EDA tables Westridge lease agreement
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NEW ULM -- The New Ulm Economic Development Authority is attempting to work out a lease agreement for the Westridge day care building, but insurance coverage is proving a challenge.
Last year, the New Ulm Economic Development Authority (EDA) purchased a property at 1314 Westridge Road to create a facility to operate a pod model day care to alleviate the pressure of the day care shortage in New Ulm. The building, now called Westridge Place, has space to accommodate four private day care providers.
Construction crews started interior renovation to the building on June 5. The goal is to have the building ready for day care providers by the fall. Before the EDA can begin to lease out space in the day care, a lease agreement is needed.
The EDA reviewed an initial draft of the lease agreement Tuesday and learned each tenant would need to pay $2,400 in insurance coverage to operate at Westridge Place.
Board member Michelle Markgraf was concerned that even with low rents, the providers would be incurring significant expense based on insurance.
Tom Furth, insurance agent for EDA and New Ulm, helped draft the insurance portion of the lease. He said the insurance requirement place on Westridge Place was likely higher than the average in-home day care, but that because many in-homes are not fully covered.
"A lot of the in-home day cares think their home owners insurance is covering their day care and it is not," Furth said.
Some insurance companies will insure a home with a day care, but are not necessarily insuring the business.
"This is going to come as quite a shock to a lot of them who thought their coverage was included," he said.
Those leasing space at Westridge Place will need to provide certificates showing commercial general liability insurance coverage of $1 million per occurrence with an umbrella policy of a $2 million.
Furth said the reason coverage needs to be this high is because New Ulm's insurance does not cover day cares. The League of Minnesota Cities (LMC) does want cities covering child care facilities. In the event of a claim against Westridge Place, the city could be held liable if the tenants are not properly covered.
Furth asked for higher insurance requirements because if a tenant does not have sufficient insurance after a child is injured, the insurance companies will come after the city as the owner of the building.
Furth also recommended waiver of subrogation. This means if a tenant's insurance company pays out a claim, the company cannot recover fees from the city.
"It is in the city's best interest to isolate liability to the day cares," Furth said. In the event that 10 children are injured in a fire, and all parents file a lawsuit, the $2 million umbrella coverage will likely not covered all the personal damages and it could come back on the city.
There are other insurance requirements that could be eliminated from the requirements based on restrictions. The dog and cat bit liability might not be needed if animals are restricted. Water liability could be removed if water activities are restricted.
Board member Les Schultz said in the event the leasing fee is too high, the EDA could subsidized a portion of the cost.
Furth suggested subsidizing the rent rather than the insurance. EDA could drop the rent cost lower.
Currently, the monthly rent for tenants is set at $300 for the first floor spaces and $200 for the lower level spaces.Housing Coordinator Heather Bregel said space rental was kept below market rate to allow providers to have a financial feasible business. Bregel said she worked with First Children Finance to make sure fees worked for providers.
Schultz made a motion to table the lease agreement to seek more information.
Bregel said staff could work with the city attorney on revisions and bring in back for approval in July. If the lease agreement cannot be approved during the July meeting, the EDA could hold a special meeting before August.
The renovations on Westridge Place are scheduled to be complete by August. The EDA want to begin leasing space in the building by September and have daycares operating in it by October.