FOR AGENCY MEETING OF:. AGENDA ITEM NO.

August 22, 2011 4 (a)

TO: THROUGH: FROM:

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N RENEWAL AGENCY BOARD NORRIS, EXECUTIVE DIRECTOR

H H. BAN DEVELOPMENT DEPARTMENT MINTO ISLAND BICYCLE AND PEDESTRIAN BRIDGE WILLAMETTE QUEEN STERNWHEELER LOSS OF USE AGREEMENT

A~OR

SUBJECT:

ISSUE:
Shall the Agency Board authorize the Executive Director to execute a Loss of Use Agreement with the owners of the Willamette Queen Sternwheeler for compensation of lost revenue due to the construction of a low span, tied arch bicycle and pedestrian bridge between Riverfront Park and Minto Island which will prohibit the Sternwheeler's use of the Willamette River Slough?

RECOMMENDATION:
Staff recommends the Agency Board authorize the Executive Director to execute a Loss of Use Agreement with the owners of the Willamette Queen Sternwheeler (Owners) for compensation of lost revenue due to the construction of a low span, tied arch bicycle and pedestrian bridge between Riverfront Park and Minto Island which will prohibit the Sternwheeler's use of the Willamette River Slough (Slough).

BACKGROUND:
In the Spring of 2009, staff met with the Owners to negotiate a strategy and offset the potential business losses from the reduction in navigability up the Slough should the Agency decide to place a low span, tied arch bridge that could restrict access. The negotiations were not successful. In November 2010, Council directed Staff to: (1) hire a third party, independent consultant to review the Willamette Queen Sternwheeler business to determine the financial impact of closing the Slough to commercial traffic and (2) re-open negotiations with the owners of the Willamette Queen Sternwheeler in order to reach an agreement that would allow the permit process for the construction of the Minto Island pedestrian bridge to proceed and compensate the Owners for their loss of access to the Slough.

Sternwheeler

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August 22, 2011

FACTS AND FINDINGS:

In January 2011, staff hired Valuations Northwest, a business financial consultant, to analyze the Willamette Queen Sternwheeler business, with the specific task of determining the financial impact to the business if the Slough were to be closed to commercial traffic due to the construction of a pedestrian bridge. The study concluded if the Slough was blocked from commercial traffic, the annual loss of revenue to the business would be $54, 216 and that without compensation; the Sternwheeler would be forced to cease operations in Salem. Based on the independent financial analysis, staff and the Owners completed negotiations and have agreed in principle, subject to Agency Board approval, on a mutually beneficial Loss of Use Agreement (Attachment A) that will both fairly compensate the Owners for their loss of revenue and allow the permit process and bridge construction to occur. Staff and the Owners have reached agreement in principal on the following key terms: 1. The Owners will be compensated up to $250,000, payable in five consecutive annual installments of $50,000. 2. The Owners agree to support and not contest the permit process for the low span bridge option across the Slough. 3. Compensation will commence in the calendar year in which the Slough is blocked by bridge construction. 4. The Willamette Queen Sternwheeler must be in continuous operation for the twelve months prior to each payment date to receive payment. 5. The Owners agree not to sell the sternwheeler or the business prior to the Agency's receipt of all applicable permits unless the new owner agrees to be bound by the terms of the Agreement. 6. The Owners may assign the Agreement to another party with written consent from the Agency. 7. The Agreement is valid for a period of 10 years. It is anticipated the $250,000 loss of revenue payment will be made from the RiverfrontDowntown Urban Renewal Area funds as a cost of the Minto Island Pedestrian Bridge project.

ATTACHMENT A:

Loss of Use Agreement

Report Prepared by: Clint Dameron, Real Property Services Manager, Urban Development Department
G:\URBANDEVIADMINISTRATION\Final Council Staff Reports\2011\Aug 22\Sternwheeler\Council Staff Bridge Report. doc

Sternwheeler

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August 22, 2011

AGREEMENT

Agreement between the Urban Renewal Agency of the City of Salem, Oregon, a quasi-municipal corporation (the Agency), and Richard Chesbrough, Barbara Chesbrough, CBVB Associates, Inc, an Oregon corporation, and Stem Wheeler Excursions, LLC, an Oregon limited liability company (collectively the Owners).
Recitals:

(a) The Riverfront Downtown Urban Renewal Plan contains a project for the construction of a pedestrian bridge across the Willamette River Slough (the Slough) from Riverfront Park to Minto Island (the Bridge).
(d) Richard Chesbrough and Barbara Chesbrough are the sole shareholders ofCBVB Associates, Inc. and are the sole members of Stern Wheeler Excursions, LLC. (b) CBVB Associates, Inc. is the owner of the Willamette Queen Sternwheeler (Willamette Queen).

(c) Stem Wheeler Excursions, LLC operates the Willamette Queen, and provides forprofit excursions to the public on the Willamette River and the Slough. (e) The Willamette Queen uses the Slough for excursions when conditions on the main channel of the Willamette River make the main channel unsafe.
(f) The Agency desires to construct a Bridge over the Slough, to provide pedestrian and bicycle access to the City of Salem's Minto-Brown Park.

(g) The Agency has considered two options, a "low span" bridge and a "high span" bridge. The cost of construction of a low span bridge is estimated to be $5,618,000; the cost of construction of a high span bridge is estimated to be $9,800,000. (h) The Agency desires to construct a low span bridge (the Bridge), the effect of which would be to prevent the Willamette Queen from using of the Slough.
(i) The parties agree that Owner's loss of business from the construction of the Bridge would be approximately $50,000 per year.

(j) The Agency must obtain a Bridge Permit from the United States Coast Guard Bridge Administration Division prior to commencing construction of the Bridge (the Permit).
(k) The purpose of this Agreement is to make provisions for the Owners' agreement and consent to allow the construction of the Bridge to proceed, notwithstanding the Owners' loss of access to the Slough, and to compensate the Owner for loss of business related to the loss of access to the Slough that will be caused by the Bridge.

ATTACHMENT A

(I) The purpose for which this Agreement is made is in the public interest, and the compensation provided herein reflects an appropriate balance between the interests of the Owners in the operation of the Willamette Queen, and the Agency's interest in undertaking a project that provides the greatest benefit to the public at the most appropriate cost. Agreement: NOW, THEREFORE, the parties agree as follows:

1. Project Support. Upon the Agency's submission of its application for the Permit to the United States Coast Guard, the Owners will submit a letter of support of the application for the Permit to the USCG. The Owners will not take any action to oppose the Agency's application for the Permit, or take any action to oppose any other Agency application for permits or approvals necessary for, or related to, the construction, maintenance or operation of the Bridge. The Owners' letter of support shall be substantially in the form set forth in Attachment 1, which attached hereto and incorporated herein by reference.
2. Compensation. As consideration for the Owners' duties under this Agreement, the Agency will pay the Owners up to $250,000, in five consecutive annual installments of $50,000, subject to the following conditions: (a) Agency shall have no obligation to make any annual installment payment under this Agreement until construction of the Bridge prevents the Willamette Queen from accessing the Slough.
(b) Annual payments shall occur on or before the fifteenth day of January for each year, commencing with the calendar year in which construction of the Bridge prevents the Willamette Queen from accessing the Slough (the Annual Payment Date), and payments shall continue each year until fully paid.

(c) The Willamette Queen must be in continuous operation for a period of twelve months prior to the Annual Payment Date of each year. "Continuous operation" means that Stern Wheeler Excursions, LLC uses the Willamette Queen for excursions and to operate its business on a regular basis, and making a minimum of 85 excursions during each calendar year. If the Willamette Queen is not in continuous operation, as defined herein, at the time of an Annual Payment Date, this Agreement shall terminate, and the Agency's duty to make payment under this Agreement shall have no further force or effect. 3. Sale ofWillamette Queen. (a) Prior to Agency obtaining the Bridge Permit from the USCG and all other required permits and approvals for the construction and operation of the Bridge, Owners may not sell, lease, transfer, or otherwise convey or alienate the Willamette Queen, or any interest

therein, unless the person or entity acquiring the Willamette Queen or any such interest consents, in writing, to be bound by this Agreement.
(b) Owner acknowledges that Agency is expending funds for the purposes of obtaining permits and approvals and the commission of construction plans for the construction of the Bridge in reliance on this Agreement. Owner further acknowledges that Owner's violation any of its duties under this Section will cause Agency to incur substantial economic damages and losses of types and in amounts which are impossible to compute and ascertain with certainty as a basis for recovery by Agency of actual damages, and that liquidated damages in the amount of $500,000 represent a fair, reasonable and appropriate estimate thereof, and the Owners their heirs, successors and assigns shall be jointly and severally liable for the liquidated damages as set forth in this section.

Accordingly, in lieu of actual damages, Owners agree that liquidated damages may be assessed and recovered by Agency against Owners, without Agency being required to present any evidence of the amount or character of actual damages sustained by reason thereof, in the event that Owners conveys the Willamette Queen, or any interest therein, to another party, and that party does not agree, in writing, to be bound by this Agreement. Such liquidated damages are intended to represent estimated actual damages and are not intended as a penalty, and Owners shall pay them to Agency without limiting Agency's right to terminate this Agreement for default as provided herein.
4. Assignment. This Agreement may be assigned, subject to the following conditions:

(a) Any assignment of Owners' rights and obligations under this Agreement shall be subject to Agency's written consent, which may be withheld on Agency's reasonable discretion.
(b) Owners' rights and obligations under this Agreement may be assigned to a party or parties only if that party or parties also assumes ownership of the Willamette Queen, or any interest therein, concurrent with the assignment of the rights and obligations of this Agreement.

5. Term and Termination.

(a) This Agreement is valid for a period often years from the date it is executed by all parties hereto, unless terminated earlier as set forth in this section; provided, however, if the Agency obtains the Bridge Permit from the USCG, this Agreement shall continue until all required payments have been made, as provided in Section 2.
(b) This Agreement shall terminate immediately upon:
(1) Denial by the USCG of Agency's Bridge Permit application; or

(2) Breach of this Agreement by Owner.

6. Nonwaiver. Waiver by either party of performance of any provision of this Agreement shall not be a waiver of or prejudice the party's right to require performance of the same provision in the future or of any other provision. 7. Notices. Any notice required or desired to be given by one party to the other shall be given, in writing, by personal delivery; by United States mail; by FAX; or by nationally recognized overnight courier service, to the following addresses, or to such other address as may be specified from time to time by the respective party in writing. Urban Renewal Agency of the City of Salem Richard and Barbara Chesbrough, et.al.

8. Heirs, Successors, and Assigns. Subject to the above stated limitations on assignment or transfer, the rights and obligations herein shall be binding on and inure to the benefit of the parties and their respective heirs, successors and assigns. 9. Time of Essence. Time is of the essence of the performance of this Agreement. 10. Amendment. This agreement may not be altered, modified, supplemented, or amended in any manner whatsoever except by mutual agreement of the parties in writing. Any such alteration, modification, supplementation, or amendment, if made, shall be effective only in the specific instance and for the specific purpose given, and shall be valid and binding only if signed by the parties. 11. Integration. This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes any and all prior negotiations and agreements between the parties, whether written or verbal, which are not fully expressed herein. 12. Severability. The parties agree that if any term or provision of this Agreement is declared by a court of competent jurisdiction to be illegal or in conflict with any law, the validity of the remaining terms and provisions shall not be affected, and the rights and obligations of the parties shall be construed and enforced as if this Agreement did not contain the particular term or provision held to be invalid. Should any provision be declared invalid, the parties shall agree to enter into negotiations within ten days of fmal judgment regarding any matter so declared invalid, and reform or replace such provision or part thereof with a valid and enforceable provision that comes as close as possible to expressing the intention of the provision so declared. 13. Legal Counsel; No Construction Against Drafter. Both parties acknowledge and affirm they each have sought the advice of, or are each represented by, legal counsel in connection with the terms, conditions, and effect of this Agreement, have read and understood the Agreement, are fully informed of the contents of the Agreement and the legal consequences thereof, knowingly and voluntarily agree to be bound by its terms, and acknowledge and affirm that the terms of this Agreement shall not be construed against either party as a drafter hereof.

14. Execution in Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, and all of which shall constitute but one and the same instrument. Urban Renewal Agency of the City of Salem Date: By: Linda Norris, Executive Director

Date: Richard Chesbrough Date: Barbara Chesbrough

CBVB Associates, Inc. Date: By: Barbara Chesbrough

Stern Wheeler Excursions, LLC Date: By: Barbara Chesbrough Date: By: Richard Chesbrough

ATTACHMENT 1

Date: _ _ _ _ _ _ __

This is a letter in support of the application by the Urban Renewal Agency of the City of Salem ("Agency") for a permit to construct a low-span bridge across the Minto Island Slough that will connect downtown Salem to Minto Brown Park. We are the owners and operators of the Willamette Queen stemwheeler and, since 20XX, have provided excursions on the Willamette River to the public from the public dock in Salem. As a commercial user of the Willamette River near downtown Salem, and a part of Salem's tourism industry, we wish to provide our support for the proposed bridge. Although the low-span bridge will limit access to the Willamette River Slough for the Willamette Queen, we will be able to continue to operate on the Willamette River, and understand the benefit the bridge will provide to the community. When completed, the bridge will provide an important link in Salem's bike and pedestrian trail system and will create a public gateway from downtown Salem to the green space, trails and natural areas in Minto Brown Park. The bridge will increase the visibility and vitality of Salem's existing Riverfront Park and will open up Salem's riverfront area, an underutilized amenity in Salem, making it more accessible to the public. We support the Agency's application, and urge you to approve it without delay.

Sincerely,

Richard and Barbara Chesbrough