City Council Committee of the Whole Meeting July 25, 2018|6:00 Pm City Council Chambers
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CITY COUNCIL COMMITTEE OF THE WHOLE MEETING JULY 25, 2018|6:00 PM CITY COUNCIL CHAMBERS Call to Order Roll Call Approval of Minutes of Previous Meeting – July 11, 2018 Items also on Council Agenda A. Consideration of Consent to Propose Sale of Joint Venture Interests in Elgin Riverboat Resort and the Grand Victoria Casino to a New Joint Venture Entity Controlled by Eldorado Resorts, Inc. (No cost to the City) Objective: Provide City of Elgin consent to the proposed sale of the joint venture interest in Elgin Riverboat Resort and the Grand Victoria Casino Special Presentations and Reports - None Initiatives and Other Items B. Consideration of Land Use Agreement with the Elgin BMX Riders Association to Operate BMX Track at the Elgin Sports Complex (No cost to the City) Objective: Partner with a local volunteer group to operate the Elgin Sports Complex’s BMX Track. C. Consideration of Agreement with WBK Engineering, LLC for Design Engineering Services for the Rehabilitation and/or Replacement of Two Right-of-Way Retaining Walls ($54,210) Objective: Analyze, design and prepare construction documents for the replacement of two deteriorating right-of-way retaining walls D. Consideration of Engineering Services Agreement with Burns and McDonnell Engineering Company, Inc. for Various Utility Department Projects ($206,000) Objective: Provide engineering services for a variety of projects to maintain and improve the city’s water treatment facilities and utility infrastructure. E. Consideration of Alignment Collaborative for Education Partnership ($60,000 over three-year period) Objective: Address educational priorities of the community and improve overall workforce readiness. Announcements from Council Announcements from Staff COMMITTEE OF THE WHOLE AGENDA July 25, 2018 Executive Session F. Establishment of Reserves or Settlement of Claims as Provided in the Local Governmental and Governmental Employees Tort Immunity Act - Exempt Under Section 120/2(c)(12) of the Open Meetings Act G. Selection of a Person to Fill a Public Office, Including a Vacancy in a Public Office, When the Public Body is Given Power to Appoint Under Law or Ordinance, or the Discipline, Performance or Removal of the Occupant of a Public Office, When the Public Body is Given Power to Remove the Occupant Under Law or Ordinance - Exempt Under Section 120/2(c)(3) of the Open Meetings Act Adjournment PLEASE NOTE: The City of Elgin is subject to the requirements of the Americans with Disabilities Act of 1990. Individuals with disabilities who plan to attend this meeting and who require certain accommodations in order to allow them to observe and/or participate in this meeting, or who have questions regarding the accessibility of the meeting or the facilities, are requested to contact the Human Resources Department at (847) 931-6076 or TT/TDD (847) 931-5616 promptly to allow the City of Elgin to make reasonable accommodations for those persons. 2 AGENDA ITEM: A MEETING DATE: July 25, 2018 ITEM: Consent to Propose Sale of Joint Venture Interests in Elgin Riverboat Resort and the Grand Vic- toria Casino to a New Joint Venture Entity Controlled by Eldorado Resorts, Inc. (No cost to the City) OBJECTIVE: Provide City of Elgin consent to the proposed sale of the joint venture interest in Elgin Riverboat Resort and the Grand Victoria Casino. RECOMMENDATION: Consent to the proposed sale of the joint venture interest in Elgin Riverboat Resort and the Grand Victoria Casino to a new joint venture entity controlled by Eldorado Resorts, Inc. The existing joint venture partners of Elgin Riverboat Resort which operates the Grand Victoria Casino have entered into an agreement providing for a proposed sale of the joint venture inter- est in Elgin Riverboat Resort. The new joint venture entity is controlled by Eldorado Resorts, Inc., a Nevada corporation. The City’s lease with Elgin Riverboat Resort requires the City’s consent regarding the transfer of ownership of the riverboat, which consent cannot be unreasonably withheld by the City. BACKGROUND The City and Elgin Riverboat Resort, d/b/a The Grand Victoria Casino previously entered into a development agreement dated as of June 24, 1992, and a ground lease agreement effective as of January 20, 1994 relating to the development and operation of the Grand Victoria Casino on and adjacent to the City owned property bounded by National Street on the south, the Fox Riv- er on the east, Lake Street on the north and vacated Wellington Avenue on the east. The ground lease agreement was subsequently amended pursuant to an amended and restated ground lease agreement dated December 2, 1998. Such amended and restated ground lease agreement has since been amended on three occasions including a first amendment as of Sep- tember 8, 1999, a second amendment as of November 19, 2003, and a third amendment as of August 13, 2014. The amended and restated ground lease agreement provides for the lease of the City property to the casino for operation of entertainment and support facilities for and in conjunction with the adjacent riverboat gambling operation on the Fox River. The improvements located on the City owned property include the casino pavilion, parking garage and surface parking lots. The original term of the lease was a ten-year period from October 31, 1994 through October 31, 2004. The lease also had four five-year additional option terms by which the casino could elect to extend the term of the lease. The casino has to date exercised three of these four-year options from 2004 through 2009, from 2009 through 2014 and from 2014 through 2019. Pursu- ant to the third amendment to the lease the number of five-year additional option terms was increased from four to ten five-year renewal options for the casino. The casino now has renew- al options by which it could extend the lease through October 31, 2054. Section 2 of the lease provides for rent to be paid by the casino to the City. The rent consists of the defined Basic Rent and the defined Percentage Rent. Basic rent is a calculation of the total square footage of the City land by $.20 per annum. Percentage Rent is defined as additional rent to be paid in the amount by which three percent of the net operating income of the casino in a lease year exceeds the Basic Rent. Effective January 1, 2015, pursuant to the third amend- ment the amount of rent was amended from the then current amount of the sum of Basic Rent and Percentage Rent to an amount equal to the lesser of such Basic Rent and Percentage Rent or $1,000,000.00, as increased annually by the consumer price index. The tenant under the lease with the City is Elgin Riverboat Resort, an Illinois joint venture con- sisting of MGM Elgin Sub, Inc., and RBG, LLC, a Delaware limited liability company. The existing joint venture partners of Elgin Riverboat Resort have entered into an agreement providing for a proposed sale of the joint venture interests in Elgin Riverboat Resort to a new joint venture en- tity controlled by Eldorado Resorts, Inc., a Nevada corporation and consisting of Elgin Holdings I, LLC, a Delaware limited liability company, and Elgin Holdings II, LLC, a Delaware limited liabil- ity company. Elgin Holdings I and Elgin Holdings II are identified as the “Buyer Purchasing Sub- sidiaries”. Sections 14B and 23C of the City’s lease with Elgin Riverboat Resort provide in part that the tenant may not sub lease any portion of the premises or assign its interest in the lease nor transfer ownership of the Riverboat without the prior consent of the City, which consent shall not be unreasonably withheld. The parties to the pending proposed sale of the casino have contacted the City and requested the City’s consent to the sale transaction. Attached is a draft letter of July 19, 2018 to the City requesting the City’s execution thereof and consent to the proposed sale transaction. The sale of the joint venture interest to the Eldorado Resorts, Inc. entities also requires approv- al by the Illinois State Gaming Commission. The consideration of the proposed sale by the Illi- nois Gaming Commission is currently scheduled for August. 2 OPERATIONAL ANALYSIS The Grand Victoria Casino has provided the following information regarding the sale transaction and Eldorado Resorts, Inc.: 1. BACKGROUND AND CURRENT OWNERSHIP Elgin Riverboat Resort-Riverboat Casino, an Illinois partnership d/b/a Grand Victoria Ca- sino (“Elgin Riverboat Resort”), operates a riverboat casino and other facilities on land leased from the City of Elgin, Illinois pursuant to that certain Amended and Restated Ground Lease Agreement, dated as of December 2, 1998 (as subsequently amended, the “Ground Lease”). Elgin Riverboat Resort is currently owned by two partners: (i) MGM El- gin Sub, Inc., a subsidiary of MGM Resorts International (“MGM Elgin”) and (ii) Illinois RBG, L.L.C., a private investment vehicle (“IL RBG”), with each of MGM Elgin and IL RBG holding a fifty percent partnership interest in Elgin Riverboat Resort. Following is an il- lustration of the existing ownership of Elgin Riverboat Resort: MGM Elgin Illinois RBG, Sub, Inc. L.L.C. (Existing Owner) Owner) 50% partnership inter- 50% partnership inter- est est Elgin Riverboat Casino (Tenant under Ground Lease) 2. SALE TO ELDORADO RESORTS On April 15, 2018, Elgin Riverboat Resort, MGM Elgin and IL RBG entered into an Inter- est Purchase Agreement with Eldorado Resorts, Inc. (“Eldorado”), Elgin Holdings I LLC, a direct wholly owned subsidiary of Eldorado (“Elgin I”), and Elgin Holdings II LLC, an indi- rect wholly owned subsidiary of Eldorado (“Elgin II”). Pursuant to the Interest Purchase Agreement, each of Elgin I and Elgin II will collectively acquire 100% of the partnership interests in Elgin Riverboat Resort from MGM Elgin and IL RBG for cash.