DL council approves changes to Legion campground contract, approves sale of land for airport
Since 2011, the American Legion Campground on West Lake Drive has been operated by John Bridges American Legion Post 15 under a management agreement with the City of Detroit Lakes.
At its regular meeting on Tuesday night, the council approved some changes to its campground management agreement with the Legion that should, in theory, be beneficial to both parties. The new two-year agreement is set to expire in 2019, and while it is designed to be renewed automatically, it can be renegotiated at that time.
Though little discussion of the agreement took place at the council meeting, it was reviewed in depth at a meeting of the city's finance committee, held that same afternoon.
"There's been a lot of back and forth (discussion between the Legion and the city) on this," said City Administrator Kelcey Klemm at the finance meeting.
The Legion manages about 150 sites, tucked between Legion Road, the Canadian Pacific Railway corridor and the Becker County Fairgrounds. A total of 115 sites are rented out on a seasonal basis, with about 35 more leased on a 'transient' basis — i.e., to people staying in the community for a short time only.
In the past, the city has paid the Legion an $18,000 annual management fee, with all management expenses (wages, taxes, insurance, etc.) to be paid out of this fee and not the Campground Fund. In return, the city has received a $7,500 annual payment from the Campground Fund, which is where all rental proceeds and other revenue from campground operations are deposited. It was also past practice for any expenses incurred by the manager for campground operations would come from the Campground Fund, as these expenses usually far exceeded the management fee paid by the city. Meanwhile, any remaining proceeds in the Campground Fund at the end of each year could be used by the Legion to support its local youth and community-based projects and programs.
In a July 6 memo to the council, Klemm stated, "To reconcile the way that management expenses are paid, negotiations have revolved around some sort of profit sharing agreement. Several ideas and variations on how the management fees should be paid were proposed... initially, a 50/50 profit sharing scenario was explored, but but the downfall to that proposal was the difficulty with the American Legion being able to cashflow operations until the end of the year, when the financials would be reconciled. Plus, a strict profit sharing scenario could pose greater risk to the American Legion (from unforeseen expenses, damage due to a major weather event, etc.)."
In the end, Klemm said, the negotiations resulted in a "hybrid" proposal that includes both a flat management fee and profit sharing. The Legion will now be paid a $60,000 annual management fee, on a quarterly basis, and receive 20 percent of the campground profits, to be distributed at its discretion. The city, meanwhile, will receive about $86,000 per year, with the remainder of the proceeds to be reserved for future campground improvements and maintenance.
Also at Tuesday's regular meeting, the council approved, in two separate actions, the acquisition of three tracts of city-owned land for the expansion of the Detroit Lakes-Becker County Airport. The first action was an avigation easement on 2.7 acres of land, for which the city will receive $1,100; the second was the sale of two tracts of land, totaling 53.6 acres, for a price of $37,500.
Klemm said the relatively low purchase price for the land was based on the fact that it had certain use restrictions that limited its market value.