Loading...
HomeMy WebLinkAbout07-11-16 CC Mtg - A1. L&J Interlocal Agreement Page 1 Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Karen Stambaugh, Assistant City Attorney Chuck Winn, Assistant City Manager SUBJECT: Interlocal Agreement with Gallatin County for Joint Law and Justice Center Project MEETING DATE: July 11, 2016 AGENDA ITEM TYPE: Action RECOMMENDATION: Approve the Interlocal Agreement with Gallatin County for the Law and Justice Center Project and authorize the Mayor to sign the Agreement on behalf of the City. PROPOSED MOTION: Having considered public comment and the information presented by staff, I hereby move to authorize the Mayor to sign the Law and Justice Center Project Interlocal Agreement with additional changes consistent with the purpose and intent of the attached draft. BACKGROUND: On February 23, 2015, the Bozeman City Commission adopted Resolution 4580 establishing an advisory committee to explore City and County cooperation for joint improvements at the Law and Justice Center (“L&J”) campus. The Joint Advisory Committee recommendations included a framework to explore the development of joint City-County law and justice facilities on the current L&J campus. On July 13, 2015, the Bozeman City Commission adopted Resolution 4324 formally adopting the recommendations of the Joint Advisory Committee. The County Commission adopted the recommendations on July 14, 2015. On September 14, 2015, the City Commission approved a memorandum of understanding (MOU) with Gallatin County describing how design and construction professionals would be jointly chosen, contracted, and paid. The MOU authorized the creation of a committee (“3.2 Committee”) consisting of three persons appointed by the City and three persons appointed by the County to make recommendations to the respective commissions regarding contracts for schematic design, design development, and preliminary cost estimates. The MOU recognized that an additional written agreement would be required between the two entities to further define the responsibilities and obligations of each. The 3.2 Committee and City and County staff drafted an Interlocal Agreement addressing the structure of land ownership, the City’s payment to the County for an interest in the land required for the Project, funding mechanisms for the Project, the allocation of construction costs and ongoing operations and 194 Page 2 maintenance costs, oversight and project management during construction and pre-construction phases of the Project, and future payment for services, further described below. On June 27, 2016 City staff presented the main points addressed in the Interlocal Agreement to the City Commission for discussion. A similar presentation took place at the County Commission meeting on June 28, 2016. City staff was directed to bring back the draft Interlocal Agreement for final approval. The draft Interlocal Agreement will be considered by the County Commission at their regular meeting on July 12, 2016. 1. Project. As designed, the Project consists of two separate buildings constructed on the L&J campus; a Courts building (“Justice Center” on the attached site plan) and a Law Enforcement building. The total estimated square footage for both buildings is 181,658, with the Courts building measuring 121,940 square feet and the Law Enforcement building measuring 59,718 square feet. The plans include opportunities for future expansion of the two buildings. 2. Project Cost. The Architect and Construction Manager are finalizing the estimated project costs. These costs were not available by the Commission meeting packet deadline, but should be known by the July 11, 2016 Commission meeting. 3. Project Debt a. County Bond Election. The County would ask County residents to approve general obligation bonds for construction of the Project. b. City Mill Levy Question. The City would ask city residents to approve a debt service mill levy to reimburse the County for the City’s proportional share of the Project costs financed through the bond. 4. Ownership Structure. The joint City/County Committee recommends a condominium form of ownership for the Project. Many of the provisions in the Interlocal Agreement will be described in greater detail in the condominium declaration and bylaws, which will be jointly drafted by the City and County and brought back to the Commission for approval later in the Project. Under the condominium form of ownership, each party owns their condominium unit (the areas of the buildings exclusively occupied by that party), plus an undivided property interest in the common elements, expressed as a percentage. The City’s property deed would reflect City’s exclusive ownership of its condominium unit, together with an undivided interest in the common elements. 5. Condominium Governance and Voting Rights. The City and County would each have a 50% voting interest in the condominium’s common elements. Decisions regarding each of the party’s condominium units and any limited common elements exclusively used by that party will remain with that party. The condominium documents will include a dispute resolution procedure in the case of deadlocks. 6. Allocation of Project Costs to City and County. The cost of construction of the joint Project would be allocated to the City and the County in proportion to the relative square footages of each party’s condominium units except as otherwise noted below. 195 Page 3 a. Shared Spaces. The cost of construction of certain project elements, designed on the architect’s plans as “shared” spaces, would be shared equally. Examples of these shared elements are certain reception areas, shared conference rooms, restrooms, and break rooms. The City and County anticipate that their respective use of these shared areas will be more or less equivalent, and that an equal allocation of the costs of these spaces is fair based on the anticipated levels of use. b. Common Spaces. The remaining common elements in the buildings, including lobbies, the jury assembly room, mechanical and other facilities support rooms, hallways, and stairwells would be shared on a pro-rata basis based on the relative size of the City’s and County’s condominium units. This cost allocation method results in 30.03% of the Project cost being allocated to the City and 69.97% being allocated to the County. This percentage allocation also represents each of the Party’s ownership interest in the common elements of the condominium. These ownership interests will be reflected in the condominium declaration. 7. Land Ownership and Payment to County for City’s Interest. The land on which the Project would be built is approximately 12.1 acres and is currently owned by the County. The components of the City’s payment to the County for its 30.03% undivided interest in the Project’s real property is described in Exhibit B to the Interlocal Agreement. The Parties have negotiated a price of $576,000 for the City’s interest. The payment would consist of credits for pre-paid lease payments on the City’s existing L&J lease, pre-paid maintenance fees, a cash contribution of $200,000 toward the cost of demolishing the existing L&J building, and a contribution toward costs associated with relocating the third district court to another location on the site. 8. Project Management. The Interlocal Agreement authorizes an “Oversight Committee” during the pre-construction and construction phases to provide project management. The City and County also anticipate hiring an “Owners’ Project Representative” to make day-to-day decisions for the County and City and to serve as the point of contact for the General Contractor/Construction Manager and the Architect. The Oversight Committee would consist of seven members: three appointed by the City, to include the Mayor or his/her designee; three appointed by the County, to include the Chair of the County Commission or his/her designee; and one designee of the Owners’ Project Representative. The Interlocal Agreement would grant the Oversight Committee the authority to administer the Pre-Construction Phase and Construction Phase of the construction contract. The City and County Commissions will jointly define and approve the scope, fees, price contingencies, time for completion of the Project, the Guaranteed Maximum Price (GMP), and any contract amendments. 9. Allocation of Costs of Ongoing Operations, Maintenance, and other Common Expenses. The allocation of operating and maintenance costs and other common expenses of the completed Project will be calculated based on square footage as shown on the as- built drawings. The calculation is similar to the allocation of construction costs, with shared spaces allocated equally, and common areas allocated proportionally based on the size of each party’s condominium units. However, instead of aggregating the space of both buildings, the cost allocation will be done for each building separately. The cost to operate and maintain the courts building is materially different than the cost to operate and maintain 196 Page 4 the law enforcement building, and the joint City/County Committee decided assessing the parties separately for each building is appropriate. Expenses for common elements appurtenant to a building (for example, the Law Enforcement parking areas and the Courts Building parking areas) would be allocated using this same method. The method of assessment for common expenses will be further detailed in the condominium declaration and bylaws. 10. Allocation of Joint Operations and Maintenance Duties. In order to maximize efficiency, the joint City/County Committee emphasized sharing responsibility for providing ongoing services to the extent reasonably feasible, allocating responsibilities to the organization best suited to provide those services. The parties anticipate the County will be primarily responsible for providing facilities services to the L&J campus, while the City will be primarily responsible for providing shared information technology (IT) services. The parties are currently negotiating a separate agreement describing the parties’ respective obligations regarding IT services. Further details related to operations and maintenance will be included in the condominium declaration and bylaws. UNRESOLVED ISSUES: 1. City and County staff are working with bond counsel to finalize bond and mill levy language to bring to the respective Commissions for approval in August. 2. Interlocal Agreement Exhibit A Legal Description of Property. The creation for the lot for this project is contingent upon successful passage of the bond and mill levy request in November. 3. The creation of the condominium association and all related bylaws and documentation is also contingent upon successful passage of the bond and mill levy request in November. ALTERNATIVES: As suggested by the City Commission. FISCAL EFFECTS: Estimated project costs were not recieved by the packet deadline, but are expected by the July 11, 2016 Commission meeting. Once the final construction estimates are received and analyzed, the City and County will determine the estimated costs to each local government subdivision based on the adopted formulas and work to finalize bond and mill levy language to be presented to both Commissions in August. Attachments: Interlocal Agreement for Law & Justice Center Project Report compiled on: July 5, 2016 197 Page 1 INTERLOCAL AGREEMENT CONSTRUCTION AND MANAGEMENT OF JOINT LAW AND JUSTICE CENTER PROJECT GALLATIN COUNTY AND THE CITY OF BOZEMAN This Interlocal Agreement (“IA”) is made pursuant to Title 7, Chapter 11, Part 1, Montana Code Annotated and Title 7, Chapter 8, Part 2, Montana Code Annotated on the ___ day of ______________, 2016 (“Effective Date”) between Gallatin County, Montana (“County”) and the City of Bozeman, Montana (“City”) (collectively the “Parties”). ARTICLE I PURPOSE The purpose of this IA is to describe the rights and obligations of the Parties and to provide the general terms and conditions for the construction, purchase, land ownership, equipping, operation and ongoing management of joint County-City buildings and facilities to house certain law and justice functions of city government and county government (the “Project”). This IA is intended to promote and facilitate the Parties’ shared goal of maximizing efficiency and minimizing Project cost by providing for the joint use of space and integration of City and County functions where feasible, and by allocating Project responsibilities and costs to make best use of each Party’s particular expertise and skills. After the County initiates and completes a hearing to consider a resolution to issue general obligation bonds in accordance with the provisions of §7-7-2223, MCA and the City initiates and completes a hearing to consider the question to impose mill levies in accordance with the provisions of §15-10-425, MCA nothing herein shall obligate either Party to submit the question of financing the Project to an election. ARTICLE II DURATION and TERMINATION The initial term of this IA will commence on the Effective Date and terminate upon final repayment of the debt obligation of the bond(s) issued to finance the Project, unless earlier terminated by the Parties as set forth herein. When the Parties agree to and record declarations and bylaws governing the real property as set forth below in this IA, any term, condition or provision therein pertaining to the operation and ongoing management of joint County-City buildings and facilities shall supersede this IA. This IA may be terminated or renewed by written agreement of the Parties. The Parties contemplate that the County will finance the Project through the issuance of general obligation bonds necessary for funding the entire capital costs of the Project to be approved by the eligible electors of the County and the City will make its agreed upon payments to the County for its share of the entire capital costs of the Project through a new mill levy approved by the eligible electors of the City. Both questions must be approved for the Project to proceed. Should any one question submitted to voters fail either Party may terminate this IA on written notice to the other Party. Page 2 ARTICLE III CREATION OF LEGAL ENTITY-PROPERTY OWNERSHIP The County and the City shall construct, purchase and manage joint County-City property, buildings and facilities to house certain offices of county and city government on a parcel or parcels of real property where the County and City maintain separate condominium ownership in individual units and own undivided interests in common elements as defined in and pursuant to the Montana Unit Ownership Act (“Act”). Subsequent disposition of property submitted to the provisions of the Act by the County and City shall be made pursuant to the Act and in accordance to the declarations and bylaws governing the real property. The County currently holds exclusive title to the real property and improvements located at 615 South 16th Street with a legal description as shown on Exhibit A (the “Property”), subject to Commercial Lease Agreements between the Parties effective November 1, 1994 and September 14, 2009 (“Leases”). The Parties agree to allocate certain Project costs, fees, liabilities and other financial concerns between the County and City in order to provide the City’s consideration for the County’s transfer of ownership interests of the Project real property to the City as shown in Exhibit B in accordance with this IA and the Act. Transfer of such real property interests may be made in accordance with §7-8-101, MCA from the County to the City. The Property currently consists of three parcels. The Parties may undertake a boundary line adjustment or subdivision process in order to redefine the three parcels consistent with the joint ownership interest in the Project real property described in this IA. The Parties anticipate that the transfer of unit and common element ownership to the City as contemplated by this IA will occur after voter approval of the bonds and mill levy related financing of the Project and prior to commencing the Construction Phase as described in section 2.3 of the Standard Form of Agreement Between Owner and Construction Manager as Constructor A133 – 2009 approved by the Parties on February 9, 2016 (“the A133”). Certain capitalized terms herein are defined in the A133. The Parties agree that the declarations and bylaws governing the real property created pursuant to this IA will create equal (50%) voting rights in the City and County. Further details on unit ownership, governance and voting procedures will be included in the declarations and bylaws governing the real property to be executed by the Parties. ARTICLE IV FINANCING, COSTS AND BUDGET A. DEFINITIONS 1. “Pro-rata Share” shall only be used in this Article IV to compute the respective costs to be allocated to the Parties. Pro-rata Share shall be computed as follows: allocating the square footage of the general common elements inside structures in proportion to the square footage of a party's units and limited common elements to the overall square footage of all unit and limited common element square footage added to one half of the square footage of the general common elements identified as shared space inside structures added to the square footage of a party's units and limited common elements divided by the gross square footage of all structures. The Pro-rata Share shall be determined at the time of the hearing to consider the County’s resolution to issue general obligation bonds. Page 3 B. FINANCING 1. General obligation bonds for Project Related Costs; allocation. It is the intention of the Parties that the full amount of general obligation bonds necessary for funding the entire capital costs of building and improving the Project will be submitted to the eligible electors of the County. Such bonds will be issued by the County only if eligible electors approve both the issuance of the general obligation bonds described in this section IV.B.1 and the debt service levy for the City’s share of the bond repayment described in section IV.B.2. If both ballot questions are approved, the City will be responsible for its Pro-rata Share of the debt service payments on those bonds and will make such payments directly to the County. Upon the issuance of any bonds, the County will provide the City with an allocated debt service schedule including amounts of debt service payments and dates the payments are due from the City. The Parties acknowledge and agree the bonds of the County may be issued in multiple series. No provision in this IA shall be construed in a manner that causes the bonds of the County not to be general obligation bonds to which the full faith and credit and taxing power of the County are pledged without limitation as to rate or amount. 2. Debt service levy for City’s share of bond repayment. At the election on the County bonds in the preceding paragraph, the City voters will be asked to approve a levy that will pay for the City’s Pro-rata Share of the principal and interest for the amount of bonds issued. If the County bonds are issued, the City will set the mill levy each year according to the amounts and due dates for scheduled debt service. The County will ensure that debt payments on the bonds are due within timeframes that allow for the City’s annual mill levy resolution adopted each August, and tax collection each November and May, provided that, under the terms of a subsequent agreement between the City and the County, the City may levy applicable amounts in advance of the County’s mill levy to pay the County’s Pro-rata Share of the annual debt service on the bonds or approximate amounts may otherwise be made available from the City to the County in advance of the County mill levy to pay the County’s Pro-rata Share of annual debt service on the bonds. 3. Administration and allocation of costs of general obligation bond issuance, underwriters, financial advisors. The Parties acknowledge and agree that if the costs of issuing the County bonds are paid from proceeds of such bonds, then the allocation of the Pro-rata share of debt service payments on such bonds between the County and the City will account for spreading cost of issuance to each of the County and City. If or to the extent cost of issuance of the County’s bonds are not paid for bond proceeds, then the County and the City will each pay its Pro-rata Share of such costs from available funds of the County and City. The County and the City will each pay its Pro-rata Share of legal fees and other third-party costs of preparing and submitting bond and mill levy election questions to voters from available funds of the County and City. C. PROJECT BUDGET; ALLOCATION OF MISCELLANEOUS COSTS 1. Project budget The Parties will seek to ensure that the Project costs are within or below the amount of bonded indebtedness approved by voters of the County. If after the time a budget is established for the Project the budget is exceeded, the Parties will work with the Project consultants to adjust the Project scope to fit the budget. Page 4 The Project budget will include all costs of the Project (“Project Costs”). Unless otherwise specified herein or in a separate agreement between the Parties, all Project Costs will be allocated to the Parties in proportion to each Party’s Pro-rata share as defined above. 2. Cost of demolition of existing facilities The Parties intend to demolish the current Law and Justice Center building. The Parties contemplate that the cost of demolition of the building, including removal of demolition debris, will be included as Project Costs to be allocated to the County; however, costs of demolition shall also be borne in part by the City in the amount of $200,000 as part of the consideration for the City’s ownership interest in the real property. 3. Cost of boundary line readjustment and subdivision/zoning applications The costs related to any boundary line readjustment and any other zoning or subdivision application process required in order to reconfigure the parcels currently owned by the County as required by the Project will be shared equally by the Parties. ARTICLE V ADMINISTRATION AND GOVERNANCE A. GENERAL The Parties intend to include provisions for the administration, governance and ongoing operation of the Project in declarations and bylaws governing the real property and associated documents as the Parties deem advisable. Provisions specified in this IA shall also be included therein. Any contract entered for the design, construction, purchase, land ownership, equipping, operation and ongoing management of the Project wherein both Parties are responsible for a portion of the costs thereof shall be made jointly and severally between the County and City in accordance with this IA and any other agreement, declaration or bylaws executed by them. B. PROJECT DESIGN AND CONSTRUCTION MANAGEMENT 1. Oversight Committee The Parties hereby appoint a joint City/County Law and Justice Building Committee (“Oversight Committee” or “OC”) which consists of seven members: three members designated by the County to include the Chair of the County Commission (or his designee) and two additional members, three members designated by the City to include the Mayor (or his designee) and two additional members, and one designee of the Owners’ Project Manager. Owners’ Project Manager is defined below. Either Party may fill absent positions in its group and send a proxy to attend OC meetings and vote in the member’s place. The OC is designated as the “Owner’s Designated Representative” in the A133. The Parties’ respective Commissions will agree to the Project scope, Guaranteed Maximum Price and Contract Time and execute the Guaranteed Maximum Price Amendment to the A133 (“GMP”). The Parties’ respective Commissions will also execute amendments to the GMP. In doing so both Commissions define the scope, price, price contingencies and time for completion of the Project. The Parties agree that the OC has the authority to administer the Construction Phase of the A133 pursuant to Page 5 the GMP or any amendment thereto. In addition, the Parties agree that OC has the authority to administer the Preconstruction Phase of the A133 including the administration of any design or other contracts necessary for the construction of the Project. The OC will schedule regular meetings as necessary in order to not impede or delay progress of the Project design and construction. As the Construction Phase progresses, the OC’s primary responsibility is to administer Article 7 of the A133 and decide matters pertaining to Requests for Information (“RFI”) and Change Estimate Reports (as defined by the processes used by the GC-CM) and Construction Change Directives and Change Orders. Changes to the established Project scope, price or time will be forwarded to the respective Commissions of the Parties by the OC in the form of an amendment to the GMP for final approval or ratification on those bodies’ consent agendas. The OC will: i. Be available to consult with and advise the Owner’s Project Manager. ii. Coordinate publicity and community outreach activities. iii. Bring matters regarding the Project before the respective Parties’ Commissions as necessary and make recommendations thereon where required or appropriate, including approval of consultants, contractors, Owners’ Project Manager contracts, approval of Constructive Change Directives and Change Orders and Project status updates. iv. Ensure that the applicable policies and procedures of the County and City are followed and that public information regarding the Project is made available to the public by the County and City and their agents as required by law. v. Have such additional responsibilities as become apparent and appropriate as work on the Project proceeds. The Oversight Committee may develop rules or protocols for implementation of its responsibilities consistent with this IA. 2. Owner’s Project Manager The Parties intend to jointly hire an “Owners’ Project Manager” (“OPM”) who will make day-to-day decisions for the benefit of both the County and City during the Preconstruction and Construction phases of the Project. The Owner’s Project Manager will serve as the agent of the OC for communications with the Architect and General Contractor-Construction Manager (“GC-CM”) pursuant to the terms and conditions of the A133. The Owners’ Project Manager will bring RFI’s, Construction Change Directives, Change Estimates and Change Orders that may result in a change in the scope, price or time of completion of the Project, or in use of approved contingency funds, to the OC for discussion and recommendation. Until the Owners’ Project Manager is hired, the Parties designate Nick Borzak (on behalf of the County) and Chuck Winn (on behalf of the City) to jointly serve as point-persons for communications with the Architect and GC-CM. The Owners’ Project Manager will bring certain questions or issues to the OC for decision as described herein. The scope of duties of the Owners’ Project Manager will be detailed in a separate agreement between the Parties and the selected contractor. Page 6 In the event of cost overruns or threatened cost overruns for any reason, including actual or impending increase in the GMP, the Owners’ Project Manager will bring the details of such cost overruns to the immediate attention of the OC for a determination of the appropriate resolution of such overruns. C. USE AND OCCUPANCY 1. Exclusive and joint uses i. The County shall have the right of exclusive occupancy of that portion of the Project depicted as “County” units, areas, facilities and limited common elements in the declarations and bylaws governing the real property. ii. The City shall have the right of exclusive occupancy of that portion of the Project depicted as “City” or “Municipal” units, areas, facilities and limited common elements in the declarations and bylaws governing the real property. iii. The Parties shall have the rights of joint and several use and occupancy of general common elements and the remaining portions of the Project as depicted and described in the condominium declaration. 2. Expansion/new facilities Initial plans and design documents include space for future expansion of the Parties’ respective facilities and/or the joint facilities. Procedures for review and approval of expansion plans will be included in the declarations and bylaws governing the real property. D. ONGOING OPERATION AND MAINTENANCE OF PROJECT PROPERTY 1. General Upon completion of the Project, the City and the County will operate, manage, and maintain the Project as described in this IA. This IA sets forth the Parties’ understandings as of the Effective Date of this IA regarding the matters listed below. The particulars regarding such operation, management and maintenance will be set forth in subsequent agreements, including the declarations and bylaws governing the real property. The Parties intend to allocate costs for ongoing operation and maintenance of each structure in accordance with each Party’s “OM Share” (as defined below) for that structure. Assessments for common expenses not reasonably attributable to a particular structure will be made in accordance with each Party’s ownership percentage in the common elements as specified in the condominium declaration. The method of assessment for common expenses will be further described in the condominium declaration and bylaws. 2. Definitions “OM Share” as used in this Article V, Section D shall mean a Party’s interest in any completed Project structure computed as follows: allocating the square footage of the general common elements in that structure in proportion to the square footage of a party's units and limited common elements in that structure to the overall square footage of all unit and limited common element square footage in that structure, added to one-half of the square-footage of the general common elements identified as shared space in that structure, added to the square footage of a party’s unit or units and limited common elements in that structure, divided by the total square footage of that structure. For the purpose of calculating the Page 7 Parties’ OM Share, square footages shall be determined by as-built drawings at the final completion of the construction contract. 3. Condominium governance Upon formation of the condominium association, the City and County will appoint a Board of Directors comprised of an equal number of members, appointed by the City and appointed by the County. The Parties will agree to a dispute resolution procedure to be included in the condominium bylaws to resolve deadlocks and disputes. 4. Voting rights Except as otherwise expressly provided in the declarations and bylaws governing the real property the Parties shall have equal voting rights as described in the same. 5. Staffing i. County and City staffing Except as otherwise specified in this IA, each Party will be responsible for the staffing and conduct of its own operations and activities, including providing security personnel, judges, administrative staff, prosecutors, and related personnel and paying the costs thereof. ii. Joint staffing To increase efficiency and reduce costs, the Parties may agree to share the cost of staff for certain Project facilities, which may include Evidence, Records, and lobby security. 6. Payment of property taxes i. Each Party will pay the property taxes and assessments if any for the portion of the condominium they exclusively own. ii. For common areas, property taxes and assessments if any will be paid as part of monthly assessment payable to the condominium association in proportion to a Party’s OM Share. 7. Insurance i. Insurance policies will be purchased by the condominium association from an insurance company authorized to do business in Montana. ii. The association will be a named insured individually and as agent for the Parties. iii. Coverage will include comprehensive general liability insurance, insurance on the buildings, improvements, and all personal property included in the general common elements, any insurance required by federal or state law, and such other insurance as the condominium association shall determine to be desirable. iv. The condominium association will pay premiums as a common expense, except as otherwise provided in the condominium declaration or bylaws. Each Party will be responsible for its OM Share of the premiums, with assessments made by the association in accordance with the declaration or bylaws. Page 8 v. Distribution of insurance proceeds will be as described in the declarations and bylaws governing the real property. 8. Utilities The accounting and payment of utilities bills will be described in the declarations and bylaws governing the real property and allocated in proportion to a Party’s OM Share. 9. Facilities services i. The County will provide facilities services for the completed Project as reasonably necessary, including providing personnel for the routine maintenance, routine repairs, day to day security of facilities, and general upkeep for the entire Project. ii. The City shall reimburse the County on a quarterly basis for its OM Share of facilities services charges. The declarations and bylaws governing the real property shall include a requirement that the OM Share reimbursement account for reserve amounts to maintain and repair improvements to the general common elements. iii. Each Party will be responsible for the cost of major repairs in areas exclusively used by that Party including the limited common elements. 10. Alterations and improvements After initial occupancy by a Party of areas and facilities designated for its exclusive use, the declarations and bylaws governing the real property shall give that Party the right to remodel, redecorate, and improve such areas and facilities without seeking the approval of the other Party, except if such remodeling, redecoration or improvements affect the operations or use or costs of the general common elements or the other Party’s unit(s). All costs related to such alterations and improvements will be solely borne by that Party. Alterations of and improvements to general common elements and facilities requiring approval of the Board of the condominium association will be described in the declarations and bylaws governing the real property. 11. Information technology The Parties anticipate the City will be primarily responsible for providing IT services to the completed Project. The Parties will enter into a separate agreement detailing the scope of IT services and their respective duties and obligations. 12. Parking and Other Common Elements Outside the Structures The Project will include parking areas for joint use and parking areas for the exclusive use of a Party. Exclusive use areas are “limited common elements” and will be defined in the declarations and bylaws governing the real property. Ongoing operating and maintenance expenses for common elements outside the structures, including parking areas that are appurtenant to a structure will be allocated to the Parties in accordance with their OM Share for that structure. Any other outdoor common elements not readily discernible from the as- Page 9 built drawings as belonging to a particular structure will be allocated to each Party in accordance with their ownership percentage in the common elements as specified in the condominium declaration. 13. Limited Common Elements Limited common elements will be defined in the condominium declarations. The declarations shall include a provision that all costs, liabilities and claims associated shall be borne by the Party that has exclusive rights in the limited common element. ARTICLE VI OTHER NECESSARY AND PROPER MATTERS A. COMMITMENT TO MAINTAIN OWNERSHIP Both Parties commit to maintain their respective ownership interests described herein for a minimum of two years after the payment in full and discharge of all County bonds issued under the election authorization described above. Neither Party will enter into any arrangement or perform any undertaking that may cause the interest on the County bonds to be includible in gross income for federal income tax purposes. On or prior to the delivery of any series of County bonds, each of the City and the County agrees to execute and deliver such certificates or documents as are reasonably required by bond counsel to ensure continuing compliance with requirements regarding the ownership, use and operation of the bond-financed Project imposed by the Internal Revenue Code of 1986, as amended, and associated Treasury Regulations in order that interest on the County bonds be and continue to be excluded from gross income for federal income tax purposes. B. RIGHT OF FIRST REFUSAL/OFFER The Parties may agree to include a right of first refusal or right of first offer in the condominium declaration. If included, no such assignment, transfer, or conveyance shall be consummated without first consulting with bond counsel and obtaining an opinion that such assignment, transfer, or conveyance will not adversely affect the tax-exempt status of the outstanding or proposed County bonds. C. DISPUTE RESOLUTION Should a dispute arise as to the meaning of any provision of this IA or the Parties’ respective rights and obligations under this IA that cannot be resolved by the Oversight Committee, the dispute shall be submitted to mediation. A request to mediate shall be submitted in writing by the Party desiring mediation and shall specify the dispute for mediation. Within ten (10) working days after receipt of a request for mediation, the Party receiving the request shall submit a written response stating its position on the dispute. If no agreement or resolution is reached within ten (10) working days after receipt of the response by the requesting Party, the requesting Party shall provide a list of three (3) names of mediators to the other Party, who shall strike one name from the list. The Party requesting mediation shall then strike a name. Any decision or recommendation of the mediator is not binding on the Parties. Each Party shall be equally responsible for the costs of the mediation. If the Parties are unable to resolve the dispute through mediation, then such dispute shall be resolved in a court of competent jurisdiction in compliance with the Applicable Law provisions of this IA. Page 10 D. RELEASE AND INDEMNIFICATION FOR EXISTING CONDITIONS ON THE PROPERTY To the fullest extent permitted by law, the County shall release and shall defend, indemnify and hold harmless the City against any claims, demands, actions, fees and costs, losses, expenses, liabilities, and damages of whatever kind arising out of, resulting from or in any way related to conditions on the Property in existence prior to the City’s acquiring an ownership interest in the Property, except to the extent caused by the City’s own negligent or intentional acts or omissions or its use of the leased premises described in the Leases. ARTICLE VII GENERAL PROVISIONS A. ASSIGNMENT and AUTHORITY. No party shall assign, transfer, or convey any right or obligation set forth in this IA without the prior written consent of the other party. No such assignment, transfer, or conveyance shall be consummated without first consulting with bond counsel and obtaining an opinion that such assignment, transfer, or conveyance will not adversely affect the tax exempt status of the outstanding or proposed County bonds. The undersigned represent that they have authority to enter this IA. B. COMPLETE AGREEMENT. This IA constitutes the sole and entire agreement between the Parties with regard to the subject matter hereof. No other terms or conditions shall be binding upon either party unless accepted in writing. This IA supersedes any previous oral or written agreements between the Parties with regard to the subject matter hereof. C. APPLICABLE LAW, VENUE and ATTORNEYS FEES. This IA shall be governed by the laws of the State of Montana and any action to enforce any right or obligation shall be brought in the Eighteenth Judicial District, Gallatin County. The prevailing party in any action to enforce this IA shall be entitled to Attorney’s fees including those of in-house counsel, the City Attorney’s Office or County Attorney’s Office. D. SURVIVAL. The obligations of Articles IV and VI shall survive termination of the IA. E. COMPLIANCE WITH LAW. The Parties shall comply with all applicable federal, state, and local law in performing under this IA. E. AMENDMENT. No modification or amendment of this IA shall be valid or effective unless evidenced by an agreement in writing signed by authorized representatives of both Parties. F. WAIVER. No waiver of any default shall constitute a waiver of any other default nor shall such waiver constitute a continuing waiver. No waiver of any term or condition of this Agreement shall constitute a waiver of any other term or condition, whether or not similar, nor shall such waiver constitute a continuing waiver. G. SEVERABILITY. The provisions of this IA shall be deemed independent and severable, and the invalidity, partial invalidity, or unenforceability of any one provision or portion thereof shall not affect the validity or enforceability of any other provision of this IA. H. NOTICES. Required notices, except legal notices, shall be given in writing and sent by mail or email to: Page 11 To County: Chairman, Gallatin County Commission, 311 W. Main Street, Bozeman MT 59715 To City: Chris Kukulski, City Manager, City of Bozeman, PO Box 1230, Bozeman MT 59771-1230. I. RECORDING. The County will be responsible for filing an executed copy of this IA with the Gallatin County Clerk and Recorder and the Secretary of State pursuant to 7-11-107, MCA, and will provide a copy of the recorded document to the Bozeman City Clerk. Cost of filing will be shared equally. J. INTERLOCAL AGREEMENT. This IA is an interlocal agreement under Section 7-11-104, M.C.A. To that end, this IA shall remain in effect at least through the date stated in Article II above, unless earlier terminated under the provisions hereof or by the agreement of the Parties; the City is a valid and existing city and municipal corporation and the County is a valid and existing County; the financial obligations of each party hereunder shall be satisfied, to the extent expressly described herein, from proceeds of general obligation bonds of the County, if authorized by the voters, and from a mill levy of the City, if authorized by the voters, and, to the extent applicable, amounts each party has on hand and available therefor; except for the OC, no joint board or separate legal entity shall result from the undertakings set forth in this IA; no retirement or other employee obligations are shared between the County and the City as a result of this IA; and no partnership or joint venture exists or shall be deemed to exist between the Parties. This Interlocal Agreement entered into as of the day first written above by: GALLATIN COUNTY, MONTANA CITY OF BOZEMAN, MONTANA ________________________________ ____________________________________ Chairman, Board of County Commissioners Mayor, City Commission EXHIBIT A LEGAL DESCRIPTION OF PROPERTY EXHIBIT B PAYMENT BY CITY TO COUNTY FOR CITY’S INTEREST IN THE PROJECT REAL PROPERTY1 Value of City’s interest: $576,000 Consideration to be paid upon transfer: Amount 1. Credit for prepaid lease payments by City $306,000.00 2. Credit for excess maintenance payments by City $37,000.00 3. Cost sharing by City for relocation of third district court building $33,000.00 4. Cost sharing by City for demolition of existing court building $200,000.00 1 This table is intended to describe the manner in which the City will purchase an undivided interest in the real property for the Project from the County. The descriptions and amounts are included for purposes of this Interlocal Agreement only and will not be relied upon by the Parties for any other purpose. The figures are best estimates and may be revised by mutual agreement of the Parties.