Agenda - Council Work Session - 02/05/2013

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Loss of TOTAL tax revenue if Lease terminated 18 months early per B &C request NOTE: The City's direct loss under this scenario is $9459. (13.5% * $70,067) + fiscal disparities ($70,067.00) Loss of TOTAL tax revenue if B &C's request is denied, but City agrees it wants to exercise its right to terminate early as to the south half of the Site NOTE: The City's direct loss under this scenario is $4725. (13.5% * $35,000) + fiscal disparities ($35,000.00) Tax revenue maintained if no B &C early 18 month Lease termination and no City early termination as to south half of Site NOTE: The City's tax revenue maintained under this scenario is $9459 + fiscal disparities $70,067.00 As an alternative, the Public Works Department would like at this time to request Council approval to terminate part of the Lease as to the southerly 10.37 acre part of the Site shown on the attached graphic. The public works department has need for this portion of the site now in order to move excess soil piles off the current Public Works ( "PW ") site. Presently we store our street sweepings, seal coat rock, black dirt and recycled asphalt piles on the current PW site. These materials are essential to our operation, but are becoming cumbersome on our current 9 acre site. With the addition of the south half of the B &C property, PW would be able to move these materials to a more appropriate location and out of public view. The B &C property is ideally located and sized for our future PW operations. As the City grows, larger tracts of land will become scarce, especially in an industrial area, that is needed to support an operation such as the PW's. The original intent of the purchase of the B &C property was to provide for the future expansion of the PW's department and staff recommends we continue with that vision. The Lease does provide for such early termination by the City, requiring of course a proration of the "rent ". See the attached page 3 of the Lease which specifies the rent for the entire Site. Early termination of the Lease by the City as to the south 10 acres will reduce the rent /tax amount by 50 %. The City Council in the last two years has rejected PW's request for early termination, citing the need for the rent /tax revenue. Recommendation: Staff recommends that the Council deny B &C's early lease termination request and approve an early termination of the Lease by the City for the south 10 acres, thereby reducing the rent/tax amount by 50 %. Funding Source: The maximum potential loss for the entire site if B &C's early termination is granted is $70,067.00 in lost tax revenue, which is the loss of all the rental amount due March 31, 2014 and half the amount due March 31, 2015. In the event the City Council agrees with the PW department and elects to terminate the Lease as to the south half of the Site then B &C's early termination will cost the taxing authorities $35,000.00 as B &C's rent obligation is for only one -half of the Site. Summary: Any loss in tax base /revenue will need to be absorbed by the City's General Fund. Council Action: Deny B &C's early lease termination request and approve an early termination of the Lease by the City for the south 10 acres, thereby reducing the rent/tax amount by 50 %. Letter, Graphic, Case & pg 3 of Lease Attachments Form Review Inbox Reviewed By Date Kurt Ulrich Kurt Ulrich 01/31/2013 01:27 PM Bill Goodrich (Originator) Bill Goodrich 01/31/2013 03:55 PM