Summary and Background Mitco Investments, LLC controls Union Pacific Railroad right of way leases for two areas of ground:

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1 AFF RPORT For Meeting of Sept. 25, 2017 MAYOR AND MMBRS OF TH CITY COUNCIL Agenda Item # NO SUBJCT: Downtown Revitalization & Beautification Subject The City of Hermiston and the Hermiston Urban Renewal Agency (HURA) are partnering with Mitco Investments, LLC to develop a privately operated downtown gathering space, facilitate future downtown development through creation of additional parking, and beautify a transitioning industrial corridor. Summary and Background Mitco Investments, LLC controls Union Pacific Railroad right of way leases for two areas of ground: Parcel A: Between W. Locust, S. 1 st, W. Orchard, & UPRR tracks Parcel B: Between W. Orchard, S. 1 st, UPRR tracks, & HSD Maintenance Shed The City of Hermiston recently acquired a small parcel located between Parcel B, and S 1 st directly across from the Police Station. The City Council s plan for this city-owned parcel is to develop a skate park; however the facility would be constrained by odd geometry, as well as a lack of parking. The City Council adopted the nhance Hermiston Plan in June, 2015 for the purpose of identifying major long-term beautification and quality of life issues which the City should prioritize as opportunities arise. Two of the five issues identified in the plan were to develop additional pedestrian pathways throughout the City and development of visual buffers/screening of Railroad Rights of way. The HURA Plan, adopted in August, 2013, identified Parking Improvements as one of 11 projects to be accomplished by the HURA. The downtown commercial area west of Highway 395 currently falls under the C-1 zoning designation, which requires new developments to provide parking within 500 feet of the new development. Developing on-site parking can be a barrier to development in the downtown area due to space limitations. Mitco Investments has proposed to develop a parking lot on Parcel A, in order to construct a 5,000 square foot shade structure for hosting events. The attached map shows all parcels within 500 feet of the proposed parking lot. Site elevations of the proposed shade structure, parking lot layout, and landscaping improvements will be provided at the Sept. 25 City Council meeting. City of Hermiston

2 The enclosed Letter of Intent from HURA to Mitco will result in: Transfer of control of Parcel B from Mitco to City of Hermiston Construction of a parking lot of no less than 65 spaces on Parcel A o Landscaped to match nearby parking lots with decorative screening of UPRR tracks. o Retaining an 8 wide path to allow for the future Hermiston Loop Trail Guarantee that new parking shall be open to the public and available on a firstcome-first-served basis for any new commercial development located within 500 of Parcel A. Construction of a 5,000 square foot shade structure with restroom facilities for the purpose of hosting public and private gatherings. This is a very unique opportunity to energize the downtown core through a Public- Private Partnership. Mitco, in an effort to recover its costs and make a profit, will have a direct financial incentive to develop and host events attracting visitors to the downtown core. The downtown businesses will benefit from the increased activity brought to the area. The Urban Renewal Agency will benefit from the increased likelihood that several nearby un-developed parcels may develop due to the availability of parking at no cost. The City of Hermiston will benefit by gaining the ability to fully develop the planned skate park by utilizing the area gained by Parcel B. The City also benefits from addressing a choke point for eventual extension of the Hermiston Loop Trail. These improvements are also anticipated to greatly beautify the immediate vicinity. Fiscal Information In consideration of gaining control of 2/3 acre of downtown real estate, development of a 65 space parking lot, and other benefits, the City of Hermiston and HURA will pay Mitco Investments, LLC a total of $220,000; 50% payable up-front, 25% payable midway through development, and 25% payable upon completion. The City of Hermiston s Community nhancement Fund was created specifically to pay for projects which address issues in the nhance Hermiston Plan as opportunities arose. The City budgeted $100,000 for this purpose in This action would direct these funds to this project. The HURA s FY budget includes $437,000 for Future xpenditures as a result of bond sales. This action would direct $100,000 to be spent from the HURA for this project. The City s Transient Room Tax requires 15% of TRT revenues to be spent on economic development. Part of this project is directly aimed at creating activities within the downtown core to service patrons of the new hotel one block away, in the hopes that they will spend money in Hermiston. This action will direct $20,000 of the TRT Fund s economic development funds to be spent for this project. Alternatives and Recommendation Alternatives This action is a letter of intent (LOI) which has been negotiated at length with Mitco Investments, and represents the bulk of a binding incentive agreement. Barring City of Hermiston

3 unforeseen issues, the terms of this LOI will be accepted by Mitco. However, changes to the terms will likely not be accepted by Mitco. Recommendation Proceed with the proposal as established, and authorize the City Manager to extend the LOI and execute a final incentive agreement based on terms outlined in the LOI. Requested Action/Motion Authorize the City Manager, acting on behalf of both the City of Hermiston and the Hermiston Urban Renewal Agency, to extend the proposed LOI, and to execute a final agreement with Mitco Investments, LLC under the terms outlined in the LOI, and to make any necessary financial transfers between the City of Hermiston and the Hermiston Urban Renewal Agency as may be necessary to complete the agreement. Reviewed by: Department Head- Mark Morgan, Assistant City Manager City Manager Approval City of Hermiston

4 Hermiston Urban Renewal Agency Parking Lot Improvement Grant W RIDGWAY NW PL N 1 N1 R ID AY W G 2N T DS WH R N TO MIS N 2ND GLADYS SW D 2N S1 PL WL U OC MAIN W MAIN SW D 3R W WO R D AR CH HU BU RL HURLBURT RT SH S 1 95 Y3 WA S 2ND IGH NWPORT Legend Parking Lot Improvement Source: sri, DigitalGlobe, Geoye, arthstar Geographics, CNS/Airbus DS, USDA, USGS, AeroGRID, IGN, and the GIS User Community 500 Foot Buffer I Feet 500

5 September 19, 2017 MITCO Investments, LLC 1997 N First Place Hermiston, Oregon Attn: Mitch Myers R: Hermiston, OR Development Dear Mitch: On behalf of the Hermiston Urban Renewal Agency ( HURA ) I am pleased to present this letter of intent to develop a parking facility and related improvements on existing railroad right-of-way on property located between Orchard and Locust Streets in Hermiston, OR (the Property ). It is anticipated that development of the parking facility will be followed by development of other properties in the vicinity of the Property. HURA has several interests in assisting MITCO to bring the proposed parking facility to fruition, which include the following: Directly increasing the taxable value within the Urban Renewal District. Adding publicly available parking within the downtown core. Benefitting other nearby businesses by adding development which will attract additional new visitors to the downtown core during the evenings and weekends. Facilitating the potential future installation of another segment of the Hermiston Loop Trail. Improving the aesthetic appeal of the immediate vicinity. Accordingly, the business terms and conditions outlined below represent the basis under which staff is prepared to recommend to HURA the actions below on behalf of MITCO Investments, LLC ("Developer"): PROPRTY: DVLOPR NTITY: Railroad right-of-way parcel located south of West Locust Avenue, north of West Orchard Avenue, east of South 1st Place and west of South Highway 395, located within the C-1 Central Commercial Zone. Mitco Investments, LLC PARKING RQUIRMNT: There will be a requirement, under the C-1 Zoning designation, for Developer to install between 70 and 80 additional parking spaces, but no less than 65 parking spaces, on the Property (such spaces and related improvements, the Parking Facility ). The Parking Facility will include a shade structure of up to 5,000 square feet which may cover some parking spaces, decorative screening of the adjacent Union Pacific Railroad ( UPRR ) tracks, and 8 foot wide north / south paved walking path from Locust Avenue to Orchard Avenue, and perimeter landscaping and screening as possible (the foregoing improvements being the Parking Improvements )

6 CONSIDRATION FROM HURA: CONSIDRATION FROM MITCO: HURA will contribute $220,000 (the Contribution ) toward the cost of the Parking Facility and Parking Improvements from a combination of HURA funds and the City of Hermiston s nhancement Fund. The City of Hermiston shall consider the Parking Facility to qualify as new parking developments to satisfy the requirements of the City s C-1 Zoning Ordinance for any new development within 500 feet of the Parking Facility which occurs before January 1, The Contribution shall be payable in three installments as follows: (i) 50% upon execution of a written agreement between the parties related to the matters set forth herein; (ii) 25% upon completion of 50% of the Parking Facility; and (iii) 25% upon completion of 100% of the Parking Facility and acceptance of the same by the City. Developer will: 1. Construct the Parking Facility and Parking Improvements. 2. Retain control of the UPRR right-of-way lease for the Property. 3. Retain ownership of the Parking Improvements. 4. Assign its interest in the UPRR right-of-way lease for the property located between Orchard Avenue and the HSD maintenance facility to HURA or the City of Hermiston pursuant to an assignment in form and content satisfactory to HURA and the City of Hermiston. Subject to landlord approval, such assignment shall include the following mutual indemnity provision: Assignor agrees to defend, indemnify and hold harmless Assignee from and against any and all loss, cost, expense (including reasonable attorneys' fees and costs), liability, damage (excluding consequential, incidental, special, punitive and similar-type damages) or claims sustained by Assignee to the extent caused by any default in Assignor's performance of the obligations of the landlord under the Lease Agreement with respect to any fact, event or circumstance that first occurs prior to the date hereof. Assignee agrees to defend, indemnify and hold harmless Assignor from and against any and all loss, cost, expense (including reasonable attorneys' fees and costs), liability, damage (excluding consequential, incidental, special, punitive and similar-type damages) or claims sustained by Assignor to the extent caused by any default in Assignee's performance of the obligations of the landlord under the Lease Agreement with respect to any fact, event or circumstance that first occurs from and after the date hereof. ADDITIONAL RQUIRMNTS: Developer agrees to exercise any and all rights to renew or extend the term of its lease for the Property, and to use commercially reasonable efforts to obtain further extensions or renewals, for the life of the Parking Facility

7 CONTINGNCIS: The HURA intends to address the following items through further negotiation with Developer: The Parking Facility will have to be aesthetically similar to the existing private parking area owned by Hermiston Brewing Company. HURA will require a site plan for parking layout, as well as landscaping, prior to approval of the Contribution. Any incentive offer relative to the parking area is absolutely contingent upon the parking area becoming a fully public parking lot with use of spaces on a first-come, first-served basis; provided, however, that Developer may prohibit parking under the shade structure and within 50 feet on either side of the shade structure at any time for the purpose of hosting events open to the general public, so long as such closure does not limit usage of other spaces in the Parking Facility by blocking Parking Facility drive aisles. The HURA incentive offer must come with deadlines for Developer to both begin, and complete, the Parking Facility and Parking Improvements. The offer will effectively tie-up a large amount of HURA funds which must be put to beneficial use, and therefore cannot wait indefinitely. A potential schedule for the incentive offer would be to have a final incentive offer signed by both HURA and Developer no later than, After that, Developer must commence construction no later than, 201_. Finally, in order for Developer to receive the full incentive offer, the Parking Facility and Parking Improvements must be fully completed no later than, 201_. This Letter of Intent does not constitute a binding agreement between the parties. Sincerely, [Add HURA signature block] Acknowledged and agreed this day of, 2017 MITCO Investments, LLC, an Oregon limited liability company By: Its: Date: