6.8. SR 07-10-2006 - Laserfiche WebLink

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Issues 1. Form and Term of Agreement A. Lease or Management Agreement Minnesota Statutes Ch. 471.191 specifically authorizes the City to enter into a 30 year lease for this type of facility. However, that statute requires that the tenant (the Y) make lease payments in an amount sufficient to pay all of the debt service on any bonds issued for construction of the facility. Because our agreement with the Y will not fall within this statute, there is some concern as to whether the City has the legal authority to enter into a lease that does not comply with Section 471.191. Therefore, there has been discussion about whether to characterize the agreement as a "management contract" . Regardless of what it is called, the agreement will look like a lease in that the Y will be paying (one-third of the debt service) for the right to occupy and operate a City building. I would appreciate any feedback the Council has on whether a lease or management contract is preferable. After your feedback, this issue will be presented to Kennedy & Graven. B. Term and Termination After some back and forth, we agreed on June 29 that the initial term ofthe agreement will be equal to the term of the bonds sold to finance construction of the Y. We also agreed that either party could terminate the agreement following the initial term, with or without cause, upon a three year written notice of cancellation. The Y would like a provision to the effect that if the City terminates the agreement prior to 30 years, the Y would get back some portion of its one-third contribution. The amount of the "refund" would be dependent on how close the termination was to 30 years, and would be no more than 50 percent of the contribution. If the Y terminated the agreement following the initial term, they would not have a right to receive any of their contribution back. We did not agree on the issue of whether the agreement could be terminated for cause during the initial term. My advice is that we have such a provision, but I would appreciate Council input. We also had some discussion about whether the agreement could automatically renew after the initial term for rolling three year terms unless a notice of cancellation was served by either party. The Y would like something longer than a three year cancellation, if Kennedy & Graven found that lawful. We would like Council input on whether to present this issue to Kennedy & Graven.