WHEREAS, on December 15, 1997, the council approved a lease between Spirit Mountain Recreation Authority ("Spirit Mountain") and Spirit Ridge LLC ("Developer") for the lease of property at Spirit Mountain to be used as a golf course and hotel. The lease provides that the first base rent payment shall be due and payable on July 1, 1999. The commencement date of the lease was later extended to July 1, 2001. Copies of the fully executed lease, and written and fully executed extension, are attached hereto as Exhibit A;

    WHEREAS, the lease agreement was part of a two document package that also included a development agreement between Spirit Mountain and developer. Under the terms of this development agreement, the developer agreed to secure all necessary permits no later than December 31, 1998, and commence construction within 60 days of the receipt of all necessary permits. The deadline for securing permits was later extended to December 31, 2000. Copies of the fully executed development agreement and written and fully executed extension are attached as Exhibit B;

    WHEREAS, these documents state that the lease shall be of no force and effect unless and until the development agreement is fully executed and delivered by both parties and that any violations of any of the terms, covenants, or conditions of the development agreement shall constitute a breach of the lease;

    WHEREAS, the development agreement provides that it is conditioned upon the developer providing the following items to Spirit Mountain:
        a.     Copies of loan commitments and other financial commitments, and equity participation of the developer to be in an amount not less than the total anticipated costs of developing the project;
        b.     Personal guaranties of the principals of the developer (and by implication, the personal financial statements of the principals of the developer);
        c.     Proof that developer owns or has control of the off-site course site for at least the term of the lease;
        d.     Proof that developer has all permits and approval necessary from the township of Midway to construct and operate a golf course; and
        e.     Survey of the premises showing the location of buildings, roadways, parking areas, utilities, and other improvements on the property; and

    WHEREAS, the development agreement and lease provide that the following information and documents must be provided by developer before any construction begins:
        a.     Approved plans, specifications, and elevations for construction of the entire project;
        b.     A budget for the entire project;
        c.     A copy of the executed contracts between developer and all contractors who will be providing goods or services on the project;
        d.     Copies of executed payment bonds and performance bonds provided by contractors in connection with the project;
        e.     Copies of all work permits required for the project; and
        f.     Copies of all insurance contracts required by the agreements; and

    WHEREAS, despite the fact that the lease was approved by the council more than three years ago, developer has furnished Spirit Mountain with none of the items required above, and Spirit Mountain has not required that these items be provided by the developer. There is no question, however, that Spirit Mountain or members of its staff have acted in any manner other than a professional and conscientious manner;

    WHEREAS, the fact that developer has failed to provide this information after such a long period of time may indicate that developer is not able to develop the project, or that the developer may get started with the project and not be able to complete it without financial assistance or other assistance from the public, or may require that the public unexpectedly compromise financial or environmental standards relating to the project in order to complete the project;

    WHEREAS, Spirit Mountain's failure to require developer to comply with the terms of the development agreement and lease is tantamount to giving the developer an indefinite and open ended option to develop land at Spirit Mountain with no financial return or other public benefit;

    WHEREAS, Spirit Mountain has spent at least $10,000.00 in public funds to market and promote this private development project to Duluth residents;

    NOW, BE IT RESOLVED as follows:

        1.     That the city council requests Spirit Mountain provide the council and the administration a complete itemization of all costs incurred by it in developing and promoting the golf course;
        2.     That the council requests that Spirit Mountain immediately require that the developer provide the information and documents required by the lease and development agreement described above;
        3.     That the city council requests that Spirit Mountain puts the developer on notice that Spirit Mountain and/or the council will agree to no further extensions of the lease and development agreement;
        4.     The city council requests that Spirit Mountain give developer 30 days notice required in the lease and development agreement that it is in default of the terms of the agreements;
        5.     That the city council requests that Spirit Mountain terminate the lease and development agreement on the grounds that developer is in default of the terms of the agreements; and
        6.     That the council agrees to explore options to provide additional funding to Spirit Mountain to make up any budget deficit resulting from loss of future expected revenues caused by the termination of the lease.

STATEMENT OF PURPOSE:  This resolution requests Spirit Mountain Recreation Authority to take action against the golf course developer as set forth in the resolution.