In April 2002, the Council approved the Magnolia Power Project Site Lease and Services Agreement ("Lease Agreement") between SCPPA and the City. The Lease Agreement gives SCPPA the right to use three acres in the northeasterly quadrant of the BWP facility, where the new generation facility will be located. The Lease Agreement provides for an initial term that expires in December 2035, and gives SCPPA a right to renew until 2057 � a maximum term of 55 years. It also granted SCPPA an option to expand the leasehold area up to an additional acre. Rent during the initial thirty-year term is $27,000 per month for the three-acre site, with a pro-rated increase for any additional area. If the right to renew is exercised, the rent will be adjusted for the remaining 25 years according to an agreed formula.

In addition to the three-acre site and the one-acre expansion area, the Lease Agreement allows SCPPA to construct a services and control building where the old Magnolia 1 and 2 generators are located. Burbank and SCPPA both will occupy the completed structure.

Lastly, the Lease Agreement sets terms for the provision of utility service for the facility by the City.

The proposed Amendment No. 1 would make several minor changes to the Lease Agreement. Two changes are substantive:

• First, the initial term would be extended by one year, as requested by the Project�s underwriters. They require that the initial term coincide with the term of the bonds, and recently decided that the bonds should mature in 2036 rather than 2035. Hence, the Amendment would provide that the lease expires in December 2036. Extending the initial term does not extend the overall 55-year maximum term; that is, the Lease Agreement will still expire in 2057 (if the renewal option is exercised).

• Secondly, the Lease Agreement contains an early termination clause, which provides for automatic termination if all the other Project documents are not executed by April 1, 2003. In view of the slight delay the Project has experienced in licensing and funding, it is probable that this date cannot be met. Amendment No. 1 would change this date to May 1, 2003, and give each party the right to extend that date for an additional 90 days.

There are four other minor revisions that are for clarification only and do not change the original intent of the parties.

It is recommended that the Council approve Amendment No. 1 to the Lease Agreement and authorize the General Manager of BWP to execute it and the City Clerk to attest.

If the Council concurs, the appropriate action would be a motion to adopt the resolution entitled "A RESOLUTION OF THE COUNCIL OF THE CITY OF BURBANK APPROVING AND AUTHORIZING THE EXECUTION OF AMENDMENT NO. 1 TO THE MAGNOLIA POWER PROJECT SITE LEASE AND SERVICES AGREEMENT BETWEEN THE SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY AND THE CITY OF BURBANK."

cc: Robert "Bud" Ovrom, City Manager

Mary J. Alvord, Assistant City Manager

Ronald E. Davis, General Manager--BWP