5.1. SR 07-17-2006 - Laserfiche WebLink

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BRIGGS AND MORGAN MEMORANDUM TO: Elk River City Council FROM: Mary Ippel DATE: July 13, 2006 RE: YMCA Project The City of Elk River and The Young Men's Cluistian Association of Metropolitan Minneapolis (the "YMCA") are proposing that a ymca facility be constructed by the City and leased to and operated by the YMCA. The City has indicated that it wants to obtain voter approval for the issuance of bonds for the ymca facility. If approved by the electorate, general obligation bonds oftlle city would be issued to finance the facility and the City would construct the facility. It is proposed by the City that the ymca facility would be leased to the YMCA and the YMCA \vould pay annual net rentals sufficient to pay 1/3 of the annual debt service of the bonds. However, Mimlesota Statutes, Section 471.191, Subd 1 authorizes a city to operate a program of public recreation and playgrounds and to lease recreational facilities to nonprofit corporations, but any such lease shall require the lessee to pay net rentals sufficient to pay the principal, interest, redemption premiums, and other expenses when due with respect to all city bonds issued for the acquisition or betterment of the facilities, less such amount of taxes and special assessments, if any, as may become payable in any year of the term of the lease, on the land, building, or other facilities leased. Unfortunately, this statutory provision conflicts with the City's proposal of leasillg the facilities to the YMCA for 1/3 of the annual debt service. Instead of a lease arrangement, it was proposed that the City enter into a Management Agreement with the YMCA, but certain provisions of a Management Agreement will not meet the objectives of the City and the YMCA. I am pleased to describe an alternative approach that may better meet the objectives of the City with respect to the YMCA project. The alternative approach is to make the ymca facility a project of The Economic Development Authority of the City of Elk River (the "EDA"). lfthe facility is an EDA facility as opposed to a city facility the provisions of Section 471.191 do not apply. The laws applicable to the EDA do not conflict with the City's goals with respect to the ymca facility and the EDA can lease the facility to tIle YMCA and the YMCA can pay net relltals sufficient to pay 1/3 of the annual debt service on the bonds, which is the desire of the City and the YMCA. As an EDA project, the EDA is authorized to construct the facility, issue bonds to finance the facility and lease the facility to the YMCA on terms and rental payments that the EDA deems appropriate. The issuance of General Obligation Bonds by the EDA is governed by Minnesota Statutes, Section 469.102. This statutory provision provides as follows: . The EDA may issue general obligation bonds in the principal amount authorized by two- thirds majority vote of its City's Council.