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HomeMy WebLinkAbout12-29-2011 CCMPCity of Lake Elmo 3800 Laverne Avenue North Lake Ehno, MN 55042 SPECIAL CITY COUNCIL MEETING December 29, 2011 The Lake Elmo City Council will hold a Special meeting Thursday, December 29, 2011, from 9:00 a.m. — 10:00 a.m. at Lake Elmo City Hall, Council Chambers, 3800 Laverne Avenue North, Lake Elmo, MN. The purpose of the meeting is to address the employment of a City Administrator. Carole Luczak, Interim City Clerk City of Lake Elmo 3800 Laverne avenue North Lake Elmo, MN 55042 NOTICE OF SPECIAL MEETING December 29, 2011 10:00 a.m. A. CALL TO ORDER B. ATTENDANCE: Johnston Emmons Park Pearson Smith C. APPROVAL OF AGENDA: (The approved Agenda is the order in which the City Council will do its business.) D. PUBLIC COMMENTS/INQUIRIES: E. REGULAR AGENDA: 1. Library F Adjourn AY013 & COUNCIL COMMUNICATION DATE: December 29, 2011 AGENDA ITEM: Various Issues regarding Potential Purchase of 3537 Lake Elmo Avenue North ** Non-public Information (relates to real estate negotiations) ** SUBMITTED BY: Craig W. Dawson, Interim City Administrator The City Council and the Library Board have recently started to pursue the possible purchase of 3537 Lake Elmo Avenue North, which has also been referred to as the "Clock Building" or the "Bush Building", as the facility in which to locate the Lake Elmo Public Library. It is currently in foreclosure, and the financial institution holding it is open to discounting its price for the property. In their discussion during the December 20, 2011, meeting of the City Council, there was general agreement that it would be worthwhile to get processes underway to develop further information needed in deciding whether to purchase the property. Due Diligence Structural Assessment: On December 21, the Library Board authorized engaging services for up to $2,000 to perform a "due diligence" assessment/evaluation of the building, in order to gain an understanding of general building conditions and building code issues that may need correction, and to have an estimate of the cost to address them. On December 22, I gave authorization to Partner Engineering and Science to perform the work. Partner's standard performance condition is to provide a full report within 12 business days after receipt of authorization. The cost for the study will be assigned to the Library Fund. Possible Structural Engineering Analysis: This due diligence assessment may indicate that it would be prudent to have an engineering firm do the detailed structural analysis of what improvements are needed and their likely range of costs. The City Engineer has estimated that this work would probably fall in the $3,000 to $5,000 range. It would likely take a few weeks for this process to take place. Phase I and Phase II Environmental Reviews: It is a very common and prudent practice to conduct an enviromnental review of a property. A Phase I review is research on the property regarding its past uses and finding any known or likely activity which may require environmental clean-up. This work generally costs around $2,000 and can be done in a fairly short period of time. Phase 11 reviews are not as commonly performed, and rely on the findings of a Phase I review to deterniine the scope of work to be performed. Consequently, the cost and time to complete a Phase II review can vary considerably from site to site. -- page 1 -- Concerns with Sewage: The adequacy of the sewage system for the property has been raised as a concern. Washington County will provide technical assistance to the City, but it does not perform a full compliance review that a buyer would want. The City would likely want to have a firm hired to do the full compliance review. (A firm is planning to visit the site on Dec. 29 and prepare an estimate for its work to do the full compliance review.) In a usual real estate transaction, it is the seller's responsibility to disclose the adequacy of the sewage system. In this case, the City could engage the services of a firm to do the review as part of its own due diligence. If it is determined that the property used for a public library and private services needs to be served with holding tanks, then the City would be put in a position of granting itself a variance for the property to be served in this manner. Transaction Framework and Financing: I have spoken with Paul Donna of Northland Securities, the firm that does the City's bond issuance work. The method of acquiring and financing the property would be with "annual appropriation" (aka "lease -revenue") bonds, and would not require a referendum. As these bonds may be defaulted if an annual appropriation is not made, they carry a perceived higher amount of risk, and hence have a higher rate of interest — usually up to 0.5%. The City would purchase the property and issue the bonds, with the revenue to pay them off from an annual appropriation from the Library Fund, Given the probable size of the issue, it is quite possible that bonding could be done with a bank, who would act as trustee on the bonds for the duration of the issue. Mr, Donna believes that the process to, closing on the bonds would be 60 to 90 days, and more likely toward the 60-day end of the range, after work is authorized. There would be no compensation due Northland Securities unless and until the bonds are sold. One key concern is that the bond issue is sufficient to cover all of the costs of the project. This would occur after the sale price on the property is agreed, and after costs for building improvements (either through bids or confident cost estimates) are determined. For purposes of illustration, around Thanksgiving I asked Mr. Donna for some estimates of costs for 10-, 15-, and 20-year bond issues that would yield $500,000 in proceeds. This illustration is attached. As we have spoken about the structure of the bond sale, the figures under columns D, E, and F are the ones to consider. Summary of Action Iterns/Timeframe: 1) Due diligence structural assessment: Underway; due ca. Jan. 10; $1,800 2) Possible structural engineering analysis: After #1; a few weeks to perform; $3,000 - $5,000 3) Phase I environmental review: After #1 & concurrent w/#2; a few weeks; $2,000 4) Sewage system review: After #1 & concurrent w/#2 & 3; a few weeks?; $ ? 5) Cost estimating: After #1 thru #4; a few weeks to perform (by mid -Feb?); $ ? 6) Bond work: After #5; 60-90 days to perform (done late Apr -early May?) $ incl. w/bonds -- page 2 -- City of Lake Elmo, Minnesota City Library Project Summary of Preliminary Bond Financing Scenarios A Project Funds $500,000 Financing Costs $34,206 Par Amount of Bonds $535.000 REE D $500,000 $500,000 $500,000 $500,000 $34,206 $34,206 $37,250 $37.125 Total Principal $535,000 $535,000 Estimated Average Interest Rate 2.15% 2.71% Estimated Total Interest $71,733 $131,353 Estimated Total P&I $606,733 $666,353 Term 10 Est. Avg. Annual Pymt. $60,673 DSR Impact $0 Net P+I $60,673 Northland Securities Public Finance Group $535.000 $600,000 59 404 $535,000 $600,000 $595,000 3.17% 2.47% 3.14% $203,911 $91,875 $170,040 $738,911 $691,875 $765,040 15 20 10 15 $44,424 $36,946 $69,188 $51,003 $0 $0 $1,472 $1,667 $44,424 $36,946 $67,715 $49,336 $500,000 $36.875 $585,000 $585,000 3.65% $258,579 $843,579 20 $42,179 $1,590 $40,589 Prepared 12/28/2011 OnTuesday, | visited the Larsen Family Library ofVVebsterVNsconsin. The building had been ocar dealership, founded in 1974 by Terry Larsen. The Larsens moved their dealership south to Frederick Wisconsin about five years ago and the building remained empty. |t|slocated nnHighway 3Sin Webster. After some years, the Larsen family donated the building to the city of Webster, |amsending some photos that I took, however there are many more on the flicker website: httn://vvvvwf|ickr.cOnn/ohotos/vvehstor54893/vvith/4771989442/ The library had been inabank building smaller than our current library. They used aUSDA grant tnhelp remodel the car dealership, The current square footage ufthe library isZ1OOsquare feet, The library ix open 47 hours in winter and summer, which include evening and Saturday hours. The library has seven computers used by patrons. There are 3,S7Uborrowers, ofwhich only 463are residents ofWebster, The city of Webster has aboutr 650 residents, with a median price of a house at-$100,000. Contrast with Lake Elmo, with a population approximately 8,000, and a median price of a house at $400,000, jn 2010, The community atlarge donated books much as is happening here in Lake Elmo. Once people began to see the Library as a community resource, the donations went up. The book shelves were built in the high school shop class. The local bank gave $8OOOO.tothe Library for the initial remodeling, The annual budget comes from funds dedicated by Burnett County to the library of $49,000, and the Village of Webster contributes $37,147. With two small grants, the budget for the library for 2DIU,was $94,OOO. The head librarian ispaid annual salary ofmhnut$24,0OU,for 4Ohours aweek and the assistant et about $8,000.for 1Shours aweek, Volunteers make upthe rest ofthe team, agroup nfabout 14 toZO volunteers check out books, help patrons find books, use the computers, dostory time, and provide other services tothe library, The Friends ofthe Library were deeply involved and have anoffice inthe new facility. The library board helped topush through the change fnomesmoU|ibrarytothenevv library. The library board members come from Danbury, Webster, Siren, and other small townships. There isaconference room and community groups can sign uptouse the room. They have now community book clubs for both adults, and teens including a Murder Book Club ... those who love a good murder mystery. Local community groups use the conference room. They also had some extra room that they turned into o tutoring room for students. There is a computer there and in the chi/dren's area. The local fire department and local business groups got involved in helping in some part of the library remodeling and housing, The library now houses business and investment periodicals, such as the Wall Street Journal, Barons, and Investment Digest, where once those had to be found only in larger communities. Having a library visible in the main business area is good for business. As our local wine store observed that when the library has author events, people th-en use the time before and after to visit other businesses, Artists provide their work, shown oneasels throughout the library. The pictures onf|idkrand the ones |amincluding show interiors. The biggest expense for the library was the remodeling since the building was an empty shell with large garage like storage. The operating expenses, including salaries, technology, and acquisitions were about 9O7,U0Ofor 2O1O. | want tocontrast this scenario ofthe Webster library with its normal budget ofless than $1OOOOD and numoney bvwhich tupay back apart nfthe remodeling loan, (which the small town nfWebster will have tocome upwith) with our $26O,O0Oannual budget, and the likelihood ofbuying abuilding like the "Clock" building which already has been transformed into office like structures. | certainly think this is very possible. | am going to propose that m/e do more community outreach to businesses to help with our efforts in terms of acquisitions and furnishings which will free up money for the building itself.