Consider Lease Terms for Dennis Sharp for Properties at 6701 and 6745 Highway 10.

The city purchased, with RALF funds, the properties at 6701 and 6745 Highway 10 in 2006. Since that date, the city has leased the cold storage portions of these properties to Dennis Sharp companies. Starting in 2008 the city required that the leases be amended to collect a base rent plus each property's pro-rata share of property taxes. Mr. Sharps current leases are through July 31, 2011.

The rents paid by Mr. Sharp the last couple of years are as such:

6701 Highway 10:
Thru July 31, 2010: $3,266/mo
Thru July 31, 2011: $2,983.50/mo

6745 Highway 10:
Thru July 31, 2010: $1,886/mo
Thru July 31, 2011: $1,820/mo

Mr. Sharp presented his rental concerns to city council at the June 14, 2011 worksession and staff was directed to negotiate with Mr. Sharp.

Staff had sent to Mr. Sharp on June 23 the following proposal:
6701 Hwy 10:  $1.86/sq ft or $2,845.80/month (Reduces lease rate from current $1.95/sq foot)
6745 Hwy 10:  $1.97/sq ft or $1,820.00/month (Holds the current lease rate constant)


Staff met with Mr. Sharp on June 28 to discuss proposal and Mr. Sharp countered with a $1.45/sq ft on each property.
Mr. Sharp's proposal would calculate as such:
6701 Hwy 10:  $2,218.50/month or $26,622 annually
6745 Hwy 10:  $1,336.42/month or $16,037 annually

The city currently pays $18,672 for property taxes and insurance alone on the 6745 Hwy 10 site, thus $1.45/sq ft would not suffice, and would lead to a deficit for the City of a minimum of $2,600 for that property.

The City Council has always had a desire to have parcels remain on the tax roll.  For 2011 payable, the city collects approximately $.358 for every tax dollar paid.  

The city's tax portion applicable to the two properties is as follows:
                                                               6701 Hwy 10 $6,090 (35.8% of $17,012)
                                                               6745 Hwy 10 $5,350 (35.8% of $14,944)

In the event that the City and Mr. Sharp are unable to agree upon a new lease rate, either party may terminate this lease by giving written notice on or before August 1, 2011.  The notice to terminate the lease by either party shall be effective July 31, 2012.  Mr. Sharp would be required to pay that current lease rate until the termination.  The current lease rate may or may not cover all expenses for 2012.

These properties were purchased with RALF funds and any rental revenue generated is used to cover costs of the property.

Based on discussion.