Minneapolis Park & Recreation Board

Resolution
2013-355

Resolution Approving a Ten-Year Lease Agreement with Sea Salt Eatery, LLC, for the Minnehaha Falls Park Food and Beverage Concession and Authorizing an Internal Loan Up to $700,000 for Refectory and Site Improvements

Information

Department:Use & Events PermittingSponsors:
Category:ContractProjects:No Project

Item Discussion

Whereas, The Minneapolis Park & Recreation Board (MPRB) is the steward of the Minneapolis park system;

 

Whereas, The MPRB is authorized to contract with public and private entities in the conduct of its functions;

 

Whereas, The MPRB has determined that contracting with a private food and beverage concessionaire at Minnehaha Falls Park Refectory has broad public benefit that, among other things activates the park, provides park revenue, enhances park security, and sustains park assets;

 

Whereas, In 2005, the MPRB solicited proposals for a food and beverage concessionaire for the Minnehaha Falls Park Refectory;

 

Whereas, The selected proposal was offered by Sea Salt Eatery, LLC, leading to a five-year Concession Agreement with a three-year renewal clause initiated on May 6, 2005;

 

Whereas, The three-year renewal clause was activated in addition to a one-year extension giving the current agreement an expiration date of December 31, 3013;

 

Whereas, Given past financial, product, and service performance, the MPRB has determined that it is in the public interest to retain Sea Salt Eatery for an additional term;

 

Whereas, Lease terms have been negotiated by MPRB staff and Sea Salt Eatery representatives; and

 

Whereas, This resolution is supported by the MPRB 2007-2020 Comprehensive Plan, which envisions “Dynamic parks that shape city character and meet diverse community needs”;

 

RESOLVED, That the Board of Commissioners approve a ten-year lease agreement with Sea Salt Eatery, LLC, for the Minnehaha Falls Park food and beverage concession and authorize an internal loan up to $700,000 for refectory and site improvements; and

 

RESOLVED, That the President of the Board and Secretary to the Board are authorized to take all necessary administrative actions to implement this resolution.

 

Body

BACKGROUND

With this action, the Board considers entering into a new 10-year lease with Sea Salt Eatery, LLC for food and beverage concessions at Minnehaha Falls Park. Sea Salt Eatery has been the food and beverage concessionaire at Minnehaha Falls Park since 2005. In that time, Sea Salt has built a tremendous patronage, served high quality food and contributed to a richly dynamic park experience for which Minneapolis is becoming known.

The original request for proposals to operate the food and beverage concession at Minnehaha Falls was issued on October 15, 2004. There were two proposals submitted and the Board authorized a concession agreement with Sea Salt on May 6, 2005. The lease term was five years with a three year option, which was exercised. An additional one-year extension was also approved by the Board, bringing the expiration date of the current lease to the end of 2013.

Since opening, Sea Salt revenues have continually grown and the business has invested significantly in the operation. In its nine seasons, Sea Salt has generated over $12.7 million in gross sales and $1.5 million in lease payments to MPRB. Sea Salt has also invested in capital improvements and built-in equipment totaling roughly $300,000. By contrast, the refectory concession at Minnehaha Falls from 1981 to 2004 operated at an average annual loss of roughly $8,000 and contributed virtually nothing to capital investments. The table below shows the gross sales and commission to the MPRB from 2005 through 2013.

Year           

   Sea Salt Gross Sales

MPRB Lease Commission

2005

261,349.50

31,361.94

2006

723,642.41

86,837.09

2007

874,212.25

104,905.47

2008

1,103,702.50

132,444.31

2009

1,282,067.42

153,848.20

2010

1,785,587.54

214,270.50

2011

2,001,497.64

240,179.72

2012

2,237,849.50

272,021.42

2013

2,460,316.03

302,556.89

TOTAL

12,730,224.79

1,538,425.54

 

In preparation for the next era of Minnehaha Falls Park concessions, a facility improvement study was conducted by MPRB staff. The resulting plan was recently approved by the Board. The plan identifies roughly $3.7 million in possible improvements to the refectory and surrounding landscape and has proven invaluable to lease discussions with Sea Salt. The proposed Sea Salt lease includes the commitment of $600,000 by Sea Salt and $1.1 million by the MPRB toward the plan plus an additional $200,000 in built-in equipment investment by Sea Salt. In addition to the Sea Salt lease, the improvement plan will inform other concession agreements as well as MPRB capital improvement planning.

The proposed lease identifies that capital investments will be completed by both parties within the next two years. Staff proposes that the MPRB fund its $1.1 million capital commitment through $200,000 earmarked for the refectory in the 2012 regional CIP, a $700,000 internal loan, and, if necessary given built-in cost contingencies, up to $200,000 in regional funding transfer from Lake Nokomis Regional Park. A simple return-on-investment analysis conducted by MPRB staff suggests that the proposed capital investments can be reasonably expected to contribute nearly $1 million in additional MPRB lease revenues – well more than the amount needed to cover debt service payments on a 10-year internal loan.

Key terms of the proposed lease include:

Term: 10 years

Rate: 12% of gross sales

Capital investment: Sea Salt - $800,000, MPRB - $1.1 million

The draft agreement has been reviewed and approved by MPRB legal counsel.

PREVIOUS BOARD ACTIONS

April 6, 2005                            Authorization to negotiate and execute a contract with Sea Salt Eatery

February 18, 2009              Approval of 3-year concession agreement extension with Sea Salt Eatery

November 28, 2012              Resolution 2012-312 approving a one-year lease agreement extension with Sea Salt Eatery, LLC, for the Minnehaha Falls Concession

November 20, 2013              Resolution 2013-318 approving a rehabilitation and improvement plan for the Refectory and immediately-surrounding park area at Minnehaha Falls

RECOMMENDATION

Staff recommends approval of a ten-year lease agreement with Sea Salt Eatery, LLC, for the Minnehaha Falls Park food and beverage concession and authorization of an internal loan up to $700,000 for refectory and site improvements.

This action is supported by the following vision and goal statements in the MPRB 2007-2020 Comprehensive Plan.

Vision Theme 3:              Dynamic parks that shape city character and meet diverse community needs.

Goal:              Create opportunities for entrepreneurs, both non-profit and for-profit, to enrich the park experience and implement innovative approaches to revenue generation.

 

Meeting History

Dec 18, 2013 5:00 PM  Minneapolis Park and Recreation Board Regular Meeting
RESULT:ADOPTED [6 TO 1]
MOVER:Scott Vreeland, Commissioner District 3
SECONDER:Jon Olson, Commissioner District 2
AYES:Liz Wielinski, Scott Vreeland, John Erwin, Jon Olson, Bob Fine, Carol A. Kummer
NAYS:Anita Tabb
ABSENT:Brad Bourn, Annie Young
Dec 18, 2013 5:10 PM  Administration & Finance Committee Committee Meeting
RESULT:ADOPTED [4 TO 1]
MOVER:Jon Olson, Commissioner District 2
AYES:Jon Olson, Scott Vreeland, Bob Fine, Liz Wielinski
NAYS:Anita Tabb