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Memo- Draft Agreement Minnetonka Shady Oak BeachMEMORANDUM TO: Honorable Mayor and Members of the City Council THROUGH: Steve C. Mielke, City Manager FROM: Dave Johnson, Director of Recreation Services DATE: August 29, 1997 SUBJECT: Introduction of a Draft Agreement with Minnetonka for Shady Oak Beach Improvements and Operations Staff from Hopkins and Minnetonka have met on two occasions over the past three weeks to negotiate the terms of an improvements and operations agreement for Shady Oak Beach. Staff who have been involved in this process include the City Managers, City Attorneys and staff from Recreation Services. Attached is a copy of the initial draft agreement prepared. This initial draft agreement is being presented at the September 2 meeting to provide Council an opportunity to review the basic terms included in the document. The City Attorneys are currently negotiating additional language to be included in a revised agreement. Additional language to be included is relatively minor in content with the exception of a "First Right of Refusal" option which would provide Minnetonka the first option of purchasing the beach property should Hopkins decide to put the land up for sale. The following is a brief summary of primary information included in the Shady Oak Beach Operating Agreement. OWNERSHIP Beach improvements would be constructed on property owned by the City of Hopkins. A "Ground Lease" would be granted allowing joint ownership of the facilities to be constructed on the site. Upon completing construction of the facilities, Minnetonka would own 67% of the new facilities and Hopkins 33 %. DESIGN AND CONSTRUCTION Design and construction of improvements for Shady Oak Beach would be funded 33% by Hopkins and 67% by Minnetonka. Memorandum Introduction Of A Draft Agreement with Minnetonka for Shady Oak Beach Improvements and Operations August 29, 1997 Page 2 OPERATIONS /MAINTENANCE Operations and maintenance issues would be under the jurisdiction of both City Councils with recommendations from the Joint Recreation Board. Hopkins will provide utilities, maintenance and repair of the facilities, fishing pier, canoe landing and parking areas. Minnetonka will reimburse Hopkins for 67% of maintenance costs. Minnetonka is responsible for all maintenance related to the trail system within the park. TERMS OF AGREEMENT The improvement and operating agreement would remain in effect for twenty years. During this period of time termination of the agreement can only occur with the mutual consent of both Cities. After the initial twenty year period, either party may terminate the agreement by giving written notice. In that case, each party will have no future obligation to the other, and Hopkins will not be obligated to refund any of Minnetonka's share of facility construction costs. Contingent upon revisions requested by the Council, staff anticipates that a final agreement will be presented to Council for adoption at the September 16, 1997 Council meeting. 1. PURPOSE. 2. OWNERSHIP. 3. IMPROVEMENTS. AGREEMENT FOR IMPROVEMENTS TO AND OPERATION OF SHADY OAK BEACH DRFT arrarrmawimissa This Agreement is made on , between the CITY OF HOPKINS, a Minnesota municipal corporation ( "Hopkins "), and the CITY OF MINNETONKA, a Minnesota municipal corporation ( "Minnetonka "). 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. 2.1. The Facility will be constructed on property owned by Hopkins, generally located as shown on attached Exhibit A. Hopkins agrees that this 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. 3.1. 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. The improvements in Phase II will be designed and constructed pursuant to this agreement. Page 2 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 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. Page 3 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 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 Page 4 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. 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. Page 5 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 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 Page 6 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 Hopkins makes its final payment to Minnetonka for its share of the Facility construction cost. 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 past 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 [Language to be inserted which establishes a right of first refusal for Minnetonka to buy the property if Hopkins chooses to sell at any time during the term of the agreement and during 10 years after termination of the agreement.] 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 Page 7 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. 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 Page 8 And Its City Manager Date: CITY OF MINNETONKA By Its Mayor And Its City Manager