A RESOLUTION designating the proposed partnership between the City of Seattle and the Seattle Aquarium Society for the future development of the Pacific Northwest Aquarium as a Targeted Partnership.

WHEREAS, the City is considering entering into a partnership with the Seattle Aquarium Society for the future development of the Pacific Northwest Aquarium, to achieve benefits for the public that might not materialize absent such a partnership; and

WHEREAS, the City has established a process designed to improve the public knowledge of certain partnerships between the City and public or private entities, and to enable better comparison between projects and assessment of the costs and benefits arising from the partnership;

NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEATTLE, THE MAYOR CONCURRING, THAT:

Section 1: The proposed partnership between the City of Seattle and the Seattle Aquarium Society, as reflected in the attached proposed Memorandum of Understanding, be subject to the review process described by Resolution 30072

Adopted by the City Council the _____ day of _______________, 2000, and signed by me in open session in authentication of its adoption this _____ day of _______________, 2000.

________________________________________

President of the City Council

THE MAYOR CONCURRING:

________________________________________

Paul Schell, Mayor

Filed by me this _____ day of _______________, 2000.

________________________________________

City Clerk

(Seal)

Tony Kilduff

F:

2/1/2000

V # 1 MEMORANDUM OF UNDERSTANDING

Between

THE CITY OF SEATTLE

and

THE SEATTLE AQUARIUM SOCIETY

for

THE PACIFIC NORTHWEST AQUARIUM

This Memorandum of Understanding ("MOU") is dated _____________, 2000, and is entered into by and between the City of Seattle ("City"), a Washington Municipal Corporation, and the Seattle Aquarium Society ("SEAS"), a Washington nonprofit corporation.

1. RECITALS

1.1 The City is the owner and operator of the Seattle Aquarium, located on Pier 59 over Elliott Bay in Seattle, Washington. The City leases the tideland, over which the Seattle Aquarium stands, from the State of Washington, through the State's Department of Natural Resources.

1.2 For many years, SEAS has supported the Seattle Aquarium through the promotion, sale and management of the Seattle Aquarium's memberships; publication of a newsletter; fundraising from corporations, individuals and foundations; and the provision of the skills and leadership of its staff and board.

1.3 When the Seattle Aquarium opened more than 20 years ago, it was a state-of-the-art facility. However, the Seattle Aquarium has not kept up with developments in aquarium technology and presentation. Desired capital improvements have not been made and too few new exhibits have been added. Without the construction of a new aquarium facility, the Seattle Aquarium may suffer substantial physical deterioration, declining visits, and financial deficits.

1.4 In the late 1980s, the City purchased Pier 62 and 63 for the purpose of expanding the existing Seattle Aquarium or constructing a new aquarium.

1.5 In the fall of 1992, the City initiated a citizen's effort to develop a long-term vision for the future development of the Seattle Aquarium and adjoining park. The City appointed the Central Waterfront Citizens Advisory Committee ("CAC") to advise the Mayor and the City Council on the future direction for these City-owned properties. Representing a broad spectrum of interests including educators, environmentalists, the waterfront community, civic, government and business leaders throughout the region, the CAC worked with a national team of consultants (architects, exhibit designers, engineers, financial analysts and planners) and Seattle Aquarium staff for two years to develop a vision for these properties that celebrates the spirit of the waterfront, stimulates the economic vitality of the region, and inspires stewardship of the natural wonders of the Pacific Northwest.

1.6 In December of 1994, the CAC issued a report entitled "The Central Waterfront Master Plan-Portal to the Pacific." The CAC recommended replacing the existing aquarium facility with a new state-of-the-art aquarium, raising approximately $150 million to construct the necessary facilities, and transferring management and control of the new aquarium to a private nonprofit corporation.

1.7 In 1996, SEAS commissioned and completed a financial feasibility study performed by the Lyons Group. This study concluded that a new state-of-the-art aquarium, as described by the CAC, could generate sufficient revenues to cover its maintenance and operation expenses, and to support debt sufficient to raise at least $40 million of the capital costs necessary for construction.

1.8 On January 27, 1997, the City Council voted unanimously to adopt the Master Plan to construct a new aquarium on the Seattle waterfront, and requested SEAS to prepare and submit an implementation plan. On October 7, 1997 SEAS submitted the Implementation Plan for the Seattle Aquarium Master Plan, which, among many other things, called for the transfer of development and operation of the new Seattle Aquarium to an operating entity outside of City of Seattle governance. On December 15, 1997, the City Council unanimously accepted the Implementation Plan commissioned by SEAS for the development of a new aquarium, including the transfer of development and operation of the new aquarium to SEAS, through Council Resolution 29682.

1.9 On June 2, 1998, the Collins Group completed a campaign advancement study for SEAS regarding private fund raising for the Pacific Northwest Aquarium. The Collins Group found "unwavering community support" for the new Aquarium, "overwhelming support" for the proposed transition from public to private governance, and a need of private donors to know that there will be substantial government contributions to the project. Based upon its review of potential private donors and foundations, the Collins Group recommended a structure for the private fund raising campaign.

1.10 Between October 6 and 8, 1998, the City and SEAS conducted a program charette for the proposed Pacific Northwest Aquarium. Aquarium experts, community leaders and citizens participated in the public charette. Among other tasks, the charette reaffirmed the 1994 Master Plan and produced an addendum report to that plan. In particular, the charette concluded (1) that the present proposed location for the new Aquarium was the most appropriate location, (2) that the proposed size range for the new Aquarium was reasonable, (3) that the Aquarium design needs to reflect the unique Northwest style, (4) that the success of the new Aquarium will depend upon a broad range of partnerships and public participation, and (5) that there was a consensus to move forward with the project immediately.

1.11 On May 3, 1999, the City Council passed Resolution 29939, with the Mayor concurring, which approved a 1999 work plan and project schedule for the redevelopment of the Seattle Aquarium, including the appropriation of $500,000 in matching funds for partial schematic design (including programming and conceptual design); an updated financial feasibility study; a project financing plan; a plan for future city funding; and a governance transition plan and agreement. On June 13, 1999, the City and SEAS executed a service agreement to perform the Work Plan.

1.12 The City and SEAS desire to finance, develop, construct and operate a new state-of-the-art aquarium to be known as the Pacific Northwest Aquarium ("PNA"), on the Seattle waterfront, as described in the Waterfront Master Plan and its Addendum, the financial feasibility studies, the Implementation Plan and the deliverables from the 1999 Work Plan. The City and SEAS expect the PNA to be located between Piers 59 and 63, and to be between 150,000 and 160,000 square feet in size, with three premier exhibit areas, additional permanent exhibits and space for new or revolving exhibits. The development, design, financing, and construction of the PNA will be known as the "Project" for purposes of this MOU. The City and SEAS intend that the Project will be financed through private donations, government grants, and revenue bonds. SEAS and the City intend that SEAS will develop, construct, operate and manage the PNA.

1.13 SEAS and the City believe that the PNA is an appropriate project for a public/private partnership. The public benefits to this arrangement are substantial, including leveraging the City's financial payment to develop an important public education and community facility. SEAS and the City both recognize that they cannot accomplish these goals alone. With many other demands for the City's financial resources, the City cannot complete the Project without substantial private donations. Similarly, SEAS recognizes that a successful private fundraising campaign needs a public commitment from governmental agencies, including the City of Seattle. SEAS and the City have considered several alternatives for the PNA through the Central Waterfront Master Plan, the Programmatic Environmental Impact Statement for the Central Waterfront Master Plan, the architectural charette, and the amendment to the Central Waterfront Master Plan. With the safeguards discussed below, SEAS and the City have concluded that the PNA, as described in these recitals and the documents referenced in them, will be created in the most effective and successful manner through the proposed public/private partnership.

1.14 SEAS and the City wish to enter into this Memorandum of Understanding for the purpose of memorializing their preliminary mutual understanding of the terms and conditions under which the PNA shall be financed, constructed, owned and operated.

ACCORDINGLY, the City and SEAS identify their understandings as follows:

2. OWNERSHIP AND USE OF PROPERTY

2.1 Ownership of Existing Seattle Aquarium. It is intended that throughout all phases of this Project, the City will own the existing Seattle Aquarium. The parties understand that at the appropriate stage of completion of the Project, the existing Seattle Aquarium facility may be demolished.

2.2 Ownership of the PNA. At the present time, it is contemplated that the City shall be the owner of the PNA facility and fixtures. SEAS shall own the exhibits and all furnishings, equipment, and other personal property that SEAS may provide to furnish and equip the PNA.

2.3 Ownership of Tide Lands. Ownership of the tide land under and between Piers 60 and 63 shall remain with the State of Washington. Before the commencement of construction of the PNA, the City shall make available to SEAS that portion of the tide lands necessary for the construction and operation of the PNA.

2.4 Ownership and Maintenance of the Piers. The City intends to maintain ownership of Piers 59, 60, 62, and 63. SEAS intends to repair and/or reconstruct Piers 62 and 63 as part of the Project.

2.5 Transfer of Other Property. Upon completion of the Project, all plants and animals in the Seattle Aquarium and owned by the City will be transferred to SEAS. At that time, the City will also transfer to SEAS all rights and agreement regarding possession of plants and animals in the Seattle Aquarium not owned by the City. All equipment and personal property owned by the City in the existing Seattle Aquarium that SEAS can use in the PNA, will be transferred to SEAS when such equipment or personal property is needed.

2.6 Use Agreement for PNA. The parties intend to enter into a long-term Use Agreement under which SEAS shall be entitled to use the Project site and all capital and leasehold improvements thereon and assume responsibility for its management and operation as outlined below in Section 3. The parties further intend that the payments made by SEAS, will fairly reflect SEAS' large contribution towards the development cost of the Project as well as SEAS' assumption of management and operation responsibilities with respect to such facility. The term of the Use Agreement shall be for approximately thirty (30) years, with two options exercisable by SEAS to renew such Use Agreement for additional fifteen (15) year periods at a payment rate and under terms and conditions specified in such Use Agreement or as otherwise agreed by the City and SEAS.

SEAS shall be permitted to use the facility for all uses associated with a major aquarium, including but not limited to offices, retail shops, and the sale of food and beverage. SEAS will have exclusive use and control of the premises during the term of its Use Agreement. SEAS shall have the right to assign its use of portions of the facility to third parties for use consistent with Aquarium purposes and business.

3. OPERATION AND MANAGEMENT

3.1 Management and Operation of Existing Seattle Aquarium. The City intends to contract with SEAS to manage and operate the existing Seattle Aquarium. Within one year of the execution of this MOU, the City and SEAS expect to negotiate and prepare a management and operation contract for the Seattle Aquarium. The parties intend that SEAS' management will begin as soon as possible after execution of the management and operation agreement and expect that the transition may occur as soon as in the first quarter of 2001. The implementation of SEAS management and operation will be conditional upon the retention of Chief Executive Officer to manage the Seattle Aquarium for SEAS, the preparation and approval of a business plan for the operation of the Seattle Aquarium, and the satisfaction of the conditions in Sections 5.5.1 through 5.5.4 of this MOU and development of the mechanism described in Section 6.1. In addition, SEAS must raise at least $13 million in grants or secure pledges from other governmental entities and at least $47 million in donations and secure pledges from private donors before SEAS begins management of the existing Seattle Aquarium. After SEAS begins its management and operation of the Seattle Aquarium, the City will remain liable for its contract obligations and legal liabilities pertaining to the Seattle Aquarium and existing at the time SEAS begins its management and operation. During its management of the existing Seattle Aquarium, SEAS will not be liable for capital improvements or major maintenance or repair of the existing Seattle Aquarium facility. If SEAS substantially completes the construction of the PNA as described in the Master Plan but does not demolish or remove the existing Seattle Aquarium facility, and the City does not use the existing Seattle Aquarium facility for any purpose, then SEAS will be responsible for capital improvements and major maintenance to and insurance for the existing Seattle Aquarium facility from that time forward.

.2 Management of PNA. After its completion, SEAS will manage and operate the PNA and auxiliary businesses, including but not limited to all related gift shops, food services, and merchandise sales, and will hold any trademarks and trade names during the pendency of the use agreement. SEAS will have the right to set admission, use, rental and product prices subject to Section 3.3. SEAS will be responsible and liable for maintenance and repair (including major maintenance and repair) of the PNA except those portions thereof that are open space improvements. During the term of its use, SEAS will be entitled to all revenues and net revenues derived from the operation of the PNA and related uses, and shall be responsible for any losses.

3.3 Public Access and Use. SEAS will ensure that the PNA will be affordable and accessible to Seattle residents. Fees will be competitive with other facilities of similar scope and quality. SEAS will ensure that low income residents of Seattle, children and school age students have opportunities to visit and experience the PNA. SEAS will provide free passes to human service agencies to distribute to low income residents (similar to the Seattle Aquarium's current practice) and provide free or reduced fees for children and students. SEAS and the City will agree to certain performance measures for these public benefits which will be included in the management and operation agreement.

3.4 Naming of Pavilions, Exhibits and Facility. SEAS shall have the right to recognize donors and sponsors by affiliating their names to pavilions and exhibits. SEAS shall also have the right to recognize a major donor by affiliating that donor's name with the facility, subject to the City's approval, which shall not be unreasonably withheld.

CONSTRUCTION

4.1 Design/Build Agreement. Pursuant to the terms of R.C.W. 39.10.050, and assuming no other entity proposes more favorable terms, the parties intend to use a Design/Build Agreement under which SEAS will serve as the Project's designer/builder for the City and will be responsible for preparing all of the plans and specifications for the construction of the Project at a fixed, maximum cost to the City. Under such arrangement, SEAS shall furnish the necessary personnel, consultants, services, place of business, equipment and materials to design and construct the Project. The Design/Build Agreement shall be consistent with the following terms:

(a) Design Responsibilities. SEAS shall assume responsibility for the design of the Project. SEAS shall ensure that the preliminary project designs and specifications are submitted in a timely manner to appropriate City officials, including the Design Commission, for their review and comment, and that the final Project design and specifications are similarly submitted for such review and comment. Public access and use will also be a major focus of the design process for the PNA. Important public issues such as views, access on piers, and effects on surrounding properties will be carefully considered during design.

(b) SEAS Contracting Process. SEAS will retain an exhibit designer, architect, project manager, general contractor and other firms to perform the Project's construction elements. SEAS shall have sole responsibility for managing the architect, exhibit designer, general contractor, project manager and other design and construction professionals. SEAS shall be solely responsible for and have control over construction means, methods, techniques, sequences and procedures; and shall be solely responsible for coordinating all portions of the work.

(c) Permits. SEAS will be responsible for preparing permit applications and environmental documents and obtaining building permits and environmental approvals.

4.2 Budget and Drawings. SEAS will prepare more detailed construction budgets and conceptual design drawings, and submit them to the City's Superintendent of Parks and Recreation for review and comment before SEAS prepares construction drawings and specifications. SEAS will submit construction drawings and specifications to the Parks Superintendent for review and comment. SEAS and the City will develop schedules for periodic meetings during the pre-construction and construction phases of the Project to review the design and construction of the Project. SEAS will manage .and control the Project substantially in accordance with budgets and schedules and shall be responsible for all cost overruns on the Project.

4.3 Conformance to Laws. SEAS will construct the Project in accordance with all applicable codes and regulations, including the Uniform Building Code, the Americans With Disabilities Act, contracting laws, and City land use and zoning ordinances.

4.4 City to Assume "Lead Agency" Role. The City shall assume the responsibilities of a "Lead Agency" for S.E.P.A. compliance purposes related to the Project.

4.5 Performance Bond. SEAS may satisfy all requirements for public works performance bonds by obtaining a performance bond from the general construction contractor and designating the City as a coobligee.

4.6 Steering Committee. SEAS will provide regular progress reports to the City through the Department of Parks and Recreation and the Aquarium Steering Committee, comprised of representatives of SEAS and appropriate City Departments (the "Steering Committee").

4.7 Non-discrimination Policy. SEAS shall not create barriers to open and fair opportunities for women and minority owned businesses to obtain or compete for contracts and subcontracts as sources of supplies, equipment, construction and services funded through this MOU. In considering offers from and doing business with subconsultants and suppliers, SEAS shall not discriminate on the basis of race, color, creed, religion, sex, age, nationality, marital status, sexual orientation or the presence of any mental or physical disability in an otherwise qualified disabled person.

4.8 BOOST. SEAS will comply with the City's new "BOOST" program that is currently under development by the City. SEAS understands that this program may provide incentives for parties contracting with the City who provide contracts or work to economically disadvantaged businesses or individuals. The BOOST program is anticipated to be further developed over the next six months. Although the exact parameters of the BOOST program are uncertain, it is expected that it will be modeled after the federal DBE program with appropriate modifications to make the new program comply with the requirements of Initiative 200.

5. FINANCING

5.1 General. The City and SEAS understand that the financing of the PNA will come from private donations, government grants, and revenue bonds.

5.2 Fund Raising. SEAS shall be responsible for private fund raising and securing public grants from governmental agencies other than the City. SEAS intends to raise approximately $100 million from private corporate and individual donations, and approximately $36 million from governmental agencies other than the City. The City will support SEAS in these efforts by communicating the City's support for the project and making appropriate representatives available to provide information at fund raising events.

5.3 City Financial Payment. The City intends to pay $21,474,504.00, either directly or indirectly, for the construction of the PNA. The City may contribute up to $250,000 of its payment through in-kind contributions or government services that otherwise would have to be retained by and paid for by SEAS for the Project. The City will use its best efforts to pay for the Project in accordance with the schedule attached as Exhibit A. The City's payments will be contingent on certain fund raising thresholds to be described in the management and operation agreement.

In conjunction with SEAS and other parties, the City is currently pursuing State legislation to provide an additional voter-approved revenue source for parks, open space, and recreation purposes. In the event such a source is created and is approved by popular vote, the City intends to increase its payment to the PNA to $24 million.

5.4 City Financial Liability Limited to Funds Appropriated for Project: Timing for SEAS's Demonstration that Sufficient Funds Are Available for Project. The City shall not become contractually obligated to pay any Project cost unless sufficient funds have been appropriated by the City's legislative authority for the same. SEAS shall not become obligated to any person or entity for the construction of the Project until SEAS has demonstrated to the reasonable satisfaction of the City's Chief Financial Officer, as defined in the Design/Build Agreement, that SEAS has the ability to pay, when required, SEAS's share of the payments due to such person or entity.

5.5 General. As the current owner and operator of the Seattle Aquarium, a public education and research facility, the City has fiduciary obligations to assure that the entity financing, constructing and operating the PNA has the financial resources and management skills to complete the Project and operate the PNA for the public benefit. Consequently, the City's funding of the physical construction of the Project shall depend upon SEAS' meeting certain requirements for fundraising levels, board expertise, senior management and Project professionals. The following conditions do not apply to the City's financial contributions for activities that precede physical construction, but shall be met prior to the City's funding of the physical construction funding of the Project:

5.5.1 Expertise of the SEAS Board of Directors. The SEAS Board of Directors shall contain:

(a) At least five board members who are executives or senior managers of major Pacific Northwest corporations.

(b) One representative appointed by the City.

(c) Persons with expertise in accounting, architecture, business, education, management, construction, environmental consulting, law, marketing, marine biology or oceanography, and project management.

5.5.2 Project Professionals. SEAS shall have retained professionals to design, construct, finance and manage the Project. These professionals will include an architect, exhibit designer, general contractor, and project manager.

5.5.3 Chief Executive Officer. SEAS shall have hired and employed a Chief Executive Officer ("CEO"), capable of managing all aspects of the PNA's operation.

5.5.4 Pre-construction Management. SEAS shall have successfully managed and completed exhibit and building design through completion of construction drawings and preconstruction government permitting.

5.5.5 Fundraising. SEAS shall have obtained contributions, grants, secure pledges, and debt financing in the amount sufficient to pay 50 percent of the budgeted cost of construction of the project. The City and SEAS will develop a procedure for the City's verification of pledges.

5.6 Revenue Bonds. SEAS expects to issue approximately $40 million in bonds to finance the construction of the Project. The City will support SEAS' efforts to obtain this financing by providing necessary information and approvals. Revenue from the PNA will pay the principal and interest on the bond debt. SEAS use agreement for the Property and its right to revenue from the PNA will be available for SEAS to provide security for the debt. The City does not intend to guarantee any debt issued by SEAS for the Project.

6. AQUARIUM EMPLOYEES

6.1 SEAS and the City recognize the need to establish the necessary agreements with labor to facilitate the transition of employment of City employees. SEAS intends to offer employment to all regular Seattle Aquarium civil service employees for similar employment at the PNA. Also, the City will seek employment opportunities for Seattle Aquarium employees who do not want to work for SEAS.

7. ASSIGNMENT OF CONTRACTS, LICENSES AND PERMITS

7.1 After substantial completion of the PNA, the City will transfer to SEAS all transferable licenses, permits and other rights associated with the ownership of personal and intellectual property and with the management of the Seattle Aquarium.

8. DUE DILIGENCE BY SEAS

8.1 Before transfer of management of the Seattle Aquarium as provided in Section 2.2, SEAS will conduct further due diligence investigation into the operation and management of the Seattle Aquarium, including its financial records, personnel matters, contractual obligations, legal claims, insurance policies, government permits and property titles. SEAS may also conduct an engineering audit. The City will fully cooperate in SEAS' due diligence, and provide all reasonably requested information, including all financial records, contracts, leases, insurance policies, title certificates, permits and claim documents.

9. INSURANCE

9.1 The City will maintain general liability coverage insurance for the Seattle Aquarium, or assume such liability under its selfinsured policy or program, until the Seattle Aquarium is completely demolished and removed, except as provided in Section 3.1. During construction and the term of the use agreement, the City will maintain property casualty insurance for the PNA facility or cover the facility through its self-insured program.

10. FINAL AGREEMENT

10.1 Approximately one year after the execution of this MOU, the City and SEAS intend to execute agreements for the financing (master agreement), construction (design/build agreement), use, and management of the Project and the management of the Seattle Aquarium. These agreements shall contain reasonable and standard terms. In the master agreement, the City will provide standard representations and warranties regarding: (1) good standing, (2) authorization and approval, (3) ownership of assets transferred, (4) completeness and accuracy of financial statements, (5) compliance with zoning, (6) validity of assigned leases, (7) compliance with agreements, (8) no obligations or liabilities other than those disclosed, (9) absence of hazardous waste, and (10) compliance with laws. SEAS will provide representations and warranties regarding: (1) good standing, (2) authorization and approval, (3) no obligation or liabilities other than those disclosed, and (4) completeness and accuracy of financial statements.

11. NO ASSUMPTION OF LIABILITIES

11.1 By executing this MOU, the City and SEAS do not assume any obligations or liabilities of the other. In particular, SEAS does not assume any financial responsibility for or liabilities of the Seattle Aquarium, including, but not limited to, liabilities pertaining to the construction, maintenance or operation of the Seattle Aquarium; current or past obligations to aquarium employees; and any contractual obligations, including subleases. Similarly, the City does not assume any obligations, liabilities, or contracts of SEAS.

12. NATURE OF THE MEMORANDUM OF UNDERSTANDING

12.1 The parties agree and acknowledge that this is a MOU only and it is not intended and shall not be construed to create a contractual obligation or enforceable commitment on the part of either the City or SEAS. However, the City and SEAS recognize that a substantial amount of money and effort will be expended by both parties following this MOU, and therefore the parties affirm that the provisions set forth herein are the parties' best good faith statement of their respective objectives and obligations.

DATED: _______________, 2000.

CITY OF SEATTLE

By

Kenneth Bounds, Superintendent of Parks and Recreation

SEATTLE AQUARIUM SOCIETY

George Willoughby, President

291/149325.04

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291/149325.04

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