Adopt Resolution #21-171 Approving Obtaining Quotes for Renovation and Lease of Old Town Hall

The purpose of this case is for council consideration of staff to obtain quotes for the renovation and enter into negotiations for the lease of Old Town Hall.  Both the contract for renovation  and the lease agreement will come back to the council for final approval.

Two items are addressed in this case:

1. Structural Renovation of Old Town Hall. 
2. Leasing of space to private business.

The City has been approached by a private business, Small Town Boutique, interested in leasing this building. In order to lease the space, several repairs to the building need to be completed. The building is listed on the National Historic Registry, so any repairs need to be consistent with this protection. The estimated cost of repairs is between $40,000 and $50,000 (planning-level estimates only, not based on actual contractor quotes). 

N/A

Renovation
The City worked with the University of Minnesota's Resilient Communities Project (RCP) to put together a:

1. Historical Report of the Old Town Hall (17A) and
2. Future Options for Old Ramsey Town Hall (17B). 

The Historical Report has been provided for reference but the focus of the discussion centers around the renovation and future use of this historical building in Report 17B.  The report evaluated the pros and cons of keeping the building at is current location or moving it to the COR. The report concluded that leaving it ats current location would allow it to remain on the National Register and not risk damaging the building by moving it.  The report than looked at what would be needed to renovate the building so it could be restored appropriately and be able to be occupied and used.  Any renovation would need to comply with the Secretary of the Interior's Standards for Rehabilitation as outlined in the RCP report

In order to maintain its place on the National Register, special care must be taken to restore the building as close to the original conditions as possible.  The report outlines the 2 major steps necessary to get to this point: 1) Climatization and 2) Pre-Occupancy Upgrade. In 2018, the cost to bring this building into operation was estimated to be $44,940. in 2019, the City re-roofed the building and repaired the eaves.  There is still some minor work to do in this area but the cost should be minimal (under $1,000).  Staff has put together a document outlining the estimated costs to renovate and lease the Old Town Hall.  Staff and the EDA are supportive of completing the full renovation of this historic building.

Future Use

The 17b RCP report discussed potential future use of the Old Town Hall.   Uses contemplated ranged from a public space, museum, school, arts, business and incubator.   Staff has received multiple requests about the availability of the building for lease for various types of businesses.  Schools and retail uses have approached the City but due to the condition and renovation needed to the building the users go elsewhere. These users are excited at the possibility of using this unique building and think its allure will benefit their businesses. The current interested party has been very patient with the City and the use of a boutique with limited hours seems like a great fit for this building.  Parking is also difficult to solve for and any agreement with a future tenant would likely need some sort of cross parking easement with the adjacent properties.
 
Staff believes there is an opportunity to preserve a historic building and to add a unique building to the lease market.  The City has been presented a fair offer to lease the Old Town Hall from the Small Town Boutique.  In order to move to the next step the City Council must consider taking the initiative to renovate Old Town Hall and to put the building back into service.  If the City Council is comfortable moving forward with the renovation, Staff would ask for authorization to obtain quotes to complete the Climatization and Pre-Occupancy Upgrade outlined in the RCP 17B report.

The Old Town Hall has an estimated 778 SF of leasable space.  It includes a bathroom, main hall and cloak room.  Staff has consulted with a local real estate agent and market rate rent for this building would be in the $12-$18 / square foot range with the tenant responsible for the utilities / snowplowing and the City responsible for the property taxes. The offer by Small Town Boutique is market rate as outlined below:

Year 1 - $10,200 (13.11 / SF)
Year 2 - $15,000 ($19.28 / SF)
Year 3 - $15,000 ($19.28 / SF)

This business has an online presence at https://stgboutique.com and moving to a brick and mortar store certainly has risk.  Staff has put together a projected lease summary (see attached) and identified the break-even point if renovation expenses are accurate. This preliminary analysis shows a breakeven point, from a new City investment perspective, of five years.  Getting quotes from contractors can confirm the renovation numbers and verify the analysis.

Next Steps

The City Council will need to review the information presented and ultimately come to a decision on how to proceed in relation to the Renovation and / or lease of the Old Town Hall.

Alternatives:

Renovation

1. Direct Staff to obtain quotes to complete the full renovation and to utilize EDA / HRA funds to complete the renovation. (EDA Recommendation)
2. Direct Staff to complete the Climatization work to preserve the Old Town Hall and improve its appearance. (Future Step after obtaining quotes)
3. Something Else

Lease

1. Direct Staff to enter into exclusive negotiations with Small Town Boutique. (EDA Recommendation)
2. Direct Staff to complete the renovation and to put on lease market after renovation is complete
3. Something else.

The EDA recommends $50,000 in funding for the renovation could be provided by the City EDA Fund Balance. Alternatively, the City could potentially explore the Anoka County Housing and Redevelopment Authority (HRA) Fund, although the City has already committed other projects to this fund. 

The EDA met on June 10 to discuss this request and unanimously approved the following recommendation.

EDA recommendation to the City Council to obtain quotes to complete the full renovation and to utilize EDA / HRA funds to complete the renovation and to enter into exclusive lease negotiations with Small Town Girl Boutique.

It is recommended that the Council adopt the attached Resolution #21-171 directing Staff to obtain quotes for the renovation and enter into negotiations for the lease of Old Town Hall.  Both the contract for renovation  and the lease agreement will come back to the council for final approval.

Motion to adopt Resolution #21-171 directing Staff to obtain quotes for the renovation and enter into negotiations for the lease of Old Town Hall.