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3. Depot Building DiscussionREPORT TO: City of Kalispell Post Office Box 1997 - Kalispell, Montana 59903-1997 -Telephone (406)758-7700 Fa (406)758-7758 Honorable Mayor and City Council FROM: Chris A. Kukulski, City Manager SUBJECT: Depot Building MEETING DATE: July 16, 2001 BACK GROUND: Attached is a letter dated June 19 from the Chamber of Commerce regarding their desire to relocate the City Parks and Recreation Department. Also attached is a copy of the lease between the City and Chamber of Commerce (July 1, 1981), and a copy of the sub -lease between the Chamber and the City (December 30, 1999) for use of the 2' floor for the Parks and Recreation Department. In brief, the 1981 Lease Agreement states that, "at this time the City does not contemplate using said Old Depot Building for City administrative purposes, however, the premises is at this time suitable and adaptable to the operation of the Chamber and such use would be to the benefit of the citizens of the entire Kalispell area". It further goes on to state that, "The Chamber may use said premises only for activities which are generally associated with "non-profit" entities and/or commonly accepted "Chamber of Commerce" functions". It further states" No portion of the premises maybe sublet or assigned during the full term of this lease without written permission ofthe City Council, which permission will not be unreasonably withheld. At the termination of this lease the Chamber will quietly yield and surrender the entire premises covered by this lease to the City." The twenty year term of the lease is accompanied by a renewal that states "The Chamber shall have the right to renew this lease for two additional terms of five (5) years each, on the same terms and at the same rate as set forth berinabove" which is at a rate of $1.00 annually. Finally, the lease clearly states that " the lease shall finally terminate without right of renewal at the end of the two five year renewal periods" which will be July 1, 2011. In reviewing this lease, I believe its intent, based on the City's needs in 1981, are well laid out. I also believe that the lease was meant for the Chamber of Commerce and though it allows for sub -leases, it sets up a process so that ifthe City's needs were to change during the time of the lease, and the Chamber of Commerce is not occupying the entire building, than the City could re -assess its use of the building. Based on that re- assessment, the City could either grant the sub -lease or choose to occupy the space with City administrative offices. That being said, the City's needs have changed drastically since 1981, We need to be up front with the Chamber of Commerce as to our intent not to approve any future sub -leases until after our own space needs issues are completely resolved. Furthermore, the Chamber should be notified as soon as possible to the City's intent for 2011. Under both the City's current space needs, and the projected future needs, it would not make sense for us to purchase, build or lease administrative office space when we own a perfectly functional building. Page 1 of 2 I believe that the Chamber's desires to create a "one stop shop" for community and economic development is an exceptional idea. The City should be doing everything that it can to promote these relationships including our own community development functions. However, I don't know that the City should be providing space for this effort free of charge, particularly in light of the fact that we have a real and bonafide need for the office space. RECOMMENDATION: The City Council direct the City Manager and City Attorney to draw up a letter that states the City's intent not to approve any new sub -lease arrangements until our own space needs are completely resolved. Therefore, the Chamber can and should expect that the City's Parks and Recreation Department will occupy the second story of the Depot Building. FISCAL EFFECTS: If we do not retain the use of the second floor of the Depot Building, the Parks and Recreation Department will have to lease space somewhere within the city at an estimated cost of $8,000 to $12,000 annually. ALTERNATIVES: As suggested by the Council. Respectfully submitted, • �. Chris A. Kukulski City Manager Report compiled July 6, 2001 Page of 2 * � V \= F alispell June 19, 2001 Area Chamber of Commerce Mayor Bill Boharski and Members of City Council City of Kalispell 312 First Avenue East Kalispell, MT 59901 RE: Depot Building Dear Mayor Boharski and Members of City Council: As you probably know, we have exercised our lease option on the Depot Building extending the term through 2011, and the City sub -lease for the second floor expires at the end of this month. Therefore, it seems to be an appropriate time to talk about our vision for this facility and how it can be used to create jobs and improve the business and community environment. Our vision for the building is that of a one -stop center for business and visitor services, based on the concept of the Spokane Regional Business Center (SRBC). The SRBC contains the chamber of commerce, the convention and visitors bureau, the economic development corporation, and a small business information center. The co -location of these organizations has gone a long way towards the coordination of these business development services. In fact, locating together helps these organizations work together. It is our goal to implement the "Kalispell version" of Spokane's SRBC. Our intent is to provide a single location where a visitor can come for information, or plan a convention; a hopeful entrepreneur can receive assistance in the development of a business plan; a prospective or expanding business can access demographic, economic, and work force information; and a civic leaders can meet to work on issues of the day. We hope to continue the momentum that was started during the Stream transaction. Several of the pieces are already in place. Current ground floor uses for the Depot Building include the Kalispell Area Chamber of Commerce and the Flathead Convention and Visitors Bureau. We have letters of intent for second floor space from the Small Business Development Center serving northwest Montana, and from the regional development officer of the Montana Department of Commerce. We are in discussion with several business development service providers for the balance of the space 15 Depot Park • Kalispell, MT 59901 (406) 758-2800 • Fax (406) 758-2805 • Email: chamber@digisys.net • www.kalispelichamber.com Mayor Bill Boharski and Members of City Council June 19, 2001 including: work force training and development, business counseling services, economic and business data and research, and business recruitment services. Our need is immediate. Our plans, and those of our cooperating partners, are built around the expectation that the second floor will be available July 1. We are appreciative of the beneficial arrangement we have enjoyed with the City for the lease of this historic structure. The building is listed on the National Register of Historic Places, is architecturally distinctive, centrally located, and has ample parking. Beyond being appreciative, we have invested $265,000 in its improvement. Ten years remain in our agreement on the Depot Building. I am hopeful that this agreement will continue yield good results for the community. Sincerely, n eph H. Unterreiner President CC: Chamber Board LEASE AGREEMENT This Agreement made and entered into this 1st day of July, 1981, by and between the City of Kalispell, a municipal corporation of the State of Montana, P. 0. Box 1035, Kalispell, Mt., 59901, hereinafter called "City" as Lessor, and the Kalispell Area Chamber of Commerce, a corporation, P. 0. Box 978, Kalispell, Mt., 59901, hereinafter called "Chamber" as Lessee, WITNESSETH: WHEREAS, the City does own in the City of Kalispell the property formerly owned by the Great Northern Railway (now known as the Burlington Northern) and utilized as the Railway Depot serving the City of Kalispell; said premises is centrally located and is part of a popular Kalispell City Park known as "Depot Park"; at this time the City does not contemplate using said Old Depot Building for City administrative purposes, however, the premises is at this time suitable and adaptable to the operation of the Chamber and such use would be to the benefit of the citizens of the entire Kalispell areea; and WHEREAS, the Chamber wishes to take over and renovate the said Depot Building and carry on its operations therein. To do so the Chamber should have a long-term lease on the premises; the City is agreeable to granting the Chamber such a lease on the grounds that such use of the premises is to the best interest of the City. NOW, THEREFORE, in consideration of the rent and covenants herein- after mentioned to be paid and performed by the Chamber, the City does demise, lease and let to the Chamber and the Chamber does lease and rent from the City the following described premises on the terms and conditions as hereinafter set out: I. PREMISES: That portion of "Depot Park" bounded on the north by the Burlington Northern Right of Way, on the west by the east side of Main Street, on the east by the west side of a northerly extension of First Avenue East and on the south by the northerly side of the curved street connecting the northerly extension of First Avenue East with Main Street, said premises includes the Old Great Northern Depot Building as well as parking areas, sidewalks and a small grassed area containing an open display pavilion. Said area is included within but does not include all the area more particularly described in the Deed of Gift and Conveyance recorded July 10, 1961, in the Records of the Flathead County Clerk and Recorder, Kalispell, Mt. at Book 463, Page 700. II. TERM: This lease shall be for an initial term of twenty (20) years, commencing July 1, 1981. III. CONSIDERA-TION: The Chamber shall pay to the City, as rent, the sum of One Dollar ($1.00) per year in advance. Receipt of the rental for the first year of the term of this lease is hereby acknowledged by the City; rental for all subsequent years during the term of this lease shall be due and payable at Kalispell, Montana, on the annual anniversary date hereof beginning July 1, 1982. IV. INSURANCE: The Chamber shall insure said premises against fire damage to the said Old Depot Building for the full term of this lease in an amount equal to the insurable value of said premises or Sixty -Five Thousand Dollars ($65,000.00), whichever is less, which amount shall be payable on loss to the City. Fire insurance in excess of that sum may be covered by the Chamber on said building and contents to its own benefit as it sees fit. The City agrees that should said Old Depot Building be totally or partially destroyed by fire during the term of this lease, that any insurance money payable to the City as a result will be utilized to rebuild or repair said building unless the Chamber elects to terminate the lease after and as a result of such fire occurrence. The Chamber will also obtain and maintain during the term of this lease a policy of all risk public liability insurance on such premises providing minimum coverage of $300,000.00 for each claimant and $1,000,000.00 for each occurrence. Said limits of coverage will be increased if the statutes of the State of Montana e. g. 2-9-104, MCA should increase the maximum exposure of a municipality. The City shall be an added named insured party under such policy. The City clerk shall be furnished with a certificate reflecting the foregoing fire and liability insurance immediately upon the Chamber taking possession of the premises under this lease; continuing certificates shall be furnished to reflect the required coverage at all times. USE: The Chamber may use said premises only for activities which are generally associated with "non-profit" entities and/or commonly accepted "Chamber of Commerce" functions. It is intended that the premises are not to be used for any major sales activity (wholesale or retail), manufacturing, distribution or assembly of business not normally or customarily associated with Chambers of Commerce. It is understood that the Chamber may, to the extent provided by City Zoning, sell souveniers such as T-shirts, hats, maps, buttons, film, postcards, etc. VI. ASSIGNABILITY: No portion of the premises may be sublet or assigned during the full term of this lease without written permission of the City Council, which permission will not be unreasonably withheld. At the termination of this lease the Chamber will quietly yield and surrender the entire premises covered by this lease to the City. VII. MAINTENANCE AND REPAIR: The Chamber intends to do extensive renovating and remodeling of the interior and exterior of the Old Depot Building and upgrade the grounds surrounding the building. The City has not charged more than nominal rental for the premises in the belief that such renovation and remodeling will be to the ultimate benefit to the City in lieu of a higher rental charge. The Chamber will be responsible for all maintenance, repairs, upkeep and the security of said building and all utilities used thereon during the entire term of this lease. -2- The Chamber will not suffer waste, destruction or damage to occur on the premies; the Chamber will not allow any lien to be filed against the premises without written permission of the City Council granted at an open and regular City Council Meeting; the City may require the Chamber to furnish additional security for any such lien allowed against the premises. VIII. TERMINATION: Failure of the Chamber to perform any or all of the covenants required by this lease shall be a breach hereof. This lease may upon such a breach be terminated by the City upon sixty days written notice to the Chamber and the Chamber's failure to perform said covenant during such notice period, i. e., if the City feels there has been a breach of any obligation it will provide the Chamber with written notice specifying in detail the alleged breach. If within sixty (60) days of the date of service of said Notice the Chamber corrects said alleged breach then its rights under this lease shall be fully reinstated and this lease shall continue the same as if no default had occurred. The Chamber may terminate this lease and surrender the premises to the City at any time upon sixty days written notice to the City Clerk. Should the Depot Building be more than 50% destroyed by fire the Chamber may terminate this lease by written notice thereof to the City and the insurance proceeds thereafter received by the City under paragraph IV above, need not be used to rebuild the building. If less than 50% of the building is destroyed, the Chamber will reubild or repair the premises unless agreed otherwise by the City. IX. NOTICE: It is agreed that the written notice required under the termination provisions of this contract, or any notice required herein, may be served upon the Chamber by either personal service, or by registered or certified mail directed to the Chamber at the following address: Kalispell Area Chamber of Commerce Box 978 Kalispell, Montana 59901 Service by mail shall be complete, and the notice period for termination of this Lease Agreement shall commence to run, on the date said notice is deposited in any U. S. Post Office, addressed to the Purchaser. RENEWAL: The Chamber shall have the right to renew this lease for two additional terms of five (5) years each, on the same terms and at the same rate as set forth hereinabove, following expiration of the initial term of twenty (20) years set forth in Paragraph II above. The lease shall finally terminate without a right of renewal at the end of the two five year renewal periods; any further renewal must be renegotiated between the parties. XI. SPECIAL PROVISIONS: At the present time the City has pending against the Flathead Valley Community College a claim for damages caused to the Old Depot Building by the Flathead Valley Community College during its term of occupancy of the building. Should the -3- City collect anything as a result of such claim, all monies realized will be utilized to assist the Chamber in its renovation and remodeling of the said building. The City is agreeable to assignment of its claim vs. the Flathead Valley Community College at the Chamber's request. The City will continue its maintenance and upkeep of the balance of Depot Park. The Chamber shall, however, be responsible for maintenance and upkeep of the grass and landscaping in the area around the pavilion in the western portion of the property covered by this lease. IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as of the day first above written. LESSOR: THE CITY OF KALISPELL By: —LLB, w � aua%f' Norma E. Happ, 'I yor ATTEST: MarjoGpe Giermann, City Clerk STATE OF MONTANA) ss. County of Flathead) LESSEE: THE KALIS LL ARE CHAPy E OF COMMERCE wE Jl / E )) By:i Q I.Ary 0. Lee, President ATTEST: per_ Stebbins Dean, Executive Secretary On this --Its day of , 1981, before me, the undersigned, a Notary Public 101 and for the State of Montana, personally appeared NORMA E. HAPP, Mayor, and MARJORIE GIERMANN, City Clerk,�'known to me to be the persons who executed the within instrument on behalf of the City of Kalispell, and acknowledged to me that said municipal corporation executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial Seal the day and year first above written. - f NFIVEry Pub is for tie state o Ponce Lana Residing at Kalispell, Montana (SEAL) My 0&mmission expires i STATE OF MONTANA) ss. County of Flathead) On this � day of A, 1981, before me, the undersigned, a Notary Public i and for the State of Montana, personally appeared LARRY 0. LEE, President, and STEBBINS DEAN, Executive Secretary, known to me to be the persons who executed the within instrument on behalf of the City of Kalispell, and acknowledged to me that said municipal corporation executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial Seal the day and year first.above wrAtten. Notary ublic for the State of Montana Residin at Kalispell, Montana (SEAL) My Commission expires a z� �tigZ -4- IH Area Chamber of Commerce December 30, 1999 Mike Baker, Director Kalispell Department of Parks and Recreation 312 First Avenue East Kalispell, MT 59901 RE: AGREEMENT TO SUB -LEASE: DEPOT BUILDING SECOND FLOOR Dear Mike: The purpose of this letter is to serve as an agreement that would allow the Kalispell Department of Parks and Recreation to sub -lease the second floor of the Depot Building from the Chamber. We think this sub -lease opportunity is good for both our organizations, and look forward to completing a mutually beneficial agreement as soon as possible. We offer the following terms: SUB -LESSEE: City of Kalispell. The City of Kalispell needs space for approximately an eighteen -month period to house the Department of Parks and Recreation while remodel work is being completed at City Hall. At the completion of this period, Parks & Recreation expect to return to City Hall. SUB -LESSOR: Kalispell Area Chamber of Commerce. The Kalispell Chamber seeks to improve the second floor of the Depot Building to a professional level to accommodate its future space requirements. Therefore, the Chamber agrees to accept real property improvements in -lieu of rent. LOCATION: Depot Building, 15 Depot Park, Kalispell, MT. PREMISES: The second floor consisting of approximately 1,225 square feet as identified on Attachment A. 15 Depot Park • Kalispell, MT 59901 (406) 758-2800 • Fax (406) 758.2805 • Email: chamber@digisys.net • www.kalispellchamber.com TERM: A term of eighteen (18) months commencing January 1, 2000 and terminating June 30, 2001, RENEWAL: At the conclusion of the term of this agreement, the tenancy may continue on a month -to -month basis, or on such other terms as the parties may agree. POSSESSION: Sub -lessee shall take possession of the premises upon execution of this agreement and satisfaction of its conditions. BASE RENT: None COMMON AREA COSTS: Sub -lessee shall pay its pro rata share of building operating expenses including electricity, natural gas, building insurance, garbage collection, and janitorial. Sub -lessor reserves the right to adjust sub -lessee assessment if their usage results in excessive increases in common area costs. fiffial: m IMPROVEMENTS: Sub -lessee shall improve the premises to the same level as the Chamber's premises, further identified in Attachment B. Proposed tenant improvements shall be subject to sub- lessor approval. Sub -lessee is responsible for obtaining the permits necessary for their improvements. MAINTENANCE AND REPAIR: Sub -lessee shall maintain and repair their premises during the term of this agreement. ACCESS TO PREMISES: Sub -lessee access to the premises shall be 24-hours a day, seven days a week through the door identified on Attachment A. Sub -lessor shall have access to the area identified as "cold storage" on Attachment A. SIGNAGE: Sub -lessor permits the sub -lessee to place a window sign on the door that accesses the sub -lessee's space. PARKING: Parking for six (6) Parks and Recreation employees and for visitors shall be provided free of cost. HISTORIC BUILDING: The parties acknowledge that the Depot Building is listed on the National Register of Historic Places by the U.S. Department of the Interior and that any improvements made to the building must be consistent with this designation. SUBJECT TO MASTER LEASE AGREEMENT: Since the sub -lessee is the same entity as the lessor on the master lease agreement dated August 6, 1981, the City shall be responsible for obtaining its own approvals required by the "Use" and "Assignability" provisions of the master lease. By signing below, the parties agree to the terms and conditions listed above, and that this letter will serve as the agreement to sub -lease. Mike, if you should have any questions or need further information, please do not hesitate contact me. Unterreiner Vice President ACKNOWLEDGED AND AGREED: SUB -LESSOR KALISPELL AREA CHAMBER OF COMMERCE B C' v Its:X�rwT-� L SUB -LESSEE - CITY OF KALISPELL By: 4 Its: CC) ; C) Mo, +la S e C Premises �r • rrrr�� rrrrrr o Elm rr rr ..... rrrrrrrr. VMr � / = r ® r� •arr '' • r"V ft " a I_ Access and Signing SS.QgND FLOOR PLAN FIRST FLOOR PLAN J ATTACHMENT B DEPOT BUILDING TENANT IMPROVEMENT STANDARDS CEILING: 2 x 2 foot, or 2 x 4 foot suspended acoustical tile ceiling with parabolic light fixtures. FLOORING: Lee Artstone II — Miro Jade 14, a high traffic commercial carpet, glue -down installation, no pad, bound carpet base. PAINT: Lower Wainscot Sherwin Williams SW 1124 Dromedary Camel Upper Wainscot Sherwin Williams SW 1121 Sundew Trim & Lintels Sherwin Williams SW 1084 Bison ELECTRICAL AND TELEPHONE: Conceal and consolidate electric and telephone conduits and piping within the walls, or utilize a Wiremold system.