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HomeMy WebLinkAboutminutes.council.19751103 Special Meeting Aspen City Council November 3, 1975 Mayor Standley called the s~eical meeting to order at 5:05 with Councilmembers Behrendt, De Gregorio, Johnston, Parry, City Manager Mahoney and City Attorney Stuller present. The planning office had requested a study session on the Rio Grande site planning. The Council set this session for Wednesday November 5, 1975, at 5:00 p.m. The Council decided to alternate times for study sessions between 5 p.m. and 7 p.m. Harry Brown HARRY BROWN'S - Purchase and Sale John Wendt, representing Jerome Michael, told Council he had filed all the necessary ~documents as far as the application was concerned. Wendt submitted for the record !'~l~he consent and assumption of the lease; copy of the trade name affidavit; copy of !'the assignment and assumption of the lease which is currently in effect; copy of the ~ ~scrow Agreement with respect to Aspen Lum profits for payment of the accounts pay- ' ~able. Wendt showed complinace with Colorado bulk sales with this escrow agreement. Wendt also presented a copy of the management agreement between Michaels, Inc., and Jerome Michael. ~- .Wendt told Council he felt that the applicant had demonstrated'both financial and , ~character integrity, which is required for a stockholder and director of a liquor- ~li~ensed company. Wendt noted there was concern that Jerome Michael might have ~multiple financial interests in liquor licenses. Wendt told Council he had gone to ~the Attorney General's office in Denver and had obtained an opinion of theAttorney General, stJ [1 ~n effect. This opinion allowed husband and wife to own separate liquor licenses as %~ong as it was bona fide separation and one was not the front for the other. --~ , Wendt told Council he felt he and Jerome Michael had dealt with this situation with a great deal of candor. Michael originally thought he could go into this deal with Klaus Christ. There was no way for Klaus Christ to participate in this new license. In orde for Michael to operate this new license, he had to divest himself of interests in the Ute City Banque. John Wendt had filed with the City Clerk a gift tax return giving Susan Michael all Jerome Michael's stock in the Ute City Banque. Jerome Michael had signed an accounts payable for the Ute City Banque for monies previouSly advanced which is part of the gift tax filing as well. Wendt told Council he believed that Michael had completley complied with the requiremen of the State of Colroado and the local licensing authority with respect to Jerome Michael divesting his interest inthe Ute City Banque. Wendt told Council that Susan Michael would not be an active manager of the Ute City Banque. Jerome Michael will continue to be under management agreement. Jerome and David Michael will both be paid $2,000 a month; David for the food management operations, and Jerome for the bar and payment of bills. The profits will pass through to David Michael and Susan Michael each as 50 per cent owners. Mayor Standley stated that City Attorney Stuller had summarized the legal positions in her memoranda to Council. The only question raised is whether this is a bona fide transaction. Wendt pointed out to Council that if Susan Michael ever threw a suit at Jerome Michael, this transaction has changed what is her property. Jerome Michael has changed his position legally by making a gift tax of his shares of the Ute City Ba~que to Susan Michael. C~ty Attorney Stuller asked that a copy of the October 29th memorandum to the City Council, her letters of October 6th and September 30th to John Wendt, a copy of John Wendt's memorandum of October 24th, and a copy of the 1952 Attorney General's opinion be submitted for the record. City Attorney Stuller told Council that on Friday, October 31, 1975, Jerome Michael submitted minutes of the Board of Directors meeting where he conveyed his interests in the Ute City Banque to his wife, Susan Michael, and voted her in as director and vice-president. Also submitted was an agreement between David, Jerome, and Susan Michael to waive notice requirements. Jerome Michael submitted his resignation as director of Michaels, Inc. There is a gift tax return which showed a conveyance to Susan Michael of 400 shares in Michaels, Inc. at a value of $400. There is an agreement to Michaels, Inc., in which the officer are David and Susan Michael and Donald Fleisher, and the stockholders are David and Susan Michael. There is a capital Stock certificate for 400 shares to Su~n from the Corporation~ and a ~ancella~i~n ~ 400~ha~es held by Jerry. Citv Attorney Stuller told Council that the file was in order; ~but there remains unreSolved the question asl toi~hether or not this transaction would be in vioiatffon of ~state ~tatutes which prohibit a licensee frcm conducting another licensed establi~hnent or being directly, or indirectly~ J~ interested in another City Attorney Stuller questioned Jerome Michael about the transaction. Ms. Stuller asked Michael if the Board of Directors issued any dividends under Michaels, Inc. Jerome MiChael answered "yes". Ms. Stuller asked how much per share, for how many. Michael answered $20,000 for 800 shares. Ms. Stuller asked how many times the officers of the corporation had met. Michael answered twice. Ms. Stuller asked what went on. Michael said the basic format of filing an annual report; the meetings were pure formality of those things necessary in terms of a corporate status. Councilman Wishart entered the Council meeting. Ms. Stuller asked if managerial decisions about operating the restaurant were made at these meetings. Michael answered no. Ms. Stuller noted reference made to the management agreement of Michaels, Inc. whereby Jerome Michael would receive $2,000. Jerome Michael told Council that the operation of the restaurant were specifically divided within the contract. The contract basically is set up for a three year period to be extended on at one year intervals. The contract specifically states the terms of dissolving Jerome Michael's relationship. ~ Ms. Stuller asked what Michael's salary was at the Ute City Banque at present. Michael answered $12,000. Ms. Stuller asked if the Ute City Banque pays Jerome Michael $24,000 a year, will they pay dividends next year, and what do they anticipate that dividend to be. Jerome Michael asked why the City Attorney was asking these questions. Ms. Stuller sai she wanted to be sure that he and the Ute City Banque were two distinct and separate enities. Michael answered after his salary and his brother's salary, the Ute City Banque anticipates $50,000 in net profits for the next year. Ms. Stuller asked Michael ~Whether in~relying0n his exp~rien¢~s a restauranteur, $24,000 was an appropriate salary. Michael said he had no way of knowing; he did not know what other restaurant managers made. Ms. Stuller said that the valuation given to the share is $400 in the gift tax and asked who made that valuation and how. Michael answered Reese Henry, $1 par value. City Attorney Stuller asked Jerome Michael if he had any arrangements in the event of Susan Michael's death or their divorce, would the shares be reconveyed to Jerome. Michael answered no arrangements and the shares would not be reconveyed. Ms. Stuller asked if Jerome and Susan Michael filed a joint tax return. Michael answered they had done both; a joint Federal and a separate State. Ms. Stuller asked if Jerome Michael had ever given a gift of this kind to his wife, Susan before, or had he ever been the recipient of a gif?of:this.kind frc~herzMichael answered ~oi' : Ms. Stuller asked if it was Michael's position that Susan would not be involved in the management of the Ute City Banque but only as a share holder and director. Michael answered that was his position Councilwoman Johnston said her only problem was that this might be a paper transfer onl Councilwoman Johnston stated she felt this part of the liquor code was antiquated, but it was the law. Attorney Wendt pointed out that Jerome Michael has set up a separate Corporation. Historically, as long as the transaction is done openly and properly, it is the one way that the prohibition against Michael ownership of this new establish~ with her own assets..i The only correlation in that case was the fact that they had at one time filed a joint tax return. In this case, the husband not only started the first operation, but will continue to manage not only the first but also the second operation. City Attorney stuller asked Council if this was a bona fide purely business transaction, or was this done in order to avoid the consequences of the law. City Attorney Stuller told Council she felt that Jerome Michael had been very open, that he runs his business well. There is nothing inherently wrong with a man running two operations, but Ms. Stuller stated she had to stand for the law as it stands. Ms. Stull~ stated it was quite clear to her that Jerome Michael would be running two businesses. John Wendt stated that for some reason it seems objectionable to make a bona fide gift. The law recognizes a gift as being proper. Wendt pointed out that Jerome Michael was entitled to be an employee; the fact that he is being paid $24,000 for managing one portion of Ute City Banque's business is an economic reality of how well the Ute City Banque does. Wendt told Council that Jerome Michael will have to devote as much time to Michaels, Inc. to maintain business because historically, Harry Brown's is not the best financial risk. Wendt stated that he objected to the imposition of the City Attorney. Wendt said it was the City Attorney's judgement up to this point in time that what he and his client were doing was wrong. Wendt said that he had dealt con- sistently with candor. City Attorney Stuller replied that she had been solicited to voice an opinion and that is the only time she had interjected any type of bias. City Attorney Stuller pointed ou~ the timing of filing all the necessary documents a rushed series of paper shuffling. City Attorney Stuller added that she agreed Jerome Michael was as open, but given the integrity of the law involved, she could not support the application. Councilman Parry asked if a law is broken, isn't it Michael's responsibility. City Attorney Stulle~ replied that as the local licensing authority, the Council had to determine if this transaction was consistent with the law. Mayor Standley pointed out that there were liquor licenses serving four bars. Mayor Standley said he felt that was a direct attempt to subvert the law. Mayor Standley said that here was a situation where the applicant had a proven track record by running a good business. Mayor Standley said it seemed to him that one of the Council's objectives as a governing body of the City is to see that good businesses are run. Businesses that are run well are an asset to the community. Mayor Standley stated he did not have any problem with the process that is going on in order to allow Jerome Michael to own another business. Councilman Behrendt said he was impressed by the fact that the shares have been transferred to Susan Michael, and to him this indicates that this is more than a paper shuffling operation. Councilman Wishart said that the law probably is archaic; he had nothing against a family having two liquor licenses. Councilman Wishart stated as the governing body for the State, if the Council agrees to this they are setting a precedent. Councilman Wishart said he felt the Council should think about this; it is not the Council's position to change state laws. Jerome Michael told Council he had gone to~D~nver and talked to William McCoomb, State Liquor License Department, and Michael had told McCoomb how this project had evolved. Michael said he told McCoomb that he had been partners with Klaus Christ, who was the owner of another restaurant. Michael had shown McCoomb Ms. Stuller's letters in which she made comments about the two (Krist and Michael) owning a liquor license. McCoomb agreed this was not possible. Michael said the next step had been to begin the process of transferring stock in the Ute City Banque to Susan Michael. McCoomb said there was no problem. McCoomb told Michael it was inmaterial as far as he was concerned as there are many instances in the State where husband and wife own separate liquor licenses. Michael told Council that if he and Susan got a divorce and lived together, the whole transaction would be perfectly legal. Michael also told Council that if he and Susan got a divorce in the future, there is nocdoubt in terms of legality as to who has owner- ship of the Ute City Banque. Councilwoman Johnston agreed with Councilman Wishart's statement; as the governing board it is the Council's responsibility to uphold the state laws. Councilman De Gergorio said he felt that Jerome Michael had a right to manage a place as well as ~own one. Councilman De Gregorio said Michael had clearly showed that he had divested all interest in the Ute City Banque; all he is doing is working there. Councilman Behrendt moved to approve the transfer of the liquor license; seconded by Councilman De Gregorio. All in favor, with the exception of Councilwoman Johnston. Councilman Wishart abstained as he has a conflict of interest. Motion carried. ASPEN ATHLETIC CLUB- (Formerly CDES Building) - Request to move building on site. Robin Molny, architect, appeared on behalf of Nick Coates, owner of the Aspen Athletic Aspen Club, formerly the CDES building. Molny read a memorandum to Council explaining the Athletic the request for this move. The memorandum stated that this building was granted a Club - building permit under Ordinance 19 in September 1974. In that permit, the building request to was located immediately adjacent to the west property line with a blank firewall in move buildin anticipation to a future building on the adjacent property. Molny told Council that on site due to financing difficulties, construction was not pursued. During this time, new zoning codes had been adopted and the zoning has changed, reducing both building height and density. The request of Council in this memorandum was to allow the move of the building five feet from the west property line towards the east property line. The floor plans and building orientation would not be changed. Molny told Council the west side of the building will be enhanced by the addition of windows instead of a blank fire wall. Molny also stated there is a large cottonwood tree immediately adjacent to the west property line. The building had been designed around this tree, but moving the building towards the east would further insure saving this tree. Molny stated that if the proposed zoning changes of the immediate area are enacted, a minimum midblock open space of ten feet between the office building and future develop- ment to the west would result as R/Mf zoning requires a five foot set back. Molny told Council he had spoken with City Attorney Stuller, who had reservations regarding this procedure. Clayton Meyring, building inspector, felt this was a major chan which would require a new building permit. Molny was asking Council's decision on this issue. City Attorney Stuller Council the problem was there was no code provision to allow this type of amendment, this may set a precedent. Mayor Standley pointed Out that the RBH building had been allowed to move on the site to avoid cutting down three trees. City Attorney Stuller said the RBH building had been allowed to move because they ran into soil instabilit~ problems. Councilman Behrendt said he would not like to see the City stuck with the blank fire wall staring out forever. Councilman Behrendt said he would like to see the building moved, if it were possible to do so without subverting the process. City AttOrney Stuller told Council they would have to make legitimate rationale for exercising their police power and that would require an ordinance. City Attorney Stuller pointed out that the location of the building is part of the building permit application and this would be a major change of the building permit. Mayor Standley said based on his attitude on trees, that i reason enough to move the building. Councilwoman Jonnston aSked Molny if anything else was changing at all. Molny answered "no". Councilwoman Johnston asked if the building would be right on the sidewalk. Molny told Council the building would be closer to Highway 82; the character of the open space would change. Councilman Behrendt reiterated at least the Council could keep the blank wall from being there. Councilman Behrendt said he would like to see it moved provided it doesn't upset the department heads or the establishment. Louis Koutousobos, representing the adjacent property owners told Council that they as adjacent property owners were seeking Court action abjout Mr. COates' overdig. Koutousobos told Council they had tried to come to terms about this problem. Mayor Standl, told both Koutousobos and Coates that this was not the proper place or time to discuss thi: problem. Councilman De Gregorio said he would like to see this happen but not by Subverting Clayton Meyring's authority. Councilman De Gregorio said the Council could recommend changes but still make it Meyring's decision. If it comes to the point where the Council makes the decision, Councilman De Gregorio said he would vote against it. Councilman Behrendt point~d out that an ordinance would take five weeks. Molny said they did not have that kind of time. Mayor Standley suggested that City Manager Mahoney and Building Inspector Meyring sit down, discuss Council's feelings on this matter, and let Meyring make the decision from there. Mayor Standley said he felt Meyring would like Council's assurance that they will support his decision. ~ayor Standley said he would like to see Council endorse the modifications to this building; and that the Council will support the building inspector if he makes these changes. City Attorney Stuller said this was not within Council's perogatives. They can not recommend that he allow changes to these plans. City Attorney Stuller said she could not support this action as it cound not be construed to have any effect except to be used as leverage to force a city administrator to change his position. Councilman Behrendt agreed that the Council was making a dangerous precedent by subverting the department heads' perogatives. Councilman Behrendt added he wanted the blank wall broken in any way possible, but not enough to subvert the whole process. Mayor Standley said the Council should try to get what they think is the best for this community. Sometimes the Council does not have the right tools. Mayor Standley stated there is no reason to live with something the Council doesn't want because they have not created the way to get it. ~ City Manager Mahoney told Council he was not aware of the problems and processes involved. Mahoney said he would like a chance to talk with Meyring and Ms. Stuller and then get back to Robin Molny with a decision. Mahoney told Molny this would only take two or three days Council and Molny agreed to this approach. Councilman De Gregorio moved to adjourn at 6:10 p.m.; seconded by Councilwoman Johnston. All in favor, motion Carried. ath~yn S. Hauter City Clerk Regular Meeting Aspen City Council November 10, 1975 The meeting was called in order at 5:10 p.m. by Mayor Pro Tem, De Gregorio, with Councilmembers Behrendt, Johnston, Parry, Wishart, City Manager Mahoney and City Attorney Stuller present. MINUTES Councilman Parry moved to approve the minutes for October 14, and October 27, 1975; seconded by Councilman Wishart. All in favor, motion carried. ACCOUNTS PAYABLE Councilwoman Johnston questioned the money out of mall maintenance paid to Jim Furniss in October; there were two checks in October. Finance Director Butterbaugh told Council the only money paid to Furniss was the contract price of $750 every two weeks and any- thing paid out of his own pocket. These checks don't come out of the regular payroll and perhaps the checks had been delayed some. Councilwoman Johnston questioned Furniss' salary coming out of mall maintenance. Ms. Butterbaugh told Council she felt this was an appropriate place for this.