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51- AFF REPORT <br />DATE: February 24, 1997 <br />TO: Mayor and Councilmembers <br />FROM: Michael Morrison, City Manager <br />ITEM: SAV 2 LIQUOR STORE <br />As you know, the City has been negotiating with First Bank over the past six <br />months regarding securing space at the Tires Plus building for our municipal <br />liquor store. First Bank, over the past two months, has presented the City <br />with two options in relation to the Tires Plus building. The first option is to <br />lease the building and the second option is to purchase the building. The <br />economics of both options is as follows: <br />Option 1 - Leasin <br />Years 1- 5 7.25 <br />Years 6 - 10 7.50 <br />Years 11 - 15 7.75 <br />Plus $275,000 of HRA funds to pay for some of the improvements. <br />TOTAL PAYMENTS OVER 15 YEARS -- $1,231,925 <br />Lease rate average over 15 years <br />with $275,000 -- $9.66 per square foot <br />These payments are paid back with sales from the liquor store. <br />Advantages Disadvantages <br />*No bonds to issue *Don't own anything after 15 years <br />*Good lease rates <br />Option 2 - Purchasing <br />$725,000 to purchase the building with HRA funds. <br />Tires Plus will pay lease payments to the City over the 15 years in an <br />estimated amount of $1,069,558, which in essence pays the City investment <br />back. The City then issues a liquor revenue bond for $650,000 to pay for the <br />construction of the liquor store expansion, as well as possible facade <br />