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Attachment 1 aspects of the construction, which can be done requiring KINF to pay for a construction manager experienced with prevailing wage and other State requirements. KINF could use proceeds of the grant to cover these costs. Finally, if the grant is provided as a construction grant instead of an end grant that is provided after the Facility is completed, the City will need to submit more than one disbursement request including information requested by the State and then make payments to disburse funds as required by the grant agreement. These costs could potentially be passed along to KINF as a one-time administrative fee charged at the beginning of the project subject to approval by MMB(pursuant to the Commissioner’s Order and the Act, disbursing costs likely cannot be paid from proceeds of the grant or be included in the Use Agreement). Following construction, the City will also have to comply with annual reporting requirements including 1)the submission of an annual sworn statement that the Facility is being used to operate the governmental program; 2) certifying approval of KINF’s annual budget to MMB after conducting a review ; and 3) provide MMB with a program evaluation report In other jurisdictions, this is managed by the finance directorand costs of that work are not passed along to the nonprofit because, as discussed above, under the requirements of the Commissioner’s Order and the Act, the City can only charge KINF the costs of operation and maintenance of the Facility pursuant to the Use Agreement. Also, the City will be the grantee under the grant agreement with the State. This means that they are the party that has an agreement with the State, not KINF. As such, there likely will be other questions and items that the State needs both before, during, and after construction that may require staff time to address. POTENTIAL RISK TO THE CITY The risk to the City falls into two categories: 1) risk prior to project completion; and 2) risk following project completion. The risk of breach is highest prior to project completion. This risk can be mitigated both with contract terms that protect the City and also with hiring a good construction manager to make sure that the work is done according to specifications and that all State regulations are followed (such as prevailing wage and American made steel). In the event of a breach of some kind, the risk of the State clawing back the grant funds is low. Generally, these pre-completion issues are able to be resolved. After completion, the City’s risk is reduced and likely only arises if the governmental program is not being operated by the nonprofit. This could happen either because the nonprofit ceases to exist, or because they chose not to operate the Facility. If that were to happen, under the terms of the grant agreement with the State, the City would need to ensure that the governmental program continued to operate for the remainder of the term of the grant agreement. This could be done by the City or, more likely, by a similar nonprofitsubject to approval by MMB. If the City were unable or unwilling to continue to operate the governmental program, and the City is unable to otherwise get relief from the State, the State could seek to “claw back” the grant funds although it is unclear whether the State will require repayment fromCity if the nonprofit no longer exists. The City could also try to work with the State to allow the Facility to be used for a new governmental program. To mitigate some of the risk of the State clawing back funds due to actions of KINF, the City could include a provision in the Use Agreement stating that in the event the State issues a demand, commences an action, or tries to obtain repayment of grant funds from the City, then the City may also similarly demand, commence an action, or exercise similar remedies against KINF. 4 RS160\\1\\946530.v3 Qbhf!336!pg!494