Ordinance authorizing the conveyance of real property at 116 East Walnut Street and Resolution authorizing the sale of City owned property located at 116 East Walnut Street and 120 East Walnut Street.

Adoption of the attached ordinance and resolution.

On May 24, 1993, the City of Mankato entered into a Ground Lease with Love-It Furniture for the property located at 116 East Walnut Street and 120 East Walnut Street. On August 10, 2004, the Ground Lease was assigned to Brennan Properties, LLC, who had purchased the adjacent property at 124 East Walnut Street. The current annual rent is $4,125. The property encompasses 7,851 square feet and consists of an asphalt parking lot that provides private off-street parking for customers of the adjacent property at 124 East Walnut Street. The lessee owns the adjacent property at 124 East Walnut Street and has requested to purchase 116 East Walnut Street and 120 East Walnut Street.

The existing surface parking lot, curb, and landscaping deteriorated over time and were in poor condition. Although the ground lease does not require the lessee to fund reconstruction improvements, the lessee recently invested $32,750 to replace the surface parking, $364 for the permit fee, and approximately $3,000 for landscaping improvements around the parking lot at its own expense.

The lessee has requested to purchase the property for $1.00. Given the property generates $4,125 in annual rent while the City remains responsible for maintenance and future repair costs, insurance, and overhead costs, staff believes the City's ongoing financial benefit from ownership is limited. The sale would recognize the lessee's investment and transfer future maintenance and capital responsibilities to the
lessee. The sale of property would then transfer the property tax expense to the lessee. Staff therefore recommends authorizing the City Manager to negotiate the terms of the sale of the property, after providing cost documentation of the incurred costs for improvements.

The City’s original acquisition of the properties took place in the early 1990s. The acquisition of 116 East Walnut Street happened in 1991, after the County Auditor foreclosed on the property for nonpayment of taxes. On September 14, 1992, the City Council adopted a resolution authorizing the acquisition of 120 East Walnut Street and designating the property as development property. 

In researching the acquisition of 116 East Walnut Street by the City in 1991, staff could not locate a resolution designating the property as development property under Section 10.08 of the Mankato City Charter. This is typically completed at the time of acquisition and authorizes the City to lease or convey land by resolution without the necessity of a future hearing and ordinance. Therefore, to ensure there will not be future title issues and proper procedure is being followed, staff is recommending an ordinance authorizing the sale of 116 East Walnut Street per Section 2.14 of the City Charter. This is a method provided under the Charter to authorize the disposition of property when a resolution designating development property at the time of acquisition is not available.

After the public hearing, the Council will be asked to first consider the attached ordinance, and then a resolution authorizing the City Manager to enter into a purchase agreement with Brennan Properties, LLC for the sale of 116 East Walnut Street and 120 East Walnut Street for the purchase price of One Dollar ($1.00).