IV. Agreement
The Agreement gives Katella the option to lease the Site for the development and operation of a vehicle and boat parking and storage facility. The initial term of the license is thirty (30) years, which commenced on the date Katella exercised the Option. Katella can renew the license for one (1) additional ten (10) year term. If the Commission grants this Application, the existing license will be converted into a lease. The conversion from a license to a lease is beneficial to Katella since lenders perceive a lease as having more stability and certainty than a license as it is not terminable by either party at will. The conversion to a lease is a benefit to SCE ratepayers as it allows the developer to obtain long-term project financing at a reduced interest rate. Reduced project costs will enhance the viability and future success of the project which will generate a consistent revenue stream benefiting ratepayers.
As discussed above, Katella pays an annual base license fee of $15,000 in Year 1, escalating to $72,250 in Year 10. The base license fee will be further adjusted at the expiration of the 10th and 20th year of the term and upon exercise of the renewal option to reflect the then current fair rental value of the Site, excluding the value of Katella's improvements. In no event, however, will the adjusted base license fee be less than the base license fee otherwise payable immediately prior to such adjustment, or increase more than 4% per year compounded annually for the following ten (10) years.3
The Agreement provides that Katella's activities must not interfere with the operation of the electrical transmission facilities that cross the Site. Katella is not allowed to use or store hazardous substances, explosives or flammable materials on the Site. Any equipment used by Katella will be used and operated to maintain a minimum clearance of seventeen (17) feet from all overhead electrical conductors. SCE requires Katella to maintain a minimum fifty (50) foot radius around all towers legs, and a ten (10) foot radius around all steel and wood poles. SCE also requires Katella to provide and maintain access roads on the Site that are at least sixteen (16) feet wide and capable of supporting a gross load of forty (40) tons on a three-axle vehicle. SCE has reviewed and approved construction plans and specifications related to the development of this project.
SCE retains the right and authority to enter the Site at any and all reasonable times to inspect the Site. SCE has the right to impose temporary restrictions on Katella's right to enter, occupy and use the Site to allow SCE to perform work, if necessary, on the electrical facilities located on the Site. If the license does not convert to a lease, SCE will retain the right to cancel the license upon 12 months' notice, and if the license does convert to a lease, to take all or part of the leasehold by eminent domain or inverse condemnation.
Katella is responsible for all personal property taxes, as well as other general or special assessments or fees levied against the Site or the improvements thereon. Katella has obtained all permits and approvals for construction and operation of a vehicle and boat parking and storage facility. Katella must maintain appropriate comprehensive general liability insurance, comprehensive auto liability insurance, and workers' compensation insurance. Katella has also agreed to indemnify SCE against all liability for damages or injury to persons and property on the Site except to the extent caused by SCE's negligent or willful misconduct.
3 Section 3.1(b): For example, the base rent payable in the 10th year of the lease term could not be less than $72,250 the amount of the base rent payable in the 10th year, or more than $75,140.
