HomeMy WebLinkAboutOrdinance 4838 ORDINANCE NO. 4838
AN ORDINANCE TO WAIVE THE REQUIREMENTS OF
§34.27 OF THE FAYETTEVILLE CODE OF ORDINANCES
AND TO AUTHORIZE THE SALE OF THE CONTINUING
EDUCATION CENTER BUILDING TO THE UNIVERSITY OF
ARKANSAS FOR $2079650.00
WHEREAS, after long negotiation, the City of Fayetteville and the University of
Arkansas agree that the intent of the Fayetteville City Board of Directors and University of
Arkansas in 1979 was to sell the Continuing Education Center to the University of Arkansas for
the amount of Fayetteville taxpayer dollars needed for this project and not yet returned to the
City by all revenues (including interest earnings and rent payments); and
WHEREAS, the University of Arkansas and the City of Fayetteville have agreed that the
amount of unreimbursed Fayetteville taxpayer dollars invested into the Continuing Education
Center (including construction, financing, insurance, property tax, and maintenance expenses) is
$207,650.00; and
WHEREAS, it is in the best interests of the citizens and taxpayers of Fayetteville and the
University of Arkansas to resolve this controversy by selling the Continuing Education Center to
the University of Arkansas for $207,650.00; and
WHEREAS, since this sale is in accordance with what was stated in the City Board of
Directors' minutes when the Lease Agreement was authorized and somewhat in accordance with
the option to purchase of the Lease Agreement, the City's normal requirements for the sale of
city owned property including: an appraisal, advertisement, signs, certified mail to adjacent
property owners concerning this sale are inappropriate for this sale.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE
CITY OF FAYETTEVILLE, ARKANSAS:
Section 1 : That the City Council of the City of Fayetteville, Arkansas hereby determines
that, because of the unique history of this successful collaboration between the City and the
University to build and operate the Continuing Education Center and the option to purchase
within the Lease Agreement, the sale of the Continuing Education Center building to the
University of Arkansas should not have to comply with § 34.27 of the Fayetteville Code of
Ordinances entitled Sale of Municipally Owned Read Estate. The City Council therefore
waives § 34.27, authorizes the sale of the Continuing Education Center building to the University
of Arkansas for $207,650.00 and authorizes Mayor Coody to execute a deed and all other
documents necessary to effectuate this sale.
PASSED and APPROVED this 7'h day of March, 2006.
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APPROVED: ATTEST: _�, • ��'
^ ; FAYETTEVILLE ;
By: L4 By: 9QKAN`;Pc'J=a•
DAN COODY, Mayor SO DRA SMITH, City Clerk ��' y; � GTO14
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FLAY e TTE V' LLE ejnjlnunS
THE CITY OF FAYETTEVILLE, ARKANSAS CA wyyG TCO. /
KIT WILLIAM% CITY ATTORNEY
DAVID WHITAKER, ASST. CITY ATTORNEY
DEPARTMENTAL CORRESPONDENCE LEGAL DEPARTMENT
TO: City Council
FROM: Kit Williams, City Attorney
DATE: February 8, 2006 /
RE: Decision needed for response to Chancellor White's letter
On the last page of Chancellor White's letter to Mayor Coody dated January 31 ,
2006, he states (in bold):
"Please consider this letter as a request by the University for the City
to honor its obligations under the Lease and to convey the CEC to the University at
the contracted price of Ten Dollars ($10.00) within the next 30 days."
Therefore, the City Council needs to determine what the City' s position should be
on this issue during its February 21 , 2006 meeting.
I believe the City Council has very wide authority in this case to determine the
terms or conditions of selling the CEC to the University. The Legislature has passed a
specific statute to give cities this power.
"14-43-611 . Sale of city property to college or
university.
"Any city of the first class may sell, under such
terms and conditions as it deems appropriate, city
property to any publicly supported postsecondary
educational institution."
Because the Legislature granted us the power to sell under terms City Council
"deems appropriate," normal conditions of fair market value do not appear to restrict your
judgment in this case. However, assuming the option to purchase provision is valid, the
City Council may not charge more than such option to purchase provision would allow.
I have included several old memos and e-mails about this lease option to purchase
issue and may provide further information before your meeting.
UNIVERSITY-OfARKANSAS
Office of the Chancellor 425 Administration Building
Fayetteville, Arkansas 72701
(479) 575.4146
FAX (479) 575-2361
January 31 , 2006
The Honorable Dan Coody
Mayor
City of Fayetteville
113 West Mountain
Fayetteville, AR 72701
VIA PERSONAL DELIVERY
Dear Mayor Coody:
The University of Arkansas and the City of Fayetteville enjoy a mutually beneficial and historic
relationship dating back to the institution's founding in 1871 , when the citizens of Fayetteville and
Washington County had the foresight to pass the bond issues necessary to secure the University for this
area. In more recent times, the University and the City have continuously cooperated on a wide array
of projects, including construction of the Walton Arts Center, establishment of the research technology
park and the Fayetteville Economic Development Council, various street improvements, and First
Night Fayetteville activities. Our common interests in improving the lives of the citizens of
Fayetteville and the State of Arkansas have served as a catalyst in maintaining strong ties between the
University and the City and have set the stage for the dynamic and cosmopolitan community that we
enjoy today. I know we share a strong interest and common desire to nurture that tradition of
cooperation. In that spirit, I am writing to you and each of the members of the City Council as we
stand at an important crossroads with respect to the Continuing Education Center (CEC).
One tangible expression of the cooperative relationship between the University and the City occurred
when the University agreed to locate the CEC in downtown Fayetteville. As you are aware, that
initiative was undertaken, in large measure, to help secure the economic future of the Square, an area
that is now active and vibrant, but which at the time was truly struggling for survival. As a part of that
initiative, the City of Fayetteville and the Board of Trustees of the University entered into a Lease and
Agreement for the CEC dated October 1 , 1979. As you know, for the past year, the Lease has been the
subject of ongoing discussions between representatives of the University and the City.
The University has forthrightly shared its legal interpretation of the Lease with you and with other City
officials in the attached letter of December 7, 2004. I am also aware that City Attorney Kit Williams
The University of Arkansas is an equal opportunitylaffinnative action institution.
The Honorable Dan Coody
January 31 , 2006
Page 2
has set forth his legal interpretation of the Lease. As I understand it, now that we have reached the end
of the Lease, during which the University has paid rent that was strictly dedicated to the retirement of
the bond proceeds used to construct the CEC, the City claims that the University owes millions of
dollars in order to purchase the CEC under the Lease. In essence, the City disregards the University's
lease payments, seeking to characterize them as general funds of the City, and now seeks to charge its
assessment of the current value of the CEC. The University, however, has a fiduciary responsibility to
the taxpayers of the State of Arkansas, including the citizens of Fayetteville, not to pay for the same
building twice. Although the University believes that the text of the Lease on this issue is clear, we are
fortunate to have the benefit of knowing the intent of the individuals directly involved in the decision
to locate the CEC on the Square and to finance the construction largely through the University's rental
payments.
Many officials and leading citizens who were involved with the Lease and the surrounding events a
quarter of a century ago confirm that it was not the intention for the University to pay for the building
twice. In their view, the University was supposed to obtain the facility at the conclusion of the Lease
for the nominal sum of Ten Dollars ($ 10.00) as provided in the Lease, as long as the City did not have
to reach into City taxpayer funds to retire the bonds issued to finance construction of the CEC. In fact,
I am pleased that the positive scenario anticipated by those involved in this matter actually transpired:
the University's lease payments, state-appropriated tumback funds specifically designated for the.CEC,
and interest on CEC bond funds, were together sufficient to pay for all of the costs of the construction
of the CEC and to retire the bonds without reducing the City's coffers.
The intent of the parties to the Lease is stated clearly in the attached affidavits by several individuals
who were involved in the CEC project on behalf of the University, the City, or in their capacity as
leading citizens seeking to revitalize the downtown Square:
■ David Malone, former Mayor of the City of Fayetteville (who executed the
Lease on behalf of the City);
■ Rick Osborne, City Council member at the time of execution of the Lease;
■ Pat Tobin, former Finance Director and Assistant City Manager for the City of
Fayetteville, who represented the City in Continuing Education Center negotiations;
■ John Lewis, business leader who was instrumental in efforts to locate the
Continuing Education Center on the Square; and
■ Fred Vorsanger, former Vice President for Finance and Administration of
the University of Arkansas (whose signature also appears on the Lease), as well as a
former Mayor of Fayetteville.
The Honorable Dan Coody
January 31 , 2006
Page 3
1 am hopeful that, upon having an opportunity to hear directly from these respected individuals
(including former City officials) who were actively involved in this project 25 years ago and who
understood the intent and purpose of the Lease, all parties will have a more complete and better
understanding that no one involved in this transaction intended for the University to pay for the CEC
twice.
In the event that any questions exist concerning the University's view of the Lease, please allow me to
explain our reasoning, as supported by the attached affidavits. Under the Lease, once all of the CEC
project bonds have been retired, the Lease grants the University an option to purchase the CEC for the
amount of hotel, motel and restaurant tax funds and general funds required by the City to construct and
finance the CEC (including the payment of debt service on bonds) less any state tumback funds'
received as a result of the Project. On the other hand, if the sum of the state tumback funds received
for the Project equals or exceeds the hotel, motel and restaurant tax funds plus general funds which
were required to construct and finance the CEC, then the purchase price would be Ten Dollars
($ 10.00).
The records provided by the City to the University indicate that all hotel, motel and restaurant (HMR)
tax funds ever paid into the CEC project were refunded to the Advertising and Promotion Commission
because of the amounts of state tumback dollars received by the City; this was further confirmed in a
memorandum from City officials in September, 2004. Furthermore, to date the City has not
documented that any of its general funds were ever required to construct and finance the CEC.
The rental amounts paid by the University to retire bonds and the interest on the bond funds do not
constitute "general funds" of the City. All of these funds were pledged by the City and by project
agreements for the sole purpose of retiring the bonds. As you can appreciate, if any attempt had ever
been made by Fayetteville to use those funds for any purpose other than bond retirement, there would
have been serious legal repercussions for the City. The mere fact that any funds were passed through
the City en route to the bond Trustee did not transform those funds into general funds. Again, if there
were ever any costs of financing and constructing the project paid for by the City which were not.
included in the bonded debt, the City has never provided the University with any documentation of
such costs.
A vital objective in the CEC project agreements was to protect City of Fayetteville taxpayers from
paying for bond debt. If City taxpayers had paid for the bond debt, then the University would be
responsible to pay the City that amount, less State tumback funds received, in order to purchase the
building under the terms of the Lease. Instead, the bond debt was fully paid through the combination
of the University' s rental payments, state tumback funds, and interest on bond funds. Therefore, the
' Tumback funds are state-appropriated funds designed to promote Arkansas tourism
through helping local communities finance facilities like the CEC. Appropriations were
specifically designated to the CEC and helped defray the cost of constructing the facility.
The Honorable Dan Coody
January 31 , 2006
Page 4
University is contractually entitled to purchase the CEC for Ten Dollars ($ 10.00) as expressly stated in
the Lease and as evidenced in the attached affidavits.
The Lease interpretation previously asserted by the City would result in an unfair and unintended
windfall profit for the City and an unacceptable double payment by the University. As stewards of
taxpayer funds, I am certain that you will understand why this outcome is unacceptable to the
University and unsupported by the officials and leading citizens involved in the construction of the
CEC.
As you are aware, this letter is prompted, in part, by the fact that the City has issued invoices for rent
on the CEC to the University. Further, to date, the City has not honored its contractual promise to the
University under the Lease to convey the CEC to the University by Warranty deed for a purchase price
of $ 10.00 as provided for in Section 2014(A) of the Lease. We understand, however, that this issue
has required a careful review by all of the parties. Please consider this letter as a request by the
University for the City to honor its obligations under the Lease and to convey the CEC to the
University at the contracted price of Ten Dollars ($10.00) within the next 30 days.
Although the parties have engaged in amicable discussions to resolve this matter, the City's ongoing
delay in failing to honor the terms of the Lease and the uncertainty surrounding the future of the CEC
have begun to adversely affect the University's ability to attract clients, which is detrimental to both
the University and the City. Accordingly, the parties need to honor the deal struck many years ago.
We do not support the idea of filing a "friendly" lawsuit to settle our differences and believe that any
litigation between the University and the City undermines the history and tradition of good faith
cooperation between the parties which has been the hallmark of our relationship for more than a
century. There is no mystery what the parties intended by the Lease; especially in light of the
affidavits, a lawsuit would be a waste of each party's time and resources.
We remain optimistic that we can resolve this matter amicably and in the best interests of both parties
without further delay. We look forward to the City honoring the terms of the Lease. Please feel free to
contact me if you would like to discuss this matter.
Sincerely,
"a
John A. White
Chancellor
Attachments
RECEIVED
APR 12
UNIVERSITYMMANSAS
CITY OF FAYETTEVITEVILLE
-- MAYOR'S OFFICE
Vice Chancellor for Finance and Administration 406 Administration Building
Fayetteville, Arkansas 72701
(479) 575-5828
(479) 575-5400 (FAX)
April 9, 2004
The Honorable Dan Coody
Mayor of Fayetteville
113 W. Mountain St.
Fayetteville, AR 72701
RE: Continuing Education Center Lease and Agreement
Dear Mayor Coody:
The Lease and Agreement dated October 1, 1979 between the City of Fayetteville, Arkansas
and the Board of Trustees of the University of Arkansas for the Continuing Education Center
(CEC) property is scheduled to, terminate in May 2005. As per Section 2014 of this Agreement,
the City granted the University an option to purchase the property at the termination of the
lease, provided all bonds issued to finance the project have been retired. Since the University
would like to consider this purchase option, we need for the City to send us an updated
summary of the revenues and expenses applicable to the project as stipulated in the lease.
Last year the University received from the City a summary of Trustee Statements which shows
a yearly breakdown from 1978 through May 2003 of revenues and expenses, transfers, etc. for
both the CEC project and the parking facilities. To the best of our knowledge, the parking deck
was not part of the CEC project, so the revenue and expenses associated with construction and
operation of the parking deck (including any of the bond issue used for the parking deck)
should be shown separately on the summary statement.
Thank you for your time and assistance.
Sincerely,
Don Pederson
Vice Chancellor for Finance & Administration
lac
The University of Arkansas is an equal opportunity/affirmative action institution.
A _ w.. _ ice— _ 11_ _ . _ Ito _
e - Summary of Trustee Statements CEC^ Page
From: James Ezell <jezell@uark.edu>
To: <sturberville@ci.fayetteville.ar.us>
Date: 5/11 /04 9:38AM
Subject: Summary of Trustee Statements, CEC
Shelly,
A copy of the summary statement on the CEC bonds which you sent to Don _
Pederson has been given to me for use in determiningthe the cost to the
University, if we exercise our purchase option after the current lease
expires. In order to make this determination, we need to know just the
expenses and income applicable to the Continuing Education Center. We are
not aware of the Parkin Facili beinn cart of our lease with option to, . ..,.
purchase agreement, but it a pears that the expenses and income applicable'
to this facility are somewhat ergs w to Is stiff-M aryl
Can you clarify this for me? If I am correct, can you provide a summary
statement just applicable to CEC?
Thanks, James
CC: Don Pederson <dop@uark.edu>
FAYET I' EVILLE
THE CITY OF FAYETTEVILLE, ARKANSAS
DEPARTMENTAL CORRESPONDENCE
TO: Kit Williams, City Attorney
FROM : Stephen Davis, Finance & Internal Services Director.4
DATE: July 27, 2004
SUBJECT: CEC and Settlement with the University of Arkansas
Over the past year numerous communiques have been exchanged between the City and University
concerning the payments made on the bond issue with the University seeking information on what
the transfer price would be for the University to be able to determine if the University desires to
exercise its purchase option on the facility. On May I I Ih, James Ezell, representing the University,
contacted the Accounting Division requesting information concerning the payments, tax collections,
etc associated with determining the transfer price for the CEC. On June 2"d the Accounting Division
forwarded the information requested by Mr. Ezell to your office for distribution to the University.
Mr. Ezell, on June 25th, again contacted the Accounting Division asking the status of his June 2"d
request. The Accounting Division forwarded his request to your office the same day it was received.
Please advise the current status of the negotiations with the University concerning the potential
exercise of their purchase option. If the University does not exercise the purchase option afforded it
in the 1979 lease the City will need to enter negotiations with the University for a new lease for the
CEC.
CC: Dan Coody, Mayor
Hugh Earnest, Chief Administrative Officer
Marsha Farthing, Accounting Manager
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UNIVERSITY OF ARKANSAS
Of re of rlro• Gewral Camnu!
September 27, 2004
The Honorable Kit Williams
City Attorney
City of Fayetteville
113 West Mountain
Fayetteville, AR 72701
VIA FACSIMILE
575-8315
Dear Kit:
As you know, the University is currently conducting its review of the appropriate
purchase price of the Continuing Education Center under the purchase option of the
existing Lease between the City and the University. Friday's Northwest Arkansas
Times reported that you have issued a new memorandum regarding a proposed
purchase price for the CEC. To assist in our analysis, I would appreciate it if you could
provide us with a copy of that memorandum and any underlying data upon which your
calculation is based.
In addition, James Ezell had previously requested Shelley Turberville to provide a copy
of the memorandum you issued to the City Council on March 8, 2004 regarding this
matter. We would also appreciate a copy of that memorandum. Ms. Turberville
provided certain other information to Mr. Ezell last week, which we appreciate.
After we have had an opportunity to review the necessary information, University
officials look forward to visiting with representatives of the City regarding our
assessment of the appropriate purchase price.
421 Administration Ettllding / Fayerrevillq Arkatuas 72701 / 479-575 .5401 / Faa 479-575-5046
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Kit Williams September 27, 2004 -- Page 2
Thanks in advance for your assistance in this matter.
Sincerely,
OL� n �
William R. Kincaid
Assoclate General Counsel
cc: Donald O. Pederson
James Ezell
