RESOLVED, that the proper city officials are authorized to execute the first amendment to agreement, a copy of which is on file in the office of the city clerk as Public Document No. ___________, with Duluth Building Limited Liability Company, amending the Lincoln Park redevelopment agreement, City Contract No. 18154, to modify the terms on options to purchase property and formalizing the terms and conditions related to disposal of problem soils on option property.

STATEMENT OF PURPOSE:  The purpose of this resolution is to authorize the first amendment to the development agreement for the so-called North Star Ford development in the Lincoln Park business district to address issues raised by an option granted to the developer regarding city-owned property and to address issues raised by the disposition of problem soils on option property.

When the city entered into the Lincoln Park redevelopment agreement, the initial purpose of the agreement was to attempt to retain North Star Ford in Lincoln Park, at the location it had occupied for many years. In order to attempt to reach this goal, the city committed to the developer that it could have an option on several parcels of property to the east of Garfield Avenue and the city sign shop on Michigan Street. The option granted was without any time limit but did contain a provision that if the city had another development for property covered by the option, it could require North Star (legally named Duluth Building Limited Liability Company) to either exercise its option or give it up. The agreement also contained a provision requiring the developer to expend $750,000 to improve its property in order to exercise the option.

After the agreement was signed and the option given, the city undertook the construction of new Michigan Street, which was also part of the Lincoln Park redevelopment. In the course of doing so, soils were discovered on the site of the street construction that needed to be hauled out and disposed of in accordance with MPCA requirements. Normally this would have required the city to pay to have them hauled over the hill and into the county to an approved disposal site. However, MPCA was willing to allow the city to dispose of them on city-owned property between new Michigan Street and the freeway which was to the east of the site from which it came. Unfortunately, this property was under option to the developer and created the possibility of liability in the event that the option were exercised in the future and the property developed. The city staff reached an agreement with North Star to allow us to deposit the spoils on the option property but, if they exercised their option, we would agree to deal with any soils which subsequently were required to be removed for an actual development. This agreement was never formalized.

Recently, Minnesota Power has approached the city to acquire and develop some of the property under option to North Star for an expansion of their 15th Avenue West substation. Consequently, the city sent a notice to the developer requiring them to exercise their option on any portion or portions of the option property they were willing to buy at this time and indicated that failure to exercise would result in termination of the option. North Star did not feel prepared to exercise their option at this time but did not want to give up on it totally. As a result, negotiations were initiated to modify the terms of the original option and to formalize the conceptual agreement regarding the new Michigan Street soils.

The first amendment to the agreement is the result. First, it eliminates North Star’s option to purchase that portion of the property fronting on West Superior Street, thereby freeing up the property next to the substation for the Minnesota Power expansion. Secondly, it reduces the previously unlimited term of the option to acquire the rest of the city’s property to a date certain, August 1, 2012. Thirdly, it provides that if the property east of the sign shop is to be acquired, the developer must provide the city access from old Michigan Street (traffic engineering considerations prohibits access from new Michigan Street). Fourthly, it recognizes North Star’s previous investment of $500,000 in the development agreement and reduced the remaining investment requirement in the exercise of the option to $250,000. Finally, it formalizes the rights and responsibilities of the parties in the event that the developer exercises its option to acquire the property on which the new Michigan Street soils were disposed of.