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HomeMy WebLinkAbout12564RESOLUTION NO. 12564 A RESOLUTION AUTHORIZING AND APPROVING AN AGREEMENT BY AND AMONG THE CITY OF PUEBLO, PEDCO FOUNDATION, INC. AND PROFESSIONAL BULL RIDERS INC. RELATING TO JOB CREATING CAPITAL IMPROVEMENT PROJECT BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1. The Master Agreement between the City of Pueblo, PEDCO Foundation, Inc. and Professional Bull Riders Inc., a copy of which is attached hereto, having been approved as to form by the City Attorney, is hereby approved. The Special Warranty Deed and Sixty-Day Lease attached to the Master Agreement as Exhibits C and D, respectively, are hereby approved in substantially the form as attached with such insertions, omissions and changes as shall be approved by the President of the City Council and the City Attorney. SECTION 2. The President of the City Council is authorized to execute Master Agreement and take those actions necessary to consummate the transaction contemplated by the Master Agreement including execution of the First Amendment to Special Warranty Deed with Right of Entry for Condition Broken and Sixty-Day Lease identified as Exhibits B and D, respectively, of the Master Agreement, and the City Clerk is authorized and directed to attest same and affix the seal of the City thereto. SECTION 3. This Resolution shall become effective upon final passage and approval. INTRODUCED: December 26, 2012 BY: Steve Nawrocki COUNCIL PERSON Background Paper for Proposed RESOLUTION DATE: December 26, 2012 AGENDA ITEM # Q-1 DEPARTMENT: Office of the City Manager James F. Munch, Interim City Manager TITLE A RESOLUTION AUTHORIZING AND APPROVING AN AGREEMENT BY AND AMONG THE CITY OF PUEBLO, PEDCO FOUNDATION, INC. AND PROFESSIONAL BULL RIDERS INC. RELATING TO JOB CREATING CAPITAL IMPROVEMENT PROJECT ISSUE Should the City Council approve the Master Agreement relating to the Professional Bull Riders capital improvement project? RECOMMENDATION Pueblo Economic Development Corporation recommends approval of the Master Agreement. BACKGROUND In October, 2008, the City of Pueblo (“the “City”), PEDCO Foundation (“Foundation”) and the Professional Bull Riders, Inc. (“PBR”) entered into an employment agreement, on the following terms: The City would advance, from its one-half cent sales and use tax job creating capital projects improvement fund (the “Capital Projects Fund”), an amount not to exceed $7,700,000 towards the construction of Riverwalk Place and an adjacent parking facility. The upper floors of Riverwalk Place (“Unit 2”) were leased to PBR for $0.00 rent, except as described below in connection with the Employment Obligation, and with an option to purchase for $1.00, and PBR also received 180 parking spaces for use adjoining or near Riverwalk Place for no rent. In exchange, PBR: (1) located its world headquarters to the City of Pueblo; (2) constructed and owned Units 1A and 1B of Riverwalk Place; and (3) agreed to employ within the City 76 full-time employees during the period from October 16, 2008 to October 15, 2011 and 180 full-time employees during the period from October 16, 2011 to October 15, 2018 (the “Employment Obligation”). PBR was required to pay $330.68 per month for every full-time employee less than the number required to meet the Employment Obligation as additional rent under the lease (“Additional Compensation”). Under the agreement between PBR and the City, Additional Compensation is to be paid annually in arrears. Since that time, PBR exercised its right to purchase Unit 2, and the Foundation and the City secured the Employment Obligation and the Additional Compensation requirement (which had originally been part of the lease) with a Deed with Right of Entry for Condition Broken (the “Deed”). Current Conditions Since the time of the original agreement, was sold by its original owners, and its business model changed. It no longer has a basis to maintain as many employees in Pueblo. While PBR met its Employment Obligation for the entire period from October, 2008 until October, 2011, PBR did not have enough employees in Pueblo to meet the obligation when it increased to 180 employees in October, 2011, and as of November, 2012, would have had to begin making annual payments of Additional Compensation to the City. PBR, the City and the Foundation therefore have for some time been negotiating revisions to the agreements among the parties to allow PBR to meet a revised employment obligation, to obtain ownership for the City of Units 1A and 1B (which is retail and commercial space opening directly on the Riverwalk but which is being used by PBR as storage and for its printing operations) and to extend the period during which PBR is committed to keeping its world headquarters in Pueblo. Proposed Agreement The proposed agreement the parties have reached, subject to approval by City Council and by PBR’s lender, is as follows: (1) PBR agrees to employee 80 full-time employees within the City of Pueblo through October 15, 2021 (an extension of three years over the original commitment). PBR will pay the sum of $347.39 per month for each full-time employee not provided by PBR at the Riverwalk location or within the City of Pueblo. A breakdown reflecting how this figure was reached, is attached (the “Breakdown”). The requirement to make such payments annually in arrears would not change. The Deed would be amended to reflect this change. (2) Units 1A and 1B would be deeded to the City. The Units have an appraised value of $1,140,000, which would be credited against PBR’s obligations to the City, as shown on the Breakdown. Since PBR is presently using this space, the City would lease it back to PBR for 60 days in order to give them time to relocate their operations. PBR would not pay rent for this time, but the lease would require PBR to pay all costs (utilities, maintenance, taxes, insurance, etc.) in connection with the Units. (3) PBR will provide the City with a “Repucom” national signage and marketing package for two years, valued at $250,000.00 per year, to be credited against PBR’s obligations to the City, as shown on the Breakdown. Under the plan, the City will be provided information on a regular basis as to the plan’s effectiveness through Repucom, and will have the ability to make reasonable adjustments to its national marketing package in response to that information. (4) The parking agreement between the City and PBR will be modified so that PBR gets 85 spaces, rather than 180. The spaces will continue to be rent-free during what was the term of the original parking agreement (through October, 2017), but after that time, PBR will pay monthly fees per space at the then-current City rate. (5) The Riverwalk Condominiums Declaration will be modified. Unit 2 (owned by PBR) constitites 80.2% of all the interests in the condominium. This is a super- majority and would allow the Unit 2 owner to totally control all actions taken or not taken by the Association. As the City would be acquiring Units 1A and 1B (19.8% of the condominium interests), the condominium declaration and by-laws would be modified to require the approval of at least 81% of the interests in the condominium to approve significant actions and changes. Summary of Modified Repayment Obligation Balance (reflecting credits as of 10/15/2012, $4,641,494.41 per City accounting) Value of Unit 1A & 1B ($1,140,000.00) Value of National Marketing Package ($ 500,000.00) Modified Repayment Obligation Total $3,001,494.41 Divided by 108 months $27,791.61 Divided by 80 employees $347.39/employee FINANCIAL IMPACT See Background.