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Mounds View City Council March 22,1999
<br />Regular Meeting Page 38
<br />have a tenant of this sort, the cash flow from this tenant would help with the operations of the
<br />building, and the relationship to the cost of the improvements for the property. He advised that
<br />the improvements to this portion of the building cost between $800,000 and $900,000, and at that
<br />time the City was attempting to obtain an agreement that would recover 100 percent of that cost.
<br />City Administrator Whiting pointed out that realistically speaking, the Children's Home Society
<br />could not see themselves in one location for 15 years or more, with one agreement, and the City
<br />was attempting to get them to commit that entire time period. He stated the basis for these
<br />figures was an attempt to recoup the money the City invested in the building, however, in reality,
<br />it would act as a cash flow for the building. He stated if that was the understanding at that point,
<br />the value of the building was incurred when it was constructed, and it does not have an inflation
<br />value, except in terms of its market worthiness, and the money has not been expended. He
<br />explained that this was the logic he utilized to negotiate this agreement, therefore the inflation
<br />clause based upon tuition was related to their ability to raise tuition for their clients, whereas the
<br />base rent, which costs had already been incurred by the City, was simply not examined.
<br />Council Member Marty suggested changing the term of the contract from five years to two years,
<br />and instead of making long commitment to this, they could evaluate the Children's Home
<br />Society's financial position in two years, and readdress this at that time.
<br />Council Member Thomason stated she would not be opposed to this.
<br />Mayor Coughlin requested City Administrator Whiting's opinion.
<br />City Administrator Whiting stated he believed this was somewhat self-defeating. He explained
<br />that the City would like to have a guaranteed cash flow for as long as possible, and staff has been
<br />attempting to secure the longest agreement possible, which was one of the objectives. He stated
<br />the Children's Home Society may actually accept a shorter agreement, however, the City would
<br />only know two years in advance, and less than that at any given point., if they were going to have
<br />a tenant in the building. He stated the service the Children's Home Society provides is one
<br />consideration, however, the $30,000 to $45,000 per year in rent should not be discounted either.
<br />City Administrator Whiting stated the concern of attempting to recoup the City's money in some
<br />way, shape or form, was behind many of these clauses, and not whether the Children's Home
<br />Society was paying interest on money, when they were paying it. He reiterated that reasoning
<br />was not employed in this effort.
<br />City Administrator Whiting stated there was a judgement call to be made, however, if the
<br />Council opens this matter up to the point that the Children's Home Society is constantly seeking
<br />a better situation elsewhere, this could very easily occur. He added that he did not see the
<br />Children's Home Society as a charity case. He stated they were doing a good job, and the
<br />problems they have had in the City's facility have related to the timing of the construction, and
<br />the unforeseeable need of the entire organization to re-group, and secure their funding
<br />mechanisms. He pointed out that this was something staff could not have foreseen either.
<br />Mayor Coughlin stated before the Council was a motion, which has been seconded, to approve
<br />Resolution 5324, Children's Home Society Agreement, as presented.
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