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080607 CC Sp MinCITY OF SHOREWOOD CITY COUNCIL SPECIAL MEETING MONDAY, AUGUST 6, 2007 MINUTES 1. CONVENE SPECIAL CITY COUNCIL MEETING 5755 COUNTRY CLUB ROAD COUNCIL CHAMBERS Immediately Following City Council Work Session Mayor Lizee called the meeting to order at 9:43 P.M. A. Roll Call Present. Mayor Lizee; Councilmembers Callies, Turgeon, Wellens and Woodruff; Administrator Dawson; Finance Director Burton; and Liquor Operations Manager Swandby Absent: None B. Review Agenda Woodruff moved, Wellens seconded, Approving the Agenda as presented. Motion passed 5/0. 2. LIQUOR STORE LEASE AND OPERATIONS Administrator Dawson stated the Liquor Committee met on July 30, 2007, and reviewed liquor operations financial data and the lease extension proposals for the Waterford liquor store space. The Committee thought Council should extend the lease, with no consensus on a preference for Proposal No. 1 or Proposal No. 2. Dawson reviewed the two proposals that had been discussed at a June 25, 2007, Council work session. - Under Proposal No. 1, the current lease would be continued from April 1, 2007, through October 31, 2008. The gross rent would be increased by 10 percent retroactive to April 1, 2007; and the current space would remain the same. Termination of this lease would require afour-month notice prior to October 31, 2008. The annualized cost would be $73,990; the total gross rent for the 19-month lease would be $117,1.51. - Under Proposal No. 2, the lease would run from April 1, 2007, through March 31, 2012. Gross rent would start at $64,890 for the first year and would increase three percent annually; the total gross rent would be $338,492. The space would be downsized to 2,850 square feet, with a construction cost to the City of $1.00 per square foot included in the rent. Dawson noted that under both proposals, the landlord would no longer be paid l 2 percent of yearly gross sales between $750,000 and $1 million. Dawson stated the Committee also had discussion about whether there should be a forum for public comment if the Council made a preliminary decision to discontinue its off-sale liquor operations. The Committee believed there should be an opportunity for public comment at a Council meeting on a widely-publicized date, and that the Council should make no decision until a subsequent Council meeting. CITY OF SHOREWOOD SPECIAL MEETING August 6, 2007 Page 2 of 4 Councilmember Woodruff stated after considering the proposals further and because the financial future for liquor stores was still uncertain, he would preferred Proposal No. 1. Councilmembers Turgeon and Wellens stated they also preferred Proposal No. 1 because of the shorter lease commitment. Woodruff then stated under Proposal No. 2 the construction activities would be a disruption to the public. Councilmember Callies stated the annual lease cost for Proposal No. 2 was significantly less, and she thought the lease could be written such that it would allow early termination of the lease if the Waterford liquor business was sold. Mr. Swandby agreed. Mr. Swandby stated from his vantage point Proposal No. 2 was a better option than Proposal No. 1. Councilmember Turgeon stated the fact that the City would have to find two buyers for its liquor operations could prove to be problematic. She then stated if the City planned to stay in the liquor operations business for at least five years, then Proposal No. 2 would be the better option; if the City were to exit the business in less than five years Proposal No. I was the better option. Woodruff moved, Approving Lease Proposal No. 1 to continue the lease for the Waterford liquor store space to October 31, 2008. Mr. Swandby stated the City would save $9,000 - $10,000 in the first year under Proposal No. 2. If there was not a potential buyer of the Waterford liquor operations business, then the sale of the business could be lowered by the amount saved in rent costs in the first year to entice a buyer. Wellens seconded the motion. In response to a question from Councilmember Callies, Councilmember Woodruff stated Proposal No. 1 allowed the City to exit the Waterford liquor operations business with afour-month notice, it minimized the City's risk, and the lease could be renegotiated in October 2008. Woodruff then stated under Proposal No. 2 there was no leverage to renegotiate a lower lease rate, the space leased was smaller, and customers would have to deal with construction improvements. Motion passed 4/1 with Callies dissenting. Wellens moved, Directing Staff to put the liquor operations businesses up for sale. Mayor Lizee stated the Liquor Committee believed there should be an opportunity for public comment at a Council meeting on awidely-publicized date, and that Council should make no decision until a subsequent Council meeting. She did not think it was appropriate to take formal action to put the businesses up for sale at this meeting. Councilmember Callies stated from her vantage point there were two reasons not to take action to put the businesses up for sale at this meeting: 1) the Committee agreed a forum should be held where public comment could be heard regarding the potential sale; and, 2) the mid-year liquor operations financial data had not been discussed at a regular Council meeting. Woodruff seconded the motion. Councilmember Callies stated she did not support the decision to put the businesses up for sale without discussing the financial data and with providing the opportunity for public comment. She also stated the City made money from the businesses. CITY OF SHOREWOOD SPECIAL MEETING August 6, 2007 Page 3 of 4 Mayor Lizee stated she thought Council owed the public an opportunity for public comment as agreed to by the Liquor Committee. Councilmember Woodruff stated that at the Committee meeting he reluctantly agreed to a forum for public comment, but he did not think that should prohibit Council from taking action at this meeting. He then stated Council could decide to take the sale of the businesses off the market based on public comment. Councilmember Callies stated she thought it would be more appropriate to take public comment before making a decision. Motion passed 3/2, with Callies and Lizee dissenting. Mr. Swandby departed the meeting. 3. SOUTHSHORE CENTER PROPOSAL Administrator Dawson stated the Tonka Bay Council endorsed the funding proposal for Southshore Center and Staffing/Programming Services for 2008. The other four South Lake Minnetonka cities would consider that proposal on August 6 or August 7. Dawson then stated the SCS Board decided SCS would continue providing services at the Southshore Center through October 31, 2007. It was likely the SCS Board would also decide to continue providing services through December 31, 2007, if the cities and the Friends agreed to a financing plan for 2008 by the SCS Board meeting scheduled for early September 2007. He clarified a commitment by the cities and the Friends to provide funding in 2008 would be required for SCS to provide services in 2008. Administrator Dawson reviewed the interim funding proposal that was before Council for consideration at this meeting. - In 2008, the five cities would pay the Friends what they contributed to SCS/Friends in 2007 ($17,600) but it would be based on the share of cost for the construction of the building. Shorewood's share was 50 percent of the building; therefore, this commitment would be $8,800 in 2008. - The Friends would raise an additional $25,000 for costs at the Center for 2008. The five cities would match the amount raised by the Friends, with each city's match based on their share of the cost for construction of the building. The matching funds would be given to the Friends. Shorewood's commitment would be up to $12,500. Administrator Dawson noted agreement to the proposal would be binding for all five cities. He stated the City's commitment could be as high as $21,300. Councilmember Turgeon stated she wanted to ensure the $25,000 in funds the Friends would raise was in addition to its existing fund-raising commitment, and that the funds to be matched were net after expenses. Administrator Dawson clarified the cities would match the amount minus fund raising expenses. Turgeon then stated she would support the $8,800 commitment to SCS/Friends in 2008; and she was not confident the Friends could raise $25,000 above and beyond its current fund-raising efforts. She wanted to ensure there was a way to track the Friends two fund-raising commitments. Slie commented that SCS had no financial commitment with this proposal. Councilmember Wellens suggested Minnetonka Community Education (MCE) should be considered to provide services at the Center. Administrator Dawson explained the Friends Board wanted continuity of services in 2008, and MCE could be considered another year. CITY OF SHOREWOOD SPECIAL MEETING August 6, 2007 Page 4 of 4 Administrator Dawson explained that a document would need to be prepared that would formalize the terms of the proposal., and that agreement would be binding on all the cities for 2008 only. He noted that if all five cities agreed to the proposal by mid-September, SCS would continue to provide services through the end of 2007 and use SCS reserves to do so. Councilmember Woodruff suggested the City's match amount for additional funds raised by the Friends should offset some of the cost for the City to rent the Center for meetings. Administrator Dawson stated that suggestion should be addressed separate from the proposal. Councilmember Turgeon clarified that the Friends would be responsible for paying all of the Center's Directors' salary from the $17,600 contribution by the cities. Callies moved, Woodruff seconded, Agreeing to support the concept proposal for funding for Southshore Center and staffing/programming services for 2008. Motion passed 4/1, with Wellens dissenting. 4. OTHER There was no other business for discussion. 5. ADJOURN Callies moved, Woodruff seconded, Adjourning the City Council Special Meeting of August 6, 2007, at 10:24 P.M. Motion passed 5/0. RESPECTFULLY SUBMITTED, Christine Freeman, Recorder A i S Christine Lizee, Mayor