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11-12-1991 ERMU MIN ELK RIVER MUNICIPAL UTILITIES 322 King Avenue Elk River, Minnesota 55330 Phone (612) 441-2020 UTILITIES COMMISSION MINUTES November 12 , 1991 4 : 00 P.M. Present Were: Jim Simpson President James Tralle Vice Chairman George Zabee Trustee Bill Birrenkott General Manager Others Present: Glenn Sundeen Bob McCartney Duane Kropuenske Roger Holmgren Pat Klaers 1) The meeting was called to order at 4 : 00 P.M. by President Simpson. 2) Motion by Mr. Zabee seconded by Mr. Simpson to approve the agenda. The motion carried. 3) Motion by Mr. Zabee, seconded by Mr. Simpson to approve the minutes of the previous meeting as distributed. The motion carried. 4) Pat Klaers and Duane Kropuenske, representing the City of Elk Rivers presented the Commission with a proposal for the Utilities to participate in the purchase of the remaining lots in the Industrial Park. It was requested that the Utilities participate in the amount of $55, 000. Mr. Zabee indicated his concern that this will not put the financial position of the Utilities in cash jeopardy in light of the construction of a new substation and the acquisition of territory from Anoka Electric Cooperative. The General Manager indicated that, at this time, not enough was known about the acquisition costs, however, it was anticipated that this would not cause a problem. Motion by Mr. Zabee, seconded by Mr. Tralle, to loan $55, 000 at no interest towards the purchase of property in the Industrial Park to be purchased by the City of Elk River from Elk River Associated Investors Inc. This motion is contingent on the agreement that future proceeds from the sale of this property will be repaid to the Utilities on a pro-rated basis to the Elk River Municipal Utilities, City Capital Projects Fund, and the City Equipment Reserves Fund. The motion carried unanimously. 5) Bob McCartney reported on the status of projects in the Water Department. 6) The Line Superintendent reported on the status of construction projects and other operating conditions. 7) The General Manager reviewed the September and October financial statements with the Commissioners. 8) The December meeting was set for Tuesday, December 10, 1991 at the Utilities office. 14) Motion by Mr. Zabee, seconded by Mr. Tralle to adjourn. The motion carried. Meeting adjourned at 5: 45 P.M. Bill Birrenkott General Manager - • -, • . • - ' . .. . . . ( / Industrial Sites in .t. City ofiv Elk River, Minnesota Elk e River A Profile of the Elk River Industrial Park \ \ 1 4....„.............. ...... ,:f.:.. ..'7.-.9... 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" -v, • Iflaci .utra.11 Park ,,..\ ss, ELK RIVER ASSOCIATED INVESTORS,INC. . _ LEGEND i''::::::••••••••'-';:- SOLD „ss ss ITEM 5.2__ Cicy or N. Elk River TO: MAYOR AND CITY COUNCIL FROM: PATRICK KLAERS , CITY ADMINI 1� � _ • DATE: OCTOBER 31 , 1991 SUBJECT: INDUSTRIAL PARK FUNDING . INTRODUCTION Over the past ten years, the City Council has periodically discussed the purchase of the Industrial Park from the Elk River Associated Investors . Serious discussions on this issue again took place during the summer of 1991 . Recently, on 10/17/91 the City Council decided on a 3-2 vote to purchase all • of the remaining parcels in the Elk River Industrial Park from • the Elk River Associated Investors . The price for this purchase is $210,000 for seven lots , plus $50,000 for the lot that is to be used for recreation fields . Funding for this $50 ,000 lot has already been agreed upon by the City Council . The issue before the City Council is how to finance the $210 ,000 purchase for industrial lots . BACKGROUND The City staff has previously suggested that one possible way to finance the $210 ,000 Industrial Park purchase is to use the following sources : $110 ,000 - City Liquor Store Reserves $ 55 ,000 - Loan from City Revolving Loan Fund • . • $ 20,000 - City Capital Projects Reserve Fund • $ 25, 000 - City Equipment Reserve Fund - Undesignated • On 10/17/91 when the City Council decided to move forward with this purchase, staff heard some concerns regarding the use of $55 , 000 from the City Revolving Loan fund. Concerns were expressed regarding how the use of these funds could limit the flexibility of our economic development endeavors . This concern was expressed in spite of the fact that when the purchase takes place , the Elk River Associated Investors will be contributing $39 ,000 into the Revolving Loan fund based on a previous agreement . At the 10/17/91 meeting, staff was requested to provide the Council with a "laundry list" of possible funding sources for this land purchase . At this time, it appears that there are very few additional sources of funds available for this purchase . Staff has a limited number of options to present to the City Council . To begin, it would appropriate that the FDA, who ultimately will be the owner of the property and the group responsible 720 Dodge Avenue N.W., EIk River, Minnesota 55330 (612) 441-7420 a HOWARD LAWRENCE APPRAISALS INC. THE APPRAISAL ASSIGNMENT The market value appraisal of eight vacant lots in the Elk River Industrial Park both as eight parcels in separate transactions and as a combination of all eight parcels in a single transaction. It is noted that the Park has a special market with a history of sales and asking prices which can be used as a proper guide to value estimates. The assigned market values assume that all costs for utilities , street improvements and any remaining special assessments are paid in full . All sites are zoned I1 - Light Industrial • Subsoil testing should be accomplished in the first subdivision. There are obvious high water table, swamp and soft subsoils. z. Seller Agent, Mr. Richard Gongoll , reports that in 1989-90 Lots 7 and 8 in the original plat were tested by a prospective buyer; a bid to correct subsoil problems was about • $85 , 000. Buyer did not bid further on th'e purchase of the lots. • VALUE ESTIMATES (Eight Separate Transactions ) MARKETING, OWNERS SUBSOIL & VALUE AS A ACREAGE TERRAIN VALUE SEPARATE SIZE CONDITIONS PER ACRE PARCEL Elk River Industrial Park Lot 1 2 . 11 Sound; dry; $25 ,000 $ 52 , 750 short holding time Lot 4 3 . 69 Peat; wet 1 ,000 3 , 690 ponded water; any use questionable Lot 6 16 .43 Some peat; 2,000 32 , 860 s some wet; some high Lot 7 3 . 28 Some peat; 10,000 32 , 800 I some sound; longer holding i time . Lot 8 4 . 67 Some peat; 10 ,000 46 , 700 some sound; some excess dirt in pile ; longer holding time. Elk River Industrial Park 2nd Addn. Lot 1 2 . 84 Sound ; level ; 25 ,000 71 , 000 short holding time 1 Lot 2 2 . 75 Sound ; level ; 25 , 000 68 , 750 short holding time 1 Lot 3 2 . 25 Sound ; level ; 25 , 000 56 , 250 short holding time TOTAL - AS EIGHT SEPARATE TRANSACTIONS $364 , 800 I • a 1 1 HOWARD LAWRENCE APPRAISALS INC. VALUE ESTIMATES (All Eight Sites in a Single Transaction) 1 On page a, a value for each of the eight lots , in eight separate transactions, was assigned. In assigning the following value, it is assumed that all eight lots are sold in a single transaction. Effectively, the buyer becomes the investor in an eight lot marketing enterprise. The buyer must I discount the "retail" values/selling prices of the eight lots as eight separate transactions. The discounting must reflect the owner's selling costs and likely extended holding costs until all eight lots are sold. An "eight lot" transaction is-41 an unusual real estate opportunity which would find a very limited market. Such an investor-buyer would :. / negotiate aggressively. There is no reliable body of market information to be used as a guide to value on such a unique transaction. A land subdivider/developer z might be considered as a prospective buyer willing to undertake the 11 1 acquisition of the "as is" , "eight lot" transaction. We judge that a discount of 25% is reasonable to attract a sale . ESTIMATED VALUE OF THE "EIGHT LOTS" IN A SINGLE TRANSACTION $364, 800 ( from page a) x 75% ( 25% discount ) = $273 , 600 1 i 1 . w 3 •. s 4 l 4 I S X I 4. I I •. ' ..:•" • .. v4.6t_ea / = 2.// - es-- er'o = sAsa g- 1 - 3.6 ‘6.c. s0-tro = l ysa -fr /6. )13a.a . 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