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HomeMy WebLinkAboutResolution No. 2018-47theeityef KENAI, ALASKA 'V Sponsored by: Administration CITY OF KENAI RESOLUTION NO. 2018-47 A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, APPROVING A TWENTY-YEAR EXTENSION AND AMENDMENT TO THE ANNUAL RENT AND LEASE OPTION TERMS FOR THE LEASE AND CONCESSION AGREEMENTS FOR THE KENAI MUNICIPAL GOLF COURSE AND RECREATION AREA BETWEEN THE CITY OF KENAI AND GRIFFIN GOLF ENTERPRISES. WHEREAS, the Kenai Municipal Golf Course is an important asset to the City of Kenai providing recreational opportunities for residents and visitors ; and, WHEREAS, the Kenai Municipal Golf Course was constructed on City-owned lands partially restricted by Section 6(f)(3) of the Land & Water Conservation Fund (LWCF), which requires the property to be maintained in perpetuity for public outdoor recreation; and , WHEREAS , on June 7 , 1985 the City entered into a 20-year Lease and Concession Agreement with Richard Morgan for the construction and operation of a public golf facility with a 10-year option to extend; and, WHEREAS, on May 28, 1987, the City entered into a second Lease and Concession Agreement for an expansion of the Golf Course with Richard Morgan with similar terms to the first Lease and Concession Agreement; and WHEREAS, since the initiation of the Lease and Concession Agreements there have been various amendments and assignments, and the Lease and Concession Agreements are currently held by Griffin Golf Enterprises, LLC., and are set to expire on January 1, 2026 with an additional option to renew for an additional term of ten years; and, WHEREAS, Griffin Golf Enterprises has successfully managed and improved the golf course for the City of Kenai maintaining an 18-hole course with reasonable green fees; and , WHEREAS, the Leases provide for areas not being utilized for golf to be available to the public without charge for jogging and other uses not inconsistent with the primary use as a golf course; and, WHEREAS , Griffin Golf Enterprises identified needed improvements and upgrades required at the Kenai Municipal Golf Course over the next 20 years in excess of ordinary business income and requested an extension to the lease term and a reduction in the annual lease amount in order to complete required improvements in an economically reasonable manner; and , WHEREAS , Griffin Golf Enterprises has agreed that if an extension and reduction in the annual lease rate is approved, an investment of $120,000 in permanent land and building improvements on the premises will be completed within five (5) years from July 1, 2018 and payments to the City will decrease from approximately $8,000 per year for each Lease and Concession Agreement to $1 .00 per year for each lease effective July 1, 2018; and , WHEREAS , it is in the best interest of the City of Kenai to authorize the City Manager to enter into such an amendment with Griffin Golf Enterprises , LLC , on behalf of the City. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA: Section 1. That the Kenai City Council approves the Thirteenth Amendment to the Lease and Concession Agreement for the Kenai Municipal Golf Course and Recreation Area and the Twelfth Amendment to the Lease and Concession Agreement for the Kenai Municipal Golf Course and Recreation Area No. II as shown in Exhibit A with a retroactive effective date of July 1, 2018; and , Section 2. That the Kenai City Manager is authorized to enter into such Amendments with Griffin Golf Enterprises , LLC; and , Section 3 . That this resolution takes effect immed iately upon adoption . ADOPTED BY THE COUNCIL OF THE CITY OF KENAI , ALASKA, this 15th day of August, 2018. ~RIAN GABRIEL SR., MAYOR TWELFTH AMENDMENT TO LEASE AND CONCESSION AGREEMENT KENAI MUNICIPAL GOLF COURSE AND RECREATION AREA NO. II THIS Amendment to Lease and Concession Agreement is made as of the __ day of , 2018, by and between the CITY OF KENAI (City), a municipal corporation whose address is 210 Fidalgo Avenue, Kenai, Alaska 99611 , and GRIFFIN GOLF ENTERPRISES , LLC (Lessee), whose address is PO Box 289 , Kenai , Alaska 99611. WITNESS ETH WHEREAS, on May 28 , 1987, the City entered into a lease with Richard I. Morgan, for City-owned lands identified as Exhibit "A", a Preliminary Drawing for Field Survey to be replaced at a later date by a Field Survey, which lease was recorded at Book 311 Pages 134 -143 , on May 28, 1987 , in the Kenai Recording District, Third Judicial District, State of Alaska (the Lease); and , WHEREAS , since May 28 , 1987, the rights under the Lease have been as s igned or transferred to various Lessees and the current Lessee is Griffin Golf Enterprises, LLC ; and , WHEREAS , the Lease has been amended over the years , which amendments are recorded in the Kenai Recording District and are summarized as follows: Amendment to Lease, recorded at Book 362 Pages 002-003 , on March 16 , 1990 , redetermining the green fees; Amendment to Lease , recorded at Book 395 Pages 754 -756, on February 21 , 1992 , incorporated Exhibit "A" to supersede the Exhibit recorded with the original lease on May 28 , 1987; Amendment to Lease, recorded at Book 411Pages639-641 , on January 19 , 1993 , redetermining the green fees ; Amendment to Lease, recorded at Book 515 Pages 816-820 , on October 7 , 1997, amending th e lease rate; Twelfth Amendment to Lease and Concession Agreement Kenai Municipal Golf Course and Recreation Area No . II Page 1 of 5 and , Amendment to Lease, recorded at Book 522 Pages 726 -729 , on February 10, 1998, revising the legal description as follows: Parcel B The unsubdivided remainder of Government Lots 3 and 4, located within the Nl/2 Nl/2 Section 3, T5N, RI lW, S,M, City of Kenai , Kenai Recording District, Kenai Peninsula Borough, Alaska containing 71.919 acres, according to Plat No . 97-105; Amendment of Golf Course Fees redetermining the green fees dated February 18, 2000 (Lessee and Lessor signed the Amendment; however it is not recorded in the Kenai Recording District); Amendment to Lease, recorded at 2005-003854-0, on May 11, 2005, redetermining the green fees; incorporating language that is required by the State Division of Parks and Outdoor Recreation and the National Parks Service; granting the City the right to enter and occupy the premises for a ski trail or trails; and , extending the expiration dates for additional ten-year terms to December 31 , 2015; Amendment to Lease, recorded at 2007 -004091 -0, on April 20 , 2007, redetermining the green fees; Amendment to Lease, recorded at 2010-003222-0, on April 23, 2010, redetermining the green fees; Amendment to Lease, recorded at 2013-004082 -0, on April 29, 2013 redetermining the green fees; Amendment to Lease, recorded at 2015-010220-0, on November 10, 2015 redetermining the green fees; WHEREAS , the Lessee has requested the City amend certain terms of the lease in order to incentivize improvements and additional investment in the golf course and the City recognizes the benefit to the community of having a successful golf course providing recreational opportunity for it residents and visitors. NOW THEREFORE, the parties agree as follows: 1. The Lessee has the right to a twenty (20)-year lease extension beginning July 1, 2036 based on an investment of $120 ,000 in permanent land and building improvements on the premises to be completed within five (5) years from July 1, 2018. Within thirty (30) days after completion of the permanent improvements, the lessee shall submit written Twelfth Amendment to Lease and Concession Agreement Kenai Municipal Golf Course and Recreation Area No. II Page 2 of 5 documentation acceptable to the City that the improvements have been completed as required. The City Manager shall make a report to the City Council of completion as soon as reasonably practical. If the entire investment of $120,000 is not fully completed by July I , 2023, the terms and conditions of the lease will revert to the existing terms and conditions (including Iese rate) as Amended by the Eleventh Lease Amendment and terminate on January 1, 2026 unless the Lessee opts to renew under the Eleventh Lease Amendment for an additional 10 years until 2036. 2 . During the first five years of the lease , beginning July 1, 2018, the effective date of this Amendment, the Lessee shall either invest a minimum of $16,000 into permanent land and building improvements on the premises before July 1 of the following year or deposit $16,000 into a non interest bearing account. The account must be set up to allow withdrawals only by the Lessee with concurrence from the City for permanent land and building improvements on the premises. If any funds remain in the account, on July 1, 2023 , the funds shall go to the City for payments in lieu of rent. Any investments of funds into permanent land and building improvements on the premises in excess of $16,000 in a year may be credited towards any future year's minimum investment or deposit amount. For example, if no improvements are made in year one, and $16,000 is deposited by Lessee into the account, and in year 2, $56,000 worth of permanent land and building improvements are made on the premises, the initial $16,000 deposited could be withdrawn for use towards the improvements, and no additional improvements or deposit would be required until year 4, when either an additional $8,000 worth of improvements would need to be made or an equal; amount deposited in the account. This Section (Section 2) in no way effects the requirement in Section 1 above that a total of $120 ,000 of improvements into permanent land and building improvements on the premises must be made within five years of July 1, 2018. 3. The Lessee shall pay annual rent of $1.00 per year for the first five (5) years, of the lease extension provided by this Twelfth Lease Amendment beginning July 1, 2018 and expiring June 20, 2023. Beginning July 1, 2023 , the Lessee shall pay annual rent equal to 10% of the amount of Ordinary Business Income plus any compensation paid to officers, partners or immediate family members exceeding $50,000 and not to exceed 8% of the true market assessed value of the raw land as determined by the Kenai Peninsula Borough Assessment. The Lessee agrees to submit annually a copy of its previous year's Federal Tax Return or a request for an extension no later than May 31 for the City's review and determination of payment due to the City. If the Ordinary Business Income exceeds $50,000, the City shall provide an invoice thirty (30) calendar days after receiving the Federal Tax Return from the Lessee. 4. The Lessee agrees to provide an Annual Operations Plan to the City Manager which includes a summary of business activity, report of number and type of green fees sold , competitive analysis of fees compared to other courses on the Kenai Peninsula Borough, schedule of events and programs (including youth programs), organizational structure and staffing, description of services, equipment and maintenance plan, goals and strategies for increased membership and revenue. The Annual Operations Plan Twelfth Amendment to Lease and Concession Agreement Kenai Municipal Golf Course and Recreation Area No. II Page 3 of 5 must be submitted annually no later than November 31 st for the City 's review. If the Annual Operations Plan shows three consecutive years of 10% or greater reduction in the number of green fees sold, the City Counc il shall have the option to terminate the Lease and Concession Agreement at its sole discretion. Should the City consider terminating the lease, it may consider whether factors beyond the Lessee's control are responsible for the reduction in public usage, such as atypical weather or economic recessions. 5. Article XVII, titled "Lease Option'', of the Original Lease dated June 7, 1985 , is deleted in its entirety. The Lessee shall not have a guaranteed right of first refusal to lease. 6. Except as expressly modified or stated herein, all other terms and conditions of the Lease (as amended) remain in full force and effect. Approved as to form: Scott Bloom City Attorney CITY OF KENAI By:~~~~~~~~~~~ Paul Ostrander Its : City Manager GRIFFIN GOLF ENTERPRISES, LLC By:~~~~~~~~~~~­ Name: ~~~~~~~~~~~ Its: ~~~~~~~~~~~~- Twelfth Amendment to Lease and Concession Agreement Kenai Municipal Golf Course and Recreation Area No. II Page 4of5 State of Alaska ) ) SS Third Judicial District ) The foregoing instrument was acknowledged before me this __ day of ____ , 2018 , by Paul Ostrander, City Manager for the City of Kenai. State of Alaska ) ) SS Third Judicial District ) Notary Public of Alaska My Commission Expires: --- The foregoing instrument was acknowledged before me this __ day of ___ , 2018, by (Name), (Title) for GRIFFIN GOLF ENTERPRISES, LLC RETURN TO: CITY OF KENAI 210 Fidalgo A venue Kenai, AK 99611 -7794 Notary Public of Alaska My Commission Expires: __ _ Twelfth Amendment to Lease and Concession Agreement Kenai Municipal Golf Course and Recreation Area No. II Page 5of5 Twelfth Amendment to Lease and Concession Agreement Kenai Municipal Golf Course and Recreation Area No. II Page 6of5 THIRTEENTH AMENDMENT TO LEASE AND CONCESSION AGREEMENT KENAI MUNICIPAL GOLF COURSE AND RECREATION AREA THIS Amendment to Lease and Concession Agreement is made as of the __ day of , 2018 , by and between the CITY OF KENAI (City), a municipal corporation whose address is 210 Fidalgo A venue, Kenai, Alaska 99611, and GRIFFIN GOLF ENTERPRISES , LLC (Lessee), whose address is PO Box 289 , Kenai , Alaska 99611. WITNESS ETH WHEREAS, on June 7, 1985, the City entered into a lease with Richard I. Morgan, for City-owned lands identified as Exhibit "A", a Preliminary Drawing for Field Survey to be replaced at a later date by a Field Survey, which lease was recorded at Book 265 Pages 720 -731, on July 8, 1985, in the Kenai Recording District, Third Judicial District, State of Alaska (the Lease); and , WHEREAS, since June 7, 1985, the rights under the Lease have been assigned or transferred to various Lessees and the current Lessee is Griffin Golf Enterprises, LLC; and, WHEREAS , the Lease has been amended over the years , which amendments are recorded in the Kenai Recording District and are summarized as follows: Amendment to Lease, recorded at Book 362 Pages 004-005, on March 16, 1990, redetermining the green fees; Amendment to Lease, recorded at Book 395 Pages 749-753, on February 21, 1992, incorporated Exhibit "A" and "B" to supersede the Exhibits recorded with the original lease on July 8, 1985; Amendment to Lease, recorded at Book 411 Pages 642-646, on January 19 , 1993 , redetermining the green fees; Amendment to Lease, recorded at Book 472 Pages 950-952, on October 23 , 1995, redetermining the green fees ; Amendment to Lease, recorded at Book 515 Pages 816-820, on October 7, 1997 , amending the lease rate; Thirteenth Amendment to Lease and Concession Agreement Kenai Municipal Golf Course and Recreation Area Page 1of5 and, Amendment to Lease, recorded at Book 522 Pages 726-729, on February 10, 1998 , revising the legal description as follows: Parcel A The unsubdivided remainder of Government Lots 1 and 2 , located within the Nl /2 Nl/2 Section 3, T5N, Rl 1 W , S,M, City of Kenai, Kenai Recording District, Kenai Peninsula Borough, Alaska containing 71. 919 acres, according to Plat No. 97-105 ; Amendment of Golf Course Fees redetermining the green fees dated February 18 , 2000 (Lessee and Lessor signed the Amendment; however it is not recorded in the Kenai Recording District); Amendment to Lease, recorded at 2005-003854-0, on May 11 , 2005, redetermining the green fees; incorporating language that is required by the State Division of Parks and Outdoor Recreation and the National Parks Service; granting the City the right to enter and occupy the premises for a ski trail or trails ; and, extending the expiration dates for additional ten-year terms to December 31 , 2015 ; Amendment to Lease, recorded at 2007-004091-0, on April 20, 2007, redetermining the green fees; Amendment to Lease, recorded at 2010-003222-0, on April 23, 2010, redetennining the green fees; Amendment to Lease, recorded at 2013-004082-0, on April 29, 2013, redetermining the green fees; Amendment to Lease, recorded at 2015-010220-0, on November 10, 2015, redetermining the green fees; WHEREAS, the Lessee has requested the City amend certain terms of the lease in order to incentivize improvements and additional investment in the golf course and the City recognizes the benefit to the community of having a successful golf course providing recreational opportunity for it residents and v isitors. NOW THEREFORE, the parties agree as follows: 1. The Lessee has the right to a twenty (20)-year lease extension beginning July 1, 2036 based on an investment of $120,000 in pennanent land and building improvements on the premises to be completed within five (5) years from Jul y 1, 2018. Within thirty (30) days after completion of the permanent improvements, the lessee shall submit Thirteenth Amendment to Lease and Concession Agreement Kenai Municipal Golf Course and Recreation Area Page 2 of 5 written documentation acceptable to the City that the improvements have been completed as required. The City Manager shall make a report to the City Council of completion as soon as reasonably practical. If the entire investment of $120,000 is not fully completed by July 1, 2023 , the terms and conditions of the lease will revert to the existing terms and conditions (including Iese rate) as Amended by the Twelfth Lease Amendment and terminate on January 1, 2026 unless the Lessee opts to renew under the Twelfth Lease Amendment for an additional 10 years until 2036. 2. During the first five years of the lease, beginning July 1, 2018 , the effective date of this Amendment, the Lessee shall either invest a minimum of $16,000 into permanent land and building improvements on the premises before July 1 of the following year or deposit $16 ,000 into a non interest bearing account. The account must be set up to allow withdrawals only by the Lessee with concurrence from the City for permanent land and building improvements on the premises. If any funds remain in the account , on July 1, 2023, the funds shall go to the City for payments in lieu of rent. Any investments of funds into permanent land and building improvements on the premises in excess of$16,000 in a year may be credited towards any future year's minimum investment or deposit amount. For example, if no improvements are made in year one, and $16,000 is deposited by Lessee into the account, and in year 2 , $56,000 worth of permanent land and building improvements are made on the premises, the initial $16,000 deposited could be withdrawn for use towards the improvements, and no additional improvements or deposit would be required until year 4, when either an additional $8,000 worth of improvements would need to be made or an equal; amount deposited in the account. This Section (Section 2) in no way effects the requirement in Section 1 above that a total of $120,000 of improv ements into permanent land and building improvements on the premises must be made within five years of July 1, 2018 . 3 . The Lessee shall pay annual rent of $1.00 per year for the first five (5) years, of the lease extension provided by this Thirteenth Lease Amendment beginning July 1, 2018 and expiring June 20, 2023 . Beginning July 1, 2023 , the Lessee shall pay annual rent equal to 10% of the amount of Ordinary Business Income plus any compensation paid to officers, partners or immediate family members exceeding $50,000 and not to exceed 8% of the true market assessed value of the raw land as determined by the Kenai Peninsula Borough Assessment. The Lessee agrees to submit annually a copy of its previous year's Federal Tax Return or a request for an extension no later than May 31 for the City 's review and determination of payment due to the City. If the Ordinary Business Income exceeds $50,000, the City shall provide an invoice thirty (30) calendar days after receiving the Federal Tax Return from the Lessee. 4. The Lessee agrees to provide an Annual Operations Plan to the City Manager which includes a summary of business activ ity, report of number and type of green fees sold, competitive analysis of fees compared to other courses on the Kenai Peninsula Borough, schedule of events and programs (including youth programs), organi z ational structure and staffing, description of services , equipment and maintenance plan, goals and strategies for increased membership and revenue. The Annual Operations Plan must be submitted annually no later than November 31 st for Thirteenth Amendment to Lea se and Concession Agreement Kenai Municipal Golf Course and Recreation Area Page 3 of 5 the City's review. If the Annual Operations Plan shows three consecutive years of 10% or greater reduction in the number of green fees sold, the City Counci l shall have the option to terminate the Lease and Concession Agreement at its so le discretion. Should the City consider terminating the lease, it may consider whether factors beyond the Lessee's control are responsible for the reduction in public usage, such as atypical weather or economic recessions. 5. Article XVII, titled "Lease Option", of the Original Lease dated June 7, 1985 , is deleted in its entirety. The Lessee shall not have a guaranteed right of first refusal to lease. 6. Except as expressly modified or stated herein, all other terms and conditions of the Lease (as amended) remain in full force and effect. CITY OF KENAI By: ~~~~~~~~~~~- Paul Ostrander Its: City Manager GRIFFIN GOLF ENTERPRISES, LLC Approved as to form: Scott Bloom City Attorney Thirteenth Amendment to Lease and Concession Agreement Kenai Municipal Golf Course and Recreation Area Page 4of5 State of Alaska ) ) SS Third Judicial District ) The foregoing instrument was acknowledged before me this __ day of ____ , 2018 , by Paul Ostrander, City Manager for the City of Kenai. Notary Public of Alaska My Commission Expires: __ _ State of Alaska ) ) SS Third Judicial District ) The foregoing instrument was acknowledged before me this day of 2018 , ---~ by (Name), (Title) for GRIFFfN GOLF ENTERPRISES , LLC Notary Public of Alaska My Commission Expires: __ _ RETURN TO: CITY OF KENAI 210 Fidalgo A venue Kenai , AK 99611-7794 Thirteenth Amendment to Lease and Concession Agreement Kenai Municipal Go lf Course and Recreation Area Page 5of5