Meeting_Body
FINANCE, BUDGET AND AUDIT COMMITTEE
SEPTEMBER 20, 2023
Subject
SUBJECT: LICENSE AGREEMENT WITH SOUTHERN CALIFORNIA EDISON FOR THE BLUE LINE STORAGE YARD LOCATED NEXT TO DIVISION 11 IN LONG BEACH
Action
ACTION: APPROVE RECOMMENDATIONS
Heading
RECOMMENDATION
Title
AUTHORIZE the Chief Executive Officer (CEO), or their designee, to execute a five (5)-year license agreement commencing November 1, 2023, with Southern California Edison, (“Licensor”) for the 7.7 acre storage yard located next to Division 11 in Long Beach (“Edison Yard”) at an annual rate of $139,271.30 with escalations of five percent (5%) annually for a total license value of $769,561.82 over the term.
Issue
ISSUE
Metro Operations, Rail Fleet Services, and Wayside Systems, have a license to occupy a Southern California Edison (“SCE) property (“Edison Yard”) located next to Division 11. The existing license agreement is for a five-year duration. The Board approved the current license on January 24, 2019 which was retroactive to November 1, 2018. The current five-year license will expire on October 31, 2023. Metro Operations has a continued need for the Edison Yard for ongoing Blue Line and other Rail Fleet Services and Wayside Systems needs. Approving this license (“License”) will secure the Edison Yard for an additional five-year term from November 1, 2023 through October 31, 2028. Southern California Edison will only issue licenses for five-year periods as the land also contains their transmission towers which prohibit them from surrendering ownership. The License requires Board approval as the total license expense exceeds the CEO delegated authority to enter contracts with a cost not to exceed $500,000.
Background
BACKGROUND
The current five-year license term commenced on November 1, 2018, and will expire on October 31, 2023, for a total amount of $625,672.78. Prior to the current license, Metro maintained storage at this location dating back to the 1990s, so Real Estate finds little agency exposure in continuing the License with the Licensor through consecutive five-year agreements. The Edison Yard is the only location Metro has to store large rail track and contractual spare material (e.g. 40’rail sticks, ties, etc.). There is material stored at the Edison Yard that supports every Metro Rail Line.
Discussion
DISCUSSION
Findings
The current rental rate for the Edison Yard is a fair estimation of market value. No alternate location has been found that can offer a similar affordability, proximity to Division 11, and is large enough to store the materials Metro has there. The Edison Yard provides the best fit for Rail Fleet Services and Wayside Systems needs.
Considerations
Because of the continued need for storage at the Edison Yard, the larger risk is to operational efficacy if the Board chooses not to renew the License with Edison. In the unlikely event that Metro determines the space is no longer needed, Metro can choose to exercise its right to terminate the License at any time with 30 days’ notice, mitigating any long-term financial obligations of the License.
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
The proposed License will complement Metro’s commitment to a safe, clean, on-time, and reliable transportation system by safely securing Metro rail replacement parts.
Financial_Impact
FINANCIAL IMPACT
The rental rate for the License renewal will increase from $132,639.33 per year to $139,271.30. The annual rent of $139,271.30 commencing November 1, 2023, will cost $769,561.82 over the five-year term including annual fixed increases of five percent (5%).
Metro Real Estate staff has determined that the rental rate and increases are in line with the fair market for land in the Edison Yard area.
Impact to Budget
Funding for the payment of rent for the Edison Yard will be budgeted and paid from Cost Center 0651, project number 300022 for fiscal year 2024. The funding for the proposed License will come from Federal, State, and Local sources that are eligible for bus and rail operations.
Equity_Platform
EQUITY PLATFORM
The Edison Yard is critical to keeping the Metro rail system safely maintained and serving Equity Focus Communities. The Edison Yard is in the middle of an industrial area and is closest to Virginia Country Club’s surrounding communities. Because it is a storage yard, any activity generating noise will be infrequent and minimal.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
The recommendation supports Strategic Plan Goal 5: Provide responsive, accountable, and trustworthy government by securing Metro Rail investments and supporting Vision 2028.
Alternatives_Considered
ALTERNATIVES CONSIDERED
The alternative is to not approve the license agreement. This alternative is not recommended because the Edison Yard is critical to Rail Fleet Services operations in keeping the rail system safely maintained.
Next_Steps
NEXT STEPS
Execute the License with Southern California Edison subject to County Counsel approval as to form.
Attachments
ATTACHMENTS
Attachment A - Location Map
Attachment B - Blue Line Storage Yard License Renewal Estimated Rental Costs
Prepared_by
Prepared by: John Beck, Manager, Countywide Planning & Development, (213) 922-4435
Craig Justesen, Interim Executive Officer, Countywide Planning & Development, (213) 928-7051
Holly Rockwell, SEO - Real Estate, Transit Oriented Communities and Transportation Demand Management, (213) 922-5585
Ray Sosa, Deputy Chief Planning Officer, (213) 547-4274
Reviewed_By
Reviewed by: Conan Cheung, Chief Operations Officer, (213) 418-3034
James de la Loza, Chief Planning Officer, (213) 922-2920
