Minutes - Council Work Session - 08/09/2010

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were right around $24,000 annually. The concern expressed by the property owner was that with the purchase, the taxable value would increase and, therefore, his taxes would increase. He was correct. The lease agreement capped his commitment to rent to $36,000 the first year, $37,800 the second year, and so on. The taxes on the property were $41,241 and $43,554 respectively during these timeframes. In lieu of taxes -they paid $5,740 to allow that use to continue. This does not really change the amount of rent due - we would file for tax exempt. There is a $21,000 difference in taxes paid on the property but the City is only responsible for 39 percent or $8,493 -the City would receive the $5,740. We would get half the taxes but only see a deficit of about $2,700 in order for us to utilize that site every year. There is a 120-day notice that we have to give -and there is no time limit when we can exercise that 120 day time period. Staff recommends moving forward with the termination for the south 10 acres and do that after the lease is through in April. Then we could move all our dirt piles, etc. We thought putting that on a CUP site would decrease the amount of cost to the City to upgrade these. Mayor Ramsey asked if they pay anything other than the property taxes to which Mr. Olson stated they pay rent in lieu of property taxes. Mayor Ramsey commented so we are picking up the rest of the bill to which Mr. Olson replied at the time we bought the land, we did not know what the taxes would be. Mayor Ramsey commented that a CUP is a moot point. Councilmember Dehen stated that from his perspective, when we talked about this, he specifically said this was not his idea of the use of that land (the Bury and Carlson land). He still thinks the best use is future industrial. It seems businesses are less tolerable to railroad track vibration -keep the inner area for industrial and Public Works can be along the tracks. Councilmember Look stated that when we purchased this property three years ago, taxes were at $24,000 -now the taxes are at $43,000 - that's an 81 percent increase. This is not developed land -how did this increase happen. Mayor Ramsey stated we should be challenging this. Mr. Olson stated that the value was not increased to what we paid for it - it was still less. This is a fiscal disparity. Finance Officer Lund stated that when we purchased this is when they came through on Highway #10 and everyone got huge increases; however, now the value is down. If they pay the whole amount through April, that will help recoup some of the costs. Mr. Olson stated that according to the lease amount, the annual amount is very clear. From April 1; 2010 through March 31, 2011 -the amount is $39,611. If ownership after April 1, they would still owe $36,090 and we would have half tax exempt so they would be paying more than the taxes. City Council Work Session /August 9, 2010 Page 2 of 7