River Rides Lease Renewal Req
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MEMORANDUM
October 26, 2004
TO:
The Honorable Mayor and City Council Members
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FROM:
Michael C. Van Milligen, City Manager
SUBJECT: Dubuque River Rides, Inc.
Dubuque River Rides currently leases approximately 340' of water frontage in the Ice
Harbor from the City. This lease is due to expire on December 31,2004. Included in
the lease is an option to extend the lease for an additional eight years. Under the terms
of the lease, Dubuque River Rides was required to provide written notice to the City
ninety days prior to the termination date of its intent to exercise its option. No notice
was received prior to the September 30, 2004 deadline.
On October 11, 2004, the City received a request from Nancy Webster, President and
CEO of Dubuque River Rides, to accept the late notice to extend the lease. At the
October 18, 2004 City Council meeting, the City Council tabled the request and asked
for additional information from City staff.
In 1995, the City Council allowed a lease to be extended under similar circumstances.
However, my recollection is that the City Council cautioned other leaseholders at that
meeting that in the future the City would require leaseholders to meet the conditions of
their lease, including deadlines for extensions. In fact, in 1996, the City Council did not
allow the Dubuque Terminals lease to renew when a deadline was missed.
I respectfully request Mayor and City Council denial of the Dubuque River Rides'
request to extend the lease under the current language and ask that I be directed to
approach them about negotiating a new lease.
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Michael C. Van Milligen
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Attachment
cc: Barry Lindahl, Corporation Counsel
Cindy Steinhauser, Assistant City Manager
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MEMORANDUM
October 26, 2004
TO:
Michael C. Van Milligen, City Manager
FROM:
Cindy Steinhauser, Assistant City Manager
SUBJECT: Dubuque River Rides, Inc.
Introduction
The purpose of this memorandum is to provide you information related to the lease
between the City and Dubuque River Rides, Inc.
Backaround
Dubuque River Rides currently leases approximately 340' of water frontage in the Ice
Harbor from the City. This lease is due to expire on December 31,2004. Included in
the lease is an option to extend the lease for an additional eight years. Under the terms
of the lease, Dubuque River Rides was required to provide written notice to the City
ninety days prior to the termination date of its intent to exercise its option. No notice
was received prior to the September 30, 2004 deadline.
Discussion
On October 11, 2004 the City received a request from Nancy Webster, President and
CEO of Dubuque River Rides, to accept the late notice to extend the lease. At the
October 18, 2004 City Council meeting, the City Council tabled the request and asked
for additional information from city staff.
Attached is a layout of the vessels now operated by Dubuque River Rides along with
dimension of each vessel. I have reviewed the Dubuque River Rides lease with
Corporation Counsel Barry Lindahl and we have identified several concerns related to
the lease language. They include:
. Parking agreement - Dubuque River Rides is party to the Ice Harbor Parking
Agreement. Under this Agreement, each party must agree to any new use at the
Ice Harbor Parking District if additional parking will be needed as part of the new
use. Thus, if additional parking is needed but not provided for, a project can be
delayed until all parties to the Parking Agreement consent. This has become an
issue in the past when parties to the parking agreement, such as the National
Mississippi River Museum and Aquarium, have attempted to expand operations.
This parking was built by the City and, as leases expire, the City should have
sole discretion on the adequacy of parking for new uses.
. Lease Rate - The current lease amount is not at market rate for prime waterfront
real estate ($5,500/year x COL index, currently $7,574.60). The City may want
look at a different rate for water frontage or consider more the actual impact this
lease has on the Ice Harbor and establish a rental rate based upon 1) vessel
square footage (approx. 8,883 surface area) or 2) square footage of the entire
harbor area taken up by vessels including vessel turning radius (approx. 36,380
sq. ft. - 340' x 107'). Certainly $7,574.60 a year for this prime real estate is
inadequate.
. Vessel layout - Attached is the existing Phase 2 layout for the Dubuque River
Rides operations. The recent lease amendment will allow Dubuque River Rides
to go to the layout shown under Phase 3. Phase 3 will take up the entire area of
the waterfront leased to the company and the lease gives them exclusive right to
do so.
. There are no provisions in the lease that allow adjustment of the rental rate at
interim periods (i.e. every 5 years) to reflect market rate.
. The insurance schedule in the lease should be amended to be consistent with
current city insurance requirements.
. The indemnity language in the lease should be amended to be consistent with
current city indemnity requirements.
All of these are items that need updating to reflect a lease that is consistent with the
City's other current leases, including the ability to be modified at key intervals.
In addition to a rental rate that reflects the market value of waterfront property, there are
some significant concerns with not having current insurance requirements and
indemnity language to protect the City's interests. Also, the exclusive use of this area is
of great concern.
Under the terms of the Vision Iowa Agreement, the City is obligated to construct
transient boat docks in the Ice Harbor. With the recent developments at the Port of
Dubuque, very little waterfront in the harbor remains to construct these boat docks. The
waterfront that is leased exclusively to Dubuque River Rides includes sufficient space to
moor Dubuque River Ride's vessels as well as accommodating transient boat dock.
Construction of these docks will require permission from the Corps of Engineers. As
part of the 2003 amendment to the lease, Dubuque River Rides agreed not to object to
the Corps on the City's request to conduct the boat docks in the Ice Harbor provided the
docks are not located in the leased area. Should the leased area be identified as the
location for the boats docks, according to the terms of the lease, Dubuque River Rides
can object and the City may not receive a permit from the Corps to construct the boat
docks. At its October 11, 2004, the Vision Iowa Board noted the City of Dubuque's
requirement to finish all of the components identified in the Vision Iowa Agreement,
including the boat docks. Should the City be unable to meet the requirements of the
Agreement to construct the boat docks, the $20 million Vision Iowa grant could be at
risk.
Finally, it has been a long-standing City Council policy that expired leases should be
renegotiated to reflect current financial and non-financial conditions. In 1995, Dubuque
Yacht Basin's lease option with the City of Dubuque expired. At the July 17,1995 City
Council meeting City Council acted upon the expiration and required Shanley to notify
the City sixty days in advance of the next expiration on its intent to renew their lease.
In 1996, Dubuque Terminals, Inc. submitted to the City Council a late notice to renew
two City leases for eight acres of riverfront property. The leases had expired by virtue of
Dubuque Terminals failure to submit a timely notice of excising an option in according to
the terms of the leases. The discussion at the Council Council meeting when the
request was considered included an acknowledgement that lease renewals are not
automatic. The City Manager was directed to renegotiate the leases at the February 6,
1996 City Council meeting.
Attached is a memo from you requesting City Council direction on the Dubuque
Terminals matter. The memo suggests three alternatives to respond to late requests for
lease extensions1) affirm the termination, 2) extend the lease or 3) renegotiate the
lease. The City Council established the policy in cases of late requests of affirming the
lease termination and directing staff to negotiate a new lease that would reflect current
financial and non-financial conditions. This has been the City policy staff has following
since that time.
Recommendation
Based upon these concerns relating to riverfront leases in general and the lease with
Dubuque River Rides, Inc. in particular, and the City Council's policy regarding late
requests for lease renewals, I recommend that this matter be referred to city staff for
negotiation of a new lease.
cc:
Barry Lindahl, Corporation Counsel
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CITY OF DUBUQUE, IOWA
MEMORANDUM
February 1, 1996
TO:
The Honorable Mayor and City Council Members
FROM:
Michael C. Van Milligen, City Manager
SUBJECT:
Dubuque River Terminals Lease
Two City leases with Dubuque Terminals, Inc., consisting of over eight acres
of riverfront property have expired by virtue of Dubuque Terminals not
exercising an option in writing to renew the leases in five year increments,
sixty days prior to the date of the lease expiration.
Subsequently a request was received form Dubuque Tank Terminals, Inc. to
extend the leases. The Council has several options in response to the request
for the lease extension:
1.
2.
Affirm the termination of the leases.
Extend the leases for an additional five year period under the same terms
and conditions, as though they had not expired.
4IÞ Renegotiate the leases. This renegotiation could include all conditions
of the lease, including financial, or just non-financial conditions. If
the financial conditions are renegotiated, staff requests that the City
Council authorize an appraisal of the property for a cost of approximately
$4,500.
1 respectfully request Mayor and City Council direction on this matter.
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Mfchael C. Van Millige
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Attachment
cc: Barry Lindahl, Corporation Counsel
Tim Moerman, Assistant City Manager
Mike Koch, Public Works Director
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DUBUQUE RIVER RIDES
October 11, 2004
To the Mayor and City Council
City of Dubuque
City Hall
Dubuque, IA 52001
Dear Mayor and Council Members:
I am the President and Chief Executive Officer of Dubuque River Rides, Inc. Our
company is a party to a Lease between the City of Dubuque and Roberts River Rides,
Inc., dated March 4, 1991, which was assigned to our company, then known as the Spirit
of Dubuque, Inc. on May 3,1994, and which is due to expire on December 31,2004,
unless extended under the terms of the Lease.
Pursuant to paragraph 2 of Article I of the Lease, we may elect to extend the Lease on the
same terms and conditions for an additional eight-year term, by giving the City written
notice of such extension not less than ninety days prior to the termination date of the
initial term.
We realize that the ninety day notice period expired on September 30,2004. However,
due to a variety of circumstances, including the absence of our corporate counsel from
town due to the death of an immediate family member, we inadvertently missed the
expiration of the notice period. It has always been our intention to extend this Lease. In
fact, less than one year ago we executed an Amendment to Lease Agreement revising
certain provisions of the Lease, which Amendment was approved by the City Council.
We therefore respectfully request that the City of Dubuque excuse this inadvertent error,
and agree to accept this written notice of our intention to extend the Lease for the
additional eight-year period provided in the Lease.
Thank you for your attention to this matter, and if you have any questions, please do not
hesitate to contact us.
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Nancy M. Webster
President and Chief Executive Officer
Cc
Barry Lindahl
Home of: SPIRIT of Dubuque' Miss Dubuque. Ice Harbor Galley
3rd Street Ice Harbor, Port of Dubuque, fA 52001
563-583-8093 . FAX 563-585-0634
www.dubuqueriverrides.com . email: boats@dubuqueriverrides.com