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DNRC Negotiations - Kidsports LeaseCITY QIF �- .��- City of Kalispell lift Post Of sce Box 1997 - Kalispell, Montana 59903 "o 7Al '4 Telephone: (4D6) 758-7701 Fax: (406) 758-7758 REPORT TO: Mayor Tammi Fisher and City Council FROM. Jane Howington, City Manager SUBJIECT: DNRC Negotiations — Kid5ports Lease MEETING DATE: March 1, 2010 BACKGROUND: DNRC, I d ports, and the City of Kalispell have been working on a project that could provide a revenue strum to offset the lease costs of the Kid ports complex. A key component of the proposed project plan is the redeveloprnent of the old DNRC facility on the west side of US Highway 93, The three partners have drafted a proposal which will be reviewed at the work session Monday evening. The reason for this review is two -fold. First, it has been some time since this topic was discussed and second, the partners want to make sure the council is knowledgeable and supportive of this project approach before an RFP is released to the public. Attached is summary information concerning the parameters in which DNRC trust lands must comply: a review of the Kid.Sport's organization; a short history of the project; and the proposed RFP strategies. Members fmrn all three parmers will be present to answer any questions. Respectively submitted, 0 ?&LM^JL, Jame Howinglon City Manager rrQiw[wr� . c�naNMandate DNR ' Trust Lands Mission Statement: Manage the State of Montana's trust land resources to produce revenues for the gust beneficiaries while considering en.virortmental factors and protecting the future income -genera ring capacity of the land. • IES Or' : With the Enabling Act of 1889, Congress esmblishW the Mate of Mommna and granted to the newly formed state certain lands to be held in trust for "Lhe Nappott of common schools." Over the ensuing years some of the original lands have been sold and other lands have been purchased or gifted to the Mate, but the responsibility has always been the same' rrtanW Trust lands Ear the long-term benefit of the 'Dust benefice wim. * 'gust Lauds Are Different From Other Public Lands: Ivtontanes Trust lands provide a variety of benefits For the cccnmunities that surround them, such as wildlife habitat, open space, and recreation opportunities. lJnMe most other public lands however, Trust lands carry a mandate to generate a reasonable fimandW return for the desigFated ber>,4daries. What may be viewed as public open space by some members of a commun ity is also viewed by the Trust beneficiaries as a critical source of mvenve. # Landmark decisions have occurred at bath the Montana and U.S. Supreme Court levels defining a state's fiduciary responsibill ty (as trustee) for management of Trust lands throughout both Montana and the U, . There are sipfflmA legal sideboards on how Trust land can be managed, and haw a fair rate of return for the Trust lands' beneficiaries is dewrmined. 113 O]Ita i2: The Department of Natural Resources and Conservation (DNRC) has managermnt responsibility for over 5.1 million acres of Trust land. The Department upholds its fiduciary responsibility to secure the nest measure of revenue for the Trost beneficiadetis, today and for future generations. The greatest immediae moixtwy return must be weighed against the "-term productivity of the land to ensure '.F. TrW leads Cary � rr nd to fo continued future returns to the Trusts. The decisions that guide DNRC's management of Tn ,-q lands generate a reasonable financial refurn continue to be a balancing of long4erm financial, for fhe designgW beneficiaries. environmental, and social concerns. • Where Does 'Trust Lands Revenue o:' Prw=ds generated From Ieases, licenses, sales, and easements are used for many Purposes, from paying for rexthooks and teachers" salaries to funding public service pmg arras. Rizwealue generated from Trust lands offsets Funds that would otherwise come from tax revenues paid by residents and busirae ,s in Montana. The Trust Land Beneficiaries: Public ,Schools - Montana Tech - Stare Normal School - State Reform School - Montana Stare University a School for the Deaf and Blind - University of Montana State Veteran's Home " Public Buildings - and others i:*r1_11iVr7;TiW Kidsports is a Montana non-profit corporation that was formed in 1996. It has received tax-exempt status from the Internal Revenue Service and Montana Department of Revenue. Kidsports mission is to foster amateur athletics, which it achieves by developing youth athletic facilities in Section 36 on property leased by the City of Kalispell ("City") from the Montana Department of Natural Resources ("DNRC"), and being a liaison between the organizations conducting youth athletic programs on Section 36, the City and DNRC. Board of Directors. Members of the Board of Directors are appointed by the following user groups: Kalispell Pee Wee Baseball (Dan Johns), Flathead Soccer Club (Steve Herzog and Rob Riley), Kalispell Babe Ruth League (Roy Beekman), Kalispell Youth Softball Association (Brian Wiley) and Flathead Valley Little Guy Football (Mike Rauthe). One member at large (Justin Sliter) has been appointed by the Board. • Origin. The formation of Kidsports was prompted by the City's decision to commercially develop property along Highway 93 South that was occupied by youth athletic fields. • Agreement with City. Kidsports and the City embarked on their public/private partnership in 1997 when the City agreed to commit $1 million to development of the "Kalispell Youth Athletic Complex" and maintain the fields in "like new" condition. Kidsports, in turn, committed to funding the annual lease payment and development funds in excess of the City's initial commitment. Playing Surfaces. The Complex was inaugurated in 1999 with play on five Kalispell Pee Wee fields and five Kalispell Youth Softball fields. The Complex now includes 30 playing surfaces (nine Pee Wee Baseball, seven soccer, seven softball, four football, two Babe Ruth Baseball, and one adaptive field for handicapped players), a cross country running course, playground, and Joel Heuscher Memorial Park. More fields and amenities are planned. ■ Investment. Major funding for the complex has been contributed by the City, Howard Family Foundation, Rotary Club of Kalispell, The Rotary Foundation, Terry Pugh, Dennis and Phyllis Washington Foundation, U. S. Soccer, John G. Harp, John R. Harp, Christie Lee, Plum Creek Foundation, and many local individuals and businesses. Usage. In addition to the five regular youth user groups, FIathead High School (soccer) and Glacier High School (softball) use the Complex, along with the Miracle League of Northwest Montana (http:llwww.mirac[eleague.com). On busy week nights approximately 5,000 participants, family members, coaches and officials are engaging in or enjoying sporting activities. On weekends that number grows to 7,000. Invitational tournaments bring as many as 3,500 people per event to the Complex, many of whom come from outside the Flathead Valley. Quality. The Complex is recognized as the finest youth outdoor sports facility in Montana. Its adaptive Miracle Field is the only one of its kind in Montana. ME ) �M�7' j I KYAC AdditIons I December 2008 "A- _ ' 10 � I - - _Sa 15 � 1 #' � \� I ��J •\y 1 f 4 Mama men 4 ;} HIS� ir. wnLL �. u- i Tj� 00 atWIVI IDWSAr INO On May 7, 1997, the City of Kalispell signed a Lease Agreement with the Montana Department of State Lands for approximately 134 acres located in the SETA, Section 36, to become the Kalispell Youth Athletic Complex (KYAC). The Lease is for 40 years, which was the statutory maximum available. The Lease provides for annual payments to the State based on the appraised value of the land in 1997. In 2009 Kidsports paid $41,651.00 for the annual Lease payment. In 2016, DNRC has the prerogative to re -set the lease amount. In an effort to encourage commercial development (e.g. Costco, Lowes, etc.) in Section 36 and other Trust Lands, the Montana Legislature amended the statute to permit 99 year leases for commercial uses. In addition to leases, Montana statutes allow public entities (e.g. cities, school districts) to obtain permanent usage easements -on School Trust Land (e.g. Glacier High School). The lease operation process provides that representatives of the City (leaseholder) and DNRC (manages property for owner) will annually review and discuss plans and activities on the land. These representatives, along with representatives of Kidsports, meet regularly to discuss KYAC. Given the requirements of how Trust Lands are managed, securing the long term existence of the complex was a frequent topic, with serious discussions beginning in 2008. In 2009, DNRC vacated approximately 13 acres adjacent to the KYAC. We have a unique opportunity with the availability of the DNRC agency site for commercial occupancy and the potential of "piggy -backing" additional acreage onto the agency site in support of a good plan and securing permanency of the sports complex's remaining acres. DNRC anticipates it could incorporate approximately 12 acres reduced from the Lease (located north of the softball fields) that will be offered along with its vacant office site for commercial development. The City and Kidsports have expressed willingness to amend the existing lease as part of securing the long term existence of the youth sports facility. In short order the participating parties anticipate executing an Agreement to Initate the following process. The proposed process includes two formal steps: DNRC will advertise a request for proposals (RFP) that will seek a developer/designer who will prepare a site plan for the combined acreage of approximately 22-26 acres. The successful party will work with representatives of DNRC, City and Kidsports in developing a "plan" that is compatible with both the needs of the Trust and the sports complex. The parties' objectives in developing the plan are to (1) benefit the Trust; (2) assist Kidsports in acquiring long-term entitlements; (3) meet the City of Kalispell's entitlement and development approval process; and (4) be profitable for the developer. DNRC will obtain real estate appraisals on its Highway 93 site and the acreage proposed to be dropped from the Lease. As a separate process, an appraisal will also eventually be necessary for the balance of the leased land if a permanent usage easement is sought.