CR 97-09 Close-Out Expenses - Subrurban AllianceG ,n
January 3, 1997 Council Report 97-09
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CLOSEOUT EXPENSES-SUBURBAN ALLIANCE
Proa sed Action
Staff recommends adoption of the following motion: Move to authorize the aavment of
$9.419.47 to Suburban Alliance for the Hopkins share of costs to dissolve the Suburban
Alliance aoencv.
Adoption of this motion will result in the City paying 8.56 percent of the $110,000 estimate for
closing out Suburban Alliance.
Overview
During the spring of 1996 the joint powers cities involved with Suburban Alliance/West
Hennepin Human Services Planning Board, were notified of a significant debt incurred by
Suburban Alliance. Members of the joint powers cities met several times to discuss the future
of the agency resulting in resolutions from member cities expressing the intent to dissolve the
joint powers agency by the end of January 1997.
Staff has been working with the other joint member cities and the board of Suburban Alliance to
establish the costs of paying off the debt and closing out all expenses related to Suburban
Alliance.
It is now estimated that the final close-out amount is going to be $110,000. That final amount is
then broken into each member city's proportionate share, based upon population. Staff is
recommending that the City Council concur with this method of dividing expenses and authorize
a payment to Suburban
Primary Issues to Consider
• How was the close-out amount established?
• What will happen if excess funds are received?
• What are the next steps in closing out the agency?
Suoaortina Documents
• Joint powers cities correspondence-December 23, 1996
• Staff analysis of issues
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teven C. Mielke~
City Manager
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Council Report 97-09
Page 2
Staff Analysis of Primary Issues
How was the close-out amount established?
The debt issues which confronted the agency were primarily incurred in 1995. At
that time, debts equaled somewhere between $80,000 and $90,000. During 1996
the agency has been successfully reducing that amount by significantly cutting
personnel expenses and other costs, and the 1995 debts have now been reduced to
$50,307.
An outstanding issue which has been resolved was the lease agreement between
Suburban Alliance and their landlord. Suburban Alliance signed a five year
agreement which still had three years to go, and a lease payment of $3,000 per
month. The landlord has agreed to a close-out cost of $38,000 which pays all back
rent and leasehold improvements made by the landlord for Suburban Alliance.
There is also an operating deficit for 1996 which is due to several member cities not
paying their 1996 contributions. This amount equals $6,500.
Finally, a contingency has been set up as part of the close-out expenses, in
anticipation of some member cities not paying their proportionate share of the close-
out expenses. By placing this contingency, the other member cities will be able to
effectively close out the agency, whether or not the cities who are hesitating, pay or
not.
The contingency of $15,193 will help pay for legal fees and revenue shortfalls. The
legal fees may be necessary since one of the spin-off organizations owes roughly
$40,000 to Suburban Alliance. The legal fees may also be necessary to help bring
legal action against some of the joint powers cities, should they chose not to
participate.
What will happen if excess funds are received?
The potential exists for excess revenues to be received under this close-out plan. If
the Community Builders organization makes a payment to Suburban Alliance, and if
the member cities all contribute their proportionate share, then the contingency
should not be necessary and could be rebated back to those participating in the
payments. It is anticipated that a system will be set up to allow for the dissemina-
tion of excess revenues back to the member cities toward the end of January.
What are the next steps in closing out the agency?
A final resolution which will call for the dissolutionment of Suburban Alliance is
being prepared and will be distributed to the member cities very soon. All of the
Council Report 97-09
Page 3
member cities must pass this resoiution for the agency to be dissolved. ff even one
_ member city refuses to pass the agreement, then the agency will exist through the
end of 1997 according to the by-laws of the organization. This is not anticipated to
occur, since all cities would like to see the agency dissolved.
Joint Powers Cities
Suburban AlliancelWest Hennepin Human Services Planning Board
December 23, 1996
Steve Mielke
City Manager
City of Hopkins
1010 1~` Street
Hopkins, MN 55343
Dear Mr. Mielke,
The dissolution of Suburban Alliance proceeds on schedule. The agency will
cease operations on January 31, 1997. We have received 19 of 21 resolutions expressing
the intent to dissolve from the member joint powers cities (we are currently missing
resolutions from Medina and Mound). Discussions aze underway about the future of
human services planning and coordination in western Hennepin County.
Many difficult issues have been resolved in the last months. The most significant
is a settlement with the landlord, achieved with the assistance of the Suburban Alliance
Boazd. The landlord released Suburban Alliance from the lease in consideration of a
payment of $38,000, which represents the investment in leasehold improvements made to
the property for Suburban Alliance. This settlement is good news, given that we
anticipated a much higher obligation for the lease. _
Because of the resolution of the lease question and several other issues, we are
now in a position to give you the amount of your city's obligation to close down the
agency and pay the existing debts. The final amount is $110,000. Here is a breakdown
of this number:
1495 Debts
Emergency Service Providers $37,328
FEMA 4,734
Twin Cities Voice Mail 7,545
Jobs Now Coalition 700
Subtotal $50,307
Final Lease Agreement $38,000
1946 Operating Deficit 6.500
Subtotal $94,807
Contingency 15 193
r;:,;,;; TOTAL $110,000
The attached spreadsheet shows the obligation of each of the joint powers cities. Also
included is an invoice for the amount owed by your city.
A few comments on the final calculation, in particular the contingency. The contingency
number consists of $5,000 for legal fees, and over $10,000 to accommodate an
anticipated revenue shortfall. The following provides more detail on these two items.
Legal Fees. One remaining outstanding issue is the final determination of the money
owed to Suburban Alliance from Community Builders, aspin-off organization of
Suburban Alliance. The amount owed is $40,000; however, it is unlikely that
Community Builders can afford that amount. Suburban Alliance and Community
Builders have not yet reached an agreement to resolve the debt. It may be necessary
to initiate legal action to recover some or all of the amount owed, hence the legal fees
number in the contingency. It also may be necessary to initiate legal action against
some joint powers cities. When an agreement or legal settlement is reached and the
money is received, joint powers cities will receive a partial refund.
Revenue Shortfalls. Several joint powers cities (Excelsior, Loretto, Long Lake,
Minnestrista, Mound, and Tonka Bay) have not made their 1996 contribution to
Suburban Alliance or only made a partial contribution. This is a major factor in the
1996 operating deficit of $6,500. In addition, several cities (Long Lake, Loretto,
Minnestrista, and Mound) have indicated a hesitation to pay their share of the close-
outcosts because of questions about membership status in Suburban Alliance. The
contingency includes $10,000 in anticipation of not receiving funds from these cities.
We continue to investigate the membership questions and the possible legal
implications. If the contingency funds are not needed, the joint powers cities will
receive a partial refund.
To make certain that we are able to close the doors of Suburban Alliance on
January 31, we ask that you remit a check to Suburban Alliance by January 17,
1996.
One final action will be necessary, and that is for your city council to pass a
resolution dissolving the joint powers agreement. After the first of the year, we will
forward to you a draft resolution for your use.
Thank you for your assistance and cooperation during this long process. Should
you have questions, please give any of us a call.
Steve Mielke
Hopkins
939-1326
Geralyn $azone
Mirinetonka
939-8200
Kathy Lueckert
Plymouth
509-5052
Wally Wysopal
St. Louis Park
924-2519
Sheet!
Suburban Alliance Member Jurisdictions--Close-out_O_bligations
12(17!96
City Name Population °I° of Total % of 110K
Deephaven 3621 1.88 $ 2,062.64
Excelsior 2367 1.23 $ 1,348.32
Hopkins 16536 8.56 $ 9,419.47
Independence 2952 1.53 $ 1,681.56
Long Lake 1951 1.01 $ 1,111.36
Loretto 494 ~ 0.26 $~ 281.40
Maple Plain 2094 1.08 $ 1,192.81
Medicine Lake 373 0.19 $ 212.47
Medina 3628 1.88 $ 2,066.63
Minnetonka 50569 26.19 $ 28,805.81
Minnetrista 3758 1.95 $ 2,140.68
Mound 9592 4.97 $ 5,463.93 '
Orono 7444 3.85 $ 4,240.35
Plymouth • 28696 14.86 $ 16,345.93 _.
Shorewood 6613 3.42 $ 3,766.99
Spring Park 1757 0.91 $ 1,000.85
St. Louis Park 43641 22.60 $ 24,859.39
St. Bonifacius 1192 0.62 $ 679.00
Tonka Bay 1487 0.77 $ 847.05
Wayzata
3860
2.00
$ _
2,198.79
Woodland 482 0.25 $ 274.56
i
Total 193107 100 $ 110,000.00
* Plymouth also is served by Northwest Hennepin Human Services.
The City contributes to both organizations based on 1/2 population.
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