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HomeMy WebLinkAboutJ1 Mendenhall Willson Parking lot Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Chris A. Kukulski, City Manager SUBJECT: Potential Sale of Parking Lot at the South East Corner of Mendenhall and Willson. MEETING DATE: August 28, 2006 BACKGROUND: Over the past several months our planning staff and I have met with the owners of the Armory regarding their redevelopment plans and interest in including the city’s parking lot to the west of the Armory in their redevelopment. Additionally, I have met with the owner of the Imperial Inn as he has expressed interest in redeveloping this same property. This parcel of property is owned by the city and provides 28 surface public parking spaces. It is located on the southeast corner of Willson and Mendenhall, bordering the west side of 24 W. Mendenhall. In an attempt to move the conversation forward, I received the attached Buy-Sell Agreement from Libster Building LLC and Nygard Family LLC., owners of the Armory, and an Exchange Agreement has been presented from the Wittich Law Firm, representing Thomas Mosser. Each document outlines the parameters of their perspective proposals. I have spoken with owners of the Armory and they have agreed to extend the deadline on their Buy-Sell Agreement offer (which has expired) provided they receive an expedited response from me with the support of the City Commission. The idea of redeveloping this site is exciting and certainly merits the attention of the Commission as we hope to take advantage of opportunities to strengthen Bozeman’s downtown. During the Parking Commission’s discussions this morning they strongly supported the ideals of strengthening Bozeman’s downtown - going as far as to say that “incentives” should be devised as a catalyst to bringing investment into the downtown while balancing those incentives with parking needs. The Buy-Sell Agreement purchase offer is based on the premise that the buyer would replace the 28 spaces within their project (a structure will have to be built to meet the parking demands created by the redevelopment). Even though there would be NO cash exchange, the buyer is spending over $672,000 to replace the lost public spaces and their offer, with no cash exchange proposed, is based on an estimated value of $24,000 per space as set forth in the buy-sell offer. Also attached is a letter from Carl Walker, Inc., Denver, Colorado parking consultants, confirming the value of underground, mixed-use parking at $25,000 - $30,000 per space. The Exchange Agreement presented by Thomas Mosser has no financial information to review or consider. If the City is inclined to entertain the idea of selling this property the Parking Commission recommends that the following criteria be considered in any buy-sell agreement. 1) The “status quo” must be retained on publicly accessible parking spaces. In other words, some how, and some way 28 spaces should be replaced within the area lost with reasonable access. Cash alone is not ideal. 2) The sale must be consistent with Ordinance 1658 requiring that an appraisal be conducted in order to set a minimum value on the publicly owned asset. The appraisal needs to be based on the properties highest and best use consistent with zoning not simply on its current use as a surface parking lot. (see attached ordinance outlining the sale of publicly owned property as adopted by the City in 2005) 3) If the City fails to approve the project through its approval process outlined in the Unified Development Ordinance the property reverts back to the city without penalty. 4) If the buyer fails to perform on the approved project within a reasonably defined timeline (say 3 years), the City will refund the sale price less a $10,000 penalty to the buyer and the property would revert back to the City. 5) The buyer guarantees through a development agreement that a certain level of tax dollars will be generated by the project based on the estimated taxable value of the project. Because the property is in a Tax Increment Finance District (TIFD) the district would in theory receive 100% of the new taxes generated. This guaranteed minimum tax generation is critical in that several states, including Montana, commonly change commercial tax calculations, and therefore without the guaranteed minimum, the funds might not otherwise be paid to the TIFD. (This calculation would be based on the developer’s best estimation of the investment and that information would be utilized by the department of revenue in order to calculate the estimated taxes that would be generated by the project). 6) Some type of proof acceptable to the City and buyer that the buyer has the financial wherewithal to perform. One option is a performance bond. 7) Until the existing parking lot is made unusable, the public spaces therein are leased back to the City for $1. Because this property is contiguous to the Armory and because of its ability to enhance the redevelopment of the Armory project in a way that improves Bozeman’s downtown as the business center of Bozeman and southwest Montana, and in reviewing attached Buy-Sell and Exchange Agreement, I believe that the Armory redevelopment project provides the greatest opportunity to successfully meet the above listed parameters and goals outlined in the City’s 2020 plan and UDO. Therefore, I recommend you authorize the city staff to enter into negotiations with the owners of the Armory to meet the above listed criteria for your approval as soon as the necessary documents can be completed. Unfortunately, at the time that this memo was drafted, I had not received return phone calls from parking consultants and several Cities that I had hoped to get advice from regarding their success or failure in converting surface parking lots into mixed-use, multi-story developments. Hopefully some of these conversations will take place in time for our August 28th City Commission meeting. Also it is critical that the Parking Commission be a leader in guiding this process as they are our volunteers who have taken on the responsibilities of setting policies to manage public parking in the downtown area. RECOMMENDATION: The City Commission authorize the City Manager and staff to negotiate the necessary agreements to complete the sale of the parking lot at the south east corner of Willson and Mendenhall with the Libster Building LLC, Nygard Family LLC. If however the Commission is uncomfortable moving forward in this manner, I would suggest setting a tight deadline of September 8 for the City to receive proposals from either entity and/or others. The proposals will be reviewed against the parameters listed above. Once reviewed, the City staff would enter into negotiations with the entity we believe has the greatest opportunity to meet our requirements for selling the property. FISCAL EFFECTS: The sale price is yet to be determined based on an appraised value of the land for its intended use. Also, the taxes generated by the proposed development would be paid into the City’s downtown Urban Renewal District. The minimum amount of property taxes will be set in the development agreement and will be paid by the owner even if the taxable value falls short of the estimates or the State changes property tax formulas. ALTERNATIVES: As suggested by the City Commission. Respectfully submitted, _________________________________ Chris A. Kukulski, City Manager Attachments: Purchase Offer; Letter from Carl Walker, Inc.; Exchange Agreement; Ordinance NO. 1658 , Report compiled on August 24, 2006 ORDINANCE NO. 1658 AN ORDINANCE OF THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA PROVIDING THAT THE BOZEMAN MUNICIPAL CODE BE AMENDED BY ADDING CHAPTER 2.05 PERTAINING TO ACQUISITION AND TRANSFER OF CITY PROPERTY BE IT ORDAINED by the City Commission of the City of Bozeman, Montana: Section 1 That Chapter 2.05 be added to the Bozeman Municipal Code, so that such Chapter shall read as follows: “Chapter 2.05 ACQUISITION AND TRANSFER OF CITY PROPERTY “2.05.010 Authorization for City to obtain property. The City Commission has jurisdiction and power, under such limitations and restrictions as are prescribed by law, to purchase, receive by donation or exchange, or lease any real or personal property necessary for the use of the City and to preserve, take care of, manage, and control the same. “2.05.020 Appraisal required for certain purchases of real property or conservation easements. Unless otherwise provided by law, the City may not purchase real property in an amount in excess of $10,000 or a conservation easement using public funds in an amount in excess of $40,000 unless the value of the property or conservation easement has been previously estimated by a disinterested certified general real estate appraiser selected by the City Manager. The City may not pay more than the appraised value for the real property or conservation easement. “2.05.030 Authorization to sell and exchange City property. (1) The City Commission has the power to sell, trade, or exchange any real or personal property, however acquired, belonging to the City that is not necessary to the conduct of City business or the preservation of its property. (2) Whenever the City purchases equipment, as provided in M.C.A. Sections 7-5-4301through 7-5-4310, City equipment that is not necessary to the conduct of the City business may be traded in as part of the purchase price or may be sold at public auction, as provided in 7-5-4310, in the discretion of the City Manager or City Manager’s designee (3) Any sale, trade, or exchange of real or personal property must be accomplished under the provisions of this Chapter. In an exchange of real property, the properties must be appraised, and an exchange of City property may not be made unless property received in exchange for the City property is of an equivalent - 2 - value. If the properties are not of equivalent values, the exchange may be completed if a cash payment is made in addition to the delivery of title for property having the lesser value. (4) If the City owns property containing a historically significant building or monument, the City may sell or give the property to nonprofit organizations or groups that agree to restore or preserve the property. The contract for the transfer of the property must contain a provision that: (a) requires the property to be preserved in its present or restored state upon any subsequent transfer; and (b) provides for the reversion of the property to the City for noncompliance with conditions attached to the transfer. “2.05.040 Requirements for certain sales. When the City Commission has determined, after public hearing, that any real property which is owned by the city is no longer needed, the property may be sold by bid, auction with reserve, or negotiated sale or exchange, subject, where appropriate, to a minimum price established through an appraisal that certifies the value of such property. Notice of sale, exchange, or auction shall be published as provided in M.C.A. Section 7-1-4127. The city may terminate the sale procedures used at any time and may reinitiate the same or different procedures at a later date. “2.05.050 Terms of sale. (1) Except as provided in 2.05.030(4), a sale under this part must be for cash or on terms that the City Commission may approve, provided that at least 20% of the purchase price is paid in cash. All deferred payments on the purchase price of any property sold must bear interest at the rate of 6% a year, payable annually, and may be extended over a period of not more than five years. (2) Subject to 2.05.030(4), a sale may not be made for less than 90% of the appraised value. (3) Subject to 2.05.030(4), the title to any property sold may not pass from the City until the purchaser or the purchaser's assigns have paid the full amount of the purchase price into the City treasury for the use and benefit of the City. “2.05.060 Appraisal required for certain sales. Unless otherwise provided, no sale of real property shall be made of any property unless it has been appraised within three months prior to the date of the sale. “2.05.070 Use of proceeds of property disposition. The funds derived from property disposed of in accordance with this chapter, in the discretion of the City Commission, may be credited to any account that is in the best interest of the City. Section 2 - 3 - Repealer All resolutions, ordinances and sections of the Bozeman Municipal Code and parts thereof in conflict herewith are hereby repealed. Section 3 Savings Provision This ordinance does not affect the rights and duties that matured, penalties that were incurred or proceedings that were begun before the effective date of this ordinance. Section 4 Severability If any portion of this ordinance or the application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions of this ordinance which may be given effect without the invalid provisions or application and, to this end, the provisions of this ordinance are declared to be severable. Section 5 Effective Date This ordinance shall be in full force and effect thirty (30) days after final adoption. PASSED by the City Commission of the City of Bozeman, Montana on first reading at a regular session thereof held on the ___ day of __________ 2005. __________________________________________ ANDREW L. CETRARO, Mayor ATTEST: _____________________________________ ROBIN L. SULLIVAN Clerk of the Commission PASSED, ADOPTED AND APPROVED by the City Commission of the City of Bozeman, Montana, on second reading at a regular session thereof held on the _________ day of _________________ 2006. - 4 - __________________________________________ JEFFREY K. KRAUSS, Mayor ATTEST: _____________________________________ ROBIN L. SULLIVAN Clerk of the Commission APPROVED AS TO FORM: ___________________________________ PAUL J. LUWE City Attorney