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5.6. SR 11-06-2006 City of Elk River REQUEST FOR COUNCIL ACTION Agenda Section Meeting Date Administration November 6, 2006 Item Description Discussion of YMCA Memorandum of Under stan din Administrator Introduction Following approval of the YMCA referendum, we have been working with the YMCA on clarifying the language and concepts of the previously distributed and reviewed Memorandum of Understanding (MOD) between the city, EDA, and the YMCA. The City Council reviewed the draft MOU before authorizing the referendum question to be on the ballot. Before the MOU goes to the YMCA and EDA for final consideration, the Council is asked to review and again provide input on the MOD. Discussion Attached is the draft MOU that was included in the July 17 Council packet. Although the Council reviewed the MOU at that meeting and provided a few comments, another review by the Council is needed as the MOU is the basis for the lease that will be entered into between the YMCA and EDA. There are several items that have been in discussion by YMCA staff and city staff since the referendum was approved. Much of the discussion has been around clarifying the capital improvement language. Both the YMCA staff and city agree on how to deal with capital improvements; the issue is making sure the language in the MOU is clear. Other discussion items have been park and gymnasium use. Bill Maertz has provided comments and language for dealing with those issues; these revisions are included in the November 3 draft. Mr. Maertz will be at the meeting to explain these sections of the MOD. The YMCA has some concerns about use of the park for YMCA programs and will be suggesting changes to this section. Any additional items of concern should be brought up by the Council on Monday so any Council requested changes are included in the fInal draft of the MOU that will be sent to the YMCA and EDA for approval. Financial Impact Attachments . Draft Memorandum of Understanding that was included in July 17,2006, Council packet . Draft Memorandum of Understanding dated November 3, 2006, excluding exhibits Action Requested The Council is asked to consider the draft Memorandum of Understanding between the YMCA, City of Elk River, and EDA. A final draft will be brought to the Council for approval after the city and YMCA's S:\Council\Lori\2006\ YMCA MOU.doc comments have been included. Council Action Follow Up Motion by _ Second by _ Vote S:\Council\Lori\2006\ YMCA MOU.doc 3~ \1\~o~ DRAFT MEMORANDUM OF UNDERSTANDING This Memorandum of Understanding (this "Memorandum") is made as of the _ day of ,2006, by and between The Young Men's Christian Association of Metropolitan Minneapolis, a Milmesota corporation ("YMCA") the City of Elk River ("City") and the Economic Development Authority in and for the City of Elk River ("EDA"). RECITALS A. The City owns certain real property (the "Site") adjacent to Lake Orono located within Elk River, Minnesota. The EDA proposes to construct on said Site an EDA owned building of approximately 51,000 square feet for the operation of a YMCA (the "Building"). B. The EDA is interested in entering into a lease (the "Lease") with the YMCA, whereby the YMCA will design and the EDA will construct the Building, which will then be leased by the EDA to YMCA for the operation of a YMCA. C. The City will remain the owner of the land. D. The EDA, with approval of the City for a Referendum, will provide financing for the Building in an amount not to exceed S12 million. The YMCA will make lease payments to the EDA in an amount equaling 1/3 ofthe annual cost ofthe financing. E. The YMCA and the EDA will cause the design and construction ofthe Building to incorporate reasonable architectural appeal, quality building materials, and durable finishes that comply with City standards. F. The YMCA will operate the Building using standard YMCA designed curriculum, practices and guidelines designed for youth, adults, and seniors associated with an aquatics center, fitness center, kids adventure zone, and gymnasiums. G. The YMCA will use memberships that entitle members to services as a part of the membership fee and access to additional programs on a fee basis. The YMCA will offer a package of services and programs similar to other suburban YMCAs. The YMCA will also provide Elk River residents benefits such as a one-time waiver of up to S79 of membership joining fee, periodic family events at a nominal cost and four guest passes per household per year. H. The YMCA will offer to the community who are not members, fee-based programming such as, but not limited to: senior programs, youth development programs such as day/resident camping, swimming lessons, Youth and Government, teen nights, NYPUM. 1. The YMCA shall be solely responsible for all programming at the YMCA, and all interior and exterior maintenance and operation of the Building, including all related staffing. 1 J. The YMCA will have a volunteer board made of community members and leaders. K. This Memorandum is dependent on the City, the EDA and the YMCA determining that it is feasible to financially meet the programming needs of both entities and provide cash flow adequate to operate, staff, maintain and make capital improvements to the Building, and to provide the services and programs intended. NOW, THEREFORE, in consideration of the foregoing recitals, the parties hereto agree as follows: 1. The EDA and the YMCA will enter into a Lease pursuant to which the YMCA will design and the EDA will construct an approximately 51,000 square foot Building which will be leased to the YMCA for the operation of a YMCA in accordance with the following terms and conditions: A. Design and Construction. The YMCA and the EDA will cause the design and construction of the Building to incorporate reasonable architectural appeal, quality building materials, and durable finishes that comply with City standards. B. Programming. The YMCA will operate the Building using standard YMCA designed curriculum, practices and guidelines designed for youth, adults, and seniors associated with an aquatics center, fitness center, kids adventure zone, and gymnasiums. The YMCA will use memberships that entitle members to services as a part of the membership fee and access to additional programs on a fee basis. The YMCA will offer a package of services and programs similar to other suburban YMCAs. The YMCA will also provide Elk River residents benefits such as a one-time waiver of up to $79 of membership joining fee, periodic family events at a nominal cost and four guest passes per household per year. The YMCA will offer to the conmmnity who are not members, fee-based programming such as, but not limited to: senior programs, youth development programs such as day/resident camping, swimming lessons, Youth and Government, teen nights, NYPUM. The YMCA shall be solely responsible for all programming at the YMCA, and all interior and exterior maintenance and operation of the Building, including all related staffing. The YMCA will have a volunteer board made of community members and leaders. C. Lease Term. The initial term of the Lease shall be 30 years from the date of commencement of the Lease. At the expiration of the initial term, the lease shall remain in effect unless and until terminated by either party as provided below. D. Lease Payments. The YMCA will make lease payments to the EDA in an amount equal to the amount required to amortize one-third (1/3) of the total amount financed by the EDA. Once the EDA's debt on the Building has been repaid in full, the lease payments shall be $_ per year. E. Management and Operation. The YMCA will assume all management and financial responsibility of operating and maintaining the YMCA, including related staffing. The YMCA will collect all membership fees and program fees and pay all 2 costs of operations for the YMCA, including the lease payments to the EDA. Any shortages between the amounts collected and paid will be funded by the YMCA. F. Maintenance and Capital Improvements. YMCA shall be responsible for maintaining the Building to an appropriate standard for such a facility, including making all capital improvements necessary to ensure the structural integrity of the building and to support any changes in programming necessary to keep the programming current and consistent with the programming at other YMCAs operated by the YMCA. G. Termination. 1. At End of Initial Term. The Lease may be tenninated by either party by providing 10 years written notice to the other party beginning on the 21 st anniversary date of the agreement and on each anniversary date thereafter. 2. For Cause. The EDA shall have the right to terminate the Lease for cause, upon 90 days' written notice, with the opportunity to cure, if: a. The YMCA fails to make lease payments; b. The operation of the YMCA, including the fees charged, is not consistent with the standard YMCA curriculum, practices, guidelines, and fees charged for other YMCAs operated by the YMCA; c. The YMCA ceases operations; or d. YMCA fails to maintain the Building. H. Access. The City will be responsible for providing access to the site for the YMCA Building. II. The YMCA's Hours of Operation: A. The YMCA may operate from 5 a.m. until 11 p.m. Monday through Sunday. B. Holidays: 1. The YMCA will be closed on Christmas and Easter. III. Risk Management Principles A. The YMCA will carry casualty and liability insurance customary for such a facility. Insurance policy will include the City and EDA as named insureds. B. The City and EDA as Owners will can'y casualty, property and liability insurance as the City and EDA determine necessary. The insurance will include the YMCA 3 (\,,,,. ~ ~oo \p \ DRAFT MEMORANDUM OF UNDERSTANDING This Memorandum of Understanding (this "Memorandum") is made as of the _ day of ,2006, by and between The Young Men's Christian Association of Metropolitan Minneapolis, a Minnesota corporation ("YMCA") the City of Elk River ("City") and the Economic Development Authority in and for the City of Elk River ("EDA"). RECITALS A. The City owns certain real property (the "Site") adjacent to City Hall located within Elk River, Minnesota, as depicted 011 Exhibit A. The EDA proposes to construct on said Site an EDA owned building of approximately 51,000 square feet to be leased to and operated by the YMCA (the "Building"). B. The EDA is interested in entering into a lease (the "Lease") with the YMCA, whereby the YMCA will design and the EDA will construct the Building, which will then be leased by the EDA to YMCA for the operation of a YMCA. C. The City will remain the owner of the land. D. The EDA, has been authorized to provide financing for the designing, constructing, and equipping of the Building in an amount not to exceed $12 million. The YMCA will make lease payments to the EDA in an amount equaling 1/3 of the annual cost of the financing. E. The YMCA and the EDA will cause the design and construction of the Building to incorporate reasonable architectural appeal, quality building materials, and durable finishes that comply with City standards. F. The YMCA will operate the Building using standard YMCA designed curriculum, practices and guidelines designed for youth, adults, and seniors associated with an aquatics center, fitness center, kids adventure zone, and gymnasium. G. The YMCA will use memberships that entitle members to services as a part ofthe membership fee and access to additional programs on a fee basis. The YMCA will offer a package of services and programs similar to other suburban YMCAs. The YMCA will also provide Elk River residents benefits such as a one-time waiver of the membership joining fee, periodic family events at a nominal cost and four guest passes per household per year. H. The YMCA will offer to the community who are not members, fee-based programming such as, but not limited to: senior programs, youth development programs such as day/resident camping, swimming lessons, Youth in Government, teen nights, NYPUM. 1 I. The YMCA shall be solely responsible for all programming at the YMCA, and all interior and exterior maintenance and operation of the Building, including all related staffing. J. The YMCA will have a volunteer board made of community members and leaders. K. This Memorandum is dependent on the City, the EDA and the YMCA determining that it is feasible to financially meet the programming needs of both entities and provide cash flow adequate to operate, staff, maintain and make capital improvements to the Building, and to provide the services and programs intended. L. submitted for all requests. For programs that are not otherwise offered in the (:ity of Elk River, the l1vlCA will be considered a Priority ()neUser and will be granted access to facilities based on availa biJi tv. For programs that are already offenxl in the City of Elk River. the '{]'vICA will be considered a Priority Two User andwl.U be granted access to facilities based on availabilirv. M. The Citv shall have access to the gymnasium for the purpose of recreational programminQ: vvhen the YMCA has no programmed activities in the gymnasium. The Q:vmnasium shall be designed and constructed in a manner that permits staffing and user access independent from YMCA operations. NOW, THEREFORE, in consideration of the foregoing recitals, the parties hereto agree as follows: I. The EDA and the YMCA will enter into a Lease pursuant to which the YMCA will design and the EDA will construct an approximately 51,000 square foot Building which will be leased to the YMCA for the operation of a YMCA in accordance with the following terms and conditions: A. Design and Construction. The YMCA and the EDA will cause the design and construction of the Building to incorporate reasonable architectural appeal, quality building materials, and durable finishes that comply with City standards. The cost of designing. constructing. and equipping the building will be funded through the financing. 2 B. Programming:. The YMCA will operate the Building using standard YMCA designed curriculum, practices and guidelines designed for youth, adults, and seniors associated with an aquatics center, fitness center, kids adventure zone, and gymnasiums. The YMCA will use memberships that entitle members to services as a part of the membership fee and access to additional programs on a fee basis. The YMCA will offer a package of services and programs similar to other suburban YMCAs. The YMCA will also provide Elk River residents benefits such as a one-time waiver of the membership joining fee, periodic family events at a nominal cost and four guest passes per household per year. The YMCA will offer to the community who are not members, fee-based programming such as, but not limited to: senior programs, youth development programs such as day/resident camping, swimming lessons, Youth Government, teen nights, NYPUM. The YMCA shall be solely responsible for all programming at the YMCA, and all interior and exterior maintenance and operation of the Building, including all related staffing. The YMCA will have a volunteer board made of community members and leaders. C. Lease Term. The initial term ofthe Lease shall be 30 years from the date of commencement of the Lease. At the expiration of the initial term, the lease shall remain in effect unless and until terminated by either party as provided below. D. Lease Payments. The YMCA will make lease payments to the EDA in an amount equal to the amount required to amortize one-third (1/3) of the total amount financed by the EDA. Once the EDA's debt on the Building has been repaid in full, the lease payments shall be one dollar ($1) per year. E. Management and Operation. The YMCA will assume all management and financial responsibility of operating and maintaining the YMCA, including related staffing. The YMCA will collect all membership fees and program fees and pay all costs of operations for the YMCA, including the lease payments to the EDA. Any shortages between the amounts collected and paid will be funded by the YMCA. F. Maintenance and Capital Improvements. YMCA shall be responsible for maintaining the Building to an appropriate standard for such a facility, including making all capital improvements necessary to ensure the structural integrity of the building and to support any changes in programming necessary to keep the programming current and consistent with the programming at other YMCAs operated by the YMCA. Capital improvements with an economic life exceeding: the term of the lease will be submitted to the EDA for approval ofthe cost and the economic life of the proposed capital improvement. If the Lease is terminated prior to the end of the approved economic life of the capital improvement, the YMCA will be reimbursed. at the time of the tennination of the Lease. a proportionate share of the approved cost of the capital improvement calculated bv dividing: the number of months remaining. after termination of the Lease. in the approved economic life of the capital improvement bv the total number of months in the approved economic lite of the capital improvement.. The YMCA will be responsible for their proportionate share of the cost equal to the remaining lease 3 term for capital improvements approved by the EDA: which will not be unreasonably withheld. G. Termination. 1. At End of Initial Term. The Lease may be terminated by either party by providing 10 years written notice to the other party beginning on the 21 st anniversary date of the agreement and on each anniversary date thereafter. 2. For Cause. The EDA shall have the right to terminate the Lease for cause, upon 90 days' written notice, with the opportunity to cure, if: a. The YMCA fails to make lease payments; b. The operation of the YMCA, including the fees charged, is not consistent with the standard YMCA curriculum, practices, guidelines, and fees charged for other YMCAs operated by the YMCA; c. The YMCA ceases operations; or d. the cause for the failure to maintain is the denial of the requested capital improvement.. H. Access. The City will be responsible for providing access to the site for the YMCA Building. II. The YMCA's Hours of Operation: A. The YMCA may operate from 5 a.m. until 11 p.m. Monday through Sunday. B. Holidays: 1. The YMCA will be closed on Christmas and Easter. III. Risk Management Principles A. The YMCA will carry casualty and liability insurance customary for such a facility. Insurance policies will include the City and EDA as named insureds. B. The City and EDA as Owners will carry casualty, property and liability insurance as the City and EDA determine necessary. The insurance will include the YMCA 4 as named insured. The City and EDA's costs for insurance shall be added to the Lease payments due from the YMCA. This document represents a framework of principles expressing the current understanding between both parties and does not constitute a legally binding agreement. The parties agree to utilize the principles expressed in this document as a framework for all subsequent legally binding documents between the City, EDA and the YMCA. OP: 1972859 v2 CITY OF ELK RIVER By: Its: ECONOMIC DEVELOPMENT AUTHORITY IN AND FOR THE CITY OF ELK RIVER By: Its: THE YOUNG MEN'S CHRISTIAN ASSOCIATION OF METROPOLITAN MINNEAPOLIS By: Harold Mezile, Jr. Its: President and CEO 5