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7.2 SR 12-18-1995MEMORANDUM ver' TO: Mayor and City Council FROM: Pat Klaers J I\ DATE: December 18, 1995 SUBJECT: Cass Property ITEM 7.2. Attached for your review is the October 30, 1995 memo regarding the Cass property that I have previously provided to the City Council. The attachments to this October 30, 1995 memo are not included, but are available upon request. The Planning Commission reviewed this land purchase proposal at its November 26, 1995 meeting and recommended approval. The Council should be familiar with this land purchase proposal as it has been discussed at a number of Council meetings. A brief presentation is scheduled for the December 18, 1995 meeting and staff will be available to answer questions from the public or the Council. The proposed purchase is approximately 115 acres at $2,650 acres per acre. The land is to be used for recreation purposes, WWTP sludge purposes and the balance will be sold for single family home sites. In the future (15 or 20 years from now) the WWTP sludge land is scheduled to be converted into recreation fields. Staff recommends approval of the land purchase from Mr. Cass s:\council\pincass.doc 13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • (612) 441-7420 • Fax: (612) 441-7425 P MEMORANDUM ver TO: Mayor & City Council FROM: Pat Klaers, City Administrator DATE: October 30, 1995 SUBJECT: Cass Property The city has had a long-standing goal of obtaining land and developing an active recreation field complex. The focus has mainly been on youth fields for soccer and baseball, but the need also includes adult softball. Another different goal of the city that relates to this proposal is the ultimate need to obtain more land for the disposal of Wastewater Treatment Plant (WWTP) sludge material. The city has been looking for suitable land for the development of youth recreation fields for a number of years and the city has basically been unsuccessful in its attempts to locate available land. In the last year or so, the Jack Cass property has become available, and this land appears to meet our needs for the future development of youth recreation fields and for providing additional land for the disposal of WWTP sludge. The property under evaluation is 115.65 acres in the southeast part of the community. This land is directly south of the 120 acres that the city obtained a few years ago for the disposal of WWTP sludge. It is believed that this site will be outside of the ultimate city sewer and water district and that Elk River municipal utilities may very well never reach this property. (Please see the attached maps.) The City Council reviewed this proposed land purchase at its 9/25/95 meeting and directed me to pursue a purchase agreement for its consideration. The proposed purchase agreement calls for the land to be purchased for $2650 per acre or $306,472.50. This price is 6 percent higher than the $2500 per acre market value opinion that is in the appraisal that the city had completed for this property. This price is also about 2.47 percent above the average of the adjusted sales rate of $2586 per acre that was used to determine the recommended value. This appraisal was completed by Riverside Appraisals in July, 1995. I had very little chance of getting Mr. Cass to accept the $2500 per acre amount, but I believed I had a reasonable chance to get Mr. Cass to accept 13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • (612) 441-7420 • Fax: (612) 441-7425 Cass Property Page 2 October 30, 1995 the $2586 per acre amount. This belief was in spite of the fact that Mr. Cass had offered the land to the city for $2650 per acre which was substantially lower than his original price of $3000 per acre. I was not successful in getting Mr. Cass to agree with our logic and accept the $2588 per acre amount, but I was successful in arranging an appropriate timing for payment of the property. Under the terms of the purchase agreement, the city will pay $10,000 earnest money in October (50 percent returnable if the project is not approved), an additional $50,000 at the end of December, 1995, and the balance of approximately $246,500 to be paid on March 15, 1996. The payment of the balance in March, with zero interest, will make the city a few thousand dollars based on the interest revenue we will derive from our investments on a quarter of a million dollars. Interest revenue for three months is roughly half the difference between the $2650 asking price and the $2586 average sales rate that was identified in the appraisal. In general terms, the city hopes to use approximately 25 acres of the site for the development of youth recreation fields and parking areas in the next few years. The fields would be located on the northwestern side of the property. This area is somewhat limited due to the location of the wetlands and the abandoned judicial ditch No. 1. Nonetheless, we should be able to get at least four soccer fields, four youth baseball fields, and parking space into this area. Also in 1996, we plan to designate approximately 40 acres of the site for WWTP sludge disposal. Due again to the location of the wetlands and the abandoned judicial ditch No. 1., 30 of this 40 acres would be usable for disposal of sludge. This area is located in the southwest part of the property. Once this area has been fully utilized for sludge disposal, the land would then become available for the development of recreation fields. This would happen in about 15 to 20 years. Finally, most of the balance of the property in the northeastern part of the site is proposed to be platted and put on the market for single family home sites. This area is less usable for sludge purposes or recreation field purposes, and it is believed that residential sites could be marketed and sold in order to recapture some of the original purchase price of the property. (Only the north central part of this future residential area could be used for recreation fields if the approach to market residential sites is rejected by the City Council.) The balance of the property, approximately 10 acres south and east of the recreation fields, would be retained by the city as wetlands. If this project moves forward, approximately eight recreational fields will immediately be developed. Additionally, sludge land is available for eight more fields in 15 to 20 years. Finally, there is sludge land immediately north of this site that also will have reached its maximum usage in 15 or 20 years that also could then be developed into recreation fields. This availability of land could give the city an active athletic complex of approximately 25 fields that could meet our long term needs as a community. Again, this area would Cass Property October 30, 1995 Page 3 be outside of the city sewer and water district and therefore would not be taking prime real estate out of the tax base. An additional note about this area is that the draft long range transportation plan calls for a north/south connector in the Jarvis and 165th location to hook up to Fillmore at 175th Avenue and eventually to County Road 12 and 13. This north/south link would make this area of the community much more easily accessible to all of our residents. If this approach for use of this property is accepted by the City Council, it is planned that the city would finance this purchase with WWTP funds, revenue from the future residential sites, and park dedication monies. Since the WWTP is going to use approximately 40 acres of the land for sludge purposes for 15 to 20 years, this department would pay the going rate or about $107,700 for this property. The city would then have to use some internal funds to finance the balance of the purchase, but would hope to recapture most of this approximately $200,000 through the selling of some residential building sites. An opinion by local real estate agent Mel Beaudry indicates that the city could recapture approximately $200,000 through the selling of six residential properties. This would be an approximately 7 acre residential site in the corner of Joplin and 165th, an approximately 14 acre site immediately south of this property, and for residential sites of approximately 4 acres each along 165th, immediately west of the 7 acre site. All of these residential sites would touch on the abandoned judicial ditch and wetlands area and therefore limits the usability of this property for city purposes. Please see the attached letter from Mr. Beaudry dated 8/28/95, and please note that the estimates for lot sizes are low as the total residential area exceeds 40 acres. With the selling of some land for residential lots and the funding from the WWTP, it appears that the city will recapture most of its purchase price. It may not recapture all of the expenses related to this project due to the cost to plat the property, sell the land, the environmental analysis, soil surveys, etc., and other work that has been and will need to be completed. Nonetheless, the actual outlay from the city's park dedication fund will be somewhat small for the obtaining of land for the development of recreation fields. The expenses related to the development of the recreation fields is another issue that needs to be explored and analyzed in detail if this project is to move forward. It is assumed that some of the development activities would be contracted out while some of the other development work would be completed by our city park and street crew. The funding for the development of the fields would have to come mainly from the park dedication fund, but could also come from the youth organizations that would be utilizing the fields. Cass Property October 30, 1995 Page 4 The city has had soil borings and the soil analyzed for the future building sites and every indication is that the six building sites are suitable for the construction of a home. The city has an appraisal and real estate opinion completed for this property. The city has a recommendation from the Park and Recreation Commission from its 4/19/95 meeting that supports this purchase. The city has had a wetlands analysis completed which shows that any wetlands impacted by this project can be mitigated on site. The city has had a phase one and phase two environmental audit completed for this property and it appears that there are no contaminants or environmental issues that would restrict the city's use of this property. It should be noted that the city will request the residential lots to have deep wells constructed in order to minimize the nitrates that are in the soils from years and years of farming this area. The City Council should note the property that the city hopes to sell for real estate purposes is currently in the 2.5 acre residential zone of the city. This potentially could change with the adoption of the Comprehensive Plan update and with any zoning code or subdivision changes that may go along with the updated Comp Plan. Additionally, if this area is ultimately viewed as land that may be serviced by municipal sewer and water, this may change the scenario and the opinion of staff on the desirability of this transaction. If this project moves forward, the City Council ultimately would have to approve a plat for this property that may include a service drive or common driveway easements in order to limit the access onto 165th. Additionally, the city may want to identify building location pads for the lots to be sold and/or the type of structures that could be constructed on the property. These are decisions for the future if this project moves forward. The same is true as to deciding whether or not the city should be the real estate agent selling these properties or if we should just contract this out to professionals in the industry and have them market and sell the sites for the city. There are many reasons for the city to move forward with this project including the need for recreation fields, the need for additional sludge land, and the need for the city to be creative financially so that it is not a burden on the taxpayers or any of our funds to pursue the development of recreation fields. Some reasons to not do this project include the concerns over the future zoning, lot size requirements, and sewer and water in this area. Also, there is a concern about the city getting into the real estate business, but it should be noted that this is not the primary purpose for this land acquisition, but simply a by-product that the city is going to take advantage of in order to recapture some of its expenditures. The City Council needs to make a preliminary decision as to whether or not we want to pursue this project. By authorizing the execution of the purchase agreement, the city runs the risk of losing $5,000 if we do not finalize this Cass Property Page 5 October 30, 1995 purchase. If we enter into this purchase agreement, the land acquisition is scheduled for a public hearing before the Planning Commission in November and the City Council on December 18, 1995. A public hearing for the acquisition of property by a municipality is required by state law. The City Council may dispense with this requirement if it finds by a two -third vote that the proposed acquisition has no relationship to the Comprehensive Plan. Following the scheduled December 18, 1995, City Council public hearing on this land acquisition, we will need to reach a final decision on whether or not this land acquisition and project is worth pursuing and finalizing. The purchase agreement calls for a decision and the exchange of funds on December 26 with the balance to be paid on March 15, 1996. Staff recommends approval of the project as discussed on 9/25/95 and as outlined above.