Agenda - Economic Development Authority - 06/04/2015

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BACKGROUND (Case) This case was originally reviewed by the EDA and City Council in February; at which time the original purchase agreement was approved. After this case was approved, WESTCO was unable to move forward with executing the original purchase agreement because the cost of the project was higher than originally anticipated. On March 30, City staff sent a formal cancelation of the original purchase agreement. Since March 30, WESTCO has reduced their project costs by slightly redesigning their new building, reducing the size of their new building, and by reducing the price in which they have offered the City to purchase the subject property. With these reductions in mind, WESTCO has indicated they are now comfortable with moving forward with their proposed project Notification: NA Observations/Alternatives: OBSERVATIONS • Zoning/Use: Generally, the proposed development concept fits within the City's existing zoning regulations (will require official site plan review and approval). • Sale Price: The asking price for the subject property is $2.50 per square foot ($105,000). The original offer price was $2.29 per square foot ($95,000). The new offer price is $1.33 per square foot ($55,000). The new offer price is on the "low-end" of the City's adopted "deal -range" for the subject property. Staff will recommend this offer price be accepted (due to the number of jobs and tax base to be created). • Property Taxes: The proposed development is approximately 10,000 square feet. This building property will generate about $27,000 in total property taxes (about 25% would be received by the City). • Earnest Money: This PA does include earnest money ($5,000, 9%). $2,000 will become hard immediately. The remaining will become hard after the original termination date expires. The original agreement included $3,000 earnest money that became hard after the original termination date expired; with no earnest money upfront. • Broker Commission: Commission will be paid to both the buyer's real estate agent and the seller's real estate agent via the seller's (City) land sale proceeds (split 7%, or $5,793.48). NOTE: based on the City's contract with CBRE, commission is paid on a minimum $2.00 per square foot for industrial properties. • Net Proceeds: includes deductions of commissions, closing fees, title commitment, State DEED tax, and payback to Anoka County for CDBG funding to purchase the property, $32,961.50. Please see attached. This is consistent with the City's Policy for the Sale of City Owned Land. • Closing Date: Closing is set for September 29, 2015. Attached to this case is a mock project timeline. • Buyer: The buyer (Derek West of 24 Restore) has a history of providing business services to the City of Ramsey. City staff has been impressed with the professionalism and reliability of Mr. West's company. ALTERNATIVES 1. Approve (staff recommendation) The proposed deal provides several benefits to the City: (1) tax base (2) minor land -sale proceeds (3) retain and create jobs (4) quality project (5) positive momentum for development in Ramsey (6) the Council's general goal of selling tax-exempt surplus City owned land will be realized. 2. Deny Unless a specific hardship or concern regarding this PA can be identified by the Council, staff would not recommend moving forward with this alterative. If the proposed agreement is terminated, the Staff would restart marketing the subject property with CBRE. 3. Amend The Council may wish to tweak or adjust provisions included in the proposed PA. Staff would be happy to make adjustments as requested by the Council. The one item that should be identified is the relatively low asking price. The Council may wish to counter.