Subject: LEASE RENEWAL FOR PRAXAIR

RECOMMENDATION

Adoption of a resolution authorizing the City Manager to enter into a continuation agreement between the City of San José and Union Carbide Industrial Gases, Inc., as assumed by PraxAir, for a nitrogen gas pipeline near River Oaks and Montague Expressway in San José for ten (10) years.

BACKGROUND

A franchise was granted to Union Carbide by Ordinance No. 21721, adopted on August 28, 1984, as amended by Ordinance No. 21758 on October 2, 1984 and by Ordinance No. 23668 on November 20, 1990. On October 26, 1984 the City of San José and Union Carbide Corporation entered into a Construction Agreement for construction of improvements in connection with a nitrogen distribution system near River Oaks and Montague Expressway in the City of San José.

A Property Use Agreement was executed June 30, 1992, in accordance with Resolution No. 63910.1, between the City of San José and Union Carbide Industrial Gases, Inc. Through the Property Use Agreement, the City granted the right to use a portion of the City property to Union Carbide for the purposes of installing, constructing, reconstructing, inspecting, maintaining, altering, repairing, replacing, protecting, using, owning operating and removing a nitrogen gas pipeline. Union Carbide Industrial Gases, Inc. and PraxAir have merged during the lease period and are now doing business as PraxAir.

That agreement has now expired and thus any extension thereof will have to be done via a continuation agreement.

ANALYSIS

The Property Use Agreement executed in June 1992 provided for a term of ten (10) years. The Agreement also provided for renewal in writing for successive ten (10) year periods upon the mutual written consent of the parties. Consideration for use of the property has been paid at an annual rate of $4,193.

The City is not obligated to renew this Agreement but recommends that Council authorize the City Manager to execute an Agreement permitting the Agreement to be extended retroactively for a period of ten (10) years on the same terms as previously existed. The consideration for use of the property will increase to an annual rate of $6,500, as agreed by PraxAir and City.

PUBLIC OUTREACH

Not Applicable

COORDINATION

This memorandum has been coordinated with the City Attorney's Office and the City Manager’s Budget Office.

COST IMPLICATIONS

This Property Use Agreement will generate $65,000 to the City over the ten (10) year term.

BUDGET REFERENCE

Fund: 001

RC: 000000

APPN: 8080 - Use of Money & Property

CEQA:

Not a project.

JOSE OBREGON

Director, General Services Department