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Home My WebLink About2007-09-05 PACKET 08.CREQUEST OF CITY COUNCIL ACTION COUNCIL AGENDA MEETING ITEM # �� , DATE 9/5/07 PREPARED BY Pubiic Works Zac Dockter ORIGINATING DEPARTMENT STAFF AUTHOR ��<��,��.,��,�� COUNCIL ACTION REQUEST Consider authorizing staff to enter into a 20 year lease agreement with the Cottage Grove Athletic Association regarding usage of the Cottage Grove Ice Arena STAFF RECOMMENDATION Authorize staff to enter into a 20 year lease agreement with the Cottage Grove Athletic Association regarding usage of the Cottage Grove Ice Arena BUDGET IMPLICATION BUDGETED AMOUNT ADVISORY COMMISSION ACTION DATE ❑ PLANNING ❑ PUBLIC SAFETY ❑ PUBLIC WORKS ❑ PARKS AND RECREATION ❑ HUMAN SERVICES/RIGHTS ❑ ECONOMIC DEV. AUTHORITY ❑ SUPPORTING DOCUMENTS � MEMO/LETTER: Memo ❑ RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: ❑ LEGAL RECOMMENDATION: � OTHER: Lease Agreement ADMINISTRATORS COMMENT REVIEWED ❑ ❑ ❑ ❑ ❑ ❑ ❑ ACTUALAMOUNT APPROVED ❑ ❑ ❑ ❑ ❑ ❑ ❑ DENIED ❑ ❑ ❑ ❑ ❑ ❑ ❑ � 6 7 c:s ��} Date ��,� ��,��,��«��.��:��..��,,�� C:\Documents and Settings\nbeiscam\Locai SettingsiTemporary internet Files\OLK14F\Council Action Form - CGAA Lease Agreement.doc CITY OF COTTAGE GROVE MINNESOTA To; Honorable Mayor and City Council From: Zac Dockter Date: 8-15-07 5ubject: Ice Arena Expansion INTRODUCTION This memo addresses another funding mechanism of the Cottage Grove Ice Arena Expansion. The attached agreement between the City of Cottage Grove and the Cottage Grove Athletic Association has been reviewed and approved by the Cottage Grove Athletic Association, city staff and the city attorney. Staff is looking for authorization from council to enter into this agreement. USE AGREEMENT The Cottage Grove Athletic Association (CGAA) and City will enter into a separate agreement relating to CGAA's use of the ice arena facilities. That agreement will include the following generai terms: . District agrees to rent a minimum of 2,000 hours of ice from the city each "ice" season. The first ice season will begin September 1, 2008 and commence on March 31, 2009. • CGAA will make both fixed and variable payments each month. • Fixed payments of $27,000 will be due on the first of each month in October, (Vovember, December, January, February and March of each season with a final payment of $28,000 due on April 1. . Variable payments at a discounted rate of $95 per hour from the regular price of $200 per hour will be due the first of each month and are based upon ice rental consumption. . The City will have discretion to establish third party rental rates in subsequent years. The City will have the right to establish rentai rates for CGAA's minimum commitment in 2009 and subsequent years, based on verifiable increases in the City's operating expenditures for the ice arenas. In addition, the City will agree that increases in CGAA's rental rates wili be established so that the total annual payments made by CGAA under the use agreement in any season are not increasing at a rate that is disproportionate to the increases in rates for third-party ice time. The City will have the right to establish lower rates for non-prime ice time and studio rink rates and to run specials on third-party ice time. . The use agreement may provide CGAA with the right to re-seli its ice time commitment to third parties. However, final decisions regarding re-sale of ice time requires pre- approval from the city. . The use agreement will be assignable by tne City to any successor operator of the ice arenas; including the Cottage Grove EDA and the bond trustee. RF�CREATION AGR�EMENT BETWEEN COTTAGE G120YE ATI�LLETIC' ASSOC'dATION AND CITY OF COTTAGE GROVE THIS AGREEMEl\"I' is made and entered into this day of , 2007, by and between Cottage Grove Athletic Association, a i�liiu2esota nonprofit corporation (hereinafter called "CGAA") and the City of Cottage Crrove, a Minnesota municipal corpoxation (hereinafter called "tlie City"), pw�suant to the authority of Minn. Stat. § 471.16, et seq. ARTICLE I PREMISES The subject of this Agreement is the Couage Grove Ice Arena (the °Arena"), which is Iocated at 8020 80�' Street South, Cottage Grove, Minnesota. The Arena is located on the real property n1 the Countq o�P Washington, State of Minnesota, legally described in the attached Exlvbit A. The Arena consists of an exisring siructure that includes a single standard sheeC of ice and studio rink, and it is proposed that the Arena be expanded by the construction of a second structure that will hoti�se a second standazd sheet o�f ice, with a connecting shucture. The current plans far the construction of the second structure that will house a second standard sheet of ice with a connecting structure is described in the attached E�ibit B. ART`ICLE II PURPOSF. The purpose of this Agreement is to provide far the leasing by the City to CGAA of the e�sting and proposed standard sh�ets o�f ice, in consideration for a eommitment by CGAA to ptiuchase 2000 hours of ice time each contract ice season for the term of the Agreement, as defined in Article Il7 of this Asoreemen� ARTICLE IiI TERM 3.1 The term of this Agreement shall run from the 2008/2009 contract ice season through the 2028/2029 contractice season. 3.2.1 The contract ice seasotii is defined as stazting on Sepfember 1 and ending on March 31. Thanksgiving, Chrisd7ias, and New Years day are excluded from the contract ice season. 3.2.2 The contract ice season is divided into two tiers. Tier I ice time is between October 1 and Maech 14. Tier II ice time is September 1 through September 30 and March 15 through March 31. The City will rent to CGAA at least five hours of Tier I ice time for every one hoar of Tier II ice time. 3.23 The contract ice season is limited by the contraet ice hours, which are defined as 5:00-10:30 310221v4 CAH CT160-124 p.m, Monday through Friday, and 7:00 a.m. through 10:00 p.m. on weekends. ARTICLE IV CITY OBLYGATION� 4.1 The Arena sha11 be owned, operated and managed by the City, its successors or assigns. 4.2 The City shall employ a qualified Arena Manager, who has experience in, and shall be responsible for, the day-to-day operations, selling and scheduling of ice time, and the use of Yhe Arena. 43 The City shali pay all of the operating costs of the Arena, including maintenauce and giass replacement costs. 4.4 The City sha11 maintain the Arena in good repair and tenable, sanitary and orderiy condition. ARTICLE V CGAA OSLIGATIONS 51 CGAA agrees to rent from the City a minimmn of 2000 hours of ice time each contract ice season time during 1he term of this Agreement. 5.2.1 CGAA agrees to pay to the City rent each contract ice season for the minimum number of contract ice hours in two parts: (1) fixed installment rent payments, and (2) variable hourly rent payments. Each are defined below: 5.2.2 Fixed installment payments. CGAA agrees to pay rent Co the City each contract ice season in the amount of One Hundred Ninety Thousand Dollatis ($190,000.00) in six installmenfs of Twenty-Seven Thousand Doliars ($27,000.00) each, due on October 1, November 1, Deceinber 1, January 1, February 1, and March 1 of each confraet ice season, and one final installment of Twenty-Tight Thousand Dollars ($28,000.00), due on April 1 after the conclusion of each eontract ice season. 5.2.3 Variable hourly rent payments. CGAA agrees to pay the City a variable hourly rent payment far 2000 hours of ice time eaeh ice contract season that is diseounted from the raTes regularly charged for ice time at similar times. The discounted rate will not apply to ice rented by CGAA in excess of the minimum hours. For example, durnig the 2007/2008 ice contracT season, the hourly rate �Por CGAA's ininimum hows would be $105, which represents a discount of $95 from the regular hourly rafe of $200 for similar times. Por the 2008/2009 ice contract season and subsequen2 ice contract seasons, the City will establish the discounted rate for CGAA ice time by June 1 preceding the upcoming ice contract season and will notify CGAA of the new rate. The City agrees that any increase in the hourly rate wil1 be based on inereases in the City's annual operating expenditures for the two standard sheets of ice and fhat the hourly rate for CGAA's minimum hours wi11 be at least $95 less than the regular hoi�rly rate far Tier I ice 310221 v4 CAH C7'160-124 2 during the ice contract season. The City has the righY to establish hoiuly rates that are lower than those for CGAA's minimum hours for rental of non-ice contract season ice time, and the studio rink ice time. T`he City wi11 bill CGAA on a monthly ba5is for ice time, and payments are due wiChin thirty (30) days after billing. 5.3 CGAA may not resell ice time purchased pursuant to this Agreement without the prior consent of the City, which shall not be unreasonably withheld. Where City approval is given, CGAA may reseli iee time only to other govemmental entities or to organizations described in Section 501(c)(3) of the InYernal Revenue Code of 1986, as amended (the "Code"), exempt from taxation under Section 501(a) of the Code or other organizations and individuals as approved by the City, and the ice time may be resold only at rates that are equal to or less thaal Yhe total hoarly rent paid by CGAA to the City during the ice contract season, which is determined by multiplying the variabie hourly renT payment by the minimum number of hours CGAA is required to rent dtuing the ice contract season (2000 hours assuming no pro rata correction pursuant fo �aragraphs 5.4.2 or 5.4.3), adding W the result the total fixed installment payments for the ice contraet season, and dividing the sum by the minimum number of hours during the cont�aet ice season (2000 hours assuming no pro rata correction pursuant to paragraphs 5.4.2 ar 5.43). No such resale will be a�proved if the resale of such ice time will cause the interest on the taY-exempt obligations to become includable in gross income for federal incoine tax purposes. 5.4.1 Refund of Unused Ice Time. Except as provided in paragraphs 5.4.2 and 5.4.3, CGAA shall not be entitled to any refund of rent for unused ice fime. 5.4.2 If the Arena ice sheets are not useable due to mec;hanical or equipment faih�re or damage to the Arena or any other cause that is not amibutable to CGAA, and if as a direct result of that unavailabiiity CGAA is unable to utilize ail of its minimum hours of ice time in any given contract ice season, then CGAA wi11 be relieved of its obligation to pay a pro rata portion of the rent due in that year under paragraphs 5.21-5.2.3 above based on the number of minimum hours of ice time that CGAA was unable to utilized for that contract ice season. 5.43 If CGAA is not allocated the minimum number of hours in any given ice contract season due to (1) Independent School District No. 833's preferential use as provided in that certain Amended and Restated Lease Agreement by and between the City and Independent School District No. 833, dated, May 2, 2007, (2) the City's lease of ice time durin� the ice contract season to third parties, ox (3) the City's own use of ice time during the ice contract season, lhen CGAA will be relieved of its obligation to pay a pro rata portion of the rent due in that year under paragraphs 5.2.1-5.23 above based on Che number of minimum hours of ice Cime that were not allocaYed to iT for that contract ice season. 5.4.4 CGAA agrees to use best efForts and to wark cooperatively with the City to reschedule all hours of ice time during the ice contract season so as to avoid, whenever possible, a rent reduction under paragraphs 5.4.2 or 5.43. 5.5 CGAA will assure the propei enforcemenT of all City policies that directly relate to the operation of 1he Arena during its contracted ice hours, nlcluding without limitation policies 31(Y221v4 CAGI CTI60-124 3 regarding the use or possession of drugs, alcohol or tobacco products within tl�e Arena or on its grounds. 5.6 CGAA warrants that it has the authority to enter into this Agreement and that it has duly authorized the execution, delivery and perfor�nance of this Agreement. ARTICLE VI CGAA TAX COVENANTS 6.1. CGAA is a nonprofit corporation organized and existing under the laws of the State of Minnesofa. The Articies of Incorporation and Bylaws set forth in EXHIBIT C attached hereto, constitute full, true, and correct copies of the Articles of Incorporation a��d Bylaws, and such Articles of Iucorporation and Bylaws of CGAA have not been fizrther amended, nor have any actions been taken for the purpose of effecting any further amendments or modifications thereof or of effecting the dissolution of CGAA as of the date hereo,E: 6.2. Set forth in EXHIBIT D attached hereto with respect to CGAA is a Certificate of Good Standing issued by the State of Minnesota. There has been no change in the good standing of CGAA or its authority to conduct its business in the State of vlinnesota since the date of the Certificate of Good Standing issued by the StaYe of Minnesota. 63. Set forth in EXHIBIT E attached hereto, is a copy of a determination letter from the Internal Revenue Service of the United States Department of the Treasury (the "Internal Revenue Service") with respect to the status of CGAA as an organization exempt from federal income taxation under Section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"), as a result of the application of Section 501(c)(3) of the Code. CGAA has no lrnowledge of any communicarion or notifcation from the Internal Revenue Service, since the date of the attached determination letter, that such determinarion letter has been in any way amended, repealed, or revoked, and, to the knowledge and belief of the undersigned, the determination expressed in such determination letter remains in fu11 foxce and effect on the date hereof. CGAA is not aware of any adverse action being contemplated by the Internal Revenue Service with respect to the tax-exempt status of CGAA under the Code, ar any meritorious reason therefor. CGAA has not changed it purposes, charactex, or method of operation since the date of sueh determination letter to any extent that� could adversely affect the taY-exempt status of CGAA under the Code. 6.4. No proceedings are pending or, to the knowledge of CGAA, threatened, (i) in any way conCesting or affeeting the status of CGAA as an org�anization deseribed in Section 501(c)(3) of the Code, or (ii) to subject any income of CGAA to federal income taxation. 6.5. CGAA represents, covenants, and warrants tha2 it will maintain its status as an organization described in Secfion 501(c)(3) of the Code and will remain exempt from federal income taYation pursuant to Secfion 501(a) of the Code for the term of this Lease, and any extensions of this Lease, unless the City receives an opinion from its counsel stating that the proposed change in status of CGAA may be authorized. 310221vA CAH CT160-124 4 6.6. CGAA represents, covenants, and warrants it sha11 use all ice rime leased under this Lease for the purposes allowed herein and these activities do not constitute an "unrelated Txade or business" of CGAA within the meaivng of Section 513 of the Code. CGAA wi11 not use the ice time leased under this Lease in connecfion with an activiYy that consritutes aci "unrelated trade or business" of CGAA (within the meaning of Section 145 of the Code). 6.7. As described in Article I of this Lease, the City infends to expand the Arena and plans on financing that expansion with tax-exempt obligations. LTpou issuance of such tax-exempt obligations, CGAA shall provide an opinion to the City from an attorney (who represents nonprafit arganizations and practices in the area of 501(c)(3) law) regarding CGAA's status as a 501(c)(3) organization, in a form satisfactory to the City. ARTICLE VII BREACH OF AGREEMENT 7.1 If CGAA should: a. Breach any material term of this Agreement; or b. If the intarest of CGAA under �is Agreement shall be levied on under execution or other legal proeess; or c. If any petition shall be filed by or a�ainst CUAA to declare CGAA ba�ila•upt or to delay, reduce or modify CUAA's debts or obligaYions; or d. If any peCition shall be filed or other action taken to reorga��ize or modify CGAA's capital structure; or e. If CGAA sha11 be declared insolvent under the law; or £ If any assignment of CGAA's property sha11 be made for the benefit of creditors; ar g. If a receiver or hvstee is appointed for CGAA or its property; or h. If CGAA shall abandon the Arena during the term of this A�eement, then the City may treat the occurrence of any one or more the foregoing events as a breach of this Agreement. '7.2 In the event of a default by CGAA hereunder, whether for an event of default, as listed above, or for a material �each of any other covenant, condition, obligation or other mauer or requiremenf, the City may deliver written notice of such default to CGAA. If the default specif ed ui the norice is not cured by CGAA within thirry (30) days following the mailing of such notice, the City may pursue any and/or all of the remedies for deFault listed beiow. However, in the event of exigent circumsTances, when a default may impact life safety, no thirty (30) day right to cure applies, and City iinmediately may pursue a remedy for default. 310221 v4 CAH CT L60-12A 7.3 In the event of an uncured default (with notice or ni the event of exigent circwnstances) the Cty may either terminate CGAA's right to ice time, and/or pursue other remedies available at law. In addition, the City may take whatever action at law or in equity may appear necessary or desirable to enforce perfonnance and observance of any obligation, agreement or covenant tmder this Agreement, and may pursue any other legal or equitable rights not described herein, including but not limited to, an action for damages. 7.4 If the City should materially breach any covenant, condition, obligarion ar other mattcr or requirement, sueh as to provide ice time as provided hereunder, 2hen the CGAA may terminate its obligations under this Agreement and pursue any available Icgal or equitable remedy. ARTICLE VIII ASSIGNNIENT 8.1 The parties may not assign their rights or obligations under this Agreement without the prior written approval o�P the other party, which shall not be unreasonably withheid. The City, however, shall havc the right to assign its rights under this A�reement to a third party without CGAA's prior approval where the assignment is for the purpose of the City securing financing or refmancing for the constnzcrion of improvements to the ice arena. All of the terms and provisions of this lease shall extend to and be binding upon the successars and assigns oF CGAA and City. ARTICLE IX NOTICES 9.1 Any and all notices and demands by or to the parties hereto sba11 be in writing and shall be validly given or made if served either personally or if deposited in 1he UniTed States mail (certified or registered, postage prepaid, retunl receipt requesTed). If such notice be served personally, service sha11 be conciusively deemed made at the time of such personal service. If such nofice or demand be served by registered or certified mail in the manner provided herein, service shall be conclusively deemed made forty-eighC (48) hours a$er the deposit thereof in the United SYates mail, addressed to the pariy to whom such notice is to be given. CGAA or the C.ity may, by written notice given by one to fhe other, desig�ate any address to which notices and demands sha11 be sent whan required under this Agreement. Current notices shall be addressed as follows: To CGAA: A'I'TN: President To the City: City of Cottage Grove 7516 80th Street South Cottage Grove, MN 5 501 6-3 1 95 A'I I'iV: City Administrator s iozzi�a cnr�i cri bo-iza 6 ARTICLE X SEVERABILITY 10.1 If any tei�n or provision of this Ageement sha11, to any extent, be invalid or unenforceable, the remainder of this Agreement shall noC be affected thereby, and each provision of this Agreement independently shall be valid az1d enforceable to the eatent permitted by law. ARTICLE XI GOVERNING LAW ll.1 This Ageement shall be govemed by and construed in accordance with the Iaws of the State of Minnesota. AR'I`iCL� XII AMENDMENTS 12.1 Any alterarions, aznendinents, deletions or waivers of the piovisions of this Agreement shall only be valid when expressed in writing and duly signed by the parties. ARTICLE XIII ENTIRE AGREENI�NT 131 This Agreement represents the entire understanding and agreement between U1e parties hereto and this Agreement may not be altered, changed or amended, except by an inshument in writing and signed by all parties. 310221v4 CAH CC160-11f4 WHEREFORE, the parties have executed this Agreement as of the date set forth above. COTTAGE GROVE AT�ILfiTIC ASSOCIATION By: Ite President B Its Secretary CITY OF COTTAGF. GROVE sy: Its: sy: Its: Drafted by: Kennedy & Graven, Chartered (CHT) 200 South Six2h Sfreet, Suite 470 Minneapolis, MN 55402 (612)337-9300 310221v0. CAH CTI60-124 EXHIBIT A LEGAL DESCl2IPTYOliT �F Y'R�FERTY Parcel 1: Those Portions of the Southwest Quarter of the Southwest Quarter of Section 9 and Southcast Quarter of the Southeast Quarter of Section 8, all in Township 27 North, Range 21 West, Washington County, Minnesota, described as follows: Commencing at the intersection of the centerline of Hynes Avenue South and gp Stceet South; thence westerly along the centerline o�P 80`" Street South a distance of 40 feet thence northeriy at a right angle a distance of 220 feet to the point of beginning; thence continuing northerly a distance of 400 feet thence westerly at a right angie 220 feet thence southerly at a right angle 400 feet thence easterly at a right angle a distance of 220 feet to the point of beginning. Parcel2: That part of the Southeast Quarfer of the Southeast Quarter of Section 8, Township 27 North, Range 21 West, Washington County, Minnesota, described as'follows: Cornmencing at the intersection of the centerline of Hynes Avenue South and 80`" Street South; thence westerly aiong the centerline of 80`��' 8treet South a distance of 40 feet; thence northerly at a right angle a distance of 620 feet; thence westerly at a right angle 220 feet thence southerly at a right angle 206 feet to the point of begimwlg; thence westerly at a right angle a distance oP 250 feet; thence southerly at a right angle 150 feet; 2hence easteriy aY a right angle 250 feet; thence northerly at a right angle 175 feet to the point of beginning. 310221v4 CAH CT760-124 EXI-IIBIT B Construction Plans for New Ice Sheet 310221v4CAH C"PI60-17A �XHIBIT C Articies of Incorporation and Bylaws of CGAA 310221 v4 CAH CT I60-120. EXHIBIT D Cert�ficate of Good Standing 37022tv4 CAH CTI60-124 EXHIBIT F IRS Determination Letter 310221v4 CAH C1160-L?A