CR 97-162 Approval Of Shady Oak Beach OperationsSeptember 16, 1997
Supporting Documents
• Improvements and Operations agreement
Dave Johnson
Director of R
reation Services
CR97 -162
APPROVAL OF SHADY OAK BEACH OPERATIONS AGREEMENT
Proposed Action
Staff recommends the following motion: Move to approve a Shady Oak Beach
improvements and operations agreement with the City of Minnetonka.
Ov rview
At the September 2, 1997 meeting, Council reviewed a draft agreement developed by
staff detailing long term improvements and operations for Shady Oak Beach. Language
contained in the agreement establishes ownership of the property and "facility ", and
clarifies responsibilities regarding design, construction, operations, maintenance,
dispute resolution, liability and insurance. The draft agreement was also reviewed by
the Minnetonka City Council this past week on an informal basis.
Staff has incorporated information received from the Hopkins City Council at the
September 2 meeting into the agreement and is requesting a formal review and
approval at the September 16, 997 meeting.
Primary Issues to Consider
• Terms of the agreement related to the cost of construction. (4.2 & 4.5)
• Terms of the agreement related to liability and insurance (7.1 -7.7)
• Terms related to length of the agreement
• Terms related to the length of the agreement (8.2)
Primary Issu s to Consid r
• Terms of the agreem nt related to the cost of construction (4.2 and 4.5)
subsequent to a review of the draft agreement by Council, staff reviewed proposed
funding for the project. Assuming a "construction cost" of $1.5 million and
"design costs" of $150,000, the project architects estimate a total project cost of
$1,650,00. In accordance with the terms included in the agreement, Hopkins
would be responsible for 33% of these costs or $550,000. To date, $500,000 is
included in the five year Capital Improvement Program (CIP) to fund these
improvements. The Council has been requested to consider adding an additional
year of funding, or $50,000, to complete the project. Without this additional
funding, Minnetonka would reduce their funding support from $1.1 million to $1
million. This result would reduce the total project cost from $1.65 million (the
original 1994 cost estimate) to $1.5 million.
Following direction received from Council, staff has met with the project architects
to determine what impact $150,000 in cost reductions would have on the project.
A number of deduct alternates have been developed for the project including:
• Fiberglass shingles in lieu of refinished metal roofing system.
• Sandblasted CMU in lieu of burnished CMU as exterior finish.
• Quarry tile in lieu of sealed concrete as floor finish in bath house and guard
house.
The final result these alternates will have on the project's construction cost can not be
determined until bids for construction are opened on September 23.
If, following the calculation of bids received, a total project cost of $1.5 million
could not be reached and Council decides not to increase Hopkins share of funding
to $550,000, two options to further reduce the project's cost would be available.
These options include a rebid of the project with design changes to the scope of
work by the architects and /or negotiations with the low bidder to reduce the cost
of construction through approved change orders.
• Terms of the agreement related to liability and insurance (7.1 -7.7)
7.1. Responsibility for all claims resulting from construction, operation and
maintenance of the Facility will be shared 33% by Hopkins and 67% by Minnetonka.
"Claims" as used in this paragraph means all third -party claims, losses, damages, and
expenses, including attorneys' fees, resulting from personal injury, death, violation of
civil rights, and /or property damage.
7.2. The parties agree that one attorney may represent both parties in any
third -party claim arising under paragraph 7.1, even though there is a dispute regarding
the parties' respective shares of that liability. If a dispute regarding the parties'
respective shares still exists after the third -party claim has been resolved, that dispute
will be resolved in accordance with the dispute resolution mechanisms contained in
Section 6 above.
7.3. Each party will obtain a policy of public liability insurance, either from a
reputable insurance company authorized to do business in Minnesota or through a self -
insurance pool organized pursuant to Minnesota Statutes §471.981. Each party will
name the other as an additional insured with respect to the Facility. The limits of
liability must cover each parties' exposure under Minnesota Statutes Chapter 466.
Minnetonka's insurance will be primary with a right of contribution from Hopkins'
insurance. Any claim for contribution between the respective insurance carriers will be
resolved by the procedure in Section 6 above. An insurance carrier which seeks
contribution from the second insurance carrier may not settle the subject claim without
the consent of the second insurance carrier. Failure to obtain such consent voids the
first insurance carrier's right to contribution. However, the consent may not be
unreasonably withheld. If the second carrier refuses to give its consent to a
reasonable settlement proposal, then the second carrier's insurance will become
primary with a right of contribution against the first insurance carrier.
7.5. Minnetonka will obtain sufficient insurance (in accordance with prevailing
community standards) to protect the parties' exposures to Toss and liability during the
time of Facility construction. This insurance and payment of any deductibles will be
part of the Facility construction cost, covered by the cost - sharing provision in
paragraph 4.5.
7.6. Once the Facility is constructed and occupied, Hopkins will obtain
sufficient property and casualty insurance (in accordance with prevailing community
standards) to cover the replacement cost of the Facility and its contents. This
insurance and payment of any deductibles will be a cost of operating the Facility,
covered by the cost - sharing provision in paragraph 5.2.
7.7. Upon request, each party will provide to the other a certificate of
insurance verifying that the insurance policies required by this agreement are in effect.
• Terms related to the length of the agreement
The draft agreement prepared by staff indicated that the agreement would remain
in effect for "20 years after Hopkins makes its final payment to Minnetonka for its
share of the facility construction cost ". At the request of Council Member
Maxwell, this language has been amended to read "20 years after approval of the
agreement by both parties ".
AGREEMENT FOR IMPROVEMENTS TO
AND OPERATION OF SHADY OAK BEACH
This Agreement is made on September 22, 1997, between the CITY OF
HOPKINS, a Minnesota municipal corporation ( "Hopkins "), and the CITY OF
MINNETONKA, a Minnesota municipal corporation ( "Minnetonka ").
1. PURPOSE.
Hopkins and Minnetonka have determined that it is more economical and efficient to
jointly renovate and operate a public beach facility at Shady Oak Lake (the Facility)
than for each to own and operate a separate facility. The purpose of this agreement
is to set forth the terms governing the parties in the ownership, construction,
operation, and maintenance of the Facility. The overall guiding principle embodied in
this agreement is the mutual desire of Hopkins and the Minnetonka to maximize the
use of the Facility by all members of Hopkins' and Minnetonka's respective
constituencies. This agreement is made pursuant to Minnesota Statutes Section
471.59.
2. OWNERSHIP.
2.1. The Facility will be constructed on property owned by Hopkins ( "Hopkins
Property "), which is legally described on attached Exhibit A. The Facility will be
generally located as shown on attached Exhibit B. Hopkins agrees that the Hopkins
Property is available for the Facility and will grant a ground lease to itself and
Minnetonka as tenants in common, which gives Minnetonka the right to participate in
constructing, operating, and using the Facility on this site.
2.2. The Facility to be constructed will be owned jointly by Hopkins and
Minnetonka as tenants in common, in the following proportionate shares: Hopkins -
33%; Minnetonka - 67 %.
2.3. After completing construction of the Facility, the parties will execute a
document in recordable form specifying the ownership rights outlined above, and
Hopkins will grant to itself and Minnetonka the ground lease referenced above. The
term of this lease will be co- extensive with the term of this agreement.
3. IMPROVEMENTS.
3.1. The parties agree to jointly participate in making certain improvements to the
Facility. These improvements are in two phases. Phase I was completed in 1996.
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Page 2
The improvements in Phase II will be designed and constructed pursuant to this
agreement.
3.2. All design expenses will be shared by the parties on the basis of 33% by
Hopkins and 67% by Minnetonka. Minnetonka will pay the design expenses when due
and will bill Hopkins for its share. Design expenses will not exceed $150,000 without
approval of both parties.
3.3. The final plans must be approved by both parties on or before October 1,
1997. If for any reason Hopkins and Minnetonka are unable to agree on the final plans
on or before that date, this agreement will be null and void at the option of either party
upon written notice to the other, and neither party will be further bound, except for
the payment of design expenses as described above.
4. CONSTRUCTION.
4.1. If the parties elect to proceed with construction after approval of the plans,
Minnetonka will advertise for bids in accordance with the requirements of the
municipal contracting law.
4.2. Prior to awarding construction contracts, Minnetonka will review the bidding
documents with Hopkins. Minnetonka will not award or enter into construction
contracts without the prior consent of Hopkins, which may be withheld only if the
contracts, including the amounts spent on Phase I, exceed a total of $1.5 million.
Unless otherwise agreed by the parties, Minnetonka will award the contracts no later
than November 1, 1997. If the parties determine that the Facility should not be
constructed because the costs exceed the amount specified above, this agreement will
be null and void at the option of either party upon written notice to the other, and
neither party will be further bound, except for the payment of design and bidding
expenses as described above.
4.3. Minnetonka will be the contracting party and will use ordinary and prudent
efforts to require that the Facility is constructed in compliance with approved plans
and specifications and completed with all reasonable promptness in accordance with
the schedule prepared by the architect. During construction, representatives of
Hopkins will be given access to the construction site at all reasonable times.
4.4. Minnetonka must notify Hopkins of all change orders and must obtain
Hopkins° written authorization before approving any change order which increases the
cost of the project by more than $10,000. Hopkins must not unreasonably withhold
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Page 3
its consent to change orders resulting from unforeseen circumstances arising from the
construction. If prior approval is not obtained, Minnetonka will be responsible for the
entire amount of any increased cost. Change orders not approved by Hopkins cannot
exceed a total of $50,000.
4.5. The parties agree that the "Facility construction cost "will not exceed
$1,431,784.47, excluding the design expenses referenced in paragraph 3.1 above
(estimated at 10 %), without approval by both parties. The Facility construction cost
and all related costs will be shared by both parties, 33% by Hopkins and 67% by
Minnetonka.
4.6. Minnetonka will pay all construction and related costs as they become due
and will bill Hopkins for its share. Hopkins will pay it share as follows:
January 1, 1998 $ 127,261
April 1, 1998 100,000
July 1, 1998 50,000
December 1, 1998 50,000
July 1, 1999 50,000
December 1, 1999 50,000
July 1, 2000 25,000
December 1, 2000 25,000
July 1, 2001 25,000
December 1, 2001 25,000
In the year 2002, the remainder of the amount due will be paid in two equal
installments on July 1 and December 1.
5. OPERATION, MAINTENANCE.
5.1. Hopkins and Minnetonka will jointly use and operate the Facility in accordance
with this agreement. The city councils of both cities will have jurisdiction over policy
matters involving operation and maintenance of the Facility, with recommendations
from a joint recreation committee consisting of representatives from the park boards
of both cities. Policy matters shall include such things as fees, hours, budget, and
staffing levels. Both city councils must agree in order for a change in policy to be
effective. The city managers of both cities will be jointly responsible for administrative
matters involving operation and maintenance of the Facility.
5.2. The Hopkins and Minnetonka city managers will jointly select a Facility
manager to supervise the operation, scheduling, and maintenance of the Facility. This
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Page 4
person may be the recreation services director for both cities or designee. The Facility
manager will be a Minnetonka employee, subject to the direction, control, salary
schedule, and policies of Minnetonka, but will also have a reporting relationship to both
city councils. The city councils will determine whether other employees are reasonably
necessary to assist the Facility manager in the supervision and operation of the
Facility. If so, these will also be Minnetonka employees, subject to the direction,
control, salary schedule, and policies of Minnetonka. The direct costs of these
employees will include each employee's salary, benefits, worker's compensation costs,
and unemployment costs, multiplied by the percentage of the employee's time devoted
to the Facility. Hopkins will reimburse Minnetonka for 33% of these direct costs.
5.3. Hopkins will provide all of the necessary utilities, maintenance and repair for
the Facility and the fishing pier and canoe landing used in connection with the Facility,
including snow plowing. The direct costs of all Hopkins employees who provide these
duties will be calculated in the same manner as that described in paragraph 5.2.
Minnetonka will reimburse Hopkins for 67% of these direct employee costs and 67%
of all other costs incurred in maintaining and operating the Facility and the associated
parking areas. Minnetonka will be solely responsible for the trail located near the
Facility.
5.4. Minnetonka will be responsible for the accounting of the costs for the
operation for the Facility. Hopkins and Minnetonka will jointly approve an annual
budget for these costs. The Facility operating budget will be administered by
Minnetonka.
5.5 Because the Facility is located within Minnetonka, Minnetonka will be
responsible for enforcing its park rules and ordinances within the Facility. Minnetonka
will confer with Hopkins before changing the park rules that apply to the Facility.
5.6. Capital improvements and major equipment costs will be recommended by the
Facility manager and planned in conjunction with Hopkins Public Works personnel.
6. DISPUTE RESOLUTION.
6.1. If a dispute arises between the parties regarding this agreement or the
operation or maintenance of the Facility, the city managers of each city must promptly
meet and attempt in good faith to negotiate a resolution of the dispute.
6.2. If the parties have not negotiated a resolution of the dispute within 30 days
after this meeting, the parties may jointly select a mediator to facilitate further
discussion.
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6.3. If a mediator is not used or if the parties are unable to resolve the dispute
within 30 days after first meeting with the selected mediator, the dispute will be
submitted to binding arbitration in accordance with the commercial arbitration rules of
the American Arbitration Association, except that disputes involving an amount less
than $25,000 will be submitted to a single arbitrator.
6.4. The parties will equally share the costs of conducting any mediation or
arbitration, excluding each party's cost for preparation of its own case.
6.5. In addition to the dispute resolution mechanisms contained in this section,
each party may seek specific performance of the other party's obligations under this
agreement.
7. LIABILITY, INSURANCE.
7.1. Responsibility for all claims resulting from construction, operation and
maintenance of the Facility will be shared 33% by Hopkins and 67% by Minnetonka.
"Claims" as used in this paragraph means all third -party claims, losses, damages, and
expenses, including attorneys' fees, resulting from personal injury, death, violation of
civil rights, and /or property damage.
7.2. The parties agree that one attorney may represent both parties in any third -
party claim arising under paragraph 7.1, even though there is a dispute regarding the
parties' respective shares of that liability. If a dispute regarding the parties' respective
shares still exists after the third -party claim has been resolved, that dispute will be
resolved in accordance with the dispute resolution mechanisms contained in Section
6 above.
7.3. Each party will obtain a policy of public liability insurance, either from a
reputable insurance company authorized to do business in Minnesota or through a self -
insurance pool organized pursuant to Minnesota Statutes §471.981. Each party will
name the other as an additional insured with respect to the Facility. The limits of
liability must cover each parties' exposure under Minnesota Statutes Chapter 466.
Minnetonka's insurance will be primary with a right of contribution from Hopkins'
insurance. Any claim for contribution between the respective insurance carriers will
be resolved by the procedure in Section 6 above. An insurance carrier which seeks
contribution from the second insurance carrier may not settle the subject claim without
the consent of the second insurance carrier. Failure to obtain such consent voids the
first insurance carrier's right to contribution. However, the consent may not be
unreasonably withheld. If the second carrier refuses to give its consent to a
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Page 6
reasonable settlement proposal, then the second carrier's insurance will become
primary with a right of contribution against the first insurance carrier.
7.5. Minnetonka will obtain sufficient insurance (in accordance with prevailing
community standards) to protect the parties' exposures to loss and liability during the
time of Facility construction. This insurance and payment of any deductibles will be
part of the Facility construction cost, covered by the cost - sharing provision in
paragraph 4.5.
7.6. Once the Facility is constructed and occupied, Hopkins will obtain sufficient
property and casualty insurance (in accordance with prevailing community standards)
to cover the replacement cost of the Facility and its contents. This insurance and
payment of any deductibles will be a cost of operating the Facility, covered by the
cost - sharing provision in paragraph 5.2.
7.7. Upon request, each party will provide to the other a certificate of insurance
verifying that the insurance policies required by this agreement are in effect.
8. TERM, TERMINATION, RIGHT OF FIRST REFUSAL.
8.1. This agreement will continue in effect until terminated as provided in
paragraphs 3.2 or 4.2 above or paragraphs 8.2 or 8.3 below.
8.2 Except as provided in paragraph 3.2 and 4.2, this agreement may be
terminated only by mutual consent of the parties until 20 years after the date of this
agreement. If the parties agree to an early termination, Hopkins will refund to
Minnetonka a portion of Minnetonka's share of the Facility construction cost. This
portion will be determined by subtracting 5% of Minnetonka's share for each full year
that has passed after substantial completion of the improvements.
8.3 After the initial 20 -year period, either party may terminate the agreement by
giving written notice on or before September 1 of any year that the agreement will be
terminated effective at the end of the day on December 31 of that year. In that case,
each party will have no further obligation to the other, and Hopkins will not be
obligated to refund any of Minnetonka's share of the Facility construction cost.
8.4 If at any time during the term of this agreement, or within ten years after
termination of this agreement, Hopkins enters into an agreement for the sale or
transfer of the Hopkins Property or any portion of it to a prospective purchaser (the
"Contract "), then Hopkins will notify Minnetonka within ten days after full execution
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Page 7
of the Contract and provide Minnetonka with a copy of the Contract. Minnetonka will
have 30 days after receipt of this notice and Contract within which to notify Hopkins
in writing of Minnetonka's intention to purchase the property described in the
Contract. If Minnetonka fails to exercise this option within the 30 -day period, then
Hopkins will have the right to consummate the sale of the property described in the
Contract to the prospective purchaser pursuant to the terms of the Contract.
Notwithstanding the foregoing, if the sale is not consummated within 120 days after
the notice and Contract was delivered to Minnetonka or if any of the material terms
of sale are modified from those in the Contract delivered to Minnetonka, then Hopkins
will be obligated to again offer Minnetonka the right to purchase the property described
in the Contract in accordance with the procedure described above. If Minnetonka
exercises its option to purchase the property described in the Contract, then Hopkins
and Minnetonka will proceed to settlement on such sale in accordance with the terms
of the Contract. In no event shall Hopkins convey the Hopkins Property or any portion
of it to any other party without affording Minnetonka the purchase rights described in
this paragraph, and any consummation of such sale will be voidable by Tenant. This
right of first refusal is a continuing right and will apply as often as Hopkins proposes
to dispose of the Hopkins Property during the time period stated above. Hopkins
agrees that any sale or transfer of the Hopkins Property or any portion of it will be for
a consideration expressed and payable solely in United States dollars.
9. GENERAL PROVISIONS.
9.1. All amounts due to one party from the other will be paid within 30 days after
a written notice of the amount due has been provided. Each party will allow the other
to review all of its records regarding a payment demand at reasonable times during
normal business hours. Each party's share of on -going operation and maintenance
costs that is due to the other will be paid in four quarterly installments as scheduled
by the parties' respective finance directors, at the beginning of each quarter.
9.2. All notices under this agreement must be sent by first class mail addressed
to:
If to Hopkins:
If to Minnetonka:
City Manager
City of Hopkins
1010 1st Street
Hopkins, MN 55343
Minnetonka Manager
Minnetonka of Minnetonka
14600 Minnetonka Blvd.
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Minnetonka, MN 55345
9.3. The parties agree that no later than ten years after Hopkins makes its final
payment to Minnetonka for its share of the Facility construction cost, the parties will
review this agreement to determine if any changes are appropriate.
9.4. This agreement may be amended only in writing, executed by the proper
representatives of both parties.
9.5. The parties may supplement this agreement with additional written policies
or agreements approved in writing by both parties which are not inconsistent with the
terms of this agreement.
9.6. This agreement must be interpreted under the laws of the state of Minnesota.
Date: CITY OF HOPKINS
By
Mayor
And
Its City Manager
Date: CITY OF MINNETONKA
By
Its Mayor
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Page 9
And
Its City Manager