Agenda - Council Work Session - 04/26/2011

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CC Work Session Date: 04/26/2011 By: Aaron Backman Administrative Services Information Title: Proposed Lease Agreement for 7039 Hwy 10 by RM Golf Carts Item #: 2. 3. Background: In March the Economic Development /Marketing Manager was notified that RM Golf Carts needed a new business location to meet its needs. The business owner, Mark Kaufman, indicated that the company leases a portion of the building at 6080 Hwy 10, needs better visibility, and has outgrown its current location in Ramsey. (He also is considering locations in other communities as well). Mr. Kaufman is interested in leasing the City -owned property at 7039 Hwy 10 (also known as the former EZ Tractor site). The City's property (see attached site map) encompasses .81 acres of land on the north side of the highway. The existing 3,100 sq. ft. building has been gutted and is used by Public Works to store equipment. The owner of RM Golf Carts made a lease proposal re 7039 Hwy 10 to the Economic Development /Marketing Manager on 4/13/11. He would relocate his business to the new location as soon as possible. Mr. Kaufman would be responsible for any leasehold improvements (including constructing a 20 x 40' office area, constructing one bathroom, water and sewer service, insulation, electrical service, installing a furnace, outside lighting and signage). Mr. Kaufman would be spending $25,000 (plus significant sweat equity) to make the improvements to the City's building. The business would store 80 +/- golf carts in the fenced area outside the building. Mr. Kaufman initially proposed a three -year lease with a rent of $500 per month in the first year, $900 per month in the second year, and $1,400 per month in the third year. RM Golf Carts would be responsible for all utilities and the City would pay the real estate taxes. After further negotiations between Mr. Kaufman and the Economic Development/Marketing Manager, the proposed lease has been changed to a five -year lease with a rent of $1,050 per month in the first year, $1,250 per month, and $1,500 per month thereafter. RM Golf Carts would continue to be responsible for all utilities and the City would continue to pay the real estate taxes. Though the property is currently tax exempt, the estimated real estate taxes for pay 2011 would be $11,600. Mr. Kaufman would also like to have the first right to purchase the property if it becomes available in the future. The City acquired the property with $440,000 in RALF funds in 2006. The current assessed value for 7039 Hwy 10 is $357,800. It has been communicated to Mr. Kaufman that the property is not for sale at this time. Recommendation: City staff recommends that City Council consider approving the proposed five -year lease with RM Golf Carts, Inc. The business would like to move ahead with the new location as soon as is practicable. Funding Source: Any leasehold improvements to to 7039 Hwy 10 would be the responsibility of the tenant Council Action: The City Council can move forward with considering the proposed five -year lease at the Regular City Council meeting on 4/26/11. Attachments