5. COMMITMENTS AND CONTINGENCIES Office Lease
The Commission has entered into an 85-month lease that expires on March 31, 2018. Under the terms of the lease, the rent esca- lates by 2.5% annually over the term of the lease. The landlord abated the first seven months’ rent. The cap on increased operating charges is 3%.
Under GAAP, lease incentives and scheduled rent increases over a lease term are recognized on a straight-line basis over the term of the lease. The difference between the GAAP rent expense and the required lease payments is recorded as deferred rent in the accompanying statement of financial position.
Future minimum lease payments, subject to increases based on operating expenses, real estate taxes and Consumer Price Index adjustments, are as follows:
For the Year Ending December 31, 2014 2015 2016 2017 2018
Total
Rent expense totaled $190,937 for the year ended December 31, 2013. Capital Lease
In April 2010, the Commission entered into a lease agreement with a vendor to lease office equipment. The lease agreement has been classified as a capital lease, which is generally accounted for as an addition to property and equipment using lease financing. Under the lease agreement, the Commission pays 36 monthly rental payments from the date the equipment was delivered through April 2013. The cost of the capitalized equipment and the related accumulated amortization totaled $46,968 and $34,441, respec- tively, as of December 31, 2013.
Employment Agreement
The Commission has an employment agreement with its Executive Director. The employment agreement was executed in January 2009 and is renewable annually at the sole and absolute discretion of the Commission’s Executive Board. Under the terms of the agreement, the Commission is to pay to the Executive Director certain amounts for compensation and benefits, starting on January 1, 2009. Upon termination by either party for any reason, the Executive Director is entitled to severance payments equal to the sum of 20 weeks of compensation at his highest weekly rate paid during his entire period of service to the Commission, and the product of the number of full and partial years of service to the Commission as Executive Director times three weeks of compensation at the highest weekly rate. On December 31, 2013, the Executive Director elected to retire and the provision of the employment agreement became effective. The Com- mission agreed to pay the severance to the former Executive Director in 24 equal payments in 2014.
$203,315 208,398 213,608 218,948 36,641
$880,910
32
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