Adopt Resolution #19-093 Approving Revised Purchase Agreements for Land Exchange Related to COR Infiltration Pond Project; Case of PSD LLC (Previously Item 7.02)

Purpose
To consider approval of revised purchase agreement for Parcel 45 (Armstrong Retail Site) and related terms. 

On March 13, 2019 the City Council approved the purchase agreements for the sale of Parcel 45 and the acquisition of Part of Outlot A, Ramsey Town Center 13th Addition (Stormwater, ROW and remnant).  As discussed in that approval, final acreages would be dependent on survey and verification by engineering of the two parcels that are being exchanged.  During the survey for Parcel 45/Armstrong Retail Site, a portion of the site known as Parcel 4 and 5, Anoka County ROW Plat 90 created for the Armstrong Interchange were identified and these parcels are not usable and will not be conveyed as part of the transaction.  This reduces the square footage being sold by the City to PSD, LLC by approximately 3,854 square feet.   Based on survey and engineering calculations the following square footages were determined:

Parcel 45 -100,003 square feet (previously estimated to be 103,857 square feet)
Value - 100,003 X $6.21 = $621,019 (previously $644,952 - net decrease of $23,933)

Pt. Outlot A, RTC 13th - 124,725 square feet (previously estimated to be 124,725 square feet)
Value - 124,725 X $5.10 = $636,698 (no change)

Based on the actual square footage calculations the City will now show an expense of  $15,680 rather than revenue of $8,254 for the land acquisition portion of the land exchange. Staff believes this remains the most cost effective solution, rather than purchasing the necessary pond area without a land exchange for a cash impact of $638,698.

Public Well Background

The City selected the area west of Ramsey Boulevard and generally south of Bunker Lake Boulevard for the siting of new municipal wells in the 1990’s.  Five wells were developed in the area.  The area was also selected for development of the COR (formerly known as Ramsey Town Center in the early 2000's).   
 
Stormwater Background

The City is a member of the Lower Rum River Watershed Management Organization, (LRRWMO) a joint powers agreement with the cities of Andover and Anoka.  The LRRWMO is required to update their plan every ten (10) years by state law.  The State of Minnesota updated the requirements for WMO Plans prior to preparation of the current Third Generation Plan for the LRRWMO.  The change included infiltration of the first inch of runoff from all impervious surfaces in an effort to reduce storm runoff entering the system. The Third Generation plan was updated in 2011 and included the  requirement for infiltration of the first inch of runoff with the exceptions included in the state law.  The infiltration law does allow for creating an infiltration mitigation project outside of any wellhead protection area.  The mitigation project must receive an equivalent amount of runoff as the site being mitigated.
 
Multiple development projects were constructed in the COR after the Third Generation plan was adopted and they needed to provide infiltration. However, infiltration is not permitted on their sites.  Staff conferred with the LRRWMO and determined that a regional/shared infiltration mitigation basin could be placed in the southeast corner of the COR adjacent to the existing storm water pond.  The City collected an infiltration mitigation payment from this project and all subsequent projects in the COR that are in the wellhead protection area.
 
The proposed mitigation area includes an area that was encumbered by drainage and utility easements on the original Ramsey Town Center Plat.  The original plat included provision for an emergency vehicle access to Ramsey Boulevard. The route of this access is through the proposed infiltration basin.  Since then, a full public roadway has been planned as a result of Highway 10 planning efforts. This route runs along the north edge of the proposed infiltration basin.  This connection will be right-in/right-out at Ramsey Boulevard. This route will be constructed in the future when warranted.
 
Part of the infiltration basin is on City owned property and the other part is on PSD owned property. The proposed acquisition will transfer ownership of the portion of the basin on PSD property to the City so that the City can provide perpetual maintenance of the basin.  The transfer also includes the proposed right of way for the future road and a remnant piece south of the Medical Examiners building that is too small to develop.

Staff has previously been directed by the City Council to negotiate acquisition of the land needed for for stormwater infiltration ponding and road right of way south and east of the Medical Examiner's office. 

Notification is not required.

Pricing and Impact
The proposed land exchange accomplishes multiple City goals and requirements.  First, the exchange allows the City to acquire the land needed for required improvements to the Storm Water Infiltration in the COR which will allow for future development approvals and satisfy previous obligations. Second, under the terms of the Purchase Agreement, PSD LLC is required to construct a commercial/retail project on Parcel 45/Armstrong Retail Site that will result in increased tax base, jobs and addition commercial retail opportunities for Ramsey residents.  Although the net cost of the land exchange is $15,680, the projects that will be completed as part of this exchange provide immediate and future benefit to the City of Ramsey. Aside from these secondary benefits to the primary purpose, the primary benefits of this transaction (acquisition of the area for stormwater needs) far exceed the costs of a traditional transaction.

Square foot pricing for each parcel is based off of the appraisals received from Certified Appraisal Services (CAS) and both parties have agreed to those per square foot numbers  The City is sellling Parcel 45 (Armstrong Retail Site) which is approximately 100,003 square feet. The negotiated sales price is $621,019 which is $6.21 per square foot, which is above the midpoint in the City's approved Deal Range. The City will be acquiring approximately 124,725 square feet owned by PSD LLC.  The price of acquisition is $636,698 which is at a blended rate of $5.1048 per square foot.  The proposed net cost to the City as a result of this land exchange is $15,680. 
 
Need for Ponding for Parcel 45/Armstrong Retail Site and Surrounding Parcels

During site development for PSD LLC and engineering review of stormwater requirements it was determined that ponding would be required as part of development on Parcel 45 and surrounding sites west of Armstrong Boulevard.  Originally it was conveyed to the developer that ponding would not be required onsite or as part of their project.  Engineering staff has developed plan to account for storm water ponding system for Parcel 45 and the surrounding sites as shown on the revised concept.  The area to be used for this pond would be a remnant parcel and also include the vacation of a portion of 146th Avenue NW.  The estimated cost for the storm water pond system is $50,000.  PSD, LLC now understands that ponding is necessary for their project and has agreed to pay for its share of the storm water pond to be constructed for their project.    A revised purchase agreement for Parcel 45 has been drafted reflecting the new square footage.

The complexity of this transaction allows for some flexibility in how the deal will ultimately be structured.  The sale of Parcel 45 does not fit the generic Purchase Agreement template due to it being a land exchange.  However, Staff has worked to find an agreement that will result in the City acquiring the necessary land for the proposed stormwater project referenced above.  In addition, the proposed terms of the purchase agreement requires the developer to construct one building of a commercial / retail development on Parcel 45 (concept attached). Benefits of the transaction include, but are not limited to increasing retail options, increasing tax base, and the creation of jobs.  

The following items make this proposed purchase agreement unique:

1. The closing for both properties will occur simultaneously. The City would like to close on this transaction as as soon as possible to begin work on the Stormwater Infiltration Pond and the Developer would like to construct the project in 2019.
2. A site plan and plat will not be approved by Planning Commission or City Council prior to the sale of the Parcel 45 to PSD, LLC. The Developer understands the risk and must comply with the City development process and regulations.
3. The City will execute its typical Right of Re-Entry Agreement with an edit. The Developer will have 18 months to complete the building and to receive a Certificate of Occupancy.  If this is not done Parcel 45 will be returned to the City.  However, there will not be a financial penalty if a second building is not constructed. 
4. $1.00 earnest money will be required by the Buyer for each purchase agreement due to this being a land exchange. 

A complete summary of the revised land exchange and the terms sheets for each land transaction are attached to the case. 

The effective dates are changed to reflect the proposed City Council approval date.

The City of Ramsey has already passed a sales ordinance authorizing the Sale of Parcel 45.

50% Storm Water Utility Fund / 50% Storm Water Management Fund  - Purchase of the land needed for the storm water infiltration basin, right of way and to reimburse the EDA for the sale of Parcel 45

This case is being handled as part of normal Staff duties. CBRE does have Parcel 45 listed for sale, and is entitled to a Broker Fee.  However, due to the fact this this is a land exchange and the City will not be realizing revenue for the Sale of Parcel 45 there will be no broker fee paid.

Staff recommends adoption of Resolution #19-093 Approving Revised Purchase Agreements for Land Exchange; Case of PSD LLC, subject to review by the City Attorney as to legal form.

The Planning Commission has reviewed a concept site layout, and is generally comfortable moving forward with official site plan review.

Motion to adopt Resolution #19-093 Approving Amendment to Purchase Agreements for Land Exchange; Case of PSD LLC; subject to City Attorney approval.