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2. Memorandum of Understanding - DNRCREPORT TO: Doug Russell, City Manager � K- FROM: Tom Jentz, Director SUBJECT Kidsports MOU with DNRC MEETING DATE: November 19, 2012 BACKGROUND: City staff; as well as representatives of Kidsports, had worked with DNRC for some time to develop terms and establish a process whereby the city could acquire a permanent easement from the DNRC for the 136 acres of land we currently lease from DNRC. Attached is a Memorandum of Understanding between the city and DNRC that now sets the terms for a phased acquisition. This MOU encapsulates the terms that the State Land Board approved at their October board meeting in Helena in which they approved the sale of the easement to Kalispell. Under the agreement Kidsports would acquire a permanent easement on approximately 123 acres of the site. An additional 13 acres currently leased would be turned back to DNRC at the time that a developer finalizes their lease agreement with DNRC on the adjacent Victory Commons commercial development. The general terms of the MOU are as follows: • The appraised purchase price is $18,515/acre ($2.29 million for the 123 acre site) • Kidsports has 5 years to purchase the permanent easement • Kidsports can make 5 payments (one per year) • First payment window is December 31, 2012, thereafter February 28 of each successive year. • Minimum payment is $100,000 • DNRC has required a sliding "option" payment due each year ranging from 1 % the first year to 2% in the final year of the remaining balance over the 5 year period. • 13 acres of the citiy's original lease would be turned back to DNRC at the time a developer is under contract to develop the 28 acre Victory Commons Development on lands south of Costco. Once the city has signed the MOU, it will be returned to DNRC who will then sign the agreement. Please note that if the city were to acquire the entire 123 acre lease prior to December 31, 2012 the terms of this MOU are no longer pertinent. If a full purchase is not consummated by December 31, 2012, the terms of the MOU protect the city in its long term efforts to acquire the permanent easement. RECOMMENDATION: It is recommended that council authorize the city manager to sign the Memorandum of Understanding for the Sequential Purchase and Sale of Public Park Easement. FISCAL EFFECTS: Significant financial savings will be experienced by Kidsports with the purchase of a permanent easement. Currently Kidsports pays approximately $43,000/year to the DNRC for an annual lease payment. In 2016, according to the terms of the lease, the Kidsports site will be re -appraised and the lease payment will reflect the current market values. Based on the recent appraisal of the site conducted this summer, the cost of the annual lease payment could be expected to increase two or three fold. ALTERNATIVES: As suggested by the city council. Respectfully submitted, Thomas R. Jentz, Dqeci`or� 1131UNT.11 RAW Wan H This Memorandum of Understanding (MOU) is entered into this 15th day of October, 2012, by the STATE OF MONTANA, STATE BOARD OF LAND COMMISSIONERS (hereinafter referred to as "the State"), by and through the MONTANA DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION, whose address is P.O. Box 201601, Helena, MT 59620-1601 and THE CITY OF KALISPELL, whose address is P.O. Box 1997, Kalispell, MT 59903 (hereinafter referred to as "the City'). This MOU sets forth the conditions, understandings, and procedures by which the City of Kalispell shall have the exclusive right for a limited period of time in which to make an application, or applications, to the State for a public park casement, or public park easements under Section 77-2- 101(1)(b), MCA upon all or a portion of the approximately 123.7 acres of State school trust lands located in the S '/2 of Section 36, Township 29N, Range 22W, Flathead County, Montana, as is more particularly described in the attached Exhibit 1 attached hereto and incorporated herein by reference, subject to any prior existing rights, and subject to all the terms and conditions as hereinafter set forth: The State of Montana Board of Land Commissioners holds in trust for the financial benefit of common public schools approximately 134.45 acres of real property located in the S V2 Section 36, Township 29N, Range 22W, Flathead County, Montana. The City has leased the approximately 134.45 acres from the State pursuant to State of Montana Special Lease No. 3053189 for public recreational purposes. The City wishes to make an exclusive application, or applications, over a period of time for a public park casement or easements upon all, or a portion of the approximately 123.7 acre parcel described in Exhibit 1. The City of Kalispell proposes to compensate the State for the exclusive right to submit application(s) for public park easements upon the above -described approximately 123.7 acre parcel, subject to the terms and conditions of this MOU. This Agreement is intended to set forth the procedures, conditions, and understandings by which the City of Kalispell: ® may make exclusive applications for public park easements upon the above - described approximately 123.7 acre parcel, and; • will compensate the State for this privilege. 11. Terms, Conditions and Understandings. A. Term of A I Agreement. This Memorandum of Understanding is effective upon its execution by both parties and through February 28, 2018. B. Liaisons. For the purposes of this Agreement, DNRC's liaison/designee is Anne Shaw Moran, (406) 751-2274. The City of Kalispell's liaison/designee for the Purposes of this Agreement is Tom Jentz (406) 758-7940. C. Compensation for the Exclusive Right to Apply for Public Easements. In order to compensate the school trust for the exclusive right to make applications for these public park easements, the City shall pay to the State the following amounts at the following times: Upon the execution of this Agreement: The first partial year starting upon signature and through February 28t" 2013 shall be pro -rated at 1% of the appraisal amount of the land subject to the MOU $ March 1, 2013: 1% of the appraised value of the land described herein for which the City has not been purchased an casement ($22,903 if no easements have been purchased); March l,2014: 1% of the appraised value of the land described herein for which the City has not been purchased an easement ($22,903 if no easements have been purchased); March 1, 2015: 1.5% of the appraised value of the land described herein for which the City has not been purchased an easement ($34.354.50 if no easements have been purchased); March 1, 2016: 1.5% of the appraised value of the land described herein for which the City has not been purchased an easement ($34,354.50 if no easements have been purchased); March 1, 2017: 2% of the appraised value of the land described herein for which the City has not been purchased an casement ($45,806.00 if no easements have been purchased); To maintain its rights under this MOU, during the term of this MOU, the City shall annually pay to the State (addressed to"DNRC, P.O. Box 201601, Helena, MT 59620-1601) the above -described applicable sum on each succeeding March I" during the term of this MOU. Should the State fail to receive from the City any such payment on any successive March I" date during the term of this MOU, this MOU shall automatically terminate. Time is of the essence in the performance of this MOU payment. Should the State grant the City a public park casement upon any parcel described herein, on or before February 28th of any year during the term of this MOU, the annual MOU fee payable by the City to the State on the succeeding March I" of each year thereafter shall be proportionately reduced by a fraction representing the acreage of the easement purchased divided by the total acreage originally committed to this MOU (Approximately 123.7 acres) [For example, should the City purchase an easement comprising 61.85 acres prior to March 1, 2013, the annual MOU fee due on March 1, 2013 would be $11,451.50.] D. Exclusive Right to ApI21y for Public Park Easement. Upon execution of this agreement, the City has the exclusive right to apply for Public Park Easements upon the approximately 123.7-acre parcel described herein on Exhibit 1, attached hereto and incorporated herein by reference. The City may exercise this right by submitting a completed casement application to DNRC's liaison. Real Estate Management Bureau Montana DNRC P.O. Box 201601 Helena, MT 59620-1601 E. Easement Purchase Price. The purchase price per this agreement is $18,515 per acre or, $2,290,269 for the entire subject area. In exercising the above -described right, the City of Kalispell may apply to purchase any easement parcel based on the above values subject to the following: 1. The minimum easement parcel value in any single transaction shall be $100,000; 2. The deadline for submittal of a complete application that would allow for a reduction in the subsequent year's lease fee and MOU fee is December 31"; 3. One application may be submitted in any given calendar year during the term of this agreement; 4. If purchased incrementally, the easement parcels shall: a) be acquired generally from the southeast to the northwest; b) be contiguous with previously purchased parcels; c) be mutually agreed upon by both parties and give consideration to assure each incremental acquisition can stand alone with respect to utilities, services, access and would not negatively impact adjacent properties in the case that for any reason future acquisitions do not occur. F. Form and Assignability of Easement. The Public Park Easement or easements shall be conveyed pursuant to the form attached hereto as Exhibit 2. Any Public Park easement issued under this MOU: must only be assignable to another governmental entity, must utilize the Department's Assignment form, and can only be assigned upon the prior written consent of the State Beard of Land Commissioners. Any Public Park easement granted shall be subject to the following conditions and understandings: 1. Public park easements convey limited rights, and do not include any mineral interests or water rights appurtenant to the property that possessed by the State. 2. No title insurance shall be provided by the State. 3. The City will be responsible for all surveying costs associated with this MOU and the grant of any easement or easements under this MOU. 4. All recording fees shall be paid by The City. 5. Each party shall bear its own legal and administrative costs. 6. Special Assessments on the approximately 123.7 acres, if any, shall be pro -rated as of the date of any easement is recorded. G. No Warranties by the State. The State does not warrant title to the property, and the City enters into this MOU solely in reliance upon its own examination of title to the above -described real property. The State makes no representations to the City as to whether the above -described real property is encumbered by recorded or un-recorded liens, restrictions, adverse claims or clouds on the title that either individually or collectively cause the title to be un-merchantable, or which would materially interfere with the City's intended development and long term use of youth athletic fields and recreational areas, together with related or supporting improvements (e.g. concession stands, restrooms, roadways, parking areas, parklands, etc.). H. Agreement Binding; Entire Agreement; Modification. This agreement represents the full and entire agreement between the parties with respect to this MOU and supersedes any other agreements, whether written or oral, regarding the subject matter of this agreement. Any enlargement, alteration or modification requires a written amendment signed by both parties. Successors. This MOU shall be binding upon and inure to the benefit of the parties' successors in interest. Resolution of Disagreements. If any dispute arises between the City and the State over matters covered by this Agreement that cannot be resolved at the project officer/staff attorney level, the matter shall be referred to the City Manager and the Director of DNRC for an informal dispute resolution p recess. To initiate this i nformal process, each party s hall identify and de scribe the disputed issues in writing and deliver this explanation to the other party. 3. Termination and Cancellation. The duties of either party to this MOU are wholly contingent upon the receipt of sufficient dedicated future appropriations for this MOU. IN WITNESS WHEREOF, the parties have executed this Agreement as set out below: DATED this _ Day of 2012 Doug Russell, City Manager k"Ve NATURAL RESOURCES AND CONSERVATION Date: By: Mary Sexton, Director 11!