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2. Addendum to Southfield Park AgreementCity of Kalispell Post Office Box 1997 - Kalispell. Montana 59903-1997 - Telephone (406)758-7700 Fax(406)758-7758 June 1, 2001 TO: Mayor, City Council and Mana e FROM: Glen Neier, City Attorne RE: Dasen - Addendum to Development greement Your packet contains an Addendum to Development Agreement which has been revised from a draft sent to you on May 21, 2001. Changes from the original draft are in bold and italics for your reference. Article 4, p. 2 has a change that merely recites that the new parking spaces to be constructed on 3rd Avenue West will "complement and encourage the use of Lion's Park". In Section 5.4 you will notice strike -out language which I believe indicated the Developer would only be responsible for payment if the project was not completed by June 1, 2002. Sections a-g of 5.4 are new, and describe the mechanics of the payment -in -lieu should it become necessary. The tax year of 2003, that being the first year that a payment -in -lieu would be possible, did not change. As contemplated in the original draft, the anticipated tax payments go from $124,000 to $148,000 for 8 years instead of 10. Section 5.5 states that the Developer will pay to the City the sum of $90,000 on or before June 30, 2001. After extensive discussion with Dasen's attorneys, we drafted language which would have placed a lien on the property binding future owners. For a variety of reasons, Dasen was reluctant to accept the language. As in the first agreement, Dasen has agreed to remain personally liable for the payment of taxes and the payment -in -lieu, should taxes not generate the required $148,000 per year. glendasenmemo A new Section 10.7 has been added awarding attorney's fees to the successful litigant should this Addendum be the subject of future litigation. Although the inclusion of an attorney's fees clause in an agreement may have merit, it is a two-edged sword. The unsuccessful litigant pays virtually the entire cost of litigation. This office, despite being unable to get the lien language, believes that the Addendum makes sense from a business point of view. The Developer is currently developing an office building on the property which will be approximately 30,000 square feet and a commercial building of approximately 12,000 feet. Last tax year South Field Towers generated $45,000, and the entire South Field Park property generated $59,000. The City will receive taxes on the improvements made this year to the property in the 2002 tax year. There is a possibility that tax generated by the development will exceed the $148,000 limit, making the payment -in -lieu of language superfluous. Certainly the City may not be receiving all that allegedly owed by the Developer. However, there are risks involved in litigation, which have been outlined for you. This Addendum provides a reasonable solution for both parties. glendasenmemo ADDENDUM TO DEVELOPMENT This Addendum is made this day of May, 2001 by and between the CITY OF KALISPELL, a municipal corporation, hereinafter "City" and RICHARD A. DASEN, with his principal place of business at 1701 Highway 93 South, Kalispell, Montana, hereinafter "Developer:" WITNESSETH: WHEREAS, the parties entered into a Development Agreement dated February 11, 1998 relative to the development of that tract of land bounded by Eighteenth Street West on the north, Third Avenue East on the east, Lion's Park Street on the south, and U.S. Highway 93 on the west, all within the city limits of the City of Kalispell; and WHEREAS, the referenced real property was not developed as contemplated by the parties' Development Agreement dated February 11, 1998; and WHEREAS, the parties hereto desire to alter the obligations imposed by said Development Agreement dated February 11, 1998 upon Developer; and WHEREAS, the parties intend that the terms of this Addendum take precedence over and supplement the terms contained in the parties' Development Agreement dated February 11, 1998 inconsistent with the terms hereof. NOW THEREFORE, in consideration of the foregoing premises and mutual obligations of the parties, the parties agree as follows: Articles 4, 5, 7 and 8 contained in the parties' Development Agreement dated February 11, 1998 shall be amended and completely restated as follows with the definitions set forth in Article 1 of the Development Agreement having the same meaning as set forth in the Development Agreement. ARTICLE 4 Lion's Park Street The parties acknowledge that the undedicated and undeeded street commonly known as Lion's Park Street is included in the Addendum 1 Project Property due to a resurvey of the Project Property near the time said property was conveyed to DEVELOPER. The parties acknowledge that Article 4 contained in the referenced Development Agreement dated February 11, 1998 may be construed as providing the CITY some parking rights on Lion's Park Street. The parties further acknowledge that Lion's Park Street, pursuant to the Site Plan attached hereto as Exhibit A, is proposed to be used by DEVELOPER or his assigns for patron parking associated with the Professional Office Building planned for Lot D of the Amended Subdivision Plat of Lots 1, 2, 3 and 4 of Southfield Park, a copy of which is attached hereto as Exhibit B. The CITY agrees to forego, waive and relinquish any rights it may have had to parking on Lion's Park Street in lieu of DEVELOPER'S construction of ten (10) public parking spaces to complement and encourage the use of Lions Park on Third Avenue East substantially as indicated on the Site Plan attached hereto as Exhibit A as "Lion's Park -- Additional Parking Plan." The costs associated with the additional parking shall be borne entirely by DEVELOPER, and CITY shall have no financial responsibility for the construction of said ten (10) parking spaces. CITY agrees to execute a formal instrument suitable for recording reflecting the foregoing. ARTICLE 5 Construction of Project Section 5.1. Site Plan and Construction Plans. DEVELOPER heretofore submitted a Site Plan and Construction Plans to the CITY for purposes of obtaining building permits. DEVELOPER'S Site Plan is appended hereto as Exhibit A and by this reference incorporated herein, which plan depicts the entire Project Area and shows the infrastructure improvements to be constructed thereon. The Site Plan appended hereto and the Construction Plans heretofore provided to the CITY are acceptable to the CITY and are in conformity with applicable federal, state and local laws and regulations. The CITY hereby approves the Construction Plans as substantially conforming to the Plans pursuant to this Addendum, conforming to the terms and conditions of the parties' Development Agreement dated February 11, 1998 as amended pursuant hereto, conform to all applicable federal, state and local laws, ordinances, rules and regulations, and are adequate to provide for construction of the Project. Addendum 2 Section 5.2. Construction of the Project. (a) Subject to unavoidable delays, DEVELOPER will construct the Project without encroachment onto any other property all in accordance with the Site Plan and the Construction Plans. DEVELOPER or his Assignees will be responsible for the supervision of and completion of the on -site improvements. Neither party shall exercise any control over the other regarding their respective areas of work and division of responsibilities although the parties agree to coordinate their activities to assure maximum efficiency of the construction process. (b) All work with respect to the Project shall be in substantial conformity with the Construction Plans approved by the CITY. DEVELOPER shall promptly begin and diligently complete all on -site improvements. DEVELOPER shall make reports, in such detail and at such times as may reasonably be requested by the CITY, as to the actual progress of DEVELOPER with respect to construction of the on -site improvements. (c) DEVELOPER shall not interfere with, or construct any improvements over, any public street or utility easement without the prior written consent of the CITY. All connections to public utility lines and facilities shall be subject to approval of the CITY and any private utility company involved. All street and utility installations, relocations, alterations and restorations shall be made at DEVELOPER'S expense. DEVELOPER, at its own expense, shall replace any public facilities or utilities damaged during construction of the Project. (d) DEVELOPER shall complete construction of the improvements on the Project Property as indicted on the Site Plan attached hereto no later than June 1, 2002. Section 5.3. Certificate of Completion. (a) Promptly after completion of the Project, in accordance with this Agreement, DEVELOPER should apply for a Certificate of Completion. It will be incumbent on DEVELOPER to provide the CITY with a certificate of substantial completion from DEVELOPER'S architect, and Addendum 3 the CITY shall furnish DEVELOPER with an appropriate Certificate of Completion as conclusive evidence of satisfaction and termination of the agreements and covenants of this Agreement (excepting those covenants and restrictions which expressly survive the filing of the Certificate of Completion, and except those obligations of the DEVELOPER described in Section 2.2. hereof which pertain to the obligations of DEVELOPER to construct the Project). (b) If the CITY shall refuse or fail to provide a Certificate of Completion, the CITY shall, within 15 days after the DEVELOPER provides the architect's certificate referenced in Section 5.3.(a), provide the DEVELOPER with a written statement specifying in what respect DEVELOPER has failed to complete the Project in accordance with this Agreement, or is otherwise in default, and shall specify what measures or acts will be necessary, in the opinion of the CITY, for DEVELOPER to obtain the Certificate of Completion. Section 5.4. CITY'S Remedy for Failure to Construct. It is contemplated that the Project Property (including without limitation the Southfield Tower Property) will generate annual tax revenue to the CITY in the amount of ONE HUNDRED FORTY-EIGHT THOUSAND AND N0/100 DOLLARS ($148,000.00) upon completion of the Project, exclusive of city or county special assessments. DEVELOPER, therefore, covenants to pay the CITY any difference between the amount of tax actually generated by the Project Property, including any portion of the Project transferred to another owner, and the amount contemplated by this Agreement for a period of eight (8) years commencing with tax year beginning January 1, 2003. in the event BRva3eFER u. his emsigns do not hereof. Payment under the provisions of this paragraph shall be made directly to the CITY, after certifying the tax generated by the Project through the CITY finance department subject to verification, and in accordance with the following: a. For tax year 2003, a copy of the tax bill for the tax year 2003 shall be delivered to the CITY finance office on or before November 15, 2003. Addendum 4 b. The CITY finance office shall calculate the difference between the tax bill for the 2003 tax year, exclusive of special assessments, and the sum of ONE HUNDRED AND FORTY-EIGHT THOUSAND AND N0/100 DOLLARS ($148,000.00) and invoice the DEVELOPER for the difference. C. Payment for said amount calculated shall be due and payable, from the DEVELOPER, on or before December 15, 2003. d. For tax years 2004 through 2010, a copy of the tax bill for the respective tax year shall be delivered to the CITY finance office on or before November 15. e. The CITY finance office shall calculate the difference between the tax bill for the respective tax year, exclusive of special assessments, and the sum of ONE HUNDRED AND FORTY-EIGHT THOUSAND AND N0/100 DOLLARS ($148,000.00) and invoice the DEVELOPER for the difference. f. Payment for said amount calculated shall be due and payable, from the DEVELOPER, on or before December 15, of the respective tax year. g. In tax years when the tax liability, less special assessments, equals or exceeds the sum of $148,000.00, no payment -in -lieu shall be due from the DEVELOPER, however, no credit shall be given for subsequent tax years. Section 5.5. Cash Payment by Developer to CITY. DEVELOPER shall pay the CITY the sum of NINETY THOUSAND AND N0/100 DOLLARS ($90,000.00) on or before June 30, 2001, as a compromise payment of CITY'S claim for past due payments -in -lieu of that certain Development Agreement between Richard A. Dasen and the City of Kalispell, dated February, 11, 1998. ARTICLE 7 Payment of Taxes Section 7.1. Taxes. DEVELOPER and his successors or assigns shall pay when due all real estate taxes and installments of special assessments payable on the Project Property. Addendum 5 ARTICLE 8 Assignment and Transfer Section 8.1.(a) Transfer of Ownership. The CITY acknowledges that DEVELOPER heretofore transferred his interest in and to the subject property to Northwest Investments, LLP, a Montana Limited Liability Partnership in which DEVELOPER is a principal. CITY further recognizes and acknowledges that Lot 5 of the amended subdivision plat of Southfield Park on which Southfield Tower has heretofore been constructed, has been conveyed by Northwest Investments Partnership, LLP to Gene King of Kalispell, Montana. In addition, CITY acknowledges that Lots A, B, C and D of the Amended Subdivision Plat of Lots 1, 2, 3 and 4 of Southfield Park Lots attached hereto as Exhibit B are the subject of a Buy -Sell Agreement executed by and between Northwest Investments Partnership, LLP as Sellers and Gene King and Elsene King as purchasers. The subject Project Property is no longer subject to restrictions on alienability. However, notwithstanding conveyance or assignment by DEVELOPER, DEVELOPER shall remain personally responsible to all obligations hereunder. ARTICLE 10 Section 10.7. Legal Expenses. In the event either party hereto should bring suit against the other with respect to this Addendum then all reasonable costs and expenses, including without limitation, actual professional fees and costs such as appraisers, accountant's and attorney's fees and costs, incurred by the party which prevails in such action whether by final judgement or out of court settlement, shall be paid by the other party, which obligation shall be deemed to have accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgement. As used herein, attorney's fees and costs shall include, without limitation, attorney's fees, costs and expenses incurred in connection with any (i) postjudgment motions; (ii) contempt proceedings; (iii) garnishment, levy and debtor and third party examination; (iv) discovery; and (v) bankruptcy litigation. Addendum 6 Date STATE OF MONTANA ) ss County of Flathead ) DEVELOPER Richard A. Dasen On this _ day of , 2001, before me, a Notary Public in and for the State of Montana, personally appeared Richard A. Dasen, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial Seal, the day and year first above written. SEAL STATE OF MONTANA ) ss County of Flathead ) Notary Public, State of Montana Residing at My Commission expires Northwest Investments, LLP a Montana Limited Liability Partnership By: On this _ day of , 2001, before me, a Notary Public in and for the State of Montana, personally appeared , of Northwest Investments, LLP, known to me to be the person whose name is subscribed to the Addendum 7 foregoing instrument, and acknowledged to me that he/she executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial Seal, the day and year first above written. Notary Public, State of Montana SEAL Residing at My Commission expires CITY OF KALISPELL, a Municipal Corporation By: Chris A. Kukulski, City Manager By: City Clerk STATE OF MONTANA ) ss County of Flathead ) On this _ day of , 2001, before me, a Notary Public in and for the State of Montana, personally appeared Chris A. Kukulski and Theresa White, known to me to be the City Manager and the City Clerk for the City of Kalispell, whose names are subscribed to the foregoing instrument, and acknowledged to me that they executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial Seal, the day and year first above written. Notary Public, State of Montana SEAL Residing at My Commission expires Addendum 8