7.2.
CC Regular Session
- Meeting Date:
- 02/26/2013
- Submitted For:
- Patrick Brama
- By:
- Jo Thieling, Administrative Services
Information
Title:
Request by TK Entertainment (DBA Ramsey Raceway) to Amend Lease Agreement
Background:
Staff has received a request by TK Entertainment (dba Ramsey Raceway) to amend their Lease with the City as proposed in the attached document (drafted by TK Entertainment). The Leased premises in the proposed amendment is 14550 Armstrong Boulevard ( the "Subject Property").
TK Entertainment has requested the Lease term coincide with the approved interim use permit (IUP) term which is set to expire May 16, 2016. TK has also requested elimination of the early termination provision that allows the City to terminate the agreement with a six-month notice without penalty.
TK Entertainment has requested the Lease term coincide with the approved interim use permit (IUP) term which is set to expire May 16, 2016. TK has also requested elimination of the early termination provision that allows the City to terminate the agreement with a six-month notice without penalty.
Case History
This case was originally brought forward to the Council on December 11, 2012 at which time this item was tabled. Over the past two months Staff has been working with Anoka County to confirm the tax exemption status of the Subject Property. The City received correspondence from the County on February 7, 2013; which prompted this case to be brought back to the Council.
This case was originally brought forward to the Council on December 11, 2012 at which time this item was tabled. Over the past two months Staff has been working with Anoka County to confirm the tax exemption status of the Subject Property. The City received correspondence from the County on February 7, 2013; which prompted this case to be brought back to the Council.
Observations/Alternatives:
The City Attorney has reviewed the amendment for any potential issues and/or liabilities for the City. The primary issue for the City is preserving the right for early termination. The City acquired the property for right-of-way for the Hwy 10/Armstrong Interchange. If the City had to terminate a long-term lease (without an early termination clause) the City would potentially be liable for significant lease buy-out and business relocation expenses.
Compared to other City owned properties leased by the City on Highway 10, the early termination provision is generally one year. Under almost any circumstance, the City would have a safe window of one year to notify a Lessee that its lease was being terminated for the construction of a road/interchange. However, the 3+ years requested by TK could potentially create unwarranted liability for the City.
An early Lease termination notice of one year would be consistent with City practice on other properties. It also would allow the Lessee a full year to make other plans in light of the Lease termination.
The current Lease is also attached to this case for reference.
To date, the city has collected $8,110 from the track which has been applied to Happy Days. The City is allowed to collect $19,150 for Happy Days before Tax Increment District 4 will need to be reimbursed. Tax Increment was used by the City to purchase the property.
As mentioned, Staff believes the request to extend the term of the existing lease with TK Entertainment to coincide with the existing IUP on the Subject Property is reasonable. Considering the City will still retain a twelve (12) month termination clause, risk and liability regarding the proposed amendment is minimized.
Looking back at leases the City has executed for properties along Highway 10, the early termination clause is generally one year. Under almost any circumstance, the City would have a safe window of one year to notify a business that its lease was being terminated for the construction of a road/interchange.
Staff does not foresee any benefit to the City by denying the proposed amendment to the lease with TK Entertainment. NOTE: the termination clause in the lease would change from six (6) to twelve (12) months if approved.
Compared to other City owned properties leased by the City on Highway 10, the early termination provision is generally one year. Under almost any circumstance, the City would have a safe window of one year to notify a Lessee that its lease was being terminated for the construction of a road/interchange. However, the 3+ years requested by TK could potentially create unwarranted liability for the City.
An early Lease termination notice of one year would be consistent with City practice on other properties. It also would allow the Lessee a full year to make other plans in light of the Lease termination.
The current Lease is also attached to this case for reference.
To date, the city has collected $8,110 from the track which has been applied to Happy Days. The City is allowed to collect $19,150 for Happy Days before Tax Increment District 4 will need to be reimbursed. Tax Increment was used by the City to purchase the property.
Property Tax Discussion
The City has been working with Anoka County over the past two months to confirm the tax exemption status of the Subject Property. Previously, the Subject Property was 100% property tax exempt.
The City received correspondence from Anoka County on February 7, 2013 indicating the Subject Property is neither tax exempt nor 100% taxable. A $40,000 valuation was assigned to the Subject Property; which results in an estimated $1,232 annual property tax due. The County did not indicate a need to pay back taxes (2011-2012); and referred to 2013 as the first year property taxes will be due.
Moving forward it will be the responsibility of the lessee to pay for property taxes due on the Subject Property, not the City.
AlternativesThe City has been working with Anoka County over the past two months to confirm the tax exemption status of the Subject Property. Previously, the Subject Property was 100% property tax exempt.
The City received correspondence from Anoka County on February 7, 2013 indicating the Subject Property is neither tax exempt nor 100% taxable. A $40,000 valuation was assigned to the Subject Property; which results in an estimated $1,232 annual property tax due. The County did not indicate a need to pay back taxes (2011-2012); and referred to 2013 as the first year property taxes will be due.
Moving forward it will be the responsibility of the lessee to pay for property taxes due on the Subject Property, not the City.
1. Authorize Staff to draft and execute lease agreement revisions with TK Entertainment to have a lease term ending date of May 16, 2016, and a twelve-month notice for early termination.
As mentioned, Staff believes the request to extend the term of the existing lease with TK Entertainment to coincide with the existing IUP on the Subject Property is reasonable. Considering the City will still retain a twelve (12) month termination clause, risk and liability regarding the proposed amendment is minimized.
Looking back at leases the City has executed for properties along Highway 10, the early termination clause is generally one year. Under almost any circumstance, the City would have a safe window of one year to notify a business that its lease was being terminated for the construction of a road/interchange.
2. Deny TK Entertainment's request to amend their existing lease.
Staff does not foresee any benefit to the City by denying the proposed amendment to the lease with TK Entertainment. NOTE: the termination clause in the lease would change from six (6) to twelve (12) months if approved.
3. Direct Staff to move in a different direction.
Recommendation:
1. Staff recommends that the Lease be amended to have the term coincide with the interim use permit (IUP) with an expiration date of May 16, 2016. In addition, staff recommends that the early termination provision be retained, but that the six-month notice required by the City be extended to a twelve-month notice.
Funding Source:
N/A
Council Action:
Motion to authorize Staff to draft and execute Lease revisions with TK Entertainment to have the Lease term expiration date be May 16, 2016, and a twelve-month Lessor notice for early termination.
Attachments
- Anoka County Correspondence
- Ramsey Raceway Lease Agreement
- Ramsey Raceway Proposed Amended Lease Agreement
- Res #11-05-102
Form Review
| Inbox | Reviewed By | Date |
|---|---|---|
| Kurt Ulrich | Kurt Ulrich | 02/21/2013 08:27 AM |
- Form Started By:
- Jo Thieling
- Started On:
- 02/20/2013
- Final Approval Date:
- 02/21/2013