SIOUX CITY — The operator of the Sioux City Marina has denied the city's claims that it is not fulfilling terms of its lease and has countersued the city for breach of contract.
In an answer to the city's earlier lawsuit, River City Hospitality said the city seeks to take possession of the company's property at the marina without due process or reasonable compensation and is in breach of contract because it has not honored River City's termination of a lease provision the company has cited in its decision to keep the marina and the Jolly's on the River bar closed this summer.
"The city has breached its obligations to RCH under the ground lease by failing to accept RCH's invocation of Article 17 of the lease," RCH said in its response and countersuit, filed Tuesday.
River City, of Sioux Falls, has asked a judge to dismiss the city's lawsuit, provide an interpretation of the disputed section of the lease and order the city to pay for damages and its attorney fees.
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The city sued RCH last month for breach of contract, saying RCH improperly terminated its lease, and asked for an injunction to allow it on the property so it can make improvements and open the riverfront facility and Jolly's on the River this summer. A hearing on the injunction request is set for June 28 in Woodbury County District Court.
The dispute centers on Article 17 of the lease between Sioux City and RCH, which earlier this year notified the city in February it was exercising the article that allows it to automatically modify the lease, including abatement of rent and property taxes, if Missouri River water flow is "materially altered or materially lessened," making it difficult for RCH to maintain marina facilities. RHC publicly announced in March it would not open the bar and marina this year because of low water levels, due in part to a pattern of drought and years of silt buildup.
The boat slips at the Sioux City Marina are shown in March. The operator has filed a countersuit against the city over the marina's closure th…
Paul Hegg, president and CEO of Hegg Companies, which is affiliated with River City Hospitality and manages the marina, told The Journal in April the silt buildup, which requires annual dredging, has taken a toll on the 225-slip marina, and years of lower water levels have caused damage to the dock infrastructure. He said approximately 20% of the marina's boat slips are unusable because of silt buildup.
The city contends the issues RCH cites are not a material lessening or alteration of the river, but instead are routine maintenance issues that fall under River's City's obligations contained in the lease agreement. The city argued River City does not have the option to terminate the marina portion of the lease.
The city said in its lawsuit it is willing to perform dredging and other work in an effort to open it and Jolly's on the River yet this year but is unable to do so because River City has locked the marina entrance.
In its response to the city's injunction request, RCH said it met periodically with city officials since April 2023 to discuss a long-term strategy for the marina and informed the city it was likely to invoke Article 17 of its lease. RCH said the city had agreed to a plan to beautify the area once the marina was closed and had provided RCH with a list of recommended contractors.
During a Feb. 1 meeting with city manager Bob Padmore and parks and recreation director Matt Salvatore, Hegg informed them RCH would be invoking Article 17. RCH said in its response that city officials did not respond to subsequent in-person meeting requests and a memo outlining a proposed plan to address the marina issues. Instead, HCH said, the city launched a "public smear campaign," accusing RCH of blindsiding the city with its decision not to open the marina and deceiving the public about water levels.
RCH said it has sought to resolve the dispute with the city, "but the city has made it clear that, more than anything else, at all costs, the marina must open whether RCH agrees or not, and RCH must bear the consequences of the impacts caused by the material changes in the Missouri River's access and flow."
The city has leased the marina property to private operators for more than 20 years, and the lease includes the marina, Jolly's on the River and the Hilton Garden Inn and Crave restaurant next to the marina.