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04/17/2018 11 Amendments to the YMCA Aquatic Center Ground Lease, Development Agreement and Operating AgreementBUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT 1 Item No. 11. For Meeting of: April 17, 2018 ITEM TITLE: Resolution authorizing amendments to the YMCA Aquatic Center Ground Lease, Development Agreement and Operating Agreement to represent the Parties' negotiated modifications of terms related to financing and budget SUBMITTED BY: Jeff Cutter, City Attorney SUMMARY EXPLANATION: The City and the YMCA entered Agreements associated with the cooperative development of an Aquatic Center on City -owned property at Chesterley Park in October of 2015. Since that time the City and the YMCA have worked to achieve satisfaction of their respective contingent obligations necessary to the initiation of project construction. As the satisfaction of the contingencies is now being verified, to better facilitate the partnership and cooperation expressed in the Agreements between the City of Yakima and the Yakima YMCA for the construction and operation of the Aquatic Center, the City and the YMCA have agreed to restructure the financial arrangement between the parties with terms that are more mutually beneficial. The result of this financial restructuring are several modifications to terms of financing and budget communication that are represented in the attached Resolution and amendments to the Ground Lease, the Development Agreement and the Operating Agreement. The aspects of the financial agreements that have changed are as follows: 1. The City of Yakima's initial capital construction contribution will increase from $4.5 million dollars to $8 million dollars. 2. The City of Yakima will no longer be responsible for any of the initial start-up operational costs for the Aquatic Center. 3. For a period of 10 years, rather than being charged for 50% of the annual operating deficit of the Aquatic Center, the City will not be responsible for funding any operating deficit costs. Starting in year 11, the City will be responsible for providing 50% of the annual operating deficit, except that: a. In year 11, the YMCA will reduce the City's portion by $50,000 b. In year 12, the YMCA will reduce the City's portion by $40,000 c. In year 13, the YMCA will reduce the City's portion by $30,000 d. In year 14, the YMCA will reduce the City's portion by $20,000 2 e. In year 15, the YMCA will reduce the City's portion by $10,000 4. For a period of 10 years, rather than being charged for 50% of any capital improvement costs for the operation of the Aquatic Center, the City will not be responsible for any capital improvement costs. Starting in year 11, the City will be responsible for funding 50% of capital improvement costs. 5. For a period of 10 years, rather than being charged $40,000 annually to create a Capital Reserve Fund for the Aquatic Center, the City will not be responsible for funding any Capital Reserve Fund costs. Starting in year 11, the City will be responsible for providing $40,000 per year for the Capital Reserve Fund. 6. The timing of the annual YMCA budget submission to the City will be revised from July 1 to August 1 of each year (for the following calendar year). 7. The financial reporting schedule will be adjusted as follow: a. For years 1 — 5 of the agreement, the YMCA will provide to the City semi-annual financial reports for the Aquatic Center. b. For years 6 — 8 of the agreement, the YMCA will provide to the City quarterly financial reports for the Aquatic Center. c. For years 9 and 10 of the agreement, the YMCA will provide to the City monthly financial reports for the Aquatic Center. ITEM BUDGETED: No STRATEGIC PRIORITY: Economic Development APPROVED FOR SUBMITTAL: STAFF RECOMMENDATION: City Council requested final documents to be provided. BOARD/COMMITTEE RECOMMENDATION: ATTACHM ENTS: Description Upload Date O YMCA -resolution 4!12/2018 D YMCA -First Amendment to Ground Lease 4.%1212018 O YMCA -First Amendment to Development Agreement 4/122018 D YMCA -First Amendment to Operating Agreement 4/1222018 Type Resolution tract tract tract A RESOLUTION 3 RESOLUTION NO. R -2018 - authorizing the execution of First Amendments to each of three Agreements associated with the previously approved City of Yakima/YMCA Aquatic Center; the amended documents include the Ground Lease, Development Agreement and Operating Agreement. WHEREAS, in October, 2015 the City Council approved the terms and conditions for the cooperative development of an Aquatic Center through a public-private partnership with the YMCA of Yakima; and WHEREAS, the terms and conditions for the cooperative development and operation of a publicly accessible aquatic facility are represented in four separate Agreements that include the Master Aquatic Center Agreement, the Ground Lease, the Development Agreement and the Operating Agreement; and WHEREAS, over the course of the past several years the City and the YMCA have been diligently pursuing completion of their respective obligations to achieve RCO approval of a property exchange that will allow construction of the Aquatic Center on City -owned park property and to secure necessary funding resources that will conform with the terms of the several Agreements; and WHEREAS, the Parties have determined that to better facilitate the partnership and cooperation expressed in the underlying Agreements between the City of Yakima and the Yakima YMCA for the construction and operation of the Aquatic Center, the City and the YMCA will amend the necessary Agreements they previously entered in order to restructure the financial and reporting arrangements between the parties with terms that are more mutually beneficial; and WHEREAS, to carry out the financial and reporting restructuring the Parties have reached agreement on amendments to the Ground Lease, the Development Agreement and the Operating Agreement, identified herein as Amendment One to each of said Agreements, attached hereto and incorporated herein by this reference; and WHEREAS, the City Council has determined that entering into the attached First Amendment to the Ground Lease, First amendment to the Development Agreement and First Amendment to the Operating Agreement is mutually beneficial to the Parties in the construction and operation of the Aquatic Center; Now, Therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA: The City Manager of the City of Yakima is hereby authorized and directed to execute the attached and incorporated First Amendment to Ground Lease, First Amendment to Development Agreement and First Amendment to Operating Agreement, attached hereto and incorporated herein by this reference, to restructure the financial and reporting arrangements between the parties with terms that are more mutually beneficial. ADOPTED BY THE CITY COUNCIL this 17th day of April, 2018. ATTEST: Kathy Coffey, Mayor Sonya Claar-Tee PARTIES: FIRST AMENDMENT TO GROUND LEASE EFFECTIVE DATE: April 18, 2018 CITY OF YAKIMA, a Washington municipal corporation 129 North 2nd Street Yakima, Washington 98901 (referred to in this Amendment as "Landlord") YOUNG MEN'S CHRISTIAN ASSOCIATION OF YAKIMA (dlbla YAKIMA FAMILY YMCA), a Washington nonprofit corporation 5 North Naches Avenue Yakima, Washington 98901 (referred to in this Amendment as "Tenant") 4 GROUND LEASE. The term "Ground Lease," when used in this Amendment, means and refers to the Ground Lease dated October 27, 2015, by and among Landlord and Tenant pertaining to Tenant's lease from Landlord of a portion of Chesterley Park in Yakima, Washington. BACKGROUND. To better facilitate the arrangements between the City of Yakima (i.e., Landlord) and the Yakima Family YMCA (i.e., the Tenant) for the construction and operation of the Aquatic Center, the undersigned parties have mutually agreed to amend the timing and financing of Landlord's financial obligations under the Operating Agreement through the first ten years of the Aquatic Center's operations and the manner and timing in which the City's Financial Contribution under the Development Agreement and certain other financial obligations under the Operating Agreement are met. In general terms, Landlord has requested to eliminate Landlord's obligation to reimburse Tenant for Pre -Opening Expenses, Operating Deficits, and Capital Improvement Expenditures under the Operating Agreement until the tenth anniversary of the Opening Date in exchange for Landlord's agreement to increase the City's Financial Contribution under the Development Agreement from $4,500,000.00 to $8,000,000.00. Subject to and in accordance with the terms of this Amendment and the below -described Related Amendments, Tenant has agreed to accommodate said requests by Landlord. This Amendment and the below -described Related Amendments are now executed for the purpose of memorializing the amendments made to the Development Agreement, Operating Agreement, and Ground Lease in connection with said agreement. Moreover, the Development Agreement, Operating Agreement, and Ground Lease are also executed for the purpose of confirming the satisfaction of the Due Diligence, RCO, and Funding Contingencies and to memorialize the Possession Date and commencement of the Initial Term. Finally, the Ground Lease is amended to expressly acknowledge that Tenant, in connection with financing a portion of the construction of the Aquatic Center and Other Facility through New Markets Tax Credits, may seek Landlord's consent to the assignment of certain rights under the Ground Lease to a newly formed nonprofit corporation, the purpose of which is to qualify as a "supporting organization" within the meaning of Internal Revenue Code Section 509(a)(3) for the support and benefit of Tenant and to serve as a "qualified active low-income community business" or "QALICB" as defined in Section 45D of the Internal Revenue Code. AMENDMENT. FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND ADEQUACY ACKNOWLEDGED, THE UNDERSIGNED PARTIES AGREE AND AMEND THE GROUND LEASE AS FOLLOWS: 1. Effect of Amendment. This Amendment amends, supplements, and is made part of the Ground Lease. In the event of a conflict between the provisions of this Amendment and the Ground Lease, Amendment to Ground Lease (2018) 1 5 the provisions of this Amendment will control. Nevertheless, except as expressly amended or supplemented by this Amendment, the provisions of the Ground Lease remain in full force and effect. 2. Capitalized Terms. Except when the context clearly requires another meaning and for capitalized terms defined in this Amendment, all capitalized terms used in this Amendment have the same meaning given to said terms in the Ground Lease. 3. Agreed Possession Date. For the purpose of facilitating an orderly transition of the possession of the Leased Premises from Landlord to Tenant under the Ground Lease, Section 3.1 of the Ground Lease is amended such that the Possession Date (i.e., the commencement date for the Initial Term and the date on which Tenant will take physical possession of the Leased Premises) will be April 18, 2018. 4. Completion of Landlord's Title Obligation Under Section 6.1. Landlord will, on or before April 18, 2018, satisfy Landlord's obligation under Section 6.1 of the Ground Lease to cause the instrument recorded on or about August 12, 1976, under Yakima County Auditor's File No. 2431304 to be released from the Leased Premises so that it no longer encumbers the Leased Premises. 5. NMTC. Tenant intends to finance a portion of the construction costs for the Aquatic Center and Other Facility using New Markets Tax Credits ("NMTC") in accordance with Section 45D of the Internal Revenue Code of 1986 (as amended) (the "Code"). In connection with obtaining NMTC financing it may be necessary or appropriate, in order to maximize the amount of subsidy available in connection with the construction of the Aquatic Center and Other Facility, for Tenant to assign some or all of its rights and obligations under the Ground Lease to a newly formed nonprofit corporation, the purpose of which is to qualify as a "supporting organization", within the meaning of Section 509(a)(3) of the Code for the support and benefit of Tenant and to serve as a "qualified active low-income community business" or "QALICB" as defined in Section 45D of the Code. In light of said circumstances, Landlord expressly acknowledges and understands that Tenant may request Landlord's consent under Section 10 of the Ground Lease to sublease all or a portion of the Leased Premises to the QALICB formed in connection with the NMTC financing sought by Tenant. 6. Acknowledgment of the Satisfaction of the Contingencies. The undersigned parties hereby expressly acknowledge the Due Diligence, RCO, and Funding Contingencies are satisfied. 7. Related Amendments. The provisions of this Amendment are interwoven with and dependent upon the provisions set forth and agreed to in the First Amendment to Development Agreement and First Amendment to Operating Agreement with "Effective Dates" even with the Effective Date of this Amendment (collectively the "Related Amendments"). Accordingly, the provisions of this Amendment will become binding and enforceable only upon the full execution of this Amendment and the Related Amendments by both Landlord and Tenant. 8. Counterparts and Copies. This Amendment may be executed in any number of identical counterparts, with each counterpart having the same effect as if all parties to this Amendment had signed the same document. All executed counterparts of this Amendment will be construed as and constitute one and the same instrument. A facsimile or electronic copy (e.g., a PDF copy) of an executed counterpart of this Amendment will have the same effect as an original executed counterpart of this Amendment. Amendment to Ground Lease (2018) 2 6 9. Authority. The execution, delivery, and performance by each party of this Amendment has been duly authorized by their respective governing bodies (i.e., the YMCA's Board of Directors and the City Council for the City of Yakima) in accordance with their respective governing documents and applicable law, and no further action is necessary on the part of either party to this Amendment or their respective governing bodies to make the execution, delivery, and performance of this Amendment by the undersigned persons valid and binding upon the parties to this Amendment. [Signatures on Following Page] Amendment to Ground Lease (2018) 3 7 EFFECTIVE as of the Effective Date first written above. YOUNG MEN'S CHRISTIAN CITY OF YAKIMA ASSOCIATION OF YAKIMA By: By: Bob Romero, CEO STATE OF WASHINGTON ) ) ss. COUNTY OF YAKIMA ) Cliff Moore, City Manager I certify that I know or have satisfactory evidence that BOB ROMERO is the person who appeared before me, and said person acknowledged that he/she signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as the CEO for the YOUNG MEN'S CHRISTIAN ASSOCIATION OF YAKIMA to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. DATED: , 2018. [PRINT NAME] NOTARY PUBLIC for the State of Washington, residing at My appointment expires: STATE OF WASHINGTON ) ) ss. COUNTY OF YAKIMA I certify that I know or have satisfactory evidence that CLIFF MOORE is the person who appeared before me, and said person acknowledged that he/she signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as the CITY MANAGER for the CITY OF YAKIMA to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. DATED: , 2018. [PRINT NAME] NOTARY PUBLIC for the State of Washington, residing at My appointment expires: Amendment to Ground Lease (2018) 4 FIRST AMENDMENT TO DEVELOPMENT AGREEMENT PARTIES: EFFECTIVE DATE: April 18, 2018 CITY OF YAKIMA, a Washington municipal corporation 129 North 2nd Street Yakima, Washington 98901 (referred to in this Amendment as the "City") YOUNG MEN'S CHRISTIAN ASSOCIATION OF YAKIMA (d/b/a YAKIMA FAMILY YMCA), a Washington nonprofit corporation 5 North Naches Avenue Yakima, Washington 98901 (referred to in this Amendment as the "YMCA") 8 DEVELOPMENT AGREEMENT. The term "Development Agreement," when used in this Amendment, means and refers to the Development Agreement dated October 27, 2015, by and among the City and the YMCA pertaining to the development and construction of a new YMCA facility and aquatic center at Chesterley Park in Yakima, Washington. BACKGROUND. To better facilitate the arrangements between the City and the YMCA for the construction and operation of the Aquatic Center, the undersigned parties have mutually agreed to amend the timing and financing of the City's financial obligations under the Operating Agreement through the first ten years of the Aquatic Center's operations and the manner and timing in which the City's Financial Contribution under the Development Agreement and certain other financial obligations under the Operating Agreement are met. In general terms, the City has requested to eliminate the City's obligation to reimburse the YMCA for Pre -Opening Expenses, Operating Deficits, and Capital Improvement Expenditures under the Operating Agreement until the tenth anniversary of the Opening Date in exchange for the City's agreement to increase the City's Financial Contribution under the Development Agreement from $4,500,000.00 to $8,000,000.00. Subject to and in accordance with the terms of this Amendment and the below -described Related Amendments, the YMCA has agreed to accommodate said requests by the City. This Amendment and the below -described Related Amendments are now executed for the purpose of memorializing the amendments made to the Development Agreement, Operating Agreement, and Ground Lease in connection with said agreement. Moreover, the Development Agreement, Operating Agreement, and Ground Lease are also executed for the purpose of confirming the satisfaction of the Due Diligence, RCO, and Funding Contingencies and to memorialize the Possession Date and commencement of the Initial Term. AMENDMENT. FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND ADEQUACY ACKNOWLEDGED, THE UNDERSIGNED PARTIES AGREE AND AMEND THE DEVELOPMENT AGREEMENT AS FOLLOWS : 1. Effect of Amendment. This Amendment amends, supplements, and is made part of the Development Agreement. In the event of a conflict between the provisions of this Amendment and the Development Agreement, the provisions of this Amendment will control. Nevertheless, except as expressly amended or supplemented by this Amendment, the provisions of the Development Agreement remain in full force and effect. Amendment to Development Agreement (2018) 1 9 2. Capitalized Terms. Except when the context clearly requires another meaning and for capitalized terms defined in this Amendment, all capitalized terms used in this Amendment have the same meaning given to said terms in the Development Agreement. 3. Amending the City's Financial Contribution. Section 3 of the Development Agreement is amended to increase the City's Financial Contribution from Four Million Five Hundred Thousand and No/100 U.S. Dollars ($4,500,000.00) to Eight Million and No/100 U.S. Dollars ($8,000,000.00). Accordingly, all references in the Development Agreement, Ground Lease, Operating Agreement, and Master Agreement to the "City's Financial Contribution" now refer to the City's $8,000,000.00 obligation under this paragraph, rather than the $4,500,000.00 originally set forth in Section 3 of the Development Agreement. 4. Correcting Exhibit Reference. The second paragraph of Section 2 of the Development Agreement incorrectly references "Exhibit B" of the Development Agreement (which does not exist) when referring to the location of the Required Specifications in the Development Agreement. The Required Specifications are actually listed in Exhibit A of the Development Agreement. For the purpose of correcting this inadvertent scrivener's error, the "Exhibit B" reference in the second paragraph of Section 2 of the Development Agreement is hereby amended to now refer to "Exhibit A" of the Development Agreement. 5. Acknowledgment of the Satisfaction of the Contingencies. The undersigned parties hereby expressly acknowledge the Due Diligence, RCO, and Funding Contingencies are satisfied. 6. Related Amendments. The provisions of this Amendment are interwoven with and dependent upon the provisions set forth and agreed to in the First Amendment to Ground Lease and First Amendment to Operating Agreement with "Effective Dates" even with the Effective Date of this Amendment (collectively the "Related Amendments"). Accordingly, the provisions of this Amendment will become binding and enforceable only upon the full execution of this Amendment and the Related Amendments by both the City and the YMCA. 7. Counterparts and Copies. This Amendment may be executed in any number of identical counterparts, with each counterpart having the same effect as if all parties to this Amendment had signed the same document. All executed counterparts of this Amendment will be construed as and constitute one and the same instrument. A facsimile or electronic copy (e.g., a PDF copy) of an executed counterpart of this Amendment will have the same effect as an original executed counterpart of this Amendment. 8. Authority. The execution, delivery, and performance by each party of this Amendment has been duly authorized by their respective governing bodies (i.e., the YMCA's Board of Directors and the City Council for the City of Yakima) in accordance with their respective governing documents and applicable law, and no further action is necessary on the part of either party to this Amendment or their respective governing bodies to make the execution, delivery, and performance of this Amendment by the undersigned persons valid and binding upon the parties to this Amendment. [Signatures on Following Page] Amendment to Development Agreement (2018) 2 10 EFFECTIVE as of the Effective Date first written above. YOUNG MEN'S CHRISTIAN CITY OF YAKIMA ASSOCIATION OF YAKIMA By: By: Bob Romero, CEO STATE OF WASHINGTON ) ) ss. COUNTY OF YAKIMA ) Cliff Moore, City Manager I certify that I know or have satisfactory evidence that BOB ROMERO is the person who appeared before me, and said person acknowledged that he/she signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as the CEO for the YOUNG MEN'S CHRISTIAN ASSOCIATION OF YAKIMA to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. DATED: , 2018. [PRINT NAME] NOTARY PUBLIC for the State of Washington, residing at My appointment expires: STATE OF WASHINGTON ) ) ss. COUNTY OF YAKIMA I certify that I know or have satisfactory evidence that CLIFF MOORE is the person who appeared before me, and said person acknowledged that he/she signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as the CITY MANAGER for the CITY OF YAKIMA to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. DATED: , 2018. [PRINT NAME] NOTARY PUBLIC for the State of Washington, residing at My appointment expires: Amendment to Development Agreement (2018) 3 FIRST AMENDMENT TO OPERATING AGREEMENT PARTIES: EFFECTIVE DATE: April 18, 2018 CITY OF YAKIMA, a Washington municipal corporation 129 North 2nd Street Yakima, Washington 98901 (referred to in this Amendment as the "City") YOUNG MEN'S CHRISTIAN ASSOCIATION OF YAKIMA (d/b/a YAKIMA FAMILY YMCA), a Washington nonprofit corporation 5 North Naches Avenue Yakima, Washington 98901 (referred to in this Amendment as the "YMCA") 11 OPERATING AGREEMENT. The term "Operating Agreement," when used in this Amendment, means and refers to the Operating Agreement dated October 27, 2015, by and among the City and the YMCA pertaining to the operation of a new aquatic center to be developed, constructed, and operated at Chesterley Park in Yakima, Washington. BACKGROUND. To better facilitate the arrangements between the City and the YMCA for the construction and operation of the Aquatic Center, the undersigned parties have mutually agreed to amend the timing and financing of the City's financial obligations under the Operating Agreement through the first ten years of the Aquatic Center's operations and the manner and timing in which the City's Financial Contribution under the Development Agreement and certain other financial obligations under the Operating Agreement are met. In general terms, the City has requested to eliminate the City's obligation to reimburse the YMCA for Pre -Opening Expenses, Operating Deficits, and Capital Improvement Expenditures under the Operating Agreement until the tenth anniversary of the Opening Date in exchange for the City's agreement to increase the City's Financial Contribution under the Development Agreement from $4,500,000.00 to $8,000,000.00. Subject to and in accordance with the terms of this Amendment and the below -described Related Amendments, the YMCA has agreed to accommodate said requests by the City. This Amendment and the below -described Related Amendments are now executed for the purpose of memorializing the amendments made to the Development Agreement, Operating Agreement, and Ground Lease in connection with said agreement. Moreover, the Development Agreement, Operating Agreement, and Ground Lease are also executed for the purpose of confirming the satisfaction of the Due Diligence, RCO, and Funding Contingencies and to memorialize the Possession Date and commencement of the Initial Term. AMENDMENT. FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND ADEQUACY ACKNOWLEDGED, THE UNDERSIGNED PARTIES AGREE AND AMEND THE OPERATING AGREEMENT AS FOLLOWS: 1. Effect of Amendment. This Amendment amends, supplements, and is made part of the Operating Agreement. In the event of a conflict between the provisions of this Amendment and the Operating Agreement, the provisions of this Amendment will control. Nevertheless, except as expressly amended or supplemented by this Amendment, the provisions of the Operating Agreement remain in full force and effect. Amendment to Operating Agreement (2018) 1 12 2. Capitalized Terms. Except when the context clearly requires another meaning and for capitalized terms defined in this Amendment, all capitalized terms used in this Amendment have the same meaning given to said terms in the Operating Agreement. 3. Relief from Pre -Opening Expenses. Section 7.1(a) of the Operating Agreement is amended to eliminate the City's obligation to reimburse the YMCA for the City's fifty percent (50%) share of the Pre -Opening Expenses. 4. Implementation of the Operating Deficit Reimbursements and Additional Credits. Sections 7.3(a) and 7.3(b) of the Operating Agreement are amended to: (a) Eliminate the City's obligation under Sections 7.3(a) and 7.3(b) of the Operating Agreement to reimburse the YMCA for the City's fifty percent (50%) share of the annual Operating Deficits until the first day of the first calendar month immediately following the ten- (10-) year anniversary after the Opening Date (the "Reimbursement Obligation Commencement Date"); and (b) Grant the City the following annual credits against the City's Operating Deficit reimbursement obligations under Sections 7.3(a) and 7.3(b) of the Operating Agreement during the eleventh (11th), twelfth (12th), thirteenth (13th), fourteenth (14111), and fifteenth (15th) years following the Opening Date: Year Following the Opening Date Operating Deficit Reimbursement Credit Against the First Funds Owed For the Corresponding Year Year 11 $50,000.00 Year 12 $40,000.00 Year 13 $30,000.00 Year 14 $20,000.00 Year 15 $10,000.00 For example and illustration purposes only, if the Opening Date is October 20, 2019, the City will be relieved of the City's obligation under Sections 7.3(a) and 7.3(b) of the Operating Agreement to reimburse the YMCA for the City's 50% share of Operating Deficits from October 20, 2019, through October 31, 2029, and the City's obligation to commence reimbursing the YMCA under Sections 7.3(a) and 7.3(b) of the Operating Agreement for the City's 50% share of the Operating Deficits would commence on November 1, 2029, which date would be the Reimbursement Obligation Commencement Date; provided, however, the City would receive a credit against and not have to reimburse the YMCA for (1) the first $50, 000.00 of the City's Operating Deficit reimbursement obligation under Sections 7.3(a) and 7. 3(b) of the Operating Agreement for the period running from November 1, 2029, through October 31, 2030; (2) the first $40,000.00 of the City's Operating Deficit reimbursement obligation under Sections 7.3(a) and 7.3(b) of the Operating Agreement for the period running from November 1, 2030, through October 31, 2031; (3) the first $30,000.00 of the City's Operating Deficit reimbursement obligation under Sections 7.3(a) and 7. 3(b) of the Operating Agreement for the period running from November 1, 2031, through October 31, 2032; (4) the first $20,000.00 of the City's Operating Deficit reimbursement obligation under Sections 7.3(a) and 7.3(b) of the Operating Agreement for the period running from November 1, 2032, through October 31, 2033; and (5) the first $10,000.00 of the City's Amendment to Operating Agreement (2018) 2 13 Operating Deficit reimbursement obligation under Sections 7.3(a) and 7.3(b) of the Operating Agreement for the period running from November 1, 2033, through October 31, 2034. 5. Implementation of the Capital Improvement Expenditure Reimbursements and Reserve Fund Contributions. Sections 7.4(a), 7.4(b), and 7.4(d) of the Operating Agreement are amended to: (a) Eliminate the City's obligation under Sections 7.4(a) and 7.4(b) of the Operating Agreement to reimburse the YMCA for the City's fifty percent (50%) share of the annual Capital Improvement Expenditures until the Reimbursement Obligation Commencement Date (Le., first day of the first calendar month immediately following the ten- (10-) year anniversary after the Opening Date); and (b) Eliminate the City's obligation under Section 7.4(d) of the Operating Agreement to make annual $40,000.00 contributions into the City's Capital Improvement Reserve Fund account until the Reimbursement Obligation Commencement Date (i. e. , first day of the first calendar month immediately following the ten- (10-) year anniversary after the Opening Date). For example and illustration purposes only, if the Opening Date is October 20, 2019, the City will be relieved of the City's obligation under Sections 7.4(a), 7.4(b), and 7.4(d) of the Operating Agreement to (1) reimburse the YMCA for the City's 50% share of Capital Improvement Expenditures from October 20, 2019, through October 31, 2029, and the City's obligation to commence reimbursing the YMCA under Sections 7.4(a) and 7.4(b) of the Operating Agreement for the City's 50% share of the Capital Improvement Expenditures would commence on November 1, 2029, which date would be the Reimbursement Obligation Commencement Date; and (2) make annual $40, 000.00 contributions into the City's Capital Improvement Reserve Fund account until November 1, 2029. 6. Budgeting and Reports. As a result of the Pre -Opening Expense, Operating Deficit, and Capital Improvement Expenditure relief provided to the City under Sections 3, 4, and 5 above, the Operating Agreement is amended to: (a) Eliminate (i) the YMCA's obligation under Section 7.1(b) of the Operating Agreement to prepare and submit a proposed Initial Budget to the City and (ii) the process by which the City and the YMCA will meet to discuss and review the proposed Initial Budget and agree on the final Initial Budget. Instead, the Initial Budget will be prepared and approved solely by the YMCA; provided, however, once the Initial Budget is prepared and approved by the YMCA, the YMCA will submit a copy of the Initial Budget to the City, with said submission occurring no later than the Opening Date; (b) Amend Section 7.2(a) of the Operating Agreement to extend the date on which annual Proposed Budgets are to be prepared and submitted by the YMCA to the City from July 1st of each year to August 1st of each year. For example and illustration purposes only, if the Opening Date is October 20, 2019, the YMCA, not later than September 1, 2020, will provide Proposed Budgets to the City for the first (1st) complete Fiscal Year after the Opening Date (Le., September 1, 2020 - August 31, 2021), and the budgeting process for said Fiscal Year will continue in the manner set forth in Section 7.2(a) of the Operating Agreement, with said process to repeat on an annual basis for each subsequent Fiscal Year; Amendment to Operating Agreement (2018) 3 14 (c) Eliminate the YMCA's obligation under Section 7.3(b) of the Operating Agreement to submit Monthly Financial Statements and invoices to the City until the expiration of the first eight (8) complete Fiscal Years after the Opening Date; (d) Eliminate the YMCA's obligation under Section 7.4(b) of the Operating Agreement to submit Monthly CAPEX reports and invoices to the City until the expiration of the first eight (8) complete Fiscal Years after the Opening Date; (e) Eliminate the YMCA's obligation under Section 7.5 of the Operating Agreement to meet and provide quarterly reports to the City Manager until the first quarter of the sixth (6th) complete Fiscal Year after the Opening Date; provided, however, during the first five (5) complete Fiscal Years after the Opening Date, the YMCA, on a semiannual basis (i.e., twice -a -year), will meet with the City Manager, on dates and at times mutually convenient for the YMCA and the City Manager, and provide written report summaries and in-person updates on the status of the Aquatic Center's financial performance, usage, and programs; and (f) Eliminate the YMCA's obligation under Section 7.7 of the Operating Agreement to prepare and submit to the City the annual financial statements required thereunder until the ninth (9th) complete Fiscal Year after the Opening Date, with the financial statement for said ninth (9th) Fiscal Year to be provided no later than one hundred eighty (180) days following the close of the ninth (9th) complete Fiscal Year after the Opening Date. 7. Acknowledgment of the Satisfaction of the Contingencies. The undersigned parties hereby expressly acknowledge the Due Diligence, RCO, and Funding Contingencies are satisfied. 8. Related Amendments. The provisions of this Amendment are interwoven with and dependent upon the provisions set forth and agreed to in the First Amendment to Development Agreement and First Amendment to Ground Lease with "Effective Dates" even with the Effective Date of this Amendment (collectively the "Related Amendments"). Accordingly, the provisions of this Amendment will become binding and enforceable only upon the full execution of this Amendment and the Related Amendments by both the City and the YMCA. 9. Counterparts and Copies. This Amendment may be executed in any number of identical counterparts, with each counterpart having the same effect as if all parties to this Amendment had signed the same document. All executed counterparts of this Amendment will be construed as and constitute one and the same instrument. A facsimile or electronic copy (e.g., a PDF copy) of an executed counterpart of this Amendment will have the same effect as an original executed counterpart of this Amendment. 10. Authority. The execution, delivery, and performance by each party of this Amendment has been duly authorized by their respective governing bodies (i.e., the YMCA's Board of Directors and the City Council for the City of Yakima) in accordance with their respective governing documents and applicable law, and no further action is necessary on the part of either party to this Amendment or their respective governing bodies to make the execution, delivery, and performance of this Amendment by the undersigned persons valid and binding upon the parties to this Amendment. [Signatures on Following Page] Amendment to Operating Agreement (2018) 4 15 EFFECTIVE as of the Effective Date first written above. YOUNG MEN'S CHRISTIAN CITY OF YAKIMA ASSOCIATION OF YAKIMA By: By: Bob Romero, CEO STATE OF WASHINGTON ) ) ss. COUNTY OF YAKIMA ) Cliff Moore, City Manager I certify that I know or have satisfactory evidence that BOB ROMERO is the person who appeared before me, and said person acknowledged that he/she signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as the CEO for the YOUNG MEN'S CHRISTIAN ASSOCIATION OF YAKIMA to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. DATED: , 2018. [PRINT NAME] NOTARY PUBLIC for the State of Washington, residing at My appointment expires: STATE OF WASHINGTON ) ) ss. COUNTY OF YAKIMA I certify that I know or have satisfactory evidence that CLIFF MOORE is the person who appeared before me, and said person acknowledged that he/she signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as the CITY MANAGER for the CITY OF YAKIMA to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. DATED: , 2018. [PRINT NAME] NOTARY PUBLIC for the State of Washington, residing at My appointment expires: Amendment to Operating Agreement (2018) 5 Distributed at th Meeting -17-1 CITY OF YAKIMA Report for Agreed -Upon Procedures on Capital Funding for Yakima Family YMCA For the Year Ended December 31, 2017 Clark NuberPS Independent Accountant's Report on Applying Agreed -Upon Procedures To the Yakima City Council City of Yakima Yakima, Washington We have performed the procedures enumerated below, which were agreed to by the City of Yakima (the City), solely to assist the City with gaining comfort that the Yakima Family YMCA (YMCA) has been able to secure at least 80% of the funding needed to construct the Aquatic Center. The sufficiency of these procedures is solely the responsibility of the parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures enumerated below either for the purpose for which this report has been requested or for any other purpose. The table below describes the areas tested, procedures performed and results of those procedures: AREA a PROCEDURE PERFORMED RESU ..; Debt Obtain loan documentation and review for reasonableness. We obtained and reviewed the underlying loan agreement. We reviewed the lender's website and did a search online for the lender's president (who signed the agreement) to verify the existence of the lender. City Money Obtain and review agreement with the City. We obtained and reviewed the agreement with the City rioting $4.5M would be provided for the construction of the Aquatic Center. Cash Confirm the YMCA Aquatic Center bank balance as of December 31, 2017. We were not able to obtain a bank confirmation from the bank by the issuance of this report. As an alternative procedure, we obtained a copy of the December 31, 2017 bank statement from YMCA. We used the bank statement to reconcile the bank balance to the listing of contribution receipts from YMCA as of December 31, 2017. We noted a difference of $332,907. Per discussion Bob Romero, Executive Director of the YMCA, the difference represented architecture and engineering costs incurred through December 31, 2017 on the project, which were funded with the Aquatic Center Cash account. Therefore, we reviewed the related invoices totaling $386,867.42, noting a remaining difference of $53,960. Clark NuberPs .,.x`' a, .A .... REA a0 s":3r- fir &iet CEDURE PERFOR ED,- y •_ig rr-, Z4 t vsf ,, , ..,€,?.;...- RE UL S z '� < �. Y �' r e a^'E.. Contributions We obtained a listing of all We reviewed pledge forms or check copies contributions. We sorted for 67 contributions $12,000 or greater for the list by size and directly a total of $7,806,458 of total contributions tested contributions tested. $15,000 and higher to test at least 80% of the total We called ten donors and spoke with nine commitments required as donors and for each we confirmed the of December 31, 2017 amounts recorded by the YMCA. ($16,209,484) after testing debt and City money. To test each contribution, we obtained the "A Pledge to Help Build a Second YMCA for Yakima" pledge letter and agreed the donor name, amount and donation month/year to the YMCA contribution listing. For any contributions that were cash and did not have a related pledge form we agreed the amount and donor name to the check copy. Additionally, we selected 10 donors to call and confirm their contribution. We selected five $150,000 and higher and five below $150,000. Summary of Summarize total dollars See information below: Procedures verified through the above Performed procedures and compare to the funding required by the City as of December 31, 2017 and the total funding represented by YMCA at December 31, 2017. -2- Clark Nuber5 Capital Funding Criteria) Calculation Per Agreement: Total estimated project costs per YMCA $ 20,261,855 Percent required to be committed at December 31, 2017 80% Required Commitment by December 31, 2017 $ 16,209,484 Total Funding Commitment at December 31, 2017, Per YMCA: Funding source - City of Yakima Capital $ 4,500,000 Loan 5,000,000 Contributions and pledges to the YMCA from individuals and businesses 7,440,000 Contributions and pledges made to Yakima Rotary for the Project 1,260,000 Total Funding Commitments at December 31, 2017 $ 18,200,000 Agreed -Upon -Procedures Testing Performed by Clark Nuber: Funding source - City of Yakima Capital $ 4,500,000 Loan 5,000,000 Contributions and pledges to the YMCA from individuals and businesses 7,300,772 Contributions and pledges made to Yakima Rotary for the Project 469,476 Total Funding Tested as Part of Agreed -Upon Procedures $ 17,270,248 * We performed procedures over $17,270,248 in funding commitments as the agreed -upon - procedures did not require testing of all funding commitments reported by YMCA at December 31, 2017. Therefore, we make no representation related to the untested balance of $929,752. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on the capital commitments obtained by the YMCA as of December 31, 2017. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to the City. This report is intended solely for the information and use of City management and City Council and is not intended to be and should not be used by anyone other than this specified party. aid Certified Public Accountants April 17, 2018 -3-