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2018.05.15 EDA Work Session PacketAGENDA ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF CRYSTAL  WORK SESSION  TUESDAY, MAY 15, 2018 6:30 P.M. CRYSTAL CITY HALL CONFERENCE ROOM A 1. Call to order * 2. Roll call * 3. Discuss proposed sale of 5751 West Broadway for combination with 5747 West Broadway 4. Adjournment * *Items for which no materials are included in the packet PAGE 1 OF 4 _____________________________________________________________________ FROM: John Sutter, Community Development Director _____________________________________________________________________ DATE: May 10, 2018 TO: Anne Norris, City Manager (for May 15 EDA meeting) SUBJECT: Discuss proposed sale of parking lot parcel at 5751 West Broadway for combination with office building parcel at 5747 West Broadway BACKGROUND Two adjacent parcels on West Broadway, 5751 (parking lot) and 5747 (office building), were owned by the same party prior to 2011. 5751 is encumbered by a parking lot easement in favor of 5747. This means whoever owns 5747 has the right to have a parking lot on 5751 regardless of underlying ownership of 5751. When Kentucky Avenue was reconstructed in 2011, 5751 was assessed in the normal manner but those special assessments were cancelled by tax forfeiture. At this time the balance of cancelled specials is $23,178 comprised of the original assessment ($16,906) plus interest through 2018 ($6,272). As with any tax forfeited property, the city may re-assess cancelled specials after the property returns to private ownership. The former owner stopped paying the mortgage on 5747 and the taxes on 5751. So:  5747 was foreclosed and title passed to the lender in 2011. (It was not tax forfeited because the foreclosing lender paid the property taxes.)  5751 was tax forfeited and title passed to the state in 2014. (It was not foreclosed because the mortgage only encumbered the 5747 parcel.) In 2012 FTK Properties purchased the office building at 5747 from the foreclosing lender. In accordance with the easement on 5751, the office tenants have been using the parking lot. The parking lot easement makes 5751 essentially useless to anyone other than the owner of 5747. In 2015 the city completed a study of stormwater problems and potential improvements in the north part of the city where the system frequently surcharges during heavy rain events. One potential improvement would be an underground stormwater detention and infiltration facility under the parking lot at 5751. EDA STAFF REPORT 5751 West Broadway (parking lot for 5747 West Broadway) Bass Lake Road Streetscape PAGE 2 OF 4 In fall 2016 Hennepin County determined that the market value of 5751 is $100 and the EDA purchased it for that price in 2017. The purpose of the acquisition was to provide the city with the option of constructing a stormwater infiltration facility under the parking lot at some undetermined point in the future. CURRENT STATUS  FTK Properties has expressed a desire to clean up the relationship between 5747 and 5751 by purchasing 5751, and then replatting it and 5747 into a single lot.  FTK Properties has said they are reluctant to proceed with purchasing and replatting the property unless the potential re-assessment is eliminated or at least substantially reduced, and to that end has agreed to pay $5,000 towards the cancelled specials at the closing for 5751. FTK has said they are not willing to pay more.  FTK Properties has a pending sale of 5747 to a religious institution. FTK’s proposed purchase of 5751 and combination with 5747 would be included as part of that deal. Staff expects to receive the buyer’s CUP application by 4:30 p.m. on May 15 and will have more detail to report during the May 15 work session. PROPOSED SEQUENCE 1. (June 5) EDA grants the city an easement for an underground stormwater treatment facility at 5751 West Broadway 2. (June 5) EDA holds public hearing on the sale of 5751 to FTK Properties 3. (mid June) EDA closes on the sale of 5751 West Broadway to FTK Properties:  Sale is subject to the stormwater easement and lot combination requirement  Stormwater easement runs with the land in perpetuity unless vacated by city  Lot combination must be completed within one year  FTK pays the EDA $100 plus all EDA legal & transaction costs  FTK also pays $5,000 towards cancelled pre-forfeiture specials  EDA pays remaining $18,178 for remainder of cancelled pre-forfeiture specials (the city could make an interfund transfer back to the EDA if desired) 4. (late June) FTK sells 5747 and 5751 West Broadway to [religious institution TBD] 5. (by June 2019) FTK or its successor in ownership combines 5747 and 5751 into a single lot retaining the city’s stormwater easement over the 5751 portion 6. At some future date the city would have the option of installing a stormwater facility under the parking lot:  The work would be coordinated with the property owner and office building tenants, ideally when the parking lot is in need of repair or resurfacing anyway PAGE 3 OF 4  The city’s decision to proceed with constructing the facility would depend on the city’s desire and financial capacity to do so (it may never happen)  If redevelopment of the area makes the stormwater facility unnecessary or inadvisable, the city has the option of relinquishing its easement CONSIDERATIONS Reasons to proceed: օ City retains right to install and maintain a stormwater treatment facility under the parking lot at 5751 - EDA fund balance reduced by $18,178 (but could be mitigated with an interfund transfer back to the EDA) + City receives $5,000 from private party who otherwise has no obligation to pay anything towards the street assessment for 5751 + Long-term ownership will be cleared up so the office building and its parking are on a single platted lot and cannot once again go their separate ways What if we don’t proceed? օ EDA continues to own the property at 5751 West Broadway օ Office building continues to own, maintain and use the parking lot on 5751 օ EDA could grant stormwater easement to city whenever needed - Street fund would not receive the $5,000 for cancelled specials on 5751 + EDA retains $18,178 in its fund balance In summary, the main reasons to proceed are (1) to get the two parcels consolidated into a single lot and (2) to get the city $5,000 it otherwise wouldn’t receive. REQUESTED EDA DISCUSSION Staff requests discussion of this proposal so we can put it on the June 5 meeting agenda for action. PAGE 4 OF 4