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HomeMy WebLinkAbout2016-06-01 PACKET 01. TO: Honorable Mayor and City Council EDA President and EDA Members Charlene Stevens, City Administrator/EDA Executive Director FROM: Christine Costello, Economic Development Director DATE: May 26, 2016 RE: Closure of the Business Enterprise Center (BEC) at 7516 80th Street South Background/Discussion On May 10, 2016 the City of Cottage Grove’s Economic Development Authority (EDA) held th their meeting at the Business Enterprise Center (BEC) at 7516 80 Street South. The purpose of the meeting being held at the BEC was to provide City staff future direction on the BEC. Background on the BEC from its conception in 2013 to the present was outlined, followed by a tour of the facility in which the challenges of leasing the space to small businesses was discussed. The concern is a majority of the budget and staff time is spent on building maintenance routine maintenance and operation (i.e. key making, paper towel refill, etc.). Building maintenance issues is one of the reasons city hall was ultimately relocated and a new facility built. Since then no improvements have been made to the building mechanicals. Two of the building mechanicals are nearing the need to be replaced in order to continue operating the building. The estimated cost to replace the two units is $12,000 - $13,000. The concerns faced by the City when operating in this location as City Hall still plague its current tenants. Since 2013 the BEC has ended each budget year in the negative. During the tour of the facility the challenges of the building such as the lower level space layout (jail cell area), lack of technology availability in the lower level, and poor ventilation issues and moisture problems, as well as consideration of a need for a mechanical equipment upgrade to the age of existing equipment. An additional challenge expressed to the EDA was the want for Premier Biotech to expand their office and lab operations into the lower level of the building. In order to meet that potential expansion need the tenant would need to complete a $35,000 - $45,000 (quotes were as high as $50,000) mechanical upgrade. The concern such an upgrade raised to City staff is there would be no guarantee that the City would not have to install additional mechanical equipment beyond what needs to be replaced currently. It was felt direction from the EDA was needed. Another challenge expressed to the EDA is that no data has been formally collected to determine the impact of the BEC on the community. Discussion also focused on the success of enterprise centers, such as providing business start-ups with capital, business planning assistance, and a succession plan for ‘graduating’ from the enterprise center and locating within the community. The BEC does not provide any of these services. Currently the BEC only provides below market rent. Three options for the direction of the BEC were provided to the EDA. They included:  Public/Private Partnership, Page 2 of 5  Reevaluate the BEC in a few years, and  Close down the BEC. Discussion has been expressed from an existing BEC tenant in a potential private partnership. The business owner would be willing to provide upfront investment and capital to potential start-up businesses but would require a commitment from the City and EDA that if the investor wanted to get out of the partnership that they would be compensated for their investment. Discussions have taken place with Washington County (County) who recently completed a strategic facility plan and it that process it was noted that the Park Grove library facility would need to be upgraded. The County wants to begin the planning process to study where they would locate the library in Cottage Grove. The BEC location is one option for them to consider since the current library is located in the same vicinity. Though a new library would not be considered until 2019 at the earliest since a bonding process would need to take place. Which leads to the final discussion of ‘mothballing’ the building until redevelopment with the library takes place or with a private developer. The process of ‘mothballing’ the building would allow the EDA and City to break even financially until the right redevelopment for the area came forward. The EDA discussed all the options and concluded that an exit strategy should be developed and a joint workshop should be held with the City Council on June 1, 2016, to discuss a joint recommendation on the future of the BEC. Exist Strategy/Discussion Current Tenant Overview The table lists the tenants that are currently located at the BEC and their lease expiration dates. Tenant leases would not be terminated early since there is no designated end user for the site to date. Tenants would be accommodated in vacating the facility if they are unable to vacate by the end of their current lease. Those tenants would be placed on a month to month lease until at least December 2016. City staff wants to work with tenants if more time is needed for them to find new space to lease in the community. Help has also been offered to the businesses in assisting them to find new tenant space within the community. It is the hoped that the businesses would remain in Cottage Grove. Current Tenants Lease End Date American Nursing & Technical January 15, 2017 Institute Chamber of Commerce September 30, 2018 Wakota CAER Co-tenant of Chamber Conexpspace LLC July 31, 2016 Dakota Sales Service Co-tenant of Conexspace Premier Biotech August 31, 2016 SOJO Medical Group December 31, 2016 East Ridge Robotics June 30, 2016 Verizon/Clear Wire Cell Tower December 31, 2018 Page 3 of 5 Solar Panels (New Energy Equity February 3, 2030 LLC) American Nursing and Technical Institute The lessee was informed about the potential plans to no longer operate the BEC. Their current lease expires in January 2017, and would be honored until then. The lessee voiced no concerns about the potential closing of the BEC. The lessee currently uses the space at the BEC for only storage; no nursing certification classes or training take place in Cottage Grove. It is hoped that staff could work with the tenant to have them vacate by the end of December 2016 so that it is in keeping with the majority of the tenants whose lease would end in December 2016. The tenant is currently four months behind in rent (Total $1,685.90). A letter has been sent to the tenants home and office address giving them until May 31, 2016 to pay the unpaid rent amount. The tenant reached out to City staff stating that their grant funding for their business has not come through to date. They stated they would pay once the grant funding was received. The EDA can terminate the lease if after a 30-day notice is given to remedy the situation. If rent is not paid by May 31, 2016, termination process will begin. Chamber of Commerce The lessee was informed about the potential plans to no longer operate the BEC. At the May Chamber Board meeting the potential closure was also discussed with the Chamber Board. The City Attorney reviewed the Chamber lease since it extends to September 30, 2018, and confirmed that the City will not have to buy-out the Chamber’s lease if they were to vacate before the September 2018 date.The group consensus was that they understood the situation but would very much like assistance from the City in finding new office location for the Chamber as well as a place for their co-tenant Wakota CAER who uses the training room monthly at the BEC. Staff wants to work with the Chamber to find an office location that might provide them more visibility within the community. It is also felt that alternative training space can be found in the community for Wakota CAER. Conexspace, LLC and Dakota Sales Services The lessee was informed of the possible closure of the BEC. The lessee stated that they have actually been looking for space to be closer to their clients in St. Paul and Minneapolis. They stated that they would be able to vacate most likely by the end of their lease date. Premier Biotech City staff has spoken with the President and Chief Operating Officer of Premier Biotech another lessee at the BEC about the potential closure of the facility. Premier Biotech current lease ends August 31, 2016 and they have expressed the need for additional time to move due to their lab operations. Premier Biotech would be offered a month to month lease that would extend from August 31, 2016 to December 31, 2016; this would hopefully allow them an appropriate amount of time to relocate. If more time was needed it would be reevaluated again in November 2016. Premier Biotech has been offered assistance in finding space to relocate and/or build a new facility in Cottage Grove. They have expressed that they will likely locate closer to the University of Minnesota due to their employee population age demographic. Page 4 of 5 SOJO Medical Group The lessee is aware of the potential closure of the BEC. The lessee stated that he would vacate by the end of his lease. The tenant is currently three months behind in rent (Total $2,511). A letter has been sent to the tenants home and office address giving them until May 31, 2016 to pay the unpaid rent amount. The tenant reached out to City staff stating they would send a check immediately for the unpaid rent. The EDA can terminate the lease if after a 30-day notice is given to remedy the situation. If rent is not paid by May 31, 2016, termination process will begin. East Ridge Robotics The tenant is aware that the BEC may potentially close and they will need to find alternative location to build and practice robotics. The tenants lease ends June 2016 but will also be extended until December 2016 as well. The Robotics team has stated they have the ability to vacate the premises in 48 hours. City staff would like to offer them the same amount of time to vacate the facility as other tenants, even though they do not pay rent, they still will be faced with the logistics of finding new space. Verizon/ Clear Wire Tower Verizon and co-locator Clear Wire will be notified if the BEC is closed but will not need to be relocated since the space occupied at the BEC is for equipment only. The users do not staff out of the BEC. They will still have access to their equipment. Solar Panels (New Energy Equity LLC) The solar panels installed by New Energy Equity LLC will terminate on February 3, 2030. The agreement does allow for the City to relocate the solar panels onto another City facility if the BEC building was sold to another end user. At this time there is no designated end user so the panels will not need to be moved. Building Contractors Cleaning, sanitation, and building services are contracted out. These contracts would not be terminated until the building was completely empty of tenants. Therefore, based on the potential last tenant being out mid-January 2017, the contract for these services could end at the same time or February 1, 2017 at the latest. If the building was to be ‘mothballed’ the City Facilities Maintenance staff will continue to oversee and ensure that the building is not falling into disrepair. A similar schedule that the City had for the former Home Depot location will be maintained for this building as well. Staff Time at BEC Currently the Facilities Maintenance staff and Economic Development staff spend less than 20% of their time maintaining and administering services at the BEC. The concern is that time is spent away from implanting the goals of the strategic plan which are consider of importance in order to position the community for growth. Page 5 of 5 Financials Attached are financial worksheets that show the actual budget of the BEC from 2013 as well as the budget for 2016 and what has been spent to date (May 31, 2016). Also included are detailed budgets for 2015 and 2016. The BEC has continually been over budget since 2013. The intent of the BEC was not to make a profit but to potentially break even. The only foreseeable way to meet the goal of breaking even without any private partnership would be to ‘mothball’ the building. The EDA will continue to receive funds for the cell tower and area that houses the cell tower equipment at the BEC. There is no need to terminate this contract because individuals do not office out of the BEC for this use. The solar panels will also remain for the same reason in staffing but the solar panels currently offset the utility bill for the BEC. With the income from the cell tower rental at the BEC of approximately $48,709.60 the City and the EDA would be able to break even with funds remaining if the building or site needed a major repair. The following is what would be required to maintain the building in a ‘mothball’ state until redevelopment took place. Services to ‘Mothball’ Amount Insurance $5,250 Utilities $15,000 (est.) Lawn Care $0 (done by PW) Snow Removal $4,000 - $5,000 (reduced if completed by PW) Pest control $700 - $800 Building Repairs $1,000 Est. Total $26,000 - $27,050 Recommendation Recommended Motion: 1. Authorize staff to proceed with the closure of the Business Enterprise Center (BEC) at th 7516 80 Street South as outlined in the Timeline for Exit Strategy. 2. Authorize the City Administrator to submit a letter to Washington County that the City of Cottage Grove would like to engage in a planning process for the future of Park Grove library. Timeline for Exit Strategy Spring 2016  EDA directs staff to develop an exit strategy.  Calls made to all BEC tenants on future of the BEC.  City Council/ EDA decision made about continuation of the BEC.  Formal letters sent to all tenants of status of BEC future.  Meet with all tenants to discuss new location within the community.  Remove freestanding sign on 80th Street advertising space for lease. Summer 2016  Extend leases as necessary on a month-to-month lease that will end December 2016.  Send letter to tenants that copier will be removed from facility (not being used).  Cancelled Minnesota High Tech Association membership ($500).  Inventory furniture in the BEC that belongs to the City.  Determine how furniture will be handled; offered to other City Departments, sell, etc.  Inform the Garden Club that they will not have to maintain the landscaping beds in front of the building.  Find Garden Club a new location for plantings. Give time to relocate plant material.  Contact building/site contractors on status of the BEC. (Mechanical/Cleaning/Keys)  Send email to SWCTC on status of the BEC. Audio/Video owned by SWCTC. Fall 2016  Contract for leased copier ends October 2016.  Maintain lawn care (including irrigation).  Formal letter to tenants that will need to vacate by December 31, 2016. Winter 2016 - 2017  Maintain snow removal for site.  Begin routine site inspection.  Send letter to cancel cleaning contract of building.  Cancel Google contract for BEC calendar  Remove TV carousel from the front lobby. Spring 2017  Inform City insurance the building is vacant.  Remove exterior BEC wall signage from the building.  Work on turning off water to the interior of the building  Audio/Video equipment returned to SWCTC or work to have located at City Hall.  Cancel trash removal and dumpster contract for the site. May 26, 2016 Washington County Attention: Molly O’Rourke, County Administrator Department of Administration 14949 62nd Street North, P.O. Box 6 Stillwater, MN 55082-0006 RE: Park Grove Library – Cottage Grove Dear Ms. O’Rourke: The City of Cottage Grove would like to express the community’s strong commitment to the future of Washington County’s Park Grove Library. The City recognizes that Washington County will be studying the Park Grove facility over the next few years to ensure the library meets the Library Strategic Plan. The City of Cottage Grove is prepared to participate in the planning process for the library to ensure all Cottage Grove residents maintain access within a reasonable distance to their homes and a library facility located near the center of commerce or a major thoroughfare. The City believes a joint planning process will ensure that the location of the library in Cottage Grove will provide a high quality facility that meets the needs of current and future residents of Cottage Grove. Sincerely, Charlene Stevens City Administrator CITY OF COTTAGE GROVE 12800 Ravine Parkway Cottage Grove, Minnesota 55016  www.cottage-grove.org 651-458-2800 Fax 651-458-2897 Equal Opportunity Employer  B.E.C. (Business Enterprise Center) 20132014201520162016 actualactualactualBudgetYTD REVENUES BEC Rentals 9,196 34,548 35,767 96,000 20,811 BEC Tower Rent 28,684 61,484 64,743 60,000 48,710 3812Donations 655 - 3829Misc. other 7,978 Total Revenue 38,535 104,010 100,510 156,000 69,521 COMMODITIES 4210Operating supplies 1,681 522 113 - 788 4272Operating supplies - bldg 96,407 4,113 4,364 - 226 Capital outlay < $5000 1,998 6,566 - Total Commodities 98,088 6,633 11,043 - 1,014 CONTRACTUAL SERVICES 4300Prof. services other 6,588 8,666 7,662 12,000 3,125 4302Legal Service 789 491 1,266 - 73 4305Fees for service 3,559 2,066 1,631 9,000 2,981 4310Communication 480 2,032 1,791 - 824 4311Postage - - - - 4321Data Processing 550 363 34 - - 4340Printing 222 295 - 300 - 4341Advertising/publishing - - - 1,000 - 4350Property insurance - 5,250 5,250 5,250 2,188 4360Utilities 15,561 27,724 29,900 16,000 11,455 4372Maintenance & operations - - 4372Maintenance/repair-bldg 22,510 27,208 48,761 25,000 4,642 4380Rental/lease 3,211 2,318 2,234 3,200 745 4405Clean/Waste Remv 16,036 5,795 3,895 16,000 1,604 4407Property Taxes - - - - 4434Special Events - - 2,000 - Total Contractual Services 69,506 82,208 102,424 89,750 27,637 CAPITAL OUTLAY 4540Other capital outlay 52,527 - - 30,000 - Total Capital Outlay 52,527 - - 30,000 - Total Expenditures 220,121 88,841 113,467 119,750 28,651 Total Revenues over expenditures (181,586) 15,169 (12,957) 36,250 40,870 Cumulative operations total (181,586) (166,417) (179,374)