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HomeMy WebLinkAboutC 9 Final Adopt Ord 1885 Memorandum for Final Adoption of Ordinance 1885 Page 1 of 10 Commission Memorandum REPORT TO: Honorable Mayor and City Commission. FROM: Brit Fontenot, Director of Economic Development. SUBJECT: Final Adoption of Ordinance 1885 – an ordinance ratifying the City Manager’s signature on a purchase and sale agreement transferring ownership of the North Park property to Micropolitan Ent., LLC and Powder River Comp., LLC. MEETING DATE: July 21, 2014 AGENDA ITEM TYPE: Consent (4/5 vote of the Commission required for adoption of Ordinance 1885). RECOMMENDATION: Staff recommends the Commission adopt Ordinance 1885 upon second reading on the Consent agenda. BACKGROUND: On July 7, 2014 the City Commission held a public hearing on Ordinance 1885. At that time, the Commission considered this, and other related staff memoranda, written and spoken public testimony, and provisionally adopted Ordinance 1885 by a 5-0 vote thus ratifying the City Manager’s signature on the attached Agreement to Sell and Purchase Real Estate, the North Park property, with Micropolitan Ent., LLC and Powder River Comp., LLC (the “Agreement”). Prior to final adoption on second reading, the Commission directed Staff to modify the language in Section 3 of Ordinance 1885 to read as follows: Section 3 Proceeds of the sale shall be deposited in the City’s Post-Closure General Fund. (EXHIBIT A) I. AUTHORITY TO SELL REAL PROPERTY Ordinance 1885 authorizes the sale of the North Park property. (EXHIBITS A, A1 & A2). The City Commission has authority over the disposition of property owned by the City 103 Memorandum for Final Adoption of Ordinance 1885 Page 2 of 10 pursuant to Chapter 2.06 of the Bozeman Municipal Code (BMC). This chapter was created by Ordinance 1658 (2006) and later amended by Ordinances 1683 (2006) and 1713 (2007). II. BACKGROUND: For a complete history of the North Park project please refer to the January 14, 2013 (EXHIBITS B & B1) 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 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. In August, 2013, after conducting a public hearing, the Commission determined the North Park property was no longer necessary for the conduct of City business and that the public interest would be furthered by disposing of the property, (EXHIBITS C & C1). The Commission directed staff to hire a real estate professional to list and market the property for sale. A Committee was formed to produce an RFP. The Committee reviewed the three proposals submitted and selected CBRE to represent the City in the sale of the North Park property. On September 25, 2013, the City signed the listing agreement with CBRE for a one- year term, with an option to renew the agreement for one additional year, (EXHIBIT D). Since the listing agreement was signed, CBRE has actively marketed the property nationwide. To date, two parties have shown interest in the North Park property but only one has agreed to terms. III. THE NORTH PARK PROPERTY The North Park property was purchased in July, 2003, without the benefit of an appraisal, 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: 104 Memorandum for Final Adoption of Ordinance 1885 Page 3 of 10 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 neighboring State of Montana owned properties. Currently, public infrastructure is limited on the property. Additionally, access to the property is limited to one at-grade railroad crossing to the north and west. 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. IV. NORTH PARK APPRASIALS In January, 2014 the City conducted an appraisal on the North Park property. The appraisal determined an “as is” market value of $850,000, or $10,000 per acre. As part of the appraisal, the City requested an “as proposed” value. The “as proposed” value assumes viable access to the site. The “as proposed” value is estimated at $1,536,300, or $18,000 per acre. (EXHIBIT E) The date of valuation of the City’s North Park appraisal is February 28, 2014. The City’s North Park appraisal addenda are linked here. Additionally, at the request of the Commission, Staff reviewed the content and conclusions of a second appraisal, the Buyer’s North Park appraisal. Staff found that the Buyer’s appraisal was performed by a licensed and certified real estate appraiser. Staff also found that the Buyer’s appraisal made assumptions about access to the property not made in the City’s “as is” appraisal. The Buyer’s appraised value is $1,280,000, or $14,997 per acre. The date of valuation on the Buyer’s appraisal is December 16, 2013. V. RATIONALE FOR THE SALE OF THE NORTH PARK PROPERTY In August of 2013, the Commission determined the North Park property was no longer necessary for the conduct of City business and the public interest findings supported the sale. In doing so, the Commission considered and adopted the following findings: a. 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; b. 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 105 Memorandum for Final Adoption of Ordinance 1885 Page 4 of 10 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; c. 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; d. 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; e. 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; f. 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; g. The City does not have the staff resources or expertise to develop the property without significant outside assistance; and h. 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 provided the following additional discussion in support of the determination that sale of the property furthers the public interest. Primarily, the objective of the North Park Plan was to raise awareness of the economic development potential, in terms of job creation and economic diversification, existing at the North Park properties. Additionally, an objective of the Plan was 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 established 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. CBRE has marketed the property touting the aforementioned benefits as part of the overall strategy. The buyers have reviewed the North Park material and believe the property does have the potential set forth in the Plan vision. Additional rational for the sale of the North Park property include: 106 Memorandum for Final Adoption of Ordinance 1885 Page 5 of 10 a. The buyer desires to begin development of portions of the property immediately; b. The property has access limitations; c. The property has infrastructure limitations; and d. The City will apply the proceeds to the Landfill Post-Closure Fund. Private ownership of the North Park property will likely result in a more timely and cost effective development resulting in the catalyst for job creation and industry diversification originally envisioned by the Commission. VI. CURRENT PURCHASE AND SALE AGREEMENT: OFFER PRICE, DUE DILLIGENCE AND CONDITIONS OF THE SALE OF THE NORTH PARK PROPERTY Over the past several months, the City Manager and I have been working with Micropolitan Ent., LLC and Powder River Comp., LLC to negotiate a purchase and sale agreement for the North Park Property. The attached agreement is the result of these negotiations. The Commission’s action will be to ratify the City Manager’s approval of this agreement. The sale price for the property will be $1,500,000. This price constitutes 176% of the “as is” appraised value ($853,500) and 98% of the “as proposed” appraised value ($1,536,300) (Exhibit A1). Additional conditions for the sale of the North Park property as stated in the agreement include: a. DUE DILIGENCE: BUYER shall have a due diligence period of six (6) months from the Effective Date of this Agreement as defined in Paragraph 6B below, during which time it shall be entitled to inspect the Property, examine all available records and review other relevant matters pertaining to the Property. If BUYER, in its sole discretion, is unsatisfied with the Property or any aspect thereof, it shall give SELLER written notice prior to the expiration of this due diligence period, and this Agreement shall terminate and BUYER shall be entitled to a refund of earnest money. b. BOZEMAN CITY COMMISSION RATIFICATION CONTINGENCY: The parties recognize and agree the sale of the Property is contingent upon ratification by the Bozeman City Commission of the City Manager’s approval of this Agreement by duly adopted ordinance of the Bozeman City Commission pursuant to the requirements of Section 2.11 of the Bozeman City Charter and Chpt. 2, Art. 6, Div. 5, BMC. Final ratification of this agreement shall not be effective until thirty (30) days after final adoption of such ordinance (“Effective Date”). Should the Bozeman City Commission fail to ratify the City Manager’s approval of this Agreement for whatever reason, this agreement shall be terminated, and SELLER shall have no further obligations to BUYER except return of BUYER’S Earnest 107 Memorandum for Final Adoption of Ordinance 1885 Page 6 of 10 Money. If the Effective Date is not established within ninety (90) days of the date of this Agreement then at BUYERS election this Agreement shall terminate and BUYER shall be entitled to a refund of earnest money. c. ACQUISITION OF ACCESS AND UTILITY EASEMENTS FROM STATE OF MONTANA: The closing of this Agreement is contingent on SELLER, at no cost to BUYER, obtaining and recording within six (6) months of the Effective Date, public utility and public access easements (“State Easements”) over and across the State of Montana lands lying between the Property and the existing terminus ends of Wheat Drive and Flora Lane in locations substantially similar to Exhibit A as provided by BUYER. If SELLER fails to secure the State Easements, BUYER, in its sole discretion, may either (i) waive this contingency, or (ii) give SELLER written notice prior to the expiration of the six (6) month period (or any extension thereto) of SELLER’S failure to meet its obligations, and upon such notice this Agreement shall terminate and BUYER shall be entitled to a refund of earnest money. d. APPROVAL OF MASTER SITE PLAN FROM CITY OF BOZEMAN: The closing of this Agreement is contingent on BUYER obtaining approval to its satisfaction from the City of Bozeman of BUYER’S application of a Master Site Plan for the Property within six (6) months of the Effective Date which application may seek access to the Property through Red Wing Drive over right of way owned by Burlington Northern Sante Fe Railroad and leased to Montana Rail Link thus necessitating BUYER obtaining an access agreement from the railroad(s) for access to the Property. If the Master Site Plan is not obtained within the time period described above or the results and content of the Master Site Plan is not satisfactory to BUYER for any reason, BUYER, in its sole discretion, may either (i) waive this contingency, or (ii) give SELLER written notice prior to the expiration of the six (6) month period (or any extension thereto) of SELLER’S failure to meet its obligations or of its dissatisfaction, and upon such notice this Agreement shall terminate and BUYER shall be entitled to a refund of earnest money. Nothing herein shall be construed to require the SELLER to obtain the access agreement with Montana Rail Link or to bind the City of Bozeman to approve a Master Site Plan or any future development on the Property. Further, nothing herein shall be construed to restrict the City of Bozeman when acting in its regulatory capacity to impose reasonable conditions regarding improvements to or maintenance of Red Wing Drive as part of the Master Site Plan or any other development on the Property. e. TIF DISTRICT: The closing of this Agreement is contingent on BUYER and the City of Bozeman entering into a memorandum of understanding (“MOU”) within six (6) months of the Effective Date regarding the North Park Economic 108 Memorandum for Final Adoption of Ordinance 1885 Page 7 of 10 Development District (the “TIF District”) and the allocation of tax increment financing funds to the BUYER for costs related to public infrastructure, including, but not limited to, those costs associated with the Bozeman Solvent Site Water Main Payback District. If the MOU is not obtained or is not satisfactory to BUYER, BUYER, in its sole discretion, may either (i) waive this contingency, or (ii) give SELLER written notice prior to the expiration of the six (6) month period (or any extension thereto) of SELLER’S failure to meet its obligations or of its dissatisfaction, and upon such notice this Agreement shall terminate, and BUYER shall be entitled to a refund of earnest money. f. CLOSING: Closing of the transaction set forth in this Agreement shall occur on the later of (i) within sixty (60) days of the expiration of the six (6) month contingency periods, or (ii) within sixty (60) days of the expiration of the due diligence period. SELLER and BUYER may mutually agree in writing to extend the Closing. Closing Agent shall be Security Title Company, Bozeman, Montana. The parties agree to share equally in the fee of the Closing Agent of the transaction. The BUYER agrees to pay all recording fees. Lastly, the parties shall each pay the fees and costs of their own attorneys. VII. THE DEVELOPMENT PROPOSAL The buyers, Micropolitan Ent., LLC and Powder River Comp., LLC, have indicated that they intend to develop the property in phases and are prepared to begin seeking entitlements immediately. Initially, a site, or sites, will be prepared for the construction of one or more buildings compatible with the existing zoning (M-2). On a portion of the property, the buyers intend to consolidate business activities currently spread about community onto one site for the purposes of accommodating current and future business growth and increasing efficiencies by consolidating disparate activities. Other phases likely include additional build-out for other compatible M-2 uses. The North Park concept land use plan anticipates M-2 uses on the city-owned portion of the site. The Plan sought to take advantage of the existing adjacency to a main-line railroad track and partnerships with the State, through the DNRC, for improved access to the parcel. Adjacency to rail may represent future opportunities. VIII. ACCESS EASMENTS As required by the Agreement, the City has submitted two (2) applications to the State of Montana’s Department of Natural Resources and Conservation for the acquisition of two public access easements across State land. The applications propose purchasing easements for Wheat Drive and Flora Lane (Exhibit A1). As set forth in the Agreement, the City must attain the easements within six (6) months of the effective date of Ordinance 1885. If provisionally adopted on June 9, 2014 and finally adopted on June 23, 2014, the effective date of Ordinance 1885 is July 23, 2014. 109 Memorandum for Final Adoption of Ordinance 1885 Page 8 of 10 IX. UNRESOLVED ISSUES Other than the City and the buyers addressing the contingencies, there are currently no unresolved issues as it relates to the sale of the North Park property. Water rights are proposed to transfer with the property as are the cell tower and agricultural leases currently in place. X. ALTERNATIVES The listing agreement is in effect until August 29, 2014, with an additional one year option to extend the agreement. An alternative to selling the property to the buyers listed herein is to maintain the listing with CBRE until at least August 29, 2014 and continue to work with the DNRC to secure access through State property via Wheat Drive and Flora Lane. The Wheat Drive access acquisition was attempted several years ago when the transfer station was under consideration and the property was preliminarily platted for that proposed use. When the transfer station discussion ended, further negotiations with the State on securing the access through easements on the DNRC property ceased without executing the easement documents. If the City were to retain ownership of the property, secure the two access easements discussed above and continue to market it, the property value may continue to increase due to an overall strengthening of the commercial real estate market. While this alternative is feasible, Staff suggests that the timing of such work may not be in the best interest of the City for the following reasons: a. Since the initial listing in September of 2013, we have had one (1) signed Purchase and Sale agreement; b. The current offer of $1,500,000, or $18,000 per acre, achieves 98% of the “as proposed” market value using the City’s “as proposed” appraisal estimate. While currently trending upward, there is no way to predict how the commercial real estate market may change if a sale is delayed; c. The listing agreement, without extension, terminates in approximately four months; d. Delays in a sale preclude the property from working for the community by adding significantly to the property tax base, creating jobs and diversifying the economy; and e. Given what we know about the property today, limited infrastructure and access, it is unlikely that even once the access issues are resolved, the value of the North Park property would likely not reach that of the original purchase price of $3,000,000. XI. FISCAL EFFECTS 110 Memorandum for Final Adoption of Ordinance 1885 Page 9 of 10 Pursuant to the requirements of the Bozeman Municipal Code, the property 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 expenses related to outside counsel. At this price, the City would receive approximately $1,410,000 upon closing, after realtor commission. The City’s North Park Economic Development District, an industrial TIF district, invested approximately $225,000 in development of the preliminary plat in 2006-2008. The plat is currently active and the potential buyers are considering an extension. The Industrial TIF continues to have a small amount of increment each year, but has not fully recovered the money spent to develop the plat. The balance in the Industrial TIF fund is $180,000. Selling this land to a private developer will positively impact the TIF, bringing cash streams from property taxes into the fund to recover the initial investment and to possibly provide financing for the installation of public infrastructure within the district. The City receives revenue from an agricultural lease and cell tower lease on the property, which is deposited into the Solid Waste Fund. 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. To date, the total value of the two (2) public access easements has not been firmly established. Cost estimates range from between $50,000 and $100,000 to acquire both Wheat Drive and Flora Lane easements from the State. The value will be established by the State in accordance with their policies and will be communicated to the City during the easement application review process. The North Park property was purchased without an appraisal in 2003 for $3,000,000 with money from the City’s Solid Waste Fund. At this time, staff believes the goal is not to recover the initial purchase price; the goal is to turn the property over to a private owner and developer who will, in a timely manner, move forward with plans for development which result in job creation and industry diversification as originally intended by the Commission. Additional benefits include the addition of the North Park property on the City tax rolls, investment in the industrial TIF, and new development in the largest M-2 zoned property left in the Bozeman City limits. These benefits are consistent with the Commission’s intent to increase and support manufacturing, and the associated jobs, as a primary sector development initiative. Staff recommends that the proceeds from the sale of the North Park property be deposited in the Landfill Post-Closure Fund, to be used to assist with Landfill site remediation and monitoring. 111 Memorandum for Final Adoption of Ordinance 1885 Page 10 of 10 XII. EXHIBITS: A Ordinance 1885 for final adoption including Attachment A1 to Ordinance 1885, the Purchase and Sale Contract Documents and Exhibit A to the Purchase and Sale Contract Documents which include the easement alignments for Wheat Drive and Flora Lane; A1 Agreement to Sell and Purchase the North Park Property; A2 COS 2153; B August 26, 2013 City Commission Staff Memo; B1 August 26, 2013 City Commission Meeting Minutes; C January 14, 2013 City Commission Staff Memo; C1 January 14, 2013 City Commission Meeting Minutes; D CBRE Listing Agreement; and E Hyperlink to the North Park appraisal and addenda. Report prepared on July 9, 2014 112 Page 1 of 4 ORDINANCE NO. 1885 AN ORDINANCE OF THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA, RATIFYING THE CITY MANAGER’S SIGNATURE ON A PURCHASE AND SALE AGREEMENT FOR THE SALE AND CONVEYANCE OF THE NORTH PARK PROPERTY DESCRIBED AS TRACTS 1-A, 2-A, 3-A AND 4-A OF CERTIFICATE OF SURVEY 2153 CITY OF BOZEMAN, GALLATIN COUNTY, MONTANA INCLUDING CONTINGENCIES REGARDING THE SALE AND REQUIRING THE PROCEEDS FROM THE SALE BE DEPOSITED IN THE CITY’S LANDFILL POST-CLOSURE FUND, AND PROVIDING FOR AN EFFECTIVE DATE. NOW THEREFORE, BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA: Section 1 Legislative Findings. The City Commission hereby makes the following findings in support of adoption of this Ordinance: 1. The City of Bozeman owns real property known as the North Park Property, formerly known as the Mandeville Farm identified as Tracts 1-A, 2-A, 3-A and 4-A of Certificate of Survey 2153 located in the NW ¼ and NE ¼ of Section 36, Township 1 South Range 5 East, Principle Meridian Montana, City of Bozeman, Gallatin County, Montana. 2. Section 2.11 of the Bozeman City Charter requires adoption of an ordinance when the City “convey[s]… or authorize[s] the conveyance… of any lands of the city.” 3. Section 2.06.850 of the Bozeman Municipal Code (BMC) (Ordinance 1658) grants the City Commission the jurisdiction and power to sell any real property, however acquired, belonging to the City that is not necessary to the conduct of city business or the preservation of property. 4. Section 2.06.890.B, BMC, subject to section 2.06.870.D, authorizes the sale of City property for not less than 90 percent of the appraised value. 5. Section 2.06.900, BMC provides that “[N]o sale of real property shall be made of any property unless it has been appraised within one year prior to the date of the sale. 6. On August 26, 2013, the Bozeman City Commission conducted a public hearing wherein the Commission determined by a vote of 4 – 0, adopted the findings 113 Ordinance 1885, Purchase and Sale Agreement, North Park Property Page 2 of 4 included in the August 26, 2013 staff memorandum and concluded the City-owned portion of the North Park property, described in Section II of the staff memo, was 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 directed 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. 7. Should the Bozeman City Commission provisionally adopt this ordinance by no less than a two-thirds vote of its total membership, notice of provisional adoption of this ordinance shall be published in compliance with Sect. 7-1-4127, MCA, prior to final adoption. Section 2 The Bozeman City Commission hereby ratifies the City Manager’s signature on the attached Agreement to Sell and Purchase Real Estate (Attachment A1) and to take all other action necessary to effectuate the sale of the North Park property to purchaser Micropolitan Ent., LLC and Powder River Comp. LLC and/or their assigns. The property is legally described as Tracts 1- A, 2-A, 3-A and 4-A of Certificate of Survey 2153 located in the NW ¼ and NE ¼ of Section 36, Township 1 South Range 5 East, Principle Meridian Montana, City of Bozeman, Gallatin County, Montana, according to the official Certificate of Survey thereof on file and of record in the office of the Clerk and Recorder of Gallatin County, Montana. The Commission authorizes, subject to fulfillment of the contingencies as stated in the attached Agreement and those contingencies listed below, the conveyance of the fee title to the Property by warranty deed to Micropolitan Ent., LLC and Powder River Comp. LLC and/or their assigns: 1. The sale price shall be One Million Five Hundred Thousand Dollars ($1,500,000.00). 2. The purchaser shall pay cash to the City at closing. 3. The Commission’s ratification of the City Manager’s signature shall not be effective until 30 days after final adoption of this ordinance; as such, the Agreement to Sell and Purchase Real Estate shall not be binding on the City of Bozeman until that time. Section 3 Proceeds of the sale shall be deposited in the City’s General Fund. Section 4 Repealer. All provisions of the ordinances of the City of Bozeman in conflict with the provisions of this ordinance are, and the same are hereby, repealed and all other provisions of the ordinances of the City of Bozeman not in conflict with the provisions of this ordinance shall remain in full force and effect. 114 Ordinance 1885, Purchase and Sale Agreement, North Park Property Page 3 of 4 Section 5 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. All other provisions of the Bozeman Municipal Code not amended by this Ordinance shall remain in full force and effect. Section 6 Severability. That should any sentence, paragraph, subdivision, clause, phrase or section of this ordinance be adjudged or held to be unconstitutional, illegal, or invalid, the same shall not affect the validity of this ordinance as a whole, or any part or provision thereof, other than the part so decided to be invalid, illegal or unconstitutional, and shall not affect the validity of the Bozeman Municipal Code as a whole. Section 7 Codification Instruction. This Ordinance shall not be codified but shall be kept by the City Clerk and entered into a disposition list in numerical order with all other ordinances of the City and shall be organized in a category entitled “Ordinances for Sale, Transfer, or Conveyance of Real Property.” Section 8 Effective Date. This ordinance shall be in full force and effect 30 days after final adoption. 115 Ordinance 1885, Purchase and Sale Agreement, North Park Property Page 4 of 4 PROVISIONALLY ADOPTED by the City Commission of the City of Bozeman, Montana, on first reading at a regular session held on the 7th day of July, 2014. ____________________________________ JEFFREY K. KRAUSS Mayor ATTEST: _______________________________ STACY ULMEN, CMC City Clerk FINALLY 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 21st day of July, 2014. The effective date of this ordinance is August 23, 2014. _________________________________ JEFFREY K. KRAUSS Mayor ATTEST: _______________________________ STACY ULMEN, CMC City Clerk APPROVED AS TO FORM: _________________________________ GREG SULLIVAN City Attorney 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 1 Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Brit Fontenot, Economic Development Director SUBJECT: Approval of Resolution 4426 Adopting the North Park Properties Concept Land Use Plan. MEETING DATE: January 14, 2013 RECOMMENDATION: Approve Resolution 4426 adopting the North Park Properties Concept Land Use Plan and direct Staff on the future of the city-owned North Park property. RECOMMENDED MOTION: I move to approve Resolution 4426 adopting the North Park Properties concept land use plan. OR ALTERNATIVE MOTION: I move to approve Resolution 4426 adopting the North Park Properties Concept Land Use Plan and direct staff to pursue one of the following or an alternative option or options provided by the Commission: 1) Maintain the current status and condition of the North Park property; 2) Sell the property in whole or part, unconditionally or with conditions to develop in keeping with the North Park vision; 3) Develop the property in keeping with the North Park vision; 4) Turn the property over to a management/development authority or entity to develop and manage the property in keeping with the North Park vision; and/or 5) Alternative option or options provided by the Commission. 81133 2 INTRODUCTION: Staff recommends adoption of the North Park Properties Concept Land Use Plan (the “Plan”) through approval of Commission Resolution 4426 (Attachment 1). Adoption of the Plan does not obligate the City to implement any part, or parts, of the Plan. As provided for in the motion and vote language above, adoption of the Plan requires no further action by the Commission. T he Commission may adopt the Plan and provide no a dditional direction; however, staff suggests that if the Commission adopts the Plan, direction to staff concerning the future of the City-owned portion of the North Park properties, be provided. The name of the project was changed from Mandeville Farm Concept Land Use Plan to North Park Properties Concept Land Use Plan in order to re-launch the project without the negative history associated with the purchase of the City-owned portion of the property in 2003 and the ensuing litigation. The settlement is now final and the City of Bozeman retains a clean and clear ownership title to the City-owned portion of the North Park properties. In the context of the Plan, “North Park property” refers to the approximately 85 acres city-owned portion of the property formerly known as the Mandeville farm and “North Park properties” refers to the combination of the City-owned portion and the approximately 190 acres of State of Montana owned property managed by the Department of Natural Resources and Conservation (“DNRC”) for the benefit of the Montana public education system. BACKGROUND: Brief History of the North Park Properties The City-owned portion of the North Park properties was purchased from John and Donna Mandeville in July, 2003 as a potential future site of a City-owned and operated solid waste transfer station. By 2003, the approximately 190 acres of the State-owned portion was aggregated by the State of Montana. Most of the State-owned portion of the North Park properties was acquired at Statehood as part of the Enabling Act of 1889, the remainder was acquired from the Mandeville family in 2003. Combined both properties total approximately 275 acres and currently support agricultural activities. The City-owned portion of the property consists of approximately 85 acres, is zoned M-2 (manufacturing and industrial) and is within the boundaries of an industrial tax increment finance, or TIF, district. The 190 acres of State owned property is zoned M-1 (manufacturing and industrial). The industrial TIF District, encompassing both parcels, was established in 2006 with a 15 year term. The industrial TIF District is 6 years old and approximately 40% through its “life”; It sunsets in 2021. Given the 20 – 30 year time horizon of the Plan, consideration should be given to extending the life of the industrial district. The City-owned portion of the North Park property was subdivided and platted (preliminary) but due to rising project costs, objections from nearby residents and other related issues, the transfer station was never constructed. The City’s Economic Development Council (“EDC”) and internal Economic Development Team (“EDT”) have discussed the North Park properties on several occasions and have suggested the existing preliminary plat design on the 82134 3 City-owned 85 acres may not represent the highest and best design for the property today. Given the amount of money invested in the engineering and preliminary platting of the City-owned portion of the North Park properties and despite the uncertainty of the applicability of the existing preliminary plat design, in April, 2012, the preliminary plat on the City-owned portion was extended for two additional years. The original site design and engineering on the City-owned portion of the North Park properties was intended for an entirely different configuration and mix of uses than being contemplated in the Plan. Currently, infrastructure resources are 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. Please note that a small portion of the State-owned North Park properties, managed by the DNRC, was identified as a possible location for future Bozeman Fire Station 7 in the Fire Protection Master Plan adopted by the City Commission in August, 2006, see page 170. RATIONALE FOR THE PLAN: 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, integrating economic development principles throughout the organization through the adoption of a North Park Properties Concept Land Use Plan in collaboration with the DNRC. To assist with the project, the EDC identified several high growth potential sectors including manufacturing and fabrication, along with the bio-science and bio-technology, high-technology, photonics and the outdoor industry as sectors that the City should encourage and support in an effort to create new, higher paying and skilled jobs while diversifying the local and regional economies. The North Park properties represent a physical location where these types of economic activities can be encouraged and supported. Plan Objectives Primarily, the objective of the Plan is to raise awareness of the economic development potential in terms of job creation and economic diversification that exists in the North Park properties. Additionally, an objective of this 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, an objective of the Plan is to provide a locally supportable, market based economic analysis and feasibility study and concept land use plan using local data, codes, standards and regulations and adding realistic infrastructure cost estimates through multiple phases to establish viable use patterns, timelines and costs to inform decision making and decision makers. Finally, given market conditions and development costs, the Plan establishes a sense of urgency for the development of the North Park. Specific objectives for the North Park project are shown below in long, medium and short term time horizons. The total build-out time frame for the entire North Park properties is 25- 30 years. Please note that many of the medium and short term objectives are complete or are currently underway. 83135 4 Long term objectives (present – 25 to 30 years) 1) In partnership with the DNRC, create a place (and space) where, once developed, high growth potential businesses including manufacturing and fabrication, bio-science and bio-technology, high-technology, photonics and the outdoor industry and others, can start, grow or relocate to North Park, resulting in the creation of new jobs and increased economic diversity (Underway); and 2) Continue with infrastructure improvements for undeveloped phases. Medium term objectives (present – 12 to 24 months) 1) Identify and seek funding sources for the preliminary engineering report and Phase I infrastructure development (Underway); 2) Create and/or adopt a management and operational structure that will manage the development of the North Park properties (Underway); 3) Identify and/or secure an anchor tenant or tenants (Underway); and 4) Commence Phase I infrastructure improvements. Short term objectives (present 3 to 6 months) 1) Complete the North Park Properties Concept Land Use Plan and the North Park Properties Marketing Brochure (Completed); 2) Commission approval of the North Park Properties Concept Land Use Plan (Underway); 3) Add the North Park Phase 1 infrastructure improvements to the CIP (Completed); 4) Identify 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 (Completed); 5) Re-name and re-brand the project from Mandeville Farm to North Park (Completed); 6) Recreate/extend the life of the industrial TIF district; 7) Phase 1 Environmental Site Assessment (Completed); 8) Low to moderate income study, or LMI, to support a State of Montana Department of Commerce economic development public infrastructure grant application (Underway); 9) Preliminary engineering report or PER, to support a State of Montana, Department of Commerce, CDBG for public infrastructure application (Underway); 10) Install appropriate signage at key locations on the property representing the vision of North Park; 11) Property appraisal; and 12) Phase 1 preliminary platting. Selling all or part of the City-owned portion of North Park at anytime, conditionally or unconditionally, as allowed in §§ 2.06.880 through 2.06.910 of the Bozeman Municipal Code, remains an option. 84136 5 THE NORTH PARK PROPERTIES: North Park Properties Physical Adjacencies and Geographical Assets Its size, approximately 275 acres within Bozeman city limits, as well as North Park’s existing zoning designations (M-1 and M-2), current inclusion in an industrial TIF district, potential as a Foreign Trade Zone (FTZ), proximity to, and frontages on, Interstate 90, interchanges at North 7th Avenue, North 19th Avenue and a future interchange near Belgrade at the Bozeman Yellowstone International Airport, the existing rail corridor and possible rail spur and proximities to North 7th Avenue, Griffin Drive, Frontage Road, and Bozeman Yellowstone International Airport, collectively support the concept of the North Park properties as an ideal location for the development of a mixed use, light manufacturing/fabrication and/or distribution centers, commercial and/or hospitality center(s), flexible, unique and specialized office and hi- tech facilities (technology, biosciences, etc.) with the vision of creating new job opportunities and increasing the economic diversification in southwest Montana. The North Park vision is supported by local market data research and feasibility studies conducted by the consultants in preparation of the final Plan. Please note that a significant connectivity improvement suggested in the preferred option identifies a possible overpass spanning Interstate 90 and linking Baxter Lane and Mandeville Road. This connection is identified in the Greater Bozeman Area Transportation Plan (2007 update), p. 3-38. PARTNERSHIPS: In the early stages of the project (2011) it became clear that the City of Bozeman and the State of Montana, through the DNRC, would benefit by working collaboratively on the North Park project. Each piece of property has inherent advantages and disadvantages. When considered and planned separately, many of the inherent disadvantages remain, i.e. size, transportation connections, land features (grade, creeks etc.). When aggregated, the properties may still have certain disadvantages like access and connectivity; however, the overall benefit of working in cooperation with the DNRC on N orth Park begins to mitigate some of the disadvantages outlined above. T he City and the DNRC are an example of an effective partnership. With the assistance of our consultants, we have jointly brought the North Park Properties Concept Land Use Plan to life. Both organizations agree on the overall vision of the North Park project as a place where job creating and industry diversifying businesses can come to start, grow or relocate operations adding value to the property, the community and the region. The North Park properties and associated plans and projects represent an important piece of the City’s economic development strategy and works in cooperation with many other economic development projects currently underway, i.e. the MSU Innovation Campus, Gallatin College Programs and overall cluster support and development. 85137 6 It is important to note that as the MSU Innovation Campus begins campus expansion within the recently established South Bozeman Technology District, there will likely be opportunities to work together to facilitate the success of each site, the Innovation Campus and North Park, by collaborating on t he most appropriate locations for new and expanding businesses. THE NORTH PARK PROPERTIES CONCEPT LAND USE PLAN: North Park Properties Concept Land Use Plan The North Park Properties Land Use Plan was a cooperative effort between the City, the DNRC, CTA Architects Engineers, MXD Development Strategists, City of Bozeman Planning Department and Grants and Engineering Divisions, the Northern Rocky Mountain Economic Development District (the “NRMEDD”), the Prospera Business Network (“Prospera”), The Bozeman Area Chamber of Commerce (the “BACC”) and local business owners and real estate and development professionals. As discussed above, the goals of the Plan are to recognize the community value, in terms of job creation and economic diversification, in developing the North Park properties in some form or iteration using the Plan as a framework for development. Also, the Plan demonstrates effective intergovernmental partnerships. Additionally, the Plan establishes the uses of the North Park properties based largely on local sources of information, i.e. local codes and requirements, building data, real estate market data and trends etc., while factoring in regional and national trends and sources. While the Plan has a 25- 30 year outlook, the father away from the data collection the less reliable are the assumptions. Lastly, given market conditions, bare ground development costs and time lines, the Plan establishes a sense of urgency. The Planning Process This section of the memo describes the process for creating the DNRC partnership and getting the North Park project underway. In August, 2011, City staff was contacted by Mr. Craig Campbell, Unit Manager for the DNRC’s Bozeman Field Office to discuss City plans for the Mandeville [North Park] property. Mr. Campbell was informed that our EDT was working on the issue and was exploring how an FTZ might function on the property. The EDT quickly entered into discussions with the DNRC about the 200 + acres of State public school trust land. It was during those discussions that the DNRC was informed of the availability of Community Development Block Grant (CDBG) economic development planning grant and the City’s desire to apply for the grant in order to produce a workable plan for the City-owned 85 acres of North Park. Recognizing that the DNRC has similar goals for maximizing the economic output of the State’s school trust lands, they were invited to join the City’s effort to seek the grant in partnership. The DNRC manages approximately 190 acres known as the State [of Montana] school trust lands to the south, south-east, and contiguous with the City-owned North Park property. The stated goal of the DNRC is “manage the State of Montana's trust land resources to produce 86138 7 revenue for the trust beneficiaries while considering environmental factors and protecting the future income-generating capacity of the land.” Rather than simply plan for the City-owned portion of the North Park property, we endeavored to plan for the approximately 275 acres of City and State-owned property. A dditionally, the DNRC matching funds in the amount of $12,500 offset the total required grant match of $25,000 by one-half. The CDBG Economic Development Planning Grant presented a unique opportunity to partner with the State of Montana through the DNRC and collectively plan both properties to work together on one site. The North Park vision is to create a place in southwest Montana wherein manufacturers of products, i.e. textiles, vaccines, lasers, informatics, etc., can realize cost savings, increase efficiencies or take advantage of the existing TIF or future FTZ and/or proximities to transportation corridors and air services by strategically locating, re-locating or expanding operations into an area supportive of efforts to encourage job growth and increase the economic diversity of southwest Montana. These efforts support Commission goals of creating jobs and diversifying the local and regional economies. The North Park properties represent the garden in our economic gardening strategy, a physical space where businesses can germinate, grow, or become transplanted. The City successfully negotiated, and the Commission approved, a Memorandum of Agreement (MOA) with the DNRC in September, 2011 to collaborate on a land use plan for the properties now collectively known as the North Park properties. On September 19, 2011, the Commission authorized the City Manager to sign and submit the grant application for the Montana Community Development Block Grant (CDBG), Economic Development Program 2011 Planning Grant, in partnership with the DNRC. In November, 2011, The City received the $25,000 C DBG grant for economic development from the Montana Department of Commerce. As outlined in the MOA, the City and the DNRC agreed to equally divide the match requirement in the amount of $12,500 each. In January – March, 2012, the City and DNRC proceeded to draft and publish an RFP for professional services to produce a joint land use and marketing plan for the North Park properties. The City and the DNRC received five (5) proposals, interviewed four (4) respondents and chose CTA Architects Engineers and MXD Development Strategists as project consultants. On April 9, 2012 t he Commission authorized the City Manager to sign a contract for services with CTA Architects Engineers (CTA) for the commencement of the North Park Properties Concept Land Use Plan. On April 23, 2012 C TA provided the Commission with a special presentation outlining the goals and strategies of the project and plan. Additionally, CTA organized two public stakeholder meetings designed to open the public discussion on t he use of the North Park properties and identify opportunities for sustained economic development on the site. In addition to the public stakeholder meetings and in conjunction with the Plan development, staff, Prospera, the NRMEDD, and the BACC organized and/or attended several developer and anchor tenant meetings. The goal of these meetings was twofold. First, the team intended to generate interest 87139 8 in the project. Second, we sought to listen and understand the needs of interested developers and potential anchor tenants. We also met with private and public sector leaders. Many of whom maintain a high level of interest in the North Park project. Project Funding We continue to discuss Phase I development funding. The estimated Phase I development costs associated with the preferred development option, Option D, page 91 of the Plan, is approximately $5.4m. With Plan completion, we have expended all the funds available from the Department of Commerce for the original planning grant. If the Plan is approved and direction to move forward provided by the Commission, we intend, in cooperation with the DNRC, to seek additional funding to complete the Preliminary Engineering Report (PER). Possible sources for PER funding include the City’s General Fund, the State’s Big Sky Trust Fund and/or the U.S. Economic Development Administration. O n December 3, 2012 t he Commission approved the Capital Improvement Plan (CIP) which includes North Park Phase I improvements (GF185) broken down over three fiscal years: 1) Scheduled in FY 14 – $150k (for partial Phase 1 de velopment including preliminary engineering, site, geo-technical and platting work); 2) Scheduled in FY 15 - $4.6m (for partial Phase 1 development including completing the geotechnical and platting work, if necessary, and major Phase I infrastructure improvements); 3) Scheduled in FY 16 - $550k (for completion of the Phase 1 development) It should be noted that the CIP process was completed prior to the North Park Properties Concept Land Use Plan review or adoption by the Commission. North Park Phase I improvements shown on the CIP in FY 14 – 16 will be adjusted based on Commission direction for Plan implementation. Also in 2012, the Commission approved adding an intersection control device(s) at the Griffin Drive/Mandeville Road and North 7th Avenue (south and east of the North Park properties) intersection to the CIP as unscheduled items in the amount of $500k from street impact fees (SIF33). Public/private partnership arrangements should also be considered as a potential source of funding for Phase I infrastructure improvements. Additionally, we are aware of a State of Montana, Department of Commerce, CDBG for public infrastructure in the amount of $400k ($400k match required). Grant applications are due in May, 2013 and require and completed PER and LMI referenced above. During plan development we discussed and researched the concept of establishing a development entity or authority that would be contractually responsible for the development of North Park. If the Plan is adopted and implementation follows, we should be prepared to discuss management and ownership alternatives to the City as property owner, property developer and development regulator. A s part of our research and investigation into development authorities/entities we traveled to Great Falls, Montana to discuss the success of the Great Falls 88140 9 Development Authority (GFDA) managed by Mr. Bret Doney. The Great Falls model may be transferable to Bozeman. If directed to do so, staff will return to the Commission in the future to discuss specific models and options for the structure of ownership, management and operations of North Park. The Marketing Brochure North Park Properties Marketing Brochure The North Park Properties Marketing Brochure was created along with the Plan using the information and graphics provided by the consultants for generating interest in the North Park project to Bozeman residents and business owners, the wider southwest Montana community, potential anchor tenants, development and real estate professionals and public officials. NEXT STEPS IN COOPORATION AND COORDINATION WITH THE DNRC: If the Plan is adopted, the next most critical next step in the North Park project includes Commission direction on the goals with, and future of, the City-owned North Park property. The Commission may have additional options not listed below. Some options include: Determining the North Park Vision 1) Maintain the current status and condition of the North Park property; 2) Sell the property in whole or part, unconditionally or with conditions to develop in keeping with the North Park vision; 3) Develop the property in keeping with the North Park vision; 4) Turn the property over to a management/development authority or entity to develop and manage the property in keeping with the North Park vision; and/or 5) Alternative option or options provided by the Commission. If direction is given on which path to pursue any number of next steps are required. The list of “next steps” below assumes the Plan is approved and the North Park project is directed toward options 2), 3) and/or 4) listed above. Some or all of the steps may be required as the North Park direction is refined. Any action will have associated costs. Possible Next Steps 1) Add signage at the appropriate areas to encourage interest; 2) Preliminary Engineering Report (approximately $100k) March 1st, 2013. Possible funding sources include: a. BSTF Planning Grant – $50k (inc. $12.5k match from each City and DNRC); b. EDA Grant - $50k ($50k match with CDBG and COB/DNRC funding); c. City’s General Fund, see CIP, FY 14 - 16. 3) Identify an ownership, management and operational structure for North Park; 4) Secure a property appraisal; 89141 10 5) Begin preliminary platting process; and 6) Re-establish industrial TIF district. UNRESOLVED ISSUES: The most substantial unresolved issue is that of the vision and direction of the North Park project. Once the North Park vision is established by the Commission there are many additional unresolved issues to consider. If job creation and industry diversification are cornerstones of our economic development strategy and if the North Park vision represents an opportunity to strengthen these economic cornerstones, and in order to move the project forward past the planning stage into the implementation stage we will require more leadership, more hard work and more commitment. Additionally, we must move forward on answering the following questions: 1) Who is interested in becoming the anchor tenant or tenants? 2) What incentives will be necessary to secure commitments for anchor tenants? 3) Where will Phase I infrastructure funding come from? 4) When will Phase I infrastructure funding be available? 5) How will the ownership, management, development and operational structure function at North Park? ALTERNATIVES: As determined by the Commission. FISCAL EFFECTS: The direction on t he future of the North Park project will determine the ultimate fiscal effects. If the status quo is maintained, the fiscal effects will continue to be minimal. If the Commission directs something other than that, the costs will rise commensurate with the scale and scope of the project. It should be noted that the fiscal effects have the potential to be significant. Specific effects are undetermined at this time. Attachments: 1. Resolution 4426 adopting the North Park Properties Concept Land Use Plan. Report prepared on December 27, 2012 90142 1 RESOLUTION NO. 4426 A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA, ADOPTING THE NORTH PARK PROPERTIES CONCEPT LAND USE PLAN. WHEREAS, job creation and industry diversification are critical to the long-term economic vitality of Bozeman; and, WHEREAS, the City wishes to stimulate, encourage and support the attraction, retention and growth of jobs and industry in a variety of high growth potential sectors. The number and diversity of jobs created in a variety of sectors including manufacturing and fabrication, bio- science and bio-technology, high-technology, photonics and the outdoor industry have high growth potential and support moderate to high income employment; and, WHEREAS, the City of Bozeman’s 2012 – 2013 adopted Work-Plan includes the implementation of the adopted economic development plan, integrating economic development principles throughout the City of Bozeman organization which includes the adoption of a North Park properties [formerly Mandeville farm] concept land use plan in collaboration with the Montana Department of Natural Resources and Conservation (“DNRC”); and, WHEREAS, the City of Bozeman and the DNRC have collaborated on the North Park Properties Concept Land Use Plan (the “Plan”) which includes contiguous property owned by the City of Bozeman (85.34 acres) and the State of Montana (189.66 acres) and entirely within the Bozeman city limits, and, WHEREAS, when combined, the North Park properties represent the largest contiguous M-zoned parcels adjacent to a rail line within the Bozeman city limits; and, WHEREAS, the North Park properties are entirely included in an established (2006) industrial tax increment finance district; and, WHEREAS, the North Park properties site is zoned M – 1 and M – 2, the highest intensity zoning districts allowed, and could support the uses identified in the Plan; and, 91143 2 WHEREAS, the Plan suggests reasonable development patterns, configurations and timelines based on locally, regionally and nationally acquired market and feasibility data; and, WHEREAS, the Plan provides cost estimates on infrastructure requirements for North Park Phases I – IV; and, WHEREAS, the Bozeman City Commission did, on the 7th day of January, 2013, conduct a public hearing to consider the proposed Plan. NOW, THEREFORE, BE IT RESOLVED by the City Commission of the City of Bozeman, Montana, that: Section 1 That the North Park Properties Concept Land Use Plan, attached hereto as Exhibit A, is hereby adopted. Section 2 That the North Park Properties Concept Land Use Plan includes a marketing brochure for the site and is attached hereto as Exhibit B. Exhibit B is hereby incorporated herein and made a part hereof. This resolution shall be in full force upon passage and approval. PASSED AND APPROVED by the City Commission of the City of Bozeman, Montana at a regular session thereof on the ___ of ____________________, 2013. _________________________________ SEAN A. BECKER Mayor ATTEST: _______________________________ STACY ULMEN, CMC 92144 3 City Clerk APPROVED AS TO FORM: _________________________________ GREG SULLIVAN City Attorney 93145 146 147 148 149 150 151 152 153 154 1 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 155 2 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. 156 3 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 157 4 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 158 5 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 159 6 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 160 7 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. 161 8 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 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184