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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 09/27/2011 - UPDATE ON LEASE AGREEMENT NEGOTIATIONS WITH COLORADATE: September 27, 2011 STAFF: Bruce Hendee, Ken Mannon, Helen Matson, Carol Webb, Josh Birks Pre-taped staff presentation: available at fcgov.com/clerk/agendas.php WORK SESSION ITEM FORT COLLINS CITY COUNCIL SUBJECT FOR DISCUSSION Update on Lease Agreement Negotiations with Colorado State University Research Foundation for the Old Power Plant, 430 North College. EXECUTIVE SUMMARY Colorado State University (CSU) has leased the City-owned property known as the Old Power Plant at 430 North College Avenue for the past 17 years. CSU has used this site as the Engines and Energy Conversion Lab (EECL). This program has grown over the years and it is CSURF’s desire to construct a new building that will be used to house additional labs, office and incubator companies sharing the vision of the EECL. In order for these changes to occur on the City’s site, a new lease agreement needed to be negotiated. The new lease agreement will be with Colorado State University Research Foundation (CSURF) and CSU will relinquish all rights, title and interest in the original Lease Agreement dated February 15, 1994 and the First Amendment to Lease Agreement dated January 13, 2005. The terms of the new lease being negotiated will be discussed. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. Staff is seeking direction on whether to continue with lease negotiations with CSURF for an expansion to the Engines Lab. 2. Staff would like comments on the terms of the proposed lease agreement. BACKGROUND / DISCUSSION History of Site and Current Use The City acquired the property located at 430 North College Avenue in 1912. A municipal landfill operated on a portion of the site in the mid-1900s. The City constructed the existing facility as a power plant and, from 1935 until 1972, it was the City’s power plant. From 1972 until 1988, it was used as a switching station. The next use was as an art gallery in 1988 and 1989. On February 15, 1994, the City entered into a lease agreement with CSU to use the site and the old power plant building for laboratory and research purposes focusing on internal combustion engines. This lease agreement had an original term of ten years with automatic renewals for three successive five year periods, or a total 25 years. The rental rate during these years was $1/year. September 27, 2011 Page 2 That lease agreement was modified in the summer of 2004. This modification added another five year extension period to the lease, making the lease a total of 30 years. Also included in this modification, the City agreed to increase the termination notice period to five years. These changes were done to assist CSU with fundraising activities for EECL’s programs and the potential of a new building. NEW LEASE TERMS Due to CSU’s plan to add the new building on the City-owned property, staffs from CSU, CSURF and the City started negotiations for a new lease agreement. Agreement on the main points of the lease has been reached and the main points are discussed below: Leased Premises: Main Parcel, 430 North College Avenue Parking Parcel, portion of the Northside Aztlan Center Site (Both areas shown on Attachment 1 - Leased Premises Map) Lease Term: Initial term of forty years, with two additional twenty year terms Exception: If CSURF does not construct its new building within 8 years, the initial term shall be ten years. If CSURF is not in default at the end of the ten year period, the lease may be extended for an additional ten year period. This option is at the City’s sole discretion. Rent: Base rent at $25/year, or $1,000 due on the effective date. Rent for each extension period at $50/year, or $1,000 due at the beginning of the extension period. Lease Termination: At the expiration of Lease (or after initial term or any of the extensions) all improvements become the property of the City. Lease Termination due to default of the City: During the first 20 years of the initial term, the City will compensate CSURF the value of the new building and additions based on an MAI appraisal. During the second 20 years, the compensation will be based on the appraised value, less the fair market rent value from the first year of the current lease to termination date. Alterations or Improvements: All improvements must comply with all applicable building and zoning laws, the Land Use Code and all buffer zones Financial Support: Rent received by CSURF from its tenants will be used by CSURF to financially support CSURF’s approved uses through the Lease. The funds shall supplement, not substitute, CSURF’s annual budgeting for this program. September 27, 2011 Page 3 Environmental: Based on the results of a Phase I and Phase II Environmental Assessments, the City has required, and CSURF has agreed, to submit a Voluntary Cleanup Program (VCUP) application to the Colorado Department of Public Health and Environment (CDPHE). CSURF is also required to comply with the CDPHE approved Soil Characterization Management Plan (SCMP) and a Materials Management Plan (MMP). CSURF will be required to manage contaminated materials encountered during construction of the building as required by CDPHE. CSURF is obtaining environmental insurance and the City will be named as an additional insured. If CSURF decides that it does not want to move forward with the construction of the new building as a result of the environmental issues of the site, CSURF has the option to terminate the Lease upon 90 days notice to the City, provided that such termination occurs prior to submission of a VCUP to CDPHE. Parking: Parking Parcel - CSURF has the option to develop a parking lot on this parcel as shown on the attached Leased Premises Map. This development will be at the sole expense of CSURF. This parking lot will be available to users of the Northside Aztlan Center during off hours. Main Parcel – Both parties agree to work cooperatively to identify possible parking spots that could be made available for public parking during off hours. Option to Purchase: As long as CSURF is not in default of the lease, CSURF shall have the option to purchase the Leased Premises, subject to mutual agreement and subject to Council’s approval. Right of First Refusal: If the City decides to accept an offer to buy the Leased Premises from any potential purchaser during any of the terms of this Lease, the City shall provide CSURF with written notice of the offer and a copy of the Offer. CSURF has the right to purchase the Leased Premises with the same terms as the offer and to notify the City within thirty days of the intention to purchase. ENVIRONMENTAL ISSUES ON THE SITE A portion of the Main Parcel had been used in the past as part of a historical municipal landfill and the Parking Parcel is a portion of the Poudre River/Aztlan site (the Brownfields site to the south of the Main Parcel). With this knowledge, the City updated its Phase I Environmental Site Assessment of the Main Parcel and followed that with a Phase II Environmental Site Assessment. Since the Parking Parcel is a part of the Poudre River/Northside Aztlan Center site, CDPHE required the City to update its Soil Characterization and Management Plan of the Poudre River/Aztlan site. CSURF and the City have agreed to share the costs of these reports since these reports are beneficial to both the City and CSURF. The Phase II Assessment did identify the following: soil contamination, including arsenic, lead and asbestos; groundwater contamination, including benzene, and poly-aromatic hydrocarbons; and, soil vapors, including methane. Although soil and groundwater contamination was identified at the site, September 27, 2011 Page 4 the contamination may be managed appropriately so as to not prohibit construction of a new building and improvements. CSURF has agreed to apply to CDPHE for a Voluntary Cleanup Program. The requirements established by CDPHE in the VCUP process will detail to CSURF how potential contamination will be managed during the project. CDPHE will be the primary source for information regarding management of contamination encountered during the construction project. Such measures may include an indoor system to mitigate soil vapors from methane contamination. General site stabilization activities are guided by the SCMP. This Plan requires CSURF to notify CDPHE at least 10 days prior to any soil disturbing activities and that all workers conducting any soil disturbance work receives training in asbestos management. All supervisors or inspectors are required to go through an asbestos awareness training that covers OSHA standards. In addition, soil spotters must be used for any soil disturbance work. Engines and Energy Conversion Lab (EECL) Information The mission of the EECL is to create innovative energy solutions and entrepreneurial models that benefit the human condition and achieve global impact. The EECL at Colorado State University is one of the most important education facilities in the country. It provides a physical space for the ideas driving energy research and for the education of tomorrow’s leaders in sustainable energy and also provides real-world deliverables for energy efficiency today. Dr. Bryan Willson heads the EECL. The EECL is one of CSU’s elite Programs of Research and Scholarly Excellence, supporting the research and development efforts of faculty and students from three colleges and five departments within the University. The Lab’s research focuses on fuels, energy conversion, and energy distribution, with applications concentrated in transportation, air quality, indoor air quality, village energy systems and distributed energy. Through partnerships with large corporations and small start-up companies, the EECL develops technologies that can be directly delivered in real-world settings, making energy efficiency accessible and sustainable in communities around the world. The approach of conducting application-focused research and development in partnership with the business sector has proven very effective. The Lab continues to innovate and inspire new developments in energy, the environment, and health, including two spin-off companies (Envirofit International and Solix Biofuels) and multiple new programs at CSU, including the Global Social and Sustainable Entrepreneurship Program, and the Global Innovation Center. Due to the success of the EECL model, it has outgrown the current facility. The proposed expansion of the EECL will further facilitate its mission: a local research and business facility with global impact. The proposed new building will be a mixed-use facility built adjacent to the current facility, capable of accommodating faculty, staff, and students as well as provide laboratory and incubator space for EECL spin-off and “spin-in” companies and partnerships with industrial collaborators. Four major corporate partners and up to fifteen emerging companies are anticipated to be tenants in the Lab. The architectural design will compliment that of the original historic power plant building, and will highlight the connection between the original use of the building, and its current use, as well as showcasing energy efficient building practices. September 27, 2011 Page 5 Economic Impact of Current and Proposed Use Regional Economic Development • As a research institution, the EECL has been awarded over $20 million in research awards; these funds are used locally to fund infrastructure at the EECL, students at CSU, research staff, etc. The EECL currently employs a dozen professional research and support staff, as well as approximately 50 graduate and undergraduate students • The EECL has actively engaged in the development of “spin-off” enterprises, which have been awarded over $55 million in funding commitments. In addition, these spin-off companies currently employ over 70 professional engineers, managers, and scientists. • Additional companies have been attracted to Fort Collins as the EECL has become an “anchor” for the clean-tech industry. • Additional companies have been (or are in the process of being) accelerated through partnerships with the EECL (CZero, Van Dyne Superturbo, Spirae). These companies represent additional 20-30 primary jobs in the Fort Collins downtown area. Typical universities will see one start-up company generated for every $100 million of research and development; the best universities will see one start-up per $25-$35 million of research and development (CalTech, MIT, etc). At the EECL the ratio is 1 start-up per $7 million of research and development investment The EECL routinely has many tours and guests, including elected and appointed government officials and international visitors. The EECL provides educational and industry tours. Next Steps If Council supports this direction, staff proposes to bring this item for Council consideration for First Reading on October 18, 2011and Second Reading on November 1, 2011. ATTACHMENTS 1. Leased Premises map 2. PowerPoint presentation ATTACHMENT 1 1 1 Engine’’s Engine s Energy and Conversion Laboratory Lease Agreement • Staff would like direction on whether to continue with lease negotiations with Colorado State University Research Foundation for an expansion to the Engine’s Lab. • Staff would like comments on the terms of the proposed lease 2 Engine’’s Engine s Energy and Conversion Laboratory (EECL) Lease Agreement • Colorado State University has been using the Old Power Plant site for 17 years under an existing lease. • CSU’s success has led to a desire to construct a building addition and continue growing their program ATTACHMENT 2 2 3 Engine’’s Engine s Energy and Conversion Laboratory Lease Agreement • The EECL is an anchor in the emerging Downtown River District – Discovery Museum – Linden Street Enhancements – Bas Bleu Theater – New Belgium Brewing – The Center for Fine Art Photography – Northside Aztlan – Possible Future Marketplace 4 Site Plan 3 5 Site Plan 6 History • Fort Collin’s Power Plant from 1935-1972 • Decommissioned but used as switching station 1972-1988 • Art gallery 1988-89 • Significantly deteriorated structure when approached by CSU in 1992 • EECL has invested significantly in revitalizing the structure • EECL now a hub of clean energy in Fort Collins and Northern Colorado 4 7 8 Engine’’s Engine s Energy and Conversion Laboratory Lease Agreement •The Engine’s Laboratory is providing research and development in a university setting for new companies that provide social and sustainable entrepreneurial ventures – Envirofit –CZero –Spirae – Van Dyne – Solix BioSystems – Enerjetics / Crystal Creek –CO2 Nexus – Prometheus – Bright Energy 5 9 Engine’’s Engine s Energy and Conversion Laboratory Lease Agreement • The Engine’s Laboratory serves as an incubator for primary employers • Close Linkage with RMI2 • The EECL has been awarded over $30M in research and has raised over $50M for spinoff companies • EECL is a primary employer • The EECL is highly efficient creating one start up company per $7M of investment, compared with a ratio of one startup per $25-$35M at the best universities 10 6 11 Engine’s Energy and Conversion Laboratory Lease Agreement Environmental Considerations • The site has historically been used for a variety of industrial operations • Investigations document the presence of soil and groundwater contamination • CSU/City collaborated to complete an updated environmental assessment in July 2011 to assess contaminations that have the potential to affect the proposed development of the site 12 Engine’s Energy and Conversion Laboratory Lease Agreement • Environmental Investigation – Soil contamination • Arsenic, lead, asbestos – Groundwater contamination • Benzene, Poly-Aromatic Hydrocarbons – Soil vapor • Methane 7 13 Engine’s Energy and Conversion Laboratory Lease Agreement • Environmental requirements – Materials Management Plan – Asbestos Management Plan • Voluntary Cleanup Application • Obtain guidance from regulators • Prepare for situations that may develop during construction • CSU/City collaborating to comply with all requirements 14 Engine’’s Engine s Energy and Conversion Laboratory Lease Agreement • Site Lease- Key Considerations – Term of Lease – Lease Rate – Lease Termination – Environmental Terms – Addition required to follow all applicable building and zoning laws, including the Land Use Codes and Buffer Zones. 8 15 Engine’’s Engine s Energy and Conversion Laboratory Lease Agreement • - Key Provisions - Profit Sharing - Parking - Right of First Refusal - Option to Purchase 16 Engine’’s Engine s Energy and Conversion Laboratory Lease Agreement • Timeline for Lease Approval – First Reading of Ordinance Approving New Lease is scheduled for October 18, 2011 – Second Reading of Ordinance Approving New Lease Agreement is scheduled for November 1, 2011 – Effective date of New Lease Agreement: November 11, 2011 9 17 Engine’’s Engine s Energy and Conversion Laboratory Lease Agreement Thank You