Agenda - Economic Development Authority - 12/19/2013

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Economic Development Authority (EDA) Meeting Date: 12/19/2013 By: Ted LaFrance, Administrative Services 4. 1. Title: Sophia -Ramsey Business Subsidy Agreement; Early Termination and Payout Request Purpose/Background: On December 2nd, Sophia -Ramsey requested an early termination to their Business Subsidy Agreement (Here -in "Agreement"); dated January 15, 2010 between the City of Ramsey and Sophia -Ramsey LLC. But for this subsidy, the project and lease agreement to develop the restaurant (Acapulco) would have been unfeasible. The termination was requested to close out the LLC sooner, as the property has been sold to Phillips Edison. Sophia -Ramsey LLC has requested a discounted payout of $8000 instead of the $11,760 (two installments of $5,880 to close out the Agreement), that is due to them per the Agreement, to satisfy both parties. Sophia -Ramsey has met and exceeded its requirements per the Agreement except the term of length (5 years ending October 2014). The Agreement outlines two subsidies provided to Sophia -Ramsey. Note One provides a subsidy for our contribution to Met Council's SAC and City of Ramsey's WAC; in the amount of $74,956. Note One's payments to be made by Sophia -Ramsey LLC annually are credited by The City of Ramsey, equating to forgiveness if the business is in operation more than 7 months of the year. Note Two provides a subsidy for Sophia-Ramsey's contribution to Met Council's SAC; in the amount of $29,400. Note Two's payments to be made by The City of Ramsey annually are distributed in the amount of $5,880 per year to Sophia -Ramsey. The total value of the subsidy is $104,356. Notification: Observations/Alternatives: 1. Transfer the Agreement to the new owners, Phillips Edison, per Section 11 of the Agreement. No funds would need to be paid to Phillips Edison as the notes are set between the City of Ramsey and Sophia -Ramsey, unless Sophia -Ramsey wishes to provide that gain to the new owners as a Successor. 2. Provide Sophia -Ramsey with payment for 2013 (in the amount of $5,880) and close the agreement without offering a partial payout for 2014 as requested ($8,000 for '13 and '14), as the Agreement would be terminated prior to the originally agreed upon date to carry restaurant operations through. A savings of $5,880 would be realized. A drawback is that the business has met and exceeded all of its obligations. In talking with the restaurant we are comfortable with its continued success and have been informed of no negative projections. The restaurant will continue to operate through the h year of the Agreement under Phillips Edison ownership. 3. Accept request of Sophia -Ramsey realizing a savings to the City in the amount of $3,524.80 per the attached analysis. Please note realization of a built out development and gain to the community and expectation the restaurant will remain active beyond 2014. A potential drawback to this action is if Acapulco fails before October 2014, when the original agreement reaches termination —creating negative press. Staff has conversed with Acapulco restaurant and has been informed business is consistent and going well with no negative forecasting in the foreseeable future. Funding Source: Recommendation: Pending feedback from the EDA, Staff is recommending action #3 to Council, acceptance of Sophia-Ramsey's request to close out the agreement early. Staff is recommending the EDA recommend action #3 to Council.