MEMORANDUM 05-97

TO: Mayor Hornaday / Homer City Council

FROM: Walt Wrede

DATE: May 18, 2005

SUBJECT: Hospital Lease

As you know, the City and the Kenai Peninsula Borough have been engaged in negotiations regarding the hospital lease for the past few months. The City has historically taken the position that it is in its own best interest and that of the Hospital Service Area for the City to retain ownership of the land. The City has offered to extend the term of the existing lease and possibly amend relevant sections which address the ultimate ownership of the building.

The Borough has historically taken the position that it is in its best interest and that of the Service Area for it to own the land under the hospital. The Borough has stated that it will not go forward with the proposed $17 million dollar expansion project if it does not receive title to the land. It has proposed several options under which title is transferred.

There is one thing that both parties agreed upon. It is in everyone’s best interest that a full service, publicly owned, and locally controlled hospital remain in Homer and that the proposed expansion project go forward. To date, the City Manager and the Borough Mayor have discussed this matter, the City Council met with the Mayor, several Borough Assembly members, and key members of the public in a workshop setting, and the Council has discussed the matter with the City Attorney in an executive session.

The purpose of this memorandum is to put a recommendation and proposal on the table so that the Council can discuss the matter and take action at the May 24^th, meeting if it determines that action is appropriate at this time.

RECOMMENDATION:

That the Council make the following proposal to the Borough and direct the City Manager and City Attorney to work out the details with the Borough Mayor and Borough Attorney. The proposed final agreement will be subject to approval by the City Council and Borough Assembly.

1. The City will agree to transfer title to the hospital parcel in exchange for cash equal to fair market value based upon a current appraisal or a trade for Borough land of equal or greater value.
2. The transfer of title is contingent upon a Deed of Trust, Deed Restriction, or other recorded document as appropriate which is legally binding and states that:

• The parcel is deeded expressly for the purpose of providing a full service publicly owned hospital at the site. All other uses are prohibited unless expressly approved by the Homer City Council. The land and all improvements automatically revert to the City upon violation of this provision.
• The Borough cannot sell the property (land and improvements), operate anything less than a full service, publicly owned and locally controlled hospital, or move the hospital out of Homer or to a different site without the expressed consent of the Homer City Council.
• If the Borough wishes to sell the property (both land and improvements) the City has the right of first refusal.