REPORT TO THE CITY COUNCIL March 22, 2018 FROM: THOMAS C. ESQUEDA, Director Department of Public Utilities SUBJECT ..Title Actions pertaining to the lease of 10-acres at the Fresno-Clovis Regional Water Reclamation Facility: 1. Adopt a finding of Categorical Exemption per staff determination pursuant to Section 15301 Class 1 of the CEQA Guidelines 2. Approve the First Amendment to the Ground Lease for Energy Storage System between the City and Amber Kinetics (Council District 3) ..Body RECOMMENDATION Staff recommends the Fresno City Council approve the First Amendment to the Ground Lease for Energy Storage System (Amendment) between the City of Fresno and Amber Kinetics for 10 acres of land at the Fresno-Clovis Regional Water Reclamation Facility. The Amendment has been approved as to form by the City Attorney's Office. EXECUTIVE SUMMARY On January 14, 2016, the Fresno City Council approved (Attachment 1) a Grant of Option Agreement (Attachment 2) with Amber Kinetics for two parcels at the Fresno-Clovis Regional Water Reclamation Facility: Parcel 1 is 10 acres, and Parcel 2 is 15 acres. The total 25 acres of land at the Fresno-Clovis Regional Water Reclamation Facility will be used to install and operate a 20 megawatt (MW) energy storage facility, and accommodate a potential second phase in the future. The selected 25 acres located in proximity to the New Kearney Substation, which is owned and operated Pacific Gas and Electric (PG&E). Amber Kinetics exercised the Lease Option for Parcel 1 on July 22, 2016, (Attachment 3) and has until July 31, 2019, to exercise the Lease Option for Parcel 2. On January 29, 2018, the Department of Public Utilities received a request from Amber Kinetics (Attachment 4) to defer implementation of the originally planned energy storage project, and to maintain the lease for 10 acres (Parcel 1) and the lease-option for 15 acres (Parcel 2). Under the proposed Amendment, Amber Kinetics will continue to pay the City $2,000 per acre per year for Parcel 1, which escalates 3-percent per year for the entire 25-year term of the lease. Additionally, the City will be authorized to sub-lease the 10 acres for agricultural purposes, and the City will share the sub-lease payments with Amber Kinetics on a 50/50 basis. By sub-leasing the 10-acres for agricultural purposes, the land will remain in a neat, clean, and dressed condition, and not create nuisance conditions if it were to remain fallow. City staff estimates the 10-acres can be leased for agricultural purposes for approximately $500 per acre per year, which the City will retain 50 percent to add to the $2,000 per acre to be paid by Amber Kinetics. All other terms and conditions of the original Lease remain in full force and effect. Staff recommends the Fresno City Council approve the Amendment between the City of Fresno and Amber Kinetics for Parcel 1 (10 acres) of land at the Fresno-Clovis Regional Water Reclamation Facility. The Amendment has been approved as to form by the City Attorney's Office. ENVIRONMENTAL FINDINGS Staff performed a preliminary environmental assessment of this project and has determined that it falls within the Categorical Exemption set forth in CEQA Guidelines, Section 15301 Class 1 which exempts minor alteration of existing facilities that involves negligible or no expansion of an existing use. This exemption applies because this project involves returning 10 acres at the Fresno-Clovis Regional Water Reclamation Facility to its historic use for agricultural purposes. Furthermore, staff has determined that none of the exceptions to Categorical Exemptions set forth in the CEQA Guidelines, Section 15300.2 apply to this project. LOCAL PREFERENCE Local preference was not considered because this Amendment is not bid or award of a construction or services contract. FISCAL IMPACT The Department of Public Utilities has negotiated an annual lease payment of $20,000 based on a negotiated lease rate of $2,000 per acre per year for the 10-acre parcel and will accrue to the Wastewater Management Division. The Amendment will authorize the City to sub-lease the 10-acres and share the resultant revenue with Amber Kinetics on a 50/50 basis. The additional revenue from the sub-lease will also accrue to the Wastewater Management Division. Attachments: Original Council Agenda Item for Amber Kinetics Ground Lease for Energy Storage System (Attachment 1) Grant of Option Agreement (Attachment 2) Ground Lease for Energy Storage System (Attachment 3) Amber Kinetics Request to Defer Project Implementation (Attachment 4) First Amendment to the Ground Lease for Energy Storage System (Attachment 5)