, 2018. the compensation shall be Nine t rundrecl T wenty Three Thousand Two Hundred Ten Dollars and Eighty Cents ($923,210.80) per quarter, payable in. advance plus all tolls and charges pursuant to Port of Los Angeles Tariff No. A. Within thirty (30) days after the Secretary of the Board of Hamm Commissioners certifies to the adoption of this Order by the Board of Harbot Commissioners, Tenant shall immediately pay to the Harbor Department of the City uf los Angeles the retroactive portion of the compensation for the period commencing August 30,2013, representing the difference in the amount of compensation paid by Tenant for said period and the amount of compensation due per this Order; Section 2. Except as provided herein, alt other terms and conditions of Pomrrii: No. 560 shall remain in full force and effect.
Section 3. i he Secretary shill certify to the adoption of this Order by the Board of Harbor Commissioners of the City oi Los Angelos, I HEREBY CERTIFY that the foregoing Order was adopted by the 3oard of Harbor Commissioners of the City of Los Angeles at its meeting held AMBER ivi, KLESGES Board Secretary The undersigned Tenant has read end agrees to the terms of th* Order. VC PAX TERMINAL LOS ANGELES INC Dated* imr "%n. 2016 By,.- <> aoaaacuossmift Qdaorsf CcwOsd fi Owp* (Type/Print Name anc^title} Attest: AI ^OU\6<L \jisi\kl pa/ftf/v. A!... (Type/Print Name and Title) sr..is.. V J APPROVED AS TO FORM AMD LEGALITY rwyo?.s,2018 MICHAEL N. FEUER, City Attorney JANNA ii. SrDLEY, General Counsel By: (yoj^n T. DRISCOLL, DepuTyXfty Attorney JTD:)pr 08/15/16 2