MEMORANDUM

TO: Gary Superman, Assembly President

Kenai Peninsula Borough Assembly Members

THRU: Dale Bagley, Mayor

Max Best, Planning Director

FROM: Marcus A. Mueller, Land Management Agent

DATE: January 6, 2005

SUBJECT: Resolution 2005-009, Authorizing CPGH, Inc. to enter into a three-year lease with G & G Development Company creating a debt obligation in an amount not to exceed $164,340

Central Peninsula General Hospital, Inc. is required to obtain authorization from the Kenai Peninsula Borough Assembly for capital leases that obligate the Borough, or Central Kenai Peninsula Hospital Service Area, for more than a one-year period and in excess of $100,000. The borough, or service area, shall ultimately be obligated to pay debt service due on any debt issued to the extent such debt is authorized by the Borough Assembly. Such a capital lease creates a debt obligation requiring assembly approval.

The attached resolution authorizes CPGH, Inc. to enter into a three-year lease of space with G & G Development Company. The total debt obligation is $128,340 over the three-year lease period, plus debt for renovation of the leased space. Renovation expenses of $60,000 will be paid with an initial payment of $24,000 and 36 monthly payments of $1,000. No interest will be charged for payment of the renovation expenses over time.

The term of this lease extends three months beyond the term of the Lease and Operating Agreement for CPGH between the Kenai Peninsula Borough and CPGH, Inc. This lease with G & G Development Company allows for assignment from CPGH, Inc. to the borough or a successor operator of the hospital or its programs if the agreement with the borough is not renewed, extended, or replaced.