Loading...
HomeMy WebLinkAbout10D - Quick-Take Eminent Domain for 16320 Main Ave. Property PRIO'" ~". , \ '("\ ?\ ?\I t'11J \', ''\:!,,~ // "'<"~INN~sO~ 1'>",,/ "'-~-.- -~--~ MEETING DATE: AGENDA#: PREPARED BY: AGENDA ITEM: DISCUSSION: 4646 Dakota Street S.E. Prior Lake, MN 55372-1714 CITY COUNCIL AGENDA REPORT April 7, 2008 \ 10 D " At' Frank Boyles, City Manage~\ Consider Approval of a Reso ution Authorizing the Initiation of Quick-Take Eminent Domain for the Former Minnesota Nails Building Located at f:S32. i Main Avenue, Prior Lake. I ~~8 Introduction The purpose of this agenda item is for the City Council to consider a resolution initiating quick-take eminent domain proceedings for property located at 16328 Main Avenue S.E., Prior Lake. Historv In 2002, the City purchased the property at 16318 Main Avenue (commonly referred to as the Joe's Pizza building). In 2001, the City had also attempted to purchase the property next door to Joe's Pizza at 16328 Main Avenue (vacant then as it is today, now commonly known as MINNESOTA Nails building). The City Council was scheduled to approve the purchase agreement to acquire the property, but before the Council meeting, the realtor advised staff that the Seller had accepted another offer. The City's intent in purchasing both properties (MINNESOTA Nails and Joe's Pizza) and demolishing both was to remove blight as defined in Minnesota Statutes Section 469.174, Subd. 10 and provide additional public parking. In the near term, the two properties would provide surface parking. In the long term, both properties would become part of the parking ramp/multi-use building redevelopment of the area. In 2004, the City commissioned Bonestroo Rosene Anderlik & Associates to conduct a parking study. The study found that the City would need 400 to 600 additional parking stalls by 2025 to serve both existing and future needs. Since receiving this study, we have taken numerous steps to increase downtown public parking but we are nowhere near to adding the number of stalls the study calls for. If the Council were to decide not to purchase the Minnesota Nails property and demolish Joe's Pizza, there exists a recorded Party Wall Agreement between the two properties which provides that "should said party wall be damaged or destroyed by the act, default or negligence of one of the parties thereto, said party shall rebuild or repair said wall, and shall compensate the other party for any damages to the party of said other party." Therefore, the Joe's Pizza building cannot be demolished without exposing the City to some liability because of the shared common wall between the two buildings. Given the condition of the two buildings, the goals of the 2030 Vision and www.cityofpriorlake.com "Phone" 952:447:9805' F~2<9!)2.447'.4245 1 Strategic Plan for adding parking for Downtown, and recognizing the liability created by proceeding with demolition of the Joe's Pizza building without acquiring the MINNESOTA Nails property, we contacted the owner of the former MINNESOTA Nails property (the other party to the party wall agreement) nearly 3~ years ago when they moved the MINNESOTA Nails business from Main Avenue to South Lake Village. The family who purchased the property is represented by Donnie Nguyen. I met with Mr. Nguyen and an interpreter years ago. Through the interpreter I advised Mr. Nguyen that the City was interested in buying the property and would do so for the then appraised value. No progress was made at that meeting. Mr. Nguyen moved to Texas to an address unknown to the City. The City attempted to continue our conversations about purchasing the property through Mr. Nguyen's sister who operated, in part, the MINNESOTA Nails business at its new location at South Lake Village. We were told on numerous occasions that Donnie represented the family and he was in Texas. We were not given contact information. As a further attempt to move negotiations forward, we began to contact Prior Lake State Bank who holds the mortgage on the property. Our efforts were unproductive for months until at the beginning of this year Bob Facente from Prior Lake State Bank, contacted us indicating that Donnie would be coming back to Prior Lake for a visit. Before he arrived, the City worked to have its six- month old appraisal updated. Current Circumstances On February 28, 2008, Paul Snook, Kelly Meyer and I met with Bob Facente, Donnie Nguyen, Trieu Pham and Loan Nguyen at the Prior Lake State Bank offices. I advised the parties that the City was still interested in purchasing the property for public parking and to eliminate blight pursuant to Minnesota Statutes 469.174, Subd. 10. I indicated that we had obtained an appraisal six months ago reflecting a property value of $110,000 and had updated it in February 2008. The appraisal identified the current value for the property of $112,000. We provided a complete copy of the appraisal and a written offer letter for the property for a purchase price of $112,000. Mr. Nguyen indicated that they had put a great deal of investment into the property and therefore the family would sell the property for $150,000. I advised Mr. Nguyen that I did not have Council authority for that amount, and suggested that we meet again. I further advised Mr. Nguyen that the property had not been occupied for 3~ years, was not currently in a condition to serve as a business property, and that the City desired to purchase the property, rather than use its power of eminent domain, to address our public parking needs. We next met on March 4, 2008. Ms. Meyer was unable to be present and Mr. Facente joined us by speakerphone. During the conversation we reviewed the issues about the parcel and building, including: . It has been vacant for 3~ years. . An inspection conducted by the Building Official indicated the building is blighted pursuant to MS 469.174, Subd. 10. M:\COLJi'JCIL\i\GENDA REPCRTS\2008\040808 MN Nails eminent domain.DOC 2 . The property is believed to have once been a gas station and the City could be buying an unknown liability with respect to the costs of any potential soil clean up of the site. . The parcel's value based upon our updated appraisal is $112,000. In hopes that we could expeditiously complete an arms length transaction, I provided a letter offering $130,000 for the property (attached). After allowing Mr. Facente and the owners to talk privately, we returned after 45 minutes and were advised that the owners wanted to meet with Mr. Facente in person when he returned to the area. Since that time, in my follow up conversations with Mr. Facente, he has advised me that his clients had not contacted him or returned his calls. Over the last few weeks this situation has not changed. Conclusion I had hoped that the City could purchase the property on the open market through an arms length transaction. I no longer believe that the City can successfully purchase the property without resorting to eminent domain. The City Council has two options at this point if it wishes to continue our efforts to acquire the property: 1. Continue to attempt to contact Mr. Nguyen (who has returned to Texas and been unresponsive) and attempt to negotiate a sale. I do not believe this would be productive. 2. Initiate a gO-day quick-take eminent domain action that would call on the Court to facilitate the transfer of ownership, and a three-person condemnation board to establish a fair value for the property. The 90-day quick-take process accelerates the process of the conventional eminent domain action which is typically more complex and can take up to two years. Both the traditional eminent domain process and the quick-take process allow for the parties to continue negotiations. In a quick-take action, the City cannot walk away from the proceeding once the Commissioners determine a valuation. The steps necessary for completing a 90-day quick-take include: . City Council adopts a resolution authorizing the acquisition of the property by the exercise of eminent domain. . City offers to pay the cost of an appraisal for the Seller as required by law. . The appraisal is completed. . City escrows funds with the Court in an amount equivalent to the appraised value determined by the appraiser for the City. . Parties recommend three Condemnation Commissioners to the Court. If the parties cannot agree on the Commissioners, the Condemnation Board is appointed by the Court consisting of one representative selected by the Seller, one representative selected by the City, and the third representative selected by the Court. . The Board meets and establishes a value for the property based on its highest and best use. . Upon a finding by the Court and 90 days after the passage of the resolution, property ownership transfers to the City. M:\COUi'JCIL\AGENDA REPORTS\200S\0408C8 MN Nails eminent domain. DOC 3 ISSUES: . The City pays into the Court any balance due over and above the appraised value previously deposited with the Court. Eminent domain is not a process to initiate without considerable reflection. The property has not been occupied for over 3~ years. Mr. Nguyen indicated that they are doing well at their new location. He did, however, threaten to move back into the old location if necessary. Although to move back in would require additional repair costs. As of today, the property is not adding any commerce to our downtown. Condemnation Commissioners determine the Fair Market Value of property based on its highest and best use. Under the law, the City may not use eminent domain to acquire property unless the City has a valid "public purpose" for the property. The City Attorney is satisfied that providing parking for the Downtown business area is a valid "public purpose" and said finding is clearly set out in the resolution authorizing eminent domain proceedings. The Joe's Pizza property most likely cannot be demolished without affecting the common wall. This property alone does not provide a redevelopable parcel, nor would it add significant additional parking. Both properties need to be combined to be effectively used for parking. FINANCIAL IMPACT: Despite the fact that our appraisal reflects a value of $112,000 and the Scott County Assessor's value of the property is $115,400, the requested price continues to be $150,000 from the seller. Scott County has informed the City that commercial/ industrial property valuations will increase an average of 24.3% in Prior Lake. However, we are aware that the value of this property will actually be reduced to $100,000. Given these conditions, eminent domain is a reasonable tool to determine the real value of the property. The City could pay additional costs as part of the eminent domain process. The City will have to pay our own attorneys, and if the final value determined is more than 25% above our last offer, we could be held responsible for the seller's attorney fees. The City is also obligated under the process to pay for an appraisal for the property owner. If the building was occupied by an operating business, the City could also be responsible for relocation costs. Ultimately, the City will incur additional costs for the redevelopment of these sites, including hazardous materials inspection, demolition, inspection and mitigation of any environmental cleanup that may be on the site, and improvements. The purchase costs for this property would be drawn from Account 603-49804- 510. ALTERNATIVES: 1. Motion and Second to adopt a resolution initiating eminent domain for the property located at 16328 Main Avenue, Prior Lake. 2. Take no action and provide staff with additional direction. RECOMMENDED Alternative 1. MOTION: M:\COUNCIL\AGENDA REPORTS\2008\040808 MN Nails eminent domain DOC 4 4646 Dakota Street S.E. Prior Lake, MN 55372-1714 RESOLUTION OS-xxx A RESOLUTION AUTHORIZING THE USE OF EMINENT DOMAIN TO ACQUIRE PROPERTY IN THE DOWNTOWN BUSINESS DISTRICT TO PROVIDE PARKING FACILITIES Motion By: Second By: WHEREAS, In 2002, the City Council undertook a community-based strategic planning process that resulted in the City's first "City of Prior Lake 2020 Vision and Strategic Plan," (now 2030 Vision and Strategic Plan). One of the speCific goals set out in the 2030 Vision and Strategic Plan is to "construct new parking facilities as part of Downtown redevelopment projects;" and WHEREAS, In 2001, the City undertook and implemented a Streetscape Plan; between 2002 - 2005, the City supported a Fa~ade Improvement Program that leveraged $270,000 in public funds to incent $2,400,000 in private fund investments in downtown building renovations; in 2003, the City contracted with the McComb Group, Ltd. to study the potential for development and redevelopment in the Downtown, the Downtown Development Study is incorporated by reference herein; and in 2004, the City contracted with Bonestroo Rosene Anderlik & Associates to prepare a Downtown Parking Study; in 2008, the City will solicit proposals for the redevelopment of additional properties in the Downtown area; and WHEREAS, The Downtown Area Parking Study, incorporated by reference herein, was completed in April 2004; and demonstrated a need for an additional 400-600 parking spaces in the downtown area by the year 2025; and WHEREAS, Whenever vacant and blighted property as defined in Minnesota Statutes 469.174, Subd. 10 is available in the downtown, City staff assesses its suitability to support redevelopment or as a potential location to meet the present and future need for additional parking in the downtown; and WHEREAS There is presently a blighted and vacant building located at 16328 Main Avenue in downtown Prior Lake which is a suitable location for a municipal parking facility; and WHEREAS The City has made two purchase offers in writing on February 28, 2008, and March 5, 2008, the first equal to the appraised value and the second exceeding the appraised value, to acquire the property from its owner; and WHEREAS The property owner has established a sale price substantially higher than the appraisal value and has been unwilling to reduce the price; and WHEREAS The City has attempted to negotiate in good faith with the owner and believes further negotiations will not result in an acquisition of the property by sale. NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA as follows: M:\CQUNCIL\RESOLUTI\2008\040708 Eminent Domai~cMyi5$~@rlake.com Phone 952.447.9800 / Fax 952.447.4245 1. The recitals set forth above are incorporated herein. 2. Providing public parking to support downtown businesses is a public purpose. 3. Removal of blighted structures as defined by Minnesota Statutes 469.174, Subd. 10 is a public purpose. 4. The City Attorney is authorized to use the City's power of "quick take" eminent domain to obtain the property located at 16328 Main Avenue legally described as all that part of the South 102 feet of Lots 1 and 2, Block 2, Cates Addition to Prior Lake, lying South of a line drawn from a point on the West line of said Lot 2, distant 51.75 feet North of the Southwest corner of said Lot 2, Easterly to a point on the East line of said Lot 1, distant 52.79 feet Northerly of the Southeast corner of said Lot 1; except all that part thereof lying Easterly of the following described line: Commencing at a point 14 feet West of the Southeast corner of Lot 1; thence running Northeasterly to the Northeast corner of said Lot 1, Block 2, Cates Addition to Prior Lake, according to the United State Government survey thereof and situate in Scott County, Minnesota. 5. Funds shall be drawn from account 603-49804-510. PASSED AND ADOPTED THIS ih DAY OF APRIL 2008. YES NO Haugen Hauaen Erickson Erickson Hedbera Hedbera LeMair LeMair Millar Millar Frank Boyles, City Manager M:ICOUNCILIRESOLUTI120081040708 Eminent Domain 16328 Main.DOC