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AGENDA

REGULAR MEETING OF THE LAKEPORT CITY COUNCIL


(ALSO MEETS AS THE CITY OF LAKEPORT MUNICIPAL SEWER DISTRICT, THE LAKEPORT INDUSTRIAL
DEVELOPMENT AUTHORITY, THE MUNICIPAL FINANCING AGENCY OF LAKEPORT and THE SUCCESOR
AGENCY TO THE FORMER LAKEPORT REDEVELOPMENT AGENCY)
Tuesday, April 17, 2018
City Council Chambers, 225 Park Street, Lakeport, California 95453
Any person may speak for three (3) minutes on any agenda item; however, total public input per item is not to exceed 15 minutes, extended at the discretion of the
City Council. This rule does not apply to public hearings. Non-timed items may be taken up at any unspecified time.
I. CALL TO ORDER & ROLL CALL: 6:00 p.m.
II. PLEDGE OF ALLEGIANCE:
III. URGENCY ITEMS: To add item, Council is required to make a majority decision that an urgency
exists (as defined in the Brown Act) and a 2/3rds determination that the need to
take action arose subsequent to the Agenda being posted.
IV. ACCEPTANCE OF AGENDA: Move to accept agenda as posted, or move to add or delete items.
V. CONSENT AGENDA: The following Consent Agenda items are expected to be routine and noncontroversial. They will be acted upon by
the Council at one time without any discussion. Any Council Member may request that any item be removed from
the Consent Agenda for discussion under the regular Agenda. Removed items will be considered following the
Consent Calendar portion of this agenda.

A. Ordinances: Waive reading except by title, of any ordinances under consideration at this
meeting for either introduction or passage per Government Code Section 36934.
B. Minutes: Approve minutes of the City Council regular meeting of April 3, 2018.
C. Application 2018-001: Approve the Lakeport Criterium event application and agreement between the
City of Lakeport and Main Street Elite Cycling

D. Application 2018-014: Approve Application 2018-014, with staff recommendations, for the 2018
Memorial Day Parade, to be held May 26, 2018.

E. Application 2018-015: Approve Application 2018-015, with staff recommendations, for the 2018
Tuesday Farmers’ Market, to be held from May 1 – September 25, 2018.

F. Out of State Travel: Authorize the out of state travel as requested by the City Manager to attend
RECon – the Global Retail Real Estate Convention in Las Vegas, Nevada May 20-
23, 2018.
G. Fourth of July Fireworks Show: Approve the contract for the 2018 Fourth of July fireworks production with Pyro
Spectaculars North, Inc., in the amount of $20,500.00 and authorize the City
Manager to execute the contract.
VI. PUBLIC PRESENTATIONS/REQUESTS:
A. Citizen Input: Any person may speak for 3 minutes about any subject within the authority of the City Council, provided that the
subject is not already on tonight’s agenda. Persons wishing to address the City Council are required to complete a
Citizen’s Input form and submit it to the City Clerk prior to the meeting being called to order. While not required,
please state your name and address for the record. NOTE: Per Government Code §54954.3(a), the City Council
cannot take action or express a consensus of approval or disapproval on any public comments regarding matters
which do not appear on the printed agenda.

B. Proclamation: Presentation of a Proclamation designating the week of April, 15-21, as


Volunteer Week in the City of Lakeport.

VII. PUBLIC HEARING:

A. Solar Proposal: Authorize the City Manager to negotiate and execute an Energy Services
Contract with ENGIE Services, subject to legal review, for the performance of
energy upgrades outlined in the presented scope of wo

VIII. COUNCIL BUSINESS:


A. Public Works Director
City Council Agenda of April 17, 2018 Page 2

1. Playground Equipment: Authorize the City Manager to sign the associated purchase order and purchase
agreement for the Landscape Structures PlayBooster # 107686-2-2 from Ross
Recreation Equipment Company, Inc
2. SB-1: Adopt the proposed resolution approving the City of Lakeport SB 1 Project List
for fiscal year 2018-19 and direct staff to submit to the California Transportation
Commission.
B. Community Development Director
1. Hotel Feasibility Study Adopt a resolution accepting the Hotel Feasibility Study prepared for the City of
Lakeport by HVS.
2. Engineering Services: Authorize the City Manager to enter into an agreement with Quincy Engineering
for an amount not to exceed $125,000 for the completion of engineering design
services for a water main loop line connecting the South Main Street water main
with the Parallel Drive water main.
IX. CITY COUNCIL COMMUNICATIONS:
A. Miscellaneous Reports, if any:
X. ADJOURNMENT:
Materials related to an item on this Agenda submitted to the Council after distribution of the agenda packet are available for public inspection in the City Clerk’s Office at 225
Park Street, Lakeport, California, during normal business hours. Such documents are also available on the City of Lakeport’s website, www.cityoflakeport.com, subject to
staff’s ability to post the documents before the meeting.
The City of Lakeport, in complying with the Americans with Disabilities Act (ADA), requests individuals who require special accommodations to access, attend and/or
participate in the City meeting due to disability, to please contact the City Clerk’s Office, (707) 263-5615, 72 hours prior to the scheduled meeting to ensure reasonable
accommodations are provided.

_______________________________________
Hilary Britton, Deputy City Clerk
MINUTES
REGULAR MEETING OF THE LAKEPORT CITY COUNCIL
(ALSO MEETS AS THE CITY OF LAKEPORT MUNICIPAL SEWER DISTRICT, THE LAKEPORT INDUSTRIAL DEVELOPMENT AUTHORITY, THE
MUNICIPAL FINANCING AGENCY OF LAKEPORT and THE SUCCESOR AGENCY TO THE FORMER LAKEPORT REDEVELOPMENT AGENCY)
Tuesday, April 3, 2018
City Council Chambers, 225 Park Street, Lakeport, California 95453
CLOSED SESSION: Mayor Turner called the meeting to order at 5:30 p.m.
Mayor Turner adjourned to closed session at 5:30 p.m. to consider:
CONFERENCE WITH REAL PROPERTY NEGOTIATOR (Gov. Code § 54956.8)
1. 902 Bevins Court, APN: 025-462-11
Agency Negotiator: City Manager Silveira
Negotiating Party: Lake County Tribal Health
Under Negotiation: Price and Terms of Payment
I. CALL TO ORDER & ROLL CALL: Mayor Turner called the meeting to order at 6:00 p.m. with Council Member
Barnes, Council Member Mattina, Council Member Parlet, and Council Member
Spurr present.
REPORT OUT OF CLOSED SESSION: Mayor Turner reported no reportable action from Closed Session.
II. PLEDGE OF ALLEGIANCE: The Pledge of Allegiance was led by Zack Jordan.
URGENCY ITEMS: There were no Urgency Items
IV. ACCEPTANCE OF AGENDA: A motion was made by Council Member Mattina, seconded by Council Member
Spurr, and unanimously carried by voice vote to accept agenda as posted, or
move to add or delete items.
V. CONSENT AGENDA: The following Consent Agenda items are expected to be routine and noncontroversial. They will be acted upon by
the Council at one time without any discussion. Any Council Member may request that any item be removed from
the Consent Agenda for discussion under the regular Agenda. Removed items will be considered following the
Consent Calendar portion of this agenda.

A. Ordinances: Waive reading except by title, of any ordinances under consideration at this
meeting for either introduction or passage per Government Code Section 36934.
B. Minutes: Approve minutes of the City Council regular meeting of March 20, 2018 and the
special meeting of March 27, 2018.
C. Application 2018-012: Approve Application 2018-012, with staff recommendations, for the Quagga
Mussel Outreach Booth to be set up at the Third Street Boat Ramp during
summer events in Library Park.

D. Application 2018-011: Approve Application 2018-013, with staff recommendations, for the Walk for Life
event to be held on May 5, 2018.

E. Confidential Employees: Adopt a resolution approving the Compensation and Benefits Program for the
City of Lakeport Unrepresented Employees for the period of March 1, 2018
through June 30, 2020.

F. Statewide Initiative: Adopt a proposed resolution opposing the Tax Fairness, Transparency and
Accountability Act of 2018.
G. Public Educational and Governmental Receive and file the 2018/19 FY PEG Budget.
Channel (PEG):
Vote on Consent Agenda: Suzanne Lyons asked several questions about item E. Compensation and
Benefits Program for the City of Lakeport Unrepresented Employees.
A motion was made by Council Member Parlet, seconded by Council Member
Barnes, and unanimously carried by voice vote to approve the Consent Agenda,
items A-G.
VI. PUBLIC PRESENTATIONS/REQUESTS:
City Council Minutes of April 3, 2018 Page 2

A. Citizen Input: There was no input offered from the public.

B. Proclamation: Mayor Turner presented a proclamation designating the Month of April, 2018, as
Sexual Assault Awareness Month, and April 3, 2018 as Sexual Assault Awareness
Day of Action to Lake Family Resource Center Staff.

Proclamation: Mayor Turner presented a proclamation designating the Month of April, 2018, as
Child Abuse Prevention Month to Lake Family Resource Center (LFRC) Staff.

Proclamation: Mayor Turner presented a proclamation designating April 14, 2018 as Human
Trafficking Awareness Day to the Soroptimist International of Clear Lake.
VII. PUBLIC HEARING:

A. Hazardous Weed Abatement Ordinance: The staff report was presented by Community Development Director Ingram.

Mayor Turner opened the Public Hearing at 6:24 p.m.


Fire Chief Hutchison gave some history on destructive fires and spoke in favor of
the ordinance changes.
Mayor Turner closed the Public Hearing at 6:27 p.m.

A motion was made by Council Member Spurr, seconded by Council Member


Barnes, and unanimously carried by voice vote to adopt a proposed ordinance
amending Section 8.28 of the Lakeport Municipal Code changing the date in
which dry vegetation creating fire hazard conditions on private property must be
abated from early July to June 1st.
VIII. COUNCIL BUSINESS:
A. Utilities Superintendent
1. Sanitary Sewer Master Plan The staff report was presented by Utilities Superintendent Harris.
(SSMP) Update:
A motion was made by Council Member Mattina, seconded by Council Member
Parlet, and unanimously carried by voice vote to approve the updated Sewer
System Management Plan (SSMP) and direct staff to complete the update
certification process in the State Water Resources Board’s (SWRCB) electronic
database.
B. City Clerk
1. Email Retention Policy: The staff report was presented by City Clerk Buendia.

A motion was made by Council Member Barnes, seconded by Council Member


Barnes, and unanimously carried by voice vote to adopt the proposed resolution
adopting an Email retention policy.
2. Public Educational and The staff report was presented by City Manager Silveira.
Governmental Channel (PEG)
Board Appointment: A motion was made by Council Member Mattina, seconded by Council Member
Spurr, and unanimously carried by voice vote to appoint Mireya Turner to serve
as the Lakeport representative to the PEG Channel Board of Directors with term
expiring on the first Monday of January 2020.
C. Police Chief
1. Quarterly Update Chief Rasmussen presented an update on police activity in the first quarter of
2018. Lieutenant Ferguson complimented police staff.
IX. CITY COUNCIL COMMUNICATIONS:
A. Miscellaneous Reports, if any: City Manager Silveira had no report.
City Attorney Ruderman had no report.
Public Works Director Grider had no report.
City Council Minutes of April 3, 2018 Page 3

Utilities Superintendent Harris had no report.


Finance Director Walker had no report.
Administrative Services Director/City Clerk Buendia had no report.
Police Chief Rasmussen had no report.
Community Development Director Ingram had no report.
Council Member Spurr reported that he will be attending the League
Transportation and Communications meetings.
Council Member Parlet had no report.
Council Member Mattina reported she will be attending the League Housing,
Community and Economic Development meetings.
Council Member Barnes had no report.
Mayor Turner reported that she will not be able to attend the League policy
meetings.
X. ADJOURNMENT: Mayor Turner adjourned the meeting at 7:05 p.m.

_______________________________________
Mireya G. Turner
Attest:

________________________________________
Kelly Buendia, City Clerk
CITY OF LAKEPORT
City Council
City of Lakeport Municipal Sewer District
Lakeport Redevelopment Successor Agency
Lakeport Redevelopment Successor Agency
Lakeport Industrial Development Agency
Municipal Financing Agency of Lakeport

STAFF REPORT
RE: Application for Use of Public Areas Request for a Downtown MEETING DATE: 04/17/2018
Criterium Bicycle Race

SUBMITTED BY: Brad Rasmussen, Chief of Police

PURPOSE OF REPORT: Information only Discussion Action Item

WHAT IS BEING ASKED OF THE CITY COUNCIL/BOARD:


The City Council is being asked to approve the Application for Use of Public Areas requested by the Main Street
Elite Cycling Team to hold a Criterium Bicycle Race in Downtown Lakeport.

BACKGROUND/DISCUSSION:
The Main Street Elite Cycling Team is requesting to hold their second annual Downtown Criterium bicycle
race on June 30, 2018 on Main, Forbes, Fourth and Armstrong Streets. The hours of street closures needed
for the event will be approximately 9 AM to 10 PM. The closures will be on Main and Forbes Streets
between the north side of Martin Street and the south side of Fifth Street and Armstrong and Fourth Streets
between Main and Forbes Streets.

The agreement between the City and Main Street Elite Cycling further describes the event and party
requirements.

OPTIONS:
Council can approve the Application for Use of Public Areas requested by the Main Street Elite Cycling Team
to hold a Criterium bicycle race in Downtown Lakeport or provide alternate direction to staff.

FISCAL IMPACT:
None $3800 for staffing @event Budgeted Item? Yes No
Budget Adjustment Needed? Yes No If yes, amount of appropriation increase: $
Affected fund(s): General Fund Water OM Fund Sewer OM Fund Other:
Comments:

SUGGESTED MOTIONS:
Move to approve the Lakeport Criterium event application and agreement between the City of Lakeport and
Main Street Elite Cycling.

Meeting Date: 04/17/2018 Page 1 Agenda Item #V.C.


Attachments: 1. Application with Event Map
2. Agreement

Meeting Date: 04/17/2018 Page 2 Agenda Item #V.C.


Hilary Britton, Deputy City Clerk Administration

X X
X X LPD Etoh Permit

Applicant will need to submit the following prior to the event:


1. Insurance Certificate
2. EtOH Permit - Issued by Lakeport Police Department
3. Agreement/Hold Harmless
4. Notification to Affected Businesses
From: Lori Price
To: Hilary Britton
Subject: RE: Application 2018-001 - 2018 Lakeport Downtown Criterium
Date: Tuesday, February 06, 2018 1:54:10 PM
Attachments: image002.png

Good afternoon Hilary,


 
Thank you for the opportunity to comment on this application.  I have reviewed said application and it
does not appear it will impact County roads in any way.  We therefore have no comments or conditions
to add to this application. 
 
Thank you again,
 
Lori Price
Property Usage Permit Coordinator
Lake County Public Works

From: Hilary Britton [hbritton@cityoflakeport.com]


Sent: Tuesday, February 06, 2018 10:07 AM
To: Dean Eichelmann; Cheryl Bennett; Cynthia Ader; Daniel Chance; Doug Grider; Executive
Management; Jason Ferguson; Jim Kennedy; Linda Sobieraj; Lori Price; Mark Wall
(mwaconsulting@comcast.net); Matt Hartzog; Mike Sobieraj; Pheakdey Preciado; Rebekah Dolby; Ron
Ladd; records@lakecountyca.gov; Tina Rubin
Subject: Application 2018-001 - 2018 Lakeport Downtown Criterium

Hi all,
 
Please find attached application 2018-001 for the 2018 Downtown Criterium bicycle race for your
review and comments.
 
We would like to submit this application for Council approval at the 02/20/2018 Council meeting, so
please have your comments back to me by 02/14/2018.
 
As always, thank you for your input!
 
Hilary Britton
Deputy City Clerk
City of Lakeport
225 Park Street
Lakeport, CA  95453
(707) 263-5615 x102
hbritton@cityoflakeport.com

      
 
LAKEPORT TWILIGHT CRITERIUM AGREEMENT

This Agreement is entered into as of this __ day of _______________, 2018 by and


among David R. Garzoli, an individual and race director, and Main Street Elite Cycling Team,
a California non-profit corporation (collectively, “Main Street Elite Cycling Team”), and the
City of Lakeport, a municipal corporation organized under the laws of the State of California
(“City”). Main Street Elite Cycling Team and City are hereinafter collectively referred to as
the “Parties” and individually as a “Party.”

WHEREAS, USA Cycling is a registered Colorado non-profit corporation;

WHEREAS, the Main Street Elite Cycling Team is a USA Cycling registered cycling
team based in Lake County, California;

WHEREAS, David R. Garzoli is the race director registered with USA Cycling the
Lakeport Twilight Criterium, as defined below;

WHEREAS, Main Street Elite Cycling Team intends to sanction a criterium bike race
in the City on June 30, 2018 (“Lakeport Twilight Criterium”) as well as provide race officials,
official timing and scoring for the Lakeport Twilight Criterium;

WHEREAS, Main Street Elite Cycling Team has received a USA Cycling Permit No.
2018 - 1391 for the Lakeport Twilight Criterium under the Event Name: “RPP Hobby
Lakeport Twilight Criterium presented by Chevron and Power Market”;

WHEREAS, the City has agreed to allow the Lakeport Twilight Criterium bike race
in its downtown subject to receipt of adequate indemnity, insurance and other rights; and

WHEREAS, Main Street Elite Cycling Team wishes to provide such assurances to
facilitate the Lakeport Twilight Criterium, foster good will and grow the cycling community
in Lake County and surrounding regions.

NOW THEREFORE, in consideration of the promises and covenants contained


herein and for other good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the Parties hereby agree as follows:

1. Term. The term of this Agreement shall begin as of the date set forth above
(the “Effective Date”) and, unless earlier terminated in accordance with the terms set forth
herein, shall continue through and including July 31, 2018 (the “Term”).

2. City Obligations. City shall have the following obligations (collectively, the
“City Obligations”):

A. City Obligation Specifications. City shall provide the following in accordance


with the operational and technical specifications set forth on Exhibit “A”:

(i) Police Services: Local police services to work in coordination with the
California State Patrol, the California Department of Transportation, Main Street Elite
Cycling Team, and Main Street Elite Cycling Team volunteers; and

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(ii) Public Works: Public works services to secure road closures.

B. Media and Marketing Plan Cooperation. City will reasonably cooperate with
the media and marketing plan of Main Street Elite Cycling Team for the Lakeport Twilight
Criterium.

3. Main Street Elite Cycling Team Obligations. Main Street Elite Cycling
Team shall have the following obligations (collectively, the “Main Street Elite Cycling Team
Obligations”):

A. Race Course. Main Street Elite Cycling Team shall design the Lakeport
Twilight Criterium race course subject to the approval of City Manager. Race course shall be
designed to ensure the safety of competitors, spectators, volunteers, and the public, and both
private and public property. Main Street Elite Cycling Team shall accordingly ensure
competitors are provided advance notice of the race course and any roadway characteristics or
potential impediments.

B. No Roadway Alterations. Main Street Elite Cycling Team shall not alter any
City road ways, fixtures, signage, traffic direction signs, or similar signs. Main Street Elite
Cycling Team shall not apply any paint or other markings to the roadways, sidewalks, or other
public right-of-ways.

C. Mark the Race Lane. Main Street Elite Cycling Team shall clearly indicate the
race lane for the Lakeport Twilight Criterium. Race lane shall be clearly marked to ensure the
safety of competitors, spectators, volunteers, and the pubic, and both private and public
property. Main Street Elite Cycling Team shall install race course barricades and barriers as
needed to ensure the safety of competitors, spectators, volunteers, and the public, and both
private and public property in consultation with the City Public Works Department.

D. Mark Safe Spectator Locations. Main Street Elite Cycling Team shall clearly
indicate safe locations for spectators to view the race. Designated spectator locations shall
ensure the safety of competitors, spectators, volunteers, and the public, and both private and
public property.

E. No Parking. No later than one week before the Lakeport Twilight Criterium,
Main Street Elite Cycling Team shall delivery written notice to all residences along the race
course regarding the road closures and no parking restrictions during the race. Written notice
may be provided by distributing flyers to residences. No later than 24 hours before the first
road closure, Main Street Elite Cycling Team will post no parking and tow away signs for the
entire race course to allow Lakeport police to tow away any vehicles left on the race course
prior to commencement of the Lakeport Twilight Criterium. Main Street Elite Cycling Team
shall bear the sole cost and expense of procuring and posting no parking and tow away signs
in a quantity deemed sufficient by the Chief of Police.

F. Notice to Local Businesses. No later than a month before the Lakeport


Twilight Criterium, Main Street Elite Cycling Team shall personally contact each business
and residence owner on the race course and inform them of the Lakeport Twilight Criterium
and road closures.

G. Race Inspection. Prior to, and during the course of the Lakeport Twilight
Criterium, the Main Street Elite Cycling Team shall inspect the race course, and continuously

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inspect the race course, for any dangerous conditions and safety hazards to ensure the safety
of competitors, spectators, volunteers, and the pubic, and both private and public property and
take appropriate action to repair, redirect, bypass, or abandon any portion of the race location
or the race itself.

H. Required Equipment and Equipment Inspections. Main Street Elite Cycling


Team shall be responsible for requiring and ensuring that competitors use all necessary safety
equipment, including cycling helmets and cycling glasses. Main Street Elite Cycling Team
shall be responsible for requiring and ensuring that competitors use bicycles and other racing
equipment that are in good working order. Main Street Elite Cycling Team shall be
responsible for inspecting competitor equipment and competitor safety equipment.

I. Credentials. Main Street Elite Cycling Team shall be responsible for producing
credentials for volunteers, City employees, members of the media, and operational personnel.

J. Portable Restrooms: Main Street Elite Cycling Team shall provide portable
public restroom facilities on the day of the Lakeport Twilight Criterium.

K. Waste Management/Trash Removal/Recycling: Main Street Elite Cycling


Team shall provide or arrange for waste management, trash removal, and recycling services
during and following the conclusion of the Lakeport Twilight Criterium.

L. EMS/EMT Services: Main Street Elite Cycling Team shall coordinate with
local emergency medical services to appropriately serve competitors and the general public at
and on the day of the Lakeport Twilight Criterium.

M. Volunteers: Main Street Elite Cycling Team shall be responsible for the
recruitment, selection, management, and training of all volunteers. Main Street Elite Cycling
Team shall be responsible for the management and oversight of volunteers at and on the day
of the Lakeport Twilight Criterium. Main Street Elite Cycling Team shall require all
volunteers sign a standard Waiver and Release of Liability, Assumption of Risk and
Indemnity Agreement form set forth on Exhibit “B” and provide a copy of each signed
Waiver and Release to the City.

N. Race Competitors: Main Street Elite Cycling Team shall require all
competitors sign a standard Waiver and Release of Liability, Assumption of Risk and
Indemnity Agreement form set forth on Exhibit “B” and provide a copy of each signed
Waiver and Release to the City.

4. Financial.

A. Food and Beverage Concessions. Main Street Elite Cycling Team may offer
food and alcoholic beverage concessions and other concessions for purchase on the day of the
Lakeport Twilight Criterium. Main Street Elite Cycling Team shall be responsible for
ensuring it obtains, at Main Street Elite Cycling Team’s sole cost and expense, all permits and
regulatory approvals necessary, including a current City business license and Lake County
Health Department permits. Alcohol sales are permitted only if Main Street Elite Cycling
Team or its designee obtains all necessary state and local permits and complies with all
federal, state and local law. Main Street Elite Cycling Team may retain all revenues derived
from the concessions and shall be responsible for all expenses attendant to such concessions.

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B. Ancillary Events. Main Street Elite Cycling Team may create, organize, and
present ancillary events to the Lakeport Twilight Criterium, provided City has approves such
events in advance in writing, and Main Street Elite Cycling Team may retain all revenues
generated thereby. Main Street Elite Cycling Team shall be responsible for all expenses of
creating, organizing, and presenting such ancillary events.

5. Representations and Warranties.

A. By Main Street Elite Cycling Team. Main Street Elite Cycling Team represents
and warrants that:

(i) It has the full right, power and legal authority to enter into and fully
perform this Agreement in accordance with its terms without violating the rights of any other
person, party, or entity, that there are no other agreements or commitments, oral or written,
that will interfere with its full performance hereunder and that it will fully comply with all
federal, state and local laws, rules and regulations applicable to the day-to-day conduct of its
business and to its obligations and performances hereunder; and

(ii) It will comply with all applicable laws, regulations, and ordinances
pertaining to the promotion and conduct of the Lakeport Twilight Criterium.

(iii) It is an event organizer and/or promoter of the Lakeport Twilight


Criterium, has obtained an Event Permit from USA Cycling for specific event and date of the
Lakeport Twilight Criterium, No. 2018-1391, and is a Named Insured on any insurance
policies required under the Agreement, including but not limited to insurance policies that
provide coverage to USA Cycling or are provided by or through USA Cycling.

B. By City. City represents and warrants that:

(i) It has the full right, power and legal authority to enter into and fully
perform this Agreement in accordance with its terms without violating the rights of any other
person, party, or entity, that there are no other agreements or commitments, oral or written,
that will interfere with its full performance hereunder and that it will fully comply with all
federal, state and local laws, rules and regulations applicable to the day-to-day conduct of its
business and to its obligations and performances hereunder; and

(ii) It will comply with all applicable laws, regulations, and ordinances
pertaining to the promotion and conduct of the Lakeport Twilight Criterium.

6. Indemnification.

A. Indemnification. To the fullest extent permitted by law, Main Street Elite


Cycling Team shall indemnify, hold harmless, and when the City requests with respect to a
claim provide a deposit for the defense of, and defend City, its officers, agents, employees and
volunteers from and against any and all claims, losses, costs and expenses for any damage due
to death or injury to any person, whether physical, emotional, consequential or otherwise, and
injury to any property arising out of or in connection with Main Street Elite Cycling Team’s
alleged negligence, recklessness or willful misconduct or other wrongful acts, errors or
omissions of Main Street Elite Cycling Team or any of its officers, employees, servants,
agents, volunteers, subcontractors, or anyone directly or indirectly employed by either Main
Street Elite Cycling Team or its subcontractors in the performance of this Agreement or the
Lakeport Twilight Criterium or its failure to comply with any of its obligations contained in
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this Agreement, except such loss or damage which is caused by the sole active negligence or
willful misconduct of the City. Such costs and expenses shall include reasonable attorneys’
fees due to counsel of City’s choice, expert fees and all other expenses of litigation. Main
Street Elite Cycling Team shall not be entitled to any refund of attorneys’ fees, defense costs
or expenses in the event that it is adjudicated to have been non-negligent. Main Street Elite
Cycling Team acknowledges that City would not enter into this Agreement in the absence of
Main Street Elite Cycling Team’s commitment to indemnify and protect City as set forth
herein.

B. Obligations Not Limited. The obligations of Main Street Elite Cycling Team
under this Section of this Agreement are not limited by the provisions of any workers’
compensation or similar statute. Main Street Elite Cycling Team expressly waives its statutory
immunity under such statutes as to City, its officers, agents, employees and volunteers.

C. Subcontractors, Entities, and All Persons Involved with Performance. Main


Street Elite Cycling Team agrees to obtain executed indemnity agreements with provisions
identical to those set forth here in this Section of this Agreement from each and every
subcontractor or any other person or entity involved by, for, with or on behalf of Main Street
Elite Cycling Team in the performance of this Agreement or the Lakeport Twilight Criterium.
If Main Street Elite Cycling Team fails to obtain such indemnity obligations from others,
Main Street Elite Cycling Team agrees to indemnify, hold harmless and defend City, its
officers, agents, employees and volunteers from and against any and all claims, losses, costs
and expenses for any damage due to death or injury to any person and injury to any property
resulting from any alleged intentional, reckless, negligent, or otherwise wrongful acts, errors
or omissions of Main Street Elite Cycling Team’s subcontractors or any other person or entity
involved by, for, with or on behalf of Main Street Elite Cycling Team in the performance of
this Agreement or the Lakeport Twilight Criterium. Such costs and expenses shall include
reasonable attorneys’ fees incurred by counsel of City’s choice.

D. No Waiver. City does not, and shall not, waive any rights that it may possess
against Main Street Elite Cycling Team because of the acceptance by City, or the deposit with
City, of any insurance policy or certificate required pursuant to this Agreement. This hold
harmless and indemnification provision shall apply whether or not any insurance policies
apply to a claim, demand, damage, liability, loss, cost or expense.

E. Waive any Claims. Notwithstanding any federal, state, or local policy, rule,
regulation, law or ordinance to the contrary, Main Street Elite Cycling Team and any of its
employees, agents, volunteers, and subcontractors providing service under this Agreement
shall not qualify for or become entitled to, and hereby agree to waive any claims to, any
compensation, benefit, or any incident of employment by City, including but not limited to
eligibility to enroll in CalPERS as an employee of City and entitlement to any contribution to
be paid by City for employer contribution and/or employee contributions for CalPERS
benefits.

7. Insurance.

A. During the term of this Agreement, Main Street Elite Cycling Team shall
carry, maintain, and keep in full force and effect insurance against claims for death or injuries
to persons or damages to property that may arise from or in connection with Main Street Elite
Cycling Team’s performance of this Agreement or the Lakeport Twilight Criterium.

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B. Any available insurance proceeds broader than or in excess of the specified
minimum Insurance coverage requirements or limits shall be available to City as an
Additional Insured as provided below. Furthermore, the requirements for coverage and limits
shall be the greater of (i) the minimum coverage and limits specified in this Agreement, or (ii)
the broader coverage and maximum limits of coverage of any Insurance policy or proceeds
available to the named Insured.

C. Insurance required under this Agreement shall be of the types set forth below,
with minimum coverage as described:

(i) Comprehensive General Liability Insurance with coverage limits of not


less than One Million Dollars ($1,000,000) for each occurrence and Three Million
($3,000,000) in the aggregate, including products and operations hazard, contractual
insurance, broad form property damage, independent consultants, and personal injury.

(ii) Automobile Liability Insurance for vehicles used in connection with the
performance of this Agreement with minimum limits of One Million Dollars ($1,000,000) per
claimant and One Million dollars ($1,000,000) per incident.

(iii) Worker’s Compensation insurance if and as required by the laws of the


State of California.

(iv) Umbrella and/or Excess Liability insurance with limits not less than
Four Million Dollars ($4,000,000) each occurrence and not less than Four Million dollars
($4,000,000) in the aggregate shall apply in excess of and on a following form basis to the
primary Commercial General Liability, Automobile Liability and Employer’s Liability
policies; and

(v) Any other insurance necessary and appropriate for the staging of the
Lakeport Twilight Criterium as determined by Main Street Elite Cycling Team.

D. Main Street Elite Cycling Team shall require each of its subcontractors to
maintain insurance coverage that meets all of the requirements of this Agreement provided.

E. The policy or policies required by this Agreement shall be issued by an insurer


admitted in the State of California and with a rating of at least A:VII in the latest edition of
Best’s Insurance Guide.

F. Main Street Elite Cycling Team agrees that if it does not keep the insurance
coverages required by this Agreement in full force and effect, City may either (i) immediately
terminate this Agreement; or (ii) take out the necessary insurance and pay the premium(s)
thereon at Main Street Elite Cycling Team’s expense.

G. At all times during the term of this Agreement, Main Street Elite Cycling
Team shall maintain on file with City’s Risk Manager a certificate or certificates of insurance
showing that the required coverages are in effect and naming City and its officers, employees,
agents and volunteers as Additional Insureds. At least 15 days prior to the Lakeport Twilight
Criterium under this Agreement, Main Street Elite Cycling Team shall file with City’s Risk
Manager such certificate(s) and Forms CG 20 10 07 04 and CG 20 37 07 04 or the substantial
equivalent showing City as an Additional Insured.

6
193233.3
H. Main Street Elite Cycling Team shall provide proof that all policies of
insurance required by this Agreement expiring during the term of this Agreement have been
renewed or replaced with other policies providing at least the same coverage. Such proof will
be furnished at least two weeks prior to the expiration of the coverages.

I. The general liability and automobile policies of insurance required by this


Agreement shall contain an endorsement naming City and its officers, employees, agents and
volunteers as Additional Insureds. The parties agree that this Agreement satisfies any
requirements of USA Cycling for providing additional insured status to the City and its
officers, employees, agents and volunteers for the general liability and automobile policies of
insurance required by this Agreement. All of the policies required under this Agreement shall
contain an endorsement providing that the policies cannot be canceled or reduced except on
thirty days’ prior written notice to City. Main Street Elite Cycling Team agrees to require its
insurer to modify the certificates of insurance to delete any exculpatory wording stating that
failure of the insurer to mail written notice of cancellation imposes no obligation, and to
delete the word “endeavor” with regard to any notice provisions.

J. The insurance provided by Main Street Elite Cycling Team shall be primary to
any other coverage available to City. Any insurance or self-insurance maintained by City
and/or its officers, employees, agents or volunteers shall be in excess of Main Street Elite
Cycling Team’s insurance and shall not contribute with it.

K. All insurance coverage provided pursuant to this Agreement shall not prohibit
Main Street Elite Cycling Team, and Main Street Elite Cycling Team’s employees, agents, or
subcontractors, from waiving the right of subrogation prior to a loss. Main Street Elite
Cycling Team hereby waives all rights of subrogation against the City.

L. Any deductibles or self-insured retentions must be declared to and approved by


the City. At the option of City, Main Street Elite Cycling Team shall either reduce or
eliminate the deductibles or self-insured retentions with respect to City, or Main Street Elite
Cycling Team shall procure a bond in the amount of the deductible or self-insured retention to
guarantee payment of losses and expenses.

M. Procurement of insurance by Main Street Elite Cycling Team shall not be


construed as a limitation of Main Street Elite Cycling Team’s liability or as full performance
of Main Street Elite Cycling Team’s duties to indemnify, hold harmless and defend under
Section 6 of this Agreement.

N. Main Street Elite Cycling Team may be self-insured under the terms of this
Agreement only with express written approval from the City.

(i) All self-insured retentions (SIR) must be disclosed to the City for
approval and shall not reduce the limits of liability.

(ii) Policies containing any SIR provision shall provide or be endorsed to


provide that the SIR may be satisfied by either the named Insured or the City.

O. City reserves the right to obtain a full certified copy of any Insurance policy
and endorsements. Failure to exercise this right shall not constitute a waiver of the right to
exercise later.

8. Termination.
7
193233.3
A. Termination without Cause. Either Party may terminate this Agreement for any
reason on sixty calendar days’ written notice to the other Party. Main Street Elite Cycling
Team agrees to cease all work under this Agreement on or before the effective date of any
notice of termination.

B. Termination with Cause. Either Party may terminate this Agreement with no
liability to the terminating party at any time, upon written notice to the other Party, and upon
the occurrence of one or more of the following events:

(i) Material breach of any covenant, agreement, representation, warranty,


term, or condition of this Agreement; or

(ii) A Party becomes insolvent, fails to pay its debts or perform its
obligations in the ordinary course of its business as they become due. The parties agree that
the covenants contained in Section 3 of this Agreement shall survive the expiration or
termination of this Agreement.

C. Surviving Covenants. The Parties agree that the covenants contained in Section
6 of this Agreement (“Indemnification”) and Section 7 of this Agreement (“Insurance”) shall
survive the expiration or termination of this Agreement.

9. Independent Contractors. Main Street Elite Cycling Team and City are
independent contractors with respect to each other and nothing herein shall be deemed or
construed to create any partnership, joint venture, or agency relationship between them.
Neither Party shall have any authority to contract or bind the other Party in any manner and
shall not represent itself as the agent of the other.

10. General.

A. Assignment. Parties may not assign any rights or obligations under this
Agreement or this Agreement itself, in whole or in part, without the prior express written
consent of the other Party.

B. Notices. Except as expressly provided to the contrary herein, any notice,


consent, report, documents or other item to be given, delivered, furnished or received
hereunder shall be deemed given, delivered, furnished and received when given in writing and
personally delivered to and received by an officer or designated employee of the applicable
Party, to seventy-two (72) hours after the same is deposited in the United States mail, postage
prepaid, registered or certified first class mail, return receipt requested addressed as set forth
below, or to such other address as either of the parties shall advise the other in writing or sent
by confirmed facsimile transmission:

If to City: If to Main Street Elite Cycling Team:

Margaret Silveira David R. Garzoli


City Manager Main Street Elite Cycling Team
225 Park Street PO Box 1686
Lakeport, CA 95453 Lakeport, CA 95453
Telephone: (707) 263-5615 x32 Telephone: (707) 225-0220
Facsimile: (707) 263-8584 Facsimile: (707) 254-8554

8
193233.3
With courtesy copy to: If to David R. Garzoli:

David J. Ruderman, City Attorney David R. Garzoli


Colantuono, Highsmith & Whatley, PC 170 Deer Hill Lane
420 Sierra College Drive, Suite 140 Lakeport, CA 95453
Grass Valley, California 95945-5091 Telephone: (707) 349-0149
Telephone: (530) 432-7357
Facsimile: (530) 432-7356

C. Entire Agreement; Modifications. This Agreement constitutes the entire agreement


of the Parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings between the Parties with respect to the subject matter hereof.
This Agreement may not be modified, amended or supplemented or otherwise changed,
except by a written document executed by an authorized representative of each of the Parties
hereto.

D. No Waiver of Rights and Breaches. No failure or delay of any Party in the exercise
of any right given to such Party hereunder shall constitute a waiver thereof, nor shall any
single or partial exercise of any such right preclude other or further exercise thereof or of any
other right. The waiver by a Party of any default of any other Party hereunder shall not be
deemed to be a waiver of any such subsequent default or other default of any Party.

E. Captions. Section headings used in this Agreement are for convenience of


reference only and shall not affect the construction of any provision of this Agreement.

F. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective successors and authorized assigns.

G. Governing Law. This Agreement shall be deemed to be a contract made under the
laws of the State of California and for all purposes governed by and construed in accordance
with the laws of the State of California.

H. Construction of Agreement. Each Party acknowledges that it has participated in


the negotiation of this Agreement and that no provision of this Agreement shall be construed
against or interpreted to the disadvantage of any Party hereto by any court or other
governmental or judicial authority by reason of such Party having or deemed to have
structured, dictated or drafted such provision.

I. Relationship of Parties. This Agreement shall neither be deemed nor construed to


create a joint venture or partnership between Main Street Elite Cycling Team and City, nor
shall this Agreement be deemed or construed as making either Party the agent or
representative of the other Party. Neither Party shall have the authority to bind the other Party
in any respect.

J. Compliance with Law, Rules and Regulations. The Parties agree to comply with
all federal, state, and local laws, ordinances, orders, rules and regulations applicable to the
performance of their respective obligations under this Agreement, both now existing and as
such may hereinafter be adopted.

K. Exhibits. The documents attached hereto as exhibits are incorporated by reference


herein and made a part of this Agreement as if fully set forth herein.

9
193233.3
L. Severability. The determination that any provision of this Agreement is invalid or
unenforceable shall not invalidate this Agreement, all of such provisions being inserted
conditionally upon their being considered legally valid, and this Agreement shall be construed
and performed in all respects as if such invalid or unenforceable provision(s) were omitted.

M. Exclusive Jurisdiction. The Parties agree that venue of any judicial action in
connection with this Agreement shall lie exclusively in the state court located in Lake County,
California.

N. Further Assurances. The Parties agree to execute and deliver, or cause to be


executed and delivered, such instruments and documents as either Party may reasonably
request or require to carry out more effectively the purpose and intent of this Agreement.

O. Counterparts. This Agreement may be executed in one or more counterparts, each


of which shall be deemed an original, but all of which taken together shall constitute one and
the same agreement.

P. No Third Party Beneficiaries. It is expressly understood that there are no third


party beneficiaries to this Agreement.

Q. Immunity Preservation. To the extent permitted by applicable law nothing


contained herein shall be deemed to waive any immunity available to City.

IN WITNESS WHEREOF, the Parties hereto have caused their duly authorized
representatives to execute this Agreement on their respective behalf, all as of the day and year
first above written.

MAIN STREET ELITE CYCLING TEAM

By: _________________________

Name: ____________________

Title: ____________________

DAVID R. GARZOLI

By
David R. Garzoli As an Individual and Race Director

CITY OF LAKEPORT

10
193233.3
By
Margaret Silveira
City Manager

ATTEST:

By
Kelly Buendia
City Clerk

11
193233.3
EXHIBIT A

[Attach Main Street Elite Cycling Team application, course map and comments from
Lakeport Police Department and Public Works regarding cost and scope of services]

Public Works:

Place and remove traffic control devices for street closures from Martin Street to 5th Street.

Place “Detour Route” on streets as needed.

Provide limited staffing during event for monitoring traffic control devices.

Cost to Public Works budget estimated at: $3000.00

Police:

Provide police patrol officer for traffic & public safety.

Cost to police budget estimated at $800.00

EXHIBIT A
193233.3
EXHIBIT B

RELEASE AND WAIVER OF LIABILITY AND INDEMNITY AGREEMENT

LAKEPORT TWILIGHT CRITERIUM

IN CONSIDERATION of being permitted to compete, volunteer, officiate, observe, work for, or for any purpose
participate in any way in the Lakeport Twilight Criterium,

EACH OF THE UNDERSIGNED, for him or herself, personal representatives, heirs, and next of kin (collectively,
“You” and “Your”), acknowledges, agrees and represents that You have, or will immediately upon arrival at the
Lakeport Twilight Criterium, and will continuously thereafter, inspect the area or areas and all portions thereof
which the You enter and with which You come in contact, and You do further warrant that Your entry upon such
Lakeport Twilight Criterium area or areas and Your participation, if any, in the event constitutes an
acknowledgement that You have inspected such area and that You find and accept the same as being safe and
reasonably suited for the purposes of use, and You further agree and warrant that if, at any time, You are in or
about areas and You feel anything to be unsafe, You will immediately advise the officials of such and will
immediately leave the Lakeport Twilight Criterium areas:

1. YOU HEREBY RELEASE, WAIVE, DISCHARGE AND COVENANTS NOT TO SUE the City of Lakeport,
its officers, agents, employees and volunteers, the promoter, participants, racing association, sanctioning
organization or any subdivision thereof, any persons in any Lakeport Twilight Criterium area, promoters, sponsors,
advertisers, owners and lessees of premises used to conduct the event and each of them, their officers, elected
officials, and employees, all for the purposes herein referred to as “releases,” from all liability to the You for any
and all loss or damage, and any claim or demands therefor on account of injury to the person or property or
resulting in death of the undersigned, whether caused by the negligence of the releasees or otherwise while the
undersigned is in or upon the Lakeport Twilight Criterium area, and/or, competing, officiating in, volunteering,
observing, working for, or for any purpose participating in the event;

2. YOU HEREBY AGREE TO INDEMNIFY AND SAVE AND HOLD HARMLESS the releasees and each of
them from any loss, liability, damage, or cost they may incur due to Your presence in or upon the Lakeport Twilight
Criterium area or in any way competing, officiating, volunteering, observing, or working for, or for any purpose
participating in the event and whether caused by the negligence of the releasees or otherwise.

3. YOU HEREBY ASSUME FULL RESPONSIBILITY FOR AND RISK OF BODILY INJURY, DEATH OR
PROPERTY DAMAGE due to the negligence of releasees or otherwise while in or upon the Lakeport Twilight
Criterium area and/or while competing, officiating, volunteering, observing, or working for or for any purpose
participating in the event. You expressly acknowledge and agree that the activities of the event are very dangerous
and involve the risk of serious injury and/or death and/or property damage. You further expressly agree that the
foregoing release, waiver, and indemnity agreement is intended to be as broad and inclusive as is permitted by law
and that if any portion thereof is held invalid, it is agreed that the balance shall, notwithstanding, continue in full
legal force and effect.

THE UNDERSIGNED HAS READ AND VOLUNTARILY SIGNS THE RELEASE AND WAIVER OF
LIABILITY AND INDEMNITY AGREEMENT, and further agrees that no oral representations, statements or
inducements apart from the foregoing written agreement have been made.

PRINT NAME HERE: _____________________________________________

SIGN NAME HERE: ______________________________________________ DATE:


___________________

EXHIBIT B
193233.3
04/04/2018 2018-014
X 04/17/2018
Hilary Britton, Deputy City Clerk Administration

Applicant will need to submit the following prior to the event:


1. Insurance Certificate naming the City of Lakeport as also insured for the event

Applicant will be advised:


1. Special Requests – Barricades can be coordinated with the Public Works
Department at 707-263-0751.
Hilary Britton

From: Jason D. Ferguson <jferguson@lakeportpolice.org>


Sent: Thursday, April 05, 2018 7:28 PM
To: Hilary Britton
Subject: Re: Application 2018-014 - 2018 Memorial Day Parade

POLICE CONCERNS:

2-patrol officers to lead the parade at $64.00 per hour for one hour=$128.00

2-Volunteers for traffic control at $27.00 per hour for one hour=$54.00

LT

 
Jason Ferguson  
Lieutenant  
Lakeport Police Department  
2025 S. Main St.  
Lakeport, Ca. 95453  
Office (707) 263‐9654  
 
A true hero is not defined simply by the uniform he or she is wearing but rather the person who's wearing it! 
  
-----Original Message-----
From: Hilary Britton [mailto:hbritton@cityoflakeport.com]
Sent: Thursday, April 5, 2018 10:57 AM
To: Amanda Frazell (Dean.Eichelmann@lakecountyca.gov),
Cheryl Bennett (cheryl.bennett@lakecountyca.gov), 'Cynthia Ader', 'Daniel Chance',
'Doug Grider', 'Executive Management', 'Jason Ferguson', 'Jim Kennedy', 'Linda Sobieraj',
Lori Price (lorip@co.lake.ca.us), Mark Wall (mwaconsulting@comcast.net),
'Matt Hartzog', 'Mike Sobieraj',
Pheakdey Preciado (pheakdey.preciado@lakecountyca.gov), 'Rebekah Dolby', 'Ron Ladd',
Sheriff's Dept (records@lakecountyca.gov),
Tina Rubin (Tina.Rubin@lakecountyca.gov)
Subject: Application 2018-014 - 2018 Memorial Day Parade

Hi all, 
  
Please find attached application 2018‐014 for the 2018 Memorial Day Parade for your review. 
  
We would like to submit this for Council approval at the 04/17/2018 Council meeting, so please have your comments 
back to me by 04/11/2018. 
  
Thank you for your input. 
  
Hilary Britton 
Deputy City Clerk 

1
Hilary Britton

From: Mark Wall <mwaconsulting@comcast.net>


Sent: Monday, April 09, 2018 12:20 PM
To: Hilary Britton
Cc: 'Wanda Gray'
Subject: RE: Application 2018-014 - 2018 Memorial Day Parade
Attachments: App 2018-014 - Memorial Day Parade (LCCC).pdf

Hi Hilary, 
It is unfortunate that this is for Saturday rather than Memorial Day, as Lake Transit observes the Monday holiday.   The 
parade itself will definitely disrupt service since there really is no detour available in the downtown area.   Depending on 
how the setup and teardown impact Martin Street, it could disrupt service for the entire duration from 8:30 a.m. until 
noon, or after.  The only alternative for Lake Transit would be to skip all stops along Martin and most of Bevins (We 
would likely travel Main St. to Lakeport Blvd., and then, depending on the traffic situation, serve Bevins Ct as an out and 
back from Lakeport Blvd.).  During the parade itself, we have scheduled stops on Main Street at 11:09 for Northbound 
Route 8, 11:00 a.m. (3rd & Main) and 11:03 a.m. (Main & D) for Route 4 eastbound to Clearlake, and at 11:49 a.m. 
westbound from Clearlake.  It may be that the bus can follow the parade into the 11:49 a.m. stop, but all others are 
clearly disrupted and I don't know that there is a viable alternative.  The situation would be somewhat better if the 
parade started at 10:15 instead of 11:00, particularly if we could be assured along Main Street prior to 10:15.    If the 
parade were then to clear Main Street by 11:00 a.m., we would only have one Main Street stop that would be disrupted 
at 10:34 a.m.  It might be possible to move that stop to Forbes if the parade would take 20 minutes or more to reach 
10th & Forbes.    This would of course require cooperation from traffic control to let the buses through. 
 
I am forwarding this to Wanda Gray of our office for her input.   
 
Mark Wall 
General Manager 
Lake Transit Authority 
(707) 263‐7868 
(559) 280‐0696 Mobile 
 
 
 
From: Hilary Britton [mailto:hbritton@cityoflakeport.com]
Sent: Monday, April 09, 2018 10:37 AM
To: Mark Wall
Subject: RE: Application 2018-014 - 2018 Memorial Day Parade
 
Hi Mark, 
 
The parade will be held on Saturday, May 26th – would this impact your schedules? 
 
Hilary Britton 
Deputy City Clerk 
City of Lakeport 
225 Park Street 
Lakeport, CA  95453 
(707) 263‐5615 x102 
hbritton@cityoflakeport.com 

1
        
 
From: Mark Wall [mailto:mwaconsulting@comcast.net]  
Sent: Friday, April 06, 2018 10:44 PM 
To: Hilary Britton <hbritton@cityoflakeport.com> 
Subject: RE: Application 2018‐014 ‐ 2018 Memorial Day Parade 
 
Lake Transit does not operate on Memorial Day, so there is no conflict. 
 
Mark Wall 
General Manager 
Lake Transit Authority 
(707) 263‐7868 
(559) 280‐0696 Mobile 
 
 
 
From: Hilary Britton [mailto:hbritton@cityoflakeport.com]
Sent: Thursday, April 05, 2018 10:58 AM
To: Amanda Frazell (Dean.Eichelmann@lakecountyca.gov); Cheryl Bennett (cheryl.bennett@lakecountyca.gov); Cynthia
Ader; Daniel Chance; Doug Grider; Executive Management; Jason Ferguson; Jim Kennedy; Linda Sobieraj; Lori Price
(lorip@co.lake.ca.us); Mark Wall (mwaconsulting@comcast.net); Matt Hartzog; Mike Sobieraj; Pheakdey Preciado
(pheakdey.preciado@lakecountyca.gov); Rebekah Dolby; Ron Ladd; Sheriff's Dept (records@lakecountyca.gov); Tina
Rubin (Tina.Rubin@lakecountyca.gov)
Subject: Application 2018-014 - 2018 Memorial Day Parade
 
Hi all, 
 
Please find attached application 2018‐014 for the 2018 Memorial Day Parade for your review. 
 
We would like to submit this for Council approval at the 04/17/2018 Council meeting, so please have your comments 
back to me by 04/11/2018. 
 
Thank you for your input. 
 
Hilary Britton 
Deputy City Clerk 
City of Lakeport 
225 Park Street 
Lakeport, CA  95453 
(707) 263‐5615 x102 
hbritton@cityoflakeport.com 

        
 

2
04/09/2018 2018-015
04/17/2018
Hilary Britton, Deputy City Clerk Administration

X Vendors need 1 day license X

Applicant will need to submit the following prior to the event:


1. Insurance Certificate Naming the City of Lakeport as also insured
2. $15.00 Application Fee

Applicant will be advised:


1. No stakes allowed to anchor pop-ups
2. Special Requests – Electricity, No Parking Signs and Bathrooms can be coordinated with the Public
Works Department at 707-263-0751.
From: Jason D. Ferguson
To: Hilary Britton
Subject: Re: Application 2018-015 - Farmers" Market (Library Park)
Date: Tuesday, April 10, 2018 5:08:30 PM
Attachments: image002.png

No police concerns
 
Jason Ferguson
Lieutenant
Lakeport Police Department
2025 S. Main St.
Lakeport, Ca. 95453
Office (707) 263-9654

A true hero is not defined simply by the uniform he or she is wearing but rather the person who's wearing it!
 

-----Original Message-----
From: Hilary Britton [mailto:hbritton@cityoflakeport.com]
Sent: Tuesday, April 10, 2018 08:28 AM
To: Amanda Frazell (Dean.Eichelmann@lakecountyca.gov),
Cheryl Bennett (cheryl.bennett@lakecountyca.gov), 'Cynthia Ader', 'Daniel Chance',
'Doug Grider', 'Executive Management', 'Jason Ferguson', 'Jim Kennedy', 'Linda Sobieraj',
Lori Price (lorip@co.lake.ca.us), Mark Wall (mwaconsulting@comcast.net),
'Matt Hartzog', 'Mike Sobieraj',
Pheakdey Preciado (pheakdey.preciado@lakecountyca.gov), 'Rebekah Dolby', 'Ron Ladd',
Sheriff's Dept (records@lakecountyca.gov),
Tina Rubin (Tina.Rubin@lakecountyca.gov)
Subject: Application 2018-015 - Farmers' Market (Library Park)

Hi all,
 
Please find attached application 2018-015 for the Tuesday Farmers? Market to be held in Library
Park this summer, for your review.
 
We would like to submit this for City Council approval at the 04/17/2018 Council meeting, so
please have your comments back to me no later than this Thursday, April 12th.
 
Thank you for your input and comments.
 
Hilary Britton
Deputy City Clerk
City of Lakeport
225 Park Street
Lakeport, CA  95453
(707) 263-5615 x102
hbritton@cityoflakeport.com
CITY OF LAKEPORT
City Council
City of Lakeport Municipal Sewer District
Lakeport Redevelopment Successor Agency
Lakeport Industrial Development Authority
Municipal Financing Agency of Lakeport

STAFF REPORT
RE: Request for Out of State Travel MEETING DATE: 04/17/2018

SUBMITTED BY: Margaret Silveira, City Manager

PURPOSE OF REPORT: Information only Discussion Action Item

WHAT IS BEING ASKED OF THE CITY COUNCIL/BOARD:


The City Council is being asked to authorize the City Manager to attend the 2018 ICSC Recon: The Global Retail
and Real Estate Convention to be held in Las Vegas, Nevada May 20-23, 2018. Under current city policy, only the
City Council has the authority to authorize out of state travel by city employees.

BACKGROUND/DISCUSSION:
RECon: The Global Retail Real Estate Convention is sponsored by the International Council of Shopping Centers
(ICSC). This convention is one of the world’s largest global gathering of retail real estate professionals.
Approximately 37,000 industry professionals & 1,200 exhibitors attend RECon annually.

This event will be an opportunity to network with retailers and market the City of Lakeport to representatives
from national hotel chains. In addition, the convention offers various professional development workshops in
the area of retail development.

OPTIONS:
Authorize the out of state travel as requested by the City Manager.

Do not authorize request.

FISCAL IMPACT:
None $1500 Budgeted Item? Yes No
Budget Adjustment Needed? Yes No If yes, amount of appropriation increase: $
Affected fund(s): General Fund Water OM Fund Sewer OM Fund Other: Current budget will
cover this cost without need for adjustment.
Comments:

SUGGESTED MOTIONS:
Move to authorize the out of state travel as requested by the City Manager to attend RECon – the Global Retail
Real Estate Convention in Las Vegas, Nevada May 20-23, 2018.

Attachments:

Meeting Date: 04/17/2018 Page 1 Agenda Item #V.F.


CITY OF LAKEPORT
City Council
City of Lakeport Municipal Sewer District
Lakeport Redevelopment Successor Agency
Lakeport Industrial Development Agency
Municipal Financing Agency of Lakeport

STAFF REPORT
RE: Annual Fireworks Contract MEETING DATE: 04/17/2018

SUBMITTED BY: Margaret Silveira, City Manager

PURPOSE OF REPORT: Information only Discussion Action Item

WHAT IS BEING ASKED OF THE CITY COUNCIL/BOARD:


The City Council is being asked to approve the contract with Pyro Spectaculars North, Inc., for the annual
fireworks display.

BACKGROUND/DISCUSSION:
Pyro Spectaculars has been providing the annual fireworks show in Lakeport for many years. For the past ten
years the cost of display has been $16,500-$17,300. In 2017 the cost to provide this show was $17,300.
However, due to increased expense over the past several years, Pyro has imposed a price increase for 2018. The
price for the identical display as last year will cost $20,500.
Pyro Spectaculars has offered some options to help moderate/absorb this increase. They are willing to:
a) implement the increase over two years to reach this amount, or
b) make cuts in the production, with the goal of maintaining as much density and duration as possible, in
exchange for a more modest price increase.
This event brings hundreds of people from out of the area into Lakeport.
In 2017 the Chamber of Commerce donated $9,567.43 towards the costs of the show with the “Add a Dollar
Campaign”, while the Main Street Association donated $1,000 to the fireworks show. We do not have a
confirmation of their contribution for this year’s show, at this time.

OPTIONS:
Approve the contract for $20,500.00 for the 2018 production, or direct staff to bring back a proposal
incorporating options a) or b) described above.

FISCAL IMPACT:
None $20,500.00 Budgeted Item? Yes No
Budget Adjustment Needed? Yes No If yes, amount of appropriation increase: $
Affected fund(s): General Fund Water OM Fund Sewer OM Fund Other:
Comments:

SUGGESTED MOTIONS:

Meeting Date: 04/17/2018 Page 1 Agenda Item #V.G.


Move to approve the contract for the 2018 Fourth of July fireworks production with Pyro Spectaculars North,
Inc., in the amount of $20,500.00 and authorize the City Manager to execute the contract.

Attachments: 1. Proposal from Pyro Spectaculars, Inc.


2. Contract for 2018 Fireworks Show

Meeting Date: 04/17/2018 Page 2 Agenda Item #V.G.


ATTACHMENT 1
ATTACHMENT 1
ATTACHMENT 1
ATTACHMENT 1
ATTACHMENT 1
ATTACHMENT 1
ATTACHMENT 2
ATTACHMENT 2
ATTACHMENT 2
ATTACHMENT 2
Proclamation
OF THE CITY COUNCIL OF THE CITY OF LAKEPORT
DESIGNATING THE WEEK OF APRIL 15-21, 2018, AS VOLUNTEER WEEK

WHEREAS, the entire community can inspire, equip and mobilize people to take action that changes the
world; and

WHEREAS, individuals and communities are at the center of social change, discovering their power to
make a difference; and

WHEREAS, during this week all over the nation, service projects will be performed and volunteers
recognized for their commitment to service; and

WHEREAS, the giving of oneself in service to another empowers the giver and the recipient; and

WHEREAS, experience teaches us that government by itself cannot solve all of our nation’s social
problems; and

WHEREAS, volunteers have greatly enhanced the quality of life in the City of Lakeport; and

WHEREAS, the Lakeport Police Department has long utilized community members to assist them in their
mission; and

WHEREAS, in 2017, volunteers in the Lakeport Police Department logged 800 hours in service to their
community; and

WHEREAS, these volunteers have generously given of their time and expertise.

NOW, THEREFORE, BE IT PROCLAIMED that the Lakeport City Council does hereby proclaim April 15th –
21st, 2018 as

Volunteer Week
in the City of Lakeport; and calls upon the citizens of Lakeport to volunteer in their respective
communities. By volunteering and recognizing those who serve, we can come together to make a
difference.

I have hereunto set my hand and caused the Seal of the City of Lakeport to be affixed this 17th day
of April, 2018.

_________________________________
MIREYA G.TURNER, Mayor
CITY OF LAKEPORT
City Council
City of Lakeport Municipal Sewer District
Lakeport Redevelopment Successor Agency
Lakeport Industrial Development Agency
Municipal Financing Agency of Lakeport

STAFF REPORT
RE: Review of proposed Energy Services Contract with ENGIE MEETING DATE: 04/17/2018
Services to complete energy upgrades, including the
construction of solar arrays, at several City owned facilities
Kevin M. Ingram, Community Development Director
SUBMITTED BY:

PURPOSE OF REPORT: Information only Discussion Action Item

WHAT IS BEING ASKED OF THE CITY COUNCIL/BOARD:


The City Council is being asked to review a proposed scope of work prepared by ENGIE Services (formerly
OpTerra Energy Systems) to implement solar and other energy conservation measures at various City facilities.
Additionally, the City Council is being asked to consider entering into a Energy Services Contract with ENGIE
Services to perform the listed projects and improvements provided in the scope of work.

BACKGROUND/DISCUSSION:
In September 2017 the City Council reviewed a preliminary scope of work prepared by ENGIE Services to
implement solar and other energy conservation measures at various City facilities. At that time the Council
authorized staff to enter into a Program Development Agreement (PDA) with ENGIE authorizing the completion
of an investment grade audit, design and engineering, competitively bid the project, evaluate grants and
incentives, and finalize the financial model. At this time, ENGIE has completed the outlined components of the
PDA and is prepared to present overview of proposed scope of work to the City Council for their review and
possible direction to construct the discussed elements of the project.

In summary the scope of work proposed by ENGIE Services includes:

• Retrofit indoor and outdoor lighting at several City operated buildings (City Hall, Police Department,
Corporation Yard and Wastewater Treatment Plant).
• Replace existing lighting in Library Park and along Main Street with energy efficient LED fixtures.
• HVAC Unit Replacement (City Hall, Police Department, Corporation Yard and Carnegie Library).
• Construction of solar facilities at several City facilities:
o CLMSD Wastewater Treatment Plant (695 & 795 Linda Lane)
o Corporation Yard (591 Martin Street)
o Green Ranch Water Wells (1385 Scotts Valley Road)
o City Hall Parking Lot (75 third Street)
o Police Department (2025 South Main Street)
o Electric Vehicle Charging Station adjacent to City Hall
• Pump Motor VFD Upgrades at the Wastewater Treatment Plant
• Electric Vehicle (EV) Charging Station within City Hall Parking Lot

Meeting Date: 04/17/2018 Page 1 Agenda Item #VII.A.1.


ENGIE is also offering as a part of its Scope of Work an 11-month paid internship through the Governor’s
AmeriCorps, Civic Spark program. The City of Lakeport, ENGIE and Civic Spark representatives are currently in the
process of developing a scope of work for the recruitment of a recent college graduate to assist the City in
collecting data and implementing projects related to the reduction of Infiltration and Intrusion (I&I) impacts of
storm and flood waters into the City’s Wastewater Collection System.

In addition to working with ENGIE Services, City staff has been working closely with NHA Advisors to develop a
financing package for the completion of this approximately $4.5 million project. Project costs would be financed
through a 25-30 year loan with anticipated energy savings costs of approximately $14 million ($9 million after
financing improvements) over the life of the project. Preliminary financial figures prepared by NHA show the
project to be cash flow positive to City for each of the 25-30 years. A complete financing package will be
completed in the next month and will be presented to City Council at its May 15th regular meeting.

If the City Council decides to move forward with the proposed project, the next step is to authorize the City
Manager to enter into an Energy Services Contract with ENGIE Services to complete the outlined solar and
energy upgrades. Upon execution of the contract, the City would have 60-days in which to finalize a financing
package for the project. As mentioned in the above paragraph City staff and NHA Advisors are planning to
present a completed finance funding package to the City Council at its May 15th regular meeting. If the City
is unable to obtain financing that shows a financially viable project with positive cash flow for each year of
the project the contract would be cancelled without any additional cost to the City. Construction of solar
facilities and completion of energy upgrades could begin as early as June of this year.

OPTIONS:
1. Upon review of the proposed project scope of work authorize the City Manager to negotiate and execute an
Energy Services Contract with ENGIE Services.

2. Direct staff to make modifications to the proposed scope of work.

3. Take no action or take action to deny the proposed scope of work. Alternatively, the City Council could
provide other direction.

FISCAL IMPACT:
None $35,000.00 Budgeted Item? Yes No
Budget Adjustment Needed? Yes No If yes, amount of appropriation increase: $
Affected fund(s): General Fund Water OM Fund Sewer OM Fund Other:
Comments: If the project is found to be financially viable and the City does not elect to proceed with the project,
the City will owe ENGIE Services $35,000 for work performed as part of the completed PDA. A supplemental
appropriation of unallocated General Fund monies would need to be authorized if the City decides not to
proceed forward with the project.

SUGGESTED MOTION:
Move to authorize the City Manager to negotiate and execute an Energy Services Contract with ENGIE Services,
subject to legal review, for the performance of energy upgrades outlined in the presented scope of work.

Attachments: 1. Draft Energy Services Contract with ENGIE Services (City Attorney
recommended changes shown in track changes format)
2. ENGIE Scope of Work Presentation

Meeting Date: 04/17/2018 Page 2 Agenda Item #VII.A.1.


ATTACHMENT 1

Energy Services Contract


Lakeport and ENGIE Services U.S.

DIR Project Registration # _ _ _ _ _ _


ENGIE Services Project #: ACECN00260
ENGIE Services Contract # R _ _ _ _

ENERGY SERVICES CONTRACT

DRAFT DATED 2 March3 April 2018

This ENERGY SERVICES CONTRACT (this “Contract”) is made and entered into as of 20 17 March
April__________, 2018 (the “Contract Effective Date”) by and between ENGIE Services U.S. Inc., a Delaware
corporation, with California State Contractor’s License Number 995037 (“ENGIE Services U.S.” or “Contractor”), and the
City of Lakeport (“Lakeport” or “City” and together with ENGIE Services U.S. the “Parties” and each of Lakeport and
ENGIE Services U.S. a “Party”).

CONTRACT RECITALS

WHEREAS, Lakeport owns and/or operates certain public facilities specifically described in Attachment A (the
“Facilities”) and Lakeport wishes to reduce the Facilities’ energy consumption and costs and improve the Facilities’
energy quality and reliability; and
WHEREAS, ENGIE Services U.S. is a full-service energy services company with the technical capabilities to
provide services to Lakeport including identifying supply-side and/or demand-side energy conservation measures
(“ECMs”), engineering, procurement, construction management, installation, construction and training; and
WHEREAS, Lakeport executed a Program Development Agreement with ENGIE Services U.S., formerly known
as OpTerra Energy Services, Inc., to perform an integrated energy assessment and present Lakeport with
recommendations (the “Recommendations”) for the implementation of certain ECMs; and
WHEREAS, in the Recommendations, ENGIE Services U.S. identified potential energy and operational savings
opportunities at Lakeport’s Facilities and estimated program costs to implement the recommended ECMs and presented
an overall potential energy cost and consumption savings for implementing the ECM recommendations; and
WHEREAS, on 27 February 2018, ENGIE Services U.S. delivered the Recommendations, on an arms’ length
basis, to personnel of Lakeport with requisite technical training and experience, for those personnel to make judgments
and determinations as to the desired scope of work; and
WHEREAS, Lakeport has accepted the recommended ECMs and determined that the anticipated cost to
Lakeport to implement the recommended ECMs will be less than the anticipated cost to Lakeport for thermal, electrical,
and other energy, together with anticipated operational, maintenance and other costs, that would have been consumed
by Lakeport in the absence of the recommended ECMs in compliance with California Government Code §§ 4217.10
through 4217.18; and
WHEREAS, pursuant to California Government Code §4217.12, Lakeport held a regularly scheduled public
hearing on 20 17 March April 2018, of which two weeks advance public notice was given regarding this Contract and its
subject matter, and
WHEREAS, Lakeport has determined that entering into this energy services contract to implement the ECM
recommendations is in the best interests of Lakeport and that California Government Code §4217.10 et seq. allows
Lakeport to enter into this Contract; and
WHEREAS, by adoption of Resolution No. [●] at the above-referenced meeting, Lakeport approved this
Contract and authorized its execution.
NOW, THEREFORE, Lakeport and ENGIE Services U.S. hereby agree as follows:

ARTICLE 1. DEFINITIONS
For purposes of this Contract and its Attachments, defined terms will have the following meanings:
“Abnormally Severe Weather Conditions” means typhoons, hurricanes, tornadoes, lightning storms and other
climatic and weather conditions that are abnormally severe for the period of time when, and the area where, such
storms or conditions occur, in each case occurring at a property, the access roads to a property, or any other
location where Work or Professional Services are then being performed. The term “Abnormally Severe Weather
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Conditions” specifically includes rain, snow or sleet in excess of one hundred fifty percent (150%) of the median level
over the preceding ten (10) year period for the local geographic area and time of year in which such rain, snow or
sleet accumulates.
“Act” is defined in ARTICLE 14ARTICLE 15.
“Affiliate” means any Person that directly or indirectly through one or more intermediaries, controls or is controlled by
or is under common control with the Person specified. For purposes of this definition, control of a Person means the
power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by
contract or otherwise; ownership of fifty percent (50%) or more of the voting securities of another Person creates a
rebuttable presumption that such Person controls such other Person.
“Applicable Law” means any statute, law, treaty, building code, rule, regulation, ordinance, code, enactment,
injunction, writ, order, decision, authorization, judgment, decree, protocol, procedure or other legal or regulatory
determination or restriction by a court or Governmental Authority of competent jurisdiction, as may be in effect at the
time the Work or Professional Services are undertaken.
“Applicable Permits” means all permits, approvals, inspections and certifications required to be issued by any
Governmental Authority in connection with the Professional Services or the building, installation and start-up of the
Work as of the Contract Effective Date.
“Application for Payment” means a monthly progress payment as described in Section 8.021 or an invoice for
materials stored off-site as described in Section 8.032.
“Arbitral Panel” is defined in Section 19.04(ii).
“Arbitration Rules” is defined in Section 19.04(ii).
“Attachment” means the following attachments to this Contract, each of which is an “Attachment:”

Attachment A Lakeport’s Facilities and Existing Equipment


Attachment B Standards of Occupancy and Control
Attachment C Scope of Work
Attachment D Scope of Monitoring Installation
Attachment E M&V Services
Attachment F Maintenance Services
Attachment G Lighting Detailed Scope
Attachment H HVAC Detailed Scope

“Beneficial Use” means when major new equipment and systems included in the Scope of Work are properly
installed, inspected, operational, and are capable of being used for their intended purpose. Criteria for Beneficial Use
of equipment / systems will be established as defined in Attachment C.
“Business Day” means any calendar day other than a Saturday, a Sunday or a calendar day on which banking
institutions in San Francisco, California, are authorized or obligated by law or executive order to be closed.
“CEQA” means the California Environmental Quality Act, codified at California Public Resource Code § 21000 et
seq., and the applicable state and local guidelines promulgated thereunder.
“Certificate of Beneficial Use” means the certificate, issued by ENGIE Services U.S. to Lakeport and
subcontractor(s), which identifies when Lakeport took Beneficial Use of the Work or any portion thereof. A Certificate
of Beneficial Use may be executed for an individual subcontract, a specific building, a portion of the Work, or the
entire Work.
“Certificate of Final Completion” means the certificate issued by ENGIE Services U.S. to Lakeport, in accordance
with Section 6.03. A Certificate of Final Completion may be executed for an individual subcontract, a specific
building, a portion of the Work, or the entire Work.
“Certificate of Substantial Completion” means the certificate issued by ENGIE Services U.S. to Lakeport, in
accordance with Section 6.02. A Certificate of Substantial Completion may be executed for an individual
subcontract, a specific building, a portion of the Work, or the entire Work.
“Change” means any addition to, deletion from, suspension of, or other modification to the quality, function, or intent
of the Work or Professional Services.
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“Change in Law” means any of the following events or circumstances occurring after the Contract Effective Date:
(i) an amendment, modification, interpretation, construction, enforcement standard, supplement or other change in or
repeal of an existing Applicable Law; or (ii) an enactment or making of a new Applicable Law (excluding a change in
any income or franchise tax law, worker’s compensation, payroll or withholding tax law).
“Change Order” means a written document, signed by both ENGIE Services U.S. and Lakeport, authorizing ENGIE
Services U.S. to perform a Change. The Change Order modifies the Scope of Work and should identify: (i) the
applicable Change; (ii) any additional compensation to be paid to ENGIE Services U.S. to perform such Change;
and (iii) any extension of time to complete the Project.
“Construction” means any and all Work to be performed that involves construction, alteration, repair, installation or
removal of equipment, addition to, subtraction from, improving, moving, wrecking or demolishing any building,
parking facility, excavation, or other structure or improvement, or any part thereof.
“Construction Documents” means the final designs, drawings, specifications and submittals that are used for
Construction, and any Change Orders affecting those documents, that describe the technical requirements for the
installation of all the materials and equipment pursuant to this Contract.
“Construction Period” means the period beginning with the first day of the month in which material or equipment is
first installed at the Facilities and continuing until the M&V Commencement Date.
“Contract” is defined in the Preamble, and includes all Attachments hereto (all of which are incorporated herein by
this reference), as well as all Change Orders, amendments, restatements, supplements and other modifications
hereto.
“Contract Amount” means Four Million Five Hundred Forty-Seven Thousand Five Dollars ($4,547,005.00the
amount set forth in Section 8.01), which is inclusive of the assessment fee for the Recommendations and the
mobilization payment, as set forth in Section 8.021, but exclusive of any fees for Professional Services.
“Contract Bonds” is defined in Section 12.042.
“Contract Effective Date” is defined in the Preamble.
“Delay” means any circumstances involving delay, disruption, hindrance or interference affecting the time of
performance of the Work or the Professional Services.
“Dispute” is defined in Section 19.02.
“DOE Guidelines” is defined in Section 13.01.
“ECM” is defined in the Recitals.
“EMS” means an energy management system.
“Energy Delivery Point” means, for each Generating Facility, the point at which Utility meter energy is being
delivered, as designated in the Interconnection Agreement.
“Energy Usage Data” is defined in Section 2.065.
“ENGIE Services U.S.” is defined in the Preamble.
“ENGIE Services U.S. Warranty” is defined in Section 9.01.
“Event of Default” is defined in ARTICLE 16.
“Excusable Event” means an act, event, occurrence, condition or cause beyond the control of ENGIE Services
U.S., including, but not limited to, the following: (i) any act or failure to act of, or other Delay caused by any Lakeport
Person; (ii) the failure to obtain, or delay in obtaining, any Interconnection Agreement, Applicable Permit, or approval
of a Governmental Authority (including due to failure to make timely inspection), or Delays caused by Changes
and/or modifications to the Scope of Work required by a Governmental Authority, other than a failure caused by the
action or inaction of ENGIE Services U.S.; (iii) changes in the design, scope or schedule of the Work required by any
Governmental Authority or Lakeport Person; (iv) undisclosed or unforeseen conditions encountered at the Project
Location, including discovery or existence of Hazardous Substances not previously known to ENGIE Services U.S.;
(v) the failure to obtain, or delay in obtaining, approval of any Governmental Authority for design and installation of
any portion of the Work, including any further or subsequent approval required with respect to any Change, other
than a failure caused by the action or inaction of ENGIE Services U.S.; (vi) information provided to ENGIE Services
U.S. by any Lakeport Person or Utility is later found to be inaccurate or incomplete; (vii) any Change in Law which
increases ENGIE Services U.S.’s costs or prevents or delays progress of the WorkLaw; (viii) Delay caused by
pending arbitration; (ix) acts of God; (x) acts of the public enemy or terrorist acts; (xi) relocation or construction of
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transmission facilities or the shutdown of such facilities for the purpose of necessary repairs; (xii) work by Utility; (xiii)
flood, earthquake, tornado, storm, fire, explosions, lightning, landslide or similar cataclysmic occurrence;
(xiv) sabotage, vandalism, riots or civil disobedience; (xv) labor disputes or strikes; (xvi) labor or material shortages,
delay in manufacturing and deliveries of equipment; (xvii) Abnormally Severe Weather Conditions; (xviii) an annual
level of direct beam solar resource availability that is less than or equal to 90% of historical averages as measured
by long-term weather data (minimum 5 years) collected at the applicable Facility and/or other reliable calibrated and
appropriate weather station representative of such Facility; (xix) requirement by Utility that any Generating Facility
discontinue operation; (xx) any action by a Governmental Authority that prevents or inhibits the Parties from carrying
out their respective obligations under this Contract (including an unstayed order of a court or administrative agency
having the effect of subjecting the sales of energy output to federal or state regulation of prices and/or services); or
(xxi) any Utility power outage at a Facility.
“Facilities” is defined in the Recitals.
“Final Completion” means the stage in the progress of the Work at which the Construction Work as identified in the
Scope of Work, or a designated portion thereof, has been completed and commissioned, including completion of all
Punch List items, completion of all required training, and delivery to Lakeport of the final documentation (as-built
drawings, operation and maintenance manuals, warranty documentation and final submittals) in electronic format.
“Generating Facility” means each of the photovoltaic, solar powered generating facilities located at the sites listed
in Attachment E, and includes all associated photovoltaic panels, mounting assemblies, inverters, converters,
metering, lighting fixtures, transformers, ballasts, disconnects, combiners, switches, wires and other equipment that
may be necessary to connect the Generating Facility to the applicable Energy Delivery Point.
“Governmental Authority” means any federal, state, regional, town, county, city, municipal or local government
agency, department or regulatory body having jurisdiction under Applicable Law over the matter in question.
“Greenhouse Gas” is defined in Section 13.01.
“Hazardous Substances” means (i) any hazardous, toxic, or dangerous wastes, substances, chemicals,
constituents, contaminants, pollutants, and materials and any other carcinogenic, liquids, corrosive, ignitable,
radioactive, reactive, toxic, or otherwise hazardous substances or mixtures (whether solids, liquids, gases) now or at
any time subject to regulation, control, remediation, or otherwise addressed under Applicable Laws; (ii) any
“hazardous substance” as defined by the Resource, Conservation and Recovery Act of 1976 (42 U.S.C. §6901 et
seq.), as amended, and regulations promulgated thereunder; (iii) any “hazardous, toxic or dangerous waste,
substance or material” specifically defined as such in 42 U.S.C. §9601 et seq.), as amended and regulations
promulgated thereunder; and (iv) any hazardous, toxic or dangerous waste, substance, or material as defined in any
so-called “superfund” or “superlien” law.
“Incentive Funds” is defined in Section 8.076.
“Installation” means the setting up, construction, and placement of any equipment or materials in the manner it will
be operated, in accordance with the Scope of Work and in accordance with all Applicable Laws.
“Instruments of Service” is defined in Section 10.01(c).
“Interconnection Agreement” means the Interconnection Agreement to be entered into between Lakeport and the
Utility with respect to the Generating Facilities.
“Interconnection Facilities” is defined in Section 18.02.
“Interest” means interest calculated at the lesser of (i) the prime rate plus two percent (2%) or (ii) the maximum rate
permitted by Applicable Law. The “prime rate” will be the “Prime Rate” of interest per annum for domestic banks as
published in The Wall Street Journal in the “Money Rates” section.
“Lakeport” is defined in the Preamble.
“Lakeport Persons” means Lakeport, its agents, employees, subcontractors, architects, general contractors,
lease/leaseback contractors or other Persons acting on behalf of Lakeport or for whom Lakeport is responsible.
“Lakeport Representative” is defined in Section 5.03(a). Formatted: Font: Bold
“Losses” is defined in Section 11.01.
“M&V Commencement Date” means the first day of the month immediately following the later of (i) ENGIE Services
U.S.’s receipt of the fully signed Certificate of Final Completion, and (ii) ENGIE Services U.S.’s receipt of the full
Contract Amount.
“M&V Services” (if any) are defined in Attachment E.
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“Maintenance Services” (if any) are defined in Attachment F.


“Measurement Period” means each one-year period following the M&V Commencement Date.
“NEC” means the National Electric Code.
“Notice to Proceed” is defined in Section 2.04.
“Party” and “Parties” are defined in the Preamble.
“Person” means any natural person, corporation, general partnership, limited partnership, limited liability company,
proprietorship, other business organization, trust, union, association or Governmental Authority.
“Professional Services” means professional services (such as Maintenance Services and M&V Services, if any)
provided by ENGIE Services U.S. to Lakeport under this Contract.
“Project” means the entirety of Work to be performed by ENGIE Services U.S. pursuant to the Scope of Work, and
any Change Orders.
“Project Location” means the area or areas where the Project materials and equipment and any other energy
related equipment, as described in the Scope of Work, are installed, and the general area where the Work is
performed.
“Punch List” means, with respect to any portion of the Work, a list of minor corrective items which need to be
completed or corrected in order to complete such portion of the Work, but do not impair Lakeport’s ability to
beneficially operate and utilize such portion of the Work.
“Recommendations” is defined in the Recitals.
“Retained Items” is defined in Section 10.02.
“Retention” is defined in Section 8.043.
“Schedule of Values” is defined in Section 8.021.
“Scope of Work” means the Work set forth in Attachments C and D, as modified by any Change Order.
“Substantial Completion” means the stage in the progress of the Work at which the Work, or a designated portion
thereof, is sufficiently complete, in conformance with the Scope of Work, the Construction Documents and any
Change Orders, so that Lakeport can take Beneficial Use thereof.
“Surety” means the surety supplying the Contract Bonds, which must be an “admitted surety insurer,” as defined by
California Code of Civil Procedure §995.120, authorized to do business in the State of California, and reasonably
satisfactory to Lakeport.
“Utility” is defined in Section 18.02.
“Work” means the Work to be done by ENGIE Services U.S. pursuant to the Scope of Work, subject to any Change
Orders.

ARTICLE 2. TERM; PERFORMANCE OF THE WORK


Section 2.01 Contract Term. The term of this Contract commences on the Contract Effective Date and
ends on the last day of the Energy Savings Term, unless terminated earlier as provided in this Contract.
Section 2.02 Performance of Work. The Work and Professional Services to be performed hereunder will be
provided in accordance with the terms of this Contract and the applicable standard of care. ENGIE Services U.S. will
perform its obligations under this Contract (i) using the degree of skill and care that is required by current, good and
sound professional procedures and practices, and (ii) in conformance with (x) generally accepted professional standards
prevailing at the time the Work is performed, (y) the covenants, terms and conditions of this Contract, and (z) applicable
laws, codes, rules and regulations, including, without limitation, the applicable provisions of the California Building Code.
ENGIE Services U.S. represents and warrants that it is fully experienced in projects of the nature and scope of the Work
and Professional Services, and that it is properly qualified, licensed and equipped to supply and perform the Work and
Professional Services. The Work completed herein will be subject to Lakeport’s general right of inspection and
supervision to secure the satisfactory completion thereof in accordance with this Contract.
Section 2.03 Scope of Work.
(a) The Scope of Work may not exceed that set forth in Attachments C and D, except pursuant to a Change Order.

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Energy Services Contract


Lakeport and ENGIE Services U.S.

(b) The Professional Services may not exceed those set forth in Attachments E, F and G, except pursuant to a
Change Order.
Section 2.04 Notice to Proceed. Within ten (10) days after Lakeport has closed the financing referenced in
Section 2.07, Lakeport will issue to ENGIE Services U.S. a written Notice to Proceed (“Notice to Proceed”). ENGIE
Services U.S. will begin Work within thirty (30) calendar days after ENGIE Services U.S.’s receipt of the Notice to
Proceed. If Lakeport fails to issue the Notice to Proceed within twenty (20) calendar days after the financing has closed,
ENGIE Services U.S. will be entitled to an equitable extension of time and/or an equitable adjustment in the Contract
Amount as a result of such delay.
Section 2.05 Project Schedule. After receipt of the Notice to Proceed, ENGIE Services U.S. will develop,
with input from Lakeport, a master project schedule using Microsoft Project®. ENGIE Services U.S. will establish a
weekly construction meeting at which time the Work of the previous week will be reviewed and a two-week look ahead
will be coordinated. The project schedule will be updated monthly.
Section 2.06 Lakeport’s Energy and Operational Records and Data. If ENGIE Services U.S. requests,
Lakeport will provide to ENGIE Services U.S., within thirty (30) calendar days after such request, Lakeport’s Energy
Usage Data for the twelve (12) months preceding the Contract Effective Date, and will make commercially reasonable
efforts to provide the Energy Usage Data for the thirty-six (36) months preceding the Contract Effective Date. “Energy
Usage Data” means all of Lakeport’s records and complete data concerning energy usage, energy-related maintenance,
and other related costs for the Facilities, and including, without limitation, utility records; occupancy information;
descriptions of any past, present or anticipated changes in a building’s structure or its heating, cooling, lighting or other
systems or energy requirements; descriptions of all energy consuming or saving equipment used in the Facilities;
applicable building drawings, specifications, existing AutoCAD files, operation and maintenance manuals, and as-builts;
bills and records relating to operation and maintenance of systems and equipment within the Facilities, and a description
of operation and management procedures currently utilized. Lakeport agrees that ENGIE Services U.S. may rely on the
foregoing data as being accurate in all respects. If ENGIE Services U.S. requests, Lakeport will also provide to ENGIE
Services U.S., within thirty (30) calendar days after such request, any prior energy audits of the Facilities, and copies of
Lakeport’s financial statements and records related to energy usage and operational costs for said time period at the
Facilities, and will authorize its agents and employees to provide and freely discuss such records and to make
themselves available for consultations and discussions with authorized representatives, employees, subcontractors, and
agents of ENGIE Services U.S.
Section 2.07 Finance Contingency. It is acknowledged and agreed by the Parties that the continued
existence of this Contract is expressly contingent upon Lakeport closing financing that will allow it to make the payments
to ENGIE Services U.S. required by this Contract. Lakeport will have sixty (60) calendar days after the Contract Effective
Date to close such financing. If the financing is not closed within this time, for any reason, either Party may by written
notice to the other Party declare this Contract to be null and void; and the Contract will be null and void as of the other
Party’s receipt of this notice; provided that Lakeport may not declare this Contract to be null and void after it has issued
the Notice to Proceed. It is acknowledged and agreed that ENGIE Services U.S. will have no obligation to commence
performance of the Work unless and until the financing has been closed.
Section 2.08 Proof of Financial Arrangements. Prior to the commencement of the Work, Lakeport will
provide ENGIE Services U.S. proof that financial arrangements have been made to fulfill Lakeport’s obligations under
this Contract. Lakeport’s requirement to furnish such proof to ENGIE Services U.S. is a condition precedent to
commencement of the Work. After commencement of the Work, ENGIE Services U.S. may request such proof if (i)
Lakeport fails to make payments to ENGIE Services U.S. as this Contract requires; (ii) a Change in the Work materially
changes the Contract Amount; or (iii) ENGIE Services U.S. has other reasonable concerns regarding Lakeport’s ability to
fulfill its payment obligations under this Contract when due. Lakeport will furnish such proof as a condition precedent to
commencement or continuation of the Work or the portion of the Work affected by a material change. After Lakeport
furnishes any such proof, Lakeport will not materially vary such financial arrangements without prior consent of ENGIE
Services U.S. If Lakeport fails to provide ENGIE Services U.S. with such proof within ten (10) calendar days of receiving
a demand from ENGIE Services U.S., ENGIE Services U.S. will be entitled to suspend its performance under this
Contract until such proof is received.

ARTICLE 3. PROJECT IMPLEMENTATION - GENERAL


Section 3.01 Registrations, Permits and Approvals.
(a) Prior to issuing the Notice to Proceed, Lakeport must register the Project with the California Department of
Industrial Relations, using Form PWC-100.
(b) Lakeport will cooperate fully with and assist ENGIE Services U.S. in obtaining all Applicable Permits required
under this Contract. ENGIE Services U.S. is responsible for obtaining (but not paying for) Applicable Permits,
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except those Applicable Permits to be issued by Lakeport itself. Lakeport will be responsible for obtaining and
paying for all other inspections, certifications, permits or approvals that may be required, including annual
operating permits and any approvals or exemptions required by CEQA, as applicable.
(c) Lakeport is responsible for hiring and paying inspectors, and for fees associated with plan checks (including
expedited plan checks), permits, inspections, certifications, and utility interconnection(s), including any
additional Scope of Work that may be required by the Utilities as part of the Interconnection Agreement(s).
Section 3.02 Coordination. The Lakeport Representative will be responsible for coordinating the activities
of ENGIE Services U.S. and ENGIE Services U.S.’s subcontractors and suppliers with those of Lakeport Persons.
Section 3.03 Project Meetings/Status Updates. During the course of the Work, ENGIE Services U.S. will
periodically meet with Lakeport to report on the general status and progress of the Work. ENGIE Services U.S. may (but
is not required to) make food and beverage items of nominal value available to Lakeport and Lakeport’s employees and
agents at such meetings, which if offered will be deemed part of the Scope of Work and included in the Contract Amount.
Section 3.04 Project Location Access. Lakeport hereby grants to ENGIE Services U.S., without cost to
ENGIE Services U.S., all rights of ingress and egress at the Project Location, necessary for ENGIE Services U.S. to
perform the Work and provide all services contemplated by this Contract. ENGIE Services U.S. will provide twenty-four-
hour advance notice to Lakeport for access to any Lakeport Facilities. All persons entering the Project Location, including
Lakeport and its employees and agents, must follow ENGIE Services U.S.’s safety procedures. ENGIE Services U.S.
may (but is not required to) make transportation available to Lakeport and Lakeport’s employees and agents between
and within Project Locations, which if offered will be deemed part of the Scope of Work and included in the Contract
Amount.
Section 3.05 Consents; Cooperation. Whenever a Party’s consent, approval, satisfaction, or determination
will be required or permitted under this Contract, and this Contract does not expressly state that the Party may act in its
sole discretion, such consent, approval, satisfaction, or determination will not be unreasonably withheld, qualified,
conditioned, or delayed, whether or not such a “reasonableness” standard is expressly stated in this Contract. Whenever
a Party’s cooperation is required for the other Party to carry out its obligations hereunder, each Party agrees that it will
act in good faith and reasonably in so cooperating with the other Party or its designated representatives or assignees or
subcontractors. Each Party will furnish decisions, information, and approvals required by this Contract in a timely manner
so as not to delay the other Party’s performance under this Contract.
Section 3.06 Independent Contractor. The Parties hereto agree that ENGIE Services U.S., and any agents
and employees of ENGIE Services U.S., its subcontractors and/or consultants, is are acting in an independent capacity
in the performance of this Contract, and not as a public officials, officers, employees, consultants, or agents of Lakeport
for purposes of conflict of interest laws or any other Applicable Law.

ARTICLE 4. FINAL DESIGN PHASE – CONSTRUCTION DOCUMENTS / EQUIPMENT PROCUREMENT


Section 4.01 General Provisions.
(a) After receipt of the Notice to Proceed, ENGIE Services U.S. will proceed with the preparation of any necessary
designs, drawings, and specifications related to the Scope of Work.
(b) After completion of the design phase and approval of the final plans and specifications by Lakeport, ENGIE
Services U.S. will order the equipment identified in the Scope of Work, and any other necessary materials and
supplies in order to meet the project schedule.
(c) Lakeport will designate a single-point representative with whom ENGIE Services U.S. may consult on a
reasonable, regular basis and who is authorized to act on Lakeport’s behalf with respect to the Project design.
The Lakeport’s Rrepresentative will render decisions in a timely manner with regard to any documents
submitted by ENGIE Services U.S. and to other requests made by ENGIE Services U.S. in order to avoid delay
in the orderly and sequential progress of ENGIE Services U.S.’s design services.
(d) Within ten (10) Business Days after ENGIE Services U.S.’s request, Lakeport will:
(i) furnish all surveys or other information in Lakeport’s possession that describe the physical
characteristics, legal limitations, and utility locations in and around the Project Location;
(ii) disclose any prior environmental review documentation and all information in its possession
concerning subsurface conditions, including without limitation the existence of any known Hazardous
Substances, in or around the general area of the Project Location;
(iii) supply ENGIE Services U.S. with all relevant information in Lakeport’s possession, including any as-
built drawings and photographs, of prior construction undertaken at the Project Location;
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(iv) obtain any and all easements, zoning variances, planning approvals, including any resolution of any
environmental impact issues, and any other legal authorization regarding utilization of the Project
Location for the execution of the Work; and
(v) obtain any and all title reports for those Project Locations reasonably requested by ENGIE Services
U.S.
(e) All information furnished pursuant to this Section 4.01 will be supplied at Lakeport’s expense, and ENGIE
Services U.S. will be entitled to rely upon the accuracy and completeness of all information provided. If ENGIE
Services U.S. is adversely affected by any failure to provide, or delay in providing, the information specified in
Section 4.01(d), ENGIE Services U.S. will be entitled to an equitable extension of time and/or an equitable
adjustment in the Contract Amount.
(f) If any information disclosed under this Section 4.01 gives rise to a Change to the Work or an Excusable Event,
ENGIE Services U.S. will notify Lakeport. The Parties will meet and confer with respect to those Changes, and
ENGIE Services U.S. will be entitled to an equitable extension of time and/or an equitable adjustment in the
Contract Amount. If the Parties, however, are unable to agree on whether Lakeport’s disclosed information
gives rise to a Change to the Work or an Excusable Event, those disputes are to be resolved in accordance with
ARTICLE 19.
(g) ENGIE Services U.S. contemplates that it will not encounter any Hazardous Substances at the Project Location,
except as has been disclosed as a pre-existing condition by Lakeport prior to the Contract Effective Date or
discovered by or revealed to ENGIE Services U.S. during its site inspections. However, any disclosure of
Hazardous Substances that will affect the performance of the Work after the Contract Effective Date will
constitute a valid basis for a Change Order.
Section 4.02 Review of Construction Documents. ENGIE Services U.S. will prepare and submit all
drawings and specifications to Lakeport for review. Lakeport will review the documents and provide any comments in
writing to ENGIE Services U.S. within ten (10) Business Days after receipt of the documents. ENGIE Services U.S. will
incorporate appropriate Lakeport comments into the applicable drawings and specifications. ENGIE Services U.S.
reserves the right to issue the drawings and specifications in phases to allow Construction to be performed in phases. If
Lakeport fails to provide written comments within the ten (10) Business Day period, Lakeport will be deemed to have no
comments regarding the documents.
Section 4.03 Permits. The respective obligations of the Parties in obtaining inspections and permits are as
specified in Section 3.01. Lakeport will agree to any nonmaterial changes to the designs, drawings, and specifications
required by any Governmental Authority. The Contract Amount must be increased by any additional cost incurred by
ENGIE Services U.S. due to a Change required by a Governmental Authority and the time required to complete the Work
must be increased by the number of additional days required to complete the Work because of a Change imposed by a
Governmental Authority.
Section 4.04 Changes During Final Design Phase. If during the design phase any Lakeport Person
requests Changes and/or modifications to the Work and/or an Excusable Event occurs, ENGIE Services U.S. will be
entitled to an equitable extension of time and/or an equitable adjustment in the Contract Amount. Valid bases for
additional compensation and/or time extension include, but are not limited to: (i) any Lakeport Person requests changes
and/or modifications to the Project Scope of Work during the Project design phase; (ii) any Lakeport Person causes
delays during ENGIE Services U.S.’s design work; (iii) the discovery of subsurface or other site conditions that were not
reasonably anticipated or disclosed as of the Contract Effective Date; (iv) the discovery of Hazardous Substances at or
impacting the Project Location; (v) changes to the Scope of Work required to obtain Applicable Permits; (vi) damage to
any equipment or other Work installed by ENGIE Services U.S. caused by the act or omission of any Lakeport Person;
(vii) changes and/or modifications to Scope of Work ordered by any Governmental Authority; and (viii) any other
condition that would not reasonably have been anticipated by ENGIE Services U.S., that modifies and/or changes the
Scope of Work, that increases the agreed-upon Contract Amount or increases the time needed to complete the Work.

ARTICLE 5. CONSTRUCTION PHASE


Section 5.01 General Provisions. Upon securing the requisite Applicable Permits pursuant to Section 3.01,
and completion of Construction Documents, ENGIE Services U.S. will commence the construction of the Project in
accordance with the Construction Documents. The construction will be performed in accordance with all Applicable Laws
and Applicable Permits, by ENGIE Services U.S. and/or one or more licensed subcontractors qualified to perform the
Work.
Section 5.02 ENGIE Services U.S.’s Responsibilities during Construction Phase.

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(a) As an independent contractor to Lakeport, ENGIE Services U.S. will provide, or cause to be provided by its
subcontractor(s), all labor, materials, equipment, tools, transportation, and other facilities and services
necessary for the proper execution, construction, and completion of the Work. ENGIE Services U.S. will
purchase in advance all necessary materials and supplies for the construction of the Project in order to assure
the prompt and timely delivery of the completed Work pursuant to the project schedule. ENGIE Services U.S.
will also be responsible for all means, methods, techniques, sequences, and procedures required by the
Construction Documents.
(b) ENGIE Services U.S. will make commercially reasonable efforts to coordinate construction activities and
perform the Work to minimize disruption to Lakeport’s operations at the Project Location. ENGIE Services U.S.
will provide at least fifteen (15) calendar days’ written notice to Lakeport of any planned power outages that will
be necessary for the construction. ENGIE Services U.S. will cooperate with Lakeport in scheduling such
outages, and Lakeport agrees to provide its reasonable approval of any scheduled outage.
(c) ENGIE Services U.S. will initiate and maintain a safety program in connection with its Construction of the
Project. ENGIE Services U.S. will take reasonable precautions for the safety of, and will provide reasonable
protection to prevent damage, injury, or loss to: (i) employees of ENGIE Services U.S. and subcontractors
performing Work under this Contract; (ii) ENGIE Services U.S.’s property and other materials to be incorporated
into the Project, under the care, custody, and control of ENGIE Services U.S. or its subcontractors; and
(iii) other property at or adjacent to the Project Location not designated for removal, relocation, or replacement
during the course of construction. ENGIE Services U.S. will not be responsible for Lakeport’s employees’ safety
unless ENGIE Services U.S.’s negligence in the performance of its Work is the proximate cause of the
employee’s injury.
(d) ENGIE Services U.S. will provide notice to Lakeport of scheduled test(s) of installed equipment, if any, and
Lakeport and/or its designees will have the right to be present at any or all such tests conducted by ENGIE
Services U.S., any subcontractor, and/or manufacturers of the equipment.
(e) Pursuant to California Labor Code §6705, if the Work is a public work involving an estimated expenditure in
excess of $25,000 and includes the excavation of any trench or trenches five (5) feet or more in depth, ENGIE
Services U.S. will, in advance of excavation, submit to Lakeport and/or a registered civil or structural engineer,
employed by Lakeport, to whom authority to accept has been delegated, a detailed plan showing the design of
shoring, bracing, sloping, or other provisions to be made for worker protection from the hazard of caving ground
during the excavation of such trench or trenches, which provisions will be no less effective than the current and
applicable CAL-OSHA Construction Safety Orders. No excavation of such trench or trenches may be
commenced until this detailed plan has been accepted by Lakeport or by the person to whom authority to accept
has been delegated by Lakeport. Pursuant to California Labor Code §6705, nothing in this Section 5.02(e)
imposes tort liability on Lakeport or any of its employees.
(f) Pursuant to California Public Contract Code §7104, if the Work is a public work involving digging trenches or
other excavations that extend deeper than four (4) feet below the surface of the ground:
(i) ENGIE Services U.S. will promptly, and before the following conditions are disturbed, notify Lakeport,
in writing, of any:
1) Material that ENGIE Services U.S. believes may be material that is hazardous waste, as
defined in California Health and Safety Code §25117, that is required to be removed to a
Class I, Class II, or Class III disposal site in accordance with provisions of existing law;
2) Subsurface or latent physical conditions at the site differing from those indicated by
information about the site made available to ENGIE Services U.S. before the Contract
Effective Date;
3) Unknown physical conditions at the site of any unusual nature, different materially from those
ordinarily encountered and generally recognized as inherent in work of the character provided
for in this Contract.
(ii) Lakeport will promptly investigate the conditions and, if it finds that the conditions do materially so
differ or do involve hazardous waste, and cause a decrease or increase in ENGIE Services U.S.’s
cost of, or the time required for, performance of any part of the Work will issue a Change Order under
the procedures described in this Contract.
(iii) If a dispute arises between Lakeport and ENGIE Services U.S., whether the conditions materially
differ, or involve hazardous waste, or cause a decrease or increase in ENGIE Services U.S.’s cost of,
or time required for, performance of any part of the Work, ENGIE Services U.S. will not be excused
from any scheduled completion date provided for by this Contract but will proceed with all Work to be

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performed under this Contract. ENGIE Services U.S. will retain any and all rights provided either by
contract or by law which pertain to the resolution of disputes and protests between the Parties.
(g) ENGIE Services U.S. is responsible for the security of any project site during periods it is in possession of the Formatted: Heading 3,h3
site for purposes of performing its work under the scope of services. ENGIE Services U.S. shall be responsible
for any damage or delay which results from its failure to secure a site in accordance with this provision. ENGIE
Services U.S. shall not be responsible for damage or delay which results from the actions of Lakeport Persons
with respect to site security. Formatted: Font: Arial, 9 pt
(iii)(h) In compliance with and pursuant to Government Code § 4215, City shall assume the responsibility,
between the parties to the Contract, for the timely removal, relocation, or protection of existing main- or trunk-
line utility facilities located on the site of any construction project that is a subject of the Contract, if such utilities
are not identified by the City in the plans and specifications made a part of the invitation for bids. The Contract
documents shall include provisions to compensate the contractor for the costs of locating, repairing damage not
due to the failure of the contractor to exercise reasonable care, and removing or relocating such utility facilities
not indicated in the plans and specifications with reasonable accuracy, and for equipment on the project
necessarily idled during such work. Contractor shall not be assessed liquidated damages for delay in
completion of the project, when such delay was caused by the failure of the City or the owner of the utility to
provide for removal or relocation of such utility facilities.
Section 5.03 Lakeport’s Responsibilities during Construction Phase.
(a) Lakeport will designate a single-point representative authorized to act on Lakeport’s behalf with respect to
Project construction and/or equipment installation (the “Lakeport Representative”). Lakeport may from time to
time change the designated representative and will provide written notice to ENGIE Services U.S. of such
change. Any independent review of the construction will be undertaken at Lakeport’s sole expense, and will be
performed in a timely manner so as to not unreasonably delay the orderly progress of ENGIE Services U.S.’s
Work.
(b) Lakeport will provide a temporary staging area for ENGIE Services U.S., or its subcontractors, to use during the
construction phase to store and assemble equipment for completion of the Work, if needed. Lakeport will
provide sufficient space at the Facilities for the performance of the Work and the storage, installation, and
operation of any equipment and materials and will take reasonable steps to protect any such equipment and
materials from harm, theft and misuse. Lakeport will provide access to the Facilities, including parking permits
and identification tags, for ENGIE Services U.S. and subcontractors to perform the Work during regular
business hours, or such other reasonable hours as may be requested by ENGIE Services U.S. and acceptable
to Lakeport. Lakeport will also either provide a set or sets of keys to ENGIE Services U.S. and its
subcontractors (signed out per Lakeport policy) or provide a readily available security escort to unlock and lock
doors. Lakeport will not unreasonably restrict ENGIE Services U.S.’s access to Facilities to make emergency
repairs or corrections as ENGIE Services U.S. may determine are needed.
(c) Lakeport will maintain the portion of the Project Location that is not directly affected by ENGIE Services U.S.’s
Work. Lakeport will keep the designated Project Location and staging area for the Project free of obstructions,
waste, and materials within the control of Lakeport.
(d) Lakeport will obtain any required environmental clearance from, and any inspections, including special
inspections, or permits required by, any federal, state, and local jurisdictions, including but not limited to any
clearances required under CEQA, prior to scheduled construction start date.
(e) Lakeport will prepare the Project Location for construction, including, but not limited to, clearance of all above
and below ground obstructions, such as vegetation, buildings, appurtenances, and utilities. Subsurface
conditions and obstacles (buried pipe, utilities, etc.) that are not otherwise previously and accurately
documented by Lakeport and such documentation made available to ENGIE Services U.S. are the responsibility
of Lakeport. If ENGIE Services U.S. encounters such unforeseen conditions in the performance of the Work,
ENGIE Services U.S. will be entitled to an equitable extension of time and/or an equitable adjustment in the
Contract Amount.
(f) Lakeport will remove any Hazardous Substances either known to Lakeport prior to the commencement of the
Work or encountered by ENGIE Services U.S. during the construction of the Project, if necessary in order for
the Work to progress safely, that were not knowingly released or brought to the site by ENGIE Services U.S.
ENGIE Services U.S. will respond to the discovery of Hazardous Substances at or around the Project Location
during the course of ENGIE Services U.S.’s construction in accordance with Section 5.06.
(g) Lakeport will coordinate the Work to be performed by ENGIE Services U.S. with its own operations and with any
other construction project that is ongoing at or around the Project Location, with the exception that ENGIE
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Services U.S. will coordinate the Interconnection Facilities work, if any, which will be performed by the local
utility.
(h) Lakeport will, and will cause Lakeport Persons to, allow ENGIE Services U.S. and its subcontractors access to
and reasonable use of necessary quantities of Lakeport’s water and other utilities, including electrical power, as
needed for the construction of the Work, at no cost to ENGIE Services U.S.
(i) Lakeport will, and will cause Lakeport Persons to, provide ENGIE Services U.S. and/or its subcontractors with
reasonable access to the Project Location to perform the Work, including without limitation and at no extra cost
to ENGIE Services U.S., access to perform Work on Saturdays, Sundays, legal holidays, and non-regular
working hours.
(j) Lakeport will also do the following:
(i) Attend the regularly scheduled progress meetings. Participate as needed regarding scheduling of the
Work.
(ii) When requested by ENGIE Services U.S., participate in the job inspection walk-through with ENGIE
Services U.S. to determine Substantial Completion or Beneficial Use of major equipment, and will
sign the Certificate(s) of Substantial Completion.
(iii) Perform a final walk-through of the Project and, upon receipt of the operation and maintenance
manuals and as-built drawings in electronic format, sign the Certificate of Final Completion for the
related Work.
(iv) Upon the completion of the entire Scope of Work listed in Attachment C, including training, if any,
and submission of close-out documents, sign a Certificate of Final Completion for the entire Project.
(k) This Agreement is subject to 8-hour work day and wage and hour penalty law, including, but not limited to, Formatted
California Labor Code §§ 1810 and 1813 as follows:
Formatted: Heading 3,h3
Formatted
(iv) The Contractor shall strictly adhere to the provisions of the Labor Code regarding the 8-hour
day and the 40-hour week, overtime, Saturday, Sunday and holiday work and nondiscrimination Formatted: Normal, Indent: Left: 0.75", Right: 0.5"
because of race, religious creed, color, national origin, ancestry, physical disability, mental
disability, medical condition, marital status, sex or sexual orientation, except as provided in Section
12940 of the Government Code. Pursuant to the provisions of the Labor Code, eight hours’ labor
shall constitute a legal day’s work. Work performed by the Contractor’s employees in excess of
eight hours per day, and 40 hours during any one week, must include compensation for all hours
worked in excess of eight hours per day, or 40 hours during any one week, at not less than one
and one-half times the basic rate of pay. The Contractor shall forfeit as a penalty to City $25.00 or
any greater penalty set forth in the Labor Code for each worker employed in the execution of the
work by the Contractor or by any Subcontractor of the Contractor, for each Calendar Day during
which such worker is required or permitted to the work more than eight hours in one Calendar Day
or more than 40 hours in any one calendar week in violation of the provisions of said Labor Code.
Section 5.04 Changes.
(a) Change Orders Generally. Changes and/or modifications to the Scope of Work will be authorized by a written
Change Order. The Change Order should state the change and/or modification to the Scope of Work, any
additional compensation to be paid, and any applicable extension of time. ENGIE Services U.S. may, at its
election, suspend performance of that portion of the Work affected by any proposed Change until a written
Change Order with respect to the Changed or modified Work has been signed by both Lakeport and ENGIE
Services U.S. ENGIE Services U.S. will use its reasonable efforts to continue other portions of the Work not
affected or impacted by such proposed Change until such time as the applicable Change Order is resolved. In
addition, if any Lakeport Person requests a proposal from ENGIE Services U.S. for a Change and Lakeport
subsequently elects to not proceed with such Change, Lakeport agrees that a Change Order will be issued to
reimburse ENGIE Services U.S. for any costs reasonably incurred for estimating services, design services,
and/or preparation of the proposal requested by such Lakeport Person.
(b) Change Orders Requiring Additional Compensation. If during construction any Lakeport Person requests
changes and/or modifications to the Work, and/or there are Excusable Events, Lakeport will pay the extra costs
caused by such modifications and/or changes and/or Excusable Event and ENGIE Services U.S. will be entitled
to additional compensation for the following reasons, that include, but are not limited to: (i) any Lakeport Person
requests changes and/or modifications to the Scope of Work during the construction phase of the Project; (ii)
any Lakeport Person causes delays during ENGIE Services U.S.’s construction work; (iii) discovery of
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subsurface or other site conditions that were not reasonably anticipated or disclosed prior to the
commencement of the Work; (iv) discovery of Hazardous Substances at or impacting the Project Location;
(v) changes and/or modifications to the Scope of Work required to obtain required permits and approvals as
required by any Governmental Authority; (vi) damage to any equipment or other Work installed by ENGIE
Services U.S. caused by the act or omission of any Lakeport Person; (vii) changes and/or modifications to
Scope of Work ordered by any Governmental Authority; and (viii) any other condition that would not reasonably
have been anticipated by ENGIE Services U.S., that modifies and/or changes the Scope of Work or the
Contract Amount.
(c) Change Orders Requiring Additional Time. If during construction any Lakeport Person requests changes and/or
modifications to the Scope of Work and/or an Excusable Event occurs, the Parties agree that an equitable
extension of time to complete the Work may be necessary. Prior to any extension of time, ENGIE Services U.S.
will use commercially reasonable efforts to make up such delays, including authorizing overtime payments;
provided that Lakeport has issued a Change Order authorizing any such overtime payment and has specifically
agreed to pay all costs, including administrative charges and expenses, associated therewith.
(d) Method for Adjustment. An increase or decrease in the Contract Amount and/or time resulting from a Change in
the Work and/or Excusable Event must be determined by one or more of the following methods described in
subsections (i) – (iii), below. ENGIE Services U.S. shall bear the burden of demonstrating that an unexpected
circumstance as described in paragraphs (b) and (c) above actually resulted in an increase in cost over the
budgeted amount or a delay in performance beyond the estimated time to complete the work, and shall further
bear the burden of demonstrating the amount of increased cost or time.:
(i) unit prices set forth in this Contract or as subsequently agreed;
(ii) a mutually accepted, itemized lump sum; or
(iii) costs calculated on a basis agreed upon by Lakeport and ENGIE Services U.S. plus a fee (either a
lump sum or a fee based on a percentage of cost) to which the Parties agree.
(e) Disagreements. If there is a disagreement between Lakeport and ENGIE Services U.S. as to whether ENGIE
Services U.S. is entitled to an equitable extension of time and/or an equitable adjustment in the Contract
Amount, those disputes are to be resolved in accordance with the provisions of ARTICLE 19. Pending the
resolution of any such dispute, ENGIE Services U.S. may suspend Work.
Section 5.05 Minor Changes to Scope of Work. ENGIE Services U.S. has the authority to make minor
changes that do not change the total Contract Amount and are consistent with the intent of the Construction Documents,
without prior notice to Lakeport. ENGIE Services U.S. will either promptly inform Lakeport, in writing, of any minor
changes made during the implementation of the Project, or make available to Lakeport at the site a set of as-built
drawings that will be kept current to show those minor changes. Substitutions of material or equipment to anything but an
equal or better product shall not be considered “minor changes” and shall be subject to prior approval by Lakeport.
Section 5.06 Hazardous Substances.
(a) ENGIE Services U.S. will promptly provide written notice to Lakeport if ENGIE Services U.S. observes any
Hazardous Substance, as defined herein, at or around the Facilities during the course of construction or
installation of any equipment which have not been addressed as part of the Scope of Work. ENGIE Services
U.S. will have no obligation to investigate the Facilities for the presence of Hazardous Substances prior to
commencement of the Work unless otherwise specified in the Scope of Work. Lakeport will be solely
responsible for investigating Hazardous Substances and determining the appropriate removal and remediation
measures with respect to the Hazardous Substances. Lakeport will comply with all Applicable Laws with respect
to the identification, removal and proper disposal of any Hazardous Substances known or discovered at or
around the Facilities, and in such connection will execute all generator manifests with respect thereto. ENGIE
Services U.S. will comply with all Applicable Laws in connection with the use, handling, and disposal of any
Hazardous Substances in the performance of its Work. In connection with the foregoing, Lakeport will provide
ENGIE Services U.S., within ten (10) Business Days after the Contract Effective Date, a written statement that
represents and warrants (i) whether or not, to its knowledge, there are Hazardous Substances either on or
within the walls, ceiling or other structural components, or otherwise located in the Project Location, including,
but not limited to, asbestos-containing materials; (ii) whether or not, to its knowledge, conditions or situations
exist at the Facilities which are subject to special precautions or equipment required by federal, state, or local
health or safety regulations; and (iii) whether or not, to its knowledge, there are unsafe working conditions at the
Facilities.
(b) Lakeport will indemnify, defend, and hold ENGIE Services U.S. harmless from and against any and all Losses
that in any way result from, or arise under, such Lakeport owned or generated Hazardous Substances, except
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for liabilities to the extent due to the negligence or willful misconduct of ENGIE Services U.S., or its
subcontractors, agents or representatives, in the handling, disturbance or release of Hazardous Substances.
This indemnification will survive any termination of this Contract.
Section 5.07 Pre-Existing Conditions. Certain pre-existing conditions may be present within the Facilities
that (i) are non-compliant with applicable codes, (ii) may become non-compliant with applicable codes upon completion
of ENGIE Services U.S.’s Work, (iii) may cause ENGIE Services U.S.’s completed Work to be non-compliant with
applicable codes, (iv) may prevent Lakeport from realizing the full benefits of ENGIE Services U.S.’s Work, (v) may
present a safety or equipment hazard, or (vi) are otherwise outside the scope of ENGIE Services U.S.’s Work.
Regardless of whether or not such conditions may have been readily identifiable prior to the commencement of Work,
ENGIE Services U.S. will not be responsible for repairing such pre-existing conditions unless such responsibility is
expressly provided for in the Scope of Work or an approved Change Order. ENGIE Services U.S., in its sole discretion,
may determine whether it will bring said pre-existing conditions into compliance by agreeing to execute a Change Order
with Lakeport for additional compensation and, if appropriate, an extension of time.

ARTICLE 6. PROJECT COMPLETION


Section 6.01 Occupancy or Use of Work. Lakeport may take occupancy or use of any completed or
partially completed portion of the Work at any stage, whether or not such portion is Substantially Complete, provided that
such occupancy or use is authorized by Governmental Authority and, provided further, that Lakeport assumes
responsibility for the security of, insurance coverage for, maintenance, utilities for, and damage to or destruction of such
portion of the Work. If Substantial Completion of a portion of the Construction Work is not yet achieved, occupancy or
use of such portion of the Work will not commence until Lakeport’s insurance company has consented to such
occupancy or use. When occupancy or use of a portion of the Work occurs before Substantial Completion of such
portion, Lakeport and ENGIE Services U.S. will accept in writing the responsibilities assigned to each of them for title to
materials and equipment, payments and Retention with respect to such portion.
Section 6.02 Substantial Completion. When ENGIE Services U.S. considers the Work, or any portion
thereof, to be Substantially Complete, ENGIE Services U.S. will supply to Lakeport a written Certificate of Substantial
Completion with respect to such portion of the Work, including a Punch List of items and the time for their completion or
correction. Lakeport will within ten (10) Business Days of receipt of the Certificate of Substantial Completion, review such
portion of the Work for the sole purpose of determining that it is Substantially Complete, and sign and return the
Certificate of Substantial Completion to ENGIE Services U.S. acknowledging and agreeing: (i) that such portion of the
Work is Substantially Complete; (ii) the date of such Substantial Completion; (iii) that from the date of Substantial
Completion Lakeport will assume responsibility for the security of, insurance coverage for, maintenance, utilities for, and
damage to or destruction of such portion of the Work. Lakeport agrees that approval of a Certificate of Substantial
Completion will not be unreasonably withheld, delayed or conditioned.
Section 6.03 Final Completion. When ENGIE Services U.S. considers the entirety of the Work to be Finally
Complete, ENGIE Services U.S. will notify Lakeport that the Work is fully complete and ready for final inspection.
Lakeport will inspect the Work to verify the status of Final Completion within ten (10) Business Days after its receipt of
ENGIE Services U.S.’s certification that the Work is complete. If Lakeport does not verify the Final Completion of the
Work within this period, the Work will be deemed fully completed. When Lakeport agrees that the Work is fully
completed, ENGIE Services U.S. will issue a Certificate of Final Completion, which Lakeport must sign. Lakeport agrees
that its signing of the Certificate of Final Completion will not be unreasonably withheld, delayed or conditioned. At that
time, Lakeport will pay ENGIE Services U.S. any remaining Contract Amount due and any outstanding Retention being
withheld by Lakeport, in accordance with Section 8.043. Lakeport may give ENGIE Services U.S. written notice of
acceptance of the Work and will promptly record a notice of completion or notice of acceptance in the office of the county
recorder in accordance with California Civil Code §9204.
Section 6.04 Transfer of Title; Risk of Loss. Title to all or a portion of the Project equipment, supplies and
other components of the Construction Work will pass to Lakeport upon the earlier of (i) the date payment for such Project
equipment, supplies or components is made by Lakeport or (ii) the date any such items are incorporated into the Project
Location. ENGIE Services U.S. will retain care, custody and control and risk of loss of such Project equipment, supplies
and components until the earlier of Beneficial Use or Substantial Completion. Transfer of title to Lakeport will in no way
affect Lakeport’s and ENGIE Services U.S.’s rights and obligations as set forth in other provisions of this Contract.
Except as provided in this Section 6.04, after the date of Substantial Completion, ENGIE Services U.S. will have no
further obligations or liabilities to Lakeport arising out of or relating to this Contract, except for the obligation to complete
any Punch List items, the obligation to perform any warranty service under Section 9.01, and obligations which, pursuant
to their terms, survive the termination of this Contract.

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ARTICLE 7. SUBCONTRACTORS
Section 7.01 Authority to Subcontract. ENGIE Services U.S. may delegate its duties and performance
under this Contract, and has the right to enter into agreements with any subcontractors and other service or material
providers as ENGIE Services U.S. may select in its discretion to perform the Work. ENGIE Services U.S. shall not enter
into a subcontract without first giving Lakeport an opportunity to review and object to the subcontractor. ENGIE Services
U.S. will not be required to enter into any subcontracts with parties whom ENGIE Services U.S. has not selected or
subcontractors whom ENGIE Services U.S. has objection to using. Under Public Contract Code § 6109, ENGIE Services
U.S. will not perform work with a subcontractor who is debarred pursuant to Labor Code §§ 1777.1 or 1777.7. All
subcontractors shall be licensed to perform the work for which they are contracted. All subcontracts shall include
indemnity and insurance requirements at least equal to those required under this contract.
Section 7.02 Prompt Payment of Subcontractors. ENGIE Services U.S. will promptly pay, when due, all
amounts payable for labor and materials furnished in the performance of this Contract and will endeavor to prevent any
lien or other claim under any provision of Applicable Law from arising against any Lakeport property, against ENGIE
Services U.S.’s rights to payments hereunder, or against Lakeport.
Section 7.03 Relationship. Nothing in this Contract constitutes or will be deemed to constitute a contractual
relationship between any of ENGIE Services U.S.’s subcontractors and Lakeport, or any obligation on the part of
Lakeport to pay any sums to any of ENGIE Services U.S.’s subcontractors.
Section 7.04 Prevailing Wages. To the extent required by California Labor Code §1771 or other Applicable Formatted: Heading 2,h2
Law, all employees of ENGIE Services U.S. and ENGIE Services U.S.’s subcontractors performing Work at the Project
Location will be paid the per diem prevailing wages for the employee’s job classification in the locality in which the Work
is performed. In accordance with California Labor Code §§1773 and 1773.2, Lakeport will obtain from the Director of
Industrial Relations the general prevailing rate of per diem wages and the general prevailing rate for holiday and overtime
work, in the locality in which the Work is to be performed, for each craft, classification or type of worker needed to
execute the Work at the Project Location, and will cause copies of such determinations to be kept on file at its principal
office and posted at each Project Location. Lakeport will promptly notify ENGIE Services U.S. of any changes to any
such prevailing wage determination. Pursuant to Labor Code, § 1775 the statutory provisions for penalties for failure to
pay prevailing wages will be enforced.
Section 7.05 Payroll Records. Pursuant to Labor Code Section 1776, each contractor and subcontractor Formatted: Heading 2,h2, No bullets or numbering
shall keep accurate payroll records showing the name, address, social security number, work classification, straight time
and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice,
worker, or other employee employed by him or her in connection with the public work. Each payroll record shall contain
or be verified by a written declaration that is made under penalty of perjury, stating both of the following:
(a) The information contained in the payroll record is true and correct.
(b) The employer has complied with the requirements of the Labor Code Sections 1771, 1811 and 1815 for any Formatted: Heading 3,h3, Indent: Left: 0"
work performed by his or her employees on the public works project.
Formatted
Section 7.06 Inspection and Audit of Records. Contractor shall maintain any and all ledgers, books of
Formatted
account, invoices, vouchers, canceled checks, and other records or documents evidencing or relating to charges for
services or expenditures and disbursements charged to City under this Agreement for a minimum of three (3) years, or Formatted: Heading 2,h2
for any longer period required by law, from the date of final payment to Contractor under this Agreement. All such
documents shall be made available for inspection, audit, and/or copying at any time during regular business hours, upon
oral or written request of City. In addition, pursuant to Government Code Section 8546.7, if the amount of public funds
expended under this Agreement exceeds ten thousand dollars, all such documents and this Agreement shall be subject
to the examination and audit of the State Auditor, at the request of City or as part of any audit of City, for a period of three
(3) years after final payment under the Agreement.
The payroll records enumerated under supervision (a) shall be verified and shall be available for inspection at all
reasonable hours as required by the Labor Code Section 1771.
Section 7.07 Indemnification by Subcontractors. ENGIE Services U.S. shall require all subcontractors to
execute indemnity agreements identical to those contained in this contract, with additional indemnity of ENGIE Services
U.S. by each subcontractor from and against any and all Losses that in any way result from, or arise under, Hazardous
Substances encountered during the performance of this contract.
Section 7.04 Formatted: Body Text

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ARTICLE 8. PAYMENTS
Section 8.01 Contract Price. The total amount of compensation due to ENGIE Services U.S. for Formatted: Underline
performance of this agreement is Four Million Five Hundred Forty-Seven Thousand Five Dollars ($4,547,005.00).
Formatted: No underline
Section 8.01Section 8.02 Monthly Progress Payments. Promptly after the Contract Effective Date, ENGIE
Services U.S. will invoice Lakeport for the assessment fee for the Recommendations in the amount of Thirty-Five
Thousand Dollars ($35,000) plus a mobilization payment in the amount of Eight Hundred Seventy-Four Thousand Four
Hundred One Dollars ($874,401.00). These amounts must be paid to ENGIE Services U.S. within thirty (30) calendar
days after Lakeport’s receipt of an invoice for those amounts. In addition, as the Work progresses, ENGIE Services U.S.
will submit to Lakeport its applications for monthly payments based on the progress made on the Project through the date
on which ENGIE Services U.S. submits such Application for Payment. Within twenty-one (21) calendar days from the
Contract Effective Date, ENGIE Services U.S. will prepare and submit to Lakeport a schedule of values apportioned to
the various divisions or phases of the Work (“Schedule of Values”). Each line item contained in the Schedule of Values
will be assigned a value such that the total of all items equals the Contract Amount. All Applications for Payment will be in
accordance with the Schedule of Values.
Section 8.02Section 8.03 Materials Stored Off-Site. In addition to the monthly progress payments specified in
Section 8.02Section 8.01, ENGIE Services U.S. may invoice Lakeport for materials purchased in advance and not stored
at the Project Location. Each such Application for Payment will be accompanied by proof of off-site material purchases,
evidence that the materials have been delivered to a warehouse reasonably acceptable to Lakeport and evidence of
appropriate insurance coverage. ENGIE Services U.S. will furnish to Lakeport written consent from the Surety approving
the advance payment for materials stored off site. Lakeport will pre-pay one hundred percent (100%) of ENGIE Services
U.S.’s Application for Payment for the materials delivered, less Retention as indicated in Section 8.043. ENGIE Services
U.S. will protect stored materials from damage. Damaged materials, even though paid for, will not be incorporated into
the Work.
Section 8.03Section 8.04 Retention. Lakeport, or its designee, must approve and pay each Application for
Payment, less a retention amount (“Retention”) of five percent (5%) in accordance with California Public Contract Code
§7201, within thirty (30) calendar days after its receipt of the Application for Payment; provided, however, that there is to
be no Retention with respect to the mobilization payment and any fee for the Recommendations. A failure to approve and
pay an Application for Payment in a timely manner is a material default by Lakeport under this Contract. Lakeport may
make progress payments in full without Retention at any time after fifty percent (50%) of the Work has been completed,
as permitted pursuant to California Public Contract Code §9203. Upon Substantial Completion, the Retention must be
reduced to two percent (2%) of the Contract Amount, and ENGIE Services U.S. may invoice and Lakeport will pay this
amount. Lakeport will pay ENGIE Services U.S. the remaining two percent (2%) Retention amount upon achieving Final
Completion. In lieu of Retention being held by Lakeport, ENGIE Services U.S. may request that securities be substituted
or Retention be held in an escrow account pursuant to California Public Contract Code §22300.
Section 8.04Section 8.05 Final Payment. The final Application for Payment may be submitted after Final
Completion. The final payment amount must also include payment to ENGIE Services U.S. for any remaining Retention
withheld by Lakeport.
Section 8.05Section 8.06 Disputed Invoices/Late Payments. Lakeport may in good faith dispute any
Application for Payment, or part thereof, within fifteen (15) calendar days after the date the Application for Payment was
received by Lakeport. If Lakeport disputes all or a portion of any Application for Payment, Lakeport will pay the
undisputed portion when due and provide ENGIE Services U.S. a written notice and explanation of the basis for the
dispute and the amount of the Application for Payment being withheld related to the dispute. Lakeport will be deemed to
have waived and released any dispute known to it with respect to an Application for Payment if such notice and written
explanation is not provided within fifteen (15) calendar days after the date the Application for Payment was received by
Lakeport. If any amount disputed by Lakeport is finally determined to be due to ENGIE Services U.S., either by
agreement between the Parties or as a result of dispute resolution pursuant to ARTICLE 19 below, it will be paid to
ENGIE Services U.S. within ten (10) Business Days after such final determination, plus Interest from the date billed or
claimed until such amount is paid.
Section 8.06Section 8.07 Rebate Programs. ENGIE Services U.S. will assist Lakeport in the preparation and
submission to the applicable agencies of applications and documentation necessary for the following energy efficiency
rebate, incentive, and/or loan program(s): PG&E Lighting Rebate Program. ENGIE Services U.S. makes no guarantee
that Lakeport will receive funding from any energy efficiency rebate, incentive, and/or loan program(s), including those
listed above (collectively, “Incentive Funds), or any portion thereof; ENGIE Services U.S. expressly disclaims any liability
for Lakeport’s failure to receive any portion of the Incentive Funds, and Lakeport acknowledges and agrees that ENGIE
Services U.S. will have no liability for any failure to receive all or any portion of the Incentive Funds. Procurement, or lack
thereof, of the Incentive Funds will not alter the Contract Amount of this Contract or the payment timeline associated with
payment of the Contract Amount.
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ARTICLE 9. WARRANTY / LIMITATION OF LIABILITY


EXCEPT FOR THE WARRANTIES PROVIDED IN THIS ARTICLE 9, ENGIE SERVICES U.S. MAKES NO WARRANTIES
IN CONNECTION WITH THE WORK PROVIDED UNDER THIS CONTRACT, WHETHER EXPRESS OR IMPLIED IN
LAW, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE AND ANY IMPLIED WARRANTIES AGAINST INTELLECTUAL PROPERTY INFRINGEMENT. LAKEPORT
WILL HAVE NO REMEDIES AGAINST EITHER ENGIE SERVICES U.S. OR ANY ENGIE SERVICES U.S.
SUBCONTRACTOR OR VENDOR FOR ANY DEFECTIVE MATERIALS OR EQUIPMENT INSTALLED, EXCEPT FOR
THE REPAIR OR REPLACEMENT OF SUCH MATERIALS OR EQUIPMENT IN ACCORDANCE WITH THE
WARRANTIES INDICATED BELOW. SPECIFICALLY, NEITHER ENGIE SERVICES U.S., NOR ENGIE SERVICES U.S.’S
SUBCONTRACTORS OR VENDORS, WILL BE LIABLE TO LAKEPORT FOR LOSS OF PROFITS OR FOR ANY
SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, HOWEVER CAUSED AND ON ANY
THEORY OF LIABILITY.
Section 9.01 ENGIE Services U.S. warrants to Lakeport that material and equipment furnished under this
Contract will be of good quality and new, unless otherwise specifically required or permitted by this Contract. ENGIE
Services U.S. further warrants that its workmanship provided hereunder, including its subcontractors’ workmanship, will
be free of material defects for a period of one (1) year from the date of Substantial Completion as indicated on the
executed Certificate of Substantial Completion, or the date of Beneficial Use as indicated on the executed Certificate of
Beneficial Use (“ENGIE Services U.S. Warranty”). Notwithstanding the preceding sentence, the date the ENGIE Services
U.S. Warranty commences with respect to a specific piece or pieces of equipment may be further defined in
Attachment C.
Section 9.02 Equipment and material warranties that exceed the ENGIE Services U.S. Warranty period will
be provided directly by the equipment and/or material manufacturers and such warranties will be assigned directly to
Lakeport, after the one (1) year period. During the ENGIE Services U.S. Warranty period, ENGIE Services U.S. will be
Lakeport’s agent in working with the equipment and material manufacturers in resolving any equipment or material
warranty issues. If any material defects are discovered within the ENGIE Services U.S. Warranty period, ENGIE Services
U.S., or ENGIE Services U.S.’s subcontractors, will correct its defects, and/or ENGIE Services U.S. will work with the
equipment or material manufacturer as Lakeport’s agent to facilitate the manufacturer’s correction of the equipment or
material defect. Such warranty services will be performed in a timely manner and at the reasonable convenience of
Lakeport. If a warranty issue arises on any equipment or material installed after the ENGIE Services U.S. Warranty
period, and the equipment or material has a warranty period that exceeds one (1) year, Lakeport will contact the
manufacturer directly to resolve such warranty issues and Lakeport acknowledges that the manufacturer will have sole
responsibility for such issues.
Section 9.03 The warranties in this ARTICLE 9 expressly exclude any remedy for damage or defect caused
by improper or inadequate maintenance of the installed equipment by service providers other than ENGIE Services U.S.
or its subcontractors, corrosion, erosion, deterioration, abuse, modifications or repairs not performed by an authorized
ENGIE Services U.S. subcontractor, improper use or operation, or normal wear and tear under normal usage. ENGIE
Services U.S. shall not be responsible for the cost of correcting a breach of warranty or defect to the extent that the
manufacturer of the equipment that is the subject of a warranty hereunder does not honor its equipment warranty as a
result of its termination of operations, insolvency, liquidation, bankruptcy or similar occurrence. Unless otherwise
specified, all warranties hereunder, including without limitation those for defects, whether latent or patent, in design,
engineering, or construction, will terminate one (1) year from the date of Substantial Completion or Beneficial Use; and
thereafter, ENGIE Services U.S. will have no liability for breach of any warranty or for any latent or patent defect of any
kind pursuant to California Code of Civil Procedure §§337.1 and 337.15.
Section 9.04 Lakeport and ENGIE Services U.S. have discussed the risks and rewards associated with this
Project, as well as the Contract Amount to be paid to ENGIE Services U.S. for performance of the Work. Lakeport and
ENGIE Services U.S. agree to allocate certain of the risks so that, to the fullest extent permitted by Applicable Law,
ENGIE Services U.S.’s total aggregate liability to Lakeport and all third parties is limited to the Contract Amount for any
and all injuries, damages, claims, losses, expenses, or claim expenses (including attorney’s fees) arising out of this
Contract from any cause or causes. Such causes include, but are not limited to, negligence, errors, omissions, strict
liability, breach of contract, or breach of warranty.

ARTICLE 10. OWNERSHIP OF CERTAIN PROPERTY AND EXISTING EQUIPMENT


Section 10.01 Ownership of Certain Proprietary Property Rights.
(a) Ownership: Except as expressly provided in this Contract, Lakeport will not acquire, by virtue of this Contract,
any rights or interest in any formulas, patterns, devices, software, inventions or processes, copyrights, patents,
trade secrets, other intellectual property rights, or similar items of property which are or may be used in
connection with the Work. ENGIE Services U.S. will own all inventions, improvements, technical data, models,
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processes, methods, and information and all other work products developed or used in connection with the
Work, including all intellectual property rights therein.
(b) License: Solely in connection with the Facilities, ENGIE Services U.S. grants to Lakeport a limited, perpetual,
royalty-free, non-transferrable license for any ENGIE Services U.S. intellectual property rights necessary for
Lakeport to operate, maintain, and repair any modifications or additions to Facilities, or equipment delivered, as
a part of the Work.
(c) Ownership and Use of Instruments of Service. All data, reports, proposals, plans, specifications, flow sheets,
drawings, and other products of the Work (the “Instruments of Service”) furnished directly or indirectly, in writing
or otherwise, to Lakeport by ENGIE Services U.S. under this Contract will remain ENGIE Services U.S.’s
property and may be used by Lakeport only for the Work. ENGIE Services U.S. will be deemed the author and
owner of such Instruments of Service and will retain all common law, statutory and other reserved rights,
including copyrights. The Instruments of Service may not be used by Lakeport or any Lakeport Person for future
additions or alterations to the Project or for other projects, without the prior written agreement of ENGIE
Services U.S. Any unauthorized use of the Instruments of Service will be at Lakeport’s sole risk and without
liability to ENGIE Services U.S. If Lakeport uses the Instruments of Service for implementation purposes,
including additions to or completion of the Project, without the written permission of ENGIE Services U.S.,
Lakeport agrees to waive and release, and indemnify and hold harmless, ENGIE Services U.S., its
subcontractors, and their directors, employees, subcontractors, and agents from any and all Losses associated
with or resulting from such use.
Section 10.02 Ownership of any Existing Equipment. Ownership of any equipment and materials presently
existing at the Facilities on the Contract Effective Date will remain the property of Lakeport even if such equipment or
materials are replaced or their operation made unnecessary by work performed by ENGIE Services U.S. If applicable,
ENGIE Services U.S. will advise Lakeport in writing of all equipment and materials that will be replaced at the Facilities
and Lakeport will, within five (5) Business Days of ENGIE Services U.S.’s notice, designate in writing to ENGIE Services
U.S. which replaced equipment and materials should not be disposed of off-site by ENGIE Services U.S. (the “Retained
Items”). Lakeport will be responsible for and designate the location and storage for the Retained Items. ENGIE Services
U.S. will be responsible for the disposal of replaced equipment and materials, except for the Retained Items. ENGIE
Services U.S. will use commercially reasonable efforts to remove the Retained Items in such a manner as to avoid
damage thereto, or if it is unreasonable to avoid damage altogether, to minimize the damage done. ENGIE Services U.S.
will not be responsible for the removal and/or disposal of any Hazardous Substances except as required by the Scope of
Work.

ARTICLE 11. INDEMNIFICATION / LIMITATION ON LIABILITY


Section 11.01 Indemnification. The parties agree that City, its officers, agents, employees and volunteers Formatted: No underline
should, to the fullest extent permitted by law, be protected from any and all loss, injury, damage, claim, lawsuit, cost,
expense, attorneys’ fees, litigation costs, taxes, or any other cost arising out of or in any way related to the performance Formatted: Font: Not Bold
of this Agreement. Accordingly, the parties intend the provisions of this indemnity provision to be interpreted and Formatted: Font:
construed to provide the City with the fullest protection possible under the law. ENGIE Services U.S. acknowledges that
Formatted: Normal, Level 2, Indent: Left: 0", First line:
City would not enter into this Agreement in the absence of ENGIE Services U.S.’s commitment to indemnify and protect
0.5", Space Before: 6 pt, After: 6 pt, Outline numbered +
City as set forth herein.
Level: 2 + Numbering Style: 01, 02, 03, … + Start at: 1 +
Section 11.02 To the fullest extent permitted by law, ENGIE Services U.S. shall indemnify, hold harmless, Alignment: Left + Aligned at: 3" + Indent at: 3"
and when the City requests with respect to a claim provide a deposit for the defense of, and defend City, its officers, Formatted: Font:
agents, employees and volunteers from and against any and all claims and losses, costs or expenses for any damage
due to death or injury to any person, whether physical, emotional, consequential or otherwise, and injury to any property Formatted: Font:
arising out of or in connection with ENGIE Services U.S.’s’ alleged negligence, recklessness or willful misconduct or Formatted: Font:
other wrongful acts, errors or omissions of ENGIE Services U.S. or any of its officers, employees, servants, agents, or
subcontractors, or anyone directly or indirectly employed by either ENGIE Services U.S. or its subcontractors, in the Formatted: Font:
performance of this Agreement or its failure to comply with any of its obligations contained in this Agreement, except Formatted: Font: (Default) Arial, 9 pt
such loss or damage which is caused by the sole active negligence or willful misconduct of the City. Such costs and
expenses shall include reasonable attorneys’ fees due to counsel of City’s choice, expert fees and all other costs and
fees of litigation.
Section 11.01 ENGIE Services U.S. agrees to obtain executed indemnity agreements with provisions
identical to those set forth here in this Article 11 from each and every subcontractor or any other person or entity involved
by, for, with or on behalf of ENGIE Services U.S.in the performance of this Agreement. If ENGIE Services U.S. fails to
obtain such indemnity obligations from others as required herein, ENGIE Services U.S. agrees to be fully responsible
and indemnify, hold harmless and defend City, its officers, agents, employees and volunteers from and against any and
all claims and losses, costs or expenses for any damage due to death or injury to any person and injury to any property

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resulting from any alleged intentional, reckless, negligent, or otherwise wrongful acts, errors or omissions of ENGIE
Services U.S.’s subcontractors or any other person or entity involved by, for, with or on behalf of ENGIE Services U.S.in
the performance of this Agreement. Such costs and expenses shall include reasonable attorneys’ fees incurred by
counsel of City’s choice. To the fullest extent permitted by Applicable Laws, each Party will indemnify, hold harmless,
release and defend the other Party, its officers, employees, and agents from and against any and all actions, claims,
demands, damages, disabilities, fines, penalties, losses, costs, expenses (including consultants’ and attorneys’ fees and
other defense expenses) and liabilities of any nature (“Losses”) that may be asserted by any person or entity, to the
extent arising out of that Party’s performance or activities hereunder, including the performance or activities of other
persons employed or utilized by that Party in the performance of this Contract, excepting liabilities to the extent due to
the negligence or willful misconduct of the indemnified party. This indemnification obligation will continue to bind the
Parties after the termination of this Contract.
Section 11.02Section 11.03 Waiver of Consequential Damages and Limitation of Liability. The liability of
a defaulting Party will be limited to direct, actual damages. Neither Party shall be liable to the other Party for any special,
indirect, incidental or consequential damages whatsoever, whether in contract, tort (including negligence) or strict liability,
including, but not limited to, operational losses in the performance of business such as lost profits or revenues or any
increase in operating expense. Additionally, each Party waives any claims for negligence against the other Party to the
fullest extent permitted by Applicable Law.

ARTICLE 12. INSURANCE / BONDS


Section 12.01 ENGIE Services U.S. Insurance. ENGIE Services U.S. will maintain, or cause to be
maintained, for the duration of this Contract, the insurance coverage outlined in (a) through (f) below, and all such other
insurance as required by Applicable Law. Evidence of coverage will be provided to Lakeport via an insurance certificate.
(a) Workers’ Compensation/Employers Liability for states in which ENGIE Services U.S. is not a qualified self-
insured. Limits as follows:
* Workers’ Compensation: Statutory
* Employers Liability: Bodily Injury by accident $1,000,000 each accident
Bodily Injury by disease $1,000,000 each employee
Bodily Injury by disease $1,000,000 policy limit
(b) Commercial General Liability insurance with limits of:
* $2,000,000 each occurrence for Bodily Injury and Property Damage
* $4,000,000 General Aggregate - other than Products/Completed Operations
* $4,000,000 Products/Completed Operations Aggregate
* $2,000,000 Personal and Advertising Injury
* $ 100,000 Damage to premises rented to ENGIE Services U.S.

Coverage to be written on an occurrence form. Coverage to be at least as broad as ISO form CG 0001
(04/13) or its equivalent forms, without endorsements that limit the policy terms with respect to:
(1) provisions for severability of interest or (2) explosion, collapse, underground hazard.
(c) Auto Liability insurance for owned, hired and non-owned vehicles with limits of $1,000,000 per accident.
Coverage to be written on an occurrence form.
(d) Professional Liability insurance with limits of:
* $1,000,000 per occurrence
* $1,000,000 aggregate

Coverage to be written on a claims-made form.


(e) Umbrella/Excess Liability Insurance. Limits as follows:
* $1,000,000 each occurrence
* $1,000,000 aggregate

Coverage terms and limits to apply excess of the per occurrence and/or aggregate limits provided for
Commercial General Liability and Professional Liability written on a claims made form. Coverage terms
and limits also to apply in excess of those required for Employers Liability and Auto Liability written on
an occurrence form.

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(f) Policy Endorsements.


* The insurance provided for Workers’ Compensation and Employers’ Liability above will
contain waivers of subrogation rights against Lakeport, but only to the extent of the indemnity
obligations contained in this Contract.
* The insurance provided for Commercial General Liability and Auto Liability above will:
(i) include Lakeport, Lakeport Persons, and Lakeport Representative as an as
additional insureds with respect to Work performed under this Contract, but only to
the extent of the indemnity obligations contained in this Contract, and
(ii) provide that the insurance is primary coverage with respect to all insureds, but only
to the extent of the indemnity obligations contained in this Contract, and.
(iii) provide that the policy shall not be canceled, material reduced, or materially changed
without first giving thirty (30) days prior written notice to the City of Lakeport
Section 12.02 Lakeport’s Insurance. Lakeport will maintain, or cause to be maintained, for the duration of
this Contract, the insurance coverage outlined below, and all such other insurance as required by Applicable Law.
Evidence of coverage will be provided to ENGIE Services U.S. via an insurance certificate.
(a) Commercial General Liability insurance, written on an occurrence form, with limits of:
* $2,000,000 each occurrence for Bodily Injury and Property Damage; and
* $4,000,000 General Aggregate
(b) The insurance provided for above will contain waivers of subrogation rights against ENGIE Services
U.S., will include ENGIE Services U.S. as an additional insured, and will provide that the insurance is
primary coverage with respect to all insureds.
Section 12.03 Waivers of Subrogation. The Parties waive all rights against each other and any of their
subcontractors, sub-subcontractors, agents and employees, each of the other, for damages caused by fire or other
causes of loss to the extent covered by property insurance obtained pursuant to this ARTICLE 12 or other property
insurance applicable to the Work, except such rights as they have to proceeds of such insurance. The Parties and their
respective property damage insurers also waive all rights of subrogation against the other Party, its directors, officers,
agents and employees. A waiver of subrogation shall be effective as to a person or entity even though that person or
entity would otherwise have a duty of indemnification, contractual or otherwise, did not pay the insurance premium
directly or indirectly, and whether or not the person or entity had an insurable interest in the property damaged.
Section 12.04 Performance and Payment Bonds. Prior to commencing Work under this Contract, ENGIE
Services U.S. will furnish a performance bond, in an amount equal to one hundred percent (100%) of the Contract
Amount, and a payment bond to guarantee payment of all claims for labor and materials furnished, in an amount equal to
one hundred percent (100%) of the Contract Amount (collectively, the “Contract Bonds”). The Contract Bonds are not
being furnished to cover the performance of any Professional Services, including any energy guaranty or guaranteed
savings under this Contract, nor to cover any equipment and/or material manufacturer’s warranty or other third-party
warranty being assigned to Lakeport.

ARTICLE 13. DOE GUIDELINES; ENERGY POLICY ACT


Section 13.01 As authorized by §1605(b) of the Energy Policy Act of 1992 (Pub. L. No. 102-486) the U.S.
Department of Energy has issued, and may issue in the future, guidelines for the voluntary reporting of Greenhouse Gas
emissions (“DOE Guidelines”). “Greenhouse Gases” means those gases and other particles as defined in the DOE
Guidelines. Lakeport hereby assigns and transfers to ENGIE Services U.S., and its Affiliates and assigns, any
Greenhouse Gas emission reduction credits that result from the Work.
Section 13.02 As authorized by §1331 of the Energy Policy Act of 2005 (Pub. L. No. 109-58) Lakeport
agrees that for the Work, ENGIE Services U.S. will be the “designer” as that term is identified in Internal Revenue Bulletin
2008-14, Notice 2008-40, and ENGIE Services U.S. will have the exclusive right to report to any federal, state, or local
agency, authority or other party any tax benefit associated with the Work. Upon Final Completion, Lakeport agrees to
execute a written allocation including a declaration related to Internal Revenue Code §179D. ENGIE Services U.S. will
prepare the declaration and all accompanying documentation. ENGIE Services U.S. will be designated the §179D
beneficiary.

ARTICLE 14. MUNICIPAL ADVISOR


Section 14.01 THE PARTIES ACKNOWLEDGE AND AGREE THAT ENGIE SERVICES U.S. IS NOT A
MUNICIPAL ADVISOR AND CANNOT GIVE ADVICE TO LAKEPORT WITH RESPECT TO MUNICIPAL SECURITIES
OR MUNICIPAL FINANCIAL PRODUCTS ABSENT LAKEPORT BEING REPRESENTED BY, AND RELYING UPON
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THE ADVICE OF, AN INDEPENDENT REGISTERED MUNICIPAL ADVISOR. ENGIE SERVICES U.S. IS NOT
SUBJECT TO A FIDUCIARY DUTY WITH REGARD TO LAKEPORT OR THE PROVISION OF INFORMATION TO
LAKEPORT. LAKEPORT WILL CONSULT WITH AN INDEPENDENT REGISTERED MUNICIPAL ADVISOR ABOUT
THE FINANCING OPTION APPROPRIATE FOR LAKEPORT’S SITUATION.

ARTICLE 15. TRADE SECRETS


If any materials or information provided by ENGIE Services U.S. to Lakeport under this Contract are designated by
ENGIE Services U.S. as a “trade secret” or otherwise exempt from disclosure under the Public Records Act (California
Government Code §6250 et seq., the “Act”) and if a third party makes a request for disclosure of the materials under the Act,
as soon as practical (but not later than five (5) calendar days) after receipt of such request, Lakeport will notify ENGIE
Services U.S. of such request and advise ENGIE Services U.S. whether Lakeport believes that there is a reasonable
possibility that the materials may not be exempt from disclosure. Within ten (10) calendar days after a third party’s request for
disclosure of materials under the Act, ENGIE Services U.S. will (i) authorize Lakeport to release the documents or information
sought; or (ii) if ENGIE Services U.S. reasonably believes that the information is exempt from disclosure, advise Lakeport not
to release the materials. Lakeport shall determine, in its sole discretion, whether to release any public records in its
possession pursuant to the Act.

ARTICLE 16. EVENTS OF DEFAULT


Section 16.01 Events of Default by ENGIE Services U.S. Each of the following events or conditions will
constitute an “Event of Default” by ENGIE Services U.S.:
(i) any substantial failure by ENGIE Services U.S. to perform or comply with this Contract, including a
material breach of any covenant contained herein, and such failure continues for thirty (30) calendar
days after notice to ENGIE Services U.S. demanding that such failure to perform be cured; provided
that (y) such failure to perform will not be deemed a default hereunder if it is excused by a provision
of this Contract, and (z) if such cure cannot be effected in thirty (30) calendar days, ENGIE Services
U.S. will be deemed to have cured the default upon the commencement of a cure within thirty (30)
calendar days and diligent subsequent completion thereof; or
(ii) any representation or warranty furnished by ENGIE Services U.S. in this Contract which was false or
misleading in any material respect when made.
Section 16.02 Events of Default by Lakeport. Each of the following events or conditions will constitute an
“Event of Default” by Lakeport:
(i) any substantial failure by Lakeport to perform or comply with this Contract, including a material
breach of any covenant contained herein, and such failure continues for thirty (30) calendar days
after notice to Lakeport demanding that such failure to perform be cured; provided that (y) such
failure to perform will not be deemed a default hereunder if it is excused by a provision of this
Contract; and (z) if such cure cannot be effected in thirty (30) calendar days, Lakeport will be
deemed to have cured the default upon the commencement of a cure within thirty (30) calendar days
and diligent subsequent completion thereof; or
(ii) any representation or warranty furnished by Lakeport in this Contract which was false or misleading
in any material respect when made; or
(iii) any failure by Lakeport to pay any amount to ENGIE Services U.S. which is not paid within ten (10)
calendar days after written notice from ENGIE Services U.S. that the amount is past due.

ARTICLE 17. REMEDIES UPON DEFAULT


Section 17.01 Termination for Cause. If there is an Event of Default by either Party under this Contract,
unless such Event of Default has been cured within the applicable time periods for a cure set forth in ARTICLE 16, the
non-defaulting Party may terminate this Contract by providing three (3) Business Days’ written notice to the defaulting
Party in the case of a monetary default and ten (10) Business Days’ written notice to the defaulting Party in the case of a
non-monetary default. Upon termination of this Contract, each Party will promptly return to the other all papers, materials,
and property of the other held by such Party in connection with this Contract. Each Party will also assist the other in the
orderly termination of this Contract and the transfer of all aspects hereof, tangible and intangible, as may be necessary
for the orderly, non-disrupted business continuation of each Party. If this Contract is so terminated, ENGIE Services U.S.
will be entitled to payment for Work satisfactorily performed, earned profit and overhead, and costs incurred in
accordance with this Contract up to the date of termination.

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Section 17.02 Remedies Upon Default by ENGIE Services U.S. If an Event of Default by ENGIE Services
U.S. occurs, Lakeport will be entitled to obtain any available legal or equitable remedies through judicial reference
arbitration proceedings instituted pursuant to ARTICLE 19, including, without limitation, terminating this Contract, or
recovering amounts due and unpaid by ENGIE Services U.S. and/or damages, which will include Lakeport’s reasonable,
actual, direct out-of-pocket losses incurred by reason of such Event of Default and any cost of funding; loss of anticipated
payment obligations; and any payment or delivery required to have been made on or before the date of the Event of
Default and not made, including interest on any sums due, and losses and costs incurred as a result of terminating this
Contract and all costs and expenses reasonably incurred in exercising the foregoing remedies.
Section 17.03 Remedies upon Default by Lakeport. If an Event of Default by Lakeport occurs, ENGIE
Services U.S. will be entitled to obtain any available legal or equitable remedies through judicial reference arbitration
proceedings instituted pursuant to ARTICLE 19 including, without limitation, terminating this Contract or recovering
amounts due and unpaid by Lakeport, and/or damages which will include ENGIE Services U.S.’s reasonable, actual,
direct out-of-pocket losses incurred by reason of such Event of Default and any cost of funding; loss of anticipated
payment obligations; and any payment or delivery required to have been made on or before the date of the Event of
Default and not made, including Interest on any sums due, and losses and costs incurred as a result of terminating this
Contract and all costs and expenses reasonably incurred in exercising the foregoing remedies.

ARTICLE 18. CONDITIONS BEYOND CONTROL OF THE PARTIES


Section 18.01 Excusable Events. If any Party is delayed in, or prevented from, performing or carrying out its
obligations under this Contract by reason of any Excusable Event, such circumstance will not constitute an Event of
Default, and such Party will be excused from performance hereunder and will not be liable to the other Party for or on
account of any loss, damage, injury or expense resulting from, or arising out of, such delay or prevention.
Notwithstanding the foregoing, no Party will be excused from any payment obligations under this Contract as a result of
an Excusable Event.
Section 18.02 Utility Work. Lakeport expressly understands and agrees that Excusable Events may occur
due to Interconnection Facilities work that may need to be performed by the local electric utility (“Utility”) in order for
ENGIE Services U.S. to fully implement the Project. “Interconnection Facilities” means any distribution or transmission
lines and other facilities that may be required to connect equipment supplied under this Contract to an electrical
distribution/transmission system owned and maintained by the Utility. Any Interconnection Facilities work that may be
required will be performed by the Utility under the Interconnection Agreement.

ARTICLE 19. GOVERNING LAW AND RESOLUTION OF DISPUTES


Section 19.01 Governing Law. This Contract is governed by and must be interpreted under the laws of the
State where the Work is performed, without regard to the jurisdiction’s choice of law rules.
Section 19.02 Initial Dispute Resolution. If a dispute arises out of or relates to this Contract, the transaction
contemplated by this Contract, or the breach of this Contract (a “Dispute”), either Party may initiate the dispute resolution
process set forth in this ARTICLE 19 by giving notice to the other Party. The Parties will endeavor to settle the Dispute as
follows:
(i) Field Representatives’ Meeting: Within fifteen (15) Business Days after notice of the Dispute, ENGIE
Services U.S.’s senior project management personnel will meet with Lakeport’s project
representative in a good faith attempt to resolve the Dispute.
(ii) Management Representatives’ Meeting: If ENGIE Services U.S.’s and Lakeport’s project
representatives fail to meet, or if they are unable to resolve the Dispute, senior executives for ENGIE
Services U.S. and for Lakeport, neither of whom have had day-to-day management responsibilities
for the Project, will meet, within thirty (30) calendar days after notice of the Dispute, in an attempt to
resolve the Dispute and any other identified disputes or any unresolved issues that may lead to a
dispute. If the senior executives of ENGIE Services U.S. and Lakeport are unable to resolve a
Dispute or if a senior management conference is not held within the time provided herein, either
Party may submit the Dispute to mediation in accordance with Section 19.03.
Section 19.03 Mediation. If the Dispute is not settled pursuant to Section 19.02, the Parties will endeavor to
settle the Dispute by mediation under the Commercial Mediation Procedures of the American Arbitration Association.
Mediation is a condition precedent to arbitration or the institution judicial reference of legal or equitable proceedings by
either Party. Once one Party files a request for mediation with the other Party and with the American Arbitration
Association, the Parties agree to conclude the mediation within sixty (60) calendar days after filing the request. Either
Party may terminate the mediation at any time after the first session, but the decision to terminate must be delivered in
person by the Party’s representative to the other Party’s representative and the mediator. If the Dispute is not resolved by
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mediation within sixty (60) calendar days after the date of filing of the request for mediation, then the exclusive means to
resolve the Dispute is final and binding arbitrationthrough judicial reference, as described in Section 19.04. Either Party
may initiate judicial reference arbitration proceedings. by notice to the other Party and the American Arbitration
Association.
Section 19.04 Judicial Reference Arbitration prProceedings. The following provisions apply to all judicial
reference arbitration proceedings pursuant to this ARTICLE 19:
(i) Upon the written request of any Party, a Dispute, including any and all questions of law or fact relating thereto, Formatted: No bullets or numbering
shall be resolved exclusively pursuant to the provisions for reference and trial by referee (without jury) set forth in
California Code of Civil Procedure §638 et seq., as expressly modified by the provisions hereof (“Reference
Proceeding”). The referee (“Referee”) shall be a retired or former Superior Court judge residing in Lake County,
California, who is either (1) agreed to by the parties within fifteen (15) days of the notice by any party to the other of the
intention to initiate a Reference Proceeding pursuant to this Section 23.04 to resolve the Dispute, or (2) failing such
agreement, is appointed pursuant to California Code of Civil Procedure §640 in an action filed in the Superior Court of
Lake County, California (the “Court”). The Parties agree that any Party may file with the Clerk of the Court, and/or with
the appropriate judge of such Court, any and all petitions, motions, applications or other documents necessary to obtain
the appointment of such a Referee immediately upon the commencement of any Reference Proceeding, and to conduct
all necessary discovery and to proceed to a trial as expeditiously as possible. It is the Parties’ intention, and the Parties
and the Referee shall use their best efforts to be certain, that (a) discovery be conducted for a period no longer than six
(6) months from the date (“Referee Date”) the Referee is appointed (whether by stipulation or by the Court), excluding
motions regarding discovery, and (b) trial be set on a date that is within nine (9) months of the Referee Date. All
discovery motions shall be filed with the Referee and served upon the opposing Party no later than one week after the
end of the six-month discovery period. All proceedings, including trial, before the Referee, shall be conducted at a
neutral location (unless otherwise stipulated by the Parties). The Parties agree that said Referee shall be a judge for all
purposes (including (i) ruling on any and all discovery matters and motions and any and all pretrial or trial motions, (ii)
setting a schedule of pretrial proceedings, and (iii) making any other orders or rulings a sitting judge of the Court would
be empowered to make in any action or proceeding in the Court. Any matter before the Referee shall be governed by
the substantive law of California, its Code of Civil Procedure, Rules of Court, and Evidence Code, except as otherwise
specifically agreed by the Parties and approved by the Referee. The Parties intend this general reference agreement to
be specifically enforceable in accordance with the California Code of Civil Procedure. Any appeal of the decisions of the
Referee shall be appealable to the same extent and in the same manner that such decision would be appealable if
rendered by a judge of the Court. The Referee shall in his/her statement of decisions set forth his/her findings of fact and
conclusions of law. During the pendency of any such Reference Proceeding and before the entry of any judgment
therein, each of the Parties to such Reference Proceeding shall bear equal shares of the fees charged and costs incurred
by the Referee in connection with performing the services provided in this Section. The compensation of the Referee
shall not exceed the prevailing rate for like services.The place of arbitration will be the American Arbitration Association
office closest to where the Work was performed.
(ii) One arbitrator (or three arbitrators if the monetary value of the Dispute is more than $2,000,000) (the “Arbitral
Panel”) will conduct the arbitral proceedings in accordance with the Commercial Arbitration Rules and Mediation
Procedures (Excluding the Procedures for Large, Complex Commercial Disputes) of the American Arbitration Association
currently in effect (“Arbitration Rules”). To the extent of any conflicts between the Arbitration Rules and the provisions of
this Contract, the provisions of this Contract prevail.
(iii) The Parties will submit true copies of all documents considered relevant with their respective statement of claim
or defense, and any counterclaim or reply. In the discretion of the Arbitral Panel, the production of additional documents
that are relevant and material to the determination of the Dispute may be required.
(iv) The Arbitral Panel does not have the power to award, and may not award, any punitive, indirect or
consequential damages (however denominated). All arbitration fees and costs are to be shared equally by the parties,
regardless of which Party prevails. Each Party will pay its own costs of legal representation and witness expenses.
(v) The award must be in the form of a reasoned award.
(vi) The Dispute will be resolved as quickly as possible. The Arbitral Panel will endeavor to issue the arbitration
award within six (6) months after the date on which the arbitration proceedings were commenced.
(vii) The award will be final and binding and subject to confirmation and enforcement proceedings in any court of
competent jurisdiction.
Section 19.05 Multiparty Proceeding. Either Party may join third parties whose joinder would facilitate
complete resolution of the Dispute and matters arising from the resolution of the Dispute.

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Section 19.06 Lien Rights. Nothing in this ARTICLE 19 limits any rights or remedies not expressly waived by Formatted: Heading 2,h2
ENGIE Services U.S. that ENGIE Services U.S. may have under any lien laws or stop notice laws.
Formatted
Section 19.07 Resolution of Claims less than $375,000. This contract is further subject to the provisions of
Formatted: Underline
Article 1.5 (commencing at Section 20104) of Division 2, Part 3 of the California Public Contract Code regarding the
resolution of public works claims of less than $375,000. Article 1.5 mandates certain procedures for the filing of claims
and supporting documentation by the contractor, for the response to such claims by the contracting public City, for a
mandatory meet and confer conference upon the request of the contractor, for mandatory nonbinding mediation in the
event litigation is commenced, and for mandatory judicial arbitration upon the failure to resolve the dispute through
mediation. This contract hereby incorporates the provisions of Article 1.5 as though fully set forth herein.
Payment of Undisputed Payment Requests. This contract is further subject to the provisions of Article Formatted: Underline
1.7 (commencing at Section 20104.50) of Division 2, Part 3 of the California Public Contract Code regarding prompt
payment of contractors by local governments. Article 1.7 mandates certain procedures for the payment of undisputed and Formatted: Heading 2,h2
properly submitted payment requests within 30 days after receipt, for the review of payment requests, for notice to the
contractor of improper payment requests, and provides for the payment of interest on progress payment requests which
are not timely made in accordance with this Article. This contract hereby incorporates the provisions of Article 1.7 as
though fully set forth herein.
Section 19.08
Section 19.09 Claim Resolution. This contract is further subject to the claim resolution process of California Formatted: Underline
Public Contract Code section 9204, the provisions of which are hereby incorporated as though fully set forth herein.
Formatted: Font: (Default) Arial, 9 pt, Font color: Auto
Section 19.06Section 19.10 Assignment of Claims. In entering into a public works contract or a
Formatted: No underline
subcontract to supply goods, services, or materials pursuant to a public works contract, the Contractor or subcontractor
offers and agrees to assign to the awarding body all rights, title, and interest in and to all causes of action it may have
under Section 4 of the Clayton Act (15 U.S.C. Sec. 15) or under the Cartwright Act (Chapter 2 (commencing with Section
16700) of Part 2 of Division 7 of the Business and Professions Code), arising from purchases of goods, services, or
materials pursuant to the public works contract or the subcontract. This assignment shall be made and become effective
at the time the awarding body tenders final payment to the contractor, without further acknowledgment by the parties.

ARTICLE 20. REPRESENTATIONS AND WARRANTIES


Section 20.01 Each Party warrants and represents to the other that:
(i) it has all requisite power and authority to enter into this Contract, to perform its obligations hereunder
and to consummate the transactions contemplated hereby;
(ii) the execution, delivery, and performance of this Contract have been duly authorized by its governing
body, or are in accordance with its organizational documents, and this Contract has been duly
executed and delivered for it by the signatories so authorized, and constitutes its legal, valid, and
binding obligation;
(iii) the execution, delivery, and performance of this Contract will not breach or violate, or constitute a
default under, its organizational documents or any contract, lease or instrument to which it is a party
or by which it or its properties may be bound or affected; and
(iv) it has not received any notice, nor to the best of its knowledge is there pending or threatened any
notice, of any violation of any Applicable Laws, awards or permits which would materially and
adversely affect its ability to perform hereunder.

ARTICLE 21. NOTICE


Any notice required or permitted hereunder will be deemed sufficient if given in writing and delivered personally or
sent by registered or certified mail, return receipt requested, postage prepaid, or delivered to a nationally recognized express
mail service, charges prepaid, receipt obtained, to the address shown below or to such other persons or addresses as are
specified by similar notice.

TO ENGIE SERVICES U.S.: ENGIE Services U.S. Inc.


500 Twelfth Street, Suite 300
Oakland, CA 94607
Tel: 415-529-7955
Attention: Fady Ghobrial, Project Manager

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With a COPY TO: Legal Department


ENGIE Services U.S. Inc.
150 East Colorado Boulevard, Suite 360
Pasadena, CA 91105-3711
Tel: 626-377-4948
Attention: Contract Administrator

TO LAKEPORT: City of Lakeport


225 Park Street
Lakeport, CA 95453
Tel:
Attention:

With a COPY TO: David J. Ruderman


Lakeport City Attorney
420 Sierra College Drive, Suite 140
Grass Valley, CA 95945

ARTICLE 22. CONSTRUCTION OF CONTRACT


This Contract is the result of arms-length negotiations between two sophisticated parties and ambiguities or
uncertainties in it will not be construed for or against either Party, but will be construed in a manner that most accurately
reflects the intent of the Parties as of the Contract Effective Date. Each of the Parties acknowledges and agrees that neither
Party has provided the other with any legal, accounting, regulatory, financial, or tax advice with respect to any of the
transactions contemplated hereby, and each Party has consulted its own legal, accounting, regulatory, financial and tax
advisors to the extent it has deemed appropriate.

ARTICLE 23. BINDING EFFECT


Except as otherwise provided herein, the terms and provisions of this Contract will apply to, be binding upon, and
inure to the benefit of the Parties hereto and their respective heirs, legal representatives, successors, and permitted assigns.

ARTICLE 24. NO WAIVER


The failure of ENGIE Services U.S. or Lakeport to insist upon the strict performance of this Contract will not
constitute or be construed as a waiver or relinquishment of either Party’s right to thereafter enforce the same in accordance
with this Contract in the event of a continuing or subsequent default on the part of ENGIE Services U.S. or Lakeport.

ARTICLE 25. SEVERABILITY


If any clause or provision of this Contract or any part thereof becomes or is declared by a court of competent
jurisdiction invalid, illegal, void, or unenforceable, this Contract will continue in full force and effect without said provisions;
provided that no such severability will be effective if it materially changes the benefits or obligations of either Party hereunder.

ARTICLE 26. HEADINGS


Headings and subtitles used throughout this Contract are for the purpose of convenience only, and no heading or
subtitle will modify or be used to interpret the text of any section.

ARTICLE 27. COUNTERPARTS; INTEGRATION


This Contract may be executed in counterparts (and by different Parties hereto in different counterparts), each of
which will constitute an original, but all of which when taken together will constitute a single contract. This Contract constitutes
the entire contract among the Parties relating to the subject matter hereof and supersedes any and all previous agreements
and understandings, oral or written, relating to the subject matter hereof. This Contract cannot be amended, modified, or
terminated except by a written instrument, executed by both Parties hereto. Delivery of an executed counterpart of a signature
page of this Contract by email will be effective as delivery of a manually executed counterpart of this Contract.

[the Parties’ signatures appear on the following page]

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Lakeport and ENGIE Services U.S.

IN WITNESS WHEREOF, and intending to be legally bound, the Parties hereto subscribe their names to this
Contract by their duly authorized officers as of the Contract Effective Date.

ENGIE SERVICES U.S.: LAKEPORT:

ENGIE Services U.S. Inc. City of Lakeport

By: _________________________________ By: __________________________________


Name: Name:
Title: Title:

By: _________________________________
Name:
Title:

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ATTACHMENT A

LAKEPORT’S FACILITIES and EXISTING EQUIPMENT

(a) The following Lakeport Facilities are included under the Scope of Work as listed below:

ECMs

L-1: Interior and Exterior LED Lighting

M-1:Effluent Pump Upgrade

SL-1:Street & Park Lighting

EV-1: EV Charging Station


M-1:HVAC Replacements
PV-1:Solar PV Power

Square
Facility Address Feet
City Hall 225 Park Street 9923 X X X X
Police Department 2025 S Main Street 4995 X X X
Carnegie Library 200 Park Street 1972 X
Corporate Yard 590 Konocti Ave 1404 X X
Corporate Yard 591 Martin Street 5616
Waste Water Treatment Plant 795 Linda Lane 2200 X X X
Waste Water Treatment Plant 695 L:inda Lane 600
City Water Well 1604 Riggs Road 168 X
Street & Park Lights City-wide X

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ATTACHMENT B

STANDARDS OF OCCUPANCY and CONTROL

The following standards are a guideline used to evaluate the energy conservation measures in this program. It is
understood that existing and installed equipment may not allow for exact times and temperatures to be met, but every
effort will be made to meet the below standards as closely as the equipment allows.

Existing Existing Proposed Proposed


Existing Heating Cooling Proposed Heating Cooling
Occupancy
Facility Area HVAC Occupied/ Occupied/ HVAC Occupied/ Occupied/
Schedule
Schedule Unoccupied Unoccupied Schedule Unoccupied Unoccupied
Temperature Temperature Temperature Temperature
M-F 8A- M-F 8A- M-F 8A-
City Hall All 68/58 74/84 68/58 74/84
5P 5P 5P
M-F 8A- M-F 8A- M-F 8A-
Corp Yard All 68/58 74/84 68/58 74/84
5P 5P 5P
Police
All 24/7 24/7 68/68 74/74 24/7 68/68 74/74
Department
Carnegie M-F 8A- M-F 8A- M-F 8A-
All 68/58 74/84 68/58 74/84
Library 5P 5P 5P

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Energy Services Contract


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ATTACHMENT C

SCOPE OF WORK

California State Contractor’s License Number 995037


California Public Works Contractor Registration Number 1000001498

Energy Conservation Measures to Be Implemented

ECM
# Description
PV-1 Solar Power Generation
L-1 Interior and Exterior LED Lighting
M-1 HVAC Replacements
M-1 Effluent Pump Upgrade
ST-1 Street & Park Lighting
EV-1 EV Charging Station

PV-1 – Photovoltaic Power Generation


Solar Generating Facilities to be Installed

Facility Address Approx. kWdc Type of PV


Waste Water Treatment Plant 795 Linda Lane Exhibit PV-1A 540 Ground Mount
City Water Well 1604 Riggs Road Exhibit PV-1B 101 Ground Mount
Corporate Yard 591 Martin Street Exhibit PV-1V 237.6 Canopy
City Hall 225 Park Street Exhibit PV-1D 29 Canopy
Police Department 2025 S Main Street Exhibit PV-1E 38 Canopy

Scope of Work:

ENGIE Services U.S. will design and install a Generating Facility at each of the Facilities set out in the table above. The
final capacity of the solar project will be determined after design engineering is completed. ENGIE Services U.S.’s scope
of work will include engineering, equipment, installation, interconnection to utility, system start-up, and commissioning
necessary to design and build each Generating Facility at each site including:

• Work to be in compliance with PG&E interconnection requirements for both NEM (Net Energy Metering) and
NEM-A (Net Energy Metering Aggregate) systems; provided, however, that any requirements that could not
have been reasonably anticipated as of the Contract Effective Date and that materially impact the work will
entitle ENGIE Services U.S.to an increase in the Contract Amount and/or an increase in the time to complete
the work.
• Geotechnical evaluations necessary for design requirements.
• Final layout drawings for Fire Marshall and Lakeport review.
• Preparation of parking canopy design drawings and ground mount design drawings. Solar PV designs will be
submitted to the City of Lakeport for permitting.
• Utility (PG&E) interconnection drawings and related application management services.
• Coordinate with PG&E for interconnection infrastructure utility upgrades at ground mount site.
• The solar project sites will be connected to the existing site switchgear.
• Coordinate with PG&E for installation of the revenue grade meters.
• Provide and install inverters and all necessary electrical equipment and conduits to connect to the electrical
switchgear.
• Coordinate with PG&E for electrical interconnection. Two electrical shut-downs are anticipated at each site.
Exact schedule and time will be coordinated with Lakeport and PG&E to minimize impact to services.
• Canopy Structures
o For canopy structure, cost is based on a pier depth of eight (8) feet and assumes no dewatering,
benching, shoring, or casing. Actual pier depth will be determined upon final engineering design and
will be based upon site specific soil conditions, seismic and wind requirements, the presence of water,
or undiscovered conditions such as subsurface obstructions.

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o The canopy structure will be elevated shade structures, approximately 9 ft. high at the lowest point of
the canopy. The panels will be mounted on steel posts and beams that are tilted at approximately 7
degrees.
o Canopy structure, which will allow parking below and traffic circulation between canopies, will be
ENGIE Services U.S.’s design with standard paint. Paint color to be selected by Lakeport staff from
ENGIE Services U.S. standard colors.
o The PV shade structure is not weather tight and will not provide complete shelter from rain.
o Provide and install new lighting fixtures mounted under new parking canopy.
o Decorative fascia along the perimeter of the panels and decorative covering underneath the panels are
excluded.
• Ground Mount Systems
o Ground mount systems will be fixed at an approximately 30-degree tilt on steel structure framed racks
supported by posts set in the ground.
• Initial tree trimming or removal as necessary to construct the PV arrays will be by Lakeport. On-going tree
maintenance to ensure PV production is the responsibility of Lakeport.
• No allowance has been made for underground obstructions or unsuitable soil conditions encountered during
boring, trenching or other excavation. Remediation and/or removal of hazardous materials, hazardous wastes,
or spoils is not included in this scope of work.
• CEQA requirements or environmental studies required by other Applicable Law, if required, will be the
responsibility of Lakeport.
• Work includes trenching or horizontal boring for connecting the solar arrays with inverters, switchgear and Utility
interconnection, but excludes excavation, installation of drainage systems, or shoring of unstable soil or
substructures.
• Work will not include repairs, modifications, or upgrades to buildings or adjacent facilities not explicitly set forth
in the Contract unless damaged during construction.
• Work will not include repair or upgrade of existing electrical, mechanical, or structural infrastructure except
where explicitly set forth in the Contract.
• Water hose bibs for washing the panels are excluded.
The following photos are schematic engineering layouts. These schematic engineering layouts and the electrical routing
related thereto are subject to change due to field conditions and upon completion of final engineering:

Exhibit PV-1A
Waste Water Treatment Plant, 540 kW

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Energy Services Contract


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Exhibit PV-1B
City Corporation Yard, 237.6 kW

Exhibit PV-1C
City Water Well, 101 kW

Exhibit PV-1D
City Hall, 29 kW

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Energy Services Contract


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Exhibit PV-1E
Police Department, 38 kW

L-1 - Interior/Exterior Lighting


Scope of Work:
See Attachment G, which sets forth in detail the type and number of lighting installations or retrofits to be performed per
Facility. The lighting installations/retrofits listed directly below are merely a summary of the overall Work to be performed;
the detailed scope is set forth in Attachment G.

• Install new or retrofit lighting fixtures as identified in Attachment G:


a. Interior Retrofit
a. High Efficiency Light Emitting Diode (LED) Upgrades – The majority of lamps throughout
Lakeport’s Facilities are 32 watt T8 lamps and ballasts. These lamps will be replaced with
new generation LED lamps and drivers per Attachment G.
b. LED Recessed-Can Retrofit – Recessed-can fixtures will be retrofitted with new generation
LED replacement lamps and drivers per Attachment G.
c. Exit Sign Upgrades – Exit signs, illuminated by various wattage incandescent lamps, will be
replaced with LED fixtures per Attachment G.
b. Exterior Retrofit

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a. LED Lighting for Exterior Applications – replace high pressure sodium (HPS) and metal
halide (MH) lamps with LED lamp technology as set forth in Attachment G.

M-1 – HVAC Unit Replacement and New Units

Scope of Work: General

See Attachment H, which sets forth in detail the type, location, and number of HVAC system replacements to be
performed per Facility. Unit replacement will be like capacity in-kind replacement. ENGIE Services U.S.’s scope of work
will include the following:
• Work shall comply with latest Applicable Codes and per the Authority Having Jurisdiction (AHJ).
• Necessary documents required for permit and construction.
• Work includes material, labor, supervision, design completion, services, equipment and tools required to install
the HVAC units identified in Attachment H.
• No load calculations will be performed to validate sizing of new units.
• Compressors will have a 5-year manufacturer’s warranty
• Required line and low voltage electrical modification and connections are included. New electrical disconnect
and fuses will be provided as needed.
• Pre- and post-installation air flows where applicable will be measured and documented at each register. Unit
start-up and operational test will be performed on each unit to verify that all units are operating correctly.
Start-up will be provided by factory trained personnel and commissioning per factory specifications.

Scope of Work: City Hall, Police Department, Carnegie Library

Demolition:
• Existing mechanical equipment will be removed and disposed of.
• Disposal of refrigerant and equipment in accordance with Applicable Law is included.
• Demolition work will be performed in a safe manner and in accordance with CAL OSHA and other Applicable Law.

New Work:
• Provide and install new mechanical equipment to be installed in the location of the existing equipment.
• Flexible connector with galvanized sheet metal cover at inlet and outlet is included.
• Modification of existing curb, flashing, ductwork, piping, and conduit as required for installation of new mechanical
equipment is included.
• Crane lifts for rigging will be performed during non-occupied hours. All areas impacted will require all staff
vacated from affected areas during crane rigging of new units.
• Units will be reconnected to existing ductwork, existing gas, and condensate piping systems.
a. Existing smoke detectors will be reconnected, if applicable. New smoke detectors shall be provided, as
required, if mechanical system or combined systems serving a zone is >2000 cfm.
• Removal and re-installation of existing EMS controls and existing standalone thermostats are included.
• New curb / adapter curb or sleepers will be used, as required, for installation of new mechanical equipment and
weather proofing. Roof will be patched and repaired, as required, at new curb or sleeper locations.

Scope of Work: Corporation Yard

See Attachment H, which sets forth in detail the type, location, and number of HVAC new units to be installed at the
Corporation Yard. ENGIE Services U.S.’s scope of work will include the following:

New Work:
• Provide and install new mechanical equipment to be installed in the specified locations.
a. One (1) ton wall hung cassette in each of four offices
b. Once (4) ton condensing unit to be installed outside
c. No heat reclamation between cassettes is included in this scope. Indoor units will all run in cooling
mode or in heating mode, not in both simultaneously.
• Flashing, piping, and conduit as required for installation of new mechanical equipment is included.
a. Refrigerant line sets will be installed in attic space, will penetrate the cinderblock wall to return to outdoor
condensing unit.
• No smoke detectors will be provided as part of this work
• New standalone thermostats will be provided with the indoor units.
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• New curb will be used as required for installation of new mechanical equipment and weather proofing.

M-1 – Effluent Pump Upgrade

Scope of Work:

ENGIE Services U.S. will perform the following work:


Demolition:
• Existing motor will be removed and disposed of.
New Work:
• Work shall comply with latest Applicable Codes and per the Authority Having Jurisdiction (AHJ).
• Necessary documents required for permit and construction.
• Provide and install new Effluent Pump motors with inverter-duty motors and install VFDs (Variable Frequency
Drives):
a. Work includes material, labor, supervision, design completion, services, equipment and tools required
to replace the pumps motors.
b. New units will be installed in the location of the existing equipment.
Required line and low voltage electrical modification and connections are included. New electrical disconnect and
fuses will be provided, as needed.

SL-1 Street and Park Lights Retrofits

Scope of Work:

See Attachment G, which sets forth in detail the type and number of lighting installations or retrofits to be performed per
Facility. The lighting installations/retrofits listed directly below are merely a summary of the overall Work to be performed;
the detailed scope is set forth in Attachment G.

• Install new or retrofit lighting fixtures as identified in Attachment G:


a. Exterior Retrofit – LED Lighting for Street and Park Applications – replace high pressure sodium
(HPS) and metal halide (MH) lamps with LED lamp technology as set forth in Attachment G.

EV-1 EV Charging Station

Scope of Work:

ENGIE Services U.S. will perform the following work:

City Hall:
• Furnish and install one (1) new dual Level 2 EV car charging station.
• Station to be located in parking lot at City Hall.
• Furnish and install new conduit and wiring, circuit breakers, and equipment pad as required for proper operation
of the charging station.
• Electrical tie-in to be located inside electrical room in main office building.
• Provide start up and commissioning of new EV charger per manufacturer’s recommendations.
• Network subscription service has not been included at this time.

Exclusions from and Clarifications to the Scope of Work for all ECMs:

• Lakeport will be responsible for obtaining and paying for inspections and any required Building, Mechanical, and
Electrical Permits.
• Lakeport will be responsible for hiring and paying all inspectors, including any special inspectors.
• ADA, Fire Life Safety, and other work required as a result of AHJ submission are excluded, except as noted
below.

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• ENGIE Services U.S. has assumed Construction will be allowed to proceed smoothly and in a continuous flow.
No allowance has been made to demobilize and remobilize resources due to schedule interruptions.
• Temporary utilities are to be provided by Lakeport at no cost to ENGIE Services U.S. (including, without
limitation, trailer power, phone lines, and construction power).
• Removal and disposal of Hazardous Substances, including asbestos containing materials, to be by Lakeport
(except as noted above). If ENGIE Services U.S. encounters material suspected to be hazardous, ENGIE
Services U.S. will notify Lakeport representative and stop further work in the area until the material is removed.
• ENGIE Services U.S. will require the assistance of Lakeport personnel to secure the Project Location and to
provide traffic redirection during rigging operations, and during the move-in and move-out of large equipment.
• No allowance has been made for structural upgrades to existing structures, except as specifically set forth in
this Scope of Work.
• No allowance has been made for screening of new or existing equipment, except as specifically set forth in this
Scope of Work.
• No temporary heating or cooling services have been included in the Contract Amount. ENGIE Services U.S. will
attempt to phase Construction in such a way as to avoid complete interruptions of service.
• ENGIE Services U.S. standard construction means and methods will be used.
• Lakeport will provide access to the Facilities, laydown areas at the work sites, and a reasonable number of
parking spaces for ENGIE Services U.S. and ENGIE Services U.S.’s subcontractor vehicles in parking lots at
the Facilities.
• Work will be performed during normal work hours; no overtime hours are included in the Contract Amount
unless specified. The lighting retrofit Work will be performed so as not to unreasonably interfere with the building
schedule. Normal work hours are from 7 AM to 5 PM, Monday through Friday, to be coordinated between
Lakeport and ENGIE Services U.S. The exceptions to this work schedule are listed in the table below:

ECM or Specific Scope Type of Building Adjusted Work Hours


Activity
After facility is normally vacated, weekends,
Office
Interior Lighting or scheduled school breaks
24 Hour occupancy facility Monday – Friday, 7 AM – 5PM
Exterior Lighting Any facility Monday – Friday, 7 AM – 5PM
After facility is normally vacated, weekends,
Any facility
Utility shut downs or tie ins or scheduled holiday breaks
24 Hour occupancy facility Monday – Friday, 7 AM – 5PM
After facility is normally vacated, weekends,
Material loading/unloading of Office
or scheduled holiday breaks
facility
24 Hour occupancy facility Monday – Friday, 7 AM – 5PM
After facility is normally vacated, weekends,
Crane picks or roof hoists Any facility
or scheduled holiday breaks

• The Scope of Work assumes that, unless specifically identified otherwise, all existing systems are functioning
properly and are up to current codes. ENGIE Services U.S. will not be responsible for repairs or upgrades to
existing systems that are not functioning properly or compliant with current codes. No allowances have been
made to bring existing systems up to code.
• No allowance has been made to repair or replace damaged or inoperable existing equipment that is not
specifically being replaced under the Scope of Work. When such items are discovered, ENGIE Services U.S.
will immediately notify Lakeport representative.
• Smoke detectors and fire alarm system work is excluded.
• Parking lot repairs are excluded, except to the extent of damage caused by ENGIE Services U.S. or its
subcontractors.
• Repair or replacement of existing housekeeping pads, concrete pads, or base repair of existing walkway lighting
are excluded, except as specifically set forth in this Scope of Work.
• Painting, unless specified, is excluded.
• When replacement light fixtures are installed it will be Lakeport’s responsibility to paint any exposed surfaces
resulting from smaller sized replacement fixtures.
• With respect to lighting equipment maintenance and/or lamp and ballast retrofitting, Lakeport will properly
ground lighting fixtures before ENGIE Services U.S. commences Work in compliance with applicable codes.
• With respect to installation of new lighting fixture installations, prior to commencement of the lighting fixture
installation, Lakeport will provide an existing or new grounding conductor or solidly grounded raceway with listed

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fittings at the lighting fixture junction box that is properly connected to the facility grounding electrode system in
compliance with the latest NEC requirements adopted by the authority having jurisdiction. This Scope of Work
includes, if applicable, properly terminating the lighting fixtures to the existing grounding conductor or to the
existing solidly grounded raceway with listed fittings at the lighting fixture junction box.
• Where this Scope of Work includes pulling new wiring for lighting fixtures from an existing lighting panel, a
grounding conductor must be included in the lighting circuits. Lakeport is responsible for providing an existing or
new grounding conductor terminal bar at the lighting panel that is properly connected to the Facility grounding
electrode system in compliance with the latest NEC adopted by the authority having jurisdiction.
• With respect to Projects with new equipment connecting to the Facility’s existing electrical distribution system,
ENGIE Services U.S. will not be responsible for the electrical integrity of the existing electrical system, e.g., the
condition and proper termination of current-carrying, grounded, and grounding conductors, bus taps, protective
elements, the proper protection of existing wire through knockouts, or missing components. Lakeport is
responsible for providing and maintaining the facility’s electrical distribution system that meets the latest NEC
and guidelines adopted by the authority having jurisdiction.
• ENGIE Services U.S. is not responsible for repairing or replacing existing damaged, blocked, or leaky ductwork,
or cleaning dirt or mildew.
• ENGIE Services U.S. will not be responsible for existing damaged pipes, valves, and related parts and
components.
• Unless specifically included in this Scope of Work, existing valves, dampers, linkages, and piping specialties to
which new controls/building automation system are being connected are to be in proper functioning condition. If
existing device is found to be improperly functioning, Lakeport may repair or compensate ENGIE Services U.S.
for repair / replacement of the device.
• Repair or replacement of Communication cables found broken or cut is excluded. When such items are
discovered, ENGIE Services U.S. will immediately notify the Lakeport representative.
• ENGIE Services U.S. has included the sales tax associated with the Work in the Contract Amount

Work to be provided by Lakeport at no charge shall include the following:


• ENGIE Services U.S. will coordinate and provide minimum one (1) week advance notice of required shutdowns
and startups. Lakeport will provide assistance with equipment shutdowns and startups required for performing
the Work, including stopping and restarting existing equipment by Lakeport project manager or other personnel.
• Providing an escort(s) at sensitive Facilities if deemed necessary by Lakeport.
• Lakeport’s IT department will provide network connection points for network communications.

ENGIE Services U.S. Beneficial Use and Warranty criteria for specific pieces of equipment:
• SOLAR PHOTOVOLTAIC SYSTEM – The ENGIE Services U.S. Warranty commences immediately when the
Generating Facility is capable of generating expected energy and the Utility is ready to issue the permission-to-
operate letter.
• LIGHTING RETROFITS – With respect to the entire ECM L-1 Scope of Work, the ENGIE Services U.S.
Warranty commences immediately upon uninterrupted operation for a duration, as necessary, with a maximum
of 2 weeks, to determine proper operation. ENGIE Services U.S. will provide written notice to Lakeport of the
date the ENGIE Services U.S. Warranty commences.
• HVAC UNITS – The ENGIE Services U.S. Warranty commences immediately upon the occurrence of two
weeks of uninterrupted operation of installed equipment while providing heating or cooling. “Uninterrupted
operation” is defined as: no involuntary shutdowns due to equipment manufacture or installation problems.
Involuntary shutdowns or comfort issues due to control problems do not restart the operation test timeframe.
Comfort performance will be established by manual spot checks of temperatures by a ENGIE Services U.S.
employee. With respect to the HVAC units, ENGIE Services U.S. will provide written notice to Lakeport of the
date the ENGIE Services U.S. Warranty commences.
• PUMPS/MOTORS/VFDs – The ENGIE Services U.S. Warranty commences immediately upon the occurrence
of uninterrupted operation for a duration as necessary, with a maximum of 2 weeks, for ENGIE Services U.S. to
determine proper operation. With respect to the Pumps/Motors/VFDs, ENGIE Services U.S. will provide written
notice to Lakeport of the date the ENGIE Services U.S. Warranty commences.
• EV CHARGING STATIONS – The ENGIE Services U.S. Warranty commences immediately upon the
occurrence of uninterrupted operation for a duration as necessary, with a maximum of 2 weeks, for ENGIE
Services U.S. to determine proper operation. With respect to the EV Charging Stations, ENGIE Services U.S.
will provide written notice to Lakeport of the date the ENGIE Services U.S. Warranty commences.

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ATTACHMENT D
MONITORING INSTALLATION SCOPE OF WORK

Overview of DAS Network Installation and Equipment Requirements

ENGIE Services U.S. will provide a revenue-grade billing, data acquisition system (DAS). This will provide readily
available access to various internal and external information collected on the distributive generation (i.e., solar PV) plant.

ENGIE Services U.S. DAS Monitoring Installation:

• Supply and install hardware specific to the DAS system.


• Supply and install, terminate, label, and test all Data Point of Connection (DPOC) communication cabling from
each DAS node to the predetermined and respective DPOC(s); in accordance with Lakeport’s specifications.
• Supply, install, and configure a Modbus based digital Net Energy Meter (NEM).
• Connect the data portion of digital NEM(s) to their respective DPOC(s).
• Supply, install, and configure a Modbus based digital Net Generation Output Meter (NGOM).
• Perform the physical installation, labeling, testing and certification testing of each data circuit from the digital
NEM(s) to their respective DPOC(s).
• Provide basic system training to designated Lakeport/Facility maintenance staff.

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ATTACHMENT E
M&V SERVICES

EQUIPMENT AND FACILITIES COVERED

ENGIE Services U.S. will perform measurement and verification services (“M&V Services”) as set forth in this Attachment
E with respect to Lakeport’s property at the following Project Locations:

Facility Address
Waste Water Treatment Plant 795 Linda Lane
City Water Well 1604 Riggs Road
Corporate Yard 591 Martin Street
City Hall 225 Park Street
Police Department 2025 S Main Street

I. Definitions:

Capitalized terms used in this Attachment E and not defined in the Contract, have the meanings set forth below:

“Accumulated Savings” means, as of any date of determination, the cumulative total of Excess Savings.
“Actual Energy Rate” means, for any Measurement Period, utility rates calculated by ENGIE Services U.S. using
actual utility billing information supplied by Lakeport for that Measurement Period.
“Assessment Work” means work required to assess the effect on EC Savings for any significant changes to the
Facilities (including, but not limited to, building additions, new buildings, and new or changed HVAC equipment).
“Average Energy Unit Savings” means, with respect to any number of consecutive Measurement Periods, the
arithmetic mean of the Energy Unit Savings for such number of Measurement Periods.
“Base Energy Rate” means the dollars per energy unit for each building and/or each ECM, set forth in this
Attachment E, Section (III), and used by ENGIE Services U.S. to calculate the EC Savings.
“Baseline” means the energy use established by ENGIE Services U.S. from time to time for each building in the
Facilities, taking into consideration Energy Use Factors for such buildings.
“EC Savings” means the savings in units of dollars ($) calculated by ENGIE Services U.S. in the manner set forth in
this Attachment E, Section (III), achieved through the reduction in consumption or demand through implementation
of the Work.
“Energy Rate Factors” means factors identified by ENGIE Services U.S. which may affect utility rates from the local
utility companies.
“Energy Savings Report” is defined in this Attachment E, Section (II)(D).
“Energy Savings Term” means the period beginning on the first day of the Construction Period and ending on the
earlier of: (i) the day immediately preceding the nineteenth (19th) anniversary of the M&V Commencement Date;
(ii) the termination of the Contract; or (iii) the termination by Lakeport of the M&V Services in accordance with this
Attachment E, Section (II)(G).
“Energy Unit Savings” means the savings in units of energy, power, water, etc., calculated by ENGIE Services U.S.
in the manner set forth in this Attachment E, Section (III), achieved through the reduction in consumption or demand
through implementation of the Work.
“Energy Use Factors” means factors identified by ENGIE Services U.S. which may affect the Baselines or energy
use for the Facilities, including but not limited to: hours and levels of occupancy; adjustments in labor force; building
use and operational procedures; temperature, humidification, and ventilation levels; installed lighting and scheduled
use; building construction and size; general level of repair and efficiency of heating and air conditioning equipment
and other energy-using equipment; and amount of heating and air conditioning and other energy-using equipment.
“Energy Use Savings” means, for any Measurement Period, those savings, having units of dollars ($), achieved for
such Measurement Period through reductions in energy use, energy demand, water use, and the use of other
commodities.
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“Excess Savings” means the excess of EC Savings over Guaranteed Savings, calculated in the manner set forth in
this Attachment E, Section (II)(I)(iv).
“Guarantee Payment” means, for any Measurement Period, either: (i) a cash payment by ENGIE Services U.S. to
Lakeport in an amount equal to the Guarantee Shortfall for that Measurement Period pursuant to this Attachment E,
Section (II)(A)(ii); or (ii) additional energy services or energy saving retrofits requested by Lakeport with an agreed
value equal to the Guarantee Shortfall for that Measurement Period pursuant to this Attachment E, Section (II)(A)(iii).
“Guarantee Shortfall” means an amount calculated in accordance with this Attachment E, Section (II)(I)(v).
“Guaranteed Savings” means, for any Measurement Period, the dollar amount set forth below for such
Measurement Period, as the same may be adjusted from time to time by ENGIE Services U.S. for changes in
Energy Rate Factors, Energy Use Factors and consequential revisions to the relevant Baseline:

Measurement
Guaranteed Savings
Year

1 $251,635
2 $263,038
3 $274,959
4 $287,420
5 $300,447
6 $314,066
7 $328,302
8 $343,185
9 $358,743
10 $375,007
11 $392,010
12 $409,785
13 $428,366
14 $447,791
15 $468,098
16 $489,328
17 $511,521
18 $534,722
19 $558,978

“IPMVP” means the International Performance Measurement and Verification Protocol prepared by Efficiency
Valuation Organization.
“Projected Energy Savings” means those Energy Unit Savings which ENGIE Services U.S. anticipates will be
realized from the installation and continued operation of the Work, as set forth in this Attachment E, Section (III).
“Savings Guarantee” is defined in this Attachment E, Section (II)(A)(i).
“Stipulated Non-Energy Savings” means, for any Measurement Period, those savings, having units of dollars ($),
achieved for such Measurement Period through reductions in non-energy costs due to the implementation of the
Work. Stipulated Non-Energy Savings will be stipulated by the Parties and set forth in this Attachment E, Section
(III).

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II. Terms and Conditions


A. Guaranteed Savings.
i. Savings Guarantee. Upon the terms and subject to the conditions set forth herein, ENGIE Services
U.S. warrants that Lakeport will realize total EC Savings during the Energy Savings Term of not less
than the total Guaranteed Savings (the “Savings Guarantee”), as the same may be adjusted from time
to time for changes in Energy Rate Factors, Energy Use Factors and consequential revisions to the
relevant Baseline.
ii. Guarantee Payment. For any Measurement Period in which there is a Guarantee Shortfall, ENGIE
Services U.S. will pay to Lakeport, within thirty (30) calendar days after the acceptance by Lakeport of
the Energy Savings Report for such Measurement Period, the Guarantee Payment for that
Measurement Period.
iii. Services or Retrofits in Lieu of Guarantee Payment. If in the judgment of Lakeport, Lakeport would
benefit from additional energy services or energy saving retrofits, Lakeport and ENGIE Services U.S.
may mutually agree that ENGIE Services U.S. will provide such services or retrofits in lieu of the
Guarantee Payment for such Measurement Period. For the purposes of this Contract, such services or
retrofits will have a deemed value equal to the Guarantee Shortfall for that Measurement Period.
iv. Excess Savings. For any Measurement Period in which there are Excess Savings, Lakeport will repay
to ENGIE Services U.S., to the extent of such Excess Savings, any Guarantee Payments previously
paid by ENGIE Services U.S. to Lakeport and not previously repaid to ENGIE Services U.S. by
Lakeport, and the Excess Savings for such Measurement Period will be reduced by the amount of such
repayment. If ENGIE Services U.S. has provided services or retrofits in lieu of the Guarantee Payment
for a prior Measurement Period, such that the Guarantee Payment for such Measurement Period
cannot be repaid by Lakeport, then in lieu of such repayment Excess Savings will be increased by the
deemed value of such services or retrofits.
v. Excusable Events. If ENGIE Services U.S. is delayed in, or prevented from, accurately calculating the
actual EC Savings for any day of any Measurement Period by reason of any Excusable Event, such
circumstance will not constitute a default, and ENGIE Services U.S. will be excused from performing
the M&V Services while such event is continuing. During such event, Projected Energy Savings for the
month(s) in which such event is continuing will be used in lieu of actual data; provided that if three (3)
or more years of post M&V Commencement Date data are available for such month(s), the historical
average of such data for such month(s) will be used in lieu of Projected Energy Savings.
vi. Average Energy Unit Savings. For any Measurement Period beginning with the third (3rd)
Measurement Period, upon completion of that Measurement Period’s Energy Savings Report, ENGIE
Services U.S. has the right to calculate the Average Energy Unit Savings which have occurred over all
previous Measurement Periods. The Average Energy Unit Savings will be applied to all subsequent
Measurement Periods to determine the Energy Unit Savings for each remaining Measurement Period.
After applying such Average Energy Unit Savings for each subsequent Measurement Period and
calculating the resulting EC Savings, if such calculated EC Savings for any future Measurement Period
is greater than the Guaranteed Savings for that Measurement Period, then such excess will be Excess
Savings and the Savings Guarantee will have been met for that Measurement Period. If such
calculated EC Savings for any future Measurement Period is less than the Guaranteed Savings for that
Measurement Period, then ENGIE Services U.S. will apply Accumulated Savings then outstanding to
determine whether there is a Guarantee Shortfall for that Measurement Period. If a Guarantee Shortfall
is calculated to exist for a future Measurement Period, ENGIE Services U.S. may, in its sole discretion,
pay to Lakeport, not later than the ninetieth (90th) day of such future Measurement Period, the net
present value of the Guarantee Shortfall for any or all of such future Measurement Period(s). Net
present value will be determined using a discount rate of ten percent (10%).
B. Changes in Energy Use Factors.
i. Adjustments to Baselines. Lakeport will notify ENGIE Services U.S. in writing within ten (10) Business
Days of any change in any Energy Use Factor. In addition, data collected by ENGIE Services U.S.
during or before the Energy Savings Term may indicate a change in the energy use pattern at the
Facilities or any portion thereof and require a change to one or more Baselines. ENGIE Services U.S.
will determine the effect that any such change will have on EC Savings and present to Lakeport a
written analysis of the effects of such changes. ENGIE Services U.S. will also make corresponding
revisions to the Baselines and/or EC Savings that it deems appropriate in its reasonable discretion.

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ii. Adjustments to Guaranteed Savings. If a change in any Energy Rate Factor or Energy Use Factor
results in a reduction of EC Savings, then the Guaranteed Savings for the corresponding Measurement
Period(s) will be decreased by the same amount. ENGIE Services U.S. will notify Lakeport, in writing,
of all such changes.
iii. Changes to Facilities. Lakeport or ENGIE Services U.S. may from time to time propose to make
changes to the Facilities for the express purpose of increasing EC Savings or addressing events
beyond its control. It is agreed that these changes will only be made with the written consent of both
Parties, which will not be unreasonably withheld. The Baseline will not be adjusted to reflect any
changes agreed to under this Attachment E, Section (II)(B)(iii).
iv. Baseline Adjustment. If ENGIE Services U.S. proposes changes to the Facilities that would not
unreasonably interfere with the conduct of Lakeport’s business or cause Lakeport to incur additional
costs, and Lakeport does not consent to the changes, then ENGIE Services U.S. will adjust the
Baselines upward by the amount of savings projected from the changes.
v. Projected Energy Savings. During the Energy Savings Term, when the ultimate effect of the Work on
EC Savings cannot be accurately determined due to pending construction or changes to the Scope of
Work, Projected Energy Savings for the Facilities will be used until the effect of the changes can be
determined by ENGIE Services U.S.
vi. Assessment Work. ENGIE Services U.S. has the right to charge Lakeport for Assessment Work, which
will be billed at current ENGIE Services U.S. engineering rates and will be paid by Lakeport within thirty
(30) calendar days after receiving ENGIE Services U.S.’s invoice. Before initiating Assessment Work,
ENGIE Services U.S. will notify Lakeport in writing of the intent and estimated cost associated with the
Assessment Work. Lakeport will, within forty-five (45) calendar days, give ENGIE Services U.S. written
permission to proceed or, alternatively at no charge to ENGIE Services U.S., to stipulate that the
Projected Energy Savings for the portion of the Facility in question be used for the purpose of meeting
the Savings Guarantee for such Measurement Period and thereafter. If ENGIE Services U.S. does not
receive written notice within forty-five (45) calendar days, the Projected Energy Savings for the portion
of the Facility in question will be used until such time as Lakeport approves the Assessment Work.
vii. Changes in Energy Use Factors. If Lakeport fails to notify ENGIE Services U.S. of changes in Energy
Use Factors or fails to supply ENGIE Services U.S. in a timely manner with information that is
requested by ENGIE Services U.S. for the calculation of EC Savings, the Energy Unit Savings for the
relevant Measurement Period will be deemed equal to the corresponding Projected Energy Savings for
such period. If information for the relevant Measurement Period is supplied at a later date, the Energy
Unit Savings will be modified only if and to the extent that the calculated savings for such period
exceed the Projected Energy Savings for such period.
viii. Change Order – Savings Effect. ENGIE Services U.S. will calculate the energy impact of any Change
Orders.
ix. Changes in Savings Calculations. Any changes made by ENGIE Services U.S. to the savings
calculations will be presented to Lakeport in advance. Lakeport will have thirty (30) calendar days to
challenge or question the changes in writing.
x. Inspection of Facilities. Lakeport agrees that ENGIE Services U.S. will have the right, with or without
prior notice, to inspect the Facilities to determine if Lakeport has consistently complied with its
obligations as set forth above. If any inspection discloses that Lakeport has failed, on or prior to the
date of such inspection, to be in compliance with any of its obligations, then the Guaranteed Savings
will be assumed to have been achieved for the portion of the Energy Savings Term during which such
failure will have existed.
xi. Interference. Lakeport may not cause, and will take all commercially reasonable steps to prevent any
third party from causing, any overshadowing, shading or other interference with the solar insolation that
falls on the Generating Facility. Upon discovering, or otherwise becoming aware of, any actual or
potential overshadowing, shading or other interference with insolation, Lakeport will promptly notify
ENGIE Services U.S. If an unforeseeable overshadowing or shading condition not caused by ENGIE
Services U.S. or its subcontractors exists and continues for five (5) Business Days or more, Lakeport
agrees that the Guaranteed Savings for such Generating Facility will be reduced based upon such
shading condition, and ENGIE Services U.S. may present Lakeport with a proposed reduction to the
Guaranteed Savings reflecting such overshadowing, shading or other interference.

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C. Lakeport Maintenance. Beginning at Beneficial Use or Substantial Completion for any portion of the Work,
Lakeport will maintain such portion of the Work and upon Final Completion will maintain the Project, in
accordance with the maintenance schedules and procedures recommended by ENGIE Services U.S. and by the
manufacturers of the relevant equipment, such maintenance to include maintaining all landscaping (including
tree trimming) in and around the Generating Facilities.
D. Energy Savings Report. Annually during the first three (3) Measurement Periods of the] Energy Savings
Term, ENGIE Services U.S. will submit to Lakeport an energy savings report containing a precise calculation of
the EC Savings during the applicable Measurement Period (an “Energy Savings Report”). ENGIE Services U.S.
will use its best efforts to submit such Energy Savings Report within ninety (90) calendar days after receipt of all
needed information for a Measurement Period, unless additional information is needed to accurately calculate
the EC Savings, in which case Lakeport will be notified of such a situation within the ninety (90) calendar-day
period.
E. On-Site Measurements. Lakeport irrevocably grants to ENGIE Services U.S. the right, during the Energy
Savings Term, to monitor EC Savings and energy management performance by conducting on-site
measurements, including, but not limited to, reading meters and installing and observing on-site monitoring
equipment. ENGIE Services U.S. will not exercise such right in a manner that unreasonably interferes with the
business of Lakeport as conducted at the Facilities as of the date hereof. Lakeport will cooperate fully with the
exercise of such right by ENGIE Services U.S. pursuant to this Attachment E, Section (II)(E). Lakeport will
further cooperate with ENGIE Services U.S.’s performance of the M&V Services by providing utility information,
changes in Energy Use Factors, and/or additional information as reasonably requested by ENGIE Services U.S.
F. Termination of Guaranteed Savings. If (i) Lakeport notifies ENGIE Services U.S. in writing of its intent to
terminate the M&V Services, (ii) the Contract is terminated by ENGIE Services U.S. for default by Lakeport or by
Lakeport for any reason permitted by the Contract, (iii) ENGIE Services U.S. is no longer the provider of the
Maintenance Services set forth in Attachment F, or (iv) Lakeport fails to maintain the Project in accordance with
this Attachment E, Section (II)(C), or is in default of any of its other obligations under this Attachment E, the
obligation of ENGIE Services U.S. to prepare and deliver the Energy Savings Report and to make a Guarantee
Payment will also be terminated. If such termination occurs on a date other than the last day of a Measurement
Period, ENGIE Services U.S. will have no obligation to make a Guarantee Payment or prepare and deliver an
Energy Savings Report for such Measurement Period.
H. Intentionally Omitted.
I. Calculations.
i. Calculation of Accumulated Savings. Accumulated Savings will be increased, for any Measurement
Period, by the amount of Excess Savings during such Measurement Period, and will be decreased, for
any Measurement Period, by the difference, to the extent positive, between (i) the Guaranteed Savings
for such Measurement Period minus (ii) the EC Savings for such Measurement Period. For the
avoidance of doubt, Accumulated Savings will not be reduced below zero.
ii. Calculation of EC Savings. EC Savings for any Measurement Period will be equal to the sum, for such
Measurement Period, of (i) the Energy Use Savings, plus (ii) the Stipulated Non-Energy Savings, in
each case as adjusted for changes in Energy Use Factors during such Measurement Period. EC
Savings achieved during the Construction Period will be included in the EC Savings for the first
Measurement Period.
iii. Calculation of Energy Use Savings. Energy Use Savings will be calculated by ENGIE Services U.S. as
the product of (i) the Energy Unit Savings multiplied by (ii) the greater of (a) the applicable Base
Energy Rate or (b) the applicable Actual Energy Rate.
iv. Calculation of Excess Savings. From and after the M&V Commencement Date, Excess Savings will be
calculated by ENGIE Services U.S. as the difference, to the extent positive, between (i) the EC
Savings for the relevant Measurement Period minus (ii) the Guaranteed Savings for such
Measurement Period. During the Construction Period, Excess Savings will be calculated by ENGIE
Services U.S. in the manner set forth in this Attachment E, Section (III). For the avoidance of doubt,
Excess Savings will not be reduced below zero.
v. Calculation of Guarantee Shortfall. The Guarantee Shortfall, for any Measurement Period, will be
calculated by ENGIE Services U.S. as the difference, to the extent positive, between (i) the
Guaranteed Savings for such Measurement Period minus (ii) the sum of (a) EC Savings for such
Measurement Period plus (b) Accumulated Savings then outstanding.
III. Methodologies and Calculations
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The following details the methodologies and calculations to be used in determining the Energy Unit Savings under this
Contract.

Table E-1: Measurement and Verification Methods


M&V Method
ECM ECM Description
Electric Usage Electric Demand
PV-1 Solar Power Generation Option B N/A
L-1 Interior & Exterior LED Lighting Stipulated N/A
M-1 HVAC Unit & Effluent Pump Replacement Stipulated N/A
SL-1 Street & Park Lighting Stipulated N/A

1. M&V Option B: Energy savings performance of Scope of Work are measured and verified at the end-use site.
Option B techniques are designed for projects where long-term continuous measurement of performance is
desired and warranted. Under Option B, while some parameter may be stipulated or measured once then
stipulated, some individual loads are continuously monitored to determine performance; and this measured
performance is compared with an equipment-use Baseline to determine the Energy Unit Savings.
a. ENGIE Services U.S. will supply a one-time report to Lakeport detailing any initial measurements taken
to establish usage Baselines or other parameters. Ongoing post-retrofit measurements will be
compared to the Baselines, and the quantified Energy Unit Savings will be calculated and presented in
ongoing reports. During the Construction Period, the Energy Unit Savings will be calculated by adding
the savings measured for the whole months between Substantial Completion or Beneficial Use of the
EC Measure and the M&V Commencement Date.
b. Scope of Work
No baseline measurements are necessary because pre-retrofit PV production is zero. Kilowatt-hours
produced by the PV system will be measured using automated metering. Measured interval production
kilowatt-hours will be compared against production shown on the monthly utility bills and any differences
will be reconciled. Projected kWh production is shown in Table E-2 below, and is projected to degrade
by 0.5% per year.
Table E-2: First Year Solar PV Production

Projected Annual
Location/ECM Production
(kWh)
PV-1: Waste Water Treatment Plant 891,290
PV-1: Water Wells 167,960
PV-1: Corporation Yard 357,580
PV-1: City Hall 41,525
PV-1: Police Department 59,119
Total 1,517,474

c. Assumptions: Once Work is Substantially Complete, these savings will be measured and verified monthly
for the Energy Savings Term.
d. Baselines and Projected Savings: EC Savings will be determined by multiplying the Energy Unit savings
by the applicable Base Energy Rate. EC Savings will be calculated and presented in ongoing reports.
During the Construction Period, the EC Savings will be calculated by adding the production measured
for the period between Substantial Completion of the ECM and the M&V Commencement Date.

2. Stipulated Savings: When the cost, complexity, or uncertainty of savings measurements are high as compared
to the projected savings, Lakeport and ENGIE Services U.S. may agree to stipulate the projected Energy Unit
Savings as being achieved, without any measurements being taken.

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a. For the Stipulated Option, the Energy Unit Savings presented below will be agreed to occur each
Measurement Period. During the Construction Period, the Energy Unit Savings will be calculated by
adding the savings projected for the whole months between Substantial Completion or Beneficial Use
of the EC Measure and the M&V Commencement Date.

Table E-3: Stipulated Annual Savings

Projected Annual
Location/ECM Electric Savings
(kWh)

L-1: City Hall 9,356


L-1: Corp Yard (Konocti Ave.) 3,638
L-1: Corp Yard (Martin Ave.) 1,367
L-1: Corp Yard (Sewer Office Bldg.) 455
L-1: Parks & Recreation Bldg. 898
L-1: Police Dept. 10,662
L-1: Waste Water Treatment Plant 1,217
L-1: City Hall (exterior) 1,092
L-1: Corp Yard - Martin Ave (exterior) 8,348
L-1: Corp Yard - Water Plant (exterior) 8,102
L-1: Library Park Restrooms (exterior) 664
L-1: Lift Station 695 Linda Ln (exterior) 1,058
L-1: Library Park (exterior) 11,033
L-1: Police Department (exterior) 437
L-1: WWTP 795 Linda Ln (exterior) 4,231
M-1: Police Department 14,297
M-1: City Hall 7,915
M-1: Library 1,548
M-1: Public Works 1,238
M-1: Waste Water Treatment Plant (pump) 33,880
SL-1: City Street and Park Lights 10,447
Total 131,883

5. Base Energy Rates: EC Savings will be calculated using the Base Energy Rates or Actual Energy Rates for that
meter, whichever results in greater EC Savings. Actual Energy Rates will be calculated at the end of each
Measurement Period using utility billing information for that Measurement Period and using the same
methodology as was employed to determine the base energy rate in the Recommendations.
The Base Energy Rates listed here are to be increased each Measurement Period on a cumulative basis by five
percent (5%) beginning on the first anniversary of the M&V Commencement Date and continuing on the first day
of each Measurement Period thereafter.

Table E-4: Base Energy Rates

Electricity Rate
Location/ECM
($/kWh)

PV-1: Waste Water Treatment Plant 0.1376


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PV-1: Water Wells 0.1124


PV-1: Corporation Yard 0.1533
PV-1: City Hall 0.2310
PV-1: Police Department 0.3140
L-1: City Hall 0.2415
L-1: Corp Yard (Konocti Ave.) 0.2415
L-1: Corp Yard (Martin Ave.) 0.1995
L-1: Corp Yard (Sewer Office Bldg.) 0.1995
L-1: Parks & Recreation Bldg. 0.2163
L-1: Police Dept. 0.2625
L-1: Waste Water Treatment Plant 0.1995
L-1: City Hall (exterior) 0.2468
L-1: Corp Yard - Martin Ave (exterior) 0.1365
L-1: Corp Yard - Water Plant (exterior) 0.1365
L-1: Library Park Restrooms (exterior) 0.2163
L-1: Lift Station 695 Linda Ln (exterior) 0.1365
L-1: Library Park (exterior) 0.1365
L-1: Police Department (exterior) 0.1365
L-1: WWTP 795 Linda Ln (exterior) 0.1365
M-1: Police Department 0.2625
M-1: City Hall 0.2415
M-1: Library 0.1890
M-1: Public Works 0.1995
M-1: Waste Water Treatment Plant (pump) 0.2310
SL-1: City Street and Park Lights 0.1365

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ATTACHMENT F
MAINTENANCE SERVICES

EQUIPMENT AND FACILITIES COVERED

ENGIE Services U.S. will perform preventive maintenance services (“Maintenance Services”) as set forth in this Attachment
F with respect to Generating Facilities being constructed on Lakeport’s property at the following Project Locations:

Site kW DC Address
Wastewater Treatment Plant 540 795 Linda Lane, Lakeport, CA
Corporate Yard 238 591 Martin St, Lakeport, CA
City Water Well 101 1604 Riggs Rd, Lakeport, CA
City Hall 29 225 Park St, Lakeport, CA
Police Department 38 2025 S. Main St, Lakeport, CA

Capitalized terms used in this Attachment F and not defined in the Contract, have the meanings set forth below:

I. Definitions

“Annual Maintenance Fee” means a fee payable annually in advance by Lakeport to ENGIE Services U.S., in
consideration of the provision of up to ten (10) years of Maintenance Services. The Annual Maintenance Fee for
the first Measurement Period will be Fourteen Thousand Three Hundred Seventy-Six Dollars ($14,376.00). The
Annual Maintenance Fee will be increased annually thereafter at the rate of three percent (3%) per annum for
the first ten (10) Measurement Periods, each increase to be effective on the first day of the corresponding
Measurement Period. The Annual Maintenance Fee for each Measurement Period after the tenth (10th)
Measurement Period will be negotiated in good faith by the Parties, not later than ninety (90) days prior to the
end of the preceding Measurement Period, on the basis of then-prevailing market rates for, e.g., labor and
equipment.
II. Term

So long as Lakeport pays to ENGIE Services U.S. the Annual Maintenance Fee, ENGIE Services U.S. will provide the
Maintenance Services, as described herein. At the end of this term, Lakeport may:

a. Enter into another agreement with ENGIE Services U.S. to perform Maintenance Services
b. Enter into an agreement with another service provider
c. Self-perform preventive maintenance

III. Annual Maintenance Fee; Reporting

The Annual Maintenance Fee for the first Measurement Period will be invoiced by ENGIE Services U.S. to Lakeport in a
lump sum on the M&V Commencement Date. All subsequent Annual Maintenance Fees will be invoiced by ENGIE Services
U.S. on the first day of the corresponding Measurement Period. Lakeport, or its designee, will pay ENGIE Services U.S.
such Annual Maintenance Fee, without any retention amount withheld, within thirty (30) calendar days after its receipt of
the corresponding invoice. Any failure to timely pay the Annual Maintenance Fee in accordance with this Attachment F will
be a material default by Lakeport, and ENGIE Services U.S., in addition to any other legal, contractual and equitable
remedies available to it, will have no obligation thereafter to provide Maintenance Services.

Any amount not paid when due will, from and after the due date, bear Interest. Accrued and unpaid Interest on past due
amounts (including Interest on past due Interest) will be due and payable upon demand.

The Annual Maintenance Fee is not refundable for any reason.

Upon completion of any maintenance or repair work, ENGIE Services U.S. will update service logs detailing the work
performed, location and any notes relevant to safe and efficient operations. These service logs will be compiled and
submitted to Lakeport on a quarterly basis.

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If ENGIE Services U.S. is no longer the provider of Maintenance Services, Lakeport’s new provider will maintain similar
service logs. ENGIE Services U.S. will have reasonable access to inspect service logs to determine that adequate
Maintenance Services are being performed.

IV. Preventive Maintenance Services Provided

ENGIE Services U.S. will provide the following Maintenance Services during the term:
a Inspection: Inspect PV modules, combiner boxes, inverters, isolation transformers, and PV service roof penetrations
and support structure on an annual basis.
b. Testing: Perform voltage testing, amperage testing, and infrared scans of inverters, combiner boxes, disconnects and
switchgear on an annual basis.
c. Monitoring: Monitor system performance on a daily basis.
d. Cleaning:
i. Remove dust, dirt, and debris from outside cabinets of combiner boxes, inverters, transformers, and
disconnect switches on an annual basis.
ii Wash PV modules and remove accumulated dust and debris on an annual basis.
V. Repair Services

If a Generating Facility is damaged and requires safe-off, repair, demolition and/or reconstruction, Lakeport must contact
the ENGIE Services U.S. PV Operations & Maintenance Manager. In the event of damage, any component of the
Generating Facility installed by ENGIE Services U.S. can be repaired or reconstructed by ENGIE Services U.S. at
Lakeport’s request. Lakeport must submit a request for quotation to the ENGIE Services U.S. PV Operations &
Maintenance Manager. ENGIE Services U.S. will inspect the damage and provide a written quotation and complete
scope of work to Lakeport to restore the Generating Facility to normal operational condition. Before proceeding with
repairs, ENGIE Services U.S. and Lakeport must execute a work order, on ENGIE Services U.S.’s form, for the agreed
scope of work and quotation amount. Repair work is done on a time and materials basis.

• Hourly technician labor rate $150/hr.


• Materials markup 15%

VI. Warranty Services

The ENGIE Services U.S. PV Operations & Maintenance Manager will also be Lakeport’s point of contact for all issues
related to the ENGIE Services U.S. Warranty set forth in Section 9.01 of the Contract. Lakeport should refer to Section
9.02 of the Contract for services provided by ENGIE Services U.S. to Lakeport in relation to manufacturer’s warranties.
The terms and conditions of the relevant manufacturer’s warranties can be found in the operation and maintenance
manuals delivered to Lakeport in electronic format at Final Completion.

VII. Services and Equipment to Be Covered by Lakeport


ENGIE Services U.S.’s obligations under this Attachment F are expressly conditioned upon Lakeport’s payment of the
Annual Maintenance Fee and providing and being responsible for the following, without cost to ENGIE Services U.S.:
a. Making the Generating Facilities described herein available to ENGIE Services U.S. as of the Contract Effective Date.
b. Operating and maintaining security systems associated with the Generating Facilities.
c. Maintaining all landscaping in and around Generating Facilities including tree trimming and weed abatement.
d. Allowing ENGIE Services U.S. and its personnel access as necessary to the Generating Facilities, and any related
areas that may be reasonably necessary for performance of the Maintenance Services, including reasonable work,
parking, and equipment staging areas.
e. Allowing ENGIE Services U.S. and its personnel to access electrical power and other utilities then existing at the
Generating Facilities as necessary for ENGIE Services U.S. to satisfy its obligations under the Contract.
f. Remediating, pursuant to Applicable Law, any known Hazardous Substances encountered by ENGIE Services U.S.
during the performance of the Maintenance Services which Hazardous Substances were not deposited by ENGIE
Services U.S., including any backfill with clean soil as may be reasonably required.
g. Insuring the Generating Facilities against loss due to acts of God and the public enemy; flood, earthquake, tornado,
storm, fire; civil disobedience, sabotage, and vandalism.
Rev. Date: _______ Page 48 of 50 ESC – CA Public
V 1/1/17
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192797.1
192797.1
192797.1
192797.1
ATTACHMENT 1

Energy Services Contract


Lakeport and ENGIE Services U.S.

ENGIE Services U.S. will have no obligation to provide the Maintenance Services to the extent such provision of
Maintenance Services is materially adversely affected by Lakeport’s failure to satisfy the conditions set forth in this
Attachment F.
ATTACHMENT G

DETAILED LIGHTING SCOPE OF WORK

[See attached PDF]

Rev. Date: _______ Page 49 of 50 ESC – CA Public


V 1/1/17
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192797.1
192797.1
192797.1
192797.1
ATTACHMENT 1

Energy Services Contract


Lakeport and ENGIE Services U.S.

ATTACHMENT H
DETAILED HVAC SCOPE OF WORK

[See attached PDF]

Rev. Date: _______ Page 50 of 50 ESC – CA Public


V 1/1/17
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192797.1
192797.1
192797.1
192797.1
ATTACHMENT 2

City of Lakeport
April 17, 2018

• Ashu Jain, P.E. Senior Manager


• John Kaufman Senior Business Consultant
• Heather Benner, P.E., CEM Lead Project Manager
• Waqar Mustafa Project Manager

© 2018 ENGIE SERVICES U.S. INC. Unauthorized use or duplication of this material without the express written permission of the owner is strictly prohibited.
ATTACHMENT 2

Agenda

▪ Introduction to ENGIE Services U.S.


▪ Program Scope
▪ Financial Overview
▪ Program Benefits
▪ Roadmap

© 2018 ENGIE Services U.S. 2


ATTACHMENT 2

ENGIE Services U.S.


(formerly Opterra Energy Services)

ENGIE is the largest independent electricity producer in the world, and the third largest retail
electricity supplier in the United States. With more than 150,000 employees worldwide, ENGIE
generates over $80 billion in annual revenue.

40+ years $300MM $2.5B


Experience as an Accredited
Sales in 2017 Completed Projects
Energy Service Provider

250MW+ 350+
Solar Projects for CA Public Entities Employees

© 2018 ENGIE SERVICES U.S. INC. Unauthorized use or duplication of this material without the express written permission of the owner is strictly prohibited.
ATTACHMENT 2

2017 ENGIE Services U.S. Highlights

303,809 ~40MW 7.8MW


Metric Tons of GHG Reduced Solar Installed of Cogen Built

~210,000 52,000+
Interior/Exterior LEDs
Students Engaged
Retrofitted

© 2018 ENGIE SERVICES U.S. INC. Unauthorized use or duplication of this material without the express written permission of the owner is strictly prohibited. 4
ATTACHMENT 2

City Energy Projects

City of Alhambra City of Lemoore


City of Benicia City of Livermore
City of Brea City of Lompoc
City of Concord City of Moreno Valley
City of Delano City of Patterson
City of Dinuba City of Pismo Beach
City of Dublin City of Salinas
City of Fremont City of San Jose
City of Gonzales City of Simi Valley
City of Grass Valley City of Union City
City of Greenfield City of Waterford
City of Hanford City of Yuba City
© 2018 ENGIE Services U.S. 5
ATTACHMENT 2

Program Scope of Work

© 2018 ENGIE Services U.S. 6


ATTACHMENT 2

Facility Indoor & Outdoor Lighting Retrofit

▪ Retrofit the indoor and outdoor lighting at the following sites:


▪ City Hall
▪ Police Department
▪ Corporation Yard
▪ Wastewater Treatment Plant

© 2018 ENGIE Services U.S. 7


ATTACHMENT 2

Retrofit Indoor Lighting

▪ Replace older generation fluorescent lamps and ballasts with new,


more efficient, longer-lasting LED lamps
▪ Install wireless occupancy sensors with option to shut off interior
lighting when rooms are unoccupied
▪ Benefits include:
▪ Better quality lighting
▪ Replaces old lamps and ballasts
▪ Savings in energy cost
▪ Longer life of lamps
▪ Substantial reduction in maintenance cost

© 2018 ENGIE Services U.S. 8


ATTACHMENT 2

Retrofit Indoor Lighting

Typical Fixture Serving Proposed Sample


the City Hall LED Troffer Fixture

© 2018 ENGIE Services U.S. 9


ATTACHMENT 2

Retrofit Exterior Lighting

▪ Replace existing metal halide lamps with corresponding LED fixtures,


controlled by photocells
▪ Install dual-level motion sensors for LED fixtures, which increase
lighting level when pedestrians approach, otherwise stay at lower
lighting level
▪ Benefits include:
▪ Replaces old lamps and ballasts
▪ Savings in energy cost
▪ Longer life of lamps and ballasts
▪ Reduces maintenance cost
▪ Increases safety

© 2018 ENGIE Services U.S. 10


ATTACHMENT 2

Retrofit Street Lights and Park Lights

▪ Replace one hundred four (104) existing High Pressure Sodium


fixtures with LED fixtures, controlled by photocells
▪ Benefits include:
▪ Replaces old lamps and ballasts
▪ Savings in energy cost
▪ Longer life of lamps and ballasts
▪ Reduces maintenance cost
▪ Increases safety

© 2018 ENGIE Services U.S. 11


ATTACHMENT 2

HVAC Upgrades

▪ Replace existing HVAC units with new high


efficiency units at the following sites:
▪ Seven (7) heat-pumps at Police Department – 19.5
tons total cooling capacity
▪ Five (5) packaged rooftop units at City Hall – 25 tons
total cooling capacity
▪ One (1) packaged unit at Carnegie Library – 5 tons
total cooling capacity
▪ Install new high efficiency Mitsubishi mini-
split HVAC units at Corporation Yard:
▪ Four (4) one-ton indoor wall hung cassettes in offices
with one (1) 4-ton outdoor condensing unit
▪ Benefits include:
▪ Improves comfort
▪ Savings in energy cost
▪ Reduces maintenance cost
▪ Planned replacement vs. emergency breakdown and
repair

© 2018 ENGIE Services U.S. 12


ATTACHMENT 2

Effluent Pump Variable Frequency Drives (VFDs)

▪ Replace three (3) existing 20-hp


motors for Effluent Pumps with
inverter-duty motors and install
VFDs
▪ Benefits Include:
▪ Higher energy savings
▪ Lower power demand on start
▪ Extended equipment life and reduced
maintenance

© 2018 ENGIE Services U.S. 13


ATTACHMENT 2

Wastewater Treatment Plant: 540 kW


Groundmount Solar Photovoltaic System

© 2018 ENGIE Services U.S. 14


ATTACHMENT 2

Corporation Yard: 237.6 kW Solar Canopy


Photovoltaic System

© 2018 ENGIE Services U.S. 15


ATTACHMENT 2

Green Ranch Water Wells: 101 kW Groundmount


Solar Photovoltaic System

© 2018 ENGIE Services U.S. 16


ATTACHMENT 2

City Hall: 29 kW Solar Canopy Photovoltaic


System

© 2018 ENGIE Services U.S. 17


ATTACHMENT 2

Police Department: 38 kW Solar Canopy


Photovoltaic System

© 2018 ENGIE Services U.S. 18


ATTACHMENT 2

Electric Car Charging Station for City Hall

EV Charging Stations
Install a dual-car charging station at
City Hall underneath the solar
canopy

© 2018 ENGIE Services U.S. 19


ATTACHMENT 2

Community Impact:
CivicSpark

▪ Governor’s Initiative AmeriCorps


program
▪ Recruits graduates from top
sustainability programs to serve
as Full-Time Climate & Water
Fellows for local governments
▪ City of Lakeport CivicSpark
Fellow will support City staff for
11 months on key water
resource management initiatives
▪ Fellow will collect data, conduct
analysis, and assist with
community outreach efforts

© 2018 ENGIE Services U.S. 20


ATTACHMENT 2

Project Savings Analysis


Project Cost $4,480,417
City Contribution $0
Amount to be Financed $4,480,417
Annual Escalation of Electricity Cost 5.00%
Annual Escalation of O&M Cost 3.00%
Projected Projected Total Solar Inverter Total Net Savings
Electricity O&M Program Maintenance Replacemen Program Before Lease
Year Savings Savings Incentives Savings Cost t Cost Costs Payments
Year 1 $267,552 $7,861 $4,901 $280,314 $14,376 $0 $14,376 $265,937
Year 2 $279,667 $8,097 $0 $287,764 $14,808 $0 $14,808 $272,957
Year 3 $292,332 $8,340 $0 $300,672 $15,252 $0 $15,252 $285,420
Year 4 $305,571 $8,590 $0 $314,161 $15,709 $0 $15,709 $298,452
Year 5 $319,410 $8,848 $0 $328,258 $16,181 $0 $16,181 $312,077
Year 6 $333,877 $9,114 $0 $342,990 $16,666 $0 $16,666 $326,324
Year 7 $349,000 $9,387 $0 $358,387 $17,166 $0 $17,166 $341,220
Year 8 $364,808 $9,669 $0 $374,477 $17,681 $0 $17,681 $356,796
Year 9 $350,226 $9,959 $0 $360,185 $18,212 $0 $18,212 $341,973
Year 10 $366,109 $10,257 $0 $376,366 $18,758 $0 $18,758 $357,609
Year 11 $382,713 $10,565 $0 $393,279 $19,321 $0 $19,321 $373,958
Year 12 $400,072 $10,882 $0 $410,954 $19,900 $0 $19,900 $391,054
Year 13 $418,219 $11,209 $0 $429,427 $20,497 $0 $20,497 $408,930
Year 14 $437,190 $11,545 $0 $448,735 $21,112 $0 $21,112 $427,623
Year 15 $457,023 $11,891 $0 $468,914 $21,746 $0 $21,746 $447,169
Year 16 $477,757 $12,248 $0 $490,005 $22,398 $0 $22,398 $467,607
Year 17 $499,433 $12,615 $0 $512,048 $23,070 $0 $23,070 $488,978
Year 18 $522,093 $12,994 $0 $535,087 $23,762 $0 $23,762 $511,325
Year 19 $545,784 $13,384 $0 $559,167 $24,475 $0 $24,475 $534,692
Year 20 $570,550 $13,785 $0 $584,336 $25,209 $0 $25,209 $559,126
Year 21 $559,216 $3,812 $0 $563,029 $25,965 $96,469 $122,434 $440,594
Year 22 $584,424 $3,927 $0 $588,351 $26,744 $0 $26,744 $561,606
Year 23 $610,768 $4,045 $0 $614,813 $27,547 $0 $27,547 $587,266
Year 24 $638,302 $4,166 $0 $642,468 $28,373 $0 $28,373 $614,095
Year 25 $667,077 $4,291 $0 $671,368 $29,224 $0 $29,224 $642,144
Year 26 $652,755 $0 $0 $652,755 $30,101 $0 $30,101 $622,654
Year 27 $681,965 $0 $0 $681,965 $31,004 $0 $31,004 $650,961
Year 28 $712,483 $0 $0 $712,483 $31,934 $0 $31,934 $680,549
Year 29 $744,367 $0 $0 $744,367 $32,892 $0 $32,892 $711,475
Year 30 $777,677 $0 $0 $777,677 $33,879 $0 $33,879 $743,799
© 2018 ENGIE Services U.S. 21
Totals $14,568,422 $231,480 $4,901 $14,804,802 $683,963 $96,469 $780,432 $14,024,370
ATTACHMENT 2

Proposed Project Financing

▪ Project savings generated in:


▪ Wastewater Enterprise Fund
▪ Water Enterprise Fund
▪ General Fund (City Hall, Police, Library, Corporation Yard)

▪ Financing will include:


▪ Enterprise Fund Revenue Pledge
▪ Water Net Revenues (on parity with existing water obligations)
▪ Wastewater Net Revenues (on parity with existing wastewater obligations)

▪ Annual City Budget Amendment/Appropriation


▪ Lease Payments for Project Equipment
• Security for Lease will be Project Improvements (solar, HVAC, Charging Station, Lighting)

© 2018 ENGIE Services U.S. 22


ATTACHMENT 2

30-Year Financial Impact (Estimated)

▪ Wastewater Project
▪ ~$2,750,000 Financing
▪ Projected Savings (net of financing) = ~$4,500,000-$4,900,000
▪ Financing Period = ~18 years

▪ Water Project
▪ ~$775,000 Financing
▪ Projected Savings (net of financing) = ~$1,000,000-$1,250,000
▪ Financing Period = ~20 years

▪ General Fund Project (City Hall, Police, Library, Corporation Yard)


▪ ~$1,125,000 Financing
▪ Projected Savings (net of financing) = ~$1,000,000-$1,250,000
▪ Financing Period = ~25 years

© 2018 ENGIE Services U.S. 23


ATTACHMENT 2

Program Benefits

▪ Create millions of dollars in savings over project life


▪ Reduce City electricity spend by over 50%
▪ Hedge against rising energy costs
▪ Provide shade for vehicles at City Hall, Police Department and
Corporation Yard
▪ ENGIE guarantees 95% of the solar and lighting energy savings
▪ Improve quality of lighting in the offices with LED lighting
▪ Utilize savings to replace old HVAC equipment
▪ Save maintenance staff’s time with LED lighting and new HVAC systems
▪ Save administrative time by accomplishing multiple projects
simultaneously
▪ Stimulate local economy and provide local jobs
▪ Substantial environmental benefits equivalent to removing 285 cars off
the road annually
© 2018 ENGIE Services U.S. 24
ATTACHMENT 2

Roadmap

Opportunity Assessment July 2017 – Aug 2017


Program Development Oct 2017 – Mar 2018
Implementation Jun 2018 – May 2019
© 2018 ENGIE Services U.S. 25
CITY OF LAKEPORT
City Council
City of Lakeport Municipal Sewer District
Lakeport Redevelopment Successor Agency
Lakeport Industrial Financing Authority
Municipal Financing Agency of Lakeport

STAFF REPORT
RE: Landscape Structures PlayBooster # 107686-2-2 Purchase MEETING DATE: 4/17/2018

SUBMITTED BY: Douglas Grider, Public Works Director

PURPOSE OF REPORT: Information only Discussion Action Item

WHAT IS BEING ASKED OF THE CITY COUNCIL/BOARD:


The City Council is being asked to authorize the City Manager to sign a purchase order and the purchase
agreement required for the purchase of a new Playground Structure for Library Park.

BACKGROUND/DISCUSSION:
The City of Lakeport Public Works Department Parks Division currently utilizes a donated play structure in
Library Park. The City is no longer able to purchase repair or replacement parts for this play structure. It has
become apparent that Library Park needs a new 5 – 12 play structure in order to meet safety requirements and
the rising demand for children’s activities in Library Park.
The selection of the play structure was taken to the City Park & Recreation Commission, they reviewed six (6)
play structures presented from 3 vendors. The Commission looked at a number of factors in making their
decision, these factors included suitability for Library Park, history of the manufacturer and their products,
current and future availability of parts and support, quality and durability of the product and value vs. cost.
Another issue discussed was location and availability of the vendor. The Commission choose Ross Recreation
Equipment of Santa Rosa to provide a Landscape Structures PlayBooster model 107686-2-2 with minor additions
to the original design. The additional items requested were added to the play structure and it was approved by
the City Parks and Recreation Commission for the sum of $74,687.19 at their April 5, 2018 meeting.
Appropriations were approved for this purchase in the current fiscal year budget from anticipated Measure Z
revenues.
The Public Works Director and Parks Supervisor worked with Ross Recreation Equipment to secure a
government pricing program to ensure the best possible government pricing for this purchase.
The pricing program is through the CMAS (California Multiple Award Schedules) which uses a bidding process
like US Community’s and GSA.

OPTIONS:
Move to authorize the purchase of a Landscape Structures PlayBooster # 107686-2-2 from Ross
Recreation Equipment Company, Inc; or provide alternative direction to staff.

FISCAL IMPACT:
None $74,687.19 Budgeted Item? Yes No
Budget Adjustment Needed? Yes No If yes, amount of appropriation increase:
Affected fund(s): General Fund Water OM Fund Sewer OM Fund Other:

Meeting Date: 04/17/2018 Page 1 Agenda Item #VIII.A.1.


Comments:
SUGGESTED MOTIONS:
Move to authorize the City Manager to sign the associated purchase order and purchase agreement for the
Landscape Structures PlayBooster # 107686-2-2 from Ross Recreation Equipment Company, Inc.
1. Quote
Attachments:
2. Layout Plan Renderings
3. Minute Order – 04/05/2018 Parks & Recreation Commission Meeting

Meeting Date: 04/17/2018 Page 2 Agenda Item #VIII.A.1.


Quote Number 00023294
ATTACHMENT 1
Opportunity Name Library Park
Quote Name Library Park Option B
Quote Date 4/3/2018
Quote Exp Date 6/4/2018
Est Lead Time 2-4 weeks
Bill To Name Lakeport, City of Ship To Name Lakeport, City of
Bill To 225 Park Street Ship To 225 Park Street
Lakeport, California 95453 Lakeport, California 95453
United States United States

Quantity Product Product Description Sales Price Total Price

1.00 Bond Bond - Standard 3% on total project amount including tax and freight. $2,175.00 $2,175.00

CMAS LSI CMAS LSI Discount


1.00 ($1,035.00) ($1,035.00)
Discount CMAS Contract # 4-10-78-0057A

CMAS Ross
1.00 CMAS Ross Discount ($2,070.00) ($2,070.00)
Discount

Installation of Landscape Structures PlayBooster #107686-2-2


*Project DIR # needed for State Prevailing Wage projects.
1.00 Installation **Installation price quoted for favorable working conditions. If rock, poor soil conditions, a $16,105.00 $16,105.00
high water table and/or other unforeseen site conditions exist requiring additional materials
and labor, additional charges may be incurred.

PlayBooster,
1.00 Landscape Structures PlayBooster, ages 5-12. Design #107686-2-2 $51,770.00 $51,770.00
5-12

Total Quote Amounts

County/ City Tax Lake County/ Lakeport Materials Amount $48,665.00


Tax Rate 8.7500% Tax Amount $4,258.19
Labor Total $18,280.00
Credit Terms Net 30 On Materials Shipment Freight Amount $3,484.00
Total $74,687.19

Notes to Customer

Thank you for the opportunity to quote your upcoming project. PLEASE NOTE: quote does not include installation, offload,
payment and performance bonds, engineering calculations, security, storage, permits, inspection, or safety surfacing
unless otherwise noted.

Deposits may be required before order can be placed depending on customer credit terms. Your purchase is subject to
the terms and conditions of this quote, approval of this quote agrees to those terms.

Signature _________________________________

Name ____________________________________

Title _____________________________________

Date _____________________________________

Prepared By Jon Bawden


Email jonb@rossrec.com

100 Brush Creek Road, Suite 206, Santa Rosa, California 95404
p 707.538.3800 • f 707.538.3826 • rossrec.com • Contractors License #520752 • DIR #1000003500 • TaxID #68-0103540
ATTACHMENT 2
ATTACHMENT 2
ATTACHMENT 3

MINUTE ORDER 
PARKS AND RECREATION COMMISSION 
REGULAR MEETING 
April 5, 2018 

Please be advised of the following action taken by the Parks and Recreation 
Commission:  

A. Library Park: Parks Lead Worker Ladd presented the staff report 
regarding the new play structure in Library Park. 

A motion was made by Commissioner Knorr, seconded by 
Commissioner Hanson, and passed by voice vote, with 
Commissioner Lyons opposed, that the Parks and 
Recreation Commission recommend that the City Council 
approve the purchase of the Landscape Structures 
PlayBooster from Ross Recreation Equipment for 
installation in Library Park. 

Respectfully Submitted, 

Hilary Britton 
Deputy City Clerk 

225 Park Street, Lakeport, CA 95453 
(707) 263‐5615, Extension 12 (phone)   (707) 263‐8584 (fax)
jchapman@cityoflakeport.com 
CITY OF LAKEPORT
City Council
City of Lakeport Municipal Sewer District
Lakeport Redevelopment Successor Agency
Lakeport Industrial Development Agency
Municipal Financing Agency of Lakeport

STAFF REPORT
RE: Review and adoption of 2018/19 SB 1 Project List for the City MEETING DATE: 4/17/2018
of Lakeport
Douglas Grider, Public Works Director
SUBMITTED BY:

PURPOSE OF REPORT: Information only Discussion Action Item

WHAT IS BEING ASKED OF THE CITY COUNCIL/BOARD:


The City Council is being asked to review and adopt the presented resolution and project list proposed to be
funded with monies generated by the Road Repair and Accountability Act of 2017 for fiscal year 2018-19 for the
estimated $79,477 to be provided through RMRA funding.

BACKGROUND/DISCUSSION:
On April 28, 2017, the Governor of California signed Senate Bill 1 (SB 1), known as the Road Repair and
Accountability Act of 2017. SB 1 increases gasoline and diesel taxes and vehicle registration fees to address basic
road maintenance and rehabilitation needs on both state highways and local streets and roads.
Monies generated through SB 1, will be deposited by the State Controller into a Road Maintenance and
Rehabilitation Account (RMRA). A portion of this funding will be apportioned by formula to eligible cities and
counties, including Lakeport pursuant to California Streets and Highways Code Section (SHC) 2032 (h).
Since SB 1 emphasizes accountability and transparency in transportation funding, programming and use of the
new funds is contingent on recipient cities and counties providing annual reporting. Per SHC 2034 (a) (1) prior to
receiving and RMRA funding each fiscal year, cities and counties must submit a list of projects to be funded with
the RMRA funds to the California Transportation Commission no later than May 1st of each year.
The California League of Cities prepared RMRA estimates based upon the most recent State Department of
Finance statewide revenue projections estimates the City of Lakeport will received $79,477 in RMRA revenue for
the fiscal year 2018-19.
Staff proposes that the anticipated funds for fiscal year 2018-19 be utilized and dedicated to the Second Street
Rehabilitation Project. This project includes the reconstruction of a section of Second Street between North Main
Street and Park Street along with the replacement of curb, gutter and sidewalk to meet current ADA standards.
Any remaining monies will be dedicated to miscellaneous roadway maintenance and rehabilitation activities
citywide.

OPTIONS:
1. Adopt the proposed SB 1 resolution and project list for fiscal year 2018-19.

2. Direct staff to make modifications or revisions to the proposed SB 1 Project List.

Meeting Date: 04/17/2018 Page 1 Agenda Item #VIII.A.2.


3. Take no action or take action to deny the proposed SB 1 Project List. Alternatively, the City Council could
provide other direction.

FISCAL IMPACT:
None increase of $79,477 Road Maintenance Operations Budgeted Item? Yes No
Budget Adjustment Needed? Yes No If yes, amount of appropriation increase: $
Affected fund(s): General Fund Water OM Fund Sewer OM Fund Other: RMRA Account
Note: Funds to be included in City of Lakeport 2018-19 budget.

SUGGESTED MOTION:
Move to adopt the proposed resolution approving the City of Lakeport SB 1 Project List for fiscal year 2018-19
and direct staff to submit to the California Transportation Commission.

Attachments: 1. Resolution and Project List

Meeting Date: 04/17/2018 Page 2 Agenda Item #VIII.A.2.


ATTACHMENT 1

RESOLUTION NO. ______ (2018)

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKEPORT


ADOPTING A LIST OF PROJECTS FOR FISCAL YEAR 2018-19 FUNDED BY SB 1: THE
ROAD REPAIR AND ACCOUNTABILITY ACT

WHEREAS, Senate Bill 1 (SB 1), the Road Repair and Accountability Act of 2017 (Chapter
5, Statutes of 2017) was passed by the Legislature and Signed into law by the Governor in April
2017 in order to address the significant multi-modal transportation funding shortfalls
statewide; and

WHEREAS, the City must adopt a list of all projects proposed to receive funding from the
Road Maintenance and Rehabilitation Account (RMRA), created by SB 1 by resolution, which
must include a description and the location of each proposed project, a proposed schedule for
the project’s completion, and the estimated useful life of the improvement; and

WHEREAS, the City, will receive an estimated $79,477 in RMRA funding in Fiscal Year
2018-19 from SB 1; and

WHEREAS, this is the second year in which the City is receiving SB 1 funding and will
enable the City to continue essential road maintenance and rehabilitation projects, safety
improvements, repairing and replacing aging bridges, and increasing access and mobility
options for the traveling public that would not have otherwise been possible without SB 1 ; and

WHEREAS, the City Council solicited public input from local residents at its regular
meeting of April 17, 2018 in the determination of the community’s transportation
priorities/project list; and

WHEREAS, the City consulted its 2015 Pavement Management Program Report to
develop the SB 1 project list to ensure revenues are being used on the most high-priority and
cost-effective projects that also meet the communities priorities for transportation investment;
and

WHEREAS, the 2016 California Statewide Local Streets and Roads Needs Assessment
found that the City’s streets and roads are in poor condition and this revenue will aid in the
increase of the overall quality of the City’s local road system; and

WHEREAS, revenue from RMRA over the next decade, together with other local revenue
sources such as Measures I and Z, will aid the City in increasing the overall quality of our local
road system; and
ATTACHMENT 1

NOW, THEREFORE, BE IT RESOLVED, ORDERED AND FOUND by the City Council of the
City of Lakeport, State of California, as follows:

1. The foregoing recitals are true and correct.


2. The fiscal year 2018-19 list of projects planned to be funded with Road
Maintenance and Rehabilitation Account revenues are attached hereto as Exhibit
A, which includes the Second Street Reconstruction Project between Main and
Park Streets.
3. The Clerk shall cause this resolution and attached project list (Exhibit A) to be
transmitted to the California Transportation Commission under Streets and
Highways Code section 2034, subdivision (a)(1).

The foregoing Resolution was passed and adopted at a regular meeting of the City
Council on the 17th day of April 2018, by the following vote:

AYES:
NOES:
ABSTAINING:
ABSENT:

___________________________________
MIREYA G. TURNER, Mayor
ATTEST:

_______________________________
KELLY BUENDIA, City Clerk
ATTACHMENT 1 EXHIBIT A

State of California--California Transportation Commission


Senate Bill (SB) 1 Proposed Project List Form

Local Streets and Roads Program

Agency Name: Agency Contact:


FY
Douglas Grider
Lakeport
(707) 263-3578
LoCode: 5076 dgrider@cityoflakeport.com 18/19

Summary of Proposed Project List


Estimated Useful
Estimated Completion Date:
Life
Project
Project Title Project Description Project Location
No. Pre-
Construction Min. Max.
Construction

Reconstruct existing roadway and replace Second Street between


Second Street
curb, gutter & sidewalk to meet current ADA Main Street and Park
Reconstruction
PP01 standards. Street 7/1/2018 8/1/2018 8 15
Miscelleneous roadway Mill and fill, dig-outs, pot-hole repairs and
Citywide
PP02 maintenance activities thin lift overlays. N/A N/A N/A N/A
PP03
PP04
PP05
PP06
PP07
PP08
PP09
PP10
PP11
PP12
PP13
PP14
CITY OF LAKEPORT
City Council
City of Lakeport Municipal Sewer District
Lakeport Redevelopment Successor Agency
Lakeport Industrial Development Authority
Municipal Financing Agency of Lakeport

STAFF REPORT
RE: Receive and Adopt a Resolution Accepting the Hotel MEETING DATE: 04/17/2018
Feasibility Study Prepared by HVS for the City of Lakeport

SUBMITTED BY: Kevin M. Ingram, Community Development Director

PURPOSE OF REPORT: Information only Discussion Action Item

WHAT IS BEING ASKED OF THE CITY COUNCIL/BOARD:


Review and consider the adoption of a resolution accepting the Hotel Feasibility Study prepared for the City of
Lakeport on behalf of HVS Consulting & Valuation (HVS) and discuss current implementation activities underway
related to the Study’s findings.

BACKGROUND/DISCUSSION:

The City of Lakeport was awarded $40,000.00 by the USDA Rural Business Development Grant to develop a
Hotel Market and Development Feasibility Analysis. On March 7, 2017 the City Council authorized the City
Manager to enter into a contract with HVS for the purpose of conducting a Hotel Feasibility Study and assist the
City of Lakeport in the marketing of the Study’s findings. Representatives from HVS met with City staff in April
2017 and reviewed several potential hotel sites throughout the City. A detailed economic Demand Forecast and
Project Feasibility report was completed by HVS and reviewed by City staff in May 2017. Information from both
the April 2017 site visit and economic data from the May 2017 demand and feasibility report were then utilized
by HVS to prepare a Hotel Feasibility Study for the City.

The completed Hotel Feasibility Study analyzed a total of six sites throughout the City for their potential
economic viability as a suitable hotel development site. These six sites included:

• Willow Point and C Street waterfront properties (1 First Street & 2 C Street)
• Block of Main Street between Fourth & Fifth Streets (420 & 440 Main St.; 60 Fourth St.; and, 35 & 55
Fifth St.)
• Dutch Harbor (910 North Main Street)
• 1255 Martin Street
• Vista Point Shopping Center (818 Lakeport Blvd.)
• 1842 Todd Road

Of these analyzed sites the most economically viable site identified was the city owned Dutch Harbor property
along the lakefront. In addition to evaluating specific sites for hotel suitability, the Hotel Feasibility Study also
provides recommendation for potential facilities and brand affiliations. Recommendations take into account
both the physical limitations of recommended sites as well as trends in operating performance indicated by
available market data. The Study notes that existing lodging properties in the Lakeport area are limited to
economy and bed and breakfast facilities. A property with a minimum of two (2) acres available for a new hotel
Meeting Date: 04/17/2018 Page 1 Agenda Item #VIII.B.1.
development is preferred. Currently, the Dutch Harbor property on its own is less than two (2) acres; however,
the study states that consideration should be given to possibly acquiring additional lands from adjoining
property to the south (Natural High) in order to create a more viable development site. This same concept was
also discussed as a potential possibility within the City’s recently approved Lakeport Lakefront Revitalization
Plan.

Based on market data, HVS states that an approximately two (2) acres development site at the Dutch Harbor
property would lend itself well to a 55-unit midscale hotel. The Study makes specific notes several franchise
affiliations that fit the Lakeport market potential identified within the study. These include, but are not limited
to: Best Western brand, Comfort Inn Quality Inn (both affiliated with Choice Hotels) and Wingate by Wyndham
(affiliated with Wyndam Hotels and Resorts).

The review and acceptance of the completed Hotel Feasibility Study by the City Council at a public meeting is a
requirement of the USDA Rural Business Development Grant. However, it should be noted that the City is still
working very closely with HVS to market the Study’s results and work to attract a hotel provider to Lakeport. At
current, HVS has circulated a Request for Expression of Interest from identified hotel providers identified within
the feasibility study. The expression of interest focuses primarily upon the Dutch Harbor site identified in the
Hotel Feasibility Study but also includes information on other properties located along the City’s waterfront.
Submittals from potential hotel developers are due by the end of this month and will be reviewed by HVS and
City staff.

OPTIONS:

1. Adopt the proposed resolution accepting the Hotel Feasibility Study prepared for the City of Lakeport by
HVS.
2. Direct staff to make modifications to the proposed study.
3. Take no action or take action to deny the proposed plan. Alternatively, the City Council could provide
other direction.

FISCAL IMPACT:
None $ Budgeted Item? Yes No
Budget Adjustment Needed? Yes No If yes, amount of appropriation increase: $
Affected fund(s): General Fund Water OM Fund Sewer OM Fund Other:
Comments: None

SUGGESTED MOTION:
Move to adopt a resolution accepting the Hotel Feasibility Study prepared for the City of Lakeport by HVS.

Attachments: 1. Draft Resolution accepting the Hotel Feasibility Study


2. Hotel Feasibility Study

Meeting Date: 04/17/2018 Page 2 Agenda Item #VIII.B.1.


ATTACHMENT 1

RESOLUTION NO. ______ (2018)

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKEPORT


ACCEPTING THE HOTEL FEASIBILITY STUDY PREPARED FOR THE CITY OF
LAKEPORT BY HVS CONSULTING & VALUATION

WHEREAS, the attraction and development of hotel with conference center and dining
facilities is a recognized goal of the City Council; and

WHEREAS, the adopted Lakeport Lakefront Revitalization Plan in 2017 recommends the
locating of a hotel and related lodging amenities as means to strengthening the economic
viability of the City’s waterfront area and providing benefits to the local and regional tourism
sector; and

WHEREAS, the development of a Hotel Feasibility Study and marketing efforts to attract
a hotel developer to Lakeport is consistent with the Lakeport General Plan Economic
Development Element, most specifically Policy ED 10.2 which urges the City to support and
increase visitor-oriented services including the development of lodging and Policy ED 12.1
which specifically encourages the City to engage in activities to attract and develop a
hotel/conference center in Lakeport; and

WHEREAS, in 2017 the City of Lakeport received a USDA Rural Business Development
Grant for the development and implementation of a hotel feasibility analysis for the City of
Lakeport; and

WHEREAS, the City of Lakeport retained a professional consultant, HVS Consulting &
Valuation, to prepare a Hotel Feasibility Study for the City of Lakeport and market the Study’s
findings to potential hotel developers; and

WHEREAS, the City of Lakeport City Council has conducted a public meeting on April 17,
2017 and solicited public input on the presented Hotel Feasibility Study; and

WHEREAS, in accordance with Section 15262, Statutory Exemptions of the California


Environmental Quality Act (CEQA), feasibility and planning studies for future action which the
City has not approved, adopted, or funded does not require the preparation of an EIR or a
Negative Declaration.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Lakeport that it
hereby accepts the Hotel Feasibility Study prepared for the City of Lakeport by HVS Consulting
& Valuation.
ATTACHMENT 1

The foregoing Resolution was passed and adopted at a regular meeting of the City
Council on the 17th day of April, 2018, by the following vote:

AYES:
NOES:
ABSTAINING:
ABSENT:

___________________________________
MIREYA G. TURNER, Mayor
ATTEST:

_______________________________
KELLY BUENDIA, City Clerk
ATTACHMENT 2

FEASIBILITY STUDY

Pr
opos
ed
Hot
el
910 NORTH MAIN STREET
LAKEPORT, CALIFORNIA

SUBMITTED TO: PR OPOSED PREPARED BY:


Ms. Margaret Silveira HVS Consulting & Valuation
City of Lakeport Division of TS Worldwide, LLC
225 Park Street 413 South Howes Street
Lakeport, California, 95453 Fort Collins, Colorado, 80521

+1 (707) 263-5615 ext. 32 +1 (720) 877-1376

June-2017
ATTACHMENT 2

June 16, 2017

Ms. Margaret Silveira


City of Lakeport
225 Park Street
Lakeport, California, 95453
HVS DENVER

413 South Howes Street Re: Proposed Hotel


Fort Collins, Colorado, 80521 Lakeport, California
+1 (720) 877-1376
HVS Reference: 2017020630
+1 (415) 896-0516 FAX
www.hvs.com

Dear Ms. Silveira:

Pursuant to your request, we herewith submit our feasibility study pertaining to the
above-captioned property. We have inspected the real estate and analyzed the hotel
market conditions in the Lakeport, California area. We have studied the proposed
project, and the results of our fieldwork and analysis are presented in this report.
We have also reviewed the proposed improvements for this site. Our report was
prepared in accordance with the Uniform Standards of Professional Appraisal
Practice (USPAP), as provided by the Appraisal Foundation.

We hereby certify that we have no undisclosed interest in the property, and our
employment and compensation are not contingent upon our findings. This study is
subject to the comments made throughout this report and to all assumptions and
limiting conditions set forth herein.

Sincerely,
TS Worldwide, LLC

Brett E. Russell, Managing Director, Senior Partner


BRussell@hvs.com, +1 (720) 877-1376
State Appraiser License (CA) 3003666

Matthew D. Melville, Vice President


State Appraiser License (CA) 3003361

Superior results through unrivaled


hospitality intelligence. Everywhere.
ATTACHMENT 2

Table of Contents

SECTION TITLE PAGE


1. Executive Summary 1
Ownership, Franchise, and Management Assumptions 2
Summary of Hotel Market Trends 2
Summary of Forecast Occupancy and Average Rate 6
Summary of Forecast Income and Expense Statement 6
Feasibility Conclusion 9
2. Description of the Site and Neighborhood 12
Physical Characteristics 18
Access and Visibility 20
Airport Access 22
Neighborhood 22
Proximity to Local Demand Generators and Attractions 23
Flood Zone 25
Zoning 26
3. Market Area Analysis 27
Workforce Characteristics 31
Radial Demographic Snapshot 33
Unemployment Statistics 35
Major Business and Industry 36
Airport Traffic 37
Traffic Count Volumes 42
Tourist Attractions 42
4. Supply and Demand Analysis 45
Definition of Subject Hotel Market 45
National Trends Overview 45
Historical Supply and Demand Data 49
Seasonality 54
ATTACHMENT 2

Patterns of Demand 57
Regional Competition 60
Supply Changes 63
Demand Analysis 63
Base Demand Growth Rates 64
Accommodated Demand and Market-wide Occupancy 64
5. Description of the Proposed Improvements 66
Project Overview 66
Recommended Hotel Brands: Brand Overviews 67
Summary of Recommended Facilities 74
Site Improvements and Hotel Structure 74
Construction Budget Estimate 76
Conclusion 76
6. Projection of Occupancy and Average Rate 77
Historical Penetration Rates by Market Segment 77
Forecast of Subject Property’s Occupancy 77
Average Rate Analysis 79
Competitive Position 79
7. Projection of Income and Expense 83
Comparable Operating Statements 83
Forecast of Revenue and Expense 90
Rooms Revenue 93
Other Operated Departments Revenue 93
Miscellaneous Income 93
Rooms Expense 94
Other Operated Departments Expense 94
Administrative and General Expense 95
Information and Telecommunications Systems Expense 95
Marketing Expense 95
Franchise Fee 96
Property Operations and Maintenance 96
ATTACHMENT 2

Utilities Expense 97
Management Fee 98
Property Taxes 98
Insurance Expense 99
Reserve for Replacement 100
Forecast of Revenue and Expense Conclusion 100
8. Feasibility Analysis 102
Construction Cost Estimate 102
Mortgage Component 103
Equity Component 105
Terminal Capitalization Rate 108
Mortgage-Equity Method 110
Conclusion 112
9. Statement of Assumptions and Limiting Conditions 114
10. Certification 117

Addenda

Qualifications
Copy of Appraisal License(s)
List of Interviewed Stakeholders
Copy of Engagement Letter
Copies of STR Trends
ATTACHMENT 2

1. Executive Summary

Subject of the The subject of the feasibility study is a roughly 98,010-square-foot (2.25-acre)
Feasibility Study parcel to be improved with a limited-service lodging facility; the hotel is assumed to
be affiliated with a nationally recognized brand. The property, which is expected to
open on January 1, 2019, is assumed to offer 55 rooms, a breakfast dining area,
2,200 square feet of meeting space, a fitness room, a lobby workstation, a market
pantry, and a guest laundry room. The hotel will also contain the appropriate
parking capacity (55 ) and all necessary back-of-the-house space.

AERIAL VIEW OF RECOMMENDED SITE: DUTCH HARBOR

In addition to evaluating selected sites for hotel development, we were asked to


provide recommendations for potential facilities and brand affiliations. Our
recommendations consider both the physical limitations of the recommended site
as well as the trends in operating performance indicated by available market data.
We note that existing lodging properties in the Lakeport area are limited to
economy and bed and breakfast facilities. Based on the assumption that the
recommended site will offer a minimum of 2.25 acres, we recommend the

June-2017 Executive Summary


Proposed Hotel – Lakeport, California 1
ATTACHMENT 2

development of a 55-unit midscale hotel with interior corridors. The development


of the proposed hotel is assumed to be one component of a multi-use revitalization
plan, with oversight from the City of Lakeport. We have assumed that the city will
partner with a hotel developer who will construct and manage the property. The
subject site’s location is 910 North Main Street, Lakeport, California, 95453.

Pertinent Dates The effective date of the report is June 16, 2017. The subject site was inspected by
Matthew D. Melville on April 17, 2017. Brett E. Russell participated in the analysis
and reviewed the findings, but did not personally inspect the property.

Ownership, Franchise, The developer of the proposed subject hotel is yet to be determined. The City of
and Management Lakeport owns the hotel site under consideration. We have assumed that a portion
Assumptions of an adjacent site (owned by the local school district) can be assembled to increase
the hotel site to a minimum of 2.25 acres. We expect that the City of Lakeport will
commence discussions with potential hotel developers during the summer of 2017.

Details pertaining to management terms were not yet determined at the time of this
report. Our appraisal assumes that the proposed hotel will be managed by a
professional hotel-operating company, with fees deducted at rates consistent with
current market standards. We have assumed a market-appropriate total
management fee of 3.0% of total revenues in our study.

We recommend that the proposed subject hotel operate as a midscale, limited-


service property. While we have placed heavy consideration on the Best Western
brand, a specific franchise affiliation and/or brand has yet to be finalized. Other
potential brand affiliation recommended for consideration include Comfort Inn and
Quality Inn (both affiliated with Choice Hotels) and Wingate by Wyndham (affiliated
with Wyndham Hotels & Resorts).

Summary of Hotel The aggregate trend includes hotels in both Lake County and Mendocino County, all
Market Trends of which are located within 50 miles of Lakeport. We note that most of the hotels in
the trend are located in Mendocino County, as most of the hotels located in Lake
County do no report data to Smith Travel Research. Still, the data provides a sound
basis for understanding regional hotel trends and was utilized in our forecasts.
Occupancy levels for the selected trend of hotels fluctuated during the period
reviewed, ranging from roughly 47% to approximately 59% between 2006 and
2014. The significant drop in demand recorded in 2009 resulted from the economic
downturn, causing occupancy to fall below 49% in that year. Increased occupancy
levels in 2015 and 2016 are indicative of the impact of the Valley Fire and Clayton
Fire. Accommodated room nights in these years were influenced by demand from
fire crews, displaced residents, FEMA representatives, and other related parties.
Market-wide average rate remained generally stable between 2007 and 2013, in the

June-2017 Executive Summary


Proposed Hotel – Lakeport, California 2
ATTACHMENT 2

low $80s. Increased demand in 2015 and 2016 resulted in stronger average rate
growth, with levels surpassing $100.

Year-to-date 2017 data illustrate some softening in occupancy and a roughly $3.00
loss in average rate. Market-wide performance for 2015 and 2016 were impacted
by demand resulting from the Valley Fire and Clayton Fire. The absence of this
demand in the year-to-date period contributed to the decline recorded through
March. The long-term outlook for the market is generally positive, with opportunity
for growth associated with the heightened prominence of the region for wine and
outdoor recreation. However, near-term performance is expected to be influenced
by the decrease in demand with the assumed absence of further natural disasters.

The following table provides a historical perspective on the supply and demand
trends for a selected set of hotels, as provided by STR.

June-2017 Executive Summary


Proposed Hotel – Lakeport, California 3
ATTACHMENT 2

FIGURE 1-1 REGIONAL COMPETITORS: HISTORICAL SUPPLY AND DEMAND TRENDS (STR)

Average Daily Available Room Occupied Room Average


Year Room Count Nights Change Nights Change Occupancy Rate Change RevPAR Change

2006 768 280,320 — 164,488 — 58.7 % $77.58 — $45.52 —


2007 800 291,912 4.1 % 161,707 (1.7) % 55.4 81.09 4.5 % 44.92 (1.3) %
2008 831 303,315 3.9 168,404 4.1 55.5 82.43 1.6 45.77 1.9
2009 831 303,315 0.0 146,670 (12.9) 48.4 81.08 (1.6) 39.21 (14.3)
2010 831 303,315 0.0 155,261 5.9 51.2 80.12 (1.2) 41.01 4.6
2011 831 303,315 0.0 160,226 3.2 52.8 81.11 1.2 42.84 4.5
2012 831 303,315 0.0 164,716 2.8 54.3 81.44 0.4 44.23 3.2
2013 831 303,315 0.0 175,973 6.8 58.0 83.93 3.1 48.69 10.1
2014 831 303,315 0.0 180,201 2.4 59.4 90.80 8.2 53.94 10.8
2015 831 303,315 0.0 198,800 10.3 65.5 100.84 11.1 66.09 22.5
2016 831 303,315 0.0 194,924 (1.9) 64.3 104.52 3.6 67.17 1.6
Year-to-Date Through March
2016 831 74,790 — 42,648 — 57.0 % $101.56 — $57.91 —
2017 831 74,790 0.0 % 41,429 (2.9) % 55.4 98.66 (2.9) % 54.65 (5.6) %

Average Annua l Compounded Change:


2007 - 2010 1.3 (1.3) (0.4) (3.0)
2010 - 2016 0.0 3.9 4.5 8.6

Number Year Year


Hotels Included in Sample of Rooms Affiliated Opened

Rodeway Inn Skyl a rk Shores Res ort 45 Apr 2016 Jan 1956
Days Inn Uki ah 54 Apr 1994 Jun 1959
Qua l i ty Inn Uki ah 40 Apr 2008 Jun 1960
Motel 6 Uki ah 70 Feb 1970 Feb 1970
Super 8 Uki a h 54 Nov 2006 Jun 1981
Bes t Wes tern El Gra nde Inn 68 Jun 1990 Jun 1985
As cend Col l ecti on Hotel Ba echtel Creek Inn 43 Nov 2008 Jun 1992
Super 8 Upper La ke Ea s t 34 Oct 1992 Oct 1992
Travel odge Cl ea rl ake 31 Jun 1999 Dec 1992
Travel odge Uki ah 55 Ja n 2011 Sep 1997
Bes t Wes tern Wi l l i ts Inn 44 Dec 1998 Dec 1998
Bes t Wes tern Orcha rd Inn 54 Nov 2001 Nov 2001
Super 8 Wi l l i ts 44 Dec 2001 Dec 2001
Hampton Inn Uki a h 76 Apr 2002 Apr 2002
Fai rfi el d Inn & Sui tes Uki ah Mendoci no County 56 Oct 2005 Oct 2005
Comfort Inn & Sui tes Uki a h 63 Jul 2007 Jul 2007

Total 831

Source: STR

The following tables reflect our estimates of operating data for hotels on an
individual basis. These trends are presented in detail in the Supply and Demand
Analysis chapter of this report.

June-2017 Executive Summary


Proposed Hotel – Lakeport, California 4
ATTACHMENT 2

FIGURE 1-2 REGIONAL COMPETITORS – OPERATING PERFORMANCE

Estimated 2015 Estimated 2016

Weighted Weighted
Annual Annual
Room Room Occupancy Yield
Property Class Count Occ. Average Rate RevPAR Count Occ. Average Rate RevPAR Penetration Penetration

Mi ds ca l e & Ups ca l e Hotel s (Aggrega te) 444 65 - 70 % $110 - $115 $75 - $80 444 65 - 70 % $115 - $120 $80 - $85 100 - 110 % 120 - 130 %

Economy Hotel s (Aggrega te) 387 60 - 65 80 - 85 50 - 55 387 55 - 60 80 - 85 50 - 55 90 - 95 70 - 75

Totals/Averages 831 65.5 % $100.85 $66.09 831 64.3 % $104.52 $67.17 100.0 % 100.0 %

June-2017 Executive Summary


Proposed Hotel – Lakeport, California 5
ATTACHMENT 2

Summary of Forecast Based on our analysis presented in the Projection of Occupancy and Average Rate
Occupancy and chapter, we have chosen to use a stabilized occupancy level of 62% and a base-year
Average Rate rate position of $112.00 for the proposed subject hotel. The following table reflects
a summary of our market-wide and proposed subject hotel occupancy and average
rate projections.

FIGURE 1-3 MARKET AND SUBJECT PROPERTY AVERAGE RATE FORECAST

Opening
Calendar Year 2016 2017 2018 2019 2020 2021 2022
Regi ona l ADR (Al l 16 Hotel s Identi fi ed) $104.52 $101.38 $103.41 $105.99 $108.64 $111.36 $114.70
Projected Ma rket ADR Growth Ra te — -3.0% 2.0% 2.5% 2.5% 2.5% 3.0%

Propos ed Subject Property ADR $112.00 $108.64 $110.81 $113.58 $116.42 $119.33 $122.91
ADR Growth Ra te — -3.0% 2.0% 2.5% 2.5% 2.5% 3.0%

Propos ed Subject ADR Penetra ti on 107% 107% 107% 107% 107% 107% 107%

Summary of Forecast Our positioning of each revenue and expense level is supported by comparable
Income and Expense operations or trends specific to this market. Our forecast of income and expense is
Statement presented in the following table.

June-2017 Executive Summary


Proposed Hotel – Lakeport, California 6
ATTACHMENT 2

FIGURE 1-4 DETAILED FORECAST OF INCOME AND EXPENSE

2019 (Calendar Year) 2020 Stabilized 2022


Number of Rooms: 55 55 55 55
Occupancy: 57% 59% 62% 62%
Average Rate: $113.58 $116.42 $119.33 $122.91
RevPAR: $64.74 $68.69 $73.99 $76.21
Days Open: 365 365 365 365
Occupied Rooms: 11,443 %Gross PAR POR 11,844 %Gross PAR POR 12,447 %Gross PAR POR 12,447 %Gross PAR POR
OPERATING REVENUE
Rooms $1,300 98.2 % $23,636 $113.61 $1,379 98.3 % $25,073 $116.43 $1,485 98.3 % $27,000 $119.31 $1,530 98.3 % $27,818 $122.93
Other Operated Departments 10 0.8 190 0.91 11 0.8 198 0.92 11 0.8 207 0.91 12 0.8 213 0.94
Miscellaneous Income 13 1.0 238 1.14 14 1.0 247 1.15 14 0.9 259 1.14 15 0.9 266 1.18
Total Operating Revenues 1,324 100.0 24,064 115.67 1,403 100.0 25,518 118.50 1,511 100.0 27,465 121.37 1,556 100.0 28,298 125.04
DEPARTMENTAL EXPENSES *
Rooms 339 26.1 6,158 29.60 354 25.6 6,428 29.85 371 25.0 6,751 29.83 382 25.0 6,954 30.73
Other Operated Departments 8 76.3 145 0.70 8 75.8 150 0.70 9 75.0 155 0.69 9 75.0 160 0.71
Total Expenses 347 26.2 6,304 30.30 362 25.8 6,578 30.54 380 25.1 6,906 30.52 391 25.1 7,114 31.43
DEPARTMENTAL INCOME 977 73.8 17,761 85.37 1,042 74.2 18,940 87.95 1,131 74.9 20,559 90.85 1,165 74.9 21,184 93.61
UNDISTRIBUTED OPERATING EXPENSES
Administrative & General 116 8.8 2,116 10.17 121 8.6 2,194 10.19 126 8.3 2,285 10.10 129 8.3 2,353 10.40
Info & Telecom Systems 13 1.0 238 1.14 14 1.0 247 1.15 14 0.9 257 1.14 15 0.9 265 1.17
Marketing 58 4.4 1,058 5.08 60 4.3 1,097 5.09 63 4.2 1,142 5.05 65 4.2 1,177 5.20
Franchise Fee 51 3.8 919 4.42 52 3.7 942 4.38 53 3.5 971 4.29 55 3.5 1,000 4.42
Prop. Operations & Maint. 58 4.4 1,058 5.08 60 4.3 1,097 5.09 63 4.2 1,142 5.05 65 4.2 1,177 5.20
Utilities 70 5.3 1,269 6.10 72 5.2 1,317 6.11 75 5.0 1,371 6.06 78 5.0 1,412 6.24
Total Expenses 366 27.7 6,658 32.00 379 27.1 6,895 32.02 394 26.1 7,168 31.68 406 26.1 7,384 32.63
GROSS HOUSE PROFIT 611 46.1 11,103 53.36 663 47.1 12,046 55.93 736 48.8 13,391 59.17 759 48.8 13,800 60.98
Management Fee 40 3.0 722 3.47 42 3.0 766 3.55 45 3.0 824 3.64 47 3.0 849 3.75
INCOME BEFORE NON-OPR. INC. & EXP. 571 43.1 10,381 49.89 620 44.1 11,280 52.38 691 45.8 12,567 55.53 712 45.8 12,951 57.23
NON-OPERATING INCOME & EXPENSE
Property Taxes 70 5.3 1,282 6.16 72 5.1 1,307 6.07 73 4.9 1,334 5.89 75 4.8 1,360 6.01
Insurance 27 2.0 485 2.33 27 2.0 499 2.32 28 1.9 514 2.27 29 1.9 530 2.34
Reserve for Replacement 26 2.0 481 2.31 42 3.0 766 3.55 60 4.0 1,099 4.85 62 4.0 1,132 5.00
Total Expenses 124 9.3 2,248 10.80 141 10.1 2,572 11.94 162 10.8 2,946 13.02 166 10.7 3,022 13.35
EBITDA LESS RESERVE $447 33.8 % $8,133 $39.09 $479 34.0 % $8,708 $40.44 $529 35.0 % $9,620 $42.51 $546 35.1 % $9,930 $43.88

*Departmental expenses are expressed as a percentage of departmental revenues.

June-2017 Executive Summary


Proposed Hotel – Lakeport, California 7
ATTACHMENT 2

FIGURE 1-5 TEN-YEAR FORECAST OF INCOME AND EXPENSE


2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Number of Rooms: 55 55 55 55 55 55 55 55 55 55
Occupied Rooms: 11,443 11,844 12,447 12,447 12,447 12,447 12,447 12,447 12,447 12,447
Occupancy: 57% 59% 62% 62% 62% 62% 62% 62% 62% 62%
Average Rate: $113.58 % of $116.42 % of $119.33 % of $122.91 % of $126.60 % of $130.40 % of $134.31 % of $138.34 % of $142.49 % of $146.76 % of
RevPAR: $64.74 Gross $68.69 Gross $73.99 Gross $76.21 Gross $78.49 Gross $80.85 Gross $83.27 Gross $85.77 Gross $88.34 Gross $90.99 Gross
OPERATING REVENUE
Rooms $1,300 98.2 % $1,379 98.3 % $1,485 98.3 % $1,530 98.3 % $1,576 98.3 % $1,623 98.3 % $1,672 98.3 % $1,722 98.3 % $1,774 98.3 % $1,827 98.3 %
Other Operated Departments 10 0.8 11 0.8 11 0.8 12 0.8 12 0.8 12 0.8 13 0.8 13 0.8 14 0.8 14 0.8
Miscellaneous Income 13 1.0 14 1.0 14 0.9 15 0.9 15 0.9 16 0.9 16 0.9 16 0.9 17 0.9 17 0.9
Total Operating Revenues 1,324 100.0 1,403 100.0 1,511 100.0 1,556 100.0 1,603 100.0 1,651 100.0 1,701 100.0 1,752 100.0 1,805 100.0 1,858 100.0
DEPARTMENTAL EXPENSES *
Rooms 339 26.1 354 25.6 371 25.0 382 25.0 394 25.0 406 25.0 418 25.0 430 25.0 443 25.0 457 25.0
Other Operated Departments 8 76.3 8 75.8 9 75.0 9 75.0 9 75.0 9 75.0 10 75.0 10 75.0 10 75.0 10 75.0
Total Expenses 347 26.2 362 25.8 380 25.1 391 25.1 403 25.1 415 25.1 428 25.1 440 25.1 454 25.1 467 25.1
DEPARTMENTAL INCOME 977 73.8 1,042 74.2 1,131 74.9 1,165 74.9 1,200 74.9 1,236 74.9 1,273 74.9 1,311 74.9 1,351 74.9 1,391 74.9
UNDISTRIBUTED OPERATING EXPENSES
Administrative & General 116 8.8 121 8.6 126 8.3 129 8.3 133 8.3 137 8.3 141 8.3 146 8.3 150 8.3 155 8.3
Info & Telecom Systems 13 1.0 14 1.0 14 0.9 15 0.9 15 0.9 15 0.9 16 0.9 16 0.9 17 0.9 17 0.9
Marketing 58 4.4 60 4.3 63 4.2 65 4.2 67 4.2 69 4.2 71 4.2 73 4.2 75 4.2 77 4.2
Franchise Fee 51 3.8 52 3.7 53 3.5 55 3.5 57 3.5 58 3.5 60 3.5 62 3.5 64 3.5 66 3.5
Prop. Operations & Maint. 58 4.4 60 4.3 63 4.2 65 4.2 67 4.2 69 4.2 71 4.2 73 4.2 75 4.2 77 4.2
Utilities 70 5.3 72 5.2 75 5.0 78 5.0 80 5.0 82 5.0 85 5.0 87 5.0 90 5.0 93 5.0
Total Expenses 366 27.7 379 27.1 394 26.1 406 26.1 418 26.1 431 26.1 444 26.1 457 26.1 471 26.1 485 26.1
GROSS HOUSE PROFIT 611 46.1 663 47.1 736 48.8 759 48.8 782 48.8 805 48.8 830 48.8 854 48.8 880 48.8 906 48.8
Management Fee 40 3.0 42 3.0 45 3.0 47 3.0 48 3.0 50 3.0 51 3.0 53 3.0 54 3.0 56 3.0
INCOME BEFORE NON-OPR. INC. & EXP. 571 43.1 620 44.1 691 45.8 712 45.8 734 45.8 756 45.8 778 45.8 802 45.8 826 45.8 851 45.8
NON-OPERATING INCOME & EXPENSE
Property Taxes 70 5.3 72 5.1 73 4.9 75 4.8 76 4.8 78 4.7 79 4.7 81 4.6 83 4.6 84 4.5
Insurance 27 2.0 27 2.0 28 1.9 29 1.9 30 1.9 31 1.9 32 1.9 33 1.9 34 1.9 35 1.9
Reserve for Replacement 26 2.0 42 3.0 60 4.0 62 4.0 64 4.0 66 4.0 68 4.0 70 4.0 72 4.0 74 4.0
Total Expenses 124 9.3 141 10.1 162 10.8 166 10.7 170 10.7 175 10.6 179 10.6 184 10.5 189 10.5 193 10.4
EBITDA LESS RESERVE $447 33.8 % $479 34.0 % $529 35.0 % $546 35.1 % $563 35.1 % $581 35.2 % $599 35.2 % $618 35.3 % $638 35.3 % $657 35.4 %
1 1 1 1 1 1 1 1 1 1
*Departmental expenses are expressed as a percentage of departmental revenues.

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As illustrated, the hotel is expected to stabilize at a profitable level. Please refer to


the Forecast of Income and Expense chapter of our report for a detailed explanation
of the methodology used in deriving this forecast.

Feasibility Conclusion The Feasibility Analysis chapter of this report converts these cash flows into a net
present value indication assuming set-forth debt and equity requirements. The
conclusion of this analysis indicates that an equity investor contributing $1,561,000
(roughly 25% of the $6,200,000 development cost) could expect to receive a 18.0%
internal rate of return over a ten-year holding period, assuming that the investor
obtains financing at the time of the project’s completion at the loan-to-value ratio
and interest rate set forth. The proposed subject hotel has an opportunity to target
clientele seeking higher-quality accommodations than what is currently available in
the local area. Based on our market analysis, there appears to be sufficient market
support for a proposed, midscale hotel offering 55 guestrooms. Our conclusions are
based primarily on regional market data and qualitative insight provided by local
stakeholders. Our review of investor surveys indicates equity returns ranging from
14.2% to 22.4%, with an average of 19.1%. Based on these parameters, the
calculated return to the equity investor, 18.0%, is within the range of market-level
returns given the anticipated cost of approximately $6,200,000.

Assignment Conditions “Extraordinary Assumption” is defined in USPAP as follows:

An assumption, directly related to a specific assignment, as of the effective


date of the assignment results, which, if found to be false, could alter the
appraiser’s opinions or conclusions. Comment: Extraordinary assumptions
presume as fact otherwise uncertain information about physical, legal, or
economic characteristics of the subject property; or about conditions
external to the property, such as market conditions or trends; or about the
integrity of data used in an analysis.1

The analysis is based on the extraordinary assumption that the described


improvements have been completed as of the stated date of opening. The reader
should understand that the completed subject property does not yet exist as of the
date of this report. Our feasibility study does not address unforeseeable events that
could alter the proposed project and/or the market conditions reflected in the
analyses; we assume that no significant changes, other than those anticipated and
explained in this report, shall take place between the date of inspection and stated
date of opening. The use of this extraordinary assumption may have affected the
assignment results. We have made no other extraordinary assumptions specific to
this feasibility study. However, several important general assumptions have been

1The Appraisal Foundation, Uniform Standards of Professional Appraisal Practice, 2016–2017


ed.

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Proposed Hotel – Lakeport, California 9
ATTACHMENT 2

made that apply to this feasibility study and our studies of proposed hotels in
general. These aspects are set forth in the Assumptions and Limiting Conditions
chapter of this report.

Intended Use of the This feasibility report is being prepared for use in the development of the proposed
Feasibility Study subject hotel.

Identification of the The client for this engagement is the City of Lakeport. It is our understanding that
Client and Intended this feasibility report will be utilized in discussions with potential hotel developers.
User(s)
Scope of Work The methodology used to develop this study is based on the market research and
valuation techniques set forth in the textbooks authored by Hospitality Valuation
Services for the American Institute of Real Estate Appraisers and the Appraisal
Institute, entitled The Valuation of Hotels and Motels,2 Hotels, Motels and
Restaurants: Valuations and Market Studies,3 The Computerized Income Approach to
Hotel/Motel Market Studies and Valuations,4 Hotels and Motels: A Guide to Market
Analysis, Investment Analysis, and Valuations,5 and Hotels and Motels – Valuations
and Market Studies.6

1. All information was collected and analyzed by the staff of TS Worldwide,


LLC. Information regarding the site was supplied by the City of Lakeport.
HVS was asked to provide recommendations regarding both the site and the
proposed hotel improvements.
2. The recommended subject site has been evaluated from the viewpoint of its
physical utility for the future operation of a hotel, as well as access, visibility,
and other relevant factors. We recommended that the necessary
environmental studies are completed prior to moving forward with the
development to ensure the viability of the site.

2 Stephen Rushmore, The Valuation of Hotels and Motels. (Chicago: American Institute of
Real Estate Appraisers, 1978).
3 Stephen Rushmore, Hotels, Motels and Restaurants: Valuations and Market Studies.

(Chicago: American Institute of Real Estate Appraisers, 1983).


4 Stephen Rushmore, The Computerized Income Approach to Hotel/Motel Market Studies and

Valuations. (Chicago: American Institute of Real Estate Appraisers, 1990).


5 Stephen Rushmore, Hotels and Motels: A Guide to Market Analysis, Investment

Analysis, and Valuations (Chicago: Appraisal Institute, 1992).


6 Stephen Rushmore and Erich Baum, Hotels and Motels – Valuations and Market Studies.

(Chicago: Appraisal Institute, 2001).

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3. The recommended improvements are expected to be of a quality of


construction, design, and layout efficiency that is consistent with typical
brand-affiliated, limited-service hotel properties.
4. The surrounding economic environment, on both an area and neighborhood
level, has been reviewed to identify specific hostelry-related economic and
demographic trends that may have an impact on future demand for hotels.
5. Dividing the market for hotel accommodations into individual segments
defines specific market characteristics for the types of travelers expected to
utilize the area's hotels. The factors investigated include purpose of visit,
average length of stay, facilities and amenities required, seasonality, daily
demand fluctuations, and price sensitivity.
6. An analysis of existing and proposed competition provides an indication of
the current accommodated demand, along with market penetration and the
degree of competitiveness. Unless noted otherwise, we have inspected the
competitive lodging facilities summarized in this report.
7. Documentation for an occupancy and average rate projection is derived
utilizing the build-up approach based on an analysis of lodging activity.
8. A detailed projection of income and expense made in accordance with the
Uniform System of Accounts for the Lodging Industry sets forth the
anticipated economic benefits of the subject property.
9. A feasibility analysis is performed, in which the market equity yield an
investor would expect is compared to the equity yield an investor must
accept.

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2. Description of the Site and Neighborhood

The suitability of the land for the operation of a lodging facility is an important
consideration affecting the economic viability of a property and its ultimate
marketability. Factors such as size, topography, access, visibility, and the availability
of utilities have a direct impact on the desirability of a particular site.

We were asked to review the pertinent physical and qualitaitive attributes of six
sites located in the City of Lakeport.

FIGURE 2-1 IDENTIFICATION OF EVALUATED SITES

Site
Option Location Location Type Size

Willow Point / C Lakefront, Main


A Up to 14.2 Acres
Street Properties Street

Main Street (4th & Lakefront, Main


B Roughly 1.5 Acres
5th Street) Street

Roughly 2.25 Acres


Dutch Harbor (910 Lakefront, Main
C (assuming lot line
N. Main Street) Street
adjustment)

Highway 29
D 1255 Martin Street Up to 10.5 Acres
Corridor

Vista Point Shopping Highway 29


E Up to 8.5 Acres
Center Corridor

Highway 29
F 1842 Todd Road Up to 15 Acres
Corrdior

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AERIAL VIEW: SITE A – WILLOW POINT/C STREET PROPERTIES

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AERIAL VIEW: SITE B – MAIN STREET (4TH & 5TH STREET)

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AERIAL VIEW: SITE C – DUTCH HARBOR (910 N. MAIN STREET)

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AERIAL VIEW: SITES D & E – 1255 MARTIN STREET & VISTA POINT

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AERIAL VIEW: SITE F – 1842 TODD ROAD

The suitability of each site for potential hotel development was evaluated based on
the factors detailed in the following table.

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Proposed Hotel – Lakeport, California 17
ATTACHMENT 2

FIGURE 2-2 SITE ANALYSIS MATRIX

Site Option
Development Factors & Considerations A B C D E F

1. Si ze of Si te Supporti ve of Hotel Opera ti on 5 1 5 5 5 5

2. Mi ni ma l Fl oodpl a i n Concerns 1 3 3 5 5 5

3. Li kel y Speed of Devel opment (Va ca nt or Improved?) 3 1 5 5 1 5

4. Acces s to/from Hi ghwa y 29 3 3 3 5 5 5

5. Currentl y Control l ed/Percei ved Ea s e of Acqui s i ti on 3 1 5 5 5 5

6. Supporti ve of La kefront Devel opment Ini ti a ti ve 5 5 5 1 1 1

7. Wa l ka bi l i ty to Compl ementa ry Us es 5 5 5 1 3 1

8. Opportuni ti es for Future Expa ns i on/Mi xed Us es 5 1 3 5 5 5

TOTAL SCORE 30 20 34 32 30 32

FIGURE 2-3 SITE ANALYSIS MATRIX

Ranking Site

1 Dutch Harbor (910 N. Main Street)


2 1255 Ma rti n Street
2 1842 Todd Roa d
3 Wi l l ow Poi nt
3 Vi s ta Poi nt Shoppi ng Center
4 Ma i n Street (4th & 5th)

The recommended site for hotel development is located directly east of the
intersection of North Main Street and 9th Street. This vacant site features direct
frontage on Clear Lake and benefits from easy access to retail and food and beverage
outlets located along the Main Street corridor. For the purposes of the discussion,
the site has been identified as Dutch Harbor.

Physical Characteristics Based on information from the City of Lakeport the recommended subject site will
measure approximately 2.25 acres, or 98,010 square feet. The parcel's adjacent uses
are set forth in the following table.

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FIGURE 2-4 SUBJECT PARCEL'S ADJACENT USES

Direction Adjacent Use

North Anchorage Inn


South Vacant Land, Natural High (clos ed)
East Clear Lake
West North Main Street, Church Building

Topography and The topography of the site is generally flat, and the shape should permit efficient
Site Utility use of the site for building and site improvements, including ingress and egress.
According to details provided by the City of Lakeport, the total buildable area of the
site is 1.4 acres. Our analysis assumes that a portion of an adjacent site (south of the
main subject parcel) can be annexed to increase the size of the site to a minimum of
2.25 acres. This is an important consideration given the need for ample parking to
accommodate boats and watercraft. Upon completion of construction, the subject
site will not contain any significant portion of undeveloped land that could be sold,
entitled, and developed for alternate use. It is expected that the site will be
developed fully with building and site improvements, thus contributing to the
overall profitability of the hotel.

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AERIAL PHOTOGRAPH: DUTCH HARBOR SITE

Access and Visibility It is important to analyze the site with respect to regional and local transportation
routes and demand generators, including ease of access. The subject site is readily
accessible to a variety of local and county roads, as well as state and interstate
highways.

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Proposed Hotel – Lakeport, California 20
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MAP OF REGIONAL ACCESS ROUTES

Primary regional access through the area is provided by north/south State Highway
29, which extends north from Interstate 80 in Vallejo, terminating at State Highway
20 in Upper Lake. East/west Interstate 80 provides access to such cities as
Sacramento to the northeast and San Francisco to the west. North/south U.S.
Highway 101 is another major route, which provides access to San Francisco to the
south and Santa Rosa to the north. The subject market is served by a variety of
additional local highways, which are illustrated on the map.

Vehicular access to the subject site is provided by Main Street. The subject site is
located along the Main Street corridor and is relatively simple to locate from
Highway 29, which is the nearest highway. In general, the City of Lakeport is
somewhat remotely located, with primary access to the area provided by Highway
29. The proposed subject hotel is anticipated to have adequate signage at the street,
as well as on its façade. Overall, the subject site benefits from good accessibility, and
the proposed hotel is expected to enjoy very good visibility from within its local
neighborhood.

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Airport Access The closest major airports to the City of Lakeport include Sacramento International
Airport (75 miles to the east), Oakland International Airport (100 miles to the
southeast), and San Francisco International Airport (105 miles to the southeast).

Neighborhood The neighborhood surrounding a lodging facility often has an impact on a hotel's
status, image, class, style of operation, and sometimes its ability to attract and
properly serve a particular market segment. This section of the report investigates
the subject neighborhood and evaluates any pertinent location factors that could
affect its future occupancy, average rate, and overall profitability.

MAP OF NEIGHBORHOOD

The neighborhood that surrounds the subject site is generally defined by 16th Street
to the north, Clear Lake to the east, Willow Point to the south, and Highway 29 to
the west. The neighborhood is characterized by restaurants, small-scale office
buildings, government buildings, and retail shopping centers along the primary
thoroughfares, with residential areas located along the secondary roadways. Direct
access to Clear Lake, the largest freshwater lake in California, is considered a major
driver of economic activity in the local market area. Some specific businesses and

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Proposed Hotel – Lakeport, California 22
ATTACHMENT 2

entities in the area include Lakeport City Hall, Lakeport Camper & Truck, and
Lakeport Yacht Club. Hotels in the vicinity include the Anchorage Inn and Lakeport
English Inn, while restaurants located near the subject site include Angelina's
Bakery & Espresso, Twisted Sisters Pub & Grill, and Park Place; the proximity of
these restaurants is considered supportive of the operation of a limited-service
lodging property.

In general, this neighborhood is in the revitalization stage of its life cycle. We were
provided with a draft copy of the Lakeport Lakefront Revitalization Plan prepared
by DesignWorkshop. This report, commissioned by the City of Lakeport,
contemplates redevelopment opportunities along the city's primary waterfront
area. A key recommendation from DesignWorkshop, is the creation of a master plan
that supports enhanced retail and other commercial uses. DesignWorkshop also
recommended the evaluation of the Dutch Harbor Site for potential sale or land
swap for the development as a hotel, retail, or community center. The city's ongoing
support and focus on the redevelopment effort is expected to remain a driving force
behind the revitalization of the neighborhood.

The proposed subject hotel's opening should be a positive influence on the area; the
hotel will be in character with and will complement surrounding land uses. Overall,
the supportive nature of the development in the immediate area is considered
appropriate for and conducive to the operation of a hotel. The hotel is expected to
be one component of the neighborhood revitalization effort supported by the City
of Lakeport and area stakeholders.

Proximity to Local The subject site is located near the area's primary generators of lodging demand. A
Demand Generators sample of these demand generators is reflected on the following map, including
and Attractions respective distances from and drive times to the subject site. Overall, the subject site
is well situated with respect to demand generators.

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ACCESS TO DEMAND GENERATORS AND ATTRACTIONS

Utilities The subject site will reportedly be served by all necessary utilities.

Seismicity, Soil and The site is located within an identified Seismic Zone 4. This condition is consistent
Subsoil Conditions with the surrounding real estate and does not affect the subject site's utility or
marketability. Geological and soil reports were not provided to us or made available
for our review during the preparation of this report. We are not qualified to evaluate
soil conditions other than by a visual inspection of the surface; no extraordinary
conditions were apparent.

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ATTACHMENT 2

Nuisances We were not informed of any site-specific nuisances or hazards, and there were no
and Hazards visible signs of toxic ground contaminants at the time of our inspection. Because we
are not experts in this field, we do not warrant the absence of hazardous waste and
urge the reader to obtain an independent analysis of these factors.

Flood Zone According to the Federal Emergency Management Agency map illustrated below,
the subject site is located in X.

COPY OF FLOOD MAP AND COVER

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Proposed Hotel – Lakeport, California 25
ATTACHMENT 2

The flood zone definition for the X designation is as follows: areas outside the 500-
year flood plain; areas of the 500-year flood; areas of the 100-year flood with
average depths of less than one foot or with drainage areas less than one square
mile and areas protected by levees from the 100-year flood.

Zoning According to the local planning office, the subject property is zoned as follows:
Commercial Retail & Lodging Development. Additional details pertaining to the
proposed subject property’s zoning regulations are summarized in the following
table.

FIGURE 2-5 ZONING

Municipality Governing Zoning City of Lakeport


Current Zoning Major Retail & Res ort Resi dential
Current Use Vacant
Is Current Us e Permitted Not applicable
Is Change in Zoning Likely Yes
Permitted Us es Commercial Retail and Lodging Development
Hotel Allowed Yes
Legally Non-Conforming Not Applicable

Easements and We are not aware of any easements attached to the property that would significantly
Encroachments affect the utility of the site or marketability of this project.

Conclusion We have analyzed the issues of size, topography, access, visibility, and the
availability of utilities. The subject site is favorably located along the lakefront and
the Main Street corridor of Lakeport. In general, the site should be well suited for
future hotel use, with acceptable access, visibility, and topography for an effective
operation.

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ATTACHMENT 2

3. Market Area Analysis

The economic vitality of the market area and neighborhood surrounding the subject
site is an important consideration in forecasting lodging demand and future income
potential. Economic and demographic trends that reflect the amount of visitation
provide a basis from which to project lodging demand. The purpose of the market
area analysis is to review available economic and demographic data to determine
whether the local market will undergo economic growth, stabilize, or decline. In
addition to predicting the direction of the economy, the rate of change must be
quantified. These trends are then correlated based on their propensity to reflect
variations in lodging demand, with the objective of forecasting the amount of
growth or decline in visitation by individual market segment (e.g., commercial,
meeting and group, and leisure).

Market Area Definition The market area for a lodging facility is the geographical region where the sources
of demand and the competitive supply are located. The subject site is located in the
city of Lakeport, the county of Lake, and the state of California. The City of Lakeport
is strategically located near California State Route 29, which connects Interstate 80
in Vallejo to State Route 20 in Upper Lake. Lakeport is positioned on the northwest
shore of Clear Lake at an elevation of 1,355 feet. The city was formally incorporated
in 1888 and was home to just under 5,000 residents as of 2016. The primary drivers
of economic activity in the area include tourism, agriculture, government, and
medical services. Access to the City of Lakeport from the region's major population
centers (Sacramento and the San Francisco Bay area) is considered limited. Still, the
area is gaining prominence as an up-and-coming wine region, which is expected to
have a positive impact on future tourism demand.

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Proposed Hotel – Lakeport, California 27
ATTACHMENT 2

LAKEPORT

The following exhibit illustrates the market area.

June-2017 Market Area Analysis


Proposed Hotel – Lakeport, California 28
ATTACHMENT 2

MAP OF MARKET AREA

Economic and A primary source of economic and demographic statistics used in this analysis is the
Demographic Review Complete Economic and Demographic Data Source published by Woods & Poole
Economics, Inc.—a well-regarded forecasting service based in Washington, D.C.
Using a database containing more than 900 variables for each county in the nation,
Woods & Poole employs a sophisticated regional model to forecast economic and
demographic trends. Historical statistics are based on census data and information
published by the Bureau of Economic Analysis. Projections are formulated by
Woods & Poole, and all dollar amounts have been adjusted for inflation, thus
reflecting real change.

These data are summarized in the following table.

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Proposed Hotel – Lakeport, California 29
ATTACHMENT 2
FIGURE 3-1 ECONOMIC AND DEMOGRAPHIC DATA SUMMARY

Average Annual
Compounded Change
2000 2010 2016 2020 2000-10 2010-16 2016-20

Resident Population (Thousands)


La ke County 58.5 64.8 65.2 67.2 1.0 % 0.1 % 0.8 %
Sta te of Ca l ifornia 33,988.0 37,336.0 39,542.3 41,124.7 0.9 1.0 1.0
Uni ted Sta tes 282,162.4 309,347.1 324,506.9 336,690.4 0.9 0.8 0.9
Per-Capita Personal Income*
La ke County $28,932 $29,062 $34,222 $36,755 0.0 2.8 1.8
Sta te of Ca l ifornia 40,167 41,721 47,259 50,083 0.4 2.1 1.5
Uni ted Sta tes 36,812 39,622 43,613 46,375 0.7 1.6 1.5
W&P Wealth Index
La ke County 77.7 73.5 77.7 78.3 (0.5) 0.9 0.2
Sta te of Ca l ifornia 108.8 106.1 108.9 108.6 (0.3) 0.4 (0.1)
Uni ted Sta tes 100.0 100.0 100.0 100.0 0.0 0.0 0.0
Food and Beverage Sales (Millions)*
La ke County $36 $42 $53 $57 1.4 4.1 1.8
Sta te of Ca l ifornia 46,670 58,066 72,104 77,326 2.2 3.7 1.8
Uni ted Sta tes 368,829 447,728 562,999 602,635 2.0 3.9 1.7
Total Retail Sales (Millions)*
La ke County $497 $529 $574 $611 0.6 1.4 1.6
Sta te of Ca l ifornia 446,480 480,529 563,861 604,151 0.7 2.7 1.7
Uni ted Sta tes 3,902,830 4,130,414 4,846,834 5,181,433 0.6 2.7 1.7

* Inflation Adjusted
Source: Woods & Poole Economi cs , Inc.

June-2017 Market Area Analysis


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ATTACHMENT 2

The U.S. population has grown at an average annual compounded rate of 0.8% from
2010 through 2016. The county’s population has grown more slowly than the
nation’s population; the average annual growth rate of 0.1% between 2010 and
2016 reflects a gradually expanding area. Following this population trend, per-
capita personal income increased modestly, at 2.8% on average annually for the
county between 2010 and 2016. Local wealth indexes have remained stable in
recent years, registering a relatively low 77.7 level for the county in 2016.

Food and beverage sales totaled $53 million in the county in 2016, versus $42
million in 2010. This reflects a 4.1% average annual change, which is stronger than
the 1.4% pace recorded in the prior decade, the latter years of which were adversely
affected by the recession. Over the long term, the pace of growth is forecast to
moderate to a more sustainable level of 1.8%, which is forecast through 2020. The
retail sales sector demonstrated an annual increase of 0.6% registered in the decade
2000 to 2010, followed by an increase of 1.4% in the period 2010 to 2016. An
increase of 1.6% average annual change is expected in county retail sales through
2020.

Workforce The characteristics of an area's workforce provide an indication of the type and
Characteristics amount of transient visitation likely to be generated by local businesses. Sectors
such as finance, insurance, and real estate (FIRE); wholesale trade; and services
produce a considerable number of visitors who are not particularly rate-sensitive.
The government sector often generates transient room nights, but per-diem
reimbursement allowances often limit the accommodations selection to budget and
mid-priced lodging facilities. Contributions from manufacturing, construction,
transportation, communications, and public utilities (TCPU) employers can also be
important, depending on the company type.

The following table sets forth the county workforce distribution by business sector
in 2000, 2010, and 2016, as well as a forecast for 2020.

June-2017 Market Area Analysis


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ATTACHMENT 2

FIGURE 3-2 HISTORICAL AND PROJECTED EMPLOYMENT (000S)

Average Annual
Compounded Change
Percent Percent Percent Percent 2000- 2010- 2016-
Industry 2000 of Total 2010 of Total 2016 of Total 2020 of Total 2010 2016 2020

Fa rm 1.6 7.4 % 1.2 5.5 % 1.0 4.0 % 1.0 3.9 % (3.1) % (2.8) % 0.5 %
Fores try, Fis hing, Rel a ted Acti vitie s And Other 0.5 2.2 0.7 3.1 1.0 3.9 1.0 3.8 3.0 6.8 1.0
Mi ni ng 0.1 0.3 0.1 0.4 0.1 0.5 0.1 0.5 3.0 5.8 0.6
Uti li ti es 0.1 0.4 0.4 2.0 0.4 1.7 0.4 1.7 17.2 0.4 0.6
Cons tructi on 1.5 7.1 1.2 5.9 1.3 5.4 1.5 5.6 (2.2) 1.4 2.1
Ma nufa cturing 0.6 2.7 0.4 1.8 0.6 2.3 0.6 2.2 (4.3) 6.9 1.0
Tota l Tra de 2.9 13.2 2.7 12.9 3.2 12.9 3.3 12.8 (0.5) 2.6 1.3
Wholes a le Tra de 0.3 1.2 0.2 1.1 0.2 1.0 0.3 1.0 (1.4) 0.5 1.4
Reta il Tra de 2.6 11.9 2.5 11.8 2.9 11.9 3.1 11.8 (0.4) 2.8 1.3
Tra ns porta tion And Wa rehous i ng 0.4 1.6 0.3 1.5 0.3 1.4 0.3 1.3 (1.1) 1.3 0.4
Informa tion 0.2 1.0 0.2 1.0 0.2 0.9 0.2 0.8 (0.8) 1.2 0.1
Fina nce And Ins ura nce 0.5 2.4 0.6 2.7 0.6 2.2 0.6 2.3 1.1 (0.5) 1.8
Rea l Es ta te And Renta l And Lea s e 1.1 5.2 1.3 6.1 1.2 5.0 1.3 5.0 1.3 (0.6) 1.5
Tota l Servi ces 8.1 37.2 8.0 37.9 10.6 42.9 11.3 43.2 (0.1) 4.7 1.7
Profes s iona l And Technica l Services 1.0 4.6 1.0 4.8 1.0 4.0 1.0 3.8 0.2 (0.6) 0.3
Ma na gement Of Compa nies And Enterpri s es 0.2 0.7 0.0 0.2 0.1 0.3 0.1 0.4 (13.8) 16.2 2.0
Admini s tra tive And Wa s te Services 0.9 4.0 0.8 3.8 0.8 3.3 0.9 3.3 (0.8) 0.6 0.8
Educa ti ona l Servi ces 0.1 0.5 0.1 0.7 0.2 0.6 0.2 0.6 4.0 1.2 1.1
Hea lth Ca re And Socia l As s i s ta nce 2.3 10.7 2.7 12.8 5.1 20.7 5.6 21.5 1.5 11.2 2.5
Arts , Enterta i nment, And Recrea tion 0.4 1.9 0.3 1.5 0.4 1.4 0.4 1.4 (2.5) 1.5 1.2
Accommoda tion And Food Services 1.6 7.3 1.4 6.4 1.3 5.4 1.4 5.3 (1.5) (0.4) 1.2
Other Services , Except Publ ic Admi nis tra ti on 1.6 7.5 1.6 7.7 1.8 7.1 1.8 7.0 0.0 1.2 1.0
Tota l Government 4.2 19.2 4.1 19.4 4.2 16.9 4.4 16.9 (0.2) 0.3 1.5
Federa l Civi li a n Government 0.2 0.8 0.2 0.9 0.1 0.6 0.1 0.6 1.0 (4.4) 0.2
Federa l Mi li ta ry 0.1 0.5 0.1 0.5 0.1 0.4 0.1 0.4 (0.6) (1.5) 0.0
Sta te And Loca l Government 3.9 17.9 3.8 18.0 3.9 15.9 4.2 15.9 (0.2) 0.5 1.6

TOTAL 21.7 100.0 % 21.2 100.0 % 24.7 100.0 % 26.2 100.0 % (0.2) % 2.6 % 1.5 %
U.S. 165,370.9 — 173,034.7 — 191,870.8 — 203,418.4 — 0.9 1.7 1.5

Source: Woods & Pool e Economi cs , Inc.

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Woods & Poole Economics, Inc. reports that during the period from 2000 to 2010,
total employment in the county contracted at an average annual rate of -0.2%. This
trend lagged the national average. More recently, the pace of total employment
growth in the county accelerated to 2.6% on an annual average from 2010 to 2016,
reflecting the initial years of the recovery.

Of the primary employment sectors, Total Services recorded the highest increase in
number of employees during the period from 2010 to 2016, increasing by 2,566
people, or 32.0%, and rising from 37.9% to 42.9% of total employment. Of the
various service sub-sectors, Health Care And Social Assistance and Other Services,
Except Public Administration were the largest employers. Strong growth was also
recorded in the Total Trade sector, as well as the Forestry, Fishing, Related Activities
And Other sector, which expanded by 16.6% and 48.8%, respectively, in the period
2010 to 2016. Forecasts developed by Woods & Poole Economics, Inc. anticipate
that total employment in the county will change by 1.5% on average annually
through 2020. The trend is below the forecast rate of change for the U.S. as a whole
during the same period.

Radial Demographic The following table reflects radial demographic trends for our market area
Snapshot measured by three points of distance from the subject site.

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FIGURE 3-3 DEMOGRAPHICS BY RADIUS

0.00 - 1.00 miles 0.00 - 3.00 miles 0.00 - 5.00 miles


Population
2022 Projection 3,859 7,325 10,156
2017 Es timate 3,939 7,452 10,324
2010 Cens us 4,200 7,889 10,906
2000 Cens us 4,260 8,018 10,839
Growth 2017 - 2022 -2.0% -1.7% -1.6%
Growth 2010 - 2017 -6.2% -5.5% -5.3%
Growth 2000 - 2010 -1.4% -1.6% 0.6%
Households
2022 Projection 1,661 3,089 4,199
2017 Es timate 1,681 3,123 4,249
2010 Cens us 1,754 3,250 4,432
2000 Cens us 1,734 3,147 4,219
Growth 2017 - 2022 -1.2% -1.1% -1.2%
Growth 2010 - 2017 -4.2% -3.9% -4.1%
Growth 2000 - 2010 1.1% 3.3% 5.1%
Income
2017 Es t. Average Hous ehold Income $63,139 $61,326 $61,639
2017 Es t. Median Hous ehold Income 43,419 44,863 45,973
2017 Est. Civ. Employed Pop 16+ by Occupation 1,538 2,863 3,912
Architect/Engineer 53 73 87
Arts /Entertainment/Sports 58 71 78
Building Grounds Maintenance 15 40 57
Bus iness /Financial Operations 40 60 68
Community/Social Services 0 2 6
Computer/Mathematical 6 13 24
Cons truction/Extraction 48 129 191
Education/Training/Library 97 150 194
Farming/Fis hing/Fores try 74 125 160
Food Prep/Serving 57 124 170
Health Practitioner/Technician 66 128 173
Healthcare Support 64 104 142
Maintenance Repair 82 142 179
Legal 13 18 18
Life/Phys ical/Social Science 0 16 34
Management 224 370 503
Office/Admin. Support 259 516 728
Production 45 91 127
Protective Services 54 128 192
Sales /Related 123 255 342
Pers onal Care/Service 106 203 286
Trans portation/Moving 54 106 152
Source: The Niels en Company

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This source reports a population of 10,324 within a five-mile radius of the subject
site, and 4,249 households within this same radius. Average household income
within a five-mile radius of the subject site is currently reported at $61,639, while
the median is $45,973.

Unemployment The following table presents historical unemployment rates for the proposed
Statistics subject hotel’s market area.

FIGURE 3-4 UNEMPLOYMENT STATISTICS

Year County State Country


2007 8.4 % 5.4 % 4.6 %
2008 10.7 7.3 5.8
2009 15.0 11.2 9.3
2010 15.1(r) 12.2 9.6
2011 14.5(r) 11.7 8.9
2012 12.8(r) 10.4(d) 8.1
2013 10.9(r) 8.9(d) 7.4
2014 8.9(r) 7.5(d) 6.2
2015 7.6(r) 6.2(d) 5.3
2016 6.6(r) 5.4(d) 4.9
Recent Month - Apr
2016 6.7 % 5.4 % 5.0 %
2017 5.6 4.5 4.4

* Letters s hown next to data points (if any) reflect revised


population controls and/or model re-es timation
implemented by the BLS.
Source: U.S. Bureau of Labor Statis tics

After the U.S. unemployment rate declined to an annual average of 4.6% in 2006 and
2007, the Great Recession, which spanned December 2007 through June 2009,
resulted in heightened unemployment rates. The unemployment rate peaked at
10.0% in October 2009, after which job growth resumed; the national
unemployment rate has steadily declined since 2010. Total nonfarm payroll
employment increased by 155,000, 238,000, and 235,000 jobs in December,
January, and February, respectively. The strongest gains in February were recorded
in the construction, private educational services, manufacturing, health care, and
mining sectors. The national unemployment rate remains low, at 4.7% in December,
4.8% in January, and 4.7% in February; it has remained near the 5.0% mark since
August 2015, reflecting a trend of relative stability and the overall strength of the
U.S. economy.

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Locally, the unemployment rate was 6.6(r)% in 2016; for this same area in 2017,
the most recent month’s unemployment rate was registered at 5.6%, versus 6.7%
for the same month in 2016. Unemployment began to rise in 2007 as the region
entered an economic slowdown, and this trend continued through 2010 as the
height of the national recession took hold. However, unemployment declined in
2011 as the economy rebounded, a trend that continued through 2016. The most
recent comparative period illustrates improvement, indicated by the lower
unemployment rate in the latest available data for 2017.

Major Business and Providing additional context for understanding the nature of the regional economy,
Industry the following table presents a list of the major employers in the subject property’s
market.

FIGURE 3-5 MAJOR EMPLOYERS

Firm

Bruno's Shop Smart


Evergreen La keport Healthca re
Konocti Vista Ca sino
La ke County Record Bee
La ke County Tri bal Hea lth
La keport Ski l led Nurs i ng Center
People Services Inc.
Robinson Ra ncheria Bingo & Ca s ino
Running Creek Cas ino
Sutter La kes ide Hos pital

Source: ALMIS Employer Da tabas e, 2017

The following bullet points highlight major demand generators for this market:

· Clear Lake is the largest natural freshwater lake in the state of California, with
68 square miles of surface area. Known as the "Bass Capital of the West," Clear
Lake supports large populations of bass, crappie, bluegill, carp, and catfish. Two-
thirds of the fish caught in Clear Lake are largemouth bass, with a record of
17.52 pounds. Clear Lake was most recently ranked by Bassmaster Magazine in
2016 as the #3 best bass lake in the United States and the #1 best bass lake on
the West Coast. Clear Lake is the site of multiple Bass Tournaments each year,
with roughly 24 such events held on the lake in 2016. Most of these tournaments
were held out of Konocti Vista Resort & Casino, with team tournaments drawing

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30 to 60 boats and professional/amateur (pro-am) tournaments attracting up


to 100 boats.
· Agriculture has continued to play an important role for the economy of Lakeport
and the greater Lake County region. According to the 2015 Lake County Crop
Report, the gross value of Lake County agriculture production for 2015 was
$101,135,648, an increase of 9% from the previous year. This increase is
attributable to the increase in value of the wine grape and pear industries. The
gross value of wine grapes was $63,390,181, an increase of 7% from 2014. The
total tonnage was 38,786 and the total grape acreage was 9,455, an increase of
673 acres. The tons per acre increased slightly and the average price per ton
increased by 7%. The wine grape return (price per ton) was the highest on
record. Lake County is home to nearly 170 wine grape growers and a total of 32
wineries. The impact of positive press and recognition of the area's wine region
is expected to drive increased visitation to the county.
· Lakeport is home to Sutter Lakeside Hospital, a 25-bed critical access hospital
accredited by the Joint Commission. The hospital is affiliated with the Sutter
Health Network which serves over 20 Northern California counties. In 2016, the
facility completed renovation of its 18 medical surgical inpatient rooms. Ceiling
lifts were installed in these units, in addition to updated bathrooms, new floors,
new blinds, and fresh paint. Also in 2016, the facility completed a reorganization
of existing rooms in the emergency department (ED) to cut patient wait times.
Patients whose cases are not urgent now wait in rooms equipped with chairs
instead of beds and are treated by mid-level providers.
Lakeport, and the greater Lake County region, are expected to continue to benefit
from the presence of Clear Lake and the growing prominence of the region's wine
industry. While access to Lakeport is somewhat limited, the remote nature of the
location has served to preserve the natural beauty of the region. The area's primary
attractions (Clear Lake, outdoor recreation, wine) are expected to support growth
for the regional economy, and tourism in particular, for the long term.

Airport Traffic Airport passenger counts are important indicators of lodging demand. Depending
on the type of service provided by a particular airfield, a sizable percentage of
arriving passengers may require hotel accommodations. Trends showing changes
in passenger counts also reflect local business activity and the overall economic
health of the area.

Sacramento International Airport is the gateway to Northern California and serves


the greater Sacramento region, including Stockton, Chico, and Napa. This two-
runway facility services multiple international and national carriers, offering 145
nonstop flights to 30 destinations. Completed in 2012, The Big Build was a $1.08-
billion airport modernization project to replace the airport’s almost 40-year-old

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Terminal B to meet the rising demand for passenger services and improve the
airport’s ability to attract new carriers and routes. The new 680,000-square-foot
Terminal B facility was completed in the fall of 2011, including offices for airline
support services, parking, and an automated people mover to connect the two
terminals. Demolition of the old Terminal B and construction of new overnight
aircraft parking space were completed in August 2012. The 17,000-square-foot food
court in Terminal A was remodeled in 2015, and new local restaurants were added.
In July 2016, Sacramento became one of nine airports to offer the Global Entry
program by the U.S. Customs and Border Protection Department.

The following table illustrates recent operating statistics for the Sacramento
International Airport, which is the primary airport facility serving the proposed
subject hotel’s submarket.

FIGURE 3-6 AIRPORT STATISTICS - SACRAMENTO INTERNATIONAL AIRPORT

Passenger Percent Percent


Year Traffic Change* Change**

2007 10,767,639 — —
2008 9,982,427 (7.3) % (7.3) %
2009 8,914,510 (10.7) (9.0)
2010 8,850,239 (0.7) (6.3)
2011 8,929,289 0.9 (4.6)
2012 8,910,570 (0.2) (3.7)
2013 8,685,368 (2.5) (3.5)
2014 8,972,756 3.3 (2.6)
2015 9,609,880 7.1 (1.4)
2016 10,118,794 5.3 (0.7)

*Annual average compounded percentage change from the previous year


**Annual average compounded percentage change from firs t year of data

Source: Sacramento International Airport

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FIGURE 3-7 LOCAL PASSENGER TRAFFIC VS. NATIONAL


TREND

8%
6%

Cha nge in Pa ssenger Acti vity


4%
2%
0%
-2%
-4%
-6%
-8%
-10%
-12%
2008 2009 2010 2011 2012 2013 2014 2015 2016

Local Passenger Volume National Passenger Volume

Source: HVS, Local Airport Authority

This facility recorded 10,118,794 passengers in 2016. The change in passenger


traffic between 2015 and 2016 was %. The average annual change during the period
shown was %. The recent uptick in passenger traffic can be attributed in large part
to increased service by major air carriers in response to stronger economic
conditions and a rise in demand. Within the last few years, airlines have added new
direct flights to cities including Seattle, Boston, Chicago, Baltimore, and Mexico City.

Oakland International Airport (OAK) is located eight miles south of Downtown


Oakland in Alameda County, California and is one of three international airports in
the San Francisco Bay Area. Major commercial airlines, specifically low-cost
carriers, service the airport. In 2008, Oakland International Airport completed a
$300-million Terminal Improvement Program; projects included a new concourse
with additional boarding gates and waiting areas, expanded ticketing areas,
improved security and baggage claim facilities, and improved terminal access.
These improvements are part of an ongoing $1.4-billion Airport Development
Program that began in 2003. The Bay Area Rapid Transit (BART) line to Oakland
International Airport opened to the public in November 2014. Interior construction
is underway to modernize the Terminal 1 complex and to make needed seismic
retrofitting improvements; the project is scheduled for completion by mid-year
2017.

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The following table illustrates recent operating statistics for the Oakland
International Airport, which is the secondary airport facility serving the proposed
subject property’s submarket.

FIGURE 3-8 AIRPORT STATISTICS – OAKLAND INTERNATIONAL AIRPORT

Passenger Percent Percent


Year Traffic Change* Change**

2007 14,417,645 — —
2008 11,474,456 (20.4) % (20.4) %
2009 9,505,281 (17.2) (18.8)
2010 9,542,333 0.4 (12.9)
2011 9,266,570 (2.9) (10.5)
2012 10,040,864 8.4 (7.0)
2013 9,742,887 (3.0) (6.3)
2014 10,336,788 6.1 (4.6)
2015 11,205,063 8.4 (3.1)
2016 12,070,967 7.7 (2.0)

*Annual average compounded percentage change from the previous year


**Annual average compounded percentage change from first year of data

Source: Oakland International Airport

Air traffic registered 12,070,967 passengers in 2016. The change in passenger


traffic between 2015 and 2016 was 7.7%. The fluctuation in passenger statistics
over the historical period can be attributed in part to the airport's reliance on
compression from SFO and the slow pace of recovery as flight schedules returned to
the airport. Nine nonstop destinations were added to the airport in 2015. The most
recent year-to-date comparative period illustrates a notable increase, largely
attributed to increased airlift by air carriers in response to stronger economic
conditions and a rise in demand. In 2016, Southwest Airlines added 13 daily
domestic flights. Furthermore, Southwest is anticipated to start three new routes to
Puerto Vallarta, Los Cabos, and New York by June 2017, while Spirit Airlines and
Norwegian Airlines are expected to add two domestic routes and two international
routes, respectively.

San Francisco International Airport is situated approximately 14 miles south of the


San Francisco city center. San Francisco International is one of the busiest airports
in the country, with extensive international and national service. The airport
features ample amenities and services, which include various restaurants, shops,
spa treatments, business centers, an aviation library, and a children's area. Many

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major commercial airlines service the airport. In May 2013, airport officials
unveiled a ten-year, $4.1-billion capital improvement plan to upgrade the airport's
facilities, creating more than 36,000 jobs over the next ten years. A new air-traffic-
control tower, which replaced a control tower located atop Terminal 2, was
completed in January 2014. A complete renovation of Boarding Area B in Terminal
1 and a new luxury hotel are part of the project. These components recently passed
environmental studies. In November 2015, the airport unveiled a 53,000-square-
foot expansion of its Terminal 3 East Concourse, which connects boarding areas E
and F; this project also included three new boarding gates, a new United Club
location, and a larger central security checkpoint.

The following table illustrates recent operating statistics for the San Francisco
International Airport, which is the third airport facility serving the proposed subject
property’s submarket.

FIGURE 3-9 AIRPORT STATISTICS – SAN FRANCISCO INTERNATIONAL


AIRPORT

Passenger Percent Percent


Year Traffic Change* Change**

2007 35,790,835 — —
2008 37,402,541 4.5 % 4.5 %
2009 37,453,634 0.1 2.3
2010 39,116,764 4.4 3.0
2011 40,810,141 4.3 3.3
2012 44,477,209 9.0 4.4
2013 45,011,764 1.2 3.9
2014 47,155,100 4.8 4.0
2015 50,067,094 6.2 4.3
2016 53,106,505 6.1 4.5

*Annual average compounded percentage change from the previous year


**Annual average compounded percentage change from firs t year of data

Source: San Francis co International Airport

Air traffic registered 53,106,505 passengers in 2016. The change in passenger


traffic between 2015 and 2016 was 6.1%. San Francisco International Airport
continues to experience robust growth. Passenger traffic reached a new record high
in 2016, with over 53 million passengers. We note that the increase in 2016 was

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likely influenced by Super Bowl 50, which was held in nearby Santa Clara.
Furthermore, United Airlines increased its international flight service.

Traffic Count Volumes The area is highly dependent on the access provided by Highway 29. We reviewed
traffic count statistics (annual average daily traffic) for this major thoroughfare as
detailed in the following table.

FIGURE 3-10 TRAFFIC COUNT VOLUMES: ANNUAL AVERAGE DAILY TRAFFIC

AADT Before AADT Between AADT After


Hwy 29 Exit 102 Percentage Hwy 29 Exit 102 Percentage Hwy 29 Exit 103 Percentage
Year (Lakeport Boulevard) Change & Exit 103 Change (11th Street) Change

2005 12,700 - 14,600 - 13,100 -


2006 12,500 -1.6% 15,100 3.4% 12,700 -3.1%
2007 12,500 0.0% 15,100 0.0% 12,700 0.0%
2008 12,000 -4.0% 14,500 -4.0% 12,700 0.0%
2009 12,700 5.8% 14,200 -2.1% 11,800 -7.1%
2010 13,100 3.1% 14,600 2.8% 12,200 3.4%
2011 13,100 0.0% 14,600 0.0% 12,200 0.0%
2012 13,300 1.5% 14,800 1.4% 12,500 2.5%
2013 13,300 0.0% 14,800 0.0% 12,500 0.0%
2014 13,600 2.3% 15,100 2.0% 12,800 2.4%
2015 13,800 1.5% 15,300 1.3% 13,000 1.6%

Source: Ca ltra ns - Tra ffic Volumes on Ca lifornia State Highwa ys (Yearly Reports )

Annual average daily traffic levels near the exits 102 and 103 of Highway 29 show
some fluctuation. Activity since 2009 reflects moderate increases in traffic volume,
increasing from roughly 14,200 (between the two exits) to roughly 15,300 in 2015.
This increase in traffic is considered a positive indictor for economic activity in
Lakeport.

Tourist Attractions The market benefits from a variety of tourist and leisure attractions, primarily
associated with outdoor recreation. In addition to fishing and watersports on Clear
Lake, Lake County is a popular destination for biking and hiking. The county has a
wide range of trails, including a 1,500-acre park on Mt. Konocti. Annual events in
the area include the Lake County Fair, Wine Adventure, and the Konocti Challenge.
Lake County is also a popular destination for experiencing hot springs, horseback
riding, and birding. Lake County is home to four casinos offering table games and
slot machines. As noted previously, bass tournaments on Clear Lake are popular,

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brining hundreds of visitors to Lakeport. Three museums featuring local history and
culture also add to the list of attractions.

CLEAR LAKE

Conclusion This section discussed a wide variety of economic indicators for the pertinent
market area. Lake County, including the City of Lakeport, is experiencing improved
economic activity as evidenced by decreases in the unemployment rate and
increases in local traffic volumes. Within the city, efforts to revitalize the lakefront
area are underway, with a long-term commitment and focus from government
officials. We interviewed multiple local stakeholders, a list of those interviewed is
included in the addenda of this report. These conversations revealed a consensus
that new lodging supply is needed in the City of Lakeport. However, quantitative
data derived from these discussions was generally limited. Overall, the outlook for
Lakeport is considered positive, with opportunities for significant growth identified
for the tourism and the wine industries.

Our analysis of the outlook for this specific market also considers the broader
context of the national economy. The U.S. economy expanded during the last ten
quarters, with a relative low point in growth occurring during the fourth quarter of
2015 and the first quarter of 2016. The economy then expanded by 1.4% and 2.9%
in the second and third quarters of 2016, respectively. In recent months, increases
in personal consumption expenditures, exports, private inventory investment,

June-2017 Market Area Analysis


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ATTACHMENT 2

federal government spending, and nonresidential fixed investment were the


primary factors in the net gain.

FIGURE 3-11 UNITED STATES GDP GROWTH RATE

6.0
5.0
5.0 4.6
3.9 4.0 4.0
4.0 3.2 3.1
2.8 2.8 2.9
3.0 2.5 2.6
2.3 2.3 2.0 2.0
1.9
2.0 1.6 1.6 1.4
1.1 0.9 0.8
0.8
1.0 0.1
0.0
-1.0
-2.0 -1.3 -1.2
2010 2011 2012 2013 2014 2015 2016
Source: tra dingeconomics.com, Bureau of Economic Analysis

U.S. economic growth continues to support expansion of lodging demand; however,


demand growth was not as robust in 2016 as in the last several years. As will be
reflected in the following chapter, nationwide demand growth just slightly
surpassed supply growth in 2016. Nevertheless, the stability in the U.S. economy is
maintaining strong interest in hotel investments by a diverse array of market
participants.

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4. Supply and Demand Analysis

In the lodging industry, price varies directly, but not proportionately, with demand
and inversely, but not proportionately, with supply. Supply is measured by the
number of guestrooms available, and demand is measured by the number of rooms
occupied; the net effect of supply and demand toward equilibrium results in a
prevailing price, or average rate. The purpose of this section is to investigate current
supply and demand trends, as indicated by the current competitive market, and to
set forth a basis for the projection of future supply and demand growth.

Definition of Subject The subject site is located in the greater Lake County - Mendocino County lodging
Hotel Market market. This greater lodging market spans nearly 90 open and operating lodging
facilities totaling roughly 3,400 guestrooms. The proposed subject hotel is expected
to compete with economy and midscale hotels in the market area based on property
positioning, amenities, and price point. We reviewed the performance of
midscale/upscale and economy hotels in the market area in an effort to discern
trends in hotel demand.

National Trends The subject property’s local lodging market is most directly affected by the supply
Overview and demand trends within the immediate area. However, individual markets are
also influenced by conditions in the national lodging market. We have reviewed
national lodging trends to provide a context for the forecast of the supply and
demand for the proposed subject hotel’s competitive set.

STR is an independent research firm that compiles and publishes data on the lodging
industry, and this information is routinely used by typical hotel buyers. The
following STR diagram presents annual hotel occupancy and average rate data since
1987. The next two tables contain information that is more recent; the data are
categorized by geographical region, price point, type of location, and chain scale, and
the statistics include occupancy, average rate, and rooms revenue per available
room (RevPAR). RevPAR is calculated by multiplying occupancy by average rate and
provides an indication of how well rooms revenue is being maximized.

June-2017 Supply and Demand Analysis


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ATTACHMENT 2

FIGURE 4-1 NATIONAL OCCUPANCY AND AVERAGE RATE TRENDS

70.0%
$120

$100 65.0%

$80
60.0%

$60
55.0%
$40

50.0%
$20

$0 45.0%
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
RevPAR Average Rate Occupancy

Source: STR

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ATTACHMENT 2

FIGURE 4-2 NATIONAL OCCUPANCY AND AVERAGE RATE TRENDS – YEAR-TO-DATE DATA

Occupancy - YTD February Average Rate - YTD February RevPAR - YTD February Percent Change
% % % Rms.
2016 2017 Change 2016 2017 Change 2016 2017 Change Avail. Rms. Sold
Uni ted Sta tes 57.5 % 57.4 % (0.1) % $119.10 $122.02 2.4 % $68.44 $70.08 2.4 % 1.9 % 1.8 %
Regi on
New England 49.8 % 49.9 % 0.3 % $124.50 $123.97 (0.4) % $61.94 $61.86 (0.1) % 1.6 % 1.9 %
M iddle A tlantic 53.2 54.0 1.6 134.04 134.10 0.0 71.31 72.47 1.6 3.4 5.0
So uth A tlantic 61.6 62.3 1.1 122.65 125.74 2.5 75.54 78.32 3.7 1.6 2.7
East No rth Central 48.7 48.2 (0.9) 94.23 95.78 1.6 45.85 46.17 0.7 1.9 1.0
East So uth Central 52.3 51.2 (2.2) 87.15 89.53 2.7 45.61 45.82 0.5 1.9 (0.4)
West No rth Central 47.0 46.2 (1.8) 89.51 90.63 1.3 42.11 41.89 (0.5) 1.5 (0.3)
West So uth Central 57.8 57.4 (0.6) 98.23 102.08 3.9 56.75 58.64 3.3 3.1 2.6
M o untain 59.6 59.4 (0.3) 122.06 127.35 4.3 72.72 75.65 4.0 1.0 0.7
P acific 67.5 67.4 (0.2) 153.80 157.19 2.2 103.77 105.90 2.0 1.3 1.2
Cl as s
Luxury 64.9 % 65.0 % 0.1 % $279.10 $284.95 2.1 % $181.18 $185.14 2.2 % 3.0 % 3.1 %
Upper Upscale 65.7 65.7 0.0 172.31 176.40 2.4 113.25 115.97 2.4 1.6 1.6
Upscale 64.8 64.8 0.0 133.10 135.15 1.5 86.30 87.61 1.5 4.1 4.0
Upper M idscale 57.9 57.8 (0.2) 106.72 108.33 1.5 61.82 62.62 1.3 4.0 3.7
M idscale 50.5 50.7 0.4 86.53 87.86 1.5 43.68 44.54 2.0 0.3 0.7
Eco no my 50.7 50.3 (0.8) 64.29 66.14 2.9 32.61 33.27 2.0 (0.1) (0.9)
Loca ti on
Urban 64.3 % 64.7 % 0.5 % $155.17 $159.83 3.0 % $99.78 $103.34 3.6 % 3.3 % 3.9 %
Suburban 59.4 58.9 (0.9) 102.08 103.98 1.9 60.62 61.20 1.0 1.8 0.9
A irpo rt 67.9 68.2 0.5 111.40 114.38 2.7 75.63 78.02 3.2 1.6 2.1
Interstate 46.5 46.1 (0.7) 77.72 78.91 1.5 36.10 36.41 0.9 1.4 0.7
Reso rt 64.5 65.1 1.0 181.19 184.92 2.1 116.84 120.42 3.1 1.3 2.3
Small M etro /To wn 46.1 46.2 0.2 90.26 92.01 1.9 41.64 42.52 2.1 1.6 1.8
Cha i n Sca l e
Luxury 69.4 % 69.1 % (0.4) % $314.85 $323.62 2.8 % $218.52 $223.62 2.3 % 2.9 % 2.4 %
Upper Upscale 67.7 67.6 (0.1) 173.11 177.02 2.3 117.13 119.71 2.2 1.8 1.8
Upscale 67.2 66.6 (0.9) 132.68 134.62 1.5 89.14 89.62 0.5 6.1 5.1
Upper M idscale 58.0 57.9 (0.2) 104.29 105.72 1.4 60.53 61.22 1.1 3.1 2.9
M idscale 50.0 50.2 0.5 79.45 80.35 1.1 39.69 40.33 1.6 0.7 1.2
Eco no my 50.2 49.5 (1.4) 55.91 56.98 1.9 28.08 28.21 0.5 0.2 (1.2)
Independents 53.9 54.2 0.5 116.78 120.36 3.1 62.94 65.19 3.6 0.4 0.9

Source: STR - Februa ry 2017 Lodgi ng Revi ew

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Proposed Hotel – Lakeport, California 47
ATTACHMENT 2

FIGURE 4-3 NATIONAL OCCUPANCY AND AVERAGE RATE TRENDS – CALENDAR YEAR DATA

Occupancy Average Rate RevPAR Percent Change


% % % Rms.
2015 2016 Change 2015 2016 Change 2015 2016 Change Avail. Rms. Sold
Uni ted Sta te s 65.4 % 65.5 % 0.1 % $120.30 $123.97 3.1 % $78.68 $81.19 3.2 % 1.6 % 1.7 %
Re gi on
New England 64.5 % 64.3 % (0.4) % $146.41 $150.70 2.9 % $94.49 $96.89 2.5 % 1.3 % 1.0 %
M iddle A tlantic 67.3 67.3 0.0 162.29 163.41 0.7 109.22 109.99 0.7 2.8 2.8
So uth A tlantic 66.5 67.2 1.1 116.65 119.77 2.7 77.53 80.44 3.8 1.3 1.3
East No rth Central 61.3 61.2 (0.2) 105.20 108.09 2.7 64.45 66.10 2.6 1.6 1.4
East So uth Central 61.0 61.4 0.7 90.91 94.87 4.4 55.43 58.26 5.1 1.7 2.5
West No rth Central 59.6 59.1 (0.8) 93.28 95.91 2.8 55.58 56.68 2.0 1.5 0.7
West So uth Central 62.9 61.5 (2.3) 98.43 98.66 0.2 61.93 60.63 (2.1) 2.7 0.3
M o untain 65.0 65.5 0.7 108.77 114.24 5.0 70.68 74.79 5.8 0.8 1.5
P acific 73.2 73.9 0.9 151.10 158.44 4.9 110.57 117.04 5.8 0.9 1.9
Cl a s s
Luxury 70.8 % 71.0 % 0.3 % $278.39 $283.05 1.7 % $196.98 $200.95 2.0 % 2.8 % 3.1 %
Upper Upscale 72.7 72.6 (0.1) 173.53 177.77 2.4 126.08 129.07 2.4 1.2 1.2
Upscale 72.0 72.0 0.1 135.70 139.47 2.8 97.72 100.49 2.8 3.9 3.9
Upper M idscale 67.1 67.1 0.0 110.95 113.84 2.6 74.48 76.38 2.6 3.3 3.2
M idscale 59.9 59.9 0.1 90.13 92.61 2.7 53.96 55.50 2.9 0.4 0.6
Eco no my 58.6 58.6 0.0 67.60 70.17 3.8 39.63 41.13 3.8 (0.4) (0.4)
Loca ti on
Urban 73.0 % 73.1 % 0.1 % $173.99 $177.37 1.9 % $127.04 $129.69 2.1 % 2.9 % 3.0 %
Suburban 66.7 66.8 0.2 101.91 105.70 3.7 67.97 70.63 3.9 1.4 1.6
A irpo rt 73.6 73.4 (0.2) 109.78 113.56 3.4 80.78 83.40 3.3 1.0 0.8
Interstate 57.2 56.6 (1.1) 81.35 83.04 2.1 46.53 46.97 0.9 1.5 0.4
Reso rt 67.9 68.6 0.9 164.10 168.76 2.8 111.51 115.76 3.8 0.9 1.8
Small M etro /To wn 56.9 56.9 0.1 96.63 99.45 2.9 54.95 56.64 3.1 1.4 1.5
Cha i n Sca l e
Luxury 75.2 % 74.9 % (0.3) % $317.58 $322.84 1.7 % $238.70 $241.82 1.3 % 2.8 % 2.4 %
Upper Upscale 74.3 74.2 (0.2) 174.98 178.82 2.2 130.08 132.63 2.0 1.6 1.4
Upscale 74.3 73.8 (0.6) 134.82 138.50 2.7 100.13 102.27 2.1 5.6 5.0
Upper M idscale 67.5 67.4 (0.2) 108.75 111.43 2.5 73.46 75.14 2.3 2.1 1.9
M idscale 59.4 59.4 (0.1) 83.32 85.43 2.5 49.52 50.74 2.5 1.2 1.1
Eco no my 58.1 57.9 (0.4) 58.82 60.84 3.4 34.16 35.20 3.1 0.3 (0.1)
Independents 61.8 62.3 0.8 118.73 123.22 3.8 73.36 76.75 4.6 0.2 1.0
Source : STR - December 2016 Lodgi ng Revi e w

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Proposed Hotel – Lakeport, California 48
ATTACHMENT 2

Following the significant RevPAR decline experienced during the last recession,
demand growth resumed in 2010, led by select markets that had recorded growth
trends in the fourth quarter of 2009. A return of business travel and some group
activity contributed to these positive trends. The resurgence in demand was partly
fueled by the significant price discounts that were widely available in the first half
of 2010. These discounting policies were largely phased out in the latter half of the
year, balancing much of the early rate loss. Demand growth remained strong, but
decelerated from 2011 through 2013, increasing at rates of 4.7%, 2.8%, and 2.0%,
respectively. Demand growth then surged to 4.0% in 2014, driven by a strong
economy, a robust oil and gas sector, and limited new supply, among other factors.
By 2014, occupancy had surpassed the 64% mark. Average rate rebounded similarly
during this time, bracketing 4.0% annual gains from 2011 through 2014.

In 2015, demand growth continued to outpace supply growth, a relationship that


has been in place since 2010. With a 2.9% increase in room-nights, the nation's
occupancy level reached a record high 65.4% in 2015. Supply growth intensified,
but remained at 1.1%, following annual supply growth levels of 0.7% and 0.9% of
2013 and 2014, respectively. Average rate posted another strong year of growth, at
4.4% in 2015, in pace with the annual growth of the last four years. Robust job
growth, intensified group and leisure travel, and waning price-sensitivity all
contributed to the gains. In 2016, occupancy moved slightly higher (by 0.1
percentage point) to 65.5%, as demand growth slightly exceeded supply growth.
Average rate increased 3.1% for the year, and the net change in RevPAR was 3.2%,
reflecting a healthy lodging market overall. Year-to-date February 2017 data
illustrate that occupancy decreased 0.1 of a point, while average rate increased by
nearly $3.00, resulting in RevPAR growth of 2.4% thus far in 2017.

Historical Supply As previously noted, STR is an independent research firm that compiles and
and Demand Data publishes data on the lodging industry, routinely used by typical hotel buyers. HVS
has ordered and analyzed an STR Trend Report of historical supply and demand
data for a group of hotels considered applicable to this analysis for the proposed
subject hotel. This information is presented in the following table, along with the
market-wide occupancy, average rate, and rooms revenue per available room
(RevPAR). RevPAR is calculated by multiplying occupancy by average rate and
provides an indication of how well rooms revenue is being maximized. The
following tables include data for economy hotels, midscale/upscale hotels, and an
aggregate trend reflecting the combined performance of these property types.

June-2017 Supply and Demand Analysis


Proposed Hotel – Lakeport, California 49
ATTACHMENT 2
FIGURE 4-4 HISTORICAL SUPPLY AND DEMAND TRENDS: ECONOMY HOTELS WITHIN 50 MILES OF LAKEPORT

Average Daily Available Room Occupied Room Average


Year Room Count Nights Change Nights Change Occupancy Rate Change RevPAR Change

2006 387 141,255 — 81,058 — 57.4 % $68.10 — $39.08 —


2007 387 141,255 0.0 % 78,633 (3.0) % 55.7 70.85 4.0 % 39.44 0.9 %
2008 387 141,255 0.0 79,858 1.6 56.5 72.01 1.6 40.71 3.2
2009 387 141,255 0.0 69,179 (13.4) 49.0 69.57 (3.4) 34.07 (16.3)
2010 387 141,255 0.0 71,616 3.5 50.7 68.26 (1.9) 34.61 1.6
2011 387 141,255 0.0 72,352 1.0 51.2 66.60 (2.4) 34.11 (1.4)
2012 387 141,255 0.0 73,199 1.2 51.8 67.53 1.4 34.99 2.6
2013 387 141,255 0.0 79,107 8.1 56.0 70.07 3.8 39.24 12.1
2014 387 141,255 0.0 79,401 0.4 56.2 75.07 7.1 42.20 7.5
2015 387 141,255 0.0 86,360 8.8 61.1 83.40 11.1 50.99 20.8
2016 387 141,255 0.0 84,181 (2.5) 59.6 84.45 1.3 50.33 (1.3)
Year-to-Date Through March
2016 387 34,830 — 17,353 — 49.8 % $83.16 — $41.43 —
2017 387 34,830 0.0 % 16,806 (3.2) % 48.3 74.46 (10.5) % 35.93 (13.3) %
Avera ge Annua l Compounded Cha nge:
2007 - 2010 0.0 (3.1) (1.2) (4.3)
2010 - 2016 0.0 2.7 3.6 6.4

Number Year Year


Hotels Included in Sample of Rooms Affiliated Opened
Rodewa y Inn Skyl a rk Shores Res ort 45 Apr 2016 Ja n 1956
Da ys Inn Uki a h 54 Apr 1994 Jun 1959
Motel 6 Uki a h 70 Feb 1970 Feb 1970
Super 8 Uki a h 54 Nov 2006 Jun 1981
Super 8 Upper La ke Ea s t 34 Oct 1992 Oct 1992
Tra vel odge Cl ea rl a ke 31 Jun 1999 Dec 1992
Tra vel odge Uki a h 55 Ja n 2011 Sep 1997
Super 8 Wi l l i ts 44 Dec 2001 Dec 2001

Total 387

Source: STR

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Proposed Hotel – Lakeport, California 50
ATTACHMENT 2
FIGURE 4-5 HISTORICAL SUPPLY AND DEMAND TRENDS: MIDSCALE/UPSCALE HOTELS WITHING 50 MILES OF LAKEPORT

Average Daily Available Room Occupied Room Average


Year Room Count Nights Change Nights Change Occupancy Rate Change RevPAR Change

2006 381 139,065 — 83,430 — 60.0 % $86.80 — $52.07 —


2007 413 150,657 8.3 % 83,074 (0.4) % 55.1 90.79 4.6 % 50.07 (3.9) %
2008 444 162,060 7.6 88,546 6.6 54.6 91.83 1.1 50.17 0.2
2009 444 162,060 0.0 77,491 (12.5) 47.8 91.36 (0.5) 43.68 (12.9)
2010 444 162,060 0.0 83,645 7.9 51.6 90.28 (1.2) 46.60 6.7
2011 444 162,060 0.0 87,874 5.1 54.2 93.05 3.1 50.45 8.3
2012 444 162,060 0.0 91,517 4.1 56.5 92.56 (0.5) 52.27 3.6
2013 444 162,060 0.0 96,866 5.8 59.8 95.24 2.9 56.93 8.9
2014 444 162,060 0.0 100,800 4.1 62.2 103.18 8.3 64.18 12.7
2015 444 162,060 0.0 112,440 11.5 69.4 114.24 10.7 79.26 23.5
2016 444 162,060 0.0 110,743 (1.5) 68.3 119.77 4.8 81.84 3.3
Year-to-Date Through March
2016 444 39,960 — 25,295 — 63.3 % $114.18 — $72.28 —
2017 444 39,960 0.0 % 24,623 (2.7) % 61.6 115.17 0.9 % 70.97 (1.8) %
Avera ge Annua l Compounded Cha nge:
2007 - 2010 2.5 0.2 (0.2) (2.4)
2010 - 2016 0.0 4.8 4.8 9.8

Number Year Year


Hotels Included in Sample of Rooms Affiliated Opened
Qua l i ty Inn Uki a h 40 Apr 2008 Jun 1960
Bes t Wes tern El Gra nde Inn 68 Jun 1990 Jun 1985
As cend Col l ecti on Hotel Ba echtel Creek Inn 43 Nov 2008 Jun 1992
Bes t Wes tern Wi l l i ts Inn 44 Dec 1998 Dec 1998
Bes t Wes tern Orcha rd Inn 54 Nov 2001 Nov 2001
Ha mpton Inn Uki a h 76 Apr 2002 Apr 2002
Fa i rfi el d Inn & Sui tes Uki a h Mendoci no County 56 Oct 2005 Oct 2005
Comfort Inn & Sui tes Uki a h 63 Jul 2007 Jul 2007

Total 444

Source: STR

June-2017 Supply and Demand Analysis


Proposed Hotel – Lakeport, California 51
ATTACHMENT 2
FIGURE 4-6 HISTORICAL SUPPLY AND DEMAND TRENDS: COMBINED (AGGREGATE) TREND

Average Daily Available Room Occupied Room Average


Year Room Count Nights Change Nights Change Occupancy Rate Change RevPAR Change
2006 768 280,320 — 164,488 — 58.7 % $77.58 — $45.52 —
2007 800 291,912 4.1 % 161,707 (1.7) % 55.4 81.09 4.5 % 44.92 (1.3) %
2008 831 303,315 3.9 168,404 4.1 55.5 82.43 1.6 45.77 1.9
2009 831 303,315 0.0 146,670 (12.9) 48.4 81.08 (1.6) 39.21 (14.3)
2010 831 303,315 0.0 155,261 5.9 51.2 80.12 (1.2) 41.01 4.6
2011 831 303,315 0.0 160,226 3.2 52.8 81.11 1.2 42.84 4.5
2012 831 303,315 0.0 164,716 2.8 54.3 81.44 0.4 44.23 3.2
2013 831 303,315 0.0 175,973 6.8 58.0 83.93 3.1 48.69 10.1
2014 831 303,315 0.0 180,201 2.4 59.4 90.80 8.2 53.94 10.8
2015 831 303,315 0.0 198,800 10.3 65.5 100.84 11.1 66.09 22.5
2016 831 303,315 0.0 194,924 (1.9) 64.3 104.52 3.6 67.17 1.6
Year-to-Date Through March
2016 831 74,790 — 42,648 — 57.0 % $101.56 — $57.91 —
2017 831 74,790 0.0 % 41,429 (2.9) % 55.4 98.66 (2.9) % 54.65 (5.6) %
Average Annua l Compounded Cha nge:
2007 - 2010 1.3 (1.3) (0.4) (3.0)
2010 - 2016 0.0 3.9 4.5 8.6
Number Year Year
Hotels Included in Sample of Rooms Affiliated Opened
Rodewa y Inn Skyl ark Shores Res ort 45 Apr 2016 Ja n 1956
Da ys Inn Uki a h 54 Apr 1994 Jun 1959
Qua l ity Inn Uki a h 40 Apr 2008 Jun 1960
Motel 6 Uki a h 70 Feb 1970 Feb 1970
Super 8 Ukia h 54 Nov 2006 Jun 1981
Bes t Wes tern El Gra nde Inn 68 Jun 1990 Jun 1985
As cend Col l ecti on Hotel Baechtel Creek Inn 43 Nov 2008 Jun 1992
Super 8 Upper La ke Ea s t 34 Oct 1992 Oct 1992
Tra velodge Clea rla ke 31 Jun 1999 Dec 1992
Tra velodge Uki a h 55 Ja n 2011 Sep 1997
Bes t Wes tern Wi ll i ts Inn 44 Dec 1998 Dec 1998
Bes t Wes tern Orchard Inn 54 Nov 2001 Nov 2001
Super 8 Wil l its 44 Dec 2001 Dec 2001
Ha mpton Inn Ukia h 76 Apr 2002 Apr 2002
Fa i rfi el d Inn & Sui tes Uki ah Mendoci no County 56 Oct 2005 Oct 2005
Comfort Inn & Sui tes Ukia h 63 Jul 2007 Jul 2007

Total 831

Source: STR

June-2017 Supply and Demand Analysis


Proposed Hotel – Lakeport, California 52
ATTACHMENT 2

It is important to note some limitations of the STR data. Hotels are occasionally
added to or removed from the sample; furthermore, not every property reports data
in a consistent and timely manner. These factors can influence the overall quality of
the information by skewing the results, and these inconsistencies may also cause
the STR data to differ from the results of our competitive survey. Nonetheless, STR
data provide the best indication of aggregate growth or decline in existing supply
and demand; thus, these trends have been considered in our analysis. Opening
dates, as available, are presented for each reporting hotel in the previous table.

The STR data for the competitive set reflect a market-wide occupancy level of 2016
in 64.3%, which compares to 65.5% for 2015. The overall average occupancy level
for the calendar years presented equates to 59.1%. The STR data for the competitive
set reflect a market-wide average rate level of $104.52 in 2016, which compares to
$100.84 For 2015. The average across all calendar years presented for average rate
equates to $91.14. These occupancy and average rate trends resulted in a RevPAR
level of $67.17 in 2016.

The aggregate trend includes hotels in both Lake County and Mendocino County, all
of which are located within 50 miles of Lakeport. We note that most of the hotels in
the trend are located in Mendocino County, as most of the hotels located in Lake
County do no report data to Smith Travel Research. Still, the data provides a sound
basis for understanding regional hotel trends and was utilized in our forecasts.
Occupancy levels for the selected trend of hotels fluctuated during the period
reviewed, ranging from roughly 47% to approximately 59% between 2006 and
2014. The significant drop in demand recorded in 2009 resulted from the economic
downturn, causing occupancy to fall below 49% in that year. Increased occupancy
levels in 2015 and 2016 are indicative of the impact of the Valley Fire and Clayton
Fire. Accommodated room nights in these years were influenced by demand from
fire crews, displaced residents, FEMA representatives, and other related parties.
Market-wide average rate remained generally stable between 2007 and 2013, in the
low $80s. Increased demand in 2015 and 2016 resulted in stronger average rate
growth, with levels surpassing $100.

Year-to-date 2017 data illustrate some softening in occupancy and a roughly $3.00
loss in average rate. Market-wide performance for 2015 and 2016 were impacted
by demand resulting from the Valley Fire and Clayton Fire. The absence of this
demand in the year-to-date period contributed to the decline recorded through
March. The long-term outlook for the market is generally positive, with opportunity
for growth associated with the heightened prominence of the region for wine and
outdoor recreation. However, near-term performance is expected to be influenced
by the decrease in demand with the assumed absence of further natural disasters.

June-2017 Supply and Demand Analysis


Proposed Hotel – Lakeport, California 53
ATTACHMENT 2

Seasonality Monthly occupancy and average rate trends are presented in the following tables.

June-2017 Supply and Demand Analysis


Proposed Hotel – Lakeport, California 54
ATTACHMENT 2

FIGURE 4-7 MONTHLY OCCUPANCY TRENDS

Month 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Ja nua ry 47.2 % 45.0 % 44.7 % 36.4 % 38.4 % 36.7 % 39.2 % 39.5 % 43.2 % 49.3 % 55.3 %
Februa ry 50.9 48.2 47.7 42.0 43.6 45.2 45.3 45.9 48.4 55.7 58.0
Ma rch 53.2 52.6 49.9 41.5 48.5 45.5 46.2 47.4 49.7 51.8 57.8
Apri l 54.0 52.9 50.5 44.4 43.7 48.1 47.5 52.0 56.2 57.4 54.8
Ma y 59.0 58.6 54.4 47.1 50.3 50.5 55.4 61.6 60.5 62.5 63.0
June 70.6 71.4 69.7 60.0 64.6 63.3 62.7 71.9 69.0 72.5 73.5
Jul y 71.8 63.7 83.1 61.8 64.4 69.2 63.8 73.3 73.2 75.2 77.3
Augus t 74.6 63.6 69.1 58.0 61.7 66.1 72.7 71.2 78.8 80.7 75.9
September 68.0 60.6 60.0 58.3 60.0 67.2 64.8 66.9 68.5 83.8 71.9
October 59.7 55.8 53.8 51.3 49.9 54.7 58.7 63.8 61.9 75.8 64.9
November 50.6 48.2 43.5 41.9 46.7 47.2 51.2 56.1 54.4 64.1 63.5
December 44.0 43.5 39.3 37.4 42.0 39.8 43.7 46.0 48.4 57.2 54.8

Annual Occupancy 58.7 % 55.4 % 55.5 % 48.4 % 51.2 % 52.8 % 54.3 % 58.0 % 59.4 % 65.5 % 64.3 %
Source: STR

FIGURE 4-8 MONTHLY AVERAGE RATE TRENDS

Month 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Ja nua ry $72.50 $76.18 $76.65 $77.18 $77.25 $75.83 $77.78 $76.79 $81.08 $88.48 $101.20
Februa ry 75.76 77.74 77.28 77.21 76.59 77.81 78.49 79.91 84.01 90.96 103.11
Ma rch 75.96 78.08 78.32 78.52 78.61 78.02 77.28 78.97 82.70 88.78 100.50
April 73.96 77.35 75.09 77.44 77.75 78.73 78.41 76.77 84.27 91.80 98.77
Ma y 75.30 80.15 80.40 81.41 79.23 79.16 79.76 81.25 87.96 95.18 102.28
June 79.31 84.85 85.09 83.61 83.28 83.78 86.13 86.72 95.53 103.36 110.17
July 82.34 87.06 89.51 85.22 84.47 86.49 85.95 88.46 95.73 106.04 112.24
Augus t 81.90 85.44 90.05 84.75 83.16 85.42 86.45 89.92 103.65 111.18 113.20
September 81.70 85.57 85.70 82.95 83.47 83.67 85.95 87.87 95.09 113.22 108.18
October 74.36 80.09 81.32 82.47 78.65 79.39 80.36 85.52 90.71 103.05 103.05
November 75.58 77.18 79.71 77.91 75.70 78.89 76.12 82.18 86.78 99.06 99.45
December 76.91 76.34 78.48 77.65 77.33 78.21 76.77 83.77 88.47 103.03 94.06

Annual Average Rate $77.58 $81.09 $82.43 $81.08 $80.12 $81.11 $81.44 $83.93 $90.80 $100.84 $104.52
Source: STR

June-2017 Supply and Demand Analysis


Proposed Hotel – Lakeport, California 55
ATTACHMENT 2

FIGURE 4-9 SEASONALITY

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
High Season - June, July, August, September
Occupa ncy 71.3 % 64.7 % 70.5 % 59.5 % 62.7 % 66.5 % 66.0 % 70.9 % 72.4 % 78.1 % 74.7 %
Avera ge Rate $81.34 $85.73 $87.77 $84.16 $83.60 $84.88 $86.13 $88.26 $97.72 $108.67 $111.03
RevPAR 57.97 55.47 61.91 50.10 52.41 56.43 56.86 62.54 70.78 84.82 82.92

Shoulder Season - April, May, October, November


Occupa ncy 55.9 % 53.8 % 50.6 % 46.2 % 47.7 % 50.2 % 53.2 % 58.4 % 58.3 % 65.0 % 61.6 %
Avera ge Rate $74.79 $78.80 $79.20 $79.99 $77.89 $79.06 $78.77 $81.67 $87.56 $97.72 $101.00
RevPAR 41.81 42.44 40.08 36.97 37.15 39.67 41.94 47.72 51.03 63.54 62.21

Low Season - January, February, March, December


Occupa ncy 48.8 % 47.2 % 45.3 % 39.2 % 43.1 % 41.7 % 43.6 % 44.7 % 47.4 % 53.5 % 56.5 %
Avera ge Rate $75.27 $77.11 $77.68 $77.66 $77.51 $77.52 $77.56 $79.97 $84.14 $93.14 $99.69
RevPAR 36.72 36.42 35.22 30.48 33.42 32.34 33.79 35.72 39.90 49.79 56.28
Source: Smi th Tra vel Res ea rch

June-2017 Supply and Demand Analysis


Proposed Hotel – Lakeport, California 56
ATTACHMENT 2

The illustrated monthly occupancy and average rates patterns reflect important
seasonal characteristics. We have reviewed these trends in developing our
forthcoming forecast of market-wide demand and average rate. The competitive
market is characterized by a moderate degree of seasonality, which is evident in the
monthly occupancy statistics. The strongest occupancy levels are recorded in the
summer months, when demand from leisure travelers is at peak levels. Average rate
levels reflect a similar pattern.

Patterns of Demand A review of the trends in occupancy and average rate by day of the week provides
some insight into the impact that the current economic conditions have had on the
competitive lodging market. The data, as provided by STR, are illustrated in the
following table(s).

June-2017 Supply and Demand Analysis


Proposed Hotel – Lakeport, California 57
ATTACHMENT 2

FIGURE 4-10 OCCUPANCY BY DAY OF WEEK (TRAILING 12 MONTHS)

Month Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Month
Apr - 16 38.1 % 51.0 % 57.7 % 57.3 % 54.3 % 59.7 % 62.6 % 54.8 %
Ma y - 16 49.5 54.0 61.9 63.2 64.0 71.8 82.5 63.0
Jun - 16 55.9 69.6 76.1 74.5 69.8 79.5 89.9 73.5
Jul - 16 62.3 70.4 77.9 79.8 76.7 80.4 92.7 77.3
Aug - 16 57.4 72.6 76.4 76.6 80.2 79.3 89.2 75.9
Sep - 16 60.2 63.5 73.2 75.0 66.4 76.8 88.6 71.9
Oct - 16 44.7 61.9 73.5 69.2 64.5 69.4 74.2 64.9
Nov - 16 45.3 63.2 65.2 68.2 71.6 65.9 63.8 63.5
Dec - 16 45.8 54.9 58.7 58.7 56.7 53.4 55.3 54.8
Ja n - 17 37.9 48.2 58.4 58.4 51.6 50.3 50.5 50.5
Feb - 17 45.7 57.7 62.4 60.4 58.6 56.3 58.5 57.1
Ma r - 17 42.4 60.4 64.0 66.3 63.0 55.5 57.2 58.7
Average 48.8 % 60.5 % 67.0 % 67.6 % 64.7 % 66.4 % 72.0 % 63.9 %

Source: STR

FIGURE 4-11 AVERAGE RATE BY DAY OF WEEK (TRAILING 12 MONTHS)

Month Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Month
Apr - 16 $94.27 $99.63 $101.62 $100.08 $98.75 $98.60 $97.51 $98.77
Ma y - 16 99.86 98.78 101.76 100.93 99.64 102.92 109.94 102.28
Jun - 16 106.18 104.53 105.08 104.56 104.75 119.40 124.25 110.17
Jul - 16 106.76 106.19 107.26 105.81 107.73 118.84 124.65 112.24
Aug - 16 102.90 109.39 110.29 110.66 111.56 121.56 123.59 113.20
Sep - 16 106.60 103.83 105.55 104.28 102.85 112.57 118.10 108.18
Oct - 16 97.75 100.83 103.44 103.06 101.65 104.44 107.73 103.05
Nov - 16 94.83 100.87 100.78 99.29 101.11 98.34 99.15 99.45
Dec - 16 91.81 94.50 96.40 94.20 92.85 94.95 93.48 94.06
Ja n - 17 94.22 96.53 98.50 98.05 94.86 95.07 95.89 96.35
Feb - 17 97.46 100.79 101.29 102.34 99.44 97.89 99.63 99.94
Ma r - 17 95.54 101.28 103.16 102.62 98.54 95.71 97.93 99.51

Average $99.83 $101.88 $103.27 $102.67 $101.60 $106.43 $109.86 $103.91

Source: STR

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FIGURE 4-12 OCCUPANCY, AVERAGE RATE, AND REVPAR BY DAY OF WEEK (MULTIPLE YEARS)

Occupancy (%) Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Year
Apr 14 - Mar 15 44.9 % 59.2 % 65.0 % 65.7 % 60.9 % 61.6 % 67.2 % 60.7 %
Apr 15 - Mar 16 52.3 65.4 70.2 71.5 67.4 68.2 72.1 66.7
Apr 16 - Mar 17 48.8 60.5 67.0 67.6 64.7 66.4 72.0 63.9
Change (Occupancy Points)
FY 15 - FY 16 7.3 6.3 5.3 5.8 6.4 6.6 4.9 6.1
FY 16 - FY 17 (3.5) (4.9) (3.2) (3.9) (2.6) (1.8) (0.1) (2.9)

ADR ($) Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Year
Apr 14 - Mar 15 $89.62 $89.86 $90.50 $90.89 $90.55 $94.69 $97.31 $92.07
Apr 15 - Mar 16 101.43 101.53 101.46 100.72 101.50 106.51 108.66 103.20
Apr 16 - Mar 17 99.83 101.88 103.27 102.67 101.60 106.43 109.86 103.91
Change (Dollars)
FY 15 - FY 16 $11.81 $11.67 $10.96 $9.83 $10.95 $11.82 $11.35 $11.13
FY 16 - FY 17 (1.60) 0.35 1.81 1.95 0.10 (0.08) 1.20 0.72
Change (Percent)
FY 15 - FY 16 13.2 % 13.0 % 12.1 % 10.8 % 12.1 % 12.5 % 11.7 % 12.1 %
FY 16 - FY 17 (1.6) 0.3 1.8 1.9 0.1 (0.1) 1.1 0.7

RevPAR ($) Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total Year
Apr 14 - Mar 15 $40.25 $53.16 $58.78 $59.74 $55.18 $58.35 $65.43 $55.85
Apr 15 - Mar 16 53.01 66.44 71.23 72.03 68.37 72.63 78.36 68.87
Apr 16 - Mar 17 48.67 61.64 69.19 69.41 65.76 70.66 79.11 66.36
Change (Dollars)
FY 15 - FY 16 $12.76 $13.27 $12.45 $12.29 $13.19 $14.28 $12.93 $13.02
FY 16 - FY 17 (4.34) (4.79) (2.05) (2.62) (2.61) (1.97) 0.75 (2.51)
Change (Percent)
FY 15 - FY 16 31.7 % 25.0 % 21.2 % 20.6 % 23.9 % 24.5 % 19.8 % 23.3 %
FY 16 - FY 17 (8.2) (7.2) (2.9) (3.6) (3.8) (2.7) 1.0 (3.6)

Source: STR

In most markets, business travel, including individual commercial travelers and


corporate groups, is the predominant source of demand on Monday through
Thursday nights. Leisure travelers and non-business-related groups generate a
majority of demand on Friday and Saturday nights. The influence of the leisure
segment, particularly demand generated by those visiting the region for outdoor
recreation, is evident in the occupancy and average rate levels recorded on Friday
and Saturday nights of May through October. This source also generates
supplemental demand during the week in the summer months.

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Regional Competition The following table summarizes the recent operating performance of regional
competitive hotels by property class.

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FIGURE 4-13 REGIONAL COMPETITORS – OPERATING PERFORMANCE BY PROPERTY CLASS

Estimated 2015 Estimated 2016

Weighted Weighted
Annual Annual
Room Room Occupancy Yield
Property Class Count Occ. Average Rate RevPAR Count Occ. Average Rate RevPAR Penetration Penetration

Mi ds ca l e & Ups ca l e Hotel s (Aggrega te) 444 65 - 70 % $110 - $115 $75 - $80 444 65 - 70 % $115 - $120 $80 - $85 100 - 110 % 120 - 130 %

Economy Hotel s (Aggrega te) 387 60 - 65 80 - 85 50 - 55 387 55 - 60 80 - 85 50 - 55 90 - 95 70 - 75

Totals/Averages 831 65.5 % $100.85 $66.09 831 64.3 % $104.52 $67.17 100.0 % 100.0 %

FIGURE 4-14 MIDSCALE/UPSCALE HOTELS VERSUS ECONOMY HOTELS – HISTORICAL REVPAR PREMIUMS

YTD - March
2009 2010 2011 2012 2013 2014 2015 2016 2016 2017
RevPAR Mi ds ca l e & Ups ca l e Hotel s (Aggrega te) $43.68 $46.60 $50.45 $52.27 $56.93 $64.18 $79.26 $81.84 $72.78 $70.97

RevPAR Economy Hotel s (Aggrega te) 34.07 34.61 34.11 34.99 39.24 42.2 50.99 50.33 41.43 35.93

RevPAR Premi um - Mi ds ca l e Vs . Economy $10 $12 $16 $17 $18 $22 $28 $32 $31 $35
(rounded)
% Cha nge - 20% 33% 6% 6% 22% 27% 14% - 13%

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Since 2009, the premium in RevPAR (revenue per available room) achieved by the
aggregate midscale and upscale hotels has increased each year. We recommend the
development of a midscale property rather than one positioned in the economy
segment.

The following map illustrates the locations of the subject property and its future
competitors.

MAP OF REGIONAL COMPETITION

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Supply Changes It is important to consider any new hotels that may have an impact on the proposed
subject hotel’s operating performance. While we have taken reasonable steps to
investigate proposed hotel projects and their status, due to the nature of real estate
development, it is impossible to determine with certainty every hotel that will be
opened in the future, or what their marketing strategies and effect in the market will
be. Depending on the outcome of current and future projects, the future operating
potential of the proposed subject hotel may be affected. Future improvement in
market conditions will raise the risk of increased competition. Our forthcoming
forecast of stabilized occupancy and average rate is intended to reflect such risk.

Supply Conclusion We have identified various properties that are expected to be competitive to some
degree with the proposed subject hotel. We have also investigated potential
increases in competitive supply in this Lakeport submarket. The proposed hotel
should enter a dynamic market of varying product types and price points. Next, we
will present our forecast for demand change, using the historical supply data
presented as a starting point.

DEMAND The following table presents the most recent trends for the subject hotel market as
tracked by HVS. These data pertain to the competitors discussed previously in this
section; performance results are estimated, rounded for the competition, and in
some cases weighted if there are secondary competitors present. In this respect, the
information in the table differs from the previously presented STR data and is
consistent with the supply and demand analysis developed for this report.

FIGURE 4-15 HISTORICAL MARKET TRENDS

Accommodated Room Nights Market Market


Year Room Nights % Change Available % Change Occupancy Market ADR % Change RevPAR % Change
Es t. 2014 180,187 — 303,315 — 59.4 % $90.80 — $53.94 —
Es t. 2015 198,776 10.3 % 303,315 0.0 % 65.5 100.85 11.1 % 66.09 22.5 %
Es t. 2016 194,924 (1.9) 303,315 0.0 64.3 104.52 3.6 67.17 1.6

Avg. Annua l Compounded


Chg., Es t. 2014-Es t. 2016: 4.0 % 0.0 % 7.3 % 11.6 %

Demand Analysis Hotel demand in the regional market area is generated by motorists traveling on
local highways, some of which visit local attractions including Clear Lake and Mt.
Konocti, as well as events such as Wine Adventure and the Lake County Fair. We
note that hotel data reviewed includes properties located in the City of Ukiah, which
benefits from a more prominent location on Highway 101 and therefore enjoys a
more diverse commercial base than Lakeport. Still, the trends in demand for the
aggregate market area serve as a strong basis for forecasting the absorption of the
proposed subject hotel in Lakeport. The performance of the proposed subject

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property is expected to be primarily associated with leisure travelers visiting


Lakeport and nearby communities along State Route 29. As such, outdoor
attractions (Clear Lake, area hiking and biking trails, birding, etc.) and wine-related
attractions (tasting rooms, wineries) are expected to generate the bulk of demand
within the Lake County area.

Base Demand Growth We forecast the following average annual compounded hotel demand growth rates
Rates for the regional market area.

FIGURE 4-16 AVERAGE ANNUAL COMPOUNDED GROWTH RATES

Annual Growth Rate


Hotel Demand 2017 2018 2019 2020 2021

Tra nsi ent -3.5 % -2.5 % 4.0 % 1.0 % 0.5 %

Base Demand Growth -3.5 % -2.5 % 4.0 % 1.0 % 0.5 %

Accommodated Based upon a review of the market dynamics in the subject property’s competitive
Demand and Market- environment, we have forecast growth rates for each market segment. Using the
wide Occupancy calculated potential demand for the market, we have determined market-wide
accommodated demand based on the inherent limitations of demand fluctuations
and other factors in the market area.

The following table details our projection of lodging demand growth for the subject
market, including the total number of occupied room nights and any residual
unaccommodated demand in the market.

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FIGURE 4-17 FORECAST OF MARKET OCCUPANCY

2016 2017 2018 2019 2020 2021 2022


Transient
Ba s e Dema nd 194,924 188,101 183,399 190,735 192,642 193,605 193,605
Growth Ra te (3.5) % (2.5) % 4.0 % 1.0 % 0.5 % 0.0 %

Totals
Ba s e Dema nd 194,924 188,101 183,399 190,735 192,642 193,605 193,605
Overall Demand Growth (3.5) % (2.5) % 4.0 % 1.0 % 0.5 % 0.0 %
Market Mix
Tra ns i ent 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Existing Hotel Supply 831 831 831 831 831 831 831
Proposed Hotels
Proposed Subject Property ¹ 55 55 55 55

Ava i l abl e Room Ni ghts per Yea r 303,315 303,315 303,315 323,390 323,390 323,390 323,390
Ni ghts per Year 365 365 365 365 365 365 365
Total Supply 831 831 831 886 886 886 886
Rooms Suppl y Growth — 0.0 % 0.0 % 6.6 % 0.0 % 0.0 % 0.0 %
Marketwide Occupancy 64.3 % 62.0 % 60.5 % 59.0 % 59.6 % 59.9 % 59.9 %
¹
Openi ng i n Ja nuary 2019 of the 100% competi ti ve, 55-room Propos ed Subject Property

The defined competitive market of hotels should experience a slight decline in


occupancy over the next two years. Thereafter, a moderate increase in demand is
forecast as a result of increased marketing of the area as a destination for wine
tourism and outdoor recreation. We note that our forecasts assume that
stakeholders will continue the ongoing efforts to market the region to proximate
population centers including the San Francisco Bay area and Sacramento. Based on
historical occupancy levels in this region, and taking into consideration typical
supply and demand cyclicality, market occupancy is forecast to stabilize at roughly
60%.

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5. Description of the Proposed Improvements

The quality of a lodging facility's physical improvements has a direct influence on


marketability, attainable occupancy, and average room rate. The design and
functionality of the structure can also affect operating efficiency and overall
profitability. This section investigates the subject property's proposed physical
improvements and personal property in an effort to determine how they are
expected to contribute to attainable cash flows.

Project Overview In addition to evaluating selected sites for hotel development, we were asked to
provide recommendations for potential facilities and brand affiliations. Our
recommendations consider both the physical limitations of the recommended site
as well as the trends in operating performance indicated by available market data.
We note that existing lodging properties in the Lakeport area are limited to
economy and bed and breakfast facilities. Based on the assumption that the
recommended site will offer a minimum of 2.25 acres, we recommend the
development of a 55-unit midscale hotel with interior corridors. The development
of the proposed hotel is assumed to be one component of a multi-use lakefront
revitalization plan, with oversight from the City of Lakeport. We have assumed that
the city will partner with a hotel developer who will construct and manage the
property.

Based on our review of available market data, we recommend the development of a


limited-service lodging facility containing 55 rentable units. The three-story
property is assumed to open on January 1, 2019. Furthermore, the property is
assumed to be affiliated with a nationally-recognized hotel brand.

FIGURE 5-1 MIDSCALE BRANDS RECOMMENDED FOR CONSIDERATION

Parent Company Brand Recommendations

Bes t Wes tern Interna ti ona l Bes t Wes tern Pl us , Gl o

Choi ce Hotel s Comfort Inn, Qua l i ty Inn

Wyndha m Hotel Group Wi nga te by Wyndha m

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Recommended Hotel Best Western International Inc., operator of the Best Western Hotels & Resorts
Brands: Brand brands, boasts more than 4,100 hotels (293,000 hotel rooms) worldwide. With its
Overviews corporate headquarters in Phoenix, Arizona, the company's hotel brands include the
traditional Best Western, Best Western Plus, Best Western Premier, and BW
Premier Collection (tiered by levels of progressively more amenities and features),
as well as the boutique brands Vib and GLo. Best Western charges its franchisees a
rate that is based on an initial cost plus a fee for each additional room, considered
to be a low membership fee in comparison to other major chains’ franchise fees.
Memberships are one-year, renewable agreements, with no penalty for withdrawal.
The hotels are allowed to keep their independent identity, although they must use
Best Western signage and identify themselves as a Best Western property.
Reportedly, close to 90% of Best Western’s hotels retain three- or four-star ratings.
As of year-end 2016, for North America, the Best Western Plus brand's average
occupancy level was 68.3%, with an average daily rate of $106.40 and an average
RevPAR level of $72.67.

PROTOTYPE: BEST WESTERN PLUS EXTERIOR

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PROTOTYPE: BEST WESTERN PLUS GUESTROOM

PROTOTYPE: BEST WESTERN GLO EXTERIOR

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PROTOTYPE: BEST WESTERN GLO GUESTROOM

The Comfort Inn, by Choice Hotels International, has become one of the leading mid-
market, limited-service chains. Established in 1981, all Comfort Inn hotels offer a
swimming pool and/or exercise facilities, as well as a complimentary "Your Morning
Breakfast." The brand targets price-conscious commercial and leisure travelers, and
its primary competitors include the Holiday Inn Express, Fairfield Inn by Marriott,
and Country Inn & Suites by Carlson, among others. As of year-end 2016, there were
1,113 Comfort Inns (89,310 hotel rooms) in the U.S. In 2016, the brand's U.S. hotels
operated at an average occupancy level of 65.6%, an average daily rate of $92.56,
and an average RevPAR level of $60.70.

Quality (formerly Quality Inn or Quality Suites) is a mid-priced, midscale, limited-


service brand of Choice Hotels International. Quality hotels have a broad appeal,
offering a full range of services and amenities for both commercial and leisure
travelers, including swimming pools, guest laundry facilities, fitness rooms, and
meeting space at many locations. Each guestroom features the signature Quality
Sleeper by Serta®, with complimentary amenities such as free local phone calls and
high-speed Internet access. Most locations offer a complimentary breakfast. As of
year-end 2016, there were 1,447 Quality hotels (114,582 rooms) in the U.S. In 2016,
the brand's U.S. hotels operated at an average occupancy level of 59.1%, an average
daily rate of $77.80, and an average RevPAR level of $45.99.

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PROTOTYPE: COMFORT INN EXTERIOR

PROTOTYPE: COMFORT INN GUESTROOM

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PROTOTYPE: QUALITY INN EXTERIOR

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PROTOTYPE: QUALITY INN GUESTROOM

The first Wingate by Wyndham (formerly Wingate Inn) hotel opened in 1996. The
Wingate by Wyndham is a mid-market, midscale hotel belonging to the Wyndham
Worldwide family of brands. Wingate by Wyndham caters to the corporate traveler,
featuring oversized guestrooms with a separate work area, two-line desk phone
with speaker, a data port, free high-speed Internet access, voicemail and conference
call capabilities, and a cordless phone. Other amenities include a 24-hour business
center, a fitness room, a whirlpool, and a complimentary hot breakfast. Wingate
properties do not have a dedicated food and beverage facility. As of year-end 2016,
there were 149 Wingate by Wyndham properties (13,703 rooms) worldwide. In
2016, Wingate by Wyndham operated at an average occupancy level of 62.7%, with
an average daily rate of $90.70 and a RevPAR of $56.84 globally.

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PROTOTYPE: WINGATE BY WYNDHAM EXTERIOR

PROTOTYPE: WINGATE BY WYNDHAM GUESTROOM

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Summary of Based on typical standards for midscale, limited service hotels, we recommend the
Recommended following facilities and amenities for the subject property. The upcoming forecasts
Facilities of income and expense assume that these components will exist at the proposed
hotel. For the purposes of our analysis, our forecasts assume the development of a
hotel affiliated with Best Western. The selection of an alternate brand would result
in a change to the required amenities in accordance with brand standards.

FIGURE 5-2 RECOMMENDED FACILITIES SUMMARY

Proposed Guestroom Configuration Number of Units


King 20
Queen/Queen 35
Total 55

Proposed Food & Beverage Facilities Seating Capacity

Breakfas t Dining Area 20

Proposed Indoor Meeting Facilities Square Footage


Boardroom 200
Flexible Meeting Space 2,000

Total 2,200

Proposed Amenities & Services


Lobby Works tation Fitnes s Room
Market Pantry Gues t Laundry

Proposed Infrastructure
Parking Spaces 55
Elevators 1 Gues t
Life-Safety Sys tems Sprinklers , Smoke Detectors
Cons truction Details Poured Concrete on Slab

Site Improvements and Once guests enter the site, ample parking should be available on the surface lot
Hotel Structure around the perimeter of the hotel. Site improvements should include freestanding
signage, which will be located on the western side of the site, facing Main Street
(additional signage will likely be placed on the exterior of the building). We assume
that all signage will adequately identify the property and meet brand standards.
Planned landscaping should allow for a positive guest impression and competitive
exterior appearance. Sidewalks should be present along the front entrance and

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around the perimeter of the hotel. Overall, the site improvements should be
designed based on brand standards and the layout of the site.

Construction details for the proposed hotel are yet to be determined. However, the
hotel structure is likely to be constructed of poured concrete and concrete panels.
The exterior of the hotel will likely be finished with EIFS or stucco. The ultimate
design and layout of the building will be influenced by the selected brand. Several
elevators and stairways should provide internal vertical transportation within the
main structure as needed. The hotel roof will most likely be constructed of concrete
and a rubber-membrane roofing system. Double-paned windows will reduce noise
transmission into the rooms. Heating and cooling will likely be provided by a
combination of PTAC units and a centralized system. The building components are
expected to be normal for a hotel of this type and should meet the standards for this
market. We assume that all structural components will meet local building codes
and that no significant defaults will occur during construction that would affect the
future operating potential of the hotel or delay its assumed opening date.

The layout of the hotel was not finalized at the time of this analysis; however, we
have assumed the typical mix of amenities and facilities for a three-story midscale,
limited-service property. The ground floor of the hotel should house the lobby area,
breakfast area, market pantry, fitness room, meeting space, and back-of-house
spaces (laundry, offices). Guestrooms are likely to be located on all floors of the
hotel. The design of the public areas and guestrooms is expected to be dictated by
the standards and requirements of the selected brand. We assume that all property
management and telephone systems, as well as other technology, will be
appropriately installed for the effective management of hotel operations. The
furnishings and finishes should offer an appropriate first impression, and the design
of the hotel should lend itself to adequate efficiency.

The hotel is expected to be served by the necessary back-of-the-house space,


including an in-house laundry facility, administrative offices, and a prep kitchen to
service the needs of the breakfast dining area. These spaces should be adequate for
a hotel of this type and should allow for the efficient operation of the property under
competent management.

ADA and We assume that the property will be built according to all pertinent codes and brand
Environmental standards. Moreover, we assume its construction will not create any environmental
hazards (such as mold) and that the property will fully comply with the Americans
with Disabilities Act.

Capital Expenditures Our analysis assumes that, after its opening, the hotel will require ongoing upgrades
and periodic renovations in order to maintain its competitive level in this market
and to remain compliant with brand standards. These costs should be adequately

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funded by the forecasted reserve for replacement, as long as a successful, ongoing


preventive-maintenance program is employed by hotel staff.

Construction Budget HVS has estimated construction costs for the 55-room proposed subject property.
Estimate Our cost budget is based on building costs provided by the Marshall & Swift cost
estimator, as well as FF&E, soft costs, and pre-opening costs supported by the HVS
Development Cost Survey. In addition, we reviewed recent development budgets for
similar hotel properties. The HVS Development Cost Survey is compiled annually
utilizing data from actual construction budgets of previous assignments. We note,
however, that we are not experts in estimating construction costs, and that these
can vary widely based on location and specific attributes of the site.

FIGURE 5-3 SUBJECT PROPERTY CONSTRUCTION BUDGET – HVS ESTIMATE

Item Total Cost

Bui l di ng, Pre-Openi ng & Worki ng Ca pi ta l , Soft Cos ts $4,125,000


Furni ture, Fi xtures , & Equi pment 660,000
La nd 400,000
Entrepreneuri a l Incenti ve 1,037,000
Total Cost New Estimate $6,222,000

Conclusion Overall, the proposed subject hotel should offer a well-designed, functional layout
of support areas and guestrooms. All typical and market-appropriate features and
amenities are assumed to be included in the hotel's design. We assume that the
building will be fully open and operational on the stipulated opening date and will
meet all local building codes and brand standards. Furthermore, we assume that the
hotel staff will be adequately trained to allow for a successful opening and that pre-
marketing efforts will commence at least six months in advance of the opening date.

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6. Projection of Occupancy and Average Rate

Along with average rate results, the occupancy levels achieved by a hotel are the
foundation of the property's financial performance and market value. Most of a
lodging facility's other revenue sources (such as food, beverages, other operated
departments, and rentals and other income) are driven by the number of guests, and
many expense levels vary with occupancy. To a certain degree, occupancy
attainment can be manipulated by management. For example, hotel operators may
choose to lower rates in an effort to maximize occupancy. Our forecasts reflect an
operating strategy that we believe would be implemented by a typical, professional
hotel management team to achieve an optimal mix of occupancy and average rate.

Penetration Rate The subject property's forecasted market share and occupancy levels are based
Analysis upon its anticipated competitive position within the market, as quantified by its
penetration rate. The penetration rate is the ratio of a property's market share to its
fair share.

Historical Penetration In the following table, the penetration rates attained by the primary competitors
Rates by Market and the aggregate secondary competitors are set forth for each segment for the base
Segment year.

FIGURE 6-1 HISTORICAL PENETRATION RATES


n t
sie

ll
era
n
Tra

Ov

Property Class

Mi ds ca le & Ups ca le Hotel s (Aggrega te) 106 % 106 %


Economy Hotel s (Aggrega te) 93 93

The midscale and upscale hotels in the region achieved a higher penetration rate for
transient demand, when compared to economy hotels. This is a result of the higher
quality of facilities and amenities offers at midscale and upscale hotels.

Forecast of Subject Because the supply and demand balance for the competitive market is dynamic,
Property’s Occupancy there is a circular relationship between the penetration factors of each hotel in the
market. The performance of individual new hotels has a direct effect upon the
aggregate performance of the market, and consequently upon the calculated

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penetration factor for each hotel in each market segment. The same is true when the
performance of existing hotels changes, either positively (following a
refurbishment, for example) or negatively (when a poorly maintained or marketed
hotel loses market share).

A hotel’s penetration factor is calculated as its achieved market share of demand


divided by its fair share of demand. Thus, if one hotel’s penetration performance
increases, thereby increasing its achieved market share, this leaves less demand
available in the market for the other hotels to capture and the penetration
performance of one or more of those other hotels consequently declines (other
things remaining equal). This type of market share adjustment takes place every
time there is a change in supply, or a change in the relative penetration performance
of one or more hotels in the competitive market. Our projections of penetration,
demand capture, and occupancy performance for the subject property account for
these types of adjustments to market share within the defined competitive market.
For the purposes of our analysis, the performance of hotels in the region was
analyzed in aggregate by market class (midscale/upscale versus economy), rather
than by individual property.

The proposed subject hotel's occupancy forecast is set forth as follows, with the
adjusted projected penetration rates used as a basis for calculating the amount of
captured market demand.

FIGURE 6-2 FORECAST OF SUBJECT PROPERTY'S OCCUPANCY

Market Segment 2019 2020 2021 2022

Transient
Dema nd 190,735 192,642 193,605 193,605
Ma rket Sha re 6.0 % 6.1 % 6.4 % 6.4 %
Ca pture 11,395 11,846 12,468 12,468
Penetra ti on 96 % 99 % 104 % 104 %

Total Room Nights Captured 11,395 11,846 12,468 12,468


Ava i l a bl e Room Ni ghts 20,075 20,075 20,075 20,075
Subject Occupancy 57 % 59 % 62 % 62 %
Ma rket-wi de Ava i l a bl e Room Ni ghts 323,390 323,390 323,390 323,390
Fair Share 6 % 6 % 6 % 6 %
Ma rket-wi de Occupi ed Room Ni ghts 190,735 192,642 193,605 193,605
Market Share 6 % 6 % 6 % 6 %
Market-wide Occupancy 59 % 60 % 60 % 60 %
Total Penetration 96 % 99 % 104 % 104 %

June-2017 Projection of Occupancy and Average Rate


Proposed Hotel – Lakeport, California 78
ATTACHMENT 2

The proposed subject hotel is expected to stabilize with a strong penetration rate
due to its new facility, its strong brand, and its favorable lakefront location in
Lakeport. The facility is expected to offer roughly 2,000 square feet of meeting
space, which will provide the opportunity for hosting small meetings and events.

Given the assumed national brand affiliation and high-quality of the proposed
subject property, the hotel is forecast to achieve above-market occupancy
penetration. The asset is expected to be the first newly-constructed, limited-service
hotel in the Lakeport in nearly 15 years, with the most recent addition being the 80-
room hotel at the Konocti Vista Casino. The forecast performance of the proposed
subject hotel also assumes the continued progress of the Lakeport Lakefront
Revitalization Plan. The subject property is one component of this plan; enhanced
amenities along the lakefront corridor are considered vital to the viability of the
proposed hotel.

Based on our analysis of the proposed subject hotel and market area, we have
selected a stabilized occupancy level of 62%. The stabilized occupancy is intended
to reflect the anticipated results of the property over its remaining economic life,
given all changes in the life cycle of the hotel. Thus, the stabilized occupancy
excludes from consideration any abnormal relationship between supply and
demand, as well as any nonrecurring conditions that may result in unusually high
or low occupancies. Although the subject property may operate at occupancies
above this stabilized level, we believe it equally possible for new competition and
temporary economic downturns to force the occupancy below this selected point of
stability.

Average Rate Analysis One of the most important considerations in estimating the value of a lodging facility
is a supportable forecast of its attainable average rate, which is more formally
defined as the average rate per occupied room. Average rate can be calculated by
dividing the total rooms revenue achieved during a specified period by the number
of rooms sold during the same period. The projected average rate and the
anticipated occupancy percentage are used to forecast rooms revenue, which in turn
provides the basis for estimating most other income and expense categories.

Competitive Position Although the average rate analysis presented here follows the occupancy projection,
these two statistics are highly correlated; in reality, one cannot project occupancy
without making specific assumptions regarding average rate. This relationship is
best illustrated by revenue per available room (RevPAR), which reflects a property's
ability to maximize rooms revenue. The following table summarizes the historical
average rate and the RevPAR of the subject property’s future primary competitors.

June-2017 Projection of Occupancy and Average Rate


Proposed Hotel – Lakeport, California 79
ATTACHMENT 2

FIGURE 6-3 BASE-YEAR AVERAGE RATE AND REVPAR OF THE COMPETITORS BY PROPERTY CLASS

Estimated 2016 Rooms Revenue


Average Room Average Room Per Available RevPAR
Property Class Rate Rate Penetration Room (RevPAR) Penetration

Mi ds ca l e & Ups ca l e Hotel s


$115 - $120 110 - 120 % $80 - $85 120 - 130 %
(Aggrega te)

Economy Hotel s (Aggrega te) 80 - 85 75 - 80 50 - 55 70 - 75

Overall Average $104.52 $67.17

The defined primarily competitive market realized an overall average rate of


$104.52 in the 2016 base year, improving from the 2015 level of $100.85. In 2016,
the aggregate midscale and upscale hotels achieved an estimated $35 premium in
average rate when compared to the aggregate economy hotels in the region. The
consistent premium in average rate achieved by the aggregate midscale and upscale
hotels supports our recommendation to construct a limited-service, midscale
property, rather than an economy hotel. Important rate aspects of this region
include highway accessibility and seasonality of demand. The selected rate position
for the proposed subject hotel, in base-year dollars, takes into consideration factors
such as its new condition, its brand affiliation, and location its within the lakefront
area of Lakeport.

We have selected the rate position of $112.00, in base-year dollars, for the proposed
subject. This level is between the average rate levels achieved by the two identified
property classes and considers the assumed high-quality of the proposed as well as
the strong prevalence of rate-sensitive leisure demand in the Lakeport area.

Market-wide rates began to trend upward in 2011 in response to increases in


demand. In 2015 and 2016, average rate growth was heightened as a result of
increased demand levels following the Clayton and Valley Fires. In 2017, we expect
the market-wide average rate to decrease given the absence of fire-related demand.
In 2018, and thereafter, market-wide average rate is forecast to increase at a
moderate rate.

Based on these considerations, the following table illustrates the projected average
rate and the growth rates assumed. As a context for the average rate growth factors,
note that we have applied underlying inflation rates of 2.0%, 2.5%, and 3.0%
thereafter for each respective year following the base year of 2016.

June-2017 Projection of Occupancy and Average Rate


Proposed Hotel – Lakeport, California 80
ATTACHMENT 2

FIGURE 6-4 COMPARISON OF HISTORICAL AND PROJECTED OCCUPANCY, AVERAGE RATE, AND REVPAR – PROPOSED SUBJECT PROPERTY AND
MARKET

Projected
2014 2015 2016 2017 2018 2019 2020 2021 2022
Proposed Hotel Lakeport

Occupa ncy — — 56.8 % 59.0 % 62.1 % 62.1 %


Cha nge i n Poi nts — — — 2.2 3.1 0.0
Occupa ncy Penetra ti on — — 96.2 % 99.1 % 103.7 % 103.7 %
Avera ge Ra te $112.00 $108.64 $110.81 $113.58 $116.42 $119.33 $122.91
Cha nge — 2.0 % 2.5 % 2.5 % 2.5 % 3.0 %
Avera ge Ra te Penetra ti on 107.2 % 107.2 % 107.2 % 107.2 % 107.2 % 107.2 %
RevPAR — — $64.47 $68.70 $74.12 $76.34
Cha nge — — — 6.6 % 7.9 % 3.0 %
RevPAR Penetra ti on — — 103.1 % 106.2 % 111.2 % 111.2 %
Historical (Estimated) Projected
2015 2015 2016 2017 2018 2019 2020 2021 2022
Regional Market Area
Occupa ncy 59.4 % 65.5 % 64.3 % 62.0 % 60.5 % 59.0 % 59.6 % 59.9 % 59.9 %
Cha nge i n Poi nts — 6.1 (1.3) (2.2) (1.6) (1.5) 0.6 0.3 0.0

Avera ge Ra te $90.80 $100.85 $104.52 $101.38 $103.41 $105.99 $108.64 $111.36 $114.70
Cha nge — 11.1 % 3.6 % (3.0) % 2.0 % 2.5 % 2.5 % 2.5 % 3.0 %

RevPAR $53.94 $66.09 $67.17 $62.87 $62.53 $62.51 $64.72 $66.67 $68.67
Cha nge — 22.5 % 1.6 % (6.4) % (0.5) % (0.0) % 3.5 % 3.0 % 3.0 %

June-2017 Projection of Occupancy and Average Rate


Proposed Hotel – Lakeport, California 81
ATTACHMENT 2

The final forecast reflects years beginning on January 1, 2019 and corresponds with
our financial projections, as shown below.

FIGURE 6-5 MARKET AND SUBJECT PROPERTY AVERAGE RATE FORECAST

Opening
Calendar Year 2016 2017 2018 2019 2020 2021 2022
Regi ona l ADR (Al l 16 Hotel s Identi fi ed) $104.52 $101.38 $103.41 $105.99 $108.64 $111.36 $114.70
Projected Ma rket ADR Growth Ra te — -3.0% 2.0% 2.5% 2.5% 2.5% 3.0%

Propos ed Subject Property ADR $112.00 $108.64 $110.81 $113.58 $116.42 $119.33 $122.91
ADR Growth Ra te — -3.0% 2.0% 2.5% 2.5% 2.5% 3.0%

Propos ed Subject ADR Penetra ti on 107% 107% 107% 107% 107% 107% 107%

As illustrated above, a -3.0%% rate of change is expected for the proposed subject
hotel's positioned 2016 room rate in 2017. This is followed by growth rates of
2.0%% and 2.5%% in 2018 and 2019, respectively. The regional market should
experience fluctuations in average rate growth through the near term. The proposed
subject hotel's rate position should reflect growth similar to the market trends
because of the proposed hotel's new facility, strong brand affiliation, and location in
Lakeport. The proposed subject hotel’s penetration rate is forecast to reach 107.2%
by the stabilized period.

June-2017 Projection of Occupancy and Average Rate


Proposed Hotel – Lakeport, California 82
ATTACHMENT 2

7. Projection of Income and Expense

In this chapter of our report, we have compiled a forecast of income and expense for
the proposed subject hotel. This forecast is based on the facilities program set forth
previously, as well as the occupancy and average rate forecast discussed previously.

The forecast of income and expense is expressed in current dollars for each year.
The stabilized year is intended to reflect the anticipated operating results of the
property over its remaining economic life, given any or all applicable stages of build-
up, plateau, and decline in the life cycle of the hotel. Thus, income and expense
estimates from the stabilized year forward exclude from consideration any
abnormal relationship between supply and demand, as well as any nonrecurring
conditions that may result in unusual revenues or expenses. The ten-year period
reflects the typical holding period of large real estate assets such as hotels. In
addition, the ten-year period provides for the stabilization of income streams and
comparison of yields with alternate types of real estate. The forecasted income
streams reflect the future benefits of owning specific rights in income-producing
real estate.

Comparable Operating In order to project future income and expense for the proposed subject hotel, we
Statements have included a sample of individual comparable operating statements from our
database of hotel statistics. All financial data are presented according to the three
most common measures of industry performance: ratio to sales (RTS), amounts per
available room (PAR), and amounts per occupied room night (POR). The following
data reflect the performance of five hotel properties, which were chosen based on
similarities in product, market orientation, brand affiliation, size, and price
positioning. These historical income and expense statements will be used as
benchmarks in our forthcoming forecast of income and expense.

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 83
ATTACHMENT 2

FIGURE 7-1 COMPARABLE OPERATING STATEMENTS: RATIO TO SALES

Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Subject


Stabilized $
Number of Rooms: 70 to 100 40 to 60 50 to 70 80 to 110 80 to 110 55
Occupied Rooms: 17,801 10,599 14,325 22,435 20,772 12,447
Days Open: 365 365 365 365 365 365
Occupancy: 59% 60% 62% 64% 63% 62%
Average Rate: $96 $99 $105 $103 $109 $104
RevPAR: $56 $60 $66 $66 $68 $65
REVENUE
Rooms 99.8 % 100.0 % 99.4 % 98.0 % 98.8 % 98.3 %
Other Opera ted Depa rtments 0.0 0.0 0.0 0.5 0.8 0.8
Mi s cell a neous Income 0.2 0.0 0.6 1.5 0.5 0.9
Tota l 100.0 100.0 100.0 100.0 100.0 100.0
DEPARTMENTAL EXPENSES*
Rooms 29.1 21.5 26.2 23.5 26.3 25.0
Other Opera ted Depa rtments 686.7 0.0 0.0 144.7 67.9 75.0
Tota l 29.3 21.5 26.7 23.7 26.5 25.1
DEPARTMENTAL INCOME 70.7 78.5 73.3 76.3 73.5 74.9
OPERATING EXPENSES
Admini s tra tive & Genera l 10.1 8.1 9.7 7.8 10.5 8.3
Info. a nd Tel ecom. Sys tems 0.7 2.4 0.0 0.0 0.0 0.9
Ma rketing 2.0 0.6 0.3 6.2 0.4 4.2
Fra nchi s e Fee 5.5 8.3 7.4 7.8 1.3 3.5
Property Opera tions & Ma i ntena nce 4.8 4.9 6.6 4.0 3.1 4.2
Util i ti es 5.7 6.7 4.8 7.3 5.9 5.0
Tota l 28.9 30.9 28.8 33.1 21.2 26.1
HOUSE PROFIT 41.8 47.6 44.5 43.2 52.3 48.8
Ma na gement Fee 4.1 0.0 0.0 3.9 0.0 3.0
INCOME BEFORE FIXED CHARGES 37.7 47.6 44.5 39.3 52.3 45.8
FIXED EXPENSES
Property Ta xes 4.9 7.5 3.9 4.8 2.7 4.9
Insura nce 3.0 2.0 5.2 1.7 0.9 1.9
Res erve for Repl a cement 4.0 4.0 4.0 4.0 4.0 4.0
Tota l 11.9 13.5 13.1 10.5 7.6 10.7
NET INCOME 25.8 % 34.1 % 31.4 % 28.8 % 44.7 % 35.0 %

* Depa rtmenta l expens e ra ti os a re expres s ed a s a pe rcenta ge of depa rtmenta l revenues

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 84
ATTACHMENT 2

FIGURE 7-2 COMPARABLE OPERATING STATEMENTS: AMOUNTS PER AVAILABLE ROOM

Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Subject


Stabilized $
Number of Rooms: 70 to 100 40 to 60 50 to 70 80 to 110 80 to 110 55
Occupied Rooms: 17,801 10,599 14,325 22,435 20,772 12,447
Days Open: 365 365 365 365 365 365
Occupancy: 59% 60% 62% 64% 63% 62%
Average Rate: $96 $99 $105 $103 $109 $104
RevPAR: $56 $60 $66 $66 $68 $65
REVENUE
Rooms $20,535 $21,867 $23,958 $24,108 $24,827 $23,638
Other Opera ted Depa rtments 6 0 0 116 198 181
Mi s cell a neous Income 44 0 134 377 115 226
Tota l 20,585 21,867 24,092 24,600 25,140 24,045
DEPARTMENTAL EXPENSES
Rooms 5,980 4,701 6,286 5,662 6,525 5,909
Other Opera ted Depa rtments 43 0 159 167 135 136
Tota l 6,023 4,701 6,445 5,829 6,659 6,045
DEPARTMENTAL INCOME 14,562 17,166 17,648 18,771 18,480 18,000
OPERATING EXPENSES
Admi ni s tra tive & Genera l 2,087 1,764 2,331 1,907 2,629 2,000
Info. a nd Telecom. Sys tems 151 515 0 0 0 225
Ma rketing 417 121 64 1,521 111 1,000
Fra nchi s e Fee 1,140 1,810 1,776 1,914 339 850
Property Opera tions & Ma i ntena nce 994 1,079 1,598 996 775 1,000
Util iti es 1,169 1,460 1,166 1,801 1,478 1,200
Tota l 5,959 6,747 6,935 8,139 5,333 6,274
HOUSE PROFIT 8,603 10,419 10,713 10,632 13,147 11,726
Ma na gement Fee 852 0 0 964 0 721
INCOME BEFORE FIXED CHARGES 7,752 10,419 10,712 9,668 13,148 11,004
FIXED EXPENSES
Property Ta xes 1,010 1,643 936 1,169 681 1,167
Insura nce 624 442 1,257 420 222 450
Res erve for Repla cement 823 875 964 984 1,006 962
Tota l 2,458 2,960 3,157 2,574 1,909 2,579
NET INCOME $5,294 $7,459 $7,555 $7,094 $11,239 $8,425

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 85
ATTACHMENT 2

FIGURE 7-3 COMPARABLE OPERATING STATEMENTS: AMOUNTS PER OCCUPIED ROOM

Comp 1 Comp 2 Comp 3 Comp 4 Comp 5 Subject


Stabilized $
Number of Rooms: 70 to 100 40 to 60 50 to 70 80 to 110 80 to 110 55
Occupied Rooms: 17,801 10,599 14,325 22,435 20,772 12,447
Days Open: 365 365 365 365 365 365
Occupancy: 59% 60% 62% 64% 63% 62%
Average Rate: $96 $99 $105 $103 $109 $104
RevPAR: $56 $60 $66 $66 $68 $65
REVENUE
Rooms $95.75 $99.03 $105.37 $103.16 $108.76 $104.45
Other Opera ted Depa rtments 0.03 0.00 0.00 0.49 0.87 0.80
Mi s cell a neous Income 0.20 0.00 0.59 1.61 0.50 1.00
Tota l 95.98 99.03 105.96 105.27 110.13 106.25
DEPARTMENTAL EXPENSES
Rooms 27.88 21.29 27.64 24.23 28.58 26.11
Other Opera ted Depa rtments 0.20 0.00 0.70 0.72 0.59 0.60
Tota l 28.08 21.29 28.34 24.94 29.17 26.71
DEPARTMENTAL INCOME 67.90 77.74 77.61 80.32 80.96 79.54
OPERATING EXPENSES
Admini s tra tive & Genera l 9.73 7.99 10.25 8.16 11.52 8.84
Info. a nd Tel ecom. Sys tems 0.71 2.33 0.00 0.00 0.00 0.99
Ma rketing 1.94 0.55 0.28 6.51 0.49 4.42
Fra nchi s e Fee 5.31 8.20 7.81 8.19 1.48 3.75
Property Opera tions & Ma i ntena nce 4.64 4.89 7.03 4.26 3.40 4.42
Util i ti es 5.45 6.61 5.13 7.71 6.48 5.30
Tota l 27.78 30.56 30.50 34.83 23.36 27.73
HOUSE PROFIT 40.12 47.18 47.11 45.50 57.60 51.81
Ma na gement Fee 3.97 0.00 0.00 4.12 0.00 3.19
INCOME BEFORE FIXED CHARGES 36.14 47.18 47.11 41.37 57.60 48.63
FIXED EXPENSES
Property Ta xes 4.71 7.44 4.12 5.00 2.98 5.16
Insura nce 2.91 2.00 5.53 1.80 0.97 1.99
Res erve for Repl a cement 3.84 3.96 4.24 4.21 4.41 4.25
Tota l 11.46 13.41 13.88 11.01 8.36 11.40
NET INCOME $24.68 $33.77 $33.23 $30.36 $49.24 $37.23

The comparables’ departmental income ranged from 70.7% to 78.5% of total


revenue. The comparable properties achieved a house profit ranging from 41.8% to
52.3% of total revenue. We will refer to the comparable operating data in our
discussion of each line item, which follows later in this section of the report.

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 86
ATTACHMENT 2

Fixed and Variable HVS uses a fixed and variable component model to project a lodging facility's
Component Analysis revenue and expense levels. This model is based on the premise that hotel revenues
and expenses have one component that is fixed and another that varies directly with
occupancy and facility usage. A projection can be made by taking a known level of
revenue or expense and calculating its fixed and variable components. The fixed
component is then increased in tandem with the underlying rate of inflation, while
the variable component is adjusted for a specific measure of volume such as total
revenue.

The actual forecast is derived by adjusting each year’s revenue and expense by the
amount fixed (the fixed expense multiplied by the inflated base-year amount) plus
the variable amount (the variable expense multiplied by the inflated base-year
amount) multiplied by the ratio of the projection year’s occupancy to the base-year
occupancy (in the case of departmental revenue and expense) or the ratio of the
projection year’s revenue to the base year’s revenue (in the case of undistributed
operating expenses). Fixed expenses remain fixed, increasing only with inflation.
Our discussion of the revenue and expense forecast in this report is based upon the
output derived from the fixed and variable model. This forecast of revenue and
expense is accomplished through a systematic approach, following the format of the
Uniform System of Accounts for the Lodging Industry. Each category of revenue and
expense is estimated separately and combined at the end in the final statement of
income and expense.

Inflation Assumption A general rate of inflation must be established that will be applied to most revenue
and expense categories. The following table shows inflation estimates made by
economists at some noted institutions and corporations.

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 87
ATTACHMENT 2

FIGURE 7-4 INFLATION ESTIMATES


Projected Increase in Consumer Price
Index (Annualized Rate Versus 12
Months Earlier)
June Dec June Dec Dec
Name (Sample from Survey) Firm 2017 2017 2018 2018 2016

Lewi s Al e xa nder Nomura Securi ti es Interna ti ona l 2.6 % 2.4 % 2.1 % 2.2 % 2.2 %
Pa ul As hworth Ca pita l Economi cs 2.8 3.0 3.2 3.3 3.3
Da ni e l Ba chma n Del oi tte LP 2.1 1.8 2.2 2.4 2.4
Be rna rd Ba umohl Economi c Outl ook Group 2.1 2.3 2.3 2.5 2.5
Na ri ma n Behra ve s h IHS Gl oba l Ins i ght 2.5 2.2 2.4 2.4 2.4
Da vi d Be rs on Na ti onwi de Ins ura nce 2.6 2.5 2.7 2.8 2.8
Bri a n Bethune Tufts Uni vers i ty 1.9 2.1 2.3 2.3 2.3
Steve n Bl i tz Pa ngea Ma rke t Advi s ory 2.2 1.9 2.5 3.0 3.0
Be th Ann Bovi no Sta nda rd a nd Poor's 2.5 2.1 2.2 2.3 2.3
Mi cha el Ca re y Credi t Agri col e CIB 2.3 2.2 2.4 2.6 2.6
Jos eph Ca rs on Al l i a nceBerns tei n 2.4 3.0 3.0 3.0 3.0
Mi ke Cos grove Econocl a s t 2.5 2.5 2.2 2.0 2.0
Lou Cra nda l l Wri ghts on ICAP 2.5 2.7 2.7 2.6 2.6
Amy Crews Cutts Equifa x 1.7 2.0 2.3 2.5 2.5
J. De wey Da a ne Va nde rbi l t Uni ve rs i ty 1.8 2.0 2.3 2.5 2.5
Greg Da co Oxford Economi cs 2.3 2.2 2.3 2.2 2.2
Ra jeev Dha wa n Georgi a Sta te Uni vers i ty 2.3 2.0 2.1 2.0 2.0
Robert Di etz Na ti ona l As s oci a ti on of Home Bui l ders 2.0 2.1 2.1 2.1 2.1
Dougl a s Dunca n Fa nni e Ma e 2.5 2.3 2.2 2.1 2.1
Robert Dye Comeri ca Ba nk 2.5 2.4 2.3 2.2 2.2
Ma ri a Fi orini Ra mi re z/Jos hua Sha pi ro MFR, Inc. 2.4 2.2 2.4 — —
Mi ke Fra ta ntoni Mortga ge Ba nkers As s oci a ti on 2.6 2.3 2.4 2.6 2.6
Mi cha el Gregory BMO Ca pi ta l 2.2 2.3 2.3 2.3 2.3
Ja n Ha tzi us Gol dma n, Sa chs & Co. 2.4 2.6 2.1 2.2 2.2
Stua rt Hoffma n PNC Fi na nci a l Servi ce s Group 2.3 2.3 2.4 2.4 2.4
Derek Hol t Scoti a ba nk 2.0 2.3 2.3 2.3 2.3
Cons ta nce Hunter KPMG 2.2 2.4 2.1 2.1 2.1
Na tha ni el Ka rp BBVA Compa s s 2.2 2.4 2.6 2.8 2.8
Ja ck Kl ei nhe nz Na ti ona l Reta i l Fe dera ti on 2.4 2.5 2.6 2.5 2.5
Jos eph La Vorgna Deuts che Ba nk Securi ti es , Inc. 1.8 2.1 2.2 2.3 2.3
Edwa rd Lea mer/Da vi d Shul ma n UCLA Anders on Foreca s t 2.3 2.5 2.8 2.7 2.7
John Lons ki Moody's Inves tors Servi ce 1.9 1.6 1.5 1.6 1.6
Aneta Ma rkows ka Soci ete Ge nera l e 2.5 2.8 2.3 2.2 2.2
Ji m Mei l ACT Res ea rch 1.8 2.7 3.0 2.5 2.5
Mi cha el Mora n Da i wa Ca pi ta l 2.4 2.3 2.4 2.5 2.5
Cha d Moutra y Na ti ona l As s oci a ti on of Ma nufa cturers 2.3 2.8 2.7 2.6 2.6
Joel Na roff Na roff Economi c Advi s ors 2.6 2.8 3.0 2.8 2.8
Ma rk Ni el s on Ma croEcon Gl oba l Advi s ors 1.9 2.2 2.5 2.7 2.7
Fra nk Notha ft Corel ogi c 2.3 2.4 2.5 2.5 2.5
Ji m O'Sul l i va n Hi gh Frequency Economi cs 2.2 2.7 2.8 2.9 2.9
Li nds ey Pi egza Sti fel , Ni coul a s a nd Compa ny, Incorpora ted (formerl
1.8 y1.3
Sterne 1.2
Agee ) — —
Dr. Joel Pra kken/ Chri s Va rva res Ma croeconomi c Advi s ers 2.5 2.3 2.0 2.1 2.1
Rus s e l l Pri ce Ameri pri s e Fi na nci a l 2.3 2.2 2.2 2.2 2.2
Lynn Rea s er Poi nt Loma Na za rene Uni vers i ty 1.8 2.0 2.1 2.2 2.2
Ma rti n Rega l i a Cha mber of Commerce 1.8 1.8 — — —
Ia n Shepherds on Pa ntheon Ma croeconomi cs 2.7 3.0 2.7 2.5 2.5
John Si l vi a Wel l s Fa rgo & Co. 2.4 2.5 2.7 2.5 2.5
Al l en Si na i Decis i on Economi cs , Inc. 2.4 2.5 2.4 2.3 2.3
Ja mes F. Smi th Pa rs ec Fi na nci a l Ma na geme nt 1.6 1.6 1.7 1.8 1.8
Sea n M. Sna i th Uni ve rs i ty of Centra l Flori da 3.1 3.3 3.4 3.3 3.3
Sung Won Sohn Ca l i forni a Sta te Uni ve rs i ty 2.3 2.3 2.3 2.4 2.4
Stephen Sta nl ey Pi erpont Se curi ti es 2.9 3.3 3.4 3.3 3.3
Sus a n M. Sterne Economi c Ana l ys i s As s oci a tes Inc. 2.5 2.2 2.3 2.5 2.5
Ja mes Sweeney CSFB 2.0 2.1 — — —
Kevi n Swi ft Ameri ca n Chemi s ty Counci l 2.3 2.5 2.5 2.3 2.3
Di a ne Swonk Di a ne Swonk & As s oci a te s LLC 2.7 2.4 2.4 2.5 2.5
Ca rl Ta nnenba um The Northern Trus t 2.0 2.0 2.0 2.0 2.0
US Economi cs Te a m BNP Pa ri ba s 2.2 2.3 2.5 2.6 2.6
Ba rt va n Ark The Confe rence Boa rd 2.2 2.4 — — —
Bri a n S. Wes bury/ Robert Ste in Fi rs t Trus t Advi s ors , L.P. 2.7 2.8 2.9 3.0 3.0
La wrence Yun Na ti ona l As s oci a ti on of Rea l tors 3.0 3.1 3.0 2.8 2.8

Avera ges : 2.3 % 2.4 % 2.4 % 2.5 % 2.5 %


Source: Wa l l Street Journa l Economi c Foreca s ti ng Survey, December 2016

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 88
ATTACHMENT 2

As the preceding table indicates, the financial analysts who were surveyed in
December 2016 anticipated inflation rates ranging from 1.6% to 3.1% (on an
annualized basis) for June 2017; the average of these data points was 2.3%. The
same group expects annualized inflation rates of 2.4% for both December 2017 and
June 2018, slightly lower than the 2.5% average inflation rate forecast for December
2018.

As a further check on these inflation projections, we have reviewed historical


increases in the Consumer Price Index (CPI-U). Because the value of real estate is
predicated on cash flows over a relatively long period, inflation should be
considered from a long-term perspective.

FIGURE 7-5 NATIONAL CONSUMER PRICE INDEX (ALL URBAN CONSUMERS)

National Consumer Percent Change


Year Price Index from Previous Year

2006 201.6 —
2007 207.3 2.8 %
2008 215.3 3.8
2009 214.5 -0.4
2010 218.1 1.6
2011 224.9 3.1
2012 229.6 2.1
2013 233.0 1.5
2014 234.8 0.8
2015 236.5 0.7
2016 241.5 2.1

Avera ge Annua l Compounded Cha nge


2006 - 2016: 1.8 %
2011 - 2016: 1.4

Source: Burea u of La bor Sta ti s ti cs

Between 2006 and 2016, the national CPI increased at an average annual
compounded rate of 1.8%; from 2011 to 2016, the CPI rose by a slightly lower
average annual compounded rate of 1.4%. In 2016, the CPI rose by 2.1%, an increase
from the level of 0.7% recorded in 2015.

In consideration of the most recent trends, the projections set forth previously, and
our assessment of probable property appreciation levels, we have applied
underlying inflation rates of 2.0%, 2.5%, and 3.0% thereafter for each respective
year following the base year of 2016. This stabilized inflation rate takes into account
normal, recurring inflation cycles. Inflation is likely to fluctuate above and below

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 89
ATTACHMENT 2

this level during the projection period. Any exceptions to the application of the
assumed underlying inflation rate are discussed in our write-up of individual
income and expense items.

Forecast of Revenue Based on an analysis that will be detailed throughout this section, we have
and Expense formulated a forecast of income and expense. The following table presents a
detailed forecast through the fifth projection year, including amounts per available
room and per occupied room. The second table illustrates our ten-year forecast of
income and expense, presented with a lesser degree of detail. The forecasts pertain
to years that begin on January 1, 2019, expressed in inflated dollars for each year.

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 90
ATTACHMENT 2

FIGURE 7-6 DETAILED FORECAST OF INCOME AND EXPENSE

2019 (Calendar Year) 2020 Stabilized 2022


Number of Rooms: 55 55 55 55
Occupancy: 57% 59% 62% 62%
Average Rate: $113.58 $116.42 $119.33 $122.91
RevPAR: $64.74 $68.69 $73.99 $76.21
Days Open: 365 365 365 365
Occupied Rooms: 11,443 %Gross PAR POR 11,844 %Gross PAR POR 12,447 %Gross PAR POR 12,447 %Gross PAR POR
OPERATING REVENUE
Rooms $1,300 98.2 % $23,636 $113.61 $1,379 98.3 % $25,073 $116.43 $1,485 98.3 % $27,000 $119.31 $1,530 98.3 % $27,818 $122.93
Other Operated Departments 10 0.8 190 0.91 11 0.8 198 0.92 11 0.8 207 0.91 12 0.8 213 0.94
Miscellaneous Income 13 1.0 238 1.14 14 1.0 247 1.15 14 0.9 259 1.14 15 0.9 266 1.18
Total Operating Revenues 1,324 100.0 24,064 115.67 1,403 100.0 25,518 118.50 1,511 100.0 27,465 121.37 1,556 100.0 28,298 125.04
DEPARTMENTAL EXPENSES *
Rooms 339 26.1 6,158 29.60 354 25.6 6,428 29.85 371 25.0 6,751 29.83 382 25.0 6,954 30.73
Other Operated Departments 8 76.3 145 0.70 8 75.8 150 0.70 9 75.0 155 0.69 9 75.0 160 0.71
Total Expenses 347 26.2 6,304 30.30 362 25.8 6,578 30.54 380 25.1 6,906 30.52 391 25.1 7,114 31.43
DEPARTMENTAL INCOME 977 73.8 17,761 85.37 1,042 74.2 18,940 87.95 1,131 74.9 20,559 90.85 1,165 74.9 21,184 93.61
UNDISTRIBUTED OPERATING EXPENSES
Administrative & General 116 8.8 2,116 10.17 121 8.6 2,194 10.19 126 8.3 2,285 10.10 129 8.3 2,353 10.40
Info & Telecom Systems 13 1.0 238 1.14 14 1.0 247 1.15 14 0.9 257 1.14 15 0.9 265 1.17
Marketing 58 4.4 1,058 5.08 60 4.3 1,097 5.09 63 4.2 1,142 5.05 65 4.2 1,177 5.20
Franchise Fee 51 3.8 919 4.42 52 3.7 942 4.38 53 3.5 971 4.29 55 3.5 1,000 4.42
Prop. Operations & Maint. 58 4.4 1,058 5.08 60 4.3 1,097 5.09 63 4.2 1,142 5.05 65 4.2 1,177 5.20
Utilities 70 5.3 1,269 6.10 72 5.2 1,317 6.11 75 5.0 1,371 6.06 78 5.0 1,412 6.24
Total Expenses 366 27.7 6,658 32.00 379 27.1 6,895 32.02 394 26.1 7,168 31.68 406 26.1 7,384 32.63
GROSS HOUSE PROFIT 611 46.1 11,103 53.36 663 47.1 12,046 55.93 736 48.8 13,391 59.17 759 48.8 13,800 60.98
Management Fee 40 3.0 722 3.47 42 3.0 766 3.55 45 3.0 824 3.64 47 3.0 849 3.75
INCOME BEFORE NON-OPR. INC. & EXP. 571 43.1 10,381 49.89 620 44.1 11,280 52.38 691 45.8 12,567 55.53 712 45.8 12,951 57.23
NON-OPERATING INCOME & EXPENSE
Property Taxes 70 5.3 1,282 6.16 72 5.1 1,307 6.07 73 4.9 1,334 5.89 75 4.8 1,360 6.01
Insurance 27 2.0 485 2.33 27 2.0 499 2.32 28 1.9 514 2.27 29 1.9 530 2.34
Reserve for Replacement 26 2.0 481 2.31 42 3.0 766 3.55 60 4.0 1,099 4.85 62 4.0 1,132 5.00
Total Expenses 124 9.3 2,248 10.80 141 10.1 2,572 11.94 162 10.8 2,946 13.02 166 10.7 3,022 13.35
EBITDA LESS RESERVE $447 33.8 % $8,133 $39.09 $479 34.0 % $8,708 $40.44 $529 35.0 % $9,620 $42.51 $546 35.1 % $9,930 $43.88

*Departmental expenses are expressed as a percentage of departmental revenues.

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 91
ATTACHMENT 2

FIGURE 7-7 TEN-YEAR FORECAST OF INCOME AND EXPENSE


2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Number of Rooms: 55 55 55 55 55 55 55 55 55 55
Occupied Rooms: 11,443 11,844 12,447 12,447 12,447 12,447 12,447 12,447 12,447 12,447
Occupancy: 57% 59% 62% 62% 62% 62% 62% 62% 62% 62%
Average Rate: $113.58 % of $116.42 % of $119.33 % of $122.91 % of $126.60 % of $130.40 % of $134.31 % of $138.34 % of $142.49 % of $146.76 % of
RevPAR: $64.74 Gross $68.69 Gross $73.99 Gross $76.21 Gross $78.49 Gross $80.85 Gross $83.27 Gross $85.77 Gross $88.34 Gross $90.99 Gross
OPERATING REVENUE
Rooms $1,300 98.2 % $1,379 98.3 % $1,485 98.3 % $1,530 98.3 % $1,576 98.3 % $1,623 98.3 % $1,672 98.3 % $1,722 98.3 % $1,774 98.3 % $1,827 98.3 %
Other Operated Departments 10 0.8 11 0.8 11 0.8 12 0.8 12 0.8 12 0.8 13 0.8 13 0.8 14 0.8 14 0.8
Miscellaneous Income 13 1.0 14 1.0 14 0.9 15 0.9 15 0.9 16 0.9 16 0.9 16 0.9 17 0.9 17 0.9
Total Operating Revenues 1,324 100.0 1,403 100.0 1,511 100.0 1,556 100.0 1,603 100.0 1,651 100.0 1,701 100.0 1,752 100.0 1,805 100.0 1,858 100.0
DEPARTMENTAL EXPENSES *
Rooms 339 26.1 354 25.6 371 25.0 382 25.0 394 25.0 406 25.0 418 25.0 430 25.0 443 25.0 457 25.0
Other Operated Departments 8 76.3 8 75.8 9 75.0 9 75.0 9 75.0 9 75.0 10 75.0 10 75.0 10 75.0 10 75.0
Total Expenses 347 26.2 362 25.8 380 25.1 391 25.1 403 25.1 415 25.1 428 25.1 440 25.1 454 25.1 467 25.1
DEPARTMENTAL INCOME 977 73.8 1,042 74.2 1,131 74.9 1,165 74.9 1,200 74.9 1,236 74.9 1,273 74.9 1,311 74.9 1,351 74.9 1,391 74.9
UNDISTRIBUTED OPERATING EXPENSES
Administrative & General 116 8.8 121 8.6 126 8.3 129 8.3 133 8.3 137 8.3 141 8.3 146 8.3 150 8.3 155 8.3
Info & Telecom Systems 13 1.0 14 1.0 14 0.9 15 0.9 15 0.9 15 0.9 16 0.9 16 0.9 17 0.9 17 0.9
Marketing 58 4.4 60 4.3 63 4.2 65 4.2 67 4.2 69 4.2 71 4.2 73 4.2 75 4.2 77 4.2
Franchise Fee 51 3.8 52 3.7 53 3.5 55 3.5 57 3.5 58 3.5 60 3.5 62 3.5 64 3.5 66 3.5
Prop. Operations & Maint. 58 4.4 60 4.3 63 4.2 65 4.2 67 4.2 69 4.2 71 4.2 73 4.2 75 4.2 77 4.2
Utilities 70 5.3 72 5.2 75 5.0 78 5.0 80 5.0 82 5.0 85 5.0 87 5.0 90 5.0 93 5.0
Total Expenses 366 27.7 379 27.1 394 26.1 406 26.1 418 26.1 431 26.1 444 26.1 457 26.1 471 26.1 485 26.1
GROSS HOUSE PROFIT 611 46.1 663 47.1 736 48.8 759 48.8 782 48.8 805 48.8 830 48.8 854 48.8 880 48.8 906 48.8
Management Fee 40 3.0 42 3.0 45 3.0 47 3.0 48 3.0 50 3.0 51 3.0 53 3.0 54 3.0 56 3.0
INCOME BEFORE NON-OPR. INC. & EXP. 571 43.1 620 44.1 691 45.8 712 45.8 734 45.8 756 45.8 778 45.8 802 45.8 826 45.8 851 45.8
NON-OPERATING INCOME & EXPENSE
Property Taxes 70 5.3 72 5.1 73 4.9 75 4.8 76 4.8 78 4.7 79 4.7 81 4.6 83 4.6 84 4.5
Insurance 27 2.0 27 2.0 28 1.9 29 1.9 30 1.9 31 1.9 32 1.9 33 1.9 34 1.9 35 1.9
Reserve for Replacement 26 2.0 42 3.0 60 4.0 62 4.0 64 4.0 66 4.0 68 4.0 70 4.0 72 4.0 74 4.0
Total Expenses 124 9.3 141 10.1 162 10.8 166 10.7 170 10.7 175 10.6 179 10.6 184 10.5 189 10.5 193 10.4
EBITDA LESS RESERVE $447 33.8 % $479 34.0 % $529 35.0 % $546 35.1 % $563 35.1 % $581 35.2 % $599 35.2 % $618 35.3 % $638 35.3 % $657 35.4 %
1 1 1 1 1 1 1 1 1 1
*Departmental expenses are expressed as a percentage of departmental revenues.

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 92
ATTACHMENT 2

The following description sets forth the basis for the forecast of income and expense.
We anticipate that it will take three years for the subject property to reach a
stabilized level of operation. Each revenue and expense item has been forecast
based upon our review of the proposed subject hotel's operating budget and
comparable income and expense statements. The forecast is based upon calendar
years beginning January 1, 2019, expressed in inflated dollars for each year.

Rooms Revenue Rooms revenue is determined by two variables: occupancy and average rate. We
projected occupancy and average rate in a previous section of this report. The
proposed subject hotel is expected to stabilize at an occupancy level of 62% with an
average rate of $119.33 in 2021. Following the stabilized year, the subject
property’s average rate is projected to increase along with the underlying rate of
inflation.

Other Operated According to the Uniform System of Accounts, other operated departments include
Departments Revenue any major or minor operated department other than rooms and food and beverage.
The proposed subject hotel's other operated departments revenue sources are
expected to include the hotel's telephone charges, market pantry sales, and guest
laundry fees. Based on our review of operations with a similar extent of offerings,
we have positioned an appropriate revenue level for the proposed subject hotel.

FIGURE 7-8 OTHER OPERATED DEPARTMENTS REVENUE

Comparable Operating Statements Proposed Subject Property Forecast


#1 #2 #3 #4 #5 2019 Deflated Stabilized

Percenta ge of Revenue 0.0 % 0.0 % 0.0 % 0.5 % 0.8 % 0.8 % 0.8 %


Per Ava i l a bl e Room $6 $0 $0 $116 $198 $190 $181
Per Occupi ed Room $0.03 $0.00 $0.00 $0.49 $0.87 $0.91 $0.80

Miscellaneous Income The miscellaneous income sources comprise those other than guestrooms, food and
beverage, and the other operated departments. The proposed subject hotel's
miscellaneous income revenues are expected to be generated primarily by the
meeting room rentals and other minor collections, such as cancelation fees. Based
on our review of operations with a similar extent of offerings, we have positioned
an appropriate revenue level for the proposed subject hotel. Changes in this revenue
item through the projection period result from the application of the underlying
inflation rate and projected changes in occupancy.

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 93
ATTACHMENT 2

FIGURE 7-9 MISCELLANEOUS INCOME

Comparable Operating Statements Proposed Subject Property Forecast


#1 #2 #3 #4 #5 2019 Deflated Stabilized

Percenta ge of Revenue 0.2 % 0.0 % 0.6 % 1.5 % 0.5 % 1.0 % 0.9 %


Per Ava i l a bl e Room $44 $0 $134 $377 $115 $238 $226
Per Occupi ed Room $0.20 $0.00 $0.59 $1.61 $0.50 $1.14 $1.00

Rooms Expense Rooms expense consists of items related to the sale and upkeep of guestrooms and
public space. Salaries, wages, and employee benefits account for a substantial
portion of this category. Although payroll varies somewhat with occupancy and
managers can generally scale the level of service staff on hand to meet an expected
occupancy level, much of a hotel's payroll is fixed. A base level of front desk
personnel, housekeepers, and supervisors must be maintained at all times. As a
result, salaries, wages, and employee benefits are only moderately sensitive to
changes in occupancy.

Commissions and reservations are usually based on room sales, and thus are highly
sensitive to changes in occupancy and average rate. While guest supplies vary 100%
with occupancy, linens and other operating expenses are only slightly affected by
volume. The proposed subject hotel's rooms department expense has been
positioned based upon our review of the comparable operating data and our
understanding of the hotel's future service level and price point.

FIGURE 7-10 ROOMS EXPENSE

Comparable Operating Statements Proposed Subject Property Forecast


#1 #2 #3 #4 #5 2019 Deflated Stabilized

Percenta ge of Revenue 29.1 % 21.5 % 26.2 % 23.5 % 26.3 % 26.1 % 25.0 %


Per Ava i l a bl e Room $5,980 $4,701 $6,286 $5,662 $6,525 $6,158 $5,909
Per Occupi ed Room $27.88 $21.29 $27.64 $24.23 $28.58 $29.60 $26.11

Other Operated Other operated departments expense includes all expenses reflected in the
Departments Expense summary statements for the divisions associated in these categories. This was
previously discussed in this chapter. The proposed subject hotel's other operated
departments revenue sources are expected to include the hotel's telephone charges,
market pantry sales, and guest laundry fees. Based on our review of operations with
a similar extent of offerings, we have positioned an appropriate revenue level for
the proposed subject hotel.

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 94
ATTACHMENT 2

FIGURE 7-11 OTHER OPERATED DEPARTMENTS EXPENSE

Comparable Operating Statements Proposed Subject Property Forecast


#1 #2 #3 #4 #5 2019 Deflated Stabilized

Percenta ge of Revenue 686.7 % 0.0 % 0.0 % 144.7 % 67.9 % 76.3 % 75.0 %


Per Ava i l a bl e Room $43 $0 $159 $167 $135 $145 $136
Per Occupi ed Room $0.20 $0.00 $0.70 $0.72 $0.59 $0.70 $0.60

Administrative and Administrative and general expense includes the salaries and wages of all
General Expense administrative personnel who are not directly associated with a particular
department. Expense items related to the management and operation of the
property are also allocated to this category.

Most administrative and general expenses are relatively fixed. The exceptions are
cash overages and shortages; commissions on credit card charges; provision for
doubtful accounts, which are moderately affected by the number of transactions or
total revenue; and salaries, wages, and benefits, which are very slightly influenced
by volume. Based upon our review of the comparable operating data and the
expected scope of facility for the proposed subject hotel, we have positioned the
administrative and general expense level at a market- and property-supported level.

FIGURE 7-12 ADMINISTRATIVE AND GENERAL EXPENSE

Comparable Operating Statements Proposed Subject Property Forecast


#1 #2 #3 #4 #5 2019 Deflated Stabilized

Percenta ge of Revenue 10.1 % 8.1 % 9.7 % 7.8 % 10.5 % 8.8 % 8.3 %


Per Ava i l a bl e Room $2,087 $1,764 $2,331 $1,907 $2,629 $2,116 $2,000
Per Occupi ed Room $9.73 $7.99 $10.25 $8.16 $11.52 $10.17 $8.84

Information and Information and telecommunications systems expense consists of all costs
Telecommunications associated with a hotel’s technology infrastructure. This includes the costs of cell
Systems Expense phones, administrative call and Internet services, and complimentary call and
Internet services. Expenses in this category are typically organized by type of
technology, or the area benefitting from the technology solution. We expect the
proposed subject hotel's information and telecommunications systems to be well
managed. Expense levels should stabilize at a typical level for a property of this type.

Marketing Expense Marketing expense consists of all costs associated with advertising, sales, and
promotion; these activities are intended to attract and retain customers. Marketing

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 95
ATTACHMENT 2

can be used to create an image, develop customer awareness, and stimulate


patronage of a property's various facilities.

The marketing category is unique in that all expense items, with the exception of
fees and commissions, are totally controlled by management. Most hotel operators
establish an annual marketing budget that sets forth all planned expenditures. If the
budget is followed, total marketing expenses can be projected accurately.

Marketing expenditures are unusual because although there is a lag period before
results are realized, the benefits are often extended over a long period. Depending
on the type and scope of the advertising and promotion program implemented, the
lag time can be as short as a few weeks or as long as several years. However, the
favorable results of an effective marketing campaign tend to linger, and a property
often enjoys the benefits of concentrated sales efforts for many months. Based upon
our review of the comparable operating data and the expected scope of facility for
the proposed subject hotel, we have positioned the marketing expense level at a
market- and property-supported level.

FIGURE 7-13 MARKETING EXPENSE

Comparable Operating Statements Proposed Subject Property Forecast


#1 #2 #3 #4 #5 2019 Deflated Stabilized

Percenta ge of Revenue 2.0 % 0.6 % 0.3 % 6.2 % 0.4 % 4.4 % 4.2 %


Per Ava i l a bl e Room $417 $121 $64 $1,521 $111 $1,058 $1,000
Per Occupi ed Room $1.94 $0.55 $0.28 $6.51 $0.49 $5.08 $4.42

Franchise Fee As previously discussed, the proposed subject property is expected to be operated
by the brand; as such, there will be no franchise agreement, and no franchise fees
are expected to be required throughout the ten-year forecast period.

Property Operations Property operations and maintenance expense is another expense category that is
and Maintenance largely controlled by management. Except for repairs that are necessary to keep the
facility open and prevent damage (e.g., plumbing, heating, and electrical items),
most maintenance can be deferred for varying lengths of time.

Maintenance is an accumulating expense. If management elects to postpone


performing a required repair, they have not eliminated or saved the expenditure;
they have only deferred payment until a later date. A lodging facility that operates
with a lower-than-normal maintenance budget is likely to accumulate a
considerable amount of deferred maintenance.

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 96
ATTACHMENT 2

The age of a lodging facility has a strong influence on the required level of
maintenance. A new or thoroughly renovated property is protected for several years
by modern equipment and manufacturers' warranties. However, as a hostelry
grows older, maintenance expenses escalate. A well-organized preventive
maintenance system often helps delay deterioration, but most facilities face higher
property operations and maintenance costs each year, regardless of the occupancy
trend. The quality of initial construction can also have a direct impact on future
maintenance requirements. The use of high-quality building materials and
construction methods generally reduces the need for maintenance expenditures
over the long term.

We expect the proposed subject hotel's maintenance operation to be well managed.


Expense levels should stabilize at a typical level for a property of this type. Changes
in this expense item through the projection period result from the application of the
underlying inflation rate and projected changes in occupancy.

FIGURE 7-14 PROPERTY OPERATIONS AND MAINTENANCE EXPENSE

Comparable Operating Statements Proposed Subject Property Forecast


#1 #2 #3 #4 #5 2019 Deflated Stabilized

Percenta ge of Revenue 4.8 % 4.9 % 6.6 % 4.0 % 3.1 % 4.4 % 4.2 %


Per Ava i l a bl e Room $994 $1,079 $1,598 $996 $775 $1,058 $1,000
Per Occupi ed Room $4.64 $4.89 $7.03 $4.26 $3.40 $5.08 $4.42

Utilities Expense The utilities consumption of a lodging facility takes several forms, including water
and space heating, air conditioning, lighting, cooking fuel, and other miscellaneous
power requirements. The most common sources of hotel utilities are electricity,
natural gas, fuel oil, and steam. This category also includes the cost of water service.

Total energy cost depends on the source and quantity of fuel used. Electricity tends
to be the most expensive source, followed by oil and gas. Although all hotels
consume a sizable amount of electricity, many properties supplement their utility
requirements with less expensive sources, such as gas and oil, for heating and
cooking. The changes in this utilities line item through the projection period are a
result of the application of the underlying inflation rate and projected changes in
occupancy.

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 97
ATTACHMENT 2

FIGURE 7-15 UTILITIES EXPENSE

Comparable Operating Statements Proposed Subject Property Forecast


#1 #2 #3 #4 #5 2019 Deflated Stabilized

Percenta ge of Revenue 5.7 % 6.7 % 4.8 % 7.3 % 5.9 % 5.3 % 5.0 %


Per Ava i l a bl e Room $1,169 $1,460 $1,166 $1,801 $1,478 $1,269 $1,200
Per Occupi ed Room $5.45 $6.61 $5.13 $7.71 $6.48 $6.10 $5.30

Management Fee Management expense consists of the fees paid to the managing agent contracted to
operate the property. Some companies provide management services and a brand-
name affiliation (first-tier management company), while others provide
management services alone (second-tier management company). Some
management contracts specify only a base fee (usually a percentage of total
revenue), while others call for both a base fee and an incentive fee (usually a
percentage of defined profit). Basic hotel management fees are often based on a
percentage of total revenue, which means they have no fixed component. While base
fees typically range from 2% to 4% of total revenue, incentive fees are deal specific
and often are calculated as a percentage of income available after debt service and,
in some cases, after a preferred return on equity. We have used a base management
fee of 3.0% of total revenues, consistent with typical market standards. Total
management fees for the proposed subject hotel have been forecast at 3.0% of total
revenue.

Property Taxes Real estate in the state of California is assessed at 100% of market value upon the
sale, expansion, or new construction of a property. Once established, the assessed
value of a property can increase by no more than 2.0% per year, according to state
law. A reassessment is triggered by the sale, expansion, or improvement of a
property. Because this analysis is predicated upon a hypothetical sale, we have
calculated the first year’s property tax burden based on the estimated fee-simple
market value of the subject property determined by our analysis. Real and personal
property are taxed at the same rate. Property taxes are “stepped up” upon the
assumed sale of the hotel at the end of the tenth year by loading the terminal
capitalization rate with the tax rate.

In most states, the comparison of a hotel’s assessed value with that of comparable
hotels in the same taxing jurisdiction can provide insight into whether or not the
property is fairly assessed. The assessed value of the land and improvements is
divided by the hotel’s number of rooms to provide a unit of comparison with other
hotels. This is a useful tool in most states, where properties are periodically
reassessed to market value. However, in California, the comparison of assessed
values is generally irrelevant due to Proposition 13, enacted in 1978, which

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 98
ATTACHMENT 2

removed the relationship between a property’s assessed value and its market value.
Under Proposition 13, a property is reassessed upon sale to market value, which is
generally presumed to be the sales price; thereafter, the assessed value is increased
at a maximum of 2% per year. Trends in appreciation and depreciation caused by
market fluctuations are not reflected in a property’s assessed value in California,
unless there is a sales transaction. Thus, comparable hotels in California can have
markedly different assessed values, depending upon when the last sales transaction
occurred. For this reason, we have not researched the assessed values of
comparable hotels to assess the reasonableness of the subject property’s assessed
value.

FIGURE 7-16 SUBJECT PROPERTY TAX CALCULATION

Estimated Market Value of First Year's


Fee Simple Interest Tax Rate Tax Burden
$6,200,000 x 1.13% $69,997

Tax payments are due twice yearly in Lake County. We estimate that property taxes
for the proposed hotel will equal approximately $69,997 in the first forecast year of
our projection period, increasing by 2.0% annually thereafter, the maximum
allowed by state law.!

Insurance Expense The insurance expense category consists of the cost of insuring the hotel and its
contents against damage or destruction by fire, weather, sprinkler leakage, boiler
explosion, plate glass breakage, and so forth. General insurance costs also include
premiums relating to liability, fidelity, and theft coverage.

Insurance rates are based on many factors, including building design and
construction, fire detection and extinguishing equipment, fire district, distance from
the firehouse, and the area's fire experience. Insurance expenses do not vary with
occupancy.

FIGURE 7-17 INSURANCE EXPENSE

Comparable Operating Statements Proposed Subject Property Forecast


#1 #2 #3 #4 #5 2019 Deflated Stabilized

Percentage of Revenue 3.0 % 2.0 % 5.2 % 1.7 % 0.9 % 2.0 % 1.9 %


Per Avai l a bl e Room $624 $442 $1,257 $420 $222 $485 $450
Per Occupi ed Room $2.91 $2.00 $5.53 $1.80 $0.97 $2.33 $1.99

June-2017 Projection of Income and Expense


Proposed Hotel – Lakeport, California 99
ATTACHMENT 2

Reserve for Furniture, fixtures, and equipment are essential to the operation of a lodging facility,
Replacement and their quality often influences a property's class. This category includes all non-
real estate items that are capitalized, rather than expensed. The furniture, fixtures,
and equipment of a hotel are exposed to heavy use and must be replaced at regular
intervals. The useful life of these items is determined by their quality, durability, and
the amount of guest traffic and use.

Periodic replacement of furniture, fixtures, and equipment is essential to maintain


the quality, image, and income-producing potential of a lodging facility. Because
capitalized expenditures are not included in the operating statement but affect an
owner's cash flow, a forecast of income and expense should reflect these expenses
in the form of an appropriate reserve for replacement.

The International Society of Hospitality Consultants (ISHC) oversees a major


industry-sponsored study of the capital expenditure requirements for full-
service/luxury, select-service, and extended-stay hotels. The most recent study was
published in 2014.7 Historical capital expenditures of well-maintained hotels were
investigated through the compilation of data provided by most of the major hotel
companies in the United States. A prospective analysis of future capital expenditure
requirements was also performed based upon the cost to replace short- and long-
lived building components over a hotel's economic life. The study showed that the
capital expenditure requirements for hotels vary significantly from year to year and
depend upon both the actual and effective ages of a property. The results of this
study showed that hotel lenders and investors are requiring reserves for
replacement ranging from 4% to 5% of total revenue.

Based on the results of our analysis and on our review of the proposed subject asset
and comparable lodging facilities, as well as on our industry expertise, we estimate
that a reserve for replacement of 4% of total revenues is sufficient to provide for the
timely and periodic replacement of the subject property's furniture, fixtures, and
equipment. This amount has been ramped up during the initial projection period.

Forecast of Revenue Projected total revenue. House profit, and EBITDA less replacement reserves are set
and Expense forth in the following table.
Conclusion

7 The International Society of Hotel Consultants, CapEx 2014, A Study of Capital


Expenditure in the U.S. Hotel Industry.

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Proposed Hotel – Lakeport, California 100
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FIGURE 7-18 FORECAST OF REVENUE AND EXPENSE CONCLUSION

Total Revenue House Profit House EBITDA Less Replacement Reserve


% Profit As a % of
Year Total Change Total % Change Ratio Total % Change Ttl Rev

Projected 2019 $1,324,000 — $611,000 — 46.1 % $447,000 — 33.8 %


2020 1,403,000 6.0 % 663,000 8.5 % 47.1 479,000 7.2 % 34.0
2021 1,511,000 7.7 736,000 11.0 48.8 529,000 10.4 35.0
2022 1,556,000 3.0 759,000 3.1 48.8 546,000 3.2 35.1
2023 1,603,000 3.0 782,000 3.0 48.8 563,000 3.1 35.1

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8. Feasibility Analysis

Return on investment can be defined as the future benefits of an income-producing


property relative to its acquisition or construction cost. The first step in performing
a return on investment analysis is to determine the amount to be initially invested.
For a proposed property, this amount is most likely to be the development cost of
the hotel. Based on the total development cost, the individual investor will utilize a
return on investment analysis to determine if the future cash flow from a current
cash outlay meets his or her own investment criteria and at what level above or
below this amount such an outlay exceeds or fails to meet these criteria.

As an individual or company considering investment in hotel real estate, the


decision to use one’s own cash, an equity partner's capital, or lender financing will
be an internal one. Because hotels typically require a substantial investment, only
the largest investors and hotel companies generally have the means to purchase
properties with all cash. We would anticipate the involvement of some financing by
a third party for the typical investor or for those who may be entering the market
for hotel acquisitions at this time. In leveraged acquisitions and developments
where investors typically purchase or build upon real estate with a small amount of
equity cash (20% to 50%) and a large amount of mortgage financing (50% to 80%),
it is important for the equity investor to acknowledge the return requirements of
the debt participant (mortgagee), as well as his or her own return requirements.
Therefore, we will begin our rate of return analysis by reviewing the debt
requirements of typical hotel mortgagees.

Construction Cost HVS has estimated construction costs for the 55-room proposed subject property.
Estimate Our cost budget is based on building costs provided by the Marshall & Swift cost
estimator, as well as FF&E, soft costs, and pre-opening costs supported by the HVS
Development Cost Survey. We also reviewed actual development budgets for
recently developed and proposed midscale, limited-service hotels. The HVS
Development Cost Survey is compiled annually utilizing data from actual
construction budgets of previous assignments. We note, however, that we are not
experts in estimating construction costs, and that these can vary widely based on
location and specific attributes of the site.

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FIGURE 8-4 SUBJECT PROPERTY CONSTRUCTION BUDGET – HVS ESTIMATE

Item Total Cost


Bui l di ng, Pre-Openi ng & Worki ng Capi tal , Soft Cos ts $4,125,000
Furni ture, Fi xtures , & Equi pment 660,000
Land 400,000
Entrepreneuri a l Incenti ve 1,037,000

Total Cost New Estimate $6,222,000

We note that minimal comparable land sales were available for our review. Based
on the available data, we estimated land value for a 2.25-acre site (910 N. Main
Street) at approximately $3.75 to $4.25 per square foot. As the City of Lakeport
currently owns this site, there may be an opportunity to negotiate attractive terms.
Options could include a long-term ground lease with a nominal ground lease
payment or the contribution of the site to the developer with considerations that
are yet to be determined. In general, the land should be viewed as an opportunity to
entice a potential developer given the perceived risk associated with this
development.

Mortgage Component Hotel financing, while still available for most tiers of the lodging industry, has
become more challenging to procure since mid-year 2015 given the concerns about
rising levels of new supply and potential economic volatility. The CMBS market has
been most affected because of this shifting environment. While many lenders
remain active, underwriting standards are becoming more stringent. Lenders
continue to be attracted to the lodging industry because of the higher yields
generated by hotel financing relative to other commercial real estate, and the
industry continues to perform strongly in most markets. To varying degrees and
with some market selectivity, commercial banks, mortgage REITs, insurance
companies, and CMBS and mezzanine lenders continue to pursue deals.

Data for the mortgage component may be developed from statistics of actual hotel
mortgages made by long-term lenders. The American Council of Life Insurance,
which represents 20 large life insurance companies, publishes quarterly
information pertaining to the hotel mortgages issued by its member companies.

Because of the six- to nine-month lag time in reporting and publishing hotel
mortgage statistics, it was necessary to update this information to reflect current
lending practices. Our research indicates that the greatest degree of correlation
exists between the average interest rate of a hotel mortgage and the concurrent
yield on an average-A corporate bond.

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The following chart summarizes the average mortgage interest rates of the hotel
loans made by these lenders. For the purpose of comparison, the average-A
corporate bond yield (as reported by Moody's Bond Record) is also shown.

FIGURE 8-1 AVERAGE MORTGAGE INTEREST RATES AND AVERAGE-A


CORPORATE BOND YIELDS

9.0
8.0
7.0
Rate (%)

6.0
5.0
4.0
3.0
2007 - 3rd

2008 - 3rd

2009 - 3rd

2010 - 3rd

2011 - 3rd

2012 - 3rd

2013 - 3rd

2014 - 3rd

2015 - 3rd

2016 - 3rd
2010 - 1st

2011 - 1st

2012 - 1st

2013 - 1st

2014 - 1st

2015 - 1st

2016 - 1st
2008 - 1st

2009 - 1st

Avg. Interest Rate (%) Avg. A Corp. Bond Yield (%)

Sources: American Council of Life Insurance, Moody's Bond Record, HVS

The relationship between hotel interest rates and the yields from the average-A
corporate bond can be detailed through a regression analysis, which is expressed as
follows.

Y = 0.95520400 X + 0.77974091

Where: Y = Estimated Hotel Mortgage Interest Rate


X = Current Average-A Corporate Bond Yield
(Coefficient of correlation is 94%)

The March 22, 2017, average yield on average-A corporate bonds, as reported by
Moody’s Investors Service, was 4.18%. When used in the previously presented
equation, a factor of 4.18 produces an estimated hotel/motel interest rate of 4.77%
(rounded).

Despite the recent interest rate increases, hotel debt remains available at favorable
interest rates, though some lenders have pulled out of the market, and underwriting
standards have become more stringent. The most prevalent interest rates for single

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hotel assets are currently ranging from 5.0% to 7.0%, depending on the type of debt,
loan-to-value ratio, and the quality of the asset and its market.

In addition to the mortgage interest rate estimate derived from this regression
analysis, HVS constantly monitors the terms of hotel mortgage loans made by our
institutional lending clients. Fixed-rate debt is being priced at roughly 300 to 500
basis points over the corresponding yield on treasury notes. As of March 22, 2017,
the yield on the ten-year T-bill was 2.36%, indicating an interest rate range from
5.4% to 7.4%. The hotel investment market remains active but has slowed because
of the gap between buyer and seller expectations, as well as lender and investor
caution regarding where we stand in the investment and development cycle. The
Federal Reserve Bank increased the federal funds rate twice in 2016; moreover, it
has indicated that it expects additional interest rate increases in 2017. The yield on
the ten-year T-bill jumped 80 basis points following the election, and most experts
anticipate the T-bill yield to reach or exceed 3.0% by the end of 2017. The cost of
mortgage debt is expected to rise modestly, as spreads contract somewhat to offset
the Federal Reserve Bank's actions. At present, we find that lenders that are active
in the market are using loan-to-value ratios of 60% to 75% and amortization
periods of 20 to 30 years.

Based on our analysis of the current lodging industry mortgage market and
adjustments for specific factors, such as the proposed property’s location and
conditions in the Lakeport hotel market, it is our opinion that a 5.25% interest, 25-
year amortization mortgage with a 0.071910 constant is appropriate for the
proposed subject hotel. In the mortgage-equity analysis, we have applied a loan-to-
cost ratio of 75%, which is reasonable to expect based on this interest rate and
current parameters.

Equity Component The remaining capital required for a hotel investment generally comes from the
equity investor. The rate of return that an equity investor expects over a ten-year
holding period is known as the equity yield. Unlike the equity dividend, which is a
short-term rate of return, the equity yield specifically considers a long-term holding
period (generally ten years), annual inflation- adjusted cash flows, property
appreciation, mortgage amortization, and proceeds from a sale at the end of the
holding period. To establish an appropriate equity yield rate, we have used two
sources of data: past appraisals and investor interviews.

Hotel Sales – Each appraisal performed by HVS uses a mortgage-equity approach


in which income is projected and then discounted to a current value at rates
reflecting the cost of debt and equity capital. In the case of hotels that were sold near
the date of our valuation, we were able to derive the equity yield rate and unlevered
discount rate by inserting the ten-year projection, total investment (purchase price
and estimated capital expenditure and/or PIP) and debt assumptions into a

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valuation model and solving for the equity yield. The overall capitalization rates for
the historical income and projected first-year income are based on the sales price
“as is.” The following table shows a representative sample of hotels that were sold
on or about the time that we appraised them, along with the derived equity return
and discount rates based on the purchase price and our forecast.

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FIGURE 8-2 SAMPLE OF HOTELS SOLD

Overall Rate Gross Room


Based on Sales Price Revenue Multiplier
Total
Number Date Property Equity Historical Projected Historical Projected
Hotel Location of Rooms of Sale Yield Yield Year Year One Year Year One

Qual i ty Inn Farmvi l l e Farmvi l l e, VA 51 Dec-16 12.1 % 21.2 % 8.6 % 11.3 % 2.9 2.6
Comfort Sui tes Ma ri on Ma ri on, IN 62 Nov-16 12.1 20.7 8.1 8.7 2.6 2.5
Da ys Inn Si oux Fa l l s Ai rport Si oux Fa l l s , SD 87 Nov-16 12.5 21.0 10.9 10.3 1.9 1.8
Ha mpton Inn Tropi ca na La s Vega s , NV 322 Oct-16 10.1 20.4 10.0 8.9 ― ―
Ameri cas Bes t Va l ue Inn Ri chmond, VA 81 Oct-16 11.9 18.5 8.6 8.8 4.1 3.9
Kni ghts Inn New Orl ea ns New Orl ea ns , LA 141 Oct-16 12.4 19.1 10.2 5.6 2.7 1.9
Wi ngate by Wyndha m Col umbi a, SC 100 Sep-16 11.8 21.6 9.3 13.5 3.1 2.4
Qual i ty Inn & Sui tes Detroi t Li voni a, MI 101 Sep-16 13.5 22.6 8.0 10.1 2.9 2.7
Hol i da y Inn Expres s Ma ri on Ma ri on, OH 81 Sep-16 11.5 19.5 8.8 10.2 ― ―
Motel 6 Mi s s i on Va l l ey Eas t San Di ego, CA 99 Sep-16 11.6 20.2 8.5 9.0 5.0 4.6
Hol i da y Lodge Anti och, CA 46 Sep-16 12.4 20.5 8.3 7.4 6.6 5.7
Fa i rground Inn Monroe, WA 61 Sep-16 13.8 22.6 6.6 11.0 4.7 3.7
Red Roof Inn New London New London, CT 108 Aug-16 14.0 24.3 10.4 11.2 2.6 2.6
Hol i da y Inn Expres s & Sui tes Gl en Ros e, TX 86 Aug-16 10.8 16.5 7.6 9.3 ― ―
Va l ue Pl a ce Lexi ngton, KY 124 Aug-16 13.0 21.6 9.1 10.4 5.2 4.6
Ma gnus on Hotel Ma ni tou Spri ngs , CO 38 Aug-16 14.5 23.3 9.8 11.7 5.2 3.3
Comfort Inn Orl a ndo, FL 112 Aug-16 13.3 21.8 6.1 9.0 3.6 3.5
Seal s Motel Sea ttl e, WA 40 Aug-16 11.9 20.6 9.1 9.7 5.1 4.8
Hol i da y Inn Expres s Hers hey Hummel s town, PA 78 Jul -16 10.4 18.2 7.7 9.6 ― ―
Comfort Sui tes Al pha retta Al pha retta , GA 75 Jul -16 12.7 25.3 9.4 10.7 3.2 3.1
La Qui nta Inn & Sui tes Loui s vi l l e, KY 60 Jul -16 13.4 22.4 9.8 11.4 3.0 2.8
Bes t Wes tern Wi ckenburg, AZ 78 Jun-16 11.9 20.0 8.8 10.3 2.7 2.7
Sl eep Inn Wa ke Fores t, NC 80 Jun-16 12.0 20.7 8.6 10.9 2.6 2.6
Hol i da y Inn Expres s & Sui tes Addi s on, TX 99 Ma y-16 9.4 15.6 9.2 12.1 ― ―
La Qui nta Inn Dul uth, GA 83 Ma y-16 11.6 22.5 8.0 10.3 3.0 2.8
Comfort Inn Stephens Ci ty, VA 60 Ma y-16 11.2 22.4 9.3 10.6 3.1 2.9
Ha mpton by Hi l ton Bea umont, TX 122 Ma y-16 12.0 22.0 8.3 8.5 ― ―
Qual i ty Inn & Sui tes Va l pa ra i s o, IN 111 Ma y-16 12.9 21.8 12.3 10.5 2.5 2.2
Bes t Wes tern Inn & Sui tes Pl a i nfi el d, IN 67 Ma y-16 11.4 21.0 8.1 9.8 3.6 3.4
Ha rbors i de Inn Port Towns end, WA 63 Ma y-16 13.5 20.0 11.4 11.1 3.9 3.8
Shorel i ne Motel Shorel i ne, WA 22 Ma y-16 12.0 19.7 10.2 10.1 4.7 4.6
Wi ngate by Wyndha m Memphi s , TN 100 Ma y-16 12.0 18.3 8.6 9.0 3.3 3.0
Bes t Wes tern Sky Va l l ey Inn Monroe, WA 58 Apr-16 11.7 20.5 10.0 9.6 4.5 4.3
Bes t Wes tern Sky Va l l ey Inn Monroe, WA 58 Apr-16 11.7 20.5 10.0 9.6 4.5 4.3
Comfort Inn & Sui tes Ai rport S. Sa n Franci s co, CA 168 Ma r-16 10.9 20.5 9.4 9.0 4.1 3.7
Ha mpton Inn & Sui tes Na s hvi l l e, TN 154 Ma r-16 10.5 19.4 10.3 11.1 4.9 4.5
Ra mada Cl earwa ter Ai rport Cl earwa ter, FL 117 Ma r-16 12.7 21.8 17.7 10.5 3.0 2.7
Hol i da y Inn Expres s Hi l l s i de, IL 135 Ma r-16 11.0 20.0 7.5 8.4 ― ―

Source: HVS

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Investor Interviews - During the course of our work, we continuously monitor


investor equity-yield requirements through discussions with hotel investors and
brokers. We find that equity-yield rates currently range from a low in the low-to-
mid teens for high-barrier-to-entry "trophy assets"; the upper teens for high quality,
institutional-grade assets in strong markets; and the upper teens to low 20s for
quality assets in more typical markets. Equity-yield rates tend to exceed 20% for
aging assets with functional obsolescence and/or other challenging property- or
market-related issues. Equity return requirements also vary with an investment’s
level of leverage. Higher loan-to-value ratios are becoming more prevalent, allowing
for increased equity returns.

The following table summarizes the range of equity yields indicated by hotel sales
and investor interviews. We note that there tends to be a lag between the sales data
and current market conditions, and thus, the full effect of the change in the economy
and capital markets may not yet be reflected.

FIGURE 8-3 SUMMARY OF EQUITY YIELD OR INTERNAL RATE OF RETURN


REQUIREMENTS

Source Data Point Range Average

HVS Hotel Sa l es - Ful l -Servi ce & Luxury 10.3% - 22.7% 17.7%


HVS Hotel Sa l es - Se l ect-Se rvi ce & Extende d-Sta y 14.2% - 22.4% 19.1%
HVS Hotel Sa l es - Budget/Economy 15.6% - 25.3% 20.8%

HVS Inves tor Intervi ews 13% - 25%

Based on the assumed 75% loan-to-cost ratio, the risk inherent in achieving the
projected income stream, and the anticipated market position of the subject
property, it is our opinion that an equity investor could expect to receive a 18.0%
internal rate of return over a 10-year holding period, assuming that the investor
obtains financing at the time of the project’s completion at the loan-to-cost ratio and
interest rate set forth.

Terminal Capitalization Inherent in this valuation process is the assumption of a sale at the end of the ten-
Rate year holding period. The estimated reversionary sale price as of that date is
calculated by capitalizing the projected eleventh-year net income by an overall
terminal capitalization rate. An allocation for the selling expenses is deducted from
this sale price, and the net proceeds to the equity interest (also known as the equity
residual) are calculated by deducting the outstanding mortgage balance from the
reversion.

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We have reviewed several recent investor surveys. The following chart summarizes
the averages presented for terminal capitalization rates in various investor surveys
during the past decade.

FIGURE 8-4 HISTORICAL TRENDS OF TERMINAL CAPITALIZATION RATES

13.0

12.0
Terminal Cap Rate (%)

11.0

10.0

9.0

8.0

7.0
2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017
PWC - Limited-Service Situs RERC - Second Tier
PWC - Select-Service Situs RERC - Third Tier

FIGURE 8-5 TERMINAL CAPITALIZATION RATES DERIVED FROM INVESTOR


SURVEYS

Source Data Point Range Average

PWC Rea l Es ta te Inves tor Survey - 1s t Qua rter 2017


Sel ect-Servi ce Hotel s 7.0% - 10.75% 9.0%
Ful l -Servi ce Hotel s 7.0% - 10.0% 8.4%
Luxury Hotel s 5.5% - 9.5% 7.2%

USRC Hotel Inves tment Survey - Mi d-Yea r 2016


Ful l -Servi ce Hotel s 7.5% - 9.0% 8.0%

Si tus RERC Rea l Es ta te Report - 3rd Qua rter 2016


Fi rs t Ti er Hotel s 6.5% - 10.5% 8.5%

For purposes of this analysis, we have applied a terminal capitalization rate of 9.5%.
Our final position for the terminal capitalization rate reflects the current market for
hotel investments. Terminal capitalization rates, which have remained stable over
the past few years, have yet to reflect any change in investor expectations. Terminal

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cap rates are at the low end of the range for quality hotel assets in markets with high
barriers to entry and at the high end of the range for older assets or for those
suffering from functional obsolescence and/or weak market conditions, reflecting
the market's recognition that certain assets have less opportunity for significant
appreciation.

Mortgage-Equity As the two participants in a real estate investment, investors and lenders must
Method evaluate their equity and debt contributions based on their particular return
requirements. After carefully weighing the risk associated with the projected
economic benefits of a lodging investment, the participants will typically make their
decision whether or not to invest in a hotel or resort by determining if their
investment will provide an adequate yield over an established period. For the
lender, this yield will typically reflect the interest rate required for a hotel mortgage
over a period of what can range from seven to ten years. The yield to the equity
participant may consider not only the requirements of a particular investor, but also
the potential payments to cooperative or ancillary entities such as limited partner
payouts, stockholder dividends, and management company incentive fees.

The return on investment analysis in a hotel acquisition would not be complete


without recognizing and reflecting the yield requirements of both the equity and
debt participants. The analysis will now calculate the yields to the mortgage and
equity participants during a ten-year projection period.

The annual debt service is calculated by multiplying the mortgage component by the
mortgage constant.

Mortgage Component $4,683,000


Mortgage Constant 0.071910
Annual Debt Service $336,753

The yield to the lender based on a 75% debt contribution equates to an interest rate
of 5.25%, which is calculated as follows.

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FIGURE 8-6 RETURN TO THE LENDER

Total Annual Present Worth of $1 Discounted


Year Debt Service Factor at 5.2% Cash Flow

2019 $337,000 x 0.950667 = $320,000


2020 337,000 x 0.903768 = 305,000
2021 337,000 x 0.859182 = 290,000
2022 337,000 x 0.816796 = 275,000
2023 337,000 x 0.776501 = 262,000
2024 337,000 x 0.738194 = 249,000
2025 337,000 x 0.701777 = 236,000
2026 337,000 x 0.667156 = 225,000
2027 337,000 x 0.634243 = 214,000
2028 3,828,000 * x 0.602954 = 2,308,000

Val ue of Mortgage Component $4,684,000


*10th year debt service of $337,000 plus outstanding mortgage balance of $3,491,000

The following table illustrates the cash flow available to the equity position, after
deducting the debt service from the projected net income.

FIGURE 8-7 NET INCOME TO EQUITY

Net Income
Available for Total Annual Net Income
Year Debt Service Debt Service to Equity

2019 $447,308 - $337,000 = $110,308


2020 478,934 - 337,000 = 141,934
2021 529,126 - 337,000 = 192,126
2022 546,126 - 337,000 = 209,126
2023 563,346 - 337,000 = 226,346
2024 580,764 - 337,000 = 243,764
2025 599,237 - 337,000 = 262,237
2026 617,868 - 337,000 = 280,868
2027 637,511 - 337,000 = 300,511
2028 657,270 - 337,000 = 320,270

In order for the present value of the equity investment to equate to the $1,561,000
capital outlay, the investor must accept a 18.0% return, as shown in the following
table.

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FIGURE 8-8 EQUITY COMPONENT YIELD

Net Income Present Worth of $1 Discounted


Year to Equity Factor at 18.0% Cash Flow

2019 $110,308 x 0.847529 = $93,000


2020 141,934 x 0.718306 = 102,000
2021 192,126 x 0.608786 = 117,000
2022 209,126 x 0.515964 = 108,000
2023 226,346 x 0.437294 = 99,000
2024 243,764 x 0.370620 = 90,000
2025 262,237 x 0.314111 = 82,000
2026 280,868 x 0.266219 = 75,000
2027 300,511 x 0.225628 = 68,000
2028 3,799,270 * x 0.191226 = 727,000

Va l ue of Equi ty Component $1,561,000


*10th year net income to equity of $320,270 plus sales proceeds of $3,479,000

Conclusion In determining the potential feasibility of the proposed hotel, we analyzed the
lodging market, researched the area’s economics, reviewed the estimated
development cost, and prepared a ten-year forecast of income and expense, which
was based on our review of the current and historical market conditions, as well as
comparable income and expense statements.

The conclusion of this analysis indicates that an equity investor contributing


$1,561,000 (roughly 25% of the $6,200,000 development cost) could expect to
receive a 18.0% internal rate of return over a ten-year holding period, assuming that
the investor obtains financing at the time of the project’s completion at the loan-to-
value ratio and interest rate set forth.

The proposed subject hotel has an opportunity to target clientele seeking higher-
quality accommodations than what is currently available in the local area. Based on
our market analysis, there appears to be sufficient market support for a proposed,
midscale hotel offering 55 guestrooms. Our conclusions are based primarily on
regional market data and qualitative insight provided by local stakeholders. Our
review of investor surveys indicates equity returns ranging from 14.2% to 22.4%,
with an average of 19.1%. Based on these parameters, the calculated return to the
equity investor, 18.0%, is within the range of market-level returns given the
anticipated cost of approximately $6,200,000.

The analysis is based on the extraordinary assumption that the described


improvements have been completed as of the stated date of opening. The reader
should understand that the completed subject property does not yet exist as of the

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date of this report. Our feasibility study does not address unforeseeable events that
could alter the proposed project and/or the market conditions reflected in the
analyses; we assume that no significant changes, other than those anticipated and
explained in this report, shall take place between the date of inspection and stated
date of opening. The use of this extraordinary assumption may have affected the
assignment results. We have made no other extraordinary assumptions specific to
this feasibility study. However, several important general assumptions have been
made that apply to this feasibility study and our studies of proposed hotels in
general. These aspects are set forth in the Assumptions and Limiting Conditions
chapter of this report.

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9. Statement of Assumptions and Limiting Conditions

1. This report is set forth as a feasibility study of the proposed subject hotel;
this is not an appraisal report.
2. This report is to be used in whole and not in part.
3. No responsibility is assumed for matters of a legal nature, nor do we render
any opinion as to title, which is assumed marketable and free of any deed
restrictions and easements. The property is evaluated as though free and
clear unless otherwise stated.
4. We assume that there are no hidden or unapparent conditions of the sub-
soil or structures, such as underground storage tanks, that would affect the
property’s development potential. No responsibility is assumed for these
conditions or for any engineering that may be required to discover them.
5. We have not considered the presence of potentially hazardous materials or
any form of toxic waste on the project site. We are not qualified to detect
hazardous substances and urge the client to retain an expert in this field if
desired.
6. The Americans with Disabilities Act (ADA) became effective on January 26,
1992. We have assumed the proposed hotel would be designed and
constructed to be in full compliance with the ADA.
7. We have made no survey of the site, and we assume no responsibility in
connection with such matters. Sketches, photographs, maps, and other
exhibits are included to assist the reader in visualizing the property. It is
assumed that the use of the described real estate will be within the
boundaries of the property described, and that no encroachment will exist.
8. All information, financial operating statements, estimates, and opinions
obtained from parties not employed by TS Worldwide, LLC are assumed true
and correct. We can assume no liability resulting from misinformation.
9. Unless noted, we assume that there are no encroachments, zoning
violations, or building violations encumbering the subject property.
10. The property is assumed to be in full compliance with all applicable federal,
state, local, and private codes, laws, consents, licenses, and regulations
(including the appropriate liquor license if applicable), and that all licenses,
permits, certificates, franchises, and so forth can be freely renewed or
transferred to a purchaser.

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11. All mortgages, liens, encumbrances, leases, and servitudes have been
disregarded unless specified otherwise.
12. None of this material may be reproduced in any form without our written
permission, and the report cannot be disseminated to the public through
advertising, public relations, news, sales, or other media.
13. We are not required to give testimony or attendance in court because of this
analysis without previous arrangements, and shall do so only when our
standard per-diem fees and travel costs have been paid prior to the
appearance.
14. If the reader is making a fiduciary or individual investment decision and has
any questions concerning the material presented in this report, it is
recommended that the reader contact us.
15. We take no responsibility for any events or circumstances that take place
subsequent to the date of our field inspection.
16. The quality of a lodging facility's onsite management has a direct effect on a
property's economic viability. The financial forecasts presented in this
analysis assume responsible ownership and competent management. Any
departure from this assumption may have a significant impact on the
projected operating results.
17. The financial analysis presented in this report is based upon assumptions,
estimates, and evaluations of the market conditions in the local and national
economy, which may be subject to sharp rises and declines. Over the
projection period considered in our analysis, wages and other operating
expenses may increase or decrease because of market volatility and
economic forces outside the control of the hotel’s management. We assume
that the price of hotel rooms, food, beverages, and other sources of revenue
to the hotel will be adjusted to offset any increases or decreases in related
costs. We do not warrant that our estimates will be attained, but they have
been developed based upon information obtained during the course of our
market research and are intended to reflect the expectations of a typical
hotel investor as of the stated date of the report.
18. This analysis assumes continuation of all Internal Revenue Service tax code
provisions as stated or interpreted on either the date of value or the date of
our field inspection, whichever occurs first.
19. Many of the figures presented in this report were generated using
sophisticated computer models that make calculations based on numbers
carried out to three or more decimal places. In the interest of simplicity,
most numbers have been rounded to the nearest tenth of a percent. Thus,
these figures may be subject to small rounding errors.

June-2017 Statement of Assumptions and Limiting Conditions


Proposed Hotel – Lakeport, California 115
ATTACHMENT 2

20. It is agreed that our liability to the client is limited to the amount of the fee
paid as liquidated damages. Our responsibility is limited to the client
(namely The City of Lakeport), and use of this report by third parties shall
be solely at the risk of the client and/or third parties. The use of this report
is also subject to the terms and conditions set forth in our engagement letter
with the client.
21. Evaluating and comprising financial forecasts for hotels is both a science and
an art. Although this analysis employs various mathematical calculations to
provide value indications, the final forecasts are subjective and may be
influenced by our experience and other factors not specifically set forth in
this report.
22. This study was prepared by HVS, a division of TS Worldwide, LLC. All
opinions, recommendations, and conclusions expressed during the course
of this assignment are rendered by the staff of TS Worldwide, LLC as
employees, rather than as individuals.

June-2017 Statement of Assumptions and Limiting Conditions


Proposed Hotel – Lakeport, California 116
ATTACHMENT 2

10. Certification

The undersigned hereby certify that, to the best of our knowledge and belief:
1. the statements of fact presented in this report are true and correct;
2. the reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are our personal,
impartial, and unbiased professional analyses, opinions, and conclusions;
3. we have no present or prospective interest in the property that is the subject
of this report and no personal interest with respect to the parties involved;
4. we have no bias with respect to the property that is the subject of this report
or to the parties involved with this assignment;
5. our engagement in this assignment was not contingent upon developing or
reporting predetermined results;
6. our compensation for completing this assignment is not contingent upon the
development or reporting of a predetermined result or direction in
performance that favors the cause of the client, the attainment of a
stipulated result, or the occurrence of a subsequent event directly related to
the intended use of this study;
7. our analyses, opinions, and conclusions were developed, and this report has
been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice;
8. Matthew D. Melville personally inspected the property described in this
report; Brett E, Russell participated in the analysis and reviewed the
findings, but did not personally inspect the property;
9. Matthew D. Melville provided significant assistance to Brett E. Russell, and
that no one other than those listed above and the undersigned prepared the
analyses, conclusions, and opinions concerning the real estate that are set
forth in this report; neither Brett E. Russell nor Matthew D. Melville has
performed appraisal or consulting work on the property that is the subject
of this report within the three-year period immediately preceding
acceptance of this assignment;
10. the reported analyses, opinions, and conclusions were developed, and this
report has been prepared, in conformity with the requirements of the Code
of Professional Ethics and the Standards of Professional Appraisal Practice
of the Appraisal Institute;

June-2017 Certification
Proposed Hotel – Lakeport, California 117
ATTACHMENT 2

11. the use of this report is subject to the requirements of the Appraisal Institute
relating to review by its duly authorized representatives; and
12. as of the date of this report, Brett E. Russell and Matthew D. Melville have
completed the Standards and Ethics Education Requirements for Candidates
of the Appraisal Institute.

Brett E. Russell
Managing Director, Senior Partner
TS Worldwide, LLC
State Appraiser License (CA) 3003666

Matthew D. Melville
Vice President
TS Worldwide, LLC
State Appraiser License (CA) 3003361

June-2017 Certification
Proposed Hotel – Lakeport, California 118
ATTACHMENT 2

Brett Russell

EMPLOYMENT

2001 to present HVS CONSULTING AND VALUATION


Denver, Colorado

1999 – 2001 EVOKE COMMUNICATIONS


Louisville, Colorado

1997 – 1999 THARALDSON PROPERTY MANAGEMENT


Canton, Ohio and Westminster, Colorado

EDUCATION AND OTHER Information Systems and Business Studies – Mount Union College
TRAINING
Certified General Appraiser Classes Completed:
NCRE-200 Registered Appraiser
NCRE-202 Standards and Ethics
NCRE-204 Basic Appraisal Application
NCRE-304 Complex Appraisal Application
NCRE-209 Small Residential Income
NCRE-211 Certified Residential
NCRE-215 Appraisal Principles and Advanced Applications
NCRE-310 Basic Income Capitalization – 39 hours
General Market Analysis and HBU – 30 hours
Report Writing – 40 hours
Business Practices and Ethics – 5 hours
Advanced Income Capitalization – 40 hours
Fundamentals of Separating Real, Personal Property, and Intangible Business Assets – 15
hours
Small Hotel/Motel Valuation – 7 hours
Condominiums, Co-ops, and PUDs – 7 hours
Mandatory New Mexico Class – 4 hours
Introduction to Legal Descriptions – 2 hours
Real Estate Finance Statistics and Valuation Modeling – 15 hours

HVS, Denver, Colorado Qualifications of Brett Russell


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ATTACHMENT 2

EDUCATION (CON’T) Comparative Analysis – 7 hours


Forecasting Revenue – 7 hours
NC Trainee Supervisor Class – 4 hours
Advanced Market Analysis & HBU – 35 hours
NM Mandatory Class – 4 hours
USPAP Update – 2008, 2010, 2012, 2014, 2015

STATE CERTIFICATIONS Arizona, California, Colorado, New Mexico, South Dakota, Utah

PUBLISHED ARTICLES

HVS Journal “Key Hotel-Related Takeaways: MBA CREF16,” co-authored with Desiree Flanary, February
2016

HVS Journal “The Millennial Shift in Hotel Brands,” December 2015

HVS Journal “In Focus Hotel Market Report: Denver, CO,” co-authored with Ryan Mark, November 2015

HVS Journal “Five Key Takeaways: The Lodging Conference 2015,” co-authored with Ryan Wall and
Adam Lair, October 2015

HVS Journal “Five Key Takeaways: 2015 CREJ Hotel & Resort Summit,” April 2015

HVS Journal “Hotel-Related Takeaways: Mortgage Bankers Association’s CREF / Multifamily Housing
Convention & Expo 2015,” co-authored with Desiree Flanary, February 2015

HVS Journal “Five Key Takeaways: ALIS Conference (The Americas Lodging Investment Summit),” co-
authored with Tanya Pierson and Susan Furbay, February 2015

HVS Journal “Snowfall’s Impact on Ski Market Hotels,” January 2015

HVS Journal “Market Intelligence Report: 2013 Colorado Mountains,” August 2013

HVS, Denver, Colorado Qualifications of Brett Russell


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ATTACHMENT 2

EXAMPLES OF PROPERTIES APPRAISED Proposed SpringHill Suites, Ontario


OR EVALUATED ARKANSAS Homewood Suites, Palm Desert
Proposed Autograph Hotel, Palm
ALABAMA Hilton Garden Inn, Little Rock Desert
Proposed Hotel, Hot Springs Village Residence Inn by Marriott, Palm Desert
Holiday Inn Airport, Birmingham Proposed Marriott, Little Rock Courtyard by Marriott, Palm Desert
Courtyard by Marriott, Gulf Shores La Quinta Inn & Suites, Russellville Proposed Hilton Garden Inn, Redondo
Beach
ALASKA CALIFORNIA Proposed Homewood Suites, Redondo
Beach
Proposed Embassy Suites, Anchorage Anaheim Marriott, Anaheim Proposed Hyatt Place, Redondo Beach
Sheraton Hotel, Anchorage Anaheim Sheraton, Anaheim Proposed Residence Inn, Redondo
Portofino Inn and Suites, Anaheim Beach
ARIZONA Embassy Suites, Arcadia Proposed Select-Service Hotel,
SLS Hotel, Beverly Hills Sacramento
Proposed Hotel and Golf Course Embassy Suites, Brea Residence Inn by Marriott, Sacramento
Community, Bullhead City Proposed Hilton Garden Inn, Burbank Comfort Inn & Suites, San Diego
Carefree Resort, Carefree Courtyard by Marriott, Chico DoubleTree Club Hotel, San Diego
Hampton Inn, Chandler Residence Inn by Marriott, Chico DoubleTree Hotel, San Diego
Homewood Suites, Chandler Holiday Inn Fresno Airport, Fresno Hilton Harbor Island, San Diego
Proposed Hilton, Chandler Proposed Residence Inn by Marriott, Proposed Limited-Service Hotel, San
Proposed Residence Inn by Marriott, Garden Grove Diego
Chandler Homewood Suites, Garden Grove Proposed Residence Inn by Marriott,
Proposed TownePlace Suites by Hampton Inn, Garden Grove San Diego
Marriott, Chandler Hilton Garden Inn, Garden Grove Proposed SpringHill Suites by Marriott,
Courtyard by Marriott, Flagstaff Proposed Dual-Branded Hotel, San Diego
Embassy Suites, Flagstaff Hawthorne Radisson Mission Valley, San Diego
Proposed Select-Service Hotel, Lake Proposed Seacoast Inn, Imperial Beach Towne & County Resort & Conference
Havasu Proposed Hyatt Place, Indio Center, San Diego
Arizona Golf Resort, Mesa Proposed Residence Inn by Marriott, Holiday Inn Airport, San Francisco
Sleep Inn, Mesa Indio Proposed Hotel, San Francisco
Proposed Hampton Inn & Suites, Page Proposed Westin, Indio Proposed Sheraton Hotel, San Gabriel
Proposed Wingate Inn, Page Proposed Select-Service Hotel, Embassy Suites, San Luis Obispo
Best Western, Phoenix Livermore Embassy Suites, Santa Ana
Embassy Suites Airport, Phoenix Embassy Suites, Lompoc Courtyard, Santa Rosa
Renaissance Phoenix Downtown, Courtyard by Marriott, Long Beach Embassy Suites, Temecula
Phoenix Proposed Hampton Inn & Suites Korea Residence Inn by Marriott, Torrance
Royal Palms Resort and Spa, Phoenix Town, Los Angeles Proposed Hampton Inn, Walnut Creek
Sheraton Phoenix Downtown, Phoenix Wilshire Plaza Hotel, Los Angeles Proposed Home2 Suites by Hilton,
Hampton Inn Shea, Scottsdale Developable Land, Mammoth Lakes Walnut Creek
Proposed Hyatt House, Scottsdale Proposed Field & Stream Hotel, Proposed City Hotel, West Sacramento
Hampton Inn, Sedona Mammoth Lakes Courtyard, Vacaville
Four Points Tempe, Tempe Proposed Residence Inn by Marriott,
Marriott Buttes, Tempe Mammoth Lakes COLORADO
Embassy Suites Airport, Tucson Shilo Inn, Mammoth Lakes
Grand Canyon Railway Hotel and Courtyard, Modesto Hotel Aspen, Aspen
Resort, Williams Best Western Ivy, Napa Proposed Aspen Club & Spa, Aspen

HVS, Denver, Colorado Qualifications of Brett Russell


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ATTACHMENT 2

Proposed Boomerang Hotel, Aspen Residence Inn by Marriott, Colorado Residence Inn by Marriott, Glenwood
Sky Hotel, Aspen Springs Springs
Marriott DIA Gateway Park, Aurora Wyndham Hotel, Colorado Springs Ritz Carlton Bachelor Gulch
Proposed Hyatt Place, Aurora Proposed Irwin Mountain Lodge, The Golden Hotel, Golden
Proposed Element Hotel, Basalt Crested Butte Proposed Golf and Fishing Resort,
Courtyard by Marriott, Boulder Courtyard by Marriott Denver Tech Granby
Proposed Hotel, Boulder Center, Denver Adam's Mark, Grand Junction Comfort
Proposed Hotel North Boulder, Boulder Crawford Hotel, Denver Inn, Grand Junction
Proposed Hotel Pearl Street, Boulder Renaissance Denver, Denver DoubleTree, Grand Junction
Proposed Residence Inn by Marriott, DoubleTree DTC, Denver Proposed Courtyard by Marriott, Grand
Boulder Hampton Inn DIA, Denver Junction
Proposed St. Julian Expansion, Boulder Proposed Best Western Plus Gateway Proposed Hampton Inn and Suites,
Proposed Hotel, Breckenridge Park, Denver Grand Junction
Proposed Hotel and Conference Center Proposed Boutique Hotel - Sloan Lake, Proposed Residence Inn by Marriott,
Breckenridge Denver Grand Junction
Proposed Limited-Service Hotel, Proposed Cherry Creek Hotel, Denver Proposed SpringHill Suites, Grand
Breckenridge Proposed Convention Hotel, Denver Junction
Proposed Residence Inn by Marriott, Proposed Element Hotel, Denver DoubleTree, Greenwood Village
Breckenridge Proposed Hilton Garden Inn, Denver Proposed Hotel, Hayden
Peak 8 Condominium Hotel, Proposed Hotel Indigo, Denver Proposed Courtyard by Marriott,
Breckenridge Proposed Limited-Service Hotel, Highlands Ranch
Proposed Hotel Brighton, Brighton Denver Hampton Inn, Lakewood
Aloft Arista, Broomfield Proposed Union Station Hotel, Denver Holiday Inn, Lakewood
Proposed Fairfield Inn by Marriott, Proposed Woolley’s Classic Suites, Sheraton Denver West, Lakewood
Broomfield Denver Proposed Hotel & Water Park, Leadville
Academy Hotel, Colorado Springs Woolley’s Classic Suites, Denver Proposed Water Park Resort, Leadville
Best Western Academy, Colorado Proposed Hotel Glacier Club, Durango Proposed Courtyard by Marriott
Springs SilverLeaf Suites, Eagle Highlands Ranch, Littleton
Cheyenne Mountain Resort, Colorado Proposed TownePlace Suites DTC, Proposed TownePlace Suites by
Springs Englewood Marriott, Lone Tree
Courtyard by Marriott, Colorado Courtyard by Marriott, Fort Collins Proposed Home2 Suites by Hilton,
Springs Homewood Suites, Fort Collins Longmont
Hilton Garden Inn, Colorado Springs Marriott, Fort Collins Embassy Suites, Loveland
Proposed Complex (full-service hotel, Proposed Autograph Hotel, Fort Collins Hampton Inn, Loveland
two limited-service hotels and Residence Inn by Marriott, Fort Collins Holiday Inn Express, Montrose
conference center), Colorado Springs Hilton Garden Inn, Glendale Proposed Hotel, Northglenn
Proposed Hilton Garden Inn, Colorado Courtyard by Marriott, Glenwood Proposed Hampton Inn & Suites,
Springs Springs Silverthorne
Proposed Holiday Inn Express & Suites, Hampton Inn, Glenwood Springs Fairfield Inn by Marriott, Steamboat
Colorado Springs Holiday Inn Express, Glenwood Springs Springs
Proposed Limited-Service Hotel, Hotel Denver, Glenwood Springs Sheraton, Steamboat Springs
Colorado Springs Hotel Glenwood Springs, Glenwood Proposed Holiday Inn Express, Sterling
Proposed Renaissance, Colorado Springs Proposed Hilton Garden Inn, Superior
Springs Proposed Courtyard by Marriott, Proposed Hotel, Superior
Proposed Select-Service Hotel, Colorado Glenwood Springs Hotel Madeline, Telluride
Springs Proposed Residence Inn by Marriott, The Peaks Resort and Spa, Telluride
Radisson Hotel, Colorado Springs Glenwood Springs Proposed Hotel, Telluride

HVS, Denver, Colorado Qualifications of Brett Russell