SUBJECT: RESOLUTION NO. - SALE OF THREE CONTAINER CRANES - PASHA STEVEDORING & TERMINALS L.P.

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1 THE PORT OF LOS ANGELES Executive Director's Report to the Boord of Harbor Commissioners DATE: MAY 6,2010 FROM: REAL ESTATE DIVISION SUBJECT: RESOLUTION NO. - SALE OF THREE CONTAINER CRANES - PASHA STEVEDORING & TERMINALS L.P. SUMMARY: Since 2006, the Los Angeles Harbor Department (Harbor Department) has been divesting itself of its container cranes, due to the cranes' age, and limitations of the cranes' designed speed, structural stability, integrity, and service utilization. As part of that on-going effort, three of the Harbor Department's eight remaining container cranes are proposed for direct sale to Pasha Stevedoring & Terminals L.P. (Pasha). The proposed Contract of Sale provides for the private sale of Harbor Departmentowned Crane Nos , , and for a cost of $450,000 and associated spare parts for an approximate cost of $144,948 to Pasha. The total cost of approximately $594,948, plus applicable taxes, would be payable over a period of not more that 18-months. The final price for spare parts will be determined at the time of delivery. RECOMMENDATION: It is recommended that the Board of Harbor Commissioners (Board): 1. Find and determine, pursuant to Section 7.71 of the Los Angeles Administrative Code and the Board's surplus property resolution, Container Cranes Nos ,209-10, and , located at Berth 176, and associated spare parts, are no longer necessary or suitable for use by the Harbor Department; 2. Find that the private sale of the surplus Container Cranes Nos , , and , located at Berth 176, and associated spare parts to the Pasha, the current tenant at the Berth 176 premises, and the associated 18-month payment schedule is in the best interest of the City of Los Angeles (City); 3. Approve the Contract of Sale with Pasha for the surplus Container Cranes Nos , , and , and associated spare parts; 4. Authorize the Executive Director to execute, and the Board Secretary to attest to, the Contract of Sale on behalf of the Board; and 5. Adopt Resolution No.

DATE: MAY 6,2010 PAGE 2 5 SUBJECT: SALE OF THREE CONTAI CRANES - PASHA STEVEDORING & TERMINALS DISCUSSION: Currently, Harbor Department tenants provide their own load equipment, including cranes.

2 DATE: MAY 6,2010 PAGE 2 5 SUBJECT: SALE OF THREE CONTAI CRANES - PASHA STEVEDORING & TERMINALS DISCUSSION: Currently, Harbor Department tenants provide their own load equipment, including cranes. Harbor Department-owned container cranes are no longer necessary for Port of Angeles operations. In December 2006, the Harbor Department divest itself its 14 owned container cranes, due to the ages, and limitations of the cranes' designed speed, structural stability, integrity, and utilization. that time, cranes been demolished and three cranes have been sold. The remaining eight cranes are a financial liability due to Harbor declining net from cranes and dedication of limited Construction and Maintenance Division resources for crane maintenance. Three Harbor Department owned cranes are located at the Pasha terminal (Cranes 09, , and cranes are approximately 30 years old. Pasha currently rents cranes on an hourly basis, with maintenance being provided by Harbor Department personnel. Due to the of cranes, maintenance needs are intensive. During a peak use 24-month period from January 2007 through December 2008, the three cranes combined resulted in a net income of only $476,602. However, during the past calendar year of the Harbor Department had a net of $81,157 to a severe decrease in cargo volumes. Income from rental is uncertain, but the Harbor Department's maintenance are a constant even if the cranes are Further, with cranes age, maintenance costs are anticipated to over time. Due to cranes' age and escalating maintenance costs, , , and are no longer necessary or suitable for Harbor Department uses and it is recommended that the cranes offered for The Harbor Department will not the cranes with new cranes or similar type equipment. Cranes , , and are the primary means by which Pasha offloads its cargo at the 1 terminal. cranes are currently integral to Pasha's operations and to revenue stream they provide the Department in wharfage payments. Therefore, the private sale the cranes to Pasha has a substantial to Harbor Department, by ensuring that revenue source. Sale of the cranes to an entity other than Pasha would in significant disruption of Pasha operations, loss of revenue to Harbor Department, and potential long-term financial losses to Harbor Department. Therefore, consistent with Section 1 of the Los Administrative Code, the private sale of the cranes to Pasha is best interest of the Harbor Department and City.

3 DATE: MAY 6,2010 PAGE 3 OF 5 TERMINALS Pasha has agreed to purchase three cranes for $450,000 and the spare parts for 75 percent of cost of inventory, currently estimate approximately $144,948. The total cost of $594,948, plus applicable taxes, would be payable over a period of not more than 18 months. Further, Pasha would become responsible for the removal cranes termination or the ==-...:...:...:...== follows: - A 2009 appraisal by Thomas Simmons stated the crane values as Crane No. Relocation In Place Use $800,000 $975,000 The appraisal discusses the "complexities of the factors affecting used container crane pricing and market," such as status of and world current price offered for cranes on the open market, and the cost of transporting and retrofitting cranes to operate at other locations. further provides a market survey of 14 that cranes from , seven of which are on the West Coast. Of those seven: two ports paid to have cranes removed/salvaged; one port sold cranes for $1 on condition they removed; one terminal operator sold cranes for $50,000; one port sold cranes $100,000 in 2001 and $10,000 in 2005, and; Harbor Department sold cranes for $250,000 in Therefore, it is important that the appraisal crane values considered within the context of most Harbor Department crane sales and current economic climate. Previously, three Harbor Department owned cranes were demolished a crane cost of approximately $300,000 (Cranes and ) $450,000 (Crane ). In January 2008, cranes (Cranes ,209-1 and ) were sold at each through a salvage the bidder Matson Navigation Company, and Horizon Lines, LLC, jointly. cranes were modified 206 for re-use in Guam. The value of the spare parts for Cranes , 0, 5 had a purchase of approximately $193,254 in Fall The value of those parts is anticipated to be something than that amount today. Further, the value would be substantially diminished if sold from the cranes that parts are related to. The of the re is proposed 75 percent the of inventory. This is currently estimated at $144,948. However, the final price of will be at the time of delivery, based upon the actual delivered. This provides for a method for reconciling any discrepancies between the Harbor spare inventory and parts to Pasha.

4 MAY 6,2010 PAGE 4 OF 5 TERMINALS L.P. Based upon appraisal market survey of West crane salvage and surplus and the Harbor Department's January 2008 salvage crane the price of $450,000 for the three cranes approximately $144,948 for associated parts is favorable the Harbor Department and the of cranes sold in the Further, upon, Pasha becomes responsible for removal of the termination of its Harbor tenancy, the Harbor Department potential associated with future salvage of the cranes. As indicated above, the Harbor Department has previously expended up $450,000 for the dismantling and disposal of obsolete cranes. Therefore, it is recommended that the Harbor Department three cranes and parts for total of approximately $594,948, plus applicable taxes. Taxes (transfer, use, or similar taxes) will be computed at time of delivery. A payment schedule not to 18 months is proposed. would required to pay interest on the outstanding amount owed until paid off. first payment, consisting of one-sixth the sale price of cranes and all taxes required for both the cranes and spare parts, would due immediately effective of the Contract of but no later than June 30, remaining 1/6 installment will paid quarter beginning 1, 2010 until the total price is paid. The payment of interest ensures that the net value the deferred payments is equivalent the present value of a cash sale, as required by Section 1 (b) of the Angeles Administrative Code. ENVIRONMENTAL ASSESSMENT: The proposed action is a sale of Harbor Department-owned container cranes to at its leasehold These cranes are currently being rented by Pasha and are the primary means by which Pasha offloads cargo. Pasha will responsible the removal the cranes at the termination or expiration of its lease. Since proposed action is a direct sale for the continued use existing cranes in operation, there would no expansion of use. As such, the Director of Environmental Management has determined that the proposed action is exempt from the requirements of California Environmental Quality (CEQA) Article III Section 1 (31) of the Los Angeles City Guidelines. This Board action will have no job impact for the five-county region. financial impact of proposed of the three container cranes and associated parts referenced herein is that Harbor Department will receive approximately $595,000 in sale proceeds on a net value Subsequent to the sale, the Harbor Department will no longer for ongoing operating and maintenance with the cranes and at the same time will forego

5 DATE: MAY 6,2010 PAGE 5 OF 5 TERMINALS L.P. revenues from renting the cranes out. There is not expected to be a budgetary impact arising from this transaction since the Harbor Department anticipated the sale of these cranes before the commencement of Fiscal Year 2010/2011, such that no crane rental revenues were factored into the proposed operating budget. CITY ATTORNEY: The Contract of Sale is subject to approval as to form by the Office of the City Attorney. TRANSMITT AL: 1. Contract of Sale _---'--_ (initials) Director of Real Estate ALDINE KN~TZ'~ MJG:BG:RV:raw Author: R. Viola BL336raw Pasha Crane Sale

RECOMMENDATION APPROVED; RESOLUTION NO ADOPTED; AND AGREEMENT NO APPROVED BY THE BOARD OF HARBOR COMMISSIONERS.

2- s DATE: MAY 5, 2015 RECOMMENDATION APPROVED; RESOLUTION NO. 15-7805 ADOPTED; AND AGREEMENT NO. 15-3328 APPROVED BY THE BOARD OF HARBOR COMMISSIONERS May 21, 2015 AMBER M. KLESGi Board Secretary LA THE