Agenda - Council Work Session - 12/12/2017

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agreement. Independent Auto's current rent rate is below market. If this lease is renewed per the original lease agreement language, it would stay below market rates. If the City moved forward with a lease renewal, staff would strongly recommend all property maintenance be the responsibility of the tenant (including structural). In other words, the tenant is taking the property as -is. Staff would support working with Independent Auto before this lease renewal, to see what items need to be fixed. The City may be able to participate in a one time upfront limited property maintenance investment (for example, not -to -exceed $10,000). We do have some limited surplus RALF funds available from this lease agreement. However, staff would not support ongoing/ open-ended property maintenance responsibility based on this lease rate. (2) Zoning code and building code compliance. Code compliance has been a problem with 6745 (storage of inoperable vehicles, amount of stored vehicles, storage of tires, exposed electrical wires, oil -water separates, building safety items, etc.). More specifically, who's responsible for addressing what code compliance issues, and when (tenant or landlord)? Staff would like to clarify/ re -write language pertaining to this item in the new lease agreement. This would specifically include a default process/ penalties/ inspections. The City will require the tenant to keep the property/ building up to code, at their cost, moving forward. (3) Late rent payments. Late rent payments have been an ongoing item with this lease agreement. The existing lease language doesn't have a late fee, for late rent payments. This item will be addressed within the new lease agreement. If violations exist, the City will have enforcement/ default provisions within the lease. Staff would note: Independent Auto is a valued Ramsey business. They began their operations from a "home -based -business" in the 2000's. Their rent helps pay property taxes, they have created jobs, and they provide a good business service to our community. Staff has received positive feedback from the community RE Independent Auto's service/ price/ quality. Additionally, Independent Auto has volunteered at several city -sponsored events (police reserves). ALTERNATIVES (A) Do not renew the lease. Allow the current lease term to expire. In this scenario, due to the status of the building, staff would recommend consideration of demolishing and cleaning up the site. Independent Auto is opposed to this option. (B) Renew the lease, at the rent rate outlined in the original agreement. Tenant is in favor of this option, and feels this is what was agreed to by the City. The original lease agreement shows a provision allowing for a 3-year extension, at the existing lease rate. As mentioned, the lease agreement also includes provisions that allow the City to not renew the lease agreement. If this alterative is selected, staff would strongly recommend a complete rewrite of the lease agreement, to address the items outlined in the observations section of this case; and to come into compliance with the City's template lease agreement. (C) Renew the lease, and adjust the rent rate up to market. Staff anticipates the tenant would be opposed to this option, that it would be a hardship for the tenant's operations, that the tenant would feel this alternative is unfair treatment, and would be a deviation from the original agreement. It's staffs assumption, if the tenant were to be accepting of this option, they would likely want the City to be responsible for all/most property maintenance. Due to the poor shape of the building, and the status of the relationship with the tenant/ history, staff does not recommend this alterative. This alternative would expose the City to a significant liability, which is known to be well over $100,000. And, it would expose staff to a large workload (i.e. trouble shooting maintenance requests and managing maintenance projects requests on a regular basis). Timeframe: