COR III North Commons

 At the the regular meeting of April 23, 2013, the HRA considered an offer to purchase residential lots within the COR III North Commons development.  As part of that process, Anoka County property records were reviewed and the City solicited opinions of value from local real estate agents and determined that $35,000 for the standard residential lot in this development was close to the current market.  Premium lots along the park would command a higher price.

Due to the fact that the current price is on the low end of the original real estate pro forma for this project and significant additional costs have been added to the expense side of the development, staff was asked to re-evaluate the project and determine whether it is best to proceed as contemplated, or to delay or modify the development.  Staff was asked to look at the scenario of developing only the four lots adjacent to North Commons Park as one option.

Not applicable.

Staff has identified four options for the North Commons site as follows.
 
Option 1 would involve simply walking away from the project.  This option would require a lump sum payment to the contractor as reimbursement for expenses and fees required to clean the site up, restock previously purchased materials, and to grade and restore turf throughout the project site.  
         Cost: Total with Land and All Sunk Costs ($1,098,769)
                    Marginal Costs (i.e., no sunk costs) less Projected Revenue ($63,407)

Option 2 would include the development of the four lots on the west side of the park only.  The four house pads were previously rough graded so the work to develop the four lots would simply require construction of water and sanitary sewer services, repairing the street where the services were connected to the main, constructing driveway aprons and sidewalks across all four lots, and constructing a storm sewer outlet for the wetland located within the park.   This option would also require a lump sum payment to the contractor as reimbursement for the expenses and fees outlined in option 1.
        Cost: Total with Land and All Sunk Costs ($1,046,825)
                  Marginal Costs (i.e., no sunk costs) less Projected Revenue ($51,945)

 
Option 3a would involve completing the full 17 lot development project, including salvaging all excess topsoil from the 13 lot development site and hauling it to the Lake Ramsey site for future use in establishing turf on the pond side slopes.  The excess topsoil quantity has been estimated at 6,410 cubic yards.  The contractor would then need to excavate the same amount of clean fill material from the Lake Ramsey site and haul that fill material back to the North Commons site to fill the areas vacated by the excess topsoil excavation.  The topsoil that was hauled to the Lake Ramsey site would then be applied to the side slopes of the lake for the purpose of establishing turf.
         Cost: Total with Land and All Sunk Costs ($1,087,501)
                  Marginal Costs (i.e., no sunk costs) less Projected Revenue ($92,621)

Option 3b would also involve completing the full 17 lot development project, but instead all excess topsoil would be wasted in the rear yard areas of the North Commons residential lot sites.  This could be accomplished  by over-excavating the rear yard areas and placing the clean fill on the building pad areas to raise the pads to final grade, then burying all excess topsoil within the rear yard areas.  While this option would be slightly cheaper than option 3a to complete in the short term, it would ultimately be more expensive than option 3a in the long-term since topsoil is a valuable commodity and would need to be purchased and hauled to Lake Ramsey for establishing turf on the side slopes of Lake Ramsey in the future.  In addition, when topsoil is placed in large lifts it often results in differential settling and drainage issues for the property owners.
         Cost: Total with Land and All Sunk Costs ($1,061,513)
                   Marginal Costs (i.e., no sunk costs) less Projected Revenue ($66,633)

Upon review of all all the options, it appears that there is not a significant difference in stopping the project and moving forward with one of the full development proposals. The ultimate benefit to the City in taxes would be about $12,538 dollars per year, that will begin to generate two years from the start of each house construction.  Another benefit to the City would be the completion of the final layer of asphalt for the roads in that subdivision.

Other options would be for the City to wait until lot prices increase, but the uncertainty of revenue under that option, plus the cost of delay make that option unattractive.  Also, the "walk-away" option does not include any amount for the sale of the raw land.  This amount may cover any costs of stopping the development, but would have the risk of whether the City could sell the land. 

Upon review of all all the options, it appears that there is not a significant difference in stopping the project and moving forward with one of the full development proposals.  The primary risk in moving forward is the inability to predict lots sales and the potential of additional unanticipated costs.  The benefit would be creation of additional rooftops and a future tax base.  At least two builders have expressed interest in purchasing lots, so that it likely that many of the lots could be sold relatively soon.

Costs for this project are being funded by the Landfill trust Fund and will be reimbursed in part by land sale proceeds.

 Direct staff to move forward with development and secure lot sales.