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10.2. SR 02-06-2017City of Elk — River Request for Action To Item Number Mayor and City Council 10.2 Agenda Section Meeting Date Prepared by Work Session February 6, 2017 Cal Portner, City Administrator Item Description Reviewed by Spectrum School Expansion Zack Carlton, Planning Manager Reviewed by Action Requested Provide staff direction. Background/Discussion In September of 2016, Council directed staff to seek options for Spectrum School to expand their programs to meet demands for school enrollment. Spectrum currently has ownership of two buildings in the Northstar Business Park, which is a legal use. Because they have outstanding bonds for the purchase if their existing facilities, they have little means to capitalize their operation and move entirely to a new location. They currently have bonding capacity to purchase more space in the Northstar Business Park and it would be a legal use with a Conditional Use Permit. Spectrum also has access to a state grant to offset their planned expansion. They are concerned about increasing interest rates that may decrease their bonding capacity as they seek further solutions. The Council has long held a goal to increase the city tax base and has invested in city -developed business parks to meet the goal. While Spectrum has paid a Payment in Lieu of Fees/Taxes for the four years following the purchase of each of their current facilities, they are under no obligation to continue to make payment when their existing agreements expire. Since the January meeting in which the Council expressed consensus to not sell a city -owned lot that has a number of easement encumbrances and is not on the tax roll, the city and Spectrum have been made aware of a handful of potential sites for sale. In each case, the location, price and/or developable size of the properties does not match their needs. At this time, staff has exhausted all conceivable opportunities and recommends Spectrum proceed with the option they are most comfortable with which will be approved/not approved by the Council. The Council should also provide direction regarding a change to future uses in business parks to remove institutions as a conditional use. Financial Impact N/A Attachments ■ N/A P a w E A E U a r NaA f RE] February 6, 2017 Cal Portner Elk River City Manager 13065 Orono Parkway Elk River, MN 55330 Dear Mr. Portner, 17796 Industrial Circle NW, Elk River, MN 55330 Phone: (&763) 241-8703 Fax: (763) 663-1380 www.specturmhighschool.org This letter is intended as a follow up to the December 19, 2016 City Council meeting. As you know, Spectrum has had active discussions with the City since August 2016 about our desire to expand facilities within the Business Park. Spectrum's first plan involved expanding within the remainder of the building in which Spectrum's sixth grade facility is located. After careful consideration and planning, including discussions with City staff, Spectrum applied for a conditional use permit (CUP) for this building. We were surprised to receive a negative response toward this plan at the Planning and Zoning Commission meeting in December. Based on that response, as well as new information presented to Spectrum from City staff about possible land south of our existing high school building being donated to the school, Spectrum withdrew that CUP application. As we explore other alternatives, we at Spectrum feel it is helpful to remind you of the dimensions of our expansion needs. Charter schools have limited funds for facilities. Unlike traditional school districts, charter schools cannot use the levy process to raise additional funds. Spectrum has invested substantially into its existing facilities in the Business Park, in reliance on the willingness of the City to grant CUP's to Spectrum. Spectrum has identified an expansion site within the Business Park: the building and land located at 17823 Industrial Circle, directly east from the high school across Industrial Circle (between the high school and the existing 6th grade). This site would work for Spectrum's expansion of its 7th and 8th grades and would fit within Spectrum's budget. We believe we could configure Spectrum's use of that site in a manner that would also improve traffic flow on Industrial Circle. Spectrum is ready to proceed with this plan if it can receive a CUP for the property. Spectrum is mindful of comments from some who not only oppose any expansion of Spectrum within the Business Park, but actively desire Spectrum to reduce its footprint within the Business Park. Spectrum is willing to accommodate that desire and pursue construction of a second facility on another site, coupled with vacating the existing sixth grade facility. However, any such option increases the cost to Spectrum to a level that is substantially beyond Spectrum's ability to pay. To make any other option work, Spectrum would have to sell its existing sixth grade facility for at least $4 million. We are not aware of any market opportunity to sell the sixth grade site for that price. Therefore, to make any off-site option viable, the City will need, at a minimum, to participate in a solution that purchases the sixth grade facility from Spectrum for approximately $4 million. Page 1 of 3 As to new site options, at the request of City Staff, Spectrum initially focused it's planning efforts on the land to the south of the high school. However, as you know, the EDA and City Council expressed reluctance to donate the proposed land. Further, that land offers substantial challenges with respect to school bus ingress and egress as well as acquiring land to connect the site to the current high school site. Thus, City Council directed City staff to pursue other land options within the City of Elk River for Spectrum to be located outside of the Business Park and bring those options back to the Council for the February 6 work session. Since that time, and in preparation for the upcoming February 6 City Council work session, Spectrum has pursued the two leads presented to us by City Staff. The first was a parcel of land located to the south east of the Business Park, off of Twin Lakes Road, owned by a private party. We met with the land owner of the 12.5 acre parcel. There were numerous reasons the land cannot work for the school. There are only 7.25 buildable acres and the owner is asking $1.3M for the property. This information was conveyed to City at the time. The second land owner that approached Spectrum was for property located in close proximity to Twin Lakes Elementary School off of Cleveland Street NW. While the developer has 50 acres and is open to selling land to the school, the price tag is $30,000/acre, which is well outside of Spectrum's ability to pay. In addition to the excessive price of the land in both cases, the school is not in a position to build a new building without a sale of the sixth grade facility that recoups Spectrum's investment in that facility, as discussed above. As the City Council work session is rapidly approaching, we want to communicate what the school feels would meet our needs and allow us to realize the return on our investment. The option of having land donated to the school in close proximity to the high school facility is appealing. However, in order for the school to pursue this as an option, we would need to have at least the following in place: 1. Assurance of traffic access through the Business Park for both entering and exiting at the southernmost intersection of Twin Lakes Road and 175th Avenue NW; 2. Assurance that a sufficient access point is established between the current high school property and the 13 acres; 3. Assurance that the City will seek out a buyer or purchase the current Spectrum 6th grade facility, with a current price tag of approximately $4M. This is necessary in order for the school to have sufficient funds to build a new facility; and 4. Assurance that the land will be free or very low cost in order for the school to be able to afford building a brand-new facility. In light of the necessary assurances with the 13 acre parcel, the school believes the best option moving forward will be for the City to approve a CUP for Spectrum to purchase the building and property located at 17823 Industrial Circle NW, Elk River, Minnesota, currently owned by CPE Exchange 26404, LLC. Spectrum believes this would be the best option for the following reasons: 1. The building is currently unoccupied, therefore not displacing any current businesses; 2. The seller is interested in selling the building to the school at this time; 3. The building is in close proximity to both the 6th grade and high school buildings; 4. The open space on the southern portion of the parcel is perfectly located to provide the needed additional field space for the middle school; 5. The open space can also allow for additional parking and bus staging to address current and future traffic flow within the Business Park; 6. The open space can potential provide space for sidewalks and a cross walk — increasing safety within the Business Park; and 7. Since it is a current structure and would not require the purchase of additional land, it is an affordable option for reaching out intended growth target. Spectrum is grateful for the work of the staff and Council in seeking solutions for Spectrum's expansion needs. We are also thankful for the recognition by City staff, the Planning and Zoning Commission, and the City Council of Spectrum as a high quality public school option in the City of Elk River. We look forward to continuing our work with the City. Sincerely, Dan DeBruyn Vanessta Spark Rick Peterson Incoming Executive Outgoing Executive Facilities Director Director Director