1. Flathead County Economic Development Authority - Gateway West Mall Property TransferCity of Kalispell
I OFFICE OF THE CITY MANAGER
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TO: Mayor Fisher and Kalispell City Council
FROM: Doug Russell, City Manager
DATE: March 25, 2013
SUBJECT: Gateway Mall Property Transfer Discussion
In February of 2000, FCEDA and the City of Kalispell partnered on an economic development
project which included a joint acquisition of real property within the Gateway Mall at 1203
Highway 2, Kalispell, MT. With the purchase and refurbishment of the property, the parties
have been able to lease the facility to Stream International and most recently to Teletech.
The current lease agreement expires on the 15` day of March 2014. As we are nearing that date, it
is appropriate to review the success and fulfillment of the initial project expectations and to
consider potential mutual benefits with an alteration of this arrangement.
With that consideration in mind, FCEDA has approached the City with the proposal to acquire
the City's interest in the Gateway Mall and create a singular ownership for this property in order
to provide efficiency of management operations, including the development of improvements
and lease negotiations, all of which would now be under FCEDA's scope of operations.
The attached Memorandum of Understanding (MOU) has been developed as an outline for a
transfer arrangement and identifies the expectations and terms for both parties.
It is recommended that Council review and discuss the MOU for possible action at a future
meeting.
www.kalispell.com
Memorandum of Understanding
between
CITY OF KALISPELL
A Montana Municipal Corporation
and
FLATHEAD COUNTY ECONOMIC DEVELOPMENT AUTHORITY
A Montana State Authorized Corporate Public Body
1. Purpose and Scope
The purpose of this Memorandum of Understanding [MOU] is establish and memorialize
the understanding between the City of Kalispell [hereinafter the "City"] and the Flathead
County Economic Development Authority [hereinafter "FCEDA"] regarding the transfer
of ownership of that real property located in the Gateway West Mall in the City of
Kalispell and owned by the parties as tenants in common and the rights and obligations of
each of the parties to such real property thereafter.
2. Recital of Facts
A. The City and Flathead County, on behalf of FCEDA, entered into an Interlocal
Agreement on the 171h day of February, 2000 in which the parties agreed upon the
acquisition, financing, ownership, management and future disposition of certain real
property located in the City of Kalispell, Flathead County, Montana and more
particularly described as approximately 60,000 square feet of real property within the
Gateway West Mall, 1203 Highway 2, Kalispell, Montana and identified by Geocode
07396512407050000. Pursuant to that agreement the City acquired a 63% undivided
interest in the property and FCEDA acquired a 37% undivided interest in the
property.
B. On the 7th day of February, 2000 the City passed Resolution No. 4536 authorizing
and directing the issuance of a $2,500,000 West Side District Taxable Tax Increment
Urban Renewal Revenue Bond for the acquisition of the above described property,
which bonds were secured and paid with tax increment and the Port Authority Levy.
This debt was retired on the 21 S` day of July, 2010.
C. Since the time of the property purchase and refurbishment the parties have leased the
property, initially to Stream International and then assigned to Teletech, both firms
operating call centers. Upon the assignment of its lease, Stream International retired
all of its obligations to the City and to FCEDA.
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D. The leasehold and use agreements with the lessee contain the following salient terms:
1) The required rent payments to which the lessee is obligated shall be reduced
or negated through the lessee meeting certain employment of labor and wage
criteria. The lessee has always met this threshold and therefore no rental
payments have been required.
2) The lease agreement requires the lessee to pay all costs of the Lessor (triple
net) including the Common Area Maintenance charges and excepting those
costs of maintaining the structural integrity of the improvement.
3) A deficiency tax payment clause in the use agreement requires the lessee to
pay no less than $140,000 per year with any difference between the beneficial
use taxes paid and the threshold amount paid directly to the City.
4) The current lease agreement expires on the 1S` day of March, 2014.
3. MOU Term
The term of this MOU is Ninety (90) days commencing upon the execution of this
Agreement.
4. Associated Parking Area
The parties acquired additional real property to further serve the lessee's parking needs in
2005 and own this property as cotenants with undivided interests as well.
5. Conveyance of City Interests to FCEDA and Allocation of Taxes
The parties have determined that the City is interested in conveying its interest in all of
the subject property described above, including the parking area, to FCEDA and FCEDA
is interested in acquiring the City's interest in the property. To this purpose the parties
agree that documentation shall be drafted that shall include the following terms:
A. The City and FCEDA will execute all necessary conveyance documents to transfer
ownership of the City's interests in the Gateway West Mall property and associated
parking lot to FCEDA as well as all leasehold interests.
B. The tax base portion of the Beneficial Use Tax and Personal Property Tax paid by the
Lessee shall continue to be paid out to the taxing entities otherwise entitled to such
payment.
C. The increment portion of the Beneficial Use Tax and Personal Property Tax from the
property shall be paid to the West Side Tax Increment District so long as such District
is in existence.
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D. FCEDA shall receive the entire portion of the revenues above the Beneficial Use Tax
and Personal Property Tax amounts paid annually by the lessee until such time as a
total of $300,000 has been received for the purposes of building an adequate
maintenance reserve for the property. Thereafter, and in consideration for the City
transferring its property interests, FCEDA shall remit to the City 25% of all revenues
it receives from the Lessee which are above the Beneficial Use Tax and Personal
Property Tax amounts which will continue to be paid to the taxing entities.
E. In the event that a maintenance fee is required to be paid by the lessee, FCEDA shall
receive such funds to cover the maintenance obligations of the property, except as
otherwise noted in section 5.1).
F. In the event that the property is vacated by the lessee the parties understand that these
taxes will not be paid and received by the parties until it is again under lease.
6. City Responsibilities
The City shall execute all documents necessary to effectuate this agreement.
7. FCEDA Responsibilities
FCEDA shall execute all documents necessary to effectuate this agreement.
8. Prior Agreements
Upon execution of the documents that transfer ownership of the subject property and
assign the interests in the subject leasehold all prior agreements between the parties
regarding ownership and use of the property shall be deemed null and void.
9. No Third -Party Beneficiary
This Agreement is for the exclusive benefit of the parties, does not constitute a third -
party beneficiary agreement, and may not be relied upon or enforced by a third party.
10. Modification and Termination
Any and all amendments must be made in writing and must be agreed to and executed by
the parties before becoming effective.
11. Effective Date and Signature
This MOU shall be effective upon the signature of the City and FCEDA authorized
officials. The City and FCEDA indicate agreement with this MOU by their signatures.
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Signatures and dates
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Authorized Signature of the City Authorized Signature of FCEDA
Doug Russell, City Manager
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Date Dat
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