Adopt Resolution #24-179 Approving Purchase Agreement with Oak Terrace Estates, LLC

The purpose of this case is to consider the sale of a portion of City-owned Right Away Acquisition Loan Fund (RALF) property adjacent to the existing Oak Terrace Estates.  Staff has been working with City Attorney Knaak and Jonathan Septer, the Oak Terrace Attorney, for the past two years to bring resolution to a property line dispute between the City and Oak Terrace.  City Staff has also been working with the ownership of the park to work through building related and code enforcement related items not related to the property line dispute.  This action dates back to City Attorney Langel and his position, which has been affirmed by Attorney Knaak, that Oak Terrace is trespassing and does not have any adverse possession rights over public land.  Staff discussed two options with the Council at worksession on February 13, 2024 relating to the sale of city property to Oak Terrace. Option 1 would be to sell 12,265.7 square feet, which would bring the property into compliance (removing the encroachment) with the property line dispute and square off the lot with the adjacent parcel. Option 2 would be to sell 4520.3 square feet, which would only solve the property line dispute but would create an odd remnant that likely would lead to future encroachment by the park and its tenants.  Entering into an encroachment agreement, rather than a sale, to bring the property into compliance was also discussed, but it was not the preferred action based on the required monitoring and the likelihood that the park would spill over past the new area encumbered by an encroachment agreement.  Staff has obtained an appraisal for both Option 1 and Option 2. City Council direction from the February 13, 2024 work session was for Option 1 and to work with the Oak Terrace and Met Council to draft a Purchase Agreement and bring back to the City Council for consideration.

The appraisal was completed in August of 2022 and was $41,100 for Option 1.  Staff provided a negotiated draft Purchase Agreement to Met Council (RALF Program) in April 2024. Met Council contested the purchase price and asked for a price similar to the valuation of the developed Oak Terrace manufactured home park ($88,067.73 - approximately $7.18/SF). Both Staff and Oak Terrace communicated to Met Council that this property was undeveloped, did not have City Sewer and Water installed and would also need to install roadways which did not support the higher value requested by the Met Council.  City Staff countered with a sales price of $43,560 ($3.54/SF) and the Met Council approved this price at their board meeting on June 26, 2024 (See attached report).  As part of this purchase agreement / dispute settlement, Oak Terrace is asking to add six additional homes onsite to help recoup the cost of the expense of the land acquisition. It also gives them an opportunity to rearrange a few homes over city services, and to pave more area for parking.  Planning and engineering have reviewed the proposed site plan and home locations and are satisfied with the layout.  Additional easements may be obtained to ensure that City infrastructure is accessible. Staff believes the squaring off the lot prevents future issues and makes the land to the west more marketable without a small flag remnant and is supportive of the proposed purchase agreement.  It should also be noted that because this action is considered a dispute settlement, there is an allowance of the expansion of a legal non-conforming (six more homes) use that has been confirmed by City Attorney Knaak. The attached purchase agreement reflects the agreed upon price and terms reviewed by City Attorney Knaak.

None required

City Staff and the City Attorney have been working for nearly three years to bring the Oak Terrace encroachment onto City/RALF property into compliance. The purchase agreement presented for consideration in this case will resolve this issue and potentially prevent future encroachment issues.  The City does not receive the proceeds from the sale.  All proceeds go back to the RALF program to go towards repayment of the RALF Loan (L05-02) for this parcel.  As part of this case the City Council will consider approval of the attached site plan (also included in the PA), recommended by City Staff and engineering, pursuant to the spirit of Chapter 109.  The legal counsel for Oak Terrace agrees to the terms in the proposed purchase agreement. Key terms of the purchase agreement are below:

Property description: That part of the Northeast Quarter of the Northeast Quarter, Section 34, Township 32, Range 25, Anoka County, Minnesota, lying southerly of the Burlington Northern Railroad right of way. Also being a part of Lot 6, AUDITOR'S SUBDIVISION NUMBER 30, according to the recorded plat thereof.
Tax ID number: Portion of 34-32-25-12-0013
Purchase Price: $43,560
Title Examination / Contingency Period: 90 days
Closing Costs: All costs except City Attorney fees to be paid by Buyer.
Site Plan / Lot configuration: Graphic included in purchase agreement. six new units at Oak Terrace, none of which will be over city infrastructure or encroach on City/RALF property.

Alternatives:
1) Approve Purchase Agreement (as presented); subject to City Attorney review
2) Approve Purchase Agreement (with changes); subject to City Attorney review
3) Something else

Not applicable.  All proceeds from the sale will be forwarded to the Met Council RALF program.