TO: Honorable Mayor & Members of the North Port Commission
FROM: A. Jerome Fletcher II, ICMA-CM, MPA, City Manager
TITLE: Discussion and Possible Action Regarding Formal Commission Approval of the Facility Lease Policy for City-Owned Facilities Including Selection of a Set Discount Based on Market Value.
Recommended Action
Discussion and possible action regarding formal Commission approval of the Facility Lease Policy for City-owned facilities including selection of a set discount based on market value.
City Commission Options
Option 1: Formal Commission approval of the Facility Lease Policy for City-owned facilities using a set 10% discount based on market value.
• Pros: Allows rental rates to reflect current market conditions while maintaining consistency through a standardized discount, potentially maximizing revenue while supporting public-purpose tenants.
• Cons: Results in reduced lease revenue, approximately 10% below market value, which may impact the City’s ability to fully recover costs or maximize asset value.
Option 2: Formal Commission approval of the Facility Lease Policy for City-owned facilities using a set 20% discount based on market value.
• Pros: Allows rental rates to reflect current market conditions while maintaining consistency through a standardized discount, potentially maximizing revenue while supporting public-purpose tenants.
• Cons: Results in reduced lease revenue, approximately 20% below market value, which may impact the City’s ability to fully recover costs or maximize asset value.
Option 3: Formal Commission approval of the Facility Lease Policy for City-owned facilities using a set 30% discount based on market value.
• Pros: Allows rental rates to reflect current market conditions while maintaining consistency through a standardized discount, potentially maximizing revenue while supporting public-purpose tenants.
• Cons: Results in reduced lease revenue, approximately 30% below market value, which may impact the City’s ability to fully recover costs or maximize asset value.
Option 4: Formal Commission approval of the Facility Lease Policy for City-owned facilities using a set 40% discount based on market value.
• Pros: Allows rental rates to reflect current market conditions while maintaining consistency through a standardized discount, potentially maximizing revenue while supporting public-purpose tenants.
• Cons: Significantly reduces lease revenue, approximately 40% below market value, which may require the City to offset costs through other funding sources.
Option 5: Formal Commission approval of the Facility Lease Policy for City-owned facilities using a set 50% discount based on market value.
• Pros: Allows rental rates to reflect current market conditions while maintaining consistency through a standardized discount, potentially maximizing revenue while supporting public-purpose tenants.
• Cons: Creates a significant revenue gap, 50% below market value, increasing reliance on alternative funding sources and limiting reinvestment in facilities.
Option 6: Formal Commission approval of the Facility Lease Policy for City-owned facilities using a set 60% discount based on market value.
• Pros: Allows rental rates to reflect current market conditions while maintaining consistency through a standardized discount, potentially maximizing revenue while supporting public-purpose tenants.
• Cons: Creates a significant revenue gap, 60% below market value, increasing reliance on alternative funding sources and limiting reinvestment in facilities.
Option 7: Formal Commission approval of the Facility Lease Policy for City-owned facilities using a set 70% discount based on market value.
• Pros: Allows rental rates to reflect current market conditions while maintaining consistency through a standardized discount, potentially maximizing revenue while supporting public-purpose tenants.
• Cons: Results in a major subsidy, 70% below market value, which may not be financially sustainable and could shift costs to taxpayers or other revenue streams.
Option 8: Formal Commission approval of the Facility Lease Policy for City-owned facilities using a set 80% discount based on market value.
• Pros: Allows rental rates to reflect current market conditions while maintaining consistency through a standardized discount, potentially maximizing revenue while supporting public-purpose tenants.
• Cons: Severely limits revenue generation, 80% below market value, effectively treating leases as highly subsidized uses and reducing the City’s ability to fund operations and capital needs.
Option 9: Formal Commission approval of the Facility Lease Policy for City-owned facilities using a set 90% discount based on market value.
• Pros: Allows rental rates to reflect current market conditions while maintaining consistency through a standardized discount, potentially maximizing revenue while supporting public-purpose tenants.
• Cons: Minimizes revenue, 90% below market value, creating a near-full subsidy that may not be sustainable and could significantly impact the City’s overall financial position.
Background Information
At the December 2, 2024, City Commission Workshop, the Commission reviewed preliminary recommendations for a Facility Lease Policy, including methods for valuing City-owned facilities and establishing general lease terms. During that discussion, the Commission requested additional information on existing lease agreements and associated costs to support the development of a more consistent and transparent approach to setting rental rates for City-owned properties.
On January 20, 2026, staff presented two potential approaches for incorporating discounts within the proposed Facility Lease Policy:
• Option 1: Establish lease rates based on market value per square foot, as determined by an appraisal or staff analysis of comparable properties and prevailing market conditions, with the application of a standardized discount.
• Option 2: Establish a uniform cost per square foot for all leased space, regardless of facility location.
During that meeting, the Commission made the following motion: “to direct the City Manager to bring back the Facility Lease Policy for formal Commission approval using a set discount based on market value”. There was also discussion and direction for staff to return with additional detail of examples demonstrating how a standardized discount would be applied to market-based lease rates.
In response, staff have prepared the attached spreadsheet illustrating sample scenarios of how market-based discounts could be applied under the proposed policy.
Under this framework, leases for City-owned properties would generally follow a commercial lease structure. Tenants would be responsible for improvements to their leased space, subject to City approval, as well as utilities and other costs associated with their use of the space. The City would retain responsibility for maintaining common areas, major building systems, and the overall structure of each facility.
The proposed Facility Lease Policy would not apply to air and ambulance leases, cell tower agreements, daily or short-term rentals, or similar specialized agreements.
Staff are prepared to finalize the Facility Lease Policy upon City Commission approval and direction on the standardized discount rate based on market value.
The draft Facility Lease Policy has been reviewed by the City Attorney’s Office and is legally correct as to form.
Strategic Plan
Good Governance
Financial Impact
If approved, this policy will assist with the development of future leases and lease fees.
Procurement
Not applicable.
Attachments:
1. Draft Facility Lease Policy
2. Discount from Market Price Examples
3. December 2, 2024 Commission Workshop Minutes
4. January 20, 2026 Commission Meeting Minutes
Prepared by: Chuck Speake, Public Works Director
Department Director: Chuck Speake, Public Works Director