The new arena requires approximately 2,400 parking spaces, as well as pick-up and drop-off areas for ride sharing, bus, taxi, limousine, and other modes of private and public transportation. Eventually, the City expects to transition most of the arena's parking needs into a public-private parking garage shared with future commercial development within the Canal District. Until that development materializes, however, the City must provide interim parking, and thus is planning to develop a surface parking lot on leased land to accommodate nearly 2,000 parking spaces.

Providing surface parking is significantly less expensive than building a stand-alone garage, provides the City greater flexibility to adapt to changing parking demands through the years, and allows for future development on land that might otherwise be occupied by a permanent parking structure.

On August 29, 2019, the Mayor and Aldermen approved a lease for 22.5 acres located immediately east of the arena on which to develop this interim surface parking lot. The lease included a five-year term with the option to extend for an additional five years. The initial lease rate was $696,000 per year, with the rate for the second five-year term to be negotiated upon the expiration of the initial term. The City has a due-diligence period for investigation of the site prior to the lease becoming effective, during which time the City pays no rent. In November 2019, the City and property owner signed a First Amendment to the Lease, which extended the City's due diligence period through May 31, 2020.

As a result of this due diligence investigation, staff has renegotiated the lease agreement with the property owner to lower the lease rate and provide greater certainty over the lease term. This proposed Second Amendment to the Lease reduces the lease rate from $696,000 per year to $525,000 per year, with a 3% inflation escalator per year, and extends the lease term from five years (with a five-year renewal option) to 10 years.

The amendment is expected to save the City more than $1.6 million in rent over the term of the lease. The due diligence period will also be extended until the end of July to finalize development plans and associated approvals. Because the property is privately owned, it will remain on the property tax roll. The lease will be paid for from the Parking Services Fund, which receives revenue from parking meters, garages and citations.

Request approval of Second Amendment of the Lease and authorization for the City Manager to execute.

Approval