2007-06-19PLEASE TURN OFF CELL PHONES & PAGERS IN COUNCIL CHAMBERS.
AGENDA
Page
1. Open meeting
2. Update from representatives of Mound Harbor Renaissance
Development (MHR) and Welsh Companies including Lost
Lake District and Harbor Lane (Auditor's Road) District
•3. Discussion on property acquisition as it relates to redevelopment 1-4
4. Adjourn
K en n ed y
G
r av e n
470 U.S. Bank Plaza
200 South Sixth Street
Minneapolis MN 55402-1458
(612) 337-9300 telephone
(612) 337-9310 fax
http://www.kennedy-graven.com
Affirmative Action, Equal Opportunity Employer
Joxly B. DEAN
Attorney at Law______
__
- -
Ditect Dial (612) 337-9207
Email: jdeannkt3uredy-13aven.com
MEMORANDUM
DATE: June 15, 2007
TO: HRA Commissioners, Mayor and Council
FROM: John Dean
SUBJECT: Early Acquisition of Property
•
From time to time the HRA or City receives voluntary requests from landowners for the
HRA/City to purchase their property.
In some of those instances the HRA/City has a possible use for the land; but has not yet
developed its plans to the point where it would have initiated contact with the landowner
regarding purchase.
There are several reasons why it is in the best interests of the City/HRA to consider and
possibly accept these voluntary offers to sell land. They include:
1. Certainty as to land costs for budget and feasibility purposes.
2. Elimination of activity that could cause delay once the project starts.
3. Avoidance of possible need to use condemnation.
4. An opportunity to purchase at a reasonable price.
Staff believes that it would be useful for the Council/HRA to provide direction to it
regarding how it should reply to such landowner requests in situations where the HRA/City
has no immediate need for the property, but has identified a future use.
•
312943v1 JBD MU220-1
Most of these requests come from landowners of property located in redevelopment project
• areas, but the request could come from other places as well. An example might be a tract of
land located next to city property such as a park.
Factors to Consider
Staff believes that any directions from the HRA/City should take into consideration the
following factors:
1. The form of the purchase transaction.
2. How soon the property will be needed.
_ _ 3. _ ~'he price at which it is being offered. _ _ _ _ _ __ __
4. Whether funds are available to finance the purchase.
5. Complicating factors that may make an otherwise desirable purchase
undesirable.
The Council/HRA may well have additional factors that should be considered.
Su~~estions for Guidelines
In order to stimulate discussion on this matter, we would offer the following suggestions
regarding the listed factors, and the idea of having guidelines generally.
1. The CounciUHRA can take the position that it will not have guidelines; that
• it will ordinarily not purchase property ahead of need, and the landowner
will have the burden of establishing that it would be in the best interest of the
City/HRA to do so.
If the CounciUHRA think guidelines may have a place
2. Because we are dealing with situations in which there is no immediate need
for the property, by far the most advantageous approach for the HRA/City
would be to enter into option agreements (or contingent purchase
agreements) with the landowners. Consequently, the HRA/City may want to
consider a guideline that would require an option form of transaction, but
would specify the actual purchase price if the option were exercised.
3. If the option form of agreement is utilized, some of the other factors maybe
of less immediate concern. For example, when the property would be
needed is not so important if we are not actually purchasing it up front.
If we assume that the option form may not always be available, then we
believe that the factors of timing of need and available funding need to be
considered. Stated differently, the exercise is to use our limited resources
where they will do the most good. For that reason, we would suggest that
requests to sell (which will use the same funding source) be prioritized on
•
312943v1 JBD MLTL20-1
the basis of anticipated time needed with the soonest getting the high
• priority.
In terms of funding, we suggest that no request to purchase be considered if
funds are not currently available to be used for that purpose, and to pay for
all of the other costs related to the transaction including, if applicable,
relocation payments, contamination remediation, closing costs, etc.
4. Regardless of the form of agreement, purchase price will be an important
motivation in deciding whether or not to consider the request to purchase.
- We suggest that; to be considered; the voluntary offer to-sell should-be at a
price that is not more than the City/HRA's view of the market value of the
property as reflected by the assessors EMV for the property. If an option
form of transaction is to be used, we suggest that the same market value
approach be taken, and that the actual purchase price be included in the
option agreement.
5. Whatever we call the "guidelines" they should also make it clear that they do
not obligate the City/HRA to approve any request to purchase (even if it
meets the guidelines) and they do not entitle any landowner to be able to sell
to the City/HRA even if the request meets the guidelines.
6. We also suggest that any guidelines contain "bail-out" provisions that would
• rule out the voluntary transaction. Such situations could include difficult or
excessive costs related to such items as relocation benefits; or significant or
unknown costs related to contamination, demolition or site preparation.
Other points
1. It is not staff's intention to engage in discussion of any specific sale request
at the study session. The intention is to receive guidance from the
HRA/Council that will allow staff to formulate a response. The
HRA/Council would be involved in future stages of any transaction,
including, of course the ultimate decision to approve any proposed
agreement.
2. For the purposes of the study session, in very general terms, we are talking
about two types of agreements:
(i) Purchase Agreement. I use this term to refer to a form of agreement
by which fee title is transferred at a stated purchase price from the
seller to the buyer in a relatively short time after the satisfaction of
normal preconditions such as title and contamination. Ordinarily the
buyer looses its earnest money if it defaults and does not purchase.
312943v1 JBD MU220-1
(ii) Option Agreement. I use the term to refer to a form of agreement by
• which the buyer has the option to accept fee title at a stated purchase
price from seller in a relatively lengthy time after the exercise of the
option; and subject to satisfaction of normal preconditions. The
buyer may or may not loose its option money if it elects not to
exercise depending on the language of the agreement.
There are an infinite variety of agreements, but these are probably the basic forms
that we will be looking at.
U
•
312943v1 JBDMU220-1