Agenda - Economic Development Authority - 11/12/2020

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4.03: Consider Lease Agreement for 6701 Highway 10 NW: Case of Connections Church (Portions of the meeting may be closed to the public) Economic Development Manager Sullivan presented the staff report. Chairperson Steffen asked if there has been any interest in the space within the past year that it has been vacant. Economic Development Manager Sullivan replied that there was interest from a thrift store, but they declined to even submit a proposal of lease. He stated that there was some lukewarm interest from a fitness use, but the building air filtration and parking would not support that use. Member Kuzma asked if parking would be an issue for the church. Economic Development Manager Sullivan replied that parking could potentially be problematic but there is no competition from adjacent uses on Sundays, so there is potential for shared parking. He stated that if parking issues arise, the City can handle that through the normal processes. He commented that the potential tenant believes this space will work and is aware of the available parking. Member Riley stated that he would like to see the space rented out but would be concerned with the perception of fairness because the previous church tenant paid a higher rate. Chairperson Steffen asked if there is a policy that states that the City cannot lease space for under market rate. Economic Development Manager Sullivan replied that there is not such a policy. He stated that the current market for office space of this type is depressed and therefore it not unreasonable to accept a lower rate. He acknowledged that this would be below market rate and the group should acknowledge that, noting that his staff report included a list of reasons this could be considered. Member Cords agreed that the concept of market rate is arbitrary, and property is only worth what someone is willing to pay. He stated that he would rather see a tenant paying something rather than continuing to look for someone that may pay slightly more. He asked how the year period of the lease aligns with the construction plans of the church. Economic Development Manager Sullivan replied that there is nothing within the lease that ties to the construction of the church. Craig Norenberg, Connections Church, stated that they should be closing on their land in October 2020 and will then begin a building campaign to raise funds for the construction of the building, which he estimated could happen in two or three years. He was uncertain the plans of the church after the year lease expires. He stated that they plan to begin construction within three to five years. Chairperson Steffen stated that it is certain that the new building will not be completed in one year. He asked if there is language included for the rate for a potential lease extension. Economic Development Authority/ October 8, 2020 Page 3 of 7