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Tuesday, May 3, 2016

City signs 'lean' deal with firm to run lodge, $712,885

Tuesday, October 18, 2005

The Storm Lake City Council Monday night inked two agreements with Leisure Hotels, LLC, for management of the lodge centerpiece for Project AWAYSIS with the management firm receiving up to $712,885 before the lodge opens.

The final design of the lodge is still up for discussion. The look should be decided in November with construction to start in 2006 and opening in 2007.

"It's probably the leanest agreement that we've signed in a long time," said Leisure Hotels CEO and President Steven Olson who was present at Monday night's Council meeting. "I think we've had a good, collaborative process. I think it's a very salable project."

Rochelle Fitzpatrick, Leisure Hotels human resources manager, said the company had started its recruitment phase for a sales manager. She said the company is looking for someone with five to seven years of sales background.

In the pre-commencement agreement with Leisure Hotels, LLC, the Leawood, Kan., firm would assist with lodge design, technology, staff, marketing, and other issues. In return, the city would pay a pre-commencement fee of $200,000, travel expenses up to $49,000, and a pre-commencement budget of $463,885. The last item, the pre-commencement budget, would include $100,000 for marketing and $204,000 for labor before the lodge opens and $50,000 for initial working capital for the lodge.

The pre-commencement fee, reimbursable expenses, and legal fees associated with the agreement were negotiated down from what Leisure Hotels, LLC had initially requested. The agreement calls for a June 1, 2007 opening date for the lodge; however, the city intends to open on April 1, 2007. The June date was chosen in case lodge and waterpark construction bid overages force the design team to revise plans.

The management agreement with Leisure Hotels calls for the company to operate and market the lodge. In turn, the city will pay a base management fee of $8,500 a month plus an incentive of 1.5 percent of gross revenue the first two years. Starting the third year, the incentive will be the first $25,000 of net and 25 percent of remaining net. According to the contract, net is defined as gross less operating expenses, taxes, insurance, debt payment, and money for furniture, fixtures, and equipment.

The city will make up any operating funds shortfalls with the provision that the city be repaid. The city will also establish operating reserve, debt reserve, and early debt retirement funds to be funded with cash available after management incentive fees.

As part of the agreement, Leisure Hotels agreed to a 150-mile noncompete clause in which it promises to not own or manage facilities with a similar waterpark feature within that distance of Storm Lake.

In other business, the Council:

*Heard a report from Public Safety Director Mark Prosser on a trip last week to Mexico.

*Approved the consent agenda which includes a ban on parking on city streets starting Nov. 1. Warnings will be issued until the first snowfall when towing and ticketing will begin.

*Approved a 28E agreement with the Iowa Department of Natural Resources and bid specifications for removing an island in Casino Bay. Estimated cost of the project is $60,000 and the city will be reimbursed by the DNR, according to the agreement.

*Approved a net change order of $19,647 for the Project AWAYSIS site preparation contract. The major reason for the change is to use granular material for the fill area to increase soil stability.

*Awarded a bid to Funk Construction of Storm Lake for $27,780 for Housing Rehabilitation Project 04-HSG-019-L.

*Approved final acceptance of Housing Project 04-HSG-19-F with K&M Construction of Storm Lake for $29,080.

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