Agenda - Council Work Session - 06/02/2009

Home

~y CITY COUNCIL WORK SESSION Topic Report: By: Bury & Carlson, Inc. Lease William K. Goodrich, City Attorney Brian Olson, Public Works Director Background: As a part of the City's purchase of Lot 1, Block 1, Bury & Carlson Addition for a future public works campus in March of 2008, the City entered into a lease back ("Lease") agreement with Bury & Carlson. The Lease has a potential term of 10 years with options for the City to terminate early as to half the subject property at no cost and an option to terminate the entire Lease with a buyout. The only rent requirement of the tenant ("Bury & Carlson") is to pay a specified amount of property taxes for each year of the Lease. In addition, the tenant is obligated to pay utilities for gas, electricity, water and sanitary sewer service. The subject property is also subject to the City's storm drainage utility. The subject property incurs a quarterly storm drainage utility fee of$2,500/quarter. Up until the second quarter of 2008, the storm drainage utility fee was billed by Connexusand collected by Connexus with the electric utility bill. When the City changed utility billing services in 2008 Bury & Carlson, as with other City utility customers, began receiving a separate bill from Connexus for electricity and a separate storm water utility bill. Subsequently Bury & Carlson determined.that it, as Lessee, is not responsible for the storm water utility and that said utility is the Landlord's ("City's") responsibility. This then is the issue and it relates specifically to landlord/tenant law and the lease interpretation. In addition, Bury & Carlson is claiming that even when it owned the subject property it should not have. been required to pay the storm water utility bill and may bring suit. to collect the amounts it has previously paid. Attachments: Attached for your review are Bury and Carlson's attorney's letters dated April 30, 2009 and May 14, 2009, and the City Attorney's May 8, 2009 letter. Observation: This matter has the potential for litigation and therefore it may be beneficial to discuss more detail in a closed attorney/client meeting with the City Attorney.