HomeMy WebLinkAboutAgenda Report - July 18, 2007 K-01AGENDA ITEM Kdr I
F CITY OF LODI
COUNCIL COMMUNICATION
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AGENDA TITLE: Adopt Resolution Authorizing the City Manager to Execute a Downtown Hotel
Exclusive Exploration Period Agreement with Russ Munson
MEETING DATE: July 18, 2007
PREPARED BY: City Manager
RECOMMENDED ACTION: Adopt resolution authorizing the City Manager to execute a
Downtown Hotel Exclusive Exploration Period Agreement with Russ
Munson.
BACKGROUND INFORMATION: In 1998, Gruen & Gruen Associates, under contract to the City,
prepared a report on strategies for enhancing Downtown. It
recommended three Downtown anchors, which were: 1) "state-of-
the-art multiplex with stadium seats"; 2) wine -related outlets and
restaurants; and 3) a Downtown hotel. The City has addressed two of the three anchors: however,
development of a Downtown hotel has yet to occur.
In November 2005, the City engaged the services of nationally recognized hospitality industry consulting
firm PKF to evaluate the demand for a Downtown hotel. On April 25, 2006, the City Council received a
presentation on PKF's report. PKF looked at the possibility of developing a hotel upon the City -owned
property and the site of the former Public Safety building and concluded a Downtown hotel with some
subsidy was feasible.
The Council was interested in the concept of a Downtown hotel, but not necessarily at the old Public
Safety building site.' The Council desired that interest from the development community be solicited for
the development of a hotel on other City -owned Downtown property.
For over a year, the City Manager has sought interest in the development of a Downtown hotel via
informal direct contact. Mr. Russ Munson of Wine and Roses has now expressed a desire to enter into
an exclusive exploration period to test the feasibility of the development of a Downtown hotel.
Mr. Munson is requesting this time to develop a business plan and seek interest from investors without
the fear that other interests will capitalize upon his work before he is ready.
The City agrees that it will not sell or lease any of its property in Downtown Lodi for nine months—a very
safe commitment for the City to make. The Developer will deposit $5,000 with the City and enter into a
feasibility study period to see if a Downtown hotel is viable. The Developer will consider City -owned
parking lots, but not the old Public Safety building. At the end of nine months, the Developer can request
the City enter into good faith negotiations to secure the sale or lease of a possible site for an additional
three months; however, the City is not obligated to enter into an agreement to sell or lease. If the
Developer wishes to enter into negotiations, an additional $3,000 deposit is required. Because the City's
objective is to develop a Downtown hotel, it is hoped that Mr. Munson wants to seek the development of
a Downtown propertyfor a hotel.
1 This building remains mostly vacant with no immediate plans for renovation or reuse.
APPROVED: f
Blair to , City Manager
Adopt Resolution Authorizing the City Manager to Execute a Downtown Hotel
Exclusive Exploration Period Agreement with Russ Munson
July 18,2007
Page Two
Downtown hotels are gaining in popularity. Examples include the Hotel Healdsburg and Les Mars Hotel
in Healdsburg, the Carlton Hotel in downtown Atascadero, and the Hotel Diamond in Chico.
FISCAL IMPACT: The opportunity cost cf this agreement is little to nothing. At this point in
time the interest in the development cf a Downtown hotel has been
minimal.
It is possible that a new hotel could generate $200,000 annually in new Transient Occupancy Tax (TOT).
The City's projected fiscal year 2007-08 TOT is $397,066. In addition, a new hotel would generate
property and sales tax and contribute to the overall goal of revitalizing downtown and serving as a
Downtown anchor.
FUNDING AVAILABLE: Not applicable.
1
Blair King
City Manager
BK/jmp
DOWNTOWN HOTEL
EXCLUSIVE EXPLORATION PERIOD AGREEMENT
This Downtown Hotel Exclusive Exploration Period Agreement ("Agreement") is
entered into between the City of Lodi and Russ Munson ("Hotel Developer"), as of July
18, 2007.
Whereas, the City of Lodi desires to encourage the development of a hotel in
Downtown Lodi (as defined in the map attached hereto as Exhibit A);
Whereas, the City owns a number of parcels in Downtown Lodi that could be
leased or sold to a prospective hotel developer;
Whereas, Hotel Developer is only willing to expend the resources necessary to
explore the development of a hotel in Downtown Lodi if the City agrees not to sell or
lease its property in Downtown Lodi to a third party hotel developer.
Now, therefore the parties hereby agree as follows:
1) City agrees not to sell or lease any of its property in Downtown Lodi for a
period of nine (9) months following the execution of this Agreement
("Feasibility Study Period").
2) During the Feasibility Study Period Hotel Developer will explore the
preferred location and financial feasibility of a hotel in Downtown Lodi.
3) Hotel Developer's Deposit: Hotel Developer will deposit security in the
amount of $5,000 with the City in a form acceptable to the City Attorney
as earnest money. If Hotel Developer provides the below reports, the
deposit (with interest actually earned) will be either refunded to Hotel
Developer or applied toward any sale or lease of property to Hotel
Developer for construction of a hotel in Downtown Lodi.
a) Interim Progress Report: Within five (5) months of the
execution of this Agreement Hotel Developer will provide the City
Managerwith a preliminary report analyzing the preferred location
of a hotel in downtown Lodi, conceptual design and target market.
b) Final Progress Report: Within nine (9) months of
execution of this Agreement, Hotel Developerwill provide the City
Manager with a final report setting forth an estimate of the hotel
construction and start-up costs and a financial proforma.
4) The City agrees to negotiate in good faith exclusively with Hotel
Developer toward the sale or lease cf City owned or any other property
for the creation of a hotel in Downtown Lodi for a period of three months
following the end of the Feasibility Study Period, however, nothing herein
shall obligate the City to ultimately sell or lease to Hotel Developer. If
Hotel Developer elects to initiate exclusive negotiations under this
CalCity/Agreements/DowntownHotel-ExplorationPeriod.doc
paragraph, he will make an additional deposit of $3,000 with City subject
to the same terms and conditions set forth in Paragraph 3 of this
Agreement.
5} This Agreement may not be assigned or transferred without the express
written consent of City, which it maywithhold in its absolute discretion.
IN WITNESS WHEREOF, the parties hereto, being in agreement with the terms
of this writing, have set their hands as follows:
CITY OF LODI, a municipal corporation
BLAIR KING
City Manager
ATTEST:
RANDi JOHL
City Clerk
APPROVED AS TO FORM:
D. STEPHEN SCHWAEAUER
City Attorney
Ca/City/Agreements/DowntownHotel-ExplomtionPeriod.doc
RUSS MUNSON
Hotel Developer
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RESOLUTION NO. 2007-146
A RESOLUTION OF THE LODI CITY COUNCIL AUTHORIZING THE
CITY MANAGER TO EXECUTEA DOWNTOWN HOTEL EXCLUSIVE
EXPLORATION PERIOD AGREEMENT WITH RUSS MUNSON
WHEREAS, in 1998, Gruen & Gruen Associates prepared a report on strategies for
enhancing Downtown and recommended three Downtown anchors: 1) "state-of-the-art multiplex
with stadium seats'; 2) wine -related outlets and restaurants; and 3) a Downtown hotel; and
WHEREAS, in November 2005, the City engaged the services of PKF to evaluate the
demand for a Downtown hotel. It studied the possibility of developing a hotel upon the former
Public Safety building site and concluded a Downtown hotel with some subsidy was feasible.
The Council was interested in the concept of a Downtown hotel, but not at the old Public Safety
building site, and requested that interest from the development community be solicited for a
hotel on other City -owned Downtown property; and
WHEREAS, Russ Munson of Wine and Roses has expressed a desire to enter into an
exclusive exploration period to test the feasibility of the development of a Downtown hotel and is
requesting time to develop a business plan and seek interest from investors; and
WHEREAS, the City agrees that it will not sell or lease any of its property in Downtown
Lodi for nine months. The Developerwill deposit $5,000 with the City and enter into a feasibility
study period to see if a Downtown hotel is viable. At the end of nine months, the Developer can
request the City enter into good faith negotiations to secure the sale or lease of a possible site
for an additional three months; however, the City is not obligated to enter into an agreement to
sell or lease. If the Developerwishes to enter into negotiations, an additional $3,000 deposit is
required.
NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council does hereby
authorize the City Manager to execute a Downtown Hotel Exclusive Exploration Period
agreement w3` h --Russ Munson, as des-Wt5ett above -
Dated: July 18, 2007
1 hereby certify that Resolution No. 2007-146 was passed and adopted by the Lodi City
Council in a regular meeting held July 18, 2007, by the following vote:
AYES: COUNCIL MEMBERS -Hansen, Katzakian, Mounce, and
MayorJohnson
NOES: COUNCIL MEMBERS - None
ABSENT: COUNCIL MEMBERS - Hitchcock
ABSTAIN: COUNCIL MEMBERS -
JOHL
City Clerk
2007-146