Adopt Resolution #17-04-080 Authorizing the City of Ramsey to Purchase Real Property and Submit a RALF Program Application to the Metropolitan Council

PURPOSE
Consider approving the attached resolution formally authorizing the city to purchase 6401 Highway 10 and officially apply for Metropolitan Council RALF Program funding. 

BACKGROUND
This case was brought to the City Council on 09/13/2016 and 01/24/2017.  Please reference those cases for detailed background on this project.

UPDATES
At the 01/24 Council meeting, the City entered into a purchase agreement with Athans Holdings for the acquisition of 6401 Highway 10, and authorized staff to complete remaining property acquisition due diligence (Phase II Environmental Site Assessment (ESA), UST/ Pump Removal, State Inspection of UST Removal).  That work was recently completed by Braun InterTech. 

Overall, the Braun InterTech work went well.  The Phase II ESA came back without any major concerns--and Bruan InterTech supports the City's purchase of 6401 Highway 10.  NOTE: see actual Phase II ESA report for details--some very minor items did come up during the Phase II ESA.

RE the remaining due diligence items, staff included a line item budget in the RALF application of $52,000.  The estimate provided by Braun for this work was $40,260.  The actual project costs were $52,535.  A major reason for the difference was due to change-orders submitted to Braun from the tank-removal sub-contractor (about $10,000).  Staff is currently working with Braun and the sub-contractor to find a resolution/ settlement on this particular item.  Staff has not approved said change orders.  Staff will keep the Council posted on this item.  Regardless of how this item unfolds, staff believes we can still move forward with the attached RALF application, as-is.

Lastly, it should be noted, during the UST (underground-storage-tank) removal, a minor gas leak occurred; which, did result in a response from the Ramsey Fire Department and Centerpoint Energy, and slightly delayed said work.  No property damage occurred, and no injuries/ health concerns occurred. 

NEXT STEP
A major component of any purchase agreement is the "inspection period" (also know as the "due diligence" period).  As mentioned, the City has completed remaining due diligence items for the proposed property acquisition.  The "inspection period" for this purchase agreement officially ends on 04/12/2017.  At that time, if the City decides they want to continue pursuing the purchase of this property, our earnest money goes non-refundable ($25,000), and we enter into the "closing period" of the purchase agreement.  We formally take that step by providing something known as a "notice-to-proceed" to the seller.  The City is now ready to provide the seller with a "notice-to-proceed" to closing, as described in the purchase agreement.

NOTE: our purchase agreement requires approval from the Metropolitan Council (for a RALF loan) before the City will close.  In the event the Metropolitan Council does not approve our RALF application, the City can still walk away from this purchase agreement.  In that scenario, we would lose our earnest money, and all of the dollars we have spent to-date (due diligence).  We have until July 01, 2017 to close.  We expect to close in early June.



 

ATTACHED:
(1) Resolution 17-04-080.  This resolution is the purpose of this case.  It outlines Council action being taken.
(2) RALF Application.  This is the application staff will be providing the Metropolitan Council.
(3) RALF Loan.  This is the draft RALF loan agreement between the City and Metropolitan Council.
(4) Purchase Agreement.  This is the land acquisition agreement between the City of Ramsey and Athans Holdings.
(5) Due Diligence.  This is all of the due diligence completed on this project, wrapped into one single attachment.  This is very long.  If Councilmembers would like individual documents, please email staff.

-short term-
The City has a an account in place today, that captures revenues from all Ramsey-owned properties located along Highway 10, that were purchased via RALF, and are currently being leased to private organizations.  This "Internal Ramsey RALF Fund" can ONLY be used on expenses related to RALF/ properties purchased via RALF.  The balance of that account is $186,000 roughly.  Staff is using this account as a temporary/ short-term project funding source (due-diligence costs).

-long term-
The long term/ permanent funding source proposed for this project is the RALF program.  The the background section of this case describes the program.  The attached application describes the City's proposal.  Once the purchase agreement is closed, all costs will be funded via this new RALF program loan.  NOTE: there is a chance that the Metropolitan Council does not agree with our project budget, and doesn't reimburse the City for everything we ask.

Staff is comfortable moving forward with formally applying to the Metropolitan RALF program.  Staff has had several conversations with MnDOT and the Metropolitan Council RE this project.  Both groups have previously provided preliminary support for this application, and recent conversations with both groups have also been positive. 

RE the actual purchase of 6401, based on information in-hand, and discussions with Bruan InterTech / the City Attorney, staff is comfortable with recommending purchase of this property.  With the contingencies below in mind, it appears both the site and building are clean, and usable for the proposed future use (right-of-way).

(1) Minor trace vapor contamination in soils exists, minor trace water contamination exists, and minor trace contamination in soils exists.  Braun has indicated findings on this site DO NOT exceed industry maximums (they are below).  These findings are not surprising for a redevelopment site, with several past auto-related users.  Based on information in hand, Braun does not have any concerns using this site for a future roadway, and doesn't anticipate any major remediation.  The MPCA has provided closure letters on the water contamination item in the past.  Please see actual Phase II ESA for official information/ details.

(2) Outside of various standard items (items found in all buildings), the pre-demolition building survey came back clean.  Braun did leave a contingency RE the roof liner--per industry standards, the roof should be tested for asbestos.  That roof has not been tested because it would have required destruction to the roof liner, and seller was opposed to said work (back in 2016).  Now that this project is further along, the seller has provided staff authorization to get a core sample from the roof.  Staff has a work order in now.  This item is considered to be low risk--due to the age of construction for this building.  However, to be safe, staff is ordering this work to occur before closing.

(3) General note: regardless of the amount of due diligence completed by the buyer (City in this case), we cannot have 100% assurance of a clean site and clean building.  We can only limit risk, to the best of our ability.  There is a chance contamination exists that was not picked up during our due diligence process/ exercises. 

Motion to:
Adopt Resolution #17-04-080 Authorizing the City of Ramsey to Purchase Real Property and Submit a RALF Program Application to the Metropolitan Council