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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