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Commission Memorandum
REPORT TO: Honorable Mayor and City Commission
FROM: Brit Fontenot, Economic Development Director
SUBJECT: Public hearing to determine whether real property owned by the City of
Bozeman, known as the North Park property, is needed for public use or that the public interest may be furthered by the sale of the property as provided for in §§ 2.06.880 through 2.06.910 of the Bozeman Municipal
Code. (2/3 vote of Commission required)
MEETING DATE: August 26, 2013 RECOMMENDATION: Conduct a public hearing and by a 2/3 vote of the Commission, determine that the city-owned portion of the North Park
property is not needed for public use and that the public
interest will be furthered by the sale of the property. PROPOSED MOTION: Having considered the information presented by staff, I hereby
move to adopt the findings included in the staff memorandum and
conclude the City-owned portion of the North Park property, described in Section II of the staff memo, is no longer needed for public use and the public interest will be furthered by the sale of
the property as provided for in §§ 2.06.880 through 2.06.910 of the
Bozeman Municipal Code and direct the City Manager to complete
all steps necessary to negotiate a sale and transfer of the property and return to the Commission with an ordinance authorizing the City Manager to execute a Purchase and Sale Agreement for same.
I. INTRODUCTION
For a complete history of the North Park project please refer to the January 14 and May 13, 2013 staff memos to the City Commission.
In January, 2013 the City Commission, via Resolution 4426, unanimously adopted the
North Park Concept Land Use Plan (the Plan). Additionally the North Park project webpage contains a link to the adopted plan and additional North Park materials including the North Park
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Marketing Brochure, Phase 1 Environmental Site Assessment and the North Park Economic
Impact Study and Job Benefit Analysis.
In May, 2013 the Commission authorized staff to prepare and publish a Request for Proposals (RFP) for the acquisition of professional realty services and authorized the North Park
Realtor Selection Committee composed of EDC members and City staff (the Committee) to
select a real estate broker to negotiate the sale of the property should the Commission make the
determination that the North Park property is not needed for public use and that the public
interest is furthered by the sale of the property. Both the Plan and the direction to engage a realtor were unanimously supported by the Commission.
The Committee produced an RFP, reviewed the three proposals submitted and selected
CBRE to represent the City in the sale of the North Park property. The City has not yet signed a
listing agreement with CBRE.
The City will not execute the listing agreement until the Commission determines the City-owned portion of the North Park property is not needed for
public use and the public interest will be furthered by the sale of the property.
It is important to note that the Commission’s determination that the North Park
property is not needed for public use and the public interest is furthered by its sale is not the final decision on the actual sale of the property. The sale process will require additional step including the Commission’s adoption of an ordinance approving a purchase and sale agreement with the corresponding opportunities for public involvement.
II. THE NORTH PARK PROPERTY The North Park property was purchased in July 2003 for $3M dollars. The North Park
property consists of approximately 85 acres of unimproved land zoned M-2 (manufacturing and
industrial) and within the boundaries of an industrial tax increment finance, or TIF, district.
Currently, the Industrial TIF District fund is experiencing a deficit of approximately $180,000. The legal description of the North Park property is:
TRACTS 1A, 2A, 3A & 4A OF COS 2153 LOCATED IN THE NW ¼ & NE ¼
OF SECTION 36, TOWNSHIP 1 SOUTH, RANGE 5 EAST, PRINCIPAL
MERIDIAN MONTANA, CITY OF BOZEMAN, GALLATIN COUNTY, MOTANA.
The North Park property is generally located within the Bozeman City limits, between
Frontage Road (Highway 10) and Interstate 90 and interchanges at North 7th and North 19th
Avenues and is proximate to Redwing Drive, Reeves Road and North 7th Avenue. Click here for a map of the North Park property generally showing the physical relationship between the City
and State of Montana owned properties.
Currently, public infrastructure is limited on the property. There is an absence of a road
network, curbs, gutters, sidewalks and functional water and sewer services. Additionally, there are poor intersections for ingress and egress and limited connectivity to the existing street
network.
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III. MONTANA MUNICIPAL INTERLOCAL AUTHORITY SETTLEMENT
On December 10, 2012 the Commission authorized the approval of a settlement with the Montana Municipal Interlocal Authority (MMIA) over coverage of a $3M judgment against the City regarding the City’s purchase of the North Park property. The settlement requires the City
reimburse MMIA in the amount of $2M over the next three fiscal years. The City Manager
signed the agreement December 20, 2012. The City has made two payments to the MMIA
totaling approximately $1.3M. The final payment of $675,000 is scheduled for July, 2014. IV. FINDINGS TO DETERMINE THE NORTH PARK PROPERTY CAN BE SOLD OR THAT THE SALE FURTHERS THE PUBLIC INTEREST
Prior to finalizing a sale, the Commission must determine the North Park property is no longer necessary for the conduct of City business, or, that the public interest may be furthered by disposing of the property. The conclusions above are distinct. Therefore, for purposes of this
memorandum, Commission findings are provided below.
First, the North Park property has been identified in the past as a possible location for several City facilities; however, the property is no longer necessary for the conduct of the
City’s business
for the following reasons:
A.
Solid Waste Transfer Station
The original intent for the purchase of the North Park property in 2003 was for the future
site of a solid waste transfer station. Due to rising project costs and other related issues, a
transfer station was never constructed. Now, because of the City’s current participation in the
Gallatin Solid Waste Management District, the City has no current plans, or need, to construct
such a facility.
B.
The Mandeville Subdivision Preliminary Plat
On December 1, 2008 the City Commission held a public hearing to discuss the approval
of the Mandeville Major Subdivision preliminary plat, #08008. The meeting minutes are linked here. During the hearing, there was discussion and public comment regarding the original intent
of the purchase of the North Park property for the location of a solid waste transfer station. It
was explained that while the property was originally purchased for that purpose, the City had
joined the Gallatin Solid Waste Management District and a transfer station on the North Park
property was no longer necessary. The purpose of the preliminary plat therefore was primarily to create 22 lots for M-2 (manufacturing and industrial zoning district) development, rather than
further consider development of the transfer station. Based upon that premise, the preliminary
plat was approved by the Commission. In 2010, and again in 2012, the City approved extensions
of the preliminary plat.
Given the funds invested in the engineering and preliminary platting of the City-owned
portion of the North Park properties, approximately $225,000, and despite the uncertainty of the
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applicability of the existing preliminary plat design with the North Park design, the Mandeville
Subdivision preliminary plat (File # P-0808) was extended for two years on April 12, 2012 in
order to provide the maximum amount of flexibility available for the development of the
property. The existing preliminary plat expires on April 6, 2014.
It is clear that while a preliminary plat remains active on the property, the existence of the
entitlement does not affect, nor is it directly relevant, to whether the property is necessary for the
conduct of City business.
C.
Solid Waste Consolidation Station
In July, 2013, in a presentation to the City Commission regarding the possibility of a
consolidation station at the existing City landfill site, the North Park property was mentioned by
members of the public and Commissioners as an alternative to the proposed landfill location. After discussions with Public Works Director Craig Woolard and Solid Waste Superintendent
Kevin Handelin it became clear the cost to construct a consolidation station facility on the North
Park property is not financially feasible given the amount of infrastructure and other necessary
improvements required for the development of the North Park property and the costs of
additional staffing required to operate such a facility if located separately from other solid waste operations. Additionally, use of the property as a publicly operated solid waste consolidation or
transfer station is incompatible with the vision of the North Park property as a catalyst for private
sector job creation and economic diversification and, in fact, would negatively impact the North
Park properties for future development as identified in the Plan. As such, the North Park property
is not needed for development of solid waste facilities. Director Woolard will be in attendance during this agenda item to answer any questions.
D.
Location of Future Fire Station 7
The 2006 Fire Protection Master Plan (see pages 131 – 134) recommends a future fire station, Station 7, be located near the intersection of North 7th Avenue and Flora Lane, as future
growth and response times dictate. Any future annexations that may occur in this area will affect
response times and thus the need for a station in this part of the City. However, the projected
need for a fire station in this general area of Bozeman, and specifically when to construct it, is
undetermined at this time but the need may arise at some point in the distant future. The Bozeman Fire Department currently operates three fire stations located on South Rouse Avenue,
South 19th Avenue and Vaquero Parkway. Prior to the purchase of North Park property in 2003,
the City did not own property in the general location recommended for future fire station 7. In
order to provide for future expansion of the City’s fire station network in this area of Bozeman,
the Commission included Condition 5 in the April 6, 2009 Findings of Fact and Order (#P-08008):
Lot 11, or another lot suitable to the City of Bozeman Fire Department, shall be reserved
for the site of a future fire station.
Bozeman Fire Chief Jason Shrauger now indicates a need may exist for a station in the
northeast area of Bozeman in the distant future; however, the Chief believes the majority of
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growth in the City is currently occurring to the west and has affirmed that there are other sites in
the northeast section of Bozeman that could accommodate a future fire station when the need
arises.
Chief Shrauger will be in attendance during this agenda item to answer any questions. At
this time, it is clear the North Park property is not needed for the development of a future fire station.
Finally, there are no other City purposes currently identified by City staff for which
the North Park property may be used
.
Next, the sale of the North Park property furthers the public interest
for the following
reasons:
1. The North Park property, if developed as proposed in the Plan, furthers the City’s goals
of job creation and economic diversification as described in the Commission’s 2013 – 2014 Priorities;
2. The aggregate costs to date, approximately $5.25M, of the North Park property are high
including purchase price, costs of preliminary plat and the MMIA settlement, with very
little return on this investment. The sale of the property would help recoup some portion
of the investment made by the City over the past decade. Additional value, through private sector job creation and industry diversification, could be realized by the sale of
the property;
3. The costs to the City to fund basic infrastructure to facilitate development is higher than
the City is willing to invest to develop the property. According to the Plan, Phase I
development is estimated at $5.4M. Phase I includes the majority of the City owned portion of the North Park property;
4. The Plan, through local research and data collection, establishes the market viability of
developing the property. In addition to the Plan, the partnership has generated additional
documents referenced in this memorandum. Through these documents, a great deal of
value has been created for the North Park that, once the city-owned portion is sold, can be utilized to execute the development of the property;
5. There is both local and national interest in the sale or lease of the property for private
development. That interest has been generated, primarily, by the Plan;
6. Current commercial real estate market trends demonstrate increasing values of
commercial real estate throughout the Bozeman area; 7. Sale of the North Park property supports the City’s desire to facilitate the development of
the property without the negative perception that as property owner, the City may provide
itself exemptions or variances to its own regulatory processes;
8. The City does not have the staff resources or expertise to develop the property without
significant outside assistance; and 9. There are significant bureaucratic implications of creating an additional layer of quasi-
governmental administration through the creation of a development authority structure to
manage the sale or development of the property.
In considering the above, Staff provides the following additional discussion in support of the determination that sale of the property furthers the public interest. Primarily, the objective of
the Plan is to raise awareness of the economic development potential, in terms of job creation
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and economic diversification, existing at the North Park properties. Additionally, an objective of
the Plan is to demonstrate how governmental organizations and the private sector can work
together to support a vision greater than any one partner organization. Also, Plan objectives
include provision of locally supportable, market based economic analysis using local data, codes, standards and regulations, realistic infrastructure cost estimates and timelines through multiple phases and viable use patterns, all to facilitate informed decision making. Finally, given rapidly
changing market conditions and increasing development costs, the Plan establishes a sense of
urgency for the sale and development of the North Park. Throughout the project, selling all or
part of the City-owned portion of the North Park property at anytime, conditionally or unconditionally, remained a viable consideration.
In addition to the Plan, the City and the Department of Natural Resources and
Conservation (the DNRC) partnership produced the following supporting material – all of which
will be valuable to a purchaser:
1. North Park Properties Marketing Brochure;
2. North Park Phase 1 infrastructure improvements added to the Capital Improvements Plan
or CIP, (CIP FY 14 – 18, GF 185, p. 54);
3. Identification of capacity expanding, off-site improvements that may aid in the development of the North Park properties, i.e. intersection control device at the
intersection of North 7th Avenue and Griffin Drive (CIP FY 14 – 18, SIF 33, p. 157);
4. Completed of a Phase 1 Environmental Site Assessment;
5. Completed of a Economic Impact and Job Benefit Analyses; and
6. Preliminary Engineering Report (PER). CTA has started the work on the PER. Expected completion of the PER is the end of September, 2013.
The Commission identified North Park as part of their number one 2012 –2013 Work-
Plan goal via implementation of the adopted 2009 Economic Development Plan. In addition to
these goals, the City identified several high growth potential sectors ideally suited for location in the North Park including manufacturing and fabrication, bio-science and bio-technology, high-
technology, photonics/optics and the outdoor industry sector. It is these industries the City
encourages and supports for the creation of new, higher paying and skilled jobs which add
diversity to the local and regional economies. The North Park property represents a physical
location where these types of economic activities can be encouraged and supported. In addition, the development of the North Park property represents an important piece of the City’s economic
development strategy of working in cooperation with other economic development projects and
agencies such as the MSU Innovation Campus, Gallatin College, the Prospera Business Network
and the Northern Rocky Mountain Economic Development District. Sector support and
development, especially in photonics/optics and the outdoor industry is in accordance with the City’s funded FY 14 economic development initiatives.
Next, the sale of the property is in the public interest because the partnership that existed
with DNRC to create the Plan could still exist with a private purchaser and developer. In the
early stages of the project (2011) it became clear that the City and the State of Montana, through the DNRC, would benefit by working collaboratively on the North Park project. Both
organizations agree on the overall vision of the North Park project as a place where job creating
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and industry diversifying businesses can come to start, grow or relocate operations adding value
to the property, surrounding properties, the community and the region.
Each entity’s property has inherent advantages and disadvantages for development in terms of size, location, land features (grade, creek, etc.), ingress and egress and infrastructure. When development is planned separately, many of the inherent disadvantages remain or are
exacerbated. However, when jointly planned and developed, while certain disadvantages may
remain, the overall benefit of working in cooperation with the DNRC on North Park mitigates
some many of the disadvantages.
This proven partnership can continue with a private owner and may, in fact, result in
more timely and cost effective development of the property. As such, once sold, the City will
evolve its role from property owner and DNRC partner to that of development facilitator to work
with the new property owner and the DNRC to explore and encourage a new partnership to further the North Park guiding vision of the North Park as a catalyst for job creation and industry
diversification.
V. UNRESOLVED ISSUES
Sale of the property to a private owner has risks in terms of the fulfillment of the vision through implementation of the North Park Plan. The City Commission determined that the
North Park property should be a catalyst for job creation and industry diversification in
furtherance of the City’s broad economic development strategy. The City may find a buyer for
the City-owned portion of the North Park properties that believes in the vision created by the City and the DNRC and the data supporting that vision, but there is no certainty that development will come to fruition in the manner called for by the Plan.
Despite the effort at creating a vision for the North Park properties, a buyer may not see
the North Park as an economic development catalyst and may not share the City’s vision for North Park as a stimulator to economic growth. There is a risk that with a new owner the property remains undeveloped, underdeveloped, or that the property develops in a manner
inconsistent with the City’s economic development goals.
Considering the above, the only way to mitigate that risk is to place binding expectations on the buyer for the development of the City-owned portion of the North Park property. The Commission should carefully consider the pros and cons of a restrictive buy-sell agreement as
opposed to selling the property unconditionally while encouraging and supporting the use of the
Plan and associated documents as a framework for development. Staff recommends the
Commission refrain from imposing direct obligations on a purchaser to develop the property in compliance with the Plan as this may negatively impact interest in purchasing the property
.
Alternatively, staff pledges to remain proactively involved with the new owner, creating a
conduit to the DNRC to facilitate development of the property in conformance with the Plan.
VI. ALTERNATIVES
As determined by the Commission.
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VII. FISCAL EFFECTS
The North Park property was purchased in 2003 for $3M dollars. Pursuant to the requirements of the Bozeman Municipal Code, the property must be appraised prior to sale and cannot be sold for less than 90% of appraised value. Upon sale, because the City is using a real
estate broker, a commission of 6% will be paid. The City may have minimal additional expenses
related to the transfer including title insurance, recording fees, and possibly expenses related to
outside counsel. The City invested approximately $225,000 in development of the preliminary plat.
The City receives revenue from an agricultural lease and cell tower lease on the property.
In 2012, the City obtained $5,148 from the agricultural lease and $7,260 from the cell tower lease. Should the City sell the property, these revenues will no longer be realized. Attachments:
None - all supporting documentation is hyperlinked in this memo. Report prepared on August 15, 2013
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