Agenda - Council - 07/23/1991 - Laserfiche WebLink

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I I I I CASE McKINLEY STREET EXTENSION By: Ryan Schroeder, City Administrator Background: Staff has recently completed historical research of the McKinley Street extension approval process. This was initiated in that the City has received signed real property acquisition and municipal street and utility improvement agreements from the owners of the Industrial Park 1st Addition, Spohn and Anoka 67 Industrial Partnership. The agreements were drafted by Bill Goodrich subsequent to Resolution g90-12-373 passed by the City Council on December 11., 1990, which is attached for your review. The agreement, which is also attached for your review, results in the City acquiring 208,000 square feet of right-of-way from the property owners. In return, we are agreeing to construct roadway improvements which are estimated to cost $460,000. We further agree that we will not assess the property owners for this improvement. The net end result of that agreement is that the right-of-way is at a cost to the City of $2.21 per square foot. What makes the issue somewhat more confusing, however, is that the owners agree to an SAS charge to be paid back over a ten year period (after lot development and connection) of $7,463 an acre. They will have approximately 71 acres available after construction of the street which means they are liable for an eventual payment of $529,873. Our assessor has run a development cost approach on this property with a five-year selling period, assuming ten - five acre lots and seven - three acre lots and also assuming that the City will provide for the road but that the owner will provide for all additional expenses including the SAS charge. This schedule is attached for your review. The result is that the owner must sell the property for 45.53 cents per square foot in order to make a 12- 1/2% return on his investment (this assumes about a 49¢ per square foot cost for the three acre lots and 44¢ per square foot cost for the five acre parcels). Again, according to our City Assessor, these prices are within the market for industrial lots with urban services. The net end result of the above is that while the construction of the roadway becomes, in effect, a fairly expensive means of acquiring fight-of-way, the property could not stand the additional encumbrance of an assessment for that road construction and still remain competitive within the market place for re-sale as industrial property. If it continues to be the case that the City of Ramsey is interested in assisting industrial development, then this becomes a reasonable project to pursue. The Council may also wish to consider that eventually it will receive in the neighborhood of $530,000 in SAS reimbursements and of course the taxable value of the property increases once it becomes platted into smaller lots and certainly after the roadway is improved. Eventually the City will receive increased taxes from whichever developments occur on these parcels which are made available by construction of the roadway. Therefore, the construction of the roadway and acquisition of the right-of-way, becomes an investment with an unknown return but one which will make available urban and industrial lots which are not currently available to any great extent. Recommendation By motion, ratify the Council's earlier action directing the City Administrator to enter into an agreement with the owners of property within the McKinley Street development area for right-of- way acquisition and direct the City Engineer to initiate the public improvement project by passage of the resolution attached. Council Action Adopt/Not adopt Resolution 4~91-07- receiving a petition and calling for a feasibility study on Improvement Project ~:)1-11, the McKinley Street extension. Review Checklist: City Administrator City Engineer Project Manager I gl