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LAKE ELMO CITY COUNCIL MINUTES AUGUST 19, 2014 <br />Page 6 of 8 <br /> <br />They were able to come up with a 5 year lease for the space at the price of $12/sq ft for the first two years. <br />The lease comes with electric, water, garbage, parking, bathrooms, and use of a common area. The only <br />utilities the City is responsible for would be telephone and data lines going into the building. The space comes <br />as is with fixtures, it has some working stations that would meet the City’s needs. The terms of the lease are <br />$12/sq ft for the first two years, $13/sq ft for years three and four and $13.50/sq ft for the fifth year with a <br />90 day opt out clause. City Attorney Snyder reviewed the lease earlier today. Mr. Zuleger stated that they have <br />also priced other office space in the area and there is not a lot that can accommodate the City’s needs, <br />especially being so close to the current. Mr. Zuleger went over who would be officed out of which building. <br />He also stated that time is of the essence on this issue because Mr. Zignego has offered to give the City a free <br />month of rent for September so we could move in and get situated. Mr. Zuleger also stated that the City <br />would be given first right of refusal to purchase the building. Mr. Zuleger spoke about running the lease by <br />John Thompson, who is a premiere leasing agent, and he described it as a good deal. He thanked the Mayor, <br />Council Member Nelson, and John Thompson for doing a lot of the work on this issue. <br />Council Member Smith asked if this is more of a want or a need. She understands that down the road we will <br />be adding more staff, but right now it seems like a lot of money to spend. Ms. Smith also asked if it would be <br />more logical to move planning to the other building to be next to engineering and leave administration staff <br />in the current building. <br />Mayor Pearson responded that we need more space. He also spoke about the risk of waiting being that <br />someone else may take the space. He and Council Member Nelson have looked at other spaces and they are <br />more expensive and do not provide the convenience of this space. Mayor Pearson also spoke about being <br />able to get rid of the Annex if we accept this lease. He thinks this lease is a good deal and it is a good time to <br />move. <br />Finance Director Bendel reminded Council that the net book value of the Annex at the end of 2014 is about <br />$42,000. If it is demolished that amount will need to be expensed. The City has written off about $10,000 a <br />year for it, so we planned on having the Annex for about four more years. The City paid close to $100,000 for <br />the Annex. <br />Council Member Smith spoke about when the Annex was first purchased. She asked if when sewer and water <br />are put in, will the owners be able to raise the City’s rent in that building, or are we locked into this rent <br />number. <br />City Attorney Snyder responded that paragraph 1b of the lease responds to that. There was also some <br />additional language that Counsel wants to suggest to the property owner. He asked Council if it is their <br />direction to staff that the cost associated with assessments should not be borne by the City. Council <br />responded yes. <br />Mayor Pearson spoke about negotiating utility expenses if they go up dramatically from year to year. He <br />believes that is fair. <br />City Attorney Snyder stated that other than a few refining points, the lease is all there. <br />Council Member Nelson asked a question regarding the top of page two of the lease. City Attorney Snyder <br />responded that that is a part that needs clarification, as our percentage of the prorated share is not defined <br />and the years are in need of adjustment. He also stated that one common way of dealing with unintended <br />increases in CAM (Community Area Maintenance) costs is to put a cap on it, that they won’t increase year <br />over year by “x percent” without consent of the tenant. City Attorney Snyder also noted that there are often <br />other CAM costs in a lease that are paid by the tenant so this least is fairly tenant favorable.