Request by TK Entertainment (DBA Ramsey Raceway) to Amend Lease Agreement

Staff has received a request by TK Entertainment (dba Ramsey Raceway) to amend their lease agreement as proposed in the attached document (drafted by TK Entertainment).

The applicant has requested that the lease agreement term coincide with the interim use permit (IUP) that has been approved until May 16, 2016.  They also have requested elimination of the early termination provision that allows the City to terminate the agreement with a six-month notice without penalty.

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 Armstrong Interchange.  If it 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. 

On Highway 10 properties the City has purchased in the past, the early termination is generally one year.  Under almost any circumstance, the City would have a safe window of one year to notify the business that its lease was being terminated for the construction of the road interchange.  However, the 3+ years requested by the applicant could potentially create unwarranted liability for the City.

An early termination notice of one year would be consistent with City practice on other properties and would be acceptable to staff.  It also would allow the business a full year to make other plans if the lease was terminated.

The current lease agreement 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.

Staff recommends that the lease agreement be revised to have the term coincide with the interim use permit (IUP) with an ending 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 allow for a twelve-month notice.

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Motion to authorize the City Administrator and City Attorney 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.