Loading...
5. EDSR 05-14-2007REQUEST FOR ACTION To Item Number Economic Develo ment Authori 5. Agenda Section Meeting Date Prepared by Ma 14, 2007 Lori ohnson, Ci Administrator Item Description Reviewed by Consider Resolution Approving Lease Agreement Between the Economic Development Authority of the City of Elk River and Reviewed by the Young Men's Christian Association of Metropolitan Minneapolis and the Ground Lease Between the City of Elk River and the Economic Development Authority of the City of Elk River. Action Requested The EDA is asked to review and consider the resolution approving the lease agreement between the Economic Development Authority of the City of Elk River and the Young Men's Christian Association of Metropolitan Minneapolis and the Ground Lease between the City of Elk River and the Economic Development Authority of the City of Elk River. Background/Discussion The city council met on May 7 to discuss the lease agreement between the EDA and the YMCA. The EDA is the issuing authority for the bonds on this project; therefore, the lease is between the EDA and the YMCA. However, the city must consent to the lease in order for it to be binding. The city council is meeting at 5:00 on May 14 to again review the lease and, assuming the council takes action at that time, the EDA is requested to act on the lease. Below are some of the highlights of the lease. The last item listed is the allocation of the Sherburne County Landfill Legacy grant that the Council will be discussing. The term of the lease is 31 years, automatically renewing after that point with aten-year termination clause. The initial term was increased by one year because the lease starts one year before the building is open for operation. The lease requires the construction of a full-size gymnasium of approximately 8,000 square feet including an office for city recreation staff. The city has guaranteed use of the gym for a minimum of 23 hours per week plus all times when the building is open and the gymnasium is not scheduled by the YMCA. Park and Recreation Director Bill Maertz is very pleased with the design of the gym and arrangement for city use of the gym. Each resident of the city will receive aone-time waiver of the joiner's fee and each household will receive a guest pass four times per year allowing all residents to have access to all basic services at the YMCA for one day. S:\Council\I,ori\EDA memo re YMCA lease OS 14 07.doc ^ The city (EDA) will issue up to $12 million of bonds with debt service of the bonds to be paid one-third by the YMCA through rent payments and two-thirds by the city through a tax levy. The bonds will have a term of 25 years unless a shorter maturity is mutually agreed upon by all parties and is approved by bond counsel. ^ The city will provide the building site for the facility at no cost to the YMCA. ^ The YMCA is responsible for payment of all operating costs including grounds maintenance, taxes, insurance, and costs for operating all programs. ^ The Lease spells out in detail how all future capital improvements will be funded. This item was discussed by the Council at a work session on the MOU and the Lease is consistent with the Council's comments made at that time. ^ The Lease as originally written states that the city has applied for a Sherburne County Landfill Legacy Grant for the YMCA. The Lease further states that grant proceeds will be applied to payment of the debt on prorated basis with one-third of the grant proceeds reducing the YMCA's rent and two-thirds reducing the city's tax levy. Based on Council discussion at the last worksession, alternate lease language is attached providing that all of the grant go to the city. Since the Council will be addressing this at the 5:00 special meeting, both are included now for your review. At the meeting, the version approved by the Council will be the one the EDA will be asked to approve. Our attorney on this project, Steve Bubul, Kennedy and Graven, and I will be present at Monday meeting to answer any questions the EDA may have about the lease at that time. Additional information was included in the May 7 memo for the Council meeting; this memo can be found on the city's website. Financial Impact Once the lease is approved, the EDA is obligated to issue $12,000,000 of debt to fund this project with the debt being repaid through a city property tax levy. The levy may be reduced by grant proceeds. The lease does not provide an escape clause for the city because the maximum obligation is set at $8,000,000 plus the land contribution. The city is liable for the entire debt if the YMCA does not may rent payments as scheduled. Attachments Resolution approving Lease agreement by and between the Economic Development Authority for the City of Elk River, Minnesota as Lessor and the Young Men's Christian Association of Metropolitan Minneapolis as Lessee and Ground Lease between the City of Elk River and the Economic Development Authority Lease agreement by and between the Economic Development Authority for the City of Elk River, Minnesota as Lessor and the Young Men's Christian Association of Metropolitan Minneapolis as Lessee. Ground Lease between the City of Elk River and the Economic Development Authority S:\Council\Lori\I~;llA memo re YMCA lease US 14 07.doc Alternate lease language providing all grant proceeds go to the city Spreadsheet showing estimated tax reduction from landfill grant proceeds Estimated project budget summarized from information provided by the YMCA QCtlotl Motion by Second by Vote Follow Up S:ACouncil\Lori\F_DA memo re YMCA lease OS 14 07.doc ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RNER RESOLUTION NO. RESOLUTION APPROVING LEASE AGREEMENT BETWEEN THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER AND THE YOUNG MEN'S CHRISTIAN ASSOCIATION OF METROPOLITAN MINNEAPOLIS AND THE GROUND LEASE BETWEEN THE CITY OF ELK RIVER AND THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER BE IT RESOLVED By the Board of Commissioners ("Board") of the Economic Development Authority of the City of Elk River, Minnesota ("Authority") as follows: Section 1. Recitals. 1.01. The City of Elk River (the "City") and the Authority have determined that it is in the best interests of the health, welfare, and safety of the City and its residents that the Authority acquire and construct a facility (the "Project") to be owned by the Authority and leased to The Young Men's Christian Association of Metropolitan Minneapolis ("YMCA"). 1.02. The Authority is authorized by the provisions of Minnesota Statutes, Section 469.102 to issue its obligations to finance the Project in whole or in part and to pledge the City's full faith, credit and taxing powers together with revenues of the Project to the payment of such obligations. 1.03. At a special election held on September 12, 2006, the voters of the City approved a pledge of the City's full faith and credit to bonds in the maximum principal amount of $12,000,000 issued by the Authority to finance the acquisition and betterment of the Project. 1.04. To implement the Project, the Authority has caused to be prepared a Lease Agreement between the Authority and the YMCA (the "Lease"), under which the YMCA will lease the Project from the Authority. 1.05. The Authority has also caused to be prepared a Ground Lease between the City and the Authority (the "Ground Lease"), under which the City will lease to the Authority the land on which the Project will be constructed. 1.06. The Board has reviewed the Lease and the Ground Lease, and has determined that it is in the best interest of the Authority to approve such agreements. Section 2. AuthoritYApproval; Further Proceeding. 2.01. The Lease and the Ground Lease as presented to the Board are hereby in all respects approved, subject to modifications that do not alter the substance of the transaction and that are approved by the President and Executive Director, provided that execution of the documents by such officials shall be conclusive evidence of approval. 2.02. The President and Executive Director are hereby authorized to execute on behalf of the Authority the Ground Lease and the Lease, and any documents referenced therein requiring execution by the Authority, and to carry out on behalf of the Authority its obligations thereunder. Approved by the Board of Commissioners of the City of Elk River, Minnesota this 14th day of May, 2007. President ATTEST: Secretary