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HomeMy WebLinkAboutminutes.council.20070129 ~/JA~ ,,,,,,,,,,' f (1,0 ,.'>(J -'1; "e~"")::1 rU;?/",n'"~ - <'J . (... c, I '.' 7 r . THE CITY OF ASPEN January 25, 2007 NOTICE OF SPECIAL MEETING At the request of Mayor Helen Klanderud, there will be a special City Council meeting Monday, January 29,2007, at 4:30 p.m. meeting in the City Council Chambers, 130 South Galena Street, Aspen, Colorado. The agenda for this meeting will be c 1. 2. Isis Theatre Draft Energy Resolution 2nd Reading - Ordinance #1, 2007 - Authorization Lease/Purchase Agreement ' , COUNCIL MEETING WILL BE FOLLOWED BY A SPECIAL MEETING OF THE ASPEN PUBLIC FACILITIES AUTHORITY, DOCUMENTS A TT ACHED Notices delivered to: Mayor Helen Klanderud Councilmembers Torre J. E. DeVilbiss Jack Johnson Jasmine Tygre City Manager Barwick City Attorney Worcester special.not '~ 130 SOUTH GALENA STREET . ASPEN, COLORADO 81611-1975 . PHONE 970.920.5000. FAX 970.920.5197 www.aspengov.com Prinl~d on Recyded Paper Special Meetin2 Aspen City Council Januarv 29. 2007 """.,,,"- Mayor Klanderud called the special meeting to order with Councilmembers Tygre, Torre, Johnson and DeVilbiss present. "- John Worcester, city attorney, told Council there are two subleases and a deed restriction for the Isis building to be approved before second reading of Ordinance # 1, 2007, which authorizes the certificates of participation to purchase the Isis building. Worcester reminded Council during discussions ofthis arrangement, the parties represented the retail operation would be defined and limited as "mid-level" uses, Worcester asked the representatives to explain the definition in the agreement. Worcester told Council he recalled the discussion that mid-level uses were defined as Banana Republic, Gap or Eddie Bauer. The proposed definition is more expansive. Courtney Lord, representing the Isis Retail Group, said the 5 categories are popular price, luxury, and 3 middle categories with department story type merchandise, on which the applicants intended to focus. Lord gave examples of "moderate", "bridge" and "better" and they have been talking to representatives of all 3 categories. Worcester told Council when this was originally discussed; he did not have a definition for "mid-level" and asked the applicants for a definition. Mayor Klanderud stated the definition in the agreement does not contradict her understanding. Lord noted he listed the types of stores so that Council would have an idea of what might be expected. Councilman Johnson said the stores listed meet his idea of "mid-level". Councilman Johnson said he likes the inclusion of "local businesses" and not just national businesses. ""...- Councilman Torre said he would like to see a mix of retail tenants. Lord said the space has one storefront which is large enough to divide into two spaces. Councilman DeVilbiss opposed the length of the lease at 30 years. Councilman DeVilbiss also opposed how broadly this is written and that he would like to see local businesses. Councilman Torre said he is disappointed that it may be one store only and one store in the better category. Councilman Torre said the better category seems to be moving away from the mid-level category. Mayor Klanderud said the advantage of a broader definition is that there are more retail stores from which to choose. Council agreed section 5.0l(c) is acceptable as written. ....... ~'- Worcester said the next issue concerns Section 13.04.3, "in no event shall the AH units be sold separately from commercial unit I, and in no event shall commercial unit I be sold separately from the AH units". Worcester said commercial unit 1 is the retail space and the AH units follow the sublease for the retail portion ofthis agreement. Worcester noted this has not been discussed by Council. Worcester said the two units should be treated as one; the retail group would like the paragraph stricken so they have the option of selling the units separately from commercial unit I. The units will continue to be deed restricted for affordable housing with Filmfest having the right of deciding who the tenants are, the city having second rights and the Isis group having 3 rd rights. Lord told Council there are 2 employee housing units, which are part of the leasehold interest. Lord said they have offered approval of tenancy to Filmfest and then the city. Lord said in the event they sell their interest, the purchaser of the retail space would have an interest in owning employee housing in Aspen. Councilmembers Tygre, DeVilbiss and I -------.-- ~.-. .'..~--.,.~..- Special Meetin2 Aspen City Council Januarv 29, 2007 r "- Mayor Klanderud agreed the affordable housing paragraph could be deleted as the housing will continue to be deed restricted. Worcester suggested this item be continued until after the work session Councilman DeVilbiss moved to continue the public hearing until after the work session; seconded by Councilman Torre. All in favor, with the exception of Councilman Johnson. Motion carried. Mayor Klanderud reconvened the special meeting at 7:20 p.m. Worcester noted a major representation by the Isis group is that the building would be deed restricted in certain manner, that the retail will be used for "mid-level" retail uses. The Isis Group has requested that the deed restrictions would terminate if the city non- appropriates. Worcester reminded Council COPS are subject to city appropriation every fiscal year and Council could decide not to appropriate funds to pay the COPS and in that event, the Isis Group would like the deed restriction to go away. Worcester said the insurer ofthe COPS would like that provision on the theatre side but not on the retail side as they do not feel there is a risk to the trustees if the Council does not appropriate because there will be a demand for retail. The insurers are more concerned about having to deal with non-appropriation for the theatre side. - '- Lord said they feel this is an issue offairness. All parties have given and taken during these lengthy negotiations. Lord said there deed restrictions are in exchange for the city providing 30-year low interest rate financing. The financial deal has been structured with annual appropriations. Lord said the agreement reached with the city's bond counsel is if the city does not appropriate the funds to pay the COPS that Isis Group has a short period of time to purchase the property from bond counsel. Herb Klein, representing the Isis Group, said raising money in the event the city defaults will be a challenge and it will be complicated by a restriction on the property. Klein said the deed restriction should not burden the Isis Group if they have to go and buy the property. Klein said this should apply to both the theatre and the residential group. Klein noted the MOU states the mid-level retail restriction is to be part of the sub-lease. The theatre and restaurant use restriction are stated as being deed restrictions. Whoever buys this property at foreclosure should be able to buy it free and clear ofthe restriction. Keeping this restriction in the event of a default is inconsistent with the MOU and is unfair and treating the retail space differently from the theatre. Worcester said it would not be in the city's interest to default. Worcester said he wanted Council to know the deed restriction contains the provision that if the city defaults, the deed restriction would remain. Worcester reminded Council a decision will have to be made every fiscal year whether to appropriate for the next year. The amount the city will pay into the COPS will be recovered from a sublease rentals received from Filmfest and Isis retailer. p'--", Worcester noted if the city does not appropriate the funds, the Isis Group has a right to purchase the building by paying offthe COPS. If the Isis Group does not purchase the building, the trustee has a right to the building and the trustee would like the theatre side "- 2 - "- -~ - ----",--_.. ..._-_..__.__.~-~.--~". Special Meetin2 Aspen City Council Januarv 29, 2007 without the deed restrictions. Steve Jeffers, city's investment banker, told Council the insurer wants a requirement that the deed restriction go away if the city does not appropriate the funds. They included a right of first refusal for the remaining amount of the undefiesed principle. Jeffers said the Isis Group would get to purchase the property for the remaining amount and if they buy it, the city gets nothing out ofthat. This is a good reason for the city to appropriate the funds annually. Worcester noted the deed restrictions could be lifted in the future, if appropriate. Lord noted ifthere are any profits after the Filmfest and retails lease payments, those were always the subtenants' profits. Lord said the quid pro quo is the city providing 30- year low interest financing and the other parties agreeing to restrictions on use and other restrictions. The city cannot sign a 3D-year lease; the agreement is structured to depend on annual appropriations. The failure of the city to appropriate the funds, which are a pay through from the tenants, would be a default under the lease with the authority. Only under a default of the city would the Isis Group have to go to the commercial market and pay a different financing rate, which should also be a penalty to the city side of the agreement. Worcester outlined as the value ofthe building goes up, the Isis Group could buy the building for the outstanding COP payments, which is a hidden equity. Worcester said there is also hidden equity of the difference of the value of the building with a deed restriction and the building without the deed restriction. Herb Klein, representing the Isis Group, said this is a lease/purchase agreement and rent payments go toward the purchase price. The tenant, with an option to purchase the premises, is always building equity with rent payments. The agreement provides at the end of 30 years, if everyone does what they have agreed to, the Isis Group gets to buy the space for $10. Jeffers reiterated the insurers require the deed restriction on Filmfest to be eliminated. Klein said the Isis Group would not be treated equably. Also this would be a change in the memorandum of understanding. Worcester said he only recently discovered that the insurer wanted the deed restriction lifted on the Filmfest side and they did not care about the retail side. Councilman Torre said he is not compelled to lift the deed restriction on the retail side. Councilman Torre said this deed restriction can be lifted at a later time when more appropriate. Councilman Torre stated he does not feel this will be an issue. Klein noted the MOU states there will be a perpetual deed restriction that the theatre remain a theatre and that the sub-lease will require mid-level retail. Klein said Council is suggesting the theatre restriction be removed and not make that a deed restriction ifthere is a default by the city but impose the deed restriction on the retail side. Paul Menter, finance director, said it is not in the city's interest to waive this deed restriction now. It is a benefit that a mid-level retail store will be in this building, and this is part of the agreement. Menter pointed out this does not waive Council's ability to waive that at some time in the future. Council voted that the deed restrictions for the Isis Group not be lifted. 3 Special Meetin2 Aspen City Council Januarv 29, 2007 "- Worcester recapped the items addressed by Council for the agreement are that the definition of mid-level retail is fine the way it is; that affordable housing can be broken if the commercial unit #1 is sold, and that the deed restriction for Filmfest may be vacated upon nonappropriation and the deed restriction on the retail side may not be vacated. Councilman Johnson moved to Resolution #7, Series of2007, approval ofIsis subleases and deed restrictions as amended; seconded by Councilman Torre. Councilman DeVilbiss said the definition of mid-level retail is too broad and he cannot support it. All in favor with the exception of Councilman DeVilbiss. Councilman Torre moved to approve Ordinance #1, Series of2007, on second reading approval of certificates of participation to purchase the Isis; seconded by Councilman Johnson. Roll call vote; Councilmembers DeVilbiss, yes; Johnson, yes; Torre, yes; Tygre, yes; Mayor Klanderud, yes. Motion carried. Councilman Johnson moved to adjourn the Council meeting at 8:40 p.m.; seconded by Councilman Torre. All in favor, motion carried. ASPEN PUBLIC FACILITIES AUTHORITY President Helen Klanderud called the meeting of the public facilities authority to order at 8:40 p.m. Members present Jasmine Tygre, J. E. DeVilbiss, Torre, Jack Johnson, and Paul Menter. '''''''~ Paul Menter, treasurer, told Council the resolution before the public facilities authority authorizes the issues of certifications of participation and approves the acquisition documents. Torre moved to approve Resolution #1, Series of2007; seconded by Johnson. All in favor, motion carried. Johnson moved to adjourn at 8:45 p.m.; seconded by Torre. All in favor, motion carried. ~ ...,.-."" - 4