Loading...
HomeMy WebLinkAboutRes2017-015 Sponsored by: Hunt CITY OF SEWARD,ALASKA RESOLUTION 2017-015 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, AUTHORIZING THE CITY MANAGER TO ENTER INTO A "THIRD AMENDED AND RESTATED AGREEMENT FOR LEASE OF TRACT 2A, WATERFRONT TRACTS, AND THE LEASE, OPERATION AND MAINTENANCE OF THE ALASKA SEALIFE CENTER"WITH THE SEWARD ASSOCIATION FOR THE ADVANCEMENT OF MARINE SCIENCE WHEREAS, in 2009 the City of Seward ("City") and the Seward Association for the Advancement of Marine Science ("SAAMS") entered into an Second Amended and Restated Agreement for Lease of Tract 2A, Waterfront Tracts, and Adjacent Tidelands, and the Lease, Operation and Maintenance of the Alaska SeaLife Center(the"SAAMS AGREEMENT"); and WHEREAS,the City and the State of Alaska Department of Fish and Game are parties to a Cooperative Agreement for the Construction,Operation,and Maintenance of Research Infrastructure Improvements at the Alaska SeaLife Center,in Seward,Alaska executed in April 1995,as amended (the "Cooperative Agreement"); and WHEREAS, the City and SAAMS intended to transfer all of the obligations of the City under the Cooperative Agreement and the EVOS Trustee Council Resolution adopted November 2, 1994 to SAAMS; and WHEREAS,the City has an obligation under the Cooperative Agreement to own,operate, and maintain the Alaska SeaLife Center for the practical life of the facility,and the practical life of the facility ends upon the occurrence of both of the following: (i) the City makes a reasonable determination,as verified by an independent financial consultant selected or approved by ADF&G, that the facility is not capable of generating revenues sufficient to cover the operating expenses and debt service of the facility, and (ii)while being operated in accordance with any recommendation from the independent financial consultant and in accordance with terms and conditions of the agreement during the two-year period following the City's determination, the facility does not generate revenues sufficient to cover the operating expenses and debt service of the facility, plus fund sufficient reserves for repairs and replacements in the facility; and WHEREAS,if the City elects not to operate the facility,either because it has reached the end of its useful life or for any other reason, the City is obligated to continue operating the SeaLife Center for one year while ADF&G determines whether to exercise its option to assume operation of the SeaLife Center;and WHEREAS, with the understanding that SAAMS would continue to operate the SeaLife Center during the one-year period in which ADF&G may exercise its option, and based on CITY OF SEWARD, ALASKA RESOLUTION 2017-015 representations by SAAMS that the amount needed to mothball the SeaLife Center for one(1)year was $700,000 for fiscal year 2006, the City and SAAMS agreed in the SAAMS Agreement that SAAMS would maintain a Termination Fund in an amount of $700,000 for fiscal year ending September 30, 2006 and increasing 3% each year thereafter, and that SAAMS would maintain a Renewal and Replacement Fund balance of$500,000, also increasing by 3% each year thereafter; and WHEREAS,to assist SAAMS in managing its operating cash flow during the fall and winter months,the 2009 amendment to the SAAMS Agreement allows SAAMS to access up to $500K of the Termination Fund as necessary for cash flow as long as the Termination Fund is fully restored on one day each year(September 30th); and WHEREAS,the 3%annual increase to the fund requirement has generated balances greater than ones derived from consumer price indices (CPI) for the same period; and WHEREAS,SAAMS proposes,and the City agrees,that a fund balance and annual accrual based on available information such as a CPI is fair and reasonable; and WHEREAS,the parties agree that annual adjustments are cumbersome and unnecessary,and propose a factor approximating CPI instead; and WHEREAS, SAAMS desires now to change the annual accrual factor from 3%to 2%for both funds,pause the annual percentage increase to each fund for four(4)years so that the balances more accurately reflect actual indices' performance for the period, and to increase the amount accessible for operations use from the Termination Fund annually from$500,000 to$700,000 due to the fund's growth over time; and WHEREAS,the City Council has determined that it is in the public interest to enter into an amendment to the SAAMS AGREEMENT because of the public benefits provided by SAAMS to the Seward community. NOW,THEREFORE,BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA,that: Section 1. For the reasons stated in the above recitals, which are incorporated herein by reference, it is in the public interest to enter into a "Third Amended and Restated Agreement for Lease of Tract 2A, Waterfront Tracts, and Adjacent Tidelands and the Lease, Operation and Maintenance of the Alaska SeaLife Center". Section 2. The City Manager is hereby authorized to enter into a third amendment in substantial form as presented at this meeting and incorporated herein by reference. CITY OF SEWARD,ALASKA RESOLUTION 2017-015 Section 3. This resolution shall take effect thirty(30) days after its adoption and posting. PASSED AND APPROVED by the City Council of the City of Seward, Alaska,this 28th day of March,2017. THE CITY OF SEWARD,ALASKA • / / can Bardarson, Mayor AYES: Casagranda, Keil, Squires, McClure,Altermatt, Slater, Bardarson NOES: None ABSENT: None ABSTAIN: None ATTEST: dG I % Jo anna • . - , MC C' Clerk (City Seal) •,y OF SENA' 4. � 4 \) s e SEAL I. —.-- i Agenda Statement j of secs, Meeting Date: March 28, 2017 v 17',. 0 To: City Council acASKP From:: Jim Hunt, City Manag l Agenda Item: Third Amended and Restated Agreement for lease of Tract 2A, Waterfront Tracts, and the Lease, Operation and Maintenance of the Alaska Sealife Center with the Seward Association for the Advancement of Marine Science(SAAMS) BACKGROUND&JUSTIFICATION: In 2006 and 2009 the City and SAAMS(the parties)amended portions of the Lease, Operation and Maintenance of the Alaska Sealife Center Agreement (the SAAMS agreement). One section amended was to clarify and make specific the roles and obligations of the parties with respect to each other and to the Alaska Department of Fish and Game should the facility become uneconomic to the point that it must close. An obligation of the City under that agreement is to ensure an orderly close out of the facility if for economic or other reasons it is determined that the facility has reached the end of its useful life. Based on SAAMS's estimate of$700,000 as the 2009 cost of mothballing the facility,the previous amendment established a Termination Fund in that amount,and increasing 3%each year thereafter, as well as a Renewal and Replacement Fund Requirement in the initial amount of$500,000 and increasing by 3% each year thereafter. In recognition of seasonal cash flow fluctuations, the Agreement also allows SAAMS to short-term access up to$500,000 of the Termination Fund as long as the fund is fully restored as of September 30 of each year. SAAMS suggests,and the City agrees,that a reference index such as the Consumer Price Index is an appropriate escalator for accounts such as the Termination and Renewal and Replacement Funds.In the ten years of the Funds' existence the 1.030 multiplier has generated a Termination Fund balance of$940,741 and an R&R Fund balance of$671,958. Actual indices for the same period have been 1.020, 1.023, and 1.019, or a 1.020 average. That multiplier would have generated a current Termination Fund balance$913,341 and an R&R Fund balance of$609,497. SAAMS requests a 2%CP1 equivalent,or 1.020 multiplier going forward for each fund,a four-year pause of multiplier installments so that by September 30, 2020 each fund's balance at that point would approximate a 2% increase over the life of the fund, and to be able to short-term access $700,000 of the Termination Fund balance rather than the current$500,000,or 74%of fund balance rather than 71%, and diminishing with time as the balance increases after 2020. INTENT: Authorize the described lease amendments reducing the annual rate of increase,forgoing the annual increase in each fund for 4 years,and increasing the amount available from the Termination Fund for short term cash flow purposes. CONSISTENCY CHECKLIST: Yes No N/A 1 Comprehensive Plan (3.1.2.1, 3.7.1.2): Support...the Alaska Sealife X Center. Strategic Plan : P. 6 "Support external funding of the Alaska Sealife 2. Center". P.18 "Expand and integrate educational X programs....including ASLC...to maximize resources. " Other(list): Cooperative Agreement with the State of Alaska 3. Department of Fish and Game; and EVOS Trustee Council Resolution X adopted November 2, 1994 FISCAL NOTE: The lease amendments between the City and SAAMS have assigned greater financial risk to the taxpayers of Seward,while providing necessary operational relief to the Sealife Center. Under the original agreement for operation of the Alaska Sealife Center, the City transferred its obligations under the Cooperative Agreement with the State of Alaska,to SAAMS. This was done through the creation of three reserve accounts which have been significantly reduced over time. The first reserve account required that"SAAMS shall at all times maintain an operating reserve of not less than ten percent of projected annual operating expenses" in order to ensure positive cash flow and hedge against unexpected declines in revenue or increases in costs. In 2006, operating reserves were estimated at$1.2 million,and the amended agreement eliminated the operating reserve requirement. The second reserve account is the Renewal & Replacement Fund. This Fund was established to accumulate resources to cover major facility repairs and replacement to protect the physical plant and assets of the ASLC and ensure that over the life of operations of the Center, the facility would be properly maintained such that it could be operated indefinitely without requiring significant upgrade or repair costs. Under the original agreement, the amount required to be deposited annually was defined as follows: 0.75 x replacement value x age/ 1275, and would have reflected a balance of $1,376,471 in 2009; the reserve Fund was eliminated in 2006 and replaced by an initial deposit of $500,000 increasing by 3%annually to its current balance of$671,958. This amendment reduces the 3%annual escalator to 2%. The third reserve account is the Termination Fund. This Fund was established to prepare for the possibility that the City might need to find a new operator or transfer ownership of the ASLC in the future. Under the Cooperative Agreement with the State,the City is obliged to maintain in reserves, an amount required to maintain the facility for one year, until a new operator can be put in place. The amount needed to fund the Termination Fund was originally established in excess of$2 million based on estimates SAAMS provided of what it cost to operate the Center for a full year, and was previously reduced by amendment to a current level of$940,741. This amendment reduces the 3% annual escalator to 2%. The taxpayers are assuming financial risks through a reduction in required reserve accounts. The City may wish to consider a means to establish its own reserves to mitigate those risks, in order to meet the requirement of the State that the City maintain sufficient reserves to maintain the facility for one year, should a change in operating status ever occur. Approved by Finance Department: ,4 Go k ATTORNEY REVIEW: Yes X _ No Not Applicable RECOMMENDATION: City Council approve Resolution 2017-015, authorizing the City Manager to enter into the Third Amended and Restated Agreement for Lease, Operation and Maintenance of the Alaska Sealife Center with the Seward Association for the Advancement of Marine Science.