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HomeMy WebLinkAbout#04 - Four Corners Development RequestsSTAFF REPORT DATE: November 12, 2019 DISCUSSION AGENDA ITEM: Four Corners Development SUBMITTED BY: Kristina Handt, City Administrator REVIEWED BY: Sarah Sonsalla, City Attorney BACKGROUND: On July 17, 2018 the City Council approved zoning text amendment and preliminary and final plats for Four Corners 1st Addition and a Conditional Use Permit (CUP) for the Stillwater School District Bus Facility. On October 16, 2018 Council approved the Development Agreement for Four Corners 1st Addition. The sale of a parcel of land within the Four Corners 1st Addition subdivision from the Developer (Terry Emerson) to the Stillwater School District occurred a few weeks after. This property is being used by the School District for a school bus facility pursuant to a CUP issued by the City. A copy of the City Council resolution approving the Four Corners 1st Addition preliminary and final plats is included in your packet. Condition numbers 10 and 11 of the resolution relate to the reconstruction of Hudson Boulevard and extending water and sewer. A copy of the executed Development Agreement for Four Corners 1st Addition is also included in your packet. Since the time of approval of the preliminary and final plats last year, City staff has approved construction plans, met with utility providers, and met with the Developer and his representatives regarding Four Corners 1st Addition on numerous occasions. The City Council approved the Four Corners 2nd Addition final plat on August 19, 2019. This plat includes the Metro Transit Park and Ride facility. The Planning Commission held the public hearing on Metro Transit’s proposed park and ride CUP this spring. Metro Transit has waived the time limits under the 60 Day Rule as the recording of the final plat of Four Corners 2nd Addition is required before the City Council may consider the CUP. The plat has not yet been recorded as the development agreement has not yet been approved. The deadline under the Development Agreement for Four Corners 1st Addition for the Developer to install the public improvements (including the extension of water and sewer) was October 31, 2019. The Developer has not commenced the installation of these improvements. Meanwhile, the School District has made investments into its school bus facility property but it is not able to meet the condition in its CUP to connect to water and sewer because the Developer has not brought it to the site as required in the City’s 2018 approvals. On October 1, 2019 the Council received a letter from Mr. Nick Dragisich on behalf of the Developer that made several requests of the City pertaining to Four Corners 1st Addition and Four Corners 2nd Addition. A copy of the letter is included in your packet. City staff met to review the requests of the letter and had some follow up questions, however Mr. Dragisich was not able to meet with us prior to the packet deadline. He did speak to the City Attorney on November 7th and they were able to discuss the requests that were being made by the Developer in the letter. ISSUE BEFORE COUNCIL: Should the City amend the project approvals and the Development Agreement as requested by the Developer? PROPOSAL DETAILS/ANALYSIS: The requested changes by the Developer related to the Phase 1 (Four Corners 1st Addition) Development Agreement in Mr. Dragisich’s letter include: (staff comments in blue) • Time extension to December 1, 2020 o Policy decision for council. Will impact the Council’s decision on the school bus facility CUP. • Section 26D-City pays for insurance policy. Vali-Hi is not required to hook up to water and sewer until property develops with no penalty. o Staff would not recommend that the City pay for the Developer’s insurance policy. Standard practice is to require these items with release of the plat for recording. The City is not at fault for delay in construction. o With respect to Vali-Hi, if water and sewer stubs are placed in front of any property, the property owner is required to connect within two years of notification per City Code requirements, otherwise there is a penalty. The City has charged the penalty to other properties waiting for redevelopment. If the City wants to change this, it will require that the City’s code be amended. The Council could choose to not require stubs to the Vali-Hi property so that the connection requirement is not triggered. This would require tapping into the mains at a later date when redevelopment occurs. • Sec 31 - City pays EN Properties (the Developer) for the LOC provided with the Development Agreement in 2018. o Similar to the previous item, this is a common requirement of the City before releasing a plat for recording. Staff would not recommend the City pay these fees. • Sec 32 - numbers revised to reflect actual costs. o Staff does not understand the ask here. This was one of the items we sought clarification from Mr. Dragisich. Mr. Dragisich did not have any additional information regarding this request. • New section to allow late comers’ payment for utilities and possibly road costs. o This is one of the areas we sought more information from Mr. Dragisich to clarify which statutory authority would allow this and how specifically it could be implemented in Lake Elmo. Mr. Dragisich concurred with the City Attorney that what was being referred to here in this letter is actually a lateral benefit charge. Council could consider charging a lateral benefit charge in the future when these properties connect to water and sewer and then pass some of that charge onto the Developer. The challenge is that the future development is unknown and therefore the impact of such an agreement may actually hurt economic development efforts. For example, Vali-Hi is guided as Mixed-Use Business Park in the 2040 Comp Plan. What happens if high density residential (such as a Continental type project) wants to go there? That would mean 300 RECs used in the calculation of the lateral benefit charge. Furthermore, the City is limited to only charging the amount of the lateral benefit charge that is in its fee schedule. The current lateral benefit charge for sewer is $11,600 per REC and for water $5,800 per REC. Changes requested in Phase 2 (Four Corners 2nd Addition) include: • Site data 53.29 acres o Whatever the correct data is; staff has no issues • Outlot C-City take ownership o Staff has no issues with this. • Park Land Dedication paid by Metro Transit o Minnesota Statutes Section 462.358, subdivision 2b requires park land dedication to occur at the time of subdivision. Therefore, it was a requirement in the City’s approval of the final plat and will be a requirement in the development agreement as has been our past practice. The Developer is free to negotiate with Metro Transit to have the Metro Transit pay the fee similar to what he did with the School District, but the City should keep the requirement attached to the subdivision process. Preliminary Plat/PUD Conditions: • Ponding area to the north-watershed has easement and maintains it. o This area will go away in the future as land to the north develops. Easements and responsibilities need to be verified. • Metro Transit pay park land dedication fee. o See previous comments. Recommend Conditions: • 5. Metro Transit pays park land dedication o See previous comments. • 8. City pays oversize costs o Staff has no issue with this. Oversizing was provided in 1st Addition. Once the Developer provides cost estimates for 2nd Addition, staff can calculate the specific amounts. • 10. City owns and maintains Outlot C o See previous comments. Other Issues: • Xcel Energy Gas Main easement area o This may be possible but requires more review by legal. • Hudson Blvd North o Has been a Municipal State Aid road since 2013. Washington County is requiring the realignment for better access management along Manning Ave. While land may be used to relocate the road it also frees up land for development by the Developer in the location where the road is vacated. o Any amount of the $250,000 not used for the stoplight will be refunded to the Developer per the Development Agreement. o The Developer’s $150,000 contribution was volunteered by the Developer’s representative at the City Council meeting on July 17, 2018. While staff cannot recommend support of all of the items requested by the Developer in Mr. Dragisich’s October 1, 2019 letter, we have exhaustively reviewed all options. Staff also looked into creating a sewer district under statute. However, this would result in immediate increased property tax assessments for the properties not developing which is not consistent with the idea of a late comer’s fee. The sewer could be redesigned to allow for a lift station and force main rather than gravity. However, this would require the gravity main to be converted to a force main over time and the City loses the benefit of immediate access to sewer as was a requirement in the approvals. This could also have an impact on the School District who has already invested in infrastructure to connect to gravity sewer. Another common option that has been discussed multiple times over the past year is for the City to take over the project and proceed with a 429 special assessment project (similar to other road and sewer projects in the City). This means that the City would construct the project and specially assess all of the benefitting properties which would include the Developer’s property but also other properties (i.e. Vali-Hi). If the City proceeded with this option, and did not receive waivers of special assessments from all benefitting properties (as was done to bring sewer to Wildflower/Village Preserve and the Savona neighborhoods) the City will face increased costs in potential assessment challenges, both in legal fees and in reduced assessments if the City is not successful in defending these assessments. The project also requires easements to be acquired from neighboring property owners. The cost of easements was not included in the letter of credit received for the project as the Developer was in the process of acquiring them. If easements are not obtained from owners willingly and the City does the project, the City would need to acquire the easements through eminent domain proceedings which adds additional costs and legal exposure to the City, including legal costs and property acquisition costs. Additionally, while it would be a City project, the utility companies may still argue that the project is for a private benefit and refuse to move their utilities out of the right of way without additional charges to the City resulting in relocation costs and legal costs. The overall project costs may also increase as the City will not be able to accept the bids the Developer has received for the project but will have to follow the formal competitive bidding process that is required by statute. Lastly, the project timeline would need to be pushed back in order to accommodate all these things. The City could proceed as described above and use the Developer’s letter of credit to cover some of the costs with respect to Four Corners 1st addition. Then any costs beyond that are authorized by the Development Agreement to be specially assessed against the properties in the subdivision. In the case of Four Corners 1st Addition, the only other property in the subdivision that is not owned by the Developer is the School District property. The City could also finance the project improvements through the sale of GO bonds, though not tax exempt so the interest rate would be higher. In that event, the City would not be required to specially assess the other benefitted properties, which would remove the possibility of assessment appeals should the City go this route. However, this would only leave the property owned by the Developer to be assessed which could result in a rather large assessment being imposed on that property. Given the large assessment, this could mean that there is a more significant risk that the property will into tax forfeiture and the assessment will not be paid in full. In that event, the City would have to levy taxes to pay off the bonds. The City could consider tax abatement to finance the project improvements. The taxes (likely just the City portion of about $10,000/year as the City would need the consent of the School District and the County for their portions to be abated) could be redirected to pay off the costs of the project. The maximum amount of time for tax abatement is 20 years. It is unlikely that 20 years of the City’s portion of the taxes alone will pay off the project costs. FISCAL IMPACT: Depends upon direction from the Council. ATTACHMENTS: • Dragisich October 1, 2019 Letter • Resolution 2018-076 Approving the Four Corners 1st Addition Final and Preliminary Plat • Four Corners 1st Addition Development Agreement City of Lake Elmo, Minnesota Page | 1 October 1, 2019 Mayor Pearson & Members of the City Council City of Lake Elmo 3880 Laverne Avenue North Lake Elmo, Minnesota 55042 RE: Four Corners Development, Lake Elmo, Minnesota Dear Mayor Pearson & Members of the City Council: The Four Corners Development planning has presented a number of difficult challenges as you are aware. These challenges have established a need to for Mr. Emerson to request changes to the Development Agreement if this project is to move forward successfully for both the City and Mr. Emerson. The requested changes in Phase 1 of the Development Agreement include: • A time extension is requested until December 1, 2020 • Section 26D. – The City pays for the insurance policy which wasn’t needed until work started. Vali Hi is not required to hook up to sewer & water until property develops with no penalty payments. • Section 31. - The City pays EN Properties LLC for the letter of credit that it should not have been required to put up until work started. • Section 32.- The numbers will have to be revised to actual costs. Using the existing numbers, the City holds $56,840 plus a LOC for $227,361 after completion and final approval of the project. Is there a valid reason to hold $56,840 of EN Properties LLC’s money when you still have LOC through Warranty period? • A new section needs to be added to establish a late comers’ payment for connecting to the sewer and water to be constructed as part of this development. The agreement needs to provide that the City will require late comers to pay a connection fee in an amount sufficient to reimburse EN Properties LLC for the cost it will incur in the construction of the sewer and water improvements for which the late comers will benefit. The cost should include both the construction costs plus an annual interest charge to recognize the time value of money to EN Properties LLC. o The construction costs need to include the costs of all required improvements for bringing Hudson Boulevard North up to City standards if Vali Hi and Scott Sayer are unwilling to grant the 15 foot permanent easement and 40 foot temporary easement needed for the initial construction and subsequent access to the water and sewer utilities to be constructed by EN Properties LLC. Their refusal to grant these easements will require EN Properties LLC to Baker Tilly Municipal Advisors, LLC 380 Jackson Street, Suite 300 St. Paul, MN 55101 +1 (651) 223 3000 City of Lake Elmo, Minnesota Page | 2 construct these utilities within the existing Hudson Boulevard North right-of-way at an increased cost to EN Properties LLC currently estimated to be in the range of $500,000 depending on City requirements. The requested changes in Phase 2 of the Development Agreement include: • Site data 53.29 Acres • Outlots - Outlot C. The ponding volume is approximately 50% ponding volume for the City street. EN Properties LLC agrees to design and build the pond to City specifications at no cost to the City. Upon completion, EN Properties LLC will deed the pond to the City who take ownership and assume maintenance of the pond going forward. • Park land dedication: - When a lot is developed by the owner the Parkland Dedication fee will be paid to the City. Metro Transit will pay the 25,470.00 for its parcel. Preliminary Plat/ PUD conditions: • 13. Ponding area to the North - The Watershed District has an easement on it and maintains it. The pond is approximately a 9-acre regional pond which the City or Watershed did not have to pay for and EN Properties LLC is developing it at no cost to the City. • 17. EN Properties is not developing this lot, Metro Transit is developing the lot and paying the fee. Recommend Conditions: • 5. Metro Transit pays • 8. City pays oversized costs • 10. City owns and maintains Outlot C Other Issues Existing Xcel Energy Gas Main In a recent meeting EN Properties LLC had with Xcel Energy, they indicated they like to be on an easement as opposed to a right-of-way. Lake Elmo’s code provides that Xcel Energy’s gas main would be provided with an easement in the Hudson Boulevard North vacated right of way if it is realigned as requested/required. Xcel Energy also stated they prefer to have an easement equal the entire width of the vacated right-of-way. However, an easement of that width would preclude the use of the parcel by Metro Transit and pretty much any other entity as there would be no building or construction of improvements allowed within the limits of the easement. An easement of 20 feet (10 feet each side of the Xcel Energy gas main) would be more reasonable allowing Xcel Energy to access their gas main while also allowing the development of this property. Hudson Boulevard North EN Properties LLC would like Hudson Boulevard North to stay in its current alignment, same as the County Rd. 19 intersection. EN Properties LLC agreed to relocate and realign Hudson Boulevard North to line up with the street providing access to the Holiday station before the City designated the road a Municipal State Aid Street. This designation changed the construction standards costing EN Properties LLC hundreds of thousands of dollars in increased costs. EN Properties LLC also agreed to pay for Lake Elmo’s portion of the stop lights. Washington County informed EN Properties LLC that the cities portion of stop lights would be $60,000 not $250,000 which EN Propertied LLC has already given to the City. EN Properties LLC also gave the City $150,000 for selling two parcels of land after they agreed to relocate City of Lake Elmo, Minnesota Page | 3 Hudson Boulevard North. Relocating Hudson Boulevard North requires dedicating approximately 2 to 3 acres of land to the public for its use as part of the City’s local road network at no cost to the City which saves the City hundreds of thousands of dollars. This dedicated right-of-way has a value of hundreds of thousands of dollars. In addition, EN Properties LLC would point out that the construction of these sewer and water improvements provides a significant future benefit to the City by enabling the development of a large area of land beyond the area included in our development. This future development will increase the City’s tax base providing new revenues to the City. EN Properties LLC respectfully requests a meeting to further discuss these issued with you to reach a mutually beneficially and financially equitable development agreement for both the City and EN Properties LLC that will enable the development of this area to move forward. Sincerely, Nicholas R. Dragisich, P.E. Firm Director