MEMORANDUM 04-58

DATE: April 7, 2004

TO: Mayor Cushing / Homer City Council

FROM: Walt Wrede

SUBJECT: Kenai Peninsula Housing Initiatives Inc. ( KPHI) / Short Term Lease

The purpose of this memo is to request City Council approval of a short term lease for KPHI on the Mattox lot that the City donated to the organization. The City has not yet transferred title to the property for a variety of reasons. The parties have concluded that a short term lease on the property which expires no later than January 15, 2005, would be a good idea. Title to the property would be transferred at that time after the building is constructed and all loans and grants are closed. We believe a short term lease is a good idea for the following reasons:

• It would allow KPHI to enter the property to begin site work by the first week in May.
• It would demonstrate the City’s intent with respect to the property thereby helping KPHI with bank financing.
• It would give the Borough time to process KPHI’s application for a property tax exemption and thereby, set the stage for the City and KPHI to finalize their PILT Agreement.
• It would allow KPHI time to get the building constructed and occupied (revenue coming in) before it had to begin making PILT payments.

Under this scenario, the lease would expire and title to the property would be transferred in early January, 2005. We will take great care to protect the city with respect to insurance and other issues that might be associated with having a construction project occurring on City property. PILT payments would begin in 2006. KPHI construction plans include beginning site work the first week in May, final construction approval from all funding and financing agencies by May 22, pouring the foundation in June, completion of the building just before Christmas, occupation in early January, and full occupation by April 1, 2005.

I have worked closely with KPHI on all of the stipulations and contingencies the Council placed upon this land donation, including, pedestrian access, stream protection, and protection on natural vegetation. I believe KPHI has been very responsive on all of these concerns and I have endorsed the site plan, a copy of which will be available at the meeting. All required permits, including permits from the City are in secured to the best of my knowledge.

RECOMMENDATION: That the City Council approve a short term lease in advance for KPHI on the Mattox Property.