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CR 2004-109 Hopkins Pavilion Addition Revised Agreements CITY Or- . . July 2,2004 00PK\NS Council Report 2004-109 Hopkins Pavilion Addition Revised Agreements Proposed Action Staff recommends adoption of the following motion: "Move to approve revisions to the Ground Lease AQreement and Construction Disbursing Aqreement with Hopkins Youth Hockey Association for the construction of an addition to the Hopkins Pavilion." Overview Hopkins Youth Hockey Association Board met on June 21 S\ 2004 to discuss and vote on the agreements. The issue of liability to HYHA concerning hazardous substances at the construction site was brought to the board for discussion. A motion was made to approve all documents subject to satisfactory provisions, limiting the liability of HYHA for existing environmental conditions as approved by HYHA legal counsel. HYHA legal council has discussed and requested revisions to the ground lease that they feel would adequately indemnify HYHA and its agents from any existing hazardous conditions. Staff has met with the city attorney and discussed the cities response to the request. For the project to continue to proceed, staff is asking council to approve the revisions drafted by city attorney that indemnifies HYHA and MA Mortenson Construction Company for any existing environmental hazardous conditions. All . available data concerning the soil conditions has been reviewed and staff feels the risks of any contamination is minimal. Primary Issues to Consider . Ground Lease Revisions. . Construction Disbursing Agreement Revisions. . How do the revisions to these agreements affect the City's position? Supporting Information . Ground Lease Agreement Revisions . Construction Disbursing Agreement Revisions :~\. (';'t?~eJV\ Don Olson Pavilion Manager Financial Impact: $ N/A Budgeted: Y/N Source: I Related Documents (CIP, ERP, etc.): . Notes: Council Report 2004-096 Page 2 . Analvsis of Issues . Ground Lease Revisions Paragraph 31 was added to the Ground Lease and basically states that the City has the right to direct stoppage and/or terminate the improvement if hazardous substances are found in the soil. Any removal or cleanup of any hazardous substances will be done at the expense of the city. The City also releases HYHA and Mortenson from any liability resulting from the presence of hazardous substances, except those liabilities due to negligence. If the improvement project is terminated the ground lease will also terminate. The revisions added to the ground lease have met the approval of the legal council representing HYHA. Staff has reviewed all the data that could be found including soil borings, excavation observation report from when the Pavilion was built, and reviewed other projects as to when the soil was disturbed. We found no circumstances where a hazardous substance or condition exists. Staff feels the risks of encountering unfavorable conditions in the improvement site would be minimal. . Construction Disbursing Agreement Revisions Paragraph 18 was added to the Construction Disbursing Agreement, which . outlines how the City will stop or terminate the improvement and how any improvement expenses at the time of termination will be disbursed. The City would be responsible to disburse the contract sum to Mortenson for the work performed to the date of the termination. Mortenson would not be able to recover any other additional compensation due to the termination of the project. The Construction Disbursing Agreement would terminate once payment is made. Revisions to the Disbursing Agreement meet the approval of HYHA legal council and MA Mortenson Construction Company. . How do the revisions to these agreements affect the City's position? The new language clarifies responsibilities and lays out procedures. It clarifies that the City is responsible for pre-existing contamination and doesn't intend to hold HYHA or Mortenson responsible unless they intentionally or negligently do something to make the condition worse. The language lays out the procedure that should a contamination problem be found once digging begins it is required that the City be notified and then has the right to suspend construction until it is resolved as to what to do about the contamination. While this was implied or inherent in the previous drafts of these agreements (since the City owns the land) the new language creates clarity and procedures relating to the implied or inherent risk of contaminated soils. . . If this Lease is extended in accordance with the terms and conditions stated above, no further document or instrument evidencing extension shall be required, this Lease shall remain in effect in all of its terms and conditions and all references in this Lease to the "Leased Premises" shall mean and include the land described in Exhibit B attached hereto and the Improvements. In the event Tenant fails to give Notice of Extension to Landlord in the time and manner provided above, this Lease shall automatically terminate at the end of the current term, and Tenant shall have no further right or option to extend this Lease. When used in this Lease, the phrase "term of this Lease" or similar phrases shall mean and refer to the original term of this Lease and the extended term thereof. 31. LANDLORD'S RIGHT TO DIRECT THAT CONSTRUCTION STOP. If, during the course of construction of the Improvements, Hazardous Substances or suspected Hazardous Substances are found to be present on or beneath the surface of the Leased Premises, Tenant shall direct M.A. Mortenson Company to discontinue construction of the Improvements and immediately notify Landlord of the presence of such Hazardous Substances. Tenant agrees construction activities shall be suspended while Landlord and Landlord's consultants inspect the Leased Premises and the suspected Hazardous Substances present thereon and evaluate the proper course of action to remediate or remove the Hazardous Substances from the Leased Premises. Construction activities will not resume until Landlord and Landlord's consultants have determined the proper method for remediation or removal of such Hazardous Substances, have obtained all governmental or regulatory agency approvals required for remediation or removal and have notified HYHA construction may resume. All such remediation or removal shall be performed at . the expense of the City, and the City shall make no claim against Tenant or M. A. Mortenson Company for any liability, cost or expense incurred by the City as a result of the presence of Hazardous Substances on the Leased Premises, with the exception of any liabilities resulting from the negligent or intentional act of Tenant or M. A. Mortenson Company in the handling or disposal of Hazardous Substances present on the Leased Premises. If the Landlord determines, in its sole discretion, that completion of construction of the Improvements is impractical or unfeasible as a result of the presence of such Hazardous Substances on the Leased Premises, Landlord shall be entitled to terminate this Lease by written notice to Tenant and, upon delivery of such notice to Tenant, this Lease shall terminate and neither Landlord nor Tenant shall have any further rights or obligations hereunder. IN WITNESS WHEREOF. the pm1ies hereto have executed this Lease Agreement this day of ,2004. . 16 c: Hop civi I\Lease. Y out h Hockey - --- . 15. Any notice or other communication which any party hereto may desire or may be required to give to any other party hereto shall be in writing, and shall be deemed to be duly given when mailed by first class United States mail, postage prepaid, addressed to the parties' addresses as stated in the first paragraph of this Agreement or to such other addresses either party. by notice given as herein provide, shall designate. Mailed notice shall be conclusively deemed to have been given one business day after the date of mailing. 16. This Agreement is made and executed under the laws of the State of Minnesota and is intended to be governed by the laws of said State. 17. If any provision of this Agreement or the application thereof to any person or circumstances shall be determined invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provisions to other persons or circumstances shall not be . affected and the remainder of this Agreement shall remain enforceable in accordance with its terms. This Agreement shall bind and inure to the benefit of the parties hereto and their respective heirs, transferees, successors and permitted assigns. 18. References is made to Section 31 of the Ground Lease which provides the City is entitled to direct that construction of the Improvements be suspended or discontinued in the event "Hazardous Substances", as defined in Section 26 of the Ground Lease are found to be present on or beneath the surface of the Premises. In the event the City directs that construction of the Improvements be suspended in accordance with the provisions of Section 31 of the Ground Lease, HYHA shall direct Design Builder to suspend construction and construction shall be suspended until the City notifies HYHA construction may be resumed. In that event, the Completion Date shall be extended by a time period equal to the length of time construction was suspended at the . c: I Jopcivil\CollstructionDish^gt. Youth Hockey 9 -- -- . direction of the City. In the event the City directs that construction of the Improvements be discontinued and terminates the Growld Lease in the manner provided in Section 31 thereof, HYHA shall direct Design Builder to discontinue construction and the Construction Contract shall be terminated, effective on the date the City serves notice of termination of the Ground Lease on HYHA In the event the Construction Contract is terminated pursuant to the provisions of this Paragraph 18. the City shall disburse that part of the Contract Sum due to Design Builder for work actually performed prior to the date of termination, subject to compliance with the requirements of this Agreement applicable to disbursements by the City. Upon such payment, this Agreement shall terminate and the City shall have no further obligation to make disbursements of the Contract Sum. In no event will the City be liable for any lost profit, "benefit of the bargain", incidental or consequential damages resulting from the termination of the Construction Contract. All . remediation or removal of Hazardous Substances present on the Premises shall be performed at the expense of the City, and the City shall make no claim against HYHA or Design-Builder for any liability, cost or expense incurred by the City as a result of the presence of Hazardous Substances on the Premises, with the exception of any liabilities resulting from the negligent or intentional act of HYHA or Design-Builder in the handling or disposal of Hazardous Substances present on the Premises. By consenting to this Agreement, Design-Builder agrees to be bound by the terms and conditions stated in this Paragraph 18. IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the day and year first above written. . c: Hopcivil\ConstfuctionDisbAgt. YOLJthllocke~ 10