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