Staff recommends that City Council approve the agreement with Knife River.

The City and Knife River entered into a 2019 Purchase Agreement for property near Hesper and Shiloh Roads for future water infrastructure. Following disputes over the agreement and a subsequent 2025 Settlement Agreement, the parties have negotiated a final Addendum to fully resolve all remaining and future claims related to fill material obligations. The Addendum allows Knife River to excavate limited fill material from City property at its own expense, subject to specified conditions, permits nonexclusive use of any resulting stormwater pond for future development, requires Knife River to indemnify the City for excavation-related claims, and confirms the City will place Knife River’s annexation request on the June 22, 2026, City Council agenda without guaranteeing any outcome.
 

The City entered into a Purchase Agreement with Knife River (KR) on October 15, 2019, to purchase land near Hesper Road and Shiloh Road to construct a water treatment plant and storage reservoirs.  There were many conditions included in the Purchase Agreement. As a result of a dispute over the terms, the City and KR entered into a new agreement on May 27, 2025, to update the conditions that have been met and refine timeframes and terms for the conditions.  This agreement is the attached Mutual Release and Settlement Agreement (Settlement).

Another dispute has arisen over the terms of the Settlement and the parties have negotiated a final agreement to resolve any and all claims Knife River may have against the City now and in the future. This is entitled Addendum to Mutual Release and Settlement Agreement ("Addendum"). The primary terms of the Addendum are as follows:

• The City agrees to allow Knife River to access a portion of the City’s property to excavate and transport additional (but limited) fill material at Knife River’s sole cost and expense.
• Knife River agrees to follow and comply with the necessary setback requirements as provided for in the Addendum. Knife River also agrees to maintain side slopes on the City’s property as described therein.
• The City agrees that a stormwater pond that may be created on the City’s property as a result of Knife River’s excavation and removal of fill material may be utilized by Knife River as a stormwater facility for future development on Knife River’s adjoining property. Knife River’s utilization of any such stormwater pond is nonexclusive.
• The City will place the Knife River property annexation vote on the upcoming June 22, 2026, City Council agenda but does not guarantee or promise any particular outcome of an annexation vote by the City Council. 
• Knife River agrees to protect, defend, indemnify, save, and hold harmless the City and its officials and employees from any and all claims, causes of action, complaints, or damages which arise from or are related to Knife River’s excavation and transport of fill material.
• Knife River fully releases and discharges the City from any past, future, further, or additional duty to deliver or provide fill material apart from, or different to, the terms of this Addendum.

The intent of this Addendum is to completely, and forever, resolve any obligation of the City to provide fill material to Knife River pursuant to the original Property Purchase Agreement and the Settlement Agreement. 

There is no cost to the City for this agreement.  Furthermore, the City anticipates this agreement will save a minimum of $65,000 in stormwater storage improvements required for the parking lot along the northeast corner of the north reservoir.  There may be additional savings to the City to use the stormwater storage for the extensions of the future 44th Street West, but those savings are unknown at this time.
 

City Council may:

• Approve the Addendum; or
• Not Approve the Addendum. If the Addendum is not approved, the dispute may result in unnecessary litigation resulting in additional expenditure of taxpayer funds.