Chateau lawsuit cost Rochester nearly $800,000

Dec. 11—ROCHESTER — The cost of a

jury verdict related to a short-lived Chateau Theatre operations agreement

will deplete Rochester's remaining 2023 contingency fund and dip into an existing tax abatement fund.

In September, a seven-member jury determined the city of Rochester breached a 2019 agreement with St. Paul-based Exhibits Development Group, the former operator of the Chateau Theatre. The result was an award of $335,137 in damages.

Last month, Olmsted County District Court Judge Lisa Hayne

added $300,000 in attorney fees

to cover a portion of EDG's reported costs for going to court.

The former Chateau operator originally requested up to $19 million in damages, which it reduced to $3.1 million during the trial, and EDG's legal expenses were reported at nearly $463,000.

On top of the $635,137 to be paid to EDG and its attorneys from the Minneapolis-based law firm Maslon LLP, the city must pay a $100,000 deductible for the services of Justin Templin of the Eden Prairie-based law firm Hoff Barry PA, who defended the city in court.

Templin was paid through the League of Minnesota Cities Insurance Trust, which requires the city to pay a deductible related to the covered expenses.

The council approved spending up to $800,000 on the related court costs to account for potential interest costs related to the payments.

The city has nearly $662,000 remaining in its contingency fund, which started with $1 million at the beginning of the year.

The additional funds needed to cover costs will come from remaining downtown tax abatement reserves, which is a fund that can be used in the downtown core. The fund has nearly $10.8 million remaining to address other downtown-related expenses in the future.

The Rochester City Council voted 6-1 to approve the court-related expenses Monday.

"I think we should find another means to pay for this unfortunate event," council member Molly Dennis said in casting the sole opposing vote, adding that she thinks there are better uses for the contingency funds.

City Administrator Alison Zelms said it wouldn't be possible to use the funds for something else, since Monday was the final council meeting of the year and any remaining contingency funds would go to reserves under the 2024 budget.

"There aren't additional contingency items that could come forward," she told the council.

The allocation of funds to cover court costs, settles the former contract for operation of the Chateau.

The historic building is currently operated by Rochester-based Threshold Arts, which signed a a renewable three-year operating agreement with the city in 2022.

In other city business, the council:

* Authorized

participation in pending settlements

related to Perflouroalkyl and Polyflouroalkyl Substances, also known as PFAS or Forever Chemicals. The city will engage two law firms — Lockridge Grindal Nauen PLLP and Napoli Shkolnic PLLC — to represent it.

* Approved appointing Brian Anderson as the city's new finance director. Anderson will replace

Dale Martinson, who retired earlier this year

.