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2015-04-20 CC Agenda PacketIbertv�1 SM*4T0Wfl1"f1Q.ftC1tVU* d Council Request for Mayor an Action April 16, 2015 SUBJECT: LEGAL - TA x FORFEITED COMMERCIAL LOT IN PRAIRIE RUN RECOMMENDATION: It is respectfully requested that the Mayor and Council consider the following: MOTION TO: Re -impose the full special assessments to the property 101-111-001020 if the property is returned to private ownership. BACKGROUND: In 2004, the City of Albertville approved the plat of Prairie Run, which contained 28 "detached townhome" lots abutting CSAH 18, 25 regular single-family lots, and one commercial lot. The City agreed to install utilities and roads in the Prairie Run subdivision and special assess the costs of the improvements to the properties in the plat. The City obtained a Letter of Credit in the amount of 50% of the cost of the improvements, but the Letter of Credit was from Alpine Capital, a private financing company (not a bank). The plat immediately experienced drainage problems arising from engineering/design errors, which held up construction on a number of the lots while litigation ensued. About the time the litigation ended, the housing bust arrived, which essentially halted all lot sales. After the dust settled, there were 2 cul-de-sac lots remaining unbuilt upon that had special assessments outstanding and 15 detached townhome lots in the same position, as well as one commercial lot upon which no special assessment payments had been made. Because the special assessments were not paid on the one commercial lot, the City made the payments on the bond that financed the project using money from other City funds. The commercial lot (immediately south of the T-Square building) went tax forfeit. Under the tax forfeiture process, the City has the right to purchase any or all of the tax forfeited properties at fair market value before they are offered to the public for sale. If the City does not acquire them, the City could re -impose the special assessments on the lots once they are purchased by a private party and returned to the tax rolls. City staff is recommending that the City not acquire the commercial lot south of the T-Square building. While the City has special assessments on the commercial lot, the specials far exceed the value of this lot. Given the amount of vacant building space in Albertville, City staff does not believe that market for vacant commercial land in this area will turn around anytime soon. Because the City can only hold the commercial property tax free for 8 years, staff recommends that the City inform the County that it does not want to purchase the commercial lot and plans on re -imposing special assessments on the lot after it is sold to a private party. The County has requested again that the City of Albertville consider cancelling or reducing the special assessments or purchase the parcel at a reduced price from the County in the effort of working together on getting this parcel back on the tax rolls stating that it would give the City more control in the ultimate development of the property. Given the relatively poor market for M:\Public Data\City Council\Council Packet Infonnation\2015\042015\2015-04-20 RCA to acquire tax forfeit lands.docx Meeting Date: April 20, 2015 enda Page 99 Mayor and Council Request for Action — April 20, 2015 Tax Forfeited Commercial Lot Page 2 of 2 commercial property at the present time, staff believes that a major reduction in the special assessments would be necessary at this time to make this lot marketable. Because such a major reduction would have to be ultimately absorbed by the City's general fund, and because staff believes this property will recover in value over time, staff recommends that we inform the County that the City is not willing to reduce the amount of special assessments it will re -impose on the lot. KEY ISSUES: • The original assessment on this property was $175,167. • City staff believes that the special assessments on the commercial lot will remain outstanding for many years in the future. POLICY/PRACTICES CONSIDERATIONS: In normal circumstances, the County would sell this property to private parties. However, this parcel has not sold and will go up for auction in the spring of 2015. FINANCIAL CONSIDERATIONS: Acquiring this parcel will require the City to pay some nominal consideration to the County. In addition, it will leave the $175,167 to be collected upon sale of the parcel or require the general levy to increase and have the entire tax base pay for the improvements (assessment).. LEGAL CONSIDERATIONS: State law allows the City to acquire this property and sell it to any party it desires. Responsible Person/Department: Mike Couri, City Attorney and Tina Lannes, Finance Director Submitted Through: Adam Nafstad, City Administrator-PWD M:\Public Data\City Council\Council Packet Infonnation\2015\042015\2015-04-20 RCA to acquire tax forfeit lands.docx Meeting Date: April 20, 2015 enda Page 100