Council Directs Attorney to Draft a Lease Agreement
TELLURIDE – Telluride Science Research Center Director Nana Naisbitt appeared to be on the verge of tears of joy on Tuesday moments after the Telluride Town Council unanimously agreed to move forward with a hybrid lease agreement that would allow the TSRC to build a new 32,000 sq. ft. campus on the northwest corner of Willow and Pacific streets.
After a lengthy discussion and public comments concerning the legal documents necessary to keep TSRC in Telluride, council directed Town Attorney Kevin Geiger to draft an ordinance for first reading in three weeks. Telluride Mayor Stu Fraser concluded optimistically, “Assuming the first reading goes through, we will have a second reading after that and will be able to finalize this process.”
According to Fraser in an interview after the meeting, the ordinance would be “a simple ordinance developing a lease agreement for the property, and the actual lease will not get signed until the fundraising is completed, but it represents a commitment for the town and the TSRC to enter into this partnership.”
To kick off Tuesday’s council work-session, Geiger summarized an arduous 2.5-year process during which council inched toward an agreement with TSRC, that would be beneficial to both entities and mitigate risks, for the site of a new campus.
“In 2013/14,” he said, “this council finally determined that exploring locations and funding for the new TSRC campus would accomplish the objective and mission of the council to cultivate economic development and a successful commercial core, while fostering economic sustainability and promoting intellectual industry and education.”
While the council has been working to keep the TSRC remain in town, Mountain Village threw a monkey wrench in any plans they had on June 23, when its Town Council unanimously approved a three-party agreement with TRSC and the Telluride Mountain Village Owners Association that would effectively donate land for the proposed campus.
In response to that development, Telluride Mayor Stu Fraser simply commented, “It’s not over ’til it’s over,” and this past Tuesday, Telluride council members and the public proved it is not over.
Two-Tiered Lease Agreement
Geiger explained the fine points of a complex hybrid lease agreement the town and TSRC would be party to, which would not only allow TSRC to build a new campus in town, but would also incorporate elements and protections important to both sides.
“This is a two-tiered approach,” Geiger said. “And what this means is that TSRC and the town will first enter into an agreement to lease, which would represent a binding commitment that TSRC would then enter into a ground lease with town to lease the town’s property.”
He continued, “In order for the agreement to lease to be complete, the parties must satisfy three contingencies within the five year term of the agreement to lease.”
The contingencies require TSRC to demonstrate that it has raised the estimated construction cost along with a capital reserve — estimated to total somewhere between $9.5 million to $23 million – to secure all necessary town approvals and applications for the new structure and demolition of certain non-historic sheds on the parcel, and that it would relocate an existing historic shed, including funding the applications and permitting for the relocation and the actual removal and transportation costs for the shed.
Geiger explained that if the agreement to lease is performed within the five- year term of the agreement, the town would then execute the 99-year ground lease, which would provide TSRC with the right to occupy the site and construct the TSRC facility on the town property.
Geiger also elaborated on some of the other terms of the lease, such as a formal check-in by council three years after the lease agreement is entered into, annual updates in writing from TSRC to council and that TSRC build a minimum number of affordable housing units – two-to-three one-bedroom units and one or two two-bedroom units – for staff, the number of which could change depending on what the facility ends up looking like.
Because the new building will take over the Telluride Marshal Department’s parking spaces, TSRC is also required to pay for, provide, and maintain at all times at least six parking spots in the lot of the new facility for marshals’ vehicles.
Risks and Safeguards
Town Manager Greg Clifton commended the town’s attorneys for minimizing the risks of the partnership, saying, “Although some risk is inevitable, this type of partnership could not have been achieved without it.”
Risk is indeed inevitable, as evident in attorney Lauren Harrison’s letter to the Mountain Village Town Council read at the meeting during which they discussed TSRC’s potential relocation to Mountain Village.
Harrison’s letter surmised that “TSRC has no limits on how it will use the property and can change the property’s use any time it wants, or sublease the property to anyone it wants.” Harrison also voiced reservations about a lack of meaningful design review by the town.
Telluride seems to have preemptively addressed those concerns.
Contained in the agreement to lease, Geiger says, “There is a use limitation on property – as a campus for TSRC – and if the use should change for a period of 12 consecutive months or more, the lease terminates and ownership of structure automatically reverts back to the town.”
He also explained that the Telluride Town Council has the power to review any construction documents and plans, and to provide or withhold consent as the TSRC moves forward.
Finally, in the event of the termination of the lease for any reason, ownership of the property reverts back to the town.
“Failure to maintain adequate capital, complete the structure in a reasonable amount of time, abandonment, failure to provide insurance coverage, pay rent or insolvency or bankruptcy are all defined as ‘termination,’” Geiger said.
Council members spoke in almost complete support of the two-tiered lease agreement and of relocating TSRC to the property contemplated in the agreement.
Clifton stated during the meeting that “the public-private partnership is evident in just about every aspect of this process,” and added that “we have tried to make this 2.5 year process transparent and provide good updates along the way. You’ll see consistency and evolution among the terms.”
Clifton continued on a different note, saying “common to both institutions here, TSRC and the council, is the Town of Telluride. Making up the town of Telluride is the community and the people in the community, and TSRC has been part of our community fabric for 30 years.”
He then commended TSRC for its important and influential projects, which have gathered accolades in and beyond the town, adding, “TSRC has made local news on a number of fronts and been instrumental in making a number of publications along the way. They have participated in many community functions and institutions, such as Pinhead, and, on a lighter note, the Fourth of July parade.”
Councilor Thom Carnevale expressed some concern about the vast range of estimated costs, but his concern was put to rest when Geiger explained that the range (from $10 million-$23 million) was simply due to the many different construction options available to TSRC, in addition to the success of TSRC’s fundraising efforts and fundraising events outside their control.
Councilor Bob Saunders opined, “It is the obvious conclusion that TSRC is a great asset for whole community, and something community can be proud of. The benefits of keeping TSRC in Telluride are evident. TSRC will not only create economic benefits for the business community but intellectual benefits that will make Telluride proud.”
Local business and hotel owner Michael Zivian attested to the fact that TSRC has already benefited his businesses, even working with the meager facility it has now.
“This is economic diversification,” he said, “And this is as close as we will ever come to getting true economic diversification. I will benefit from TSRC being in town as a business owner. That’s not the reason I support it, but it couldn’t hurt.”
Perhaps the most ringing endorsement of TSRC remaining in Telluride came from TSRC Development Director Mark Kozak.
“The public should know that over the past year TSRC has grown over 30 percent,” he said. “We now have 1,500 scientists coming from a multitude of different countries and the scientific community is realizing that things can get done here in Telluride. So far this has all been without any marketing effort and it has an approximate $10 million dollar impact on the community.
“Scientists are telling us that in the eyes of the world TSRC and Telluride are poised to be at the center of overcoming scientific and technology challenges,” he concluded.
Bill Lamphere, a nine-year resident of Telluride, asked if the new facility will be “dangerous or unproductive to the community regarding its energy use.”
“We have no plans for a lab, so meeting spaces won’t generate any toxins,” Naisbitt said, and then joked, “other than hot air.”