5.1. SR 11-18-1996~sty of
iver
MEMORANDUM
ITEM 5.1.
TO:
FROM:
DATE:
SUBJECT:
Mayor & City Council
Pat Klaers, City Admini~~x~
November 18, 1996
MSF Letter of Intent
The City Council and representatives of the Minnesota Sports Federation
(MSF) met for the second time on October 28, 1996. At this meeting staff was
directed to finalize a Letter of Intent with MSF. This Letter of Intent
between the city and MSF will provide the framework for future negotiations
for a development agreement if the project is deemed financially feasible.
Attached for your consideration is the draft Letter of Intent which both the
city staff and MSF have found to be acceptable. Please note (on Page 1) that
while "this letter does not represent a binding commitment", it does state
that the city intends to give MSF a minimum of 6 acres for this project.
Recommendation
It is recommended that the City Council adopt a motion approving the Letter
of Intent between the city and MSF.
\Xelkriver\sysXshrdocXcouncilkletint.doc
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425
SPECIAL MEETING OF THE ELK RIVER CITY COUNCIL
HELD AT THE ELK RIVER CITY HALL
MONDAY, OCTOBER 28, 1996
Members Present:
Mayor Duitsman, Councilmembers Dietz, Scheel, Farber, and
Holmgren
Members Absent: None
Staff Present:
Pat Klaers, City Administrator; Sandra Thackeray, City Clerk; Lori
Johnson, Assistant City Administrator; Dave Sellergren, City
Attorney; Phil Hals, Street/Park Superintendent
Also Present:
Dave MacGillivray, Bond Consultant; Dave Anderson, Park and
Recreation Commission Representative; Dana Anderson, Park and
Recreation Representative; Jeff Asfahl, Community Recreation
Director; Pat Pelstring, Public Resource Group; MSF Representatives
Perry Coonce, Barb Northway, and Al Mundt
1. Call Meetinq To Order
Pursuant to due call and notice thereof, the special meeting of the Elk River City
Council was called to order at 5 p.m. by Mayor Duitsman.
2. Consider Council A.qenda
COUNCILMEMBER HOLMGREN MOVED TO APPROVE THE 10/28/96 AGENDA.
COUNCILMEMBER DIETZ SECONDED THE MOTION. THE MOTION CARRIED 5-0.
3. Discuss MSF Proposal and Letter of Intent
City Administrator Pat Klaers indicated that the City Council held a worksession on
October 17 to begin formal discussions between the Minnesota Sports Federation
(MSF) and the City of Elk River for the construction of a sports facility in Elk River on
property which would be donated by the City. The City Administrator indicated
that the purpose of this meeting is to continue discussions regarding the proposed
MSF sports complex. The City Administrator stated that this meeting would center
on certain issues that need to be clarified prior to entering into a Letter of Intent
with the MSF.
Assistant City Administrator Lori Johnson indicated that staff has been working
with City Bond Consultant Dave MacGillivray of Springsted to review the financial
aspects of the proposal. She indicated that the City has some concerns
regarding the exposure that this type of project would have on the City.
Dave MacGillivray of Springsted indicated that the City does have statutory
authority to finance this type of transaction. He recommended that the City
finance the project through gross revenue bonds. Dave MacGillivray indicated
that by financing through gross revenue bonds, the City must pledge that it will
operate the facility for the life of the bond issue which is approximately 20 years.
Dave MacGillivray discussed the components of the pro-forma for the MSF sports
Special City Council Meeting
October 28, 1996
Page 2
complex. He indicated that according to the pro-forma the principle revenues of
financing the MSF spods complex include the following: 27 percent from
volleyball; 27 percent from vending machines and other associated sales; 30
percent from the operation of the fitness center; and 13 percent from rentals and
advertising. Dave MacGillivray indicated his concern regarding 30 percent of the
revenues coming from the operation of the fitness center. He stated that the
Council should also be concerned about other competing fitness facilities
whether they be private or public. He stated that should another large fitness
center be built in the City of Elk River, the City must question whether this would
jeopardize the revenues of the MSF sports complex. He indicated that the City
must also bear in mind that should a fitness center be included in a community
center, it could be perceived as being in conflict with the MSF facility. Dave
MacGillivray next discussed the marketability of the project. He indicated that he
felt it would be possible to find a bond purchaser for the gross revenue bonds
through direct negotiations.
City Attorney Dave Sellergren indicated that from a legal perspective the Letter
of Intent is not binding to the City and the City would not be taking a risk to start
the process, other than costs associated with the review and evaluation process.
Dave Anderson, Park and Recreation Commission representative, discussed the
effect the MSF would have on organizations that are currently managing the
vending operations during softball games. Perry Coonce indicated that during
the first phase of the MSF project, it would continue to have the existing youth
organizations operating the concessions.
Dana Anderson, Park and Recreation Commission representative, indicated his
concern as to what type of guarantee the City would receive regarding indoor
use of the sports complex for the local youth. Al Mundt indicated that City
residents would be charged less for use of the facility than non-residents.
Discussion was held regarding cost to rent the volleyball courts. Discussion was
also held regarding a possible conflict of interest if the City builds a community
center and includes a fitness center within the community center. Al Mundt
indicated that MSF has changed its per-forma to indicate that 12 percent of the
funding would come from the fitness center rather than 30 percent.
Street/Park Superintendent Phil Hals indicated that he has some concerns
regarding the acreage and space allowed for the sports facility, parking, and
fields. He stated that Orono Park is the City's premier park. He indicated that
usage of the park has increased and suggested that the Council closely consider
whether or not it should give up the 2 acres that are adjacent to Gary Street for
the MSF complex. Phil Hals indicated that these two acres could someday be
incorporated into Orono Park.
COUNCILMEMBER DIETZ MOVED TO AUTHORIZE STAFF, CITY A1'I'ORNEY, AND BOND
CONSULTANT TO MOVE FORWARD IN DRAFTING A LETTER OF INTENT WHICH WILL BE
BROUGHT BACK TO THE CITY COUNCIL FOR DISCUSSION. COUNCILMEMBER
HOLMGREN SECONDED THE MOTION. THE MOTION CARRIED 5-0.
4. Adjournment
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November , 1996
Honorable Mayor Henry A, Duitsman
and City Council for the
City of Elk River
13065 Orono Parkway
Elk River, MN 55330
Re:
"Letter of Intent" for
Minnesota Sports Federation Project
~ITRODUCTION
The Minnesota Sports Federation and the City of Elk River do hereby express their intent to mutually
explore the feasibility of proceeding with the development of a 59,500 square foot recreational facility.
This letter represents the proposed terms and conditions to mutually proceed with the investigation and
negotiation phase of project development and financing.
NOTWITHSTANDING ANYTHING TO THE CONTRARY, HOWEVER, THIS LETTER DOES NOT
REPRESENT A BINDING COMMITMENT, BY EITHER PARTY, TO PROCEED WITH THE
DEVELOPMENT, FINANCING, OR OPEKATION OF THE PROJECT.
PROJECT DESCRIPTION
The proposed development project consists of approximately a 59,500 square foot indoor sports
recreational facility to be operated by the Minnesota Sports Federation. The facility is proposed to be
consmacted on a minimum 6-acre site (final acreage to be mutually determined after review and approval
of the site plan) located at the water tower site, south of Highway 10 and bordered by Hudson Street to
the west.
The facility will be a multi-use indoor sports facility designed for volleyball, basketball, touch football,
indoor soccer, and wrestling. The faeih'ty will contain offices, locker rooms, food service, meeting rooms,
and will be the official home of the Minnesota Amateur Sports Hall of Fame.
The Minnesota Sports Federation will utilize the fadlity for conducting clinics, recreational league
activities and tournaments. In addition, the City and Minnesota Sports Federation will work together to
develop local programming and preferential fees to benefit area residents.
669'0N
L0:60
Honorable Mayor Henry A. Duitsman
City Council for the City of Elk River
November _.__, 1996
Page 2
It is proposed that the facility will be designed by Minnesota Sports Federation with review and approval
by City representatives. The facility will be constructed and financed by the City, if the City deems the
project to be financially feasible, and 19fmnesota Sports Federation will execute a lease/purchase agreement
to fully amortize the City financing.
~[INNESOTA SPORTS~FEDERATION REPRESENTATIONS:
Minnesota Sports Federation represents its interest in the project and intends to proceed as follows:
1. Minnesota Sports Federation is a private, non-profit 501(c)3 organization with over 200,000
members and participants in its programs.
2. Minnesota Sports Federation intends that the proposed project will serve as its operational
headquarters and primary indoor sports facility.
3, Minnesota Sports Federation intends to locate the Minnesota Amateur Sports Hall of Fame as a
pan of the project.
4. Minnesota Sports Federation intends to net lease the proposed facility from the City at a minimum
annual cost equal to the City's annual debt service and related project costs.
5. Minnesota Sports Federation intends to cooperate with the City to encourage programming to
enhance local community recreational opportunities.
6. Minnesota Sports Federation intends to equip the facility with equipment valued at $300,000.00.
7. Minnesota Sports Federation intends to be responsible for all on-going operating costs.
8. Minnesota Sports Federation has provided a financial pro-forma, and will work with the City to
update it as required by the City, which accurately reflects the revenues, project costs, on-going
lease and operating expenses.
9. Minnesota Sports Federation will not undertake any actions, change its organizational structure,
or change its operational parameters that will adversely affect the tax-exempt status of the project
bonds.
DCS 500952
£0~ 669'0N S~LI~ * ago L0:60 96/SI/II
Honorable Mayor Henry A. Duitsman
City Council for thc City of Elk River
November ,1996
Page 3
_CITY REPRESENTATIONS:
The City represents its interest in the project and intends to investigate and explore project feasibility as
follows:
Cooperation with Minnesota Sports Federation in the design, construction, and financing and
development of thc proposed project.
Provision, at no charge, of a minimum 6-acre site located at water tower site for development of
the facility and potential expansion. The City and Minnesota Sports Federation will masterplan
the site and agree to the appropriate acreage (see attached site map). Minnesota Sports
Federation shall secure all zoning, subdivision, street vacation, and other necessary government
approvals.
The City recognizes the n~,3_ for ~nnesota Sports Federation to have access to additional softball
fields for summer tournaments. The City represents that it intends to develop four new softball
fields on a portion of' property identified as the "Cass Property". In addition, the City owns 23
acres immediately to the south of the proposed fields which may be available for development
approximately 15 years from now. The City's intentions to support Minnesota Sports Federation
and their requirement for outdoor softball fields is as follows:
The City will consider providing usage of some or all of the new four fields complex or
existing Elk River softball complex on seven to nine weekends per summer (lune, July,
August and September - additional to current fidd usage by Elk River Softball Association
of Minnesota Sports Federation tournaments) by Minnesota Sports Federation, as
necessary. Use of the softball fields shall include concession stands and gate revenue.
Usage of the softball fields shall be contingent on the evidence of the benefit to the City
of the sports tourism and corresponding economic impact generated to the community by
tournaments held by the Minnesota Sports Federation at the fields. Minnesota Sports
Federation will reimburse the City for any of its costs, such as additional maintenance,
satellites, police, etc., associated with such use of the fields.
The City will consider, at the point it no longer requires the use of the 23-acre site for
waste disposal, south of the proposed fields on the Cass Property, entering into a
preferential land lease or equivalent land sale of this property. Minnesota Sports
Federation shall be responsible for development of the site, and the site will be a joint use
facility.
669 'ON
80:60
Honorable Mayor Henry A. Duitsman
City Council for the City of Elk River
November ~ 1996
Page 4
The City intends to finance the facility, if determined to be financially feasible, through bonds and
lease the facility to Minnesota Sports Federation.
The City will consider sale of the facility to Minnesota Sports Federation, after debt retirement,
for the sum of $1.00, exclusive of land costs.
The City will consider providing a "fight of first refusal" on the softball fields adjacent to the
Minnesota Sports Federation development site, should the City decide to relinquish its
ownership/control of this land.
MUTUAL REPRESENTATIONS:
The Minnesota Sports Federation and City intend to mutually cooperate on the following:
Determination of whether the project is feasible through the generation of a reliable financial pro-
forma and exploration of financial sources.
2. The schedule and timing for the project.
The determination of a construction company and architect. The City and Minnesota Sports
Federation shall comply with public bidding reqtdrements as required by state statute.
4. Local programming options and cost reimbursement, if appropriate.
The potential and process for future facility expansion and the development and management of
additional outdoor recreational facilities adjacent to the facility.
The specific terms, conditions, and security for a development agreement, lease/purchase
agreement, softball field usage agreement, operations plan including preferences for Elk River
citizens, and related agreements.
The City and lVfmnesota Sports Federation agree to cooperatively support existing commitments
to the Sherbume County Fair, to provide additional parking during the annual four day county fair.
The Minnesota Sports Federation will submit license applications as required by City ordinance
to grant a 3.2 liquor license and charitable gaming for the facility, Minnesota Sports Federation
will work with the City to assure that alcoholic beverages will not be dispensed during youth
DC8 500952
669 'ON
Honorable Mayor Henry A. Duitsman
City Council for the City of Elk River
November 1996
Page 5
tournaments. Should Minnesota Sports Federation meet traditional guidelines for approval, the
City would expect to approve these licenses.
]*RE-DEVELOPMENT COMMITMENTS:
In consideration of these representations and intentions the parties do hereby intend to proceed as follows:
To conduct a financial feasibility analysis at Minnesota Sports Federation's cost of the project to
forecast anticipated revenues and expenses and an overall financing plan, said cost not to exceed
$7,500.00 without Minnesota Sports Federation's consent. An initial determination as to
feasibility is the primary detemamant as to whether to proceed with other activities. Minnesota
Spots Federation shall provide the City with reliable revenue projections prior to the City's
commitment of significant time or money in further investigation or negotiation activities,
To select a project construction company (determined by selecting the lowest responsible bidder)
and architect.
3. To initiate further design and develop detailed specifications for the facility.
4. To establish facility operational parameters.
The City and Minnesota Sports Federation mticipate that all development costs will be included
as a part of the project, In the event, however, that the project does not proceed, the parties agree
to pay costs as follows: (1) The City agrees to pay up to $3,000,00 for a preliminaxy financial
analysis of the project; (2)lVfmnesota Sports Federa6on agrees to pay for preliminary architectural
development c~sts for the project; and (3) Minnesota Sports Federation and the City agree to pay
for their individual direct expenses.
Either party to this letter may terminate the activities described in this letter at any time at its sole
discretion by written notice to the other party.
The City of Elk River
Minnesota Sports Federation
Mayor
Executive Director
City Clerk
Secretary
DC$ 500952