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HomeMy WebLinkAbout5.a. Sunrise Builder's Property' CITY OF ROSEMOUNT EXECUTIVE SUMMARY FOR ACTION CITY COUNCIL MEETING DATE: DECEMBER 3, 1991 AGENDA ITEM: Njjjj1W16 PROPERTY AGENDA SECTION: OLD BUSINESS PREPARED BY: STEPHAN JILK, CITY ADMINISTRATOR AGENDA � A ATTACHMENTS: MEMO A OV E Y To consider the purchase of the Sunrise Builder's site property it is necessary to 1. Decide the purpose of the acquistion 2. Decide on funding options for the acquisition Mr. Mike McDonough, current owner of the property is a willing seller of the property. Through financing agreements with Mr. McDonough and the First State Bank of Rosemount the City could fund this purchase. Council direction on both points need to be decided so staff can finalize such agreements. RECOMMENDED ACTION: MOTION to direct staff to finalize funding sources and contract agreements for the purchase of the Sunrise Builders property. COUNCIL ACTION: �Tly of gosemount PHONE (612) 423-4411 2875 - 145th Street West, Rosemount, Minnesota FAX (612) 423-5203 Mailing Address: P. O. Box 510, Rosemount, Minnesota 55068-0510 MAYOR Vernon Napper COUNCILMEMBERS Sheila Klassen John Oxborough Harry Willcox Dennis Wippermanh ADMINISTRATOR Stephan Jilk TO: Mayor Napper Council Members Klassen, Oxborough,`,W'll .,x, i- ann FROM: Stephan Jilk, City Administrator DATE: November 27, 1991 RE: Sunrise Builders Property Pursuant to direction provided by the City Council I have reviewed reasonable; options for the purchase of the Sunrise Builders Property, I am prepared to provide a recommendation in that regard. The property is 10.8 acres currently zoned C-2 (Community Commercial). It does not have municipalsewer or water to the site. The improvements' on the site are several stand alone structures ample size to support the current business which is a builders supply operation.' There have been two appraisals done on the property. The first one completed in August of 1988 valued the property at $312,300. The second one completed in 'September of 1991 for the City of Rosemount set the value at $316,,000 using the "highest and best use" approach. The property has two mortgages against it. Both of these are held by the First State Bank of Rosemount with a current combined balance of $200,000. There are other business loans held by the same bank but these loans have no lien on the property. The property owner, Mr. Mike McDonough is interested in selling the property to the City and is interested in working out an arrangement by which he would lease back the property for up to a three year period in order to make personal and business decisions, relating to the relocation or closing of his business operations. 6veryihings Coming (Up AosemounlP CJ 100%fvcvc1#dp pw Sunrise Property Purchase Page 2 City's Interest The City recently adopted an "Erickson Park Square" Master Plan which designates the property for future acquisition and eventual development into the plan. Funding First State Bank of Rosemount is agreeable to the City taking on the mortgage(s) for the property, combining them and negotiating a term agreeable to the City for a 3, 4 or 5 year straight amortization type loan. The City's legal counsel has considered this type of purchase agreement and find it legal to enter into such an agreement. The City has certain unallocated funds available in its CIP reserve accounts. The City could also consider funding sources through its Park Dedication Fund and Storm Water Core Facility Fund. The City's EDA could possibly have interest in assisting in the acquisitions for future development of the site or adjacent sites and to assist the City's overall development of the Erickson Community Square Project which includes the Armory site. Following is a recommendation on the financing arrangements for the purchase: A. Assume a property value of $316,000 B. Assume Mr. McDonough is interested in maintaining his business operations for a 1-3 year period. C. City would purchase the property at a price of $316,000 - City takes on mortgage with First State Bank of Rosemount at 9.5% for 5 years. - City pays Mr. McDonough $50,000 cash at closing - City takes on Contract for Deed with Mr. McDonough for $66,000 at 8% simple interest for three years with straight amortized schedule. - Mr. McDonough pays city $750 per month for each month he operates business. The maximum time Mr. McDonough stays is 36 months. At his leaving he will remove all items from property except existing structures. D. Sunrise Property Purchase Page 3 Mr. McDonough agrees that no additional compensation beyond the purchase price indicated above will be provided for relocation purposes. The City's potential cost for the property would be as follows: Annual Cumulative 1992 Down Payment $ 50,000 CD w/McDonough 24,818 First State Bank 50,404 Sub -Total $125,222 $125,222 1993 CD w/McDonough $ 24,818 First State Bank 50,404 Sub -Total $ 75,222 $200,444 1994 CD w/McDonough $ 24,818 First State Bank 50,404 Sub -Total $ 75,222 $275,666 1995 First State Bank $ 50,404 $326,070 1996 First State Bank $ 50,404 $376,474 Potential revenue would be any income from rental of the property. This could be as little as zero to a maximum of $27,000. Since the option for the continued use of the property is up to Mr. McDonough we cannot estimate any amount and suggest we look at zero for consideration of the purchase. Recommendation: I would suggest that the council consider the purchase of the Sunrise Builders Property through the above referenced financing method if: 1. Based upon the potential future use of the property the council feels it is warranted. 2. The council is willing to prioritize the use of CIP funds as the main source of revenue for the purchase. The CIP reserve balance at 12-31-91 should be $660,000±. Sunrise Property Purchase Page 4 3. That the overall development of the Erickson Community Square Project supports this effort. If the Council wants to proceed staff will develop discussion with other committees and provide written agreements for Council consideration on December 17th. 1j �I