Provide Staff Direction Related to Northern Starz Children’s Theatre Lease

PURPOSE
Provide Council with an update to an urgent situation.  Identify a solution moving forward.


UPDATE
The geothermal heating and air conditioning system, which provides service to the City’s former Police Department building, was accidently destroyed on August 20 by GS Land.  It was destroyed during construction of public improvements on the property recently sold by the City to GS Land.  Northern Starz Children’s Theatre currently leases the City’s former Police Department building.

Why is GS Land not responsible for this situation?
Although GS Land did not intentionally damage the geothermal system, it is partially physically located on their property.  Therefore, claiming this issue is solely their financial responsibility would be challenging; as they may potentially have an ownership claim.

Why was this not covered by staff as part of construction planning?
The City has no record (map) of the geothermal system. This is the only City building that utilizes geothermal.  As a result, Staff is not experienced with geothermal systems; and did not anticipate this potential issue.  Due to the expected demolition of municipal center campus this spring, extensive investigation of the geothermal system was never conducted.  Additionally, when the City originally negotiated a purchase agreement with GS Land, final clarity in several overlapping timelines related to the larger redevelopment project did not exist.


NORTHERN STARZ LEASE AGREEMENT
The City of Ramsey entered into a lease agreement with Northern Starz Children’s Theatre in July of 2014.  Northern Starz Children’s Theatre uses said space as a practice facility.  The current lease agreement includes a rate that is well below market.  The intention of this lease agreement was to help Northern Starz “get on their feet” and become established in the Ramsey community.  To date, Northern Starz has seen significant growth and support for their organization; and they hope to see that trend to continue moving forward!

With the anticipated demolition and cleanup of the former municipal center campus expected to take place in April of 2016, Staff notified Northern Starz the original lease agreement was to terminate in mid-March, 2016.  Northern Starz has since made arrangements for a new home.  They have secured a lease to utilize the former Allina building; officially beginning on February 1, 2016. 


ISSUE
Due to the significant cost to fix the damaged geothermal system, and the City’s plan to demolish/ clean up the former municipal center site next spring, replacing/ fixing the existing geothermal system is not recommended.  As a result, heating and air conditioning will not be available in the former Police Department building.

What does is cost to fix the geothermal system?
Unofficially, Staff has received preliminary estimations of $10,000-$20,000.

Because Northern Starz Children’s Theatre Leases this space, a conflict exists.  The City made notification to vacate this space by March 2016.  Do to the damaged geothermal system, Staff would now recommend Northern Starz vacate the building by October 1, 2015.

Northern Starz has agreed to vacate the space early.  This unexpected situation will result in the need for Northern Starz to pay a higher rent payment from October to February 2016 (four months).  Northern Starz is a start-up non-profit organization and has very limited funding.  Without some sort of assistance, the organization may not be able to make ends meet as a result of this unanticipated situation.

Northern Starz has indicated finding a resolution to this situation soon is very important to their continued success; as they have several schedules (kids, volunteers, etc.)/ performances/ events/ funding items/ tenant improvements to their new space they need to resolve.  Although this situation is unfortunate, Northern Starz did express their deep appreciate for City support to-date; and sincerely appreciates their consideration to find a resolution for the current issue.

PROPOSED RESOLUTION
Staff is proposing for the City to cover the “net difference” in costs between what Northern Starz would have paid the City for their existing lease from October 2015 to February 2016 and what they will need to pay now—as a result of this unexpected situation.  The current rent rate with the City $510.  The new rent rate at the former Allina building is $1,500.  The total “net difference” is $3,990 over four months. 
 
Additionally, staff is proposing to charge no rent to Northern Starz, at their existing location, for September only.  This is a $510 value.


What is the proposed funding source?
Staff proposes to utilize the City’s Facilities Fund.  This account has been utilized to-date, for all revenues and expenses related to the redevelopment of the City’s former municipal center campus; and staff anticipates using it moving forward.  Sufficient funding exists in this account to cover the proposed resolution ($3,990).
 

 

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Council motion to authorize the early termination of the lease of the municipal building by Northern Starz Children’s Theatre and authorize  a payment of $3,990 to Northern Starz Children’s Theatre as settlement in order for them to make the early transition to a new facility.