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R-98-06-11-13A1 - 6/11/1998RESOLUTION NO. R -98-06-11-13A1 WHEREAS, Nolan Ryan, Reid Ryan and Don A. Sanders, the owners of Ryan Sanders Ryan Sports, Inc., ("RSR Sports") have purchased the Jackson Generals, a Class AA Texas League Professional Baseball Franchise, and have announced their intentions to relocate said team to Round Rock, subject to reaching an acceptable agreement with the City for the construction and lease of a stadium facility, and WHEREAS, the City proposes to utilize hotel occupancy tax to construct a multi-purpose stadium facility which will be appropriate for minor league baseball, as well as for other purposes, and WHEREAS, the RSR Sports and the City wish to set forth their mutual intent and understandings with respect to continuing to negotiate various agreements which will result in the construction of said facility and the relocation of the baseball team to the City, Now Therefore BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK, TEXAS, That the Mayor is hereby authorized and directed to execute on behalf of the City a Memorandum of Understanding with RSR Sports, a copy of such Memorandum being attached hereto and incorporated herein for all purposes. The City Council hereby finds and declares that written notice of the date, hour, place and subject of the meeting at which this Resolution was adopted was posted and that such meeting was open to the public as required by law at all times during which this K:\WPDOCS\RESOLUTI\R80611A1.WPD/sls Resolution and the subject matter hereof were discussed, considered and formally acted upon, all as required by the Open Meetings Act, Chapter 551, Texas Government Code, as amended, and the Act. RESOLVED this llth day of June, 1998. ATTEST: NE LAND, City Secretary 2 CHARLES CUL'PEER, Mayor City of Round Rock, Texas MEMORANDUM OF UNDERSTANDING This Memorandum of Understanding is executed by the City of Round Rock, Texas ("City") and RSR Sports, Inc., a Texas Corporation ("RSR") for the purpose of outlining the parties' mutual intent and understandings with respect to negotiating an agreement whereby the City will construct a multi-purpose public facility ("the Facility") that is suitable for a Double -A Texas League baseball team and RSR will acquire the rights to such a team and to lease and operate the Facility. Accordingly, the parties set forth their intent and understandings as follows: I. The City's Intent A. Acquisition of Site. The City has previously entered into a Real Estate Contract with Arnold Telander to purchase a tract of land ("the Site")adjacent to Old Settlers Park that is potentially suitable for the Facility. The City agrees to continue to use good faith efforts to study and if feasible, to acquire the Site. The City agrees to keep RSR informed of its progress with respect to the study and acquisition of the Site. B. Hotel Occupancy Tax Study. The City has previously entered into an agreement with Economic Research Associates ("ERA") by which ERA will investigate the City's current and future supply and demand of hotel rooms and to project future revenues from the City's Hotel Occupancy Tax ("HOT"). The City agrees to continue to cooperate with ERA and to encourage ERA to complete the study in a timely manner. The City agrees to keep RSR informed of the progress of the ERA study. C. Design of Facility. The City has begun preliminary discussions with Hellmuth, Obata & Kassabaum, Inc. ("HOK") to retain it as the architect for the Facility. Without obligating the City to expend funds for the design of the Facility at this time, the City agrees to continue its discussions with HOK and to obtain preliminary cost estimates and preliminary designs for the Facility. The City agrees to keep RSR fully informed of cost and design discussions with HOK and to solicit and consider RSR's input with respect to cost and design decisions. The parties agree that HOK is an acceptable architectural firm for the design of the Facility and if HOK is not ultimately retained by the City, that the architectural firm that is retained will be subject to the reasonable approval of RSR. At the current time, it is estimated that the total project cost of the Facility will be approximately $13,000,000. The City will develop and construct the Facility with related amenities (i.e. parking, luxury seating, concessions and other revenue producing amenities) consistent with stadiums built in the C:\WPDOCS\ACITY\PROJ34\MOU FNL.WPD/S1S 1 last five years for comparable Double -A teams and in accordance with the standards of the Texas League, the National Association of Professional Baseball Leagues and Major League Baseball. The Facility shall contain at least 7,500 fixed seats and 24 skyboxes. The Facility will include public meeting, conference and convention space. The City will ensure complete construction of the Facility at least thirty (30) days prior to the opening of the 2000 Texas League baseball season. D. Financing for Facility. The City, with the assistance of its financial advisor, First Southwest Company ("First Southwest") has begun evaluating the financing of the Facility. This evaluation is an on-going process that will take into account the preliminary and final results of the ERA study, as well as the costs estimates of HOK. Under no circumstances will the City consider financing the Facility with property taxes or sales tax. The only sources of funds under consideration for financing the Facility are (1) HOT revenues, (2) up -front contributions from RSR, and (3) Facility lease payments. The City's intent to continue negotiations with RSR is specifically contingent on the feasibility of financing the Facility utilizing the above three sources. The City agrees to continue to investigate the possibility of tax exempt, taxable, or a combination of both types of financing. II. RSR's Intent A. Approval of Site. RSR agrees that the Site appears to be suitable and acceptable for the Facility, subject to the continued engineering and environmental studies of the feasibility of the Site. B. Approval of Architect. RSR agrees that HOK has the experience and expertise to design the Facility. RSR agrees to not unreasonably withhold its approval of a substitute architect if one is determined to be necessary by the City. C. Approval of Financing Plan. RSR agrees with and understands the City's determination to not use property tax or sales tax for the financing of the Facility. RSR agrees to continue to use good faith efforts to assist the City in developing a financing plan utilizing the sources of funds set forth in paragraph I.D. above. D. Acquisition of Team. RSR has previously entered into an agreement to acquire majority ownership of the Jackson Generals Double A baseball team ("the Team"). RSR agrees to use its best efforts to close the transaction and to move the Team to Round Rock, to begin play in the Facility in April, 2000. RSR agrees to use its best efforts to obtain any required approvals from the Texas League and Major League Baseball to move the Team to Round 2 Rock. RSR agrees to keep the City reasonably informed of its efforts and progress in this regard. E. Participation by Nolan Ryan. RSR acknowledges that a major factor in the City's agreement to consider this proposal and to negotiate with RSR is due to the outstanding reputation and credibility of Nolan Ryan. Accordingly, RSR agrees that during the lease term that Nolan Ryan will continue to retain a significant ownership interest in RSR. Any sale of Nolan Ryan's interest will be subject to the prior approval of the City, which will not be unreasonably withheld. Regardless of the foregoing, the consent of the City shall not be required for Nolan Ryan to sell his ownership interest, or any portion thereof, to Reid Ryan or Don Sanders. III. Lease Terms The City and RSR have begun preliminary negotiations with respect to the terms that will be included in the final lease agreement ("the Lease Agreement") that will be executed by the parties. The parties agree to continue in good faith to negotiate a Lease Agreement that is mutually acceptable and beneficial to the parties. The parties have thus far agreed that the Lease Agreement will include the following terms: 1) RSR will contribute $4,000,000 towards the cost of the Facility. This will be in the form of a Letter of Credit at or before the bond financing closing with the actual cash being drawn and deposited with the City only upon exhaustion of the development and construction funds raised by the City through public bond financing. 2) RSR will post another Letter of Credit in the amount of $500,000 for the first five years of the Lease Agreement or until the required coverage ratio is achieved, whichever last occurs. 3) The term of the Lease Agreement will be 20 years or for the full term of the bond financing, whichever is longer. 4) The annual lease payments will be as follows: Year 1 $500,000 Year 2 $400,000 Year 3 $300,000 Year 4 $200,000 Year 5 $100,000 Year 6 to end of lease $ 15,000 3 5) Beginning with year 5 of the Lease Agreement, the City will deposit $100,000/year into a "Capital Improvement Program" account. This obligation of the City is conditioned upon there being sufficient HOT revenues available after current HOT funding levels, annual bond debt, coverage, and reserve requirements have been met. RSR and the City will mutually determine when and how the funds from the Capital Improvement Program account will be spent. However RSR and the City agree that the Capital Improvement Program account may be used to meet any shortfall in annual debt service requirements. 6) RSR will be responsible for the operation and maintenance of the Facility and will be solely responsible for all costs associated with said operation and maintenance. RSR will be entitled to keep all revenues derived from the operation and maintenance of the Facility. 7) RSR shall have the right of first refusal with respect to the lease, management and operation of any future facility owned or developed by the City which may serve as a competing venue with the Facility (e.g. concert and/or professional sports facilities.) IV. Miscellaneous Provisions A. Good Faith Negotiations. The City and RSR each understand and acknowledge that this Memorandum of Understanding does not obligate either party in any way, however each party pledges to continue to negotiate in good faith to accomplish the mutual goals set forth herein. B. Outline of Terms. The City and RSR acknowledge that the terms and provisions contained herein are only an outline of the terms of a possible agreement and that the final agreement(s) will contain terms and provisions not covered herein. Executed this I' day of June, 1998. City of j•ound Rock, Texas By: 4 Charles Cu p-..er, Mayor By: 5 DATE: June 5, 1998 SUBJECT: City Council Meeting - June 11, 1998 ITEM: 13.A.1. Consider a resolution authorizing the Mayor to execute a Memorandum Of Understanding between RSR Sports, Inc. and the City of Round Rock concerning the leasing of a multi-purpose facility/stadium. Staff Resource Person: Steve Sheets, City Attorney.