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4.B.1. SR 06-20-2016 Request for Action To Item Number City Council 4.B.1 Agenda Section Meeting Date Prepared by Property AcquisitionJune 20, 2016Troy Adams, P.E. – ERMU General Manager Item Description Reviewed by 1437 Main Street NW, Elk River, MN Cal Portner, City Administrator Reviewed by Action Requested Approve, by motion, a resolution authorizing condemnation of land for public purposes on behalf of the Elk River Municipal Utilities Commission. Background/Discussion The Elk River Municipal Utilities Commission (ERMU) believes it is in public’s best interest to acquire the property at 1437 Main Street NW, Elk River, a property adjacent to the ERMU Field Services Facility at 1705 Main Street NW. The property is currently licensed as a rental owned by Stu and James MacGibbon, although a fire destroyed the garage, which is required by city code. Two Parcel IDs make up the property, 75-411-0220 and 75-411-0250. The property acquisition serves a public purpose as the least cost highest value option to accommodate ERMU growth needs while addressing needed environmental considerations and site security requirements. ERMU has grown significantly over the past decade due to both development in serviced communities and electric service territory expansion. In 2015, ERMU executed an electric service territory transfer agreement with Connexus Energy establishing the terms for ERMU to acquire approximately 12 square miles of additional service territory within the corporate city limits. When fully implemented, the agreement will increase customers by approximately 20% within 5 years. The communities ERMU serves expect continued growth in both residential and commercial customers especially within Elk River as the city continues developing municipally-owned industrial parks. This growth directly impacts the operational needs of ERMU. In 2015, ERMU hired Kodet Architectural Group to evaluate existing field services facility needs and develop a long-term growth plan. Kodet found the field service facility was only sized for 33% of the current needs requiring outside storage for most vehicles and inventory which is both a site security and theft concern. The site is also home to a “black-start” electric power plant under contract with Great River Energy and is bid into the Midcontinent Independent System Operator (MISO) market. Although not currently subject to the North American Reliability Corporation (NERC) Critical Infrastructure Protection security requirements, it is likely those security measures will need to be implemented. Site NERC and theft security is elevated because a neighboring home requires property access through ERMU’s property. The site also has environmental challenges located adjacent to a dam, lake, bridge, wetlands, and a steep slope to the river. To protect the waterway ERMU proposes to relocate the wetlands south of the power plant as a river buffer. The cost to level the site, relocate wetlands, and create a separated access for the adjacent property is greatly reduced with the property. The ERMU Commission authorized a property appraisal and directed General Manager Troy Adams and Vice Chair Al Nadeau to negotiate the property purchase. The parties have met four times since October 28, 2015. ERMU has offered to pay for an appraisal on behalf of the owners which has not yet been accepted. The MacGibbons had originally informed ERMU that they wanted $500,000 for the property, 323% of the appraised value. They have since lowered their asking price to $400,000, 258% of the appraised value. The Commission authorized an offer of $250,000, which is 161% of the appraised value which was rejected. The Utilities Commission believes the need for ERMU to acquire this property meets public purpose, that the owner’s asking price exceeds what is justifiable to the ERMU rate payers, and that the current offer of $250,000 is fair and justifiable. If negotiations fail, the Commission believes that condemnation is in the best interest of the public. Financial Impact There is no financial impact to the city. Costs associated with the acquisition are the responsibility of ERMU. Attachments  Overview map of 1437 Main Street NW, Elk River, MN 55330  Appraisal of 1437 Main Street NW, Elk River, MN 55330 – March 8, 2016  Draft - Elk River Municipal Utilities Offer Letter for 1437 Main Street NW, Elk River, MN 55330  Draft - City of Elk River Resolution Authorizing Condemnation of Land for Public Purposes 001-711®rBeacon"' Sherburne County, MN Overview Legend ❑ Townships Roads ❑ Plats ❑ Parcels Parcel ID 75-411-0250 Alternate ID n/a Owner Address n/a Sec/Twp/Rng 33-33-26 Class 201 -Residential )unit Property Address 1437 MAIN ST NW Acreage 1.03 ELK RIVER District ELK RIVER CITY Brief Tax Description n/a (Note: Not to be used on legal documents) Disclaimer: Every attempt has been made to ensure that the information contained on this web site is valid at the time of publication. Sherburne County reserves the right to make additions, changes, or corrections of anytime and without notice. Additionally, Sherburne County disclaims any and all liability for damages incurred directly or indirectly as a result of errors, omissions or discrepancies and is not responsible for misuse or misinterpretation. Data is updated periodically. For the most current information contact the appropriate county department. Disclaimer for St Cloud Parcels: Sherburne County information about St Cloud properties are limited to classification and value. Any questions regarding additional information please contact the City of St Cloud's assessor office. 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MacGibbon 13533 Glasgow Lane Apple Valley, Minnesota 55124 Mr. James H. MacGibbon and spouse (if any) 4976 Monmouth Road Mound, Minnesota 55364 Re: 1437 Main Street, N.W. Elk River, Minnesota Gentlemen: This letter is to formally advise you that the City of Elk River has determined that it is necessary to acquire fee title to your property located at 1437 Main Street, N.W. in Elk River and legally described on the attached Exhibit A (“Subject Property”) to expand the Elk River Municipal Utilities facilities. In order to obtain fee title to the Subject Property, the City must follow a specific procedure. An action may be filed in the District Court compelling the acquisition of fee title but as a practical and procedural first step, the City would like to offer to purchase fee title to the Subject Property directly from you. This provides an early and agreed-upon resolution for both yourselves as well as the City. Enclosed is a copy of the appraisal report prepared by independent fee appraiser John Osterman determining that the value of the Subject Property to be acquired is $155,000.00. The City offers you $250,000.00 as monetary compensation for fee title to the Subject Property. Under Minnesota law, you have the right to obtain your own appraisal and the City will reimburse you for the reasonable cost of the appraisal up to a maximum of $1,500.00. You must submit the bill and a copy of the appraisal to the City to be entitled to reimbursement. If this offer is acceptable, please let me know and I will have the necessary documents prepared for your signature. If there is a mortgage on your property, the mortgage company will need to release its mortgage from the Subject Property. Thereafter, a City check will be issued to you in the amount of $250,000.00. 187472v1 Mr. Stuart W. MacGibbon Mr. James H. MacGibbon June 15, 2016 Page Two Please contact me at 763-635-1334 or by e-mail at tadams@elkriverutilities.com. Best regards, CITY OF ELK RIVER By:___________________________ Troy Adams, P.E. Elk River Municipal Utilities General Manager TA/cjh Enclosure 187472v1 RN.2016– ESOLUTION O CITYOFELKRIVER SHERBURNECOUNTY RESOLUTION AUTHORIZING CONDEMNATION OF LAND FOR PUBLIC PURPOSES WHEREAS, Elk River Municipal Utilities (ERMU) has had significant growth over the last decade in the number of communities it services and in its electric service territory; and WHEREAS, in 2015, ERMU executed an electric service territory transfer agreement with Connexus Energy which establishes the terms for ERMU to acquire approximately 12 square miles of additional electric service territory within the City of Elk River from Connexus. When fully implemented this agreement is expected to result in an approximately 20 percent increase in customers within a five-year period; and WHEREAS, it is anticipated that the communities ERMU serves will see growth in both residential and commercial customers directly impacting the operational needs of ERMU; and WHEREAS, ERMU’s existing facility at 1705 Main Street Elk River is only sized for 33 percent of its current needs requiring ERMU to store vehicles and equipment outside which is a security and theft concern; and WHEREAS, ERMU’s existing facility is located near a dam, lake, river, and wetlands. To better protect the waterway it has been proposed ERMU relocate the wetlands on the site to the south of the power plant as a buffer to the river; and WHEREAS, ERMU has a need to acquire the property described on attached Exhibit “A” to accommodate growth needs and address needed environmental considerations and site security requirements; and WHEREAS, the City Council of the City of Elk River does hereby determine that it is necessary and for a public use and purpose to acquire the property legally described on the attached Exhibit "A", subject to engineering modifications, if any, for municipal electric utility purposes; and WHEREAS, City staff and consultants have and will continue to work with the property owners to acquire the necessary easements and/or fee title; and WHEREAS, the City Council finds it necessary to acquire title to and possession of the property as soon as possible in order to proceed in an efficient, cost effective and expeditious manner. NOW, THEREFORE, be it resolved by the City Council of the City of Elk River, Minnesota: 1 187464v1 1. That the City Attorney is authorized to commence eminent domain proceedings pursuant to Minnesota Statutes Chapter 117 to acquire the necessary easements and/or fee title identified on the attached Exhibit "A", subject to engineering modifications, if needed. 2. That the City Attorney is authorized to acquire the necessary property interests pursuant to the “quick take” provisions of Minnesota Statutes Section 117.042. 3. That the Mayor and the City Clerk are authorized to execute all documents necessary, in the opinion of the City Attorney, to effect the acquisition of the necessary property interests. 4. The City is obtaining appraisals of the property being acquired. The Council hereby authorizes the City Administrator to approve the appraisals and staff to negotiate with the property owners relating to the acquisition of the property and to acquire the property for the appraised values. th ADOPTED this 20 day of June, 2016, by the City Council of the City of Elk River, Minnesota. CITY OF ELK RIVER BY: _______________________________ John J. Dietz, Mayor ATTEST: ______________________________ Tina Allard, City Clerk 2 187464v1 EXHIBIT “A” Lots 5, 6, 7 and 8, Block 2, Auditor’s Addition to the Village of Elk River, according to the plat thereof on file and of record in the office of the County Recorder, Sherburne County, Minnesota. 3 187464v1 ķƩğǞźƓŭ źƭ ğ ĭƚƒƦźƌğƷźƚƓ ƚŅ ƩĻĭƚƩķƭͲ źƓŅƚƩƒğƷźƚƓͲ ğƓķ ķğƷğ ƌƚĭğƷĻķ źƓ ǝğƩźƚǒƭ ĭźƷǤͲ ĭƚǒƓƷǤͲ ğƓķ ƭƷğƷĻ ƚŅŅźĭĻƭͲ ğƓķ ƚƷŷĻƩ ƭƚǒƩĭĻƭ ğŅŅĻĭƷźƓŭ ƷŷĻ ğƩĻğ ƭŷƚǞƓͲ ğƓķ źƭ Ʒƚ ĬĻ ǒƭĻķ ŅƚƩ ŷźƭ ķƩğǞźƓŭ źƭ ƓĻźƷŷĻƩ ğ ƌĻŭğƌƌǤ ƩĻĭƚƩķĻķ ƒğƦ ƓƚƩ ğ ƩĻŅĻƩĻƓĭĻ ƦǒƩƦƚƭĻƭ ƚƓƌǤ͵ ŷĻ /źƷǤ ƚŅ 9ƌƉ wźǝĻƩ źƭ ƓƚƷ ƩĻƭƦƚƓƭźĬƌĻ ŅƚƩ ğƓǤ źƓğĭĭǒƩğĭźĻƭ ŷĻƩĻźƓ ĭƚƓƷğźƓĻķ͵ ƭǒƩǝĻǤ ğƓķ źƭ ƓƚƷ źƓƷĻƓķĻķ Ʒƚ ĬĻ ǒƭĻķ ğƭ ƚƓĻ͵ ŷźƭ Urban Service Area Parcels (4-1-2016) АЎΏЍЊЊΏЉЋЋЉ ε Park Areas City Limits АЎΏЍЊЊΏЉЋЎЉ \[ĻŭĻƓķ 5źƭĭƌğźƒĻƩʹ 108.1 ЏΉЊЏΉЋЉЊЏ ЌʹЋЋ ta CĻĻƷ λ .ƚƌƷƚƓ ε aĻƓƉͲ LƓĭ Ώ ‘ĻĬ DL{ АЏ Љ